Endeavour Silver Corp. Price & Performance (EXK)

Thank you, Allison, and welcome, everyone. As we commence this year's earnings call, it's important to acknowledge the dynamic landscape that shaped the mining sector in 2024. Gold prices surged 27%, closing the year at $2,624 per ounce, the largest annual rise since 2010. Gold hit a record of $2,786 per ounce in October and surpassed $2,900 earlier this year due to the global tensions, economic slowdown peers and concerns over U. S. Trade policies. Silver often mirrors gold's movement, and we expect this correlation to continue. Silver's rise has been driven by industrial demand and supply constraints. The global shift to electrification, renewable energy and electric vehicles is driving demand for silver and solar panels, batteries and key technologies. At the same time, supply deficits have emerged as new production struggles to keep pace with mine depletion. Rising industrial demand and supply changes continues to put upward pressure on silver prices. We also expect demand as a safe haven asset to have a greater impact on the silver market going forward. Endeavor Silver is well positioned to benefit from these favorable market dynamics. Now, let's discuss production in more detail. In 2024, Endeavor Silver produced 7,600,000 ounces of silver equivalent, achieving the higher end of the revised guidance range of 7,300,000 to 7,600,000 ounces.

Guidance was lowered in Q3 twenty twenty four due to a trunnion failure at the Guanacevi mine, which impacted throughput from August to December. The team worked tirelessly to resolve the issue and by December, Guanacevi resumed operations at its usual rate of 1,200 tons per day. I'd like to extend my sincere gratitude to our operations team for their swift and effective actions in overcoming this challenge. While Guanacevi had its challenges, Volcanoes continued to remain steady with increased gold production driven by higher gold grades, offset by the lower silver production due to slightly lower silver grades. In 2024, the company reported total revenue of $218,000,000 up 6% compared to 2023 with cost of sales of $176,000,000 mine operating earnings of $42,000,000 and mine operating cash flow of $72,000,000 Endeavor recognized an adjusted net earnings of $8,000,000 or an adjusted earnings per share of $0.03 after excluding loss on derivative contracts, mark to market deferred share units, gain on disposal and unrealized foreign exchange and investment losses. Cost of sales increased approximately 4% compared to the previous year. While there are a number of drivers, including lower economies of scale from lower throughput, fixed costs incurred during the trunnion failure at Guanacevi and inflationary pressures early in 2024.

The company did benefit from the weakening of the Mexican peso in the second half of the year. Direct operating costs per ton were up 8% for the year, primarily due to the lower throughput at Guanacevi. Consolidated cash cost per ounce, net of byproduct credits, decreased by 4% to 12.99 in 2024, predominantly driven by higher byproduct gold sales. All in sustaining costs increased by 4% to $23.88 per ounce compared to the prior year, again due to lower production of silver ounces partially offset by the lower cash costs. As of 12/31/2024, the company's cash position was $106,000,000 and we have working capital of $79,000,000 Cash and working capital saw an increase in Q4 following a $73,000,000 deal financing aimed at advancing the Pithoria project and strengthening general working capital. As a reminder, Pithoria is the company's next major growth project. Located in Durango, Mexico, it's one of the largest undeveloped silver deposits globally with nearly 600,000,000 ounces of silver. The company has allocated $26,000,000 budget to advance exploration, evaluation efforts and underground development. This includes drilling and technical studies aimed at supporting an economic assessment by Q1 twenty twenty six. While progress continues at Pizzeria, the company's primary focus remains on bringing Terronera online in Q2 twenty twenty five.

As of 12/31/2024, overall construction at Terronera reached 89% with $3.00 $2,000,000 allocated budgets spent. The total estimated project cost is $332,000,000 as announced by the company earlier this year. During the fourth quarter, '1 point '7 kilometers of underground mine development was completed for a total project development of 7.2 kilometers. The underground explosive magazine storage firm was also approved, improving development efficiencies. Most of the upper platform construction was complete with final punch list items to be addressed before being handed over to commission operations team. The main area of focus continues to be the lower platform area, which was 42% complete at the end of the fourth quarter. The tailing storage facility's main embankment reached eleven eighty five meters of elevation and the tailing filter swing plates were installed and the First Floor concrete was poured. The structural steel installation advanced to the Second Floor preparing to install the filter press again as of the end of the fourth quarter. The Avent pond liner was installed and completed in January of this year and the upper surface water diversion canal was nearly 90% complete. As we approach the wet commissioning phase at Terronera and prepare to bring Endeavour's next offering online, key critical path items include the tailing filter presses, which are on track for completion mid April. '20 '20 '4 marked a pivotal year for Endeavor and 2025 promised to be a transformative milestone for the company.

We extend our sincere gratitude to our shareholders and stakeholders for their steadfast support as we embark on this new era of growth and operational efficiency. As we advance, we remain committed to delivering sustained value, achieving operational excellence and fostering a sustainable future for all our partners. For more wholesome construction update at Terronera, I encourage you to visit our website where you'll find our quarterly photo gallery showcasing the latest developments, progress and information. With that, I'm happy to open this up to questions. Operator, please proceed to our Q and A session.

