3rd Quarter financials
NEWS RELEASE
Endeavour Silver Reports Third Quarter, 2013 Financial Results;
Conference Call at 10am PST (1pm EST) on November 6, 2013
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Vancouver, Canada – November 5, 2013 – Endeavour Silver Corp. (NYSE: EXK, TSX: EDR) announced today its financial results for the Third Quarter, 2013 (reported in US$). Endeavour is a mid-cap silver mining company that owns and operates three underground silver-gold mines in Mexico, the Guanaceví mine in Durango state and the Bolañitos and El Cubo mines in Guanajuato state.
Highlights of Third Quarter, 2013 (Compared to Third Quarter, 2012)
Financial
Net earnings increased from $0 to $12.3 million ($0.12 per share)
Adjusted earnings(1) increased 663% to $13.0 million ($0.13 per share)
EBITDA(1) increased 140% to $29.3 million
Cash flow from operations before working capital changes decreased 34% to $25.9 million
Mine operating cash flow(1) increased 27% to $31.8 million
Revenue increased 31% to $67.8 million on 1,693,989 silver oz sold and 20,958 gold oz sold
Realized silver price fell 21% to $22.60 per oz sold
Realized gold price fell 14% to $1,409 per oz sold
Direct costs of production increased 7% to $104.05 per tonne
Cash costs of production net of by-product gold credits (1) increased 10% to $5.14 per oz silver
All-in sustaining costs fell 43% to 12.14 per oz silver
Cash costs of production on a co-product basis were $12.32 per oz silver and $768 per oz gold
Bullion inventory at quarter-end included 365,481 oz silver and 2,176 oz gold
Concentrate inventory at quarter-end included 19,645 oz silver and 297 oz gold
Cash and equivalents of $25.2 million and working capital of $26.8 million at quarter-end
Operations
Silver production up 63% to 1,855,846 oz
Gold production up 95% to 22,947 oz
Silver equivalent production up 75% to 3.23 million oz (at a 60:1 silver:gold ratio)
Enhanced cash flow by increasing production tonnes and/or grades at all three mines
Continued to cut costs through additional work-force reductions and operating efficiencies
El Cubo and Bolañitos production and recoveries both benefitted from processing metal concentrates accumulated in Q2, 2013 and the clean-out of the leased Las Torres plant
Increased 2013 production guidance as a result of the out-performance of the Bolañitos mine and better production from the El Cubo mine
(1) Adjusted earnings, mine operating cash flow, EBITDA and cash costs are non-IFRS measures. Please refer to the definitions in the Company’s Management’s Discussion and Analysis.
Bradford Cooke, CEO of Endeavour Silver, stated, "Our solid financial performance in Q3, 2013 was a direct result of the Company’s ability to respond quickly to the drop in metal prices earlier this year. By aggressively cutting cash and other costs and boosting production and cash flow, Endeavour was able to deliver sharply higher EBITDA and net earnings in Q3, 2013 compared to Q3, 2012.
"We are now half way through our two year operational turn-around at El Cubo and it appears to have turned the corner. Our next focus at El Cubo is to expand the reserves and resources to facilitate a 35% mine expansion to 1,550 tonnes per day plant capacity over the next year. Our goal over the next year is to reduce cash operating costs to single digits, which would make El Cubo the profitable core asset we originally envisaged when we acquired the mine in 2012.
"Our free cash flow in the third quarter allowed us to start rebuilding our cash position and we were able to take our foot off the brakes, albeit carefully, with regard to capital and exploration spending. Management will continue to focus on improving our operating performance and profit margin at each mine, especially in the light of the new mining taxes currently being legislated in Mexico."
Financial Results (see Consolidated Statement of Operations below)
Mine Operations
For the quarter ended September 30, 2013, the Company generated revenue totaling $67.8 million (2012 - $51.9 million). During the period, the Company sold 1,693,989 oz silver and 20,958 oz gold at realized prices of $22.60 and $1,409 per oz respectively, compared to sales of 1,294,241 oz silver and 8,984 oz gold at realized prices of $28.72 and $1,637 per oz respectively in 2012. After cost of sales of $46.1 million (2012 - $34.8 million), mine operating earnings amounted to $21.7 million (2012 - $17.1 million).
Cash Flow
Mine operating cash flow before taxes was $31.8 million (2012 – $26.9 million), excluding depreciation and depletion of $12.6 million (2012 - $6.4 million), stock-based compensation of $0.1 million (2012- $0.1 million), and a recovery of a previous inventory write down of $2.7 million (2012- Write down of $3.3 million). The mine operating cash flow directly resulted in operating cash flow before working capital changes to increase 34% to $25.9 million (2012 – $19.3 million).
Net Earnings
Net earnings were $12.3 million or $0.12 per share compared to $0 in Q3, 2012. They included a mark-to-market derivative liability loss related to share purchase warrants issued in 2009 denominated in Canadian dollars, while the Company’s functional currency is the US dollar. Under IFRS, these warrants are classified and accounted for as financial liability at fair market value with adjustments recognized through net earnings. The appreciation of these warrants resulted in a derivative liability loss of $0.7 million (2012 – $1.7 million). Therefore, the adjusted earnings were $13.0 million ($0.13 per share) compared to $1.7 million ($0.02 per share) in Q3, 2012.