Thank The first question comes from Nick Giles with B. Riley Securities. Please go ahead.

Yes. Thank you very much, operator. Good morning, everyone. Guys, congrats on all the progress. I guess, my first question, I wanted to work backwards a little bit and start with Keteria. Can you remind us of CapEx in 2025? And then how could we see that step up in 2026? Thanks very much.

Yes. Good question, Nick. Thanks for the positive comments. Pizzeria, as you slightly know, we have a $26,600,000 budget there in 2025. Ultimately, most of that budget regards $10,000,000 allocated to drilling and $16,000,000 allocated to various budget items or capital items like mobile equipment and mine development and further evaluation and studies for an economic assessment that we expect to deliver in Q1 of next year. Ultimately, we're focused on 2025. So, we don't have capital expenditure plan for 2026 until we see that feasibility study completed. But as I touched on, it is what we expect to be our next growth asset and fully expect a positive result from the economic assessment, but we can't really say much until we get there.

Fair enough. I appreciate that, Dan. And then maybe just on Terronera. Apologies if I missed it, but should we still think about commercial production in the third quarter? And then are there any other puts and takes that you'd highlight just from a a cost perspective for the balance of 2025?

Yes. We haven't come off our $332,000,000 budget. Things have been tracking extremely well since our news release January 8, identifying timeline of early Q2. We are on track for that. We expect it to go to wet commission at the April. So, everything is tracking well. Ramp up is expected in Q2 and ultimately commercial production for Q3.

Dan, good to hear. I'll turn it over for now, but keep up the good work.

Thanks, Nick.

The next question comes from Raine Lam with TD Securities. Please go ahead.

Hey, thanks guys. Just wondering if you could talk a bit about the cost pressures you're seeing in Mexico. Just wondering how much exposure you have to the peso in general and how much of those pressures might be offset by the weakness seen in the local currency?

Yes, it's a very good question. Obviously, there's a lot of concern around the world right now, especially in North America with what seems to be a tariff forward. It's been kicking off. And we've taken a lot of questions with regards to the cost pressures that will put on our operations in Mexico. And then ultimately, what that means from a currency standpoint and probably expectation that you'll see more devaluation in the Canadian dollar and the Mexican peso. From a Mexican peso standpoint, about 33% of our costs are tied to labor. And that's been generally the case that Guanacee in volumes for the last fifteen years, and we expect that similar ratio at Terreinera. From the remaining costs, the 67%, historically, it's been about fiftyfifty between US dollars and pesos and that moves back and forth. So, roughly about 50% to 60% of our costs are tied to the Mexican peso. And if we see further devaluation of the peso, obviously, that benefits Endeavor from a cost standpoint. From a supply chain standpoint, we still don't know if there would be reciprocal tariffs put in place and what that impact has on costs. We don't think it will have a significant impact because after labor power costs, which is obviously incurred in country, is our second.

And our third highest cost is actually cyanide, which we source out of Mexico as well. So, again, it's all dynamic and things will change. But, ultimately, we've seen overall cost pressures decrease primarily because of the devaluation of the Mexican peso over the last six months of 2024. And if that continues, I think that's a benefit for us on a cost per ton basis.

Okay, perfect. Thanks for the detail. And then maybe at Terronera, how have things progressed with the construction of the eHouses? And then with the tailings construction, are the filtopressants the remaining bottleneck here? And once that's completed in mid April, you guys roll right into commissioning?

Yes. Our e houses are in place. I don't think there's much more to add to that. As you're probably aware, Wayne, that we have an LNG vaporization plant that we will be building and that will go into ultimately Q3. But again, we're on diesel gensets as we start up and until the LNG vaporization plant is complete. You're correct in to say it's the filter presses that is the bottleneck. That's a critical path item. Our concentrate filters are coming to completion here in March. And ultimately, the filter presses, the steel structures have been in place. So it's really going to come down to electrical and piping and then ultimately turning on both filter presses and start putting ore through from crusher all the way onto that tailings dam. So just as a reminder for those, at December 31, our upper platform was relatively complete and we're doing a lot of dry commissioning and pre commissioning. And it was the lower platform that ultimately was the delay and pushed us into effectively Q2 twenty twenty five. Again, from January till today, March 10, things have progressed right on plan. And the filter presses, which was the critical path then, still remains the critical path now.

And those seem to be going in relatively smoothly. So, hopefully in April, we can turn everything on and start putting ore, like I say, onto the tailings dam.

Okay, perfect. And then maybe just last one for me. At Guanacevi, can you give us an idea of the difference in the royalty structure from the ore mine from the Alcoso concessions? And then what percentage of feet in the mill is that expected to be this year?

Yes, that's a a very good question. Alperso, for those that aren't familiar with Wayne's question, is ultimately lease land that we signed in October 2019 with Monera Frisco, which is a company owned by Carlos Slim. We have to pay a sliding scale royalty there. When silver was below $15 we paid 4% NSR. And it's scaled all the way up to over $25 which is obviously where we sit now and we pay 16% NSR. So, it's a very significant royalty. It's north of $55 per ton, north of $5 per ounce of silver. And about 80% of our production is coming from Alcoercio. We still have our Malache area that we do source some ore from and then we obviously have that purchased ore. So, it's a significant part of our cost structure. And like I say, El Curso is over 80% of our actual production win.

Win.

The The next question comes from Michael Eley with J. C. Vineyard. Please go ahead.

Hey, Dan. Hey, team. Thanks for taking my questions and congratulations on all of the progress on Terronera. Thanks, Heiko.

I'm going to do my follow-up first because it actually goes well with the last question that was asked here. Your progress at Teranera obviously was 89.4% as of December 31. Is there anything that hasn't been physically received at the site? I mean, you discussed the filter press earlier, but that's presumably a component that's made specifically for you. I mean, I guess, Jose, do you have anything stuck with customs, anything stuck in the wrong village? You mentioned electrical and piping still needed, but I guess that's probably mostly just off the shelf stuff that's sitting in big boxes and just waiting, right?

Yes. No, it's a very fair question. And as of January 8, we put out the news release with regards to our timing. And if you recall, there was a steel beam that wasn't on-site that we just determined in December, and that got delivered early January. We went through that process of what else could be missing. At this point in time, we think everything is either on-site or in our lay down yard. And that's, to be honest, what we thought back in December. So, we've gone through, did a double check on that. And as you say, the piping and electrical work, that's kind of off the shelf stuff and progressing. So, everything is there that we need to get done for that filter press. And again, targeting April for that to be turned on so we can start wet commissioning.

I went through your release this morning and then cash cost was all over the place. So I controlled F4. It was listed 21 times in the release. Obviously, costs were quite good given the gold credits. And your figure used 2,647 gold, we're at 2,900 right now. But just maybe walk us through cash costs as Terronera comes online here in the very near future and by quarter and maybe for the remainder of the year as you see pricing from that side impact your company cash costs? I guess, what I'm saying is walk me through how we should model the ramp up without specifically making you say that?

Well, let me answer the first part of your or second part of your question when it's company wide. And we put out guidance in January on all in sustaining costs and cash costs. We did use a $2,200 gold price in our assumptions. Obviously, if you take what we're at now or even $2,800 6 hundred dollars difference there times our 30,000 ounces of gold, that amounts to about $18,000,000 of credit. And if we produce 7,000,000 ounces, you're looking at almost $3.04 or $2.5 to $3 less compared to our stated guidance. Now, we like to be conservative in our guidance and maybe the 2,200 was overly conservative. But again, we started doing all that back in October and November of last year. So, I think Guanacevi and Volios can outperform. And the other side of that, HEICO, is that the Mexican pesos, We again use an assumption of 18 to one. We've been sitting north of 20 to one and it seems to be the peso will continue to devalue from there. So, for existing operations, we've been there nineteen years, eighteen years, respectively. I think we have a really good handle on that. In our guidance, we were quite conservative, so it'll allow us to probably perform better than that.

And that's just math and pretty straightforward. With regards to the ramp up of Teranera, we're trying to be cautious with that. And as we come into ramp up, we were going to put out more detail around a, production totals for the year for 2025, because it really depends on when we actually hit commercial production, whether that's July or August. And then with that, that drives that cash cost and our cost per ton, how fast we can ramp up. So we're holding that back until the end of Q2 would be the expectations that we put that out in the marketplace. So I appreciate that you're asking the question of where we're going to be at right now. And I will still point to the feasibility study that showed that we had basically all the gold pace for the silver at Terronera. Our cost per tonne will be obviously a little bit higher in the first year as we work through things. But as we get to our ten year mine life, we expect costs to line up that it's going to be one of the lowest operating mines in our space lowest cost operating mines in our space.

Cool. Very helpful, very comprehensive answer. Again, congratulations and I'll get back in queue. Thanks, Heiko.

The next question comes from Craig Stanley with Raymond James. Please go ahead.

Thank you and thanks for taking my call here. Pediaia, you're coming out with an economic assessment. What form will that take, like a PEA or PFS? And will the results be announced to the market?

Yes, Greg, thanks for the question. We are trying to track towards the feasibility study. We just haven't come across that. There's a lot of information from the SSR days when they held it. As you probably know, the feasibility study they put out was on an open pit operation in 2012. We're looking at it from an underground standpoint. And in 02/2009, they put out a pre feasibility study. We're going through that assessment with some of the technical studies that we're doing right now. And then later in the year, we'll be able to really identify whether we have enough information to go right to a feasibility study, but it is kind of our expectation at this time.

This This concludes the question and answer session. I would like to turn the call back over to Dan Dickson for any closing remarks. Please go ahead.

Thank you, operator, and thanks to all our investors that called in today. And twenty twenty four four was a very positive year for Endeavor. And ultimately, I think we've set up very well for 2025 to get Terronera into production and ultimately take advantage of what we see is coming down the line with the silver price. So, have a good day.

This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a wonderful day.