Cash Costs
Cash costs of production, net of gold by-product credits, increased 10% to $5.14 per oz silver produced (2012 - $4.70), and on an all-in sustaining basis were $12.14 per oz silver, a 43% drop from 2012. On a co-product basis, cash costs were $12.74 per oz of silver and $794 per oz of gold. The higher cash costs were largely due to the growing contribution of the El Cubo operation and lower gold credits, offset by the increased production from the Bolañitos operation.
Operating Results (see Consolidated Table of Mine Operations below)
Guanaceví
Silver production at the Guanaceví mine during Q3, 2013 was 715,080 oz, a increase of 20% compared to 598,285 oz, and gold production was 1,977 oz, a decrease of 26% compared to 2,667 oz in Q2, 2012. Metal production was up due to higher metal grades and recoveries. Plant throughput was 107,480 tonnes at average grades of 265 gpt silver and 0.70 gpt gold compared to 108,343 tonnes grading 227 gpt silver and 0.87 gpt gold. The higher silver grades are a function of geological variations of the different ore zones, while the lower gold grades are primarily due to final reconciliation of concentrate processed on behalf of Bolañitos in 2012.
Bolañitos
Silver production at the Bolañitos mine was 794,734 oz, an increase of 83% compared to 433,388 oz, and gold production was 15,869 oz, an increase of 116% compared to 7,363 oz in Q3, 2012. Metal production was up due to higher throughput, grades and recoveries. The Bolañitos mine averaged 2,082 tpd, well above the mine plan due to increased contract mining and the switch from 100% cut-and-fill mining to 50% long-hole mining. The Bolañitos plant operated at its 1,600 tpd capacity, and the extra tonnes produced by the mine were processed at the El Cubo operation. This additional plant access allowed Bolañitos production to significantly exceed planned output.
Plant throughput was 181,442 tonnes at average grades of 147 gpt silver and 2.75 gpt gold compared to 117,271 tonnes grading 148 gpt silver and 2.39 gpt gold in Q3, 2012. Ore grades were also significantly above plan, as mining accessed better than planned ore grades, specifically in the Daniela vein. Silver and gold recoveries were both anomalously higher due three one-time events: the Las Torres flotation plant was cleaned out of concentrate in July prior to expiry of the lease, the El Cubo leach circuit was cleaned out as El Cubo commenced concentrate sales in September and the precipitate inventory at El Cubo at the end of Q2 was processed into doré in Q3.Management expects recoveries to return to historic levels in Q4, 2013.
In addition, selling concentrates as opposed to producing doré at the El Cubo plant will increase recoveries going forward. Concentrate sales result in higher payable metal production and higher refining charges, resulting in a net financial benefit at current metal prices. Depending on certain variables, the net financial benefit can move in favour of producing doré. Management will closely monitor these variables to optimize the financial benefit.
El Cubo
Silver production at the El Cubo mine was 346,032 oz, an increase of 226% compared to 106,260 oz in Q3, 2012 and gold production was 5,101 oz, an increase of 196% compared to 1,724 oz in Q3, 2012. The Company acquired the El Cubo mine in July 2012 and has made immediate and lasting improvements at El Cubo to ensure its economic viability at current metal prices.
Plant throughput was 100,168 tonnes at average grades of 112 gpt silver and 2.62 gpt gold compared to 80,550 tonnes grading 92 gpt silver and 1.42 gpt gold in Q3, 2012. Silver and gold recoveries were both anomalously higher due three one-time events: the Las Torres flotation plant was cleaned out of concentrate in July prior to expiry of the lease, the El Cubo leach circuit was cleaned out as El Cubo commenced concentrate sales in September, and in Q2 the El Cubo plant held a significant work-in-process metal balance that was processed in Q3 once the filter presses were installed and commissioned. Management expects recoveries to return to historic levels in Q4, 2013.
In addition, selling concentrates as opposed to producing doré at the El Cubo plant will increase recoveries going forward. Concentrate sales result in higher payable metal production and higher refining charges, resulting in a net financial benefit at current metal prices. Depending on certain variables, the net financial benefit can move in favour of producing doré. Management will closely monitor these variables to optimize the financial benefit.
Conference Call
A telephone conference call to discuss the results will be held at 10:00 am PST (1:00 pm EST) on Wednesday, November 6, 2013. To participate in the conference call, please dial the following:
Toll-free in Canada and the USA: 1-800-319-4610 Local Vancouver: 604-638-5340
Outside of Canada and the USA: 1-604-638-5340 No pass-code is necessary to participate in the conference call.
A replay of the conference call will be available by dialing 1-800-319-6413 in Canada & USA (Toll-free) or 1-604-638-9010 outside of Canada & USA. The required pass-code is 4890 followe