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Edited Transcript of EDR.TO earnings conference call or presentation 5-Nov-19 6:00pm GMT

Q3 2019 Endeavour Silver Corp Earnings Call

VANCOUVER Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Endeavour Silver Corp earnings conference call or presentation Tuesday, November 5, 2019 at 6:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel W. Dickson

Endeavour Silver Corp. - CFO

* Galina Meleger

Endeavour Silver Corp. - Director of IR

* Godfrey J. Walton

Endeavour Silver Corp. - President & COO

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Conference Call Participants

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* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research

* Joseph George Reagor

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Marcus Giannini

* Mark La France Reichman

NOBLE Capital Markets, Inc., Research Division - Senior Natural Resource Analyst

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Presentation

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Operator [1]

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Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. 2019 Third Quarter Financial Results Conference Call. (Operator Instructions)

I would now like to turn the conference over to Galina Meleger, Director, Investor Relations. Please go ahead.

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Galina Meleger, Endeavour Silver Corp. - Director of IR [2]

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Thank you, operator. Good morning, everyone, and welcome to the Endeavour Silver 2019 Third Quarter Financial Results Conference Call. With me on the line today, we have the company's Chief Executive Officer, Bradford Cooke; our Chief Financial Officer, Dan Dickson; and our Chief Operating Officer, Godfrey Walton.

Before we get started, I'm required to remind you that certain statements on today's call will contain forward-looking information within the meaning of applicable securities laws. These may include statements regarding Endeavour's anticipated performance in 2019 and future years, including revenue and cost figures, silver and gold production, grades and recoveries, and the timing and expenditures required to develop new silver mines and mineralized zones. We do not intend to and do not assume any obligation to update such forward-looking information other than as required by applicable law.

On behalf of Endeavour Silver, I'd like to thank you again for joining our call today, and I'll now turn it over to our CFO, Dan Dickson.

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [3]

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Thank you, Galina, and welcome, everybody, to our third quarter conference call. As usual, we'll start off with a high-level overview of our third quarter performance, and then we'll open it up for Q&A.

Our financial performance was generally lower year-on-year, largely due to our lower production profile, operational challenges that we've previously highlighted, leading to our higher unit costs. Our revenue was down 24% to $28.6 million from the sale of 835,000 ounces of silver and 9,375 ounces of gold, averaging a sale price of $17.52 for silver and $1,489 for gold.

On a year-to-date basis, our revenue now totals $87.1 million. After quarterly cost of sales of $30.3 million, mine operating earnings amounted to negative $1.7 million from our operations in Mexico, which drove our overall net loss to negative $6.8 million or $0.05 a share for the quarter. If we remove the impacts of noncash items, we declared an EBITDA of $1 million in Q3 and operational cash flow before working capital changes contributed $2.1 million in Q3.

As per our news release this morning, we are now starting to see improvements from the operational challenges we implemented in the second quarter. Following the company's wide operational review, notwithstanding the recent progress in the operating performance of the mines, we announced in today's news release that management does not expect to meet its 2019 production and cost guidance, and we will not be providing guidance for the balance of the year as we evaluate alternatives at the El Cubo mine, which includes the possible closure. We do maintain a strong balance sheet, and we finished the quarter with a strong working capital position of $49.4 million and a cash position of $22 million.

While our cost profile remained high in Q3, I believe we are now trending in the right direction. In comparison to Q2, we are starting to see positive changes in our unit operating costs. Specifically, operating cash cost dropped by 15% since Q2 to $11.51. And the consolidated direct production cost per tonne dropped by 7%. Most of these improvements are attributed to Guanaceví, as Guanaceví has now started to respond, and it continues to respond to the development of the 2 newer high-grade ore bodies of Milache and Santa Cruz Sur. We're seeing both the tonnes and the grades starting to improve, and the unit costs are starting to decrease quarter-over-quarter from a reduction in the workforce and the overreliance -- reduction of overreliance of contractors. As a result, cash costs in Q3 at Guanaceví decreased 26%, all-in sustaining costs in Q3 decreased 15% and direct production cost per tonne decreased 22%. Looking forward, we expect to see further improvements at Guanaceví in Q4 as Santa Cruz Sur starts production, and we expect to see almost 200 to 300 tonnes per day in Q4 from that area.

At Bolañitos, Q3 production (technical difficulty) below plan due to lower tonnes and grades. The fatality at the start of the quarter significantly impacted production. Higher all-in sustaining costs were (technical difficulty) in Q3 from the purchase of new equipment, equipment availability from the old equipment. We're looking to reduce maintenance costs going forward with this new equipment and ultimately improve mine output. We are already averaging over 1,000 tonnes per day in October and expect to get closer to the normalized rate of 1,200 tonnes per day in Q4. At Bolañitos, we made our changes in June, July, so the bulk of the turnaround is expected here in Q4.

At El Cubo, El Cubo's been our top-performing mine in 2018. And this year, we've been operating in an environment with limited reserves. We announced in Q4 2018 that we are reducing the output in 2019 from 1,500 tonnes a day to 750 tonnes per day to focus on exploration and consolidation opportunities and then also evaluate the possible closure. This quarter, the grades were lower than planned due to narrow widths and higher dilution at the V-Ascuncion ore body.

At El Compas, we declared commercial production at the end of Q1, and we're seeing continued improvement with grades and recoveries improving in Q3. So there's still work to do on the recoveries at Compas, but now we're getting effectively close to plan.

We recognized we have problems in Q2, and we made a number of changes, changes in site leadership and management, reductions in the workforce, new equipment and more to help turn around our performance, primarily at Guanaceví and secondarily at the other operations. We're now starting to see those improvements.

In terms of growth outlook, our intention is now turned towards Terronera and Parral. Terronera, as a reminder, is proposed to be our next core asset of the company. We published a feasibility study last year that it's forecasting over 5 million ounces of annual silver equivalent production over 10 years, which gears the future of the company. Since the publication of the 2018 PFS, we've continued to improve the project and we published in a final update at PFS, following the completion of a bulk sample test that's being completed now on site. The project is development-ready and fully permitted, and we're starting now in the final stages of securing our project financing that will allow us to start construction.

The Parral project is a past producing asset and is our largest exploration expenditure this year. The project continues to deliver encouraging drill results, and we are completing a 2,000-tonne bulk sample, which will be processed at a local toll mill to refine metal recoveries this quarter. We're working towards publishing our first PA to evaluate a small-scale 200-tonne per day mining and toll milling operation to generate early cash flow and pay (technical difficulty) for these minutes at Parral.

Operator, with that, I'd like to open it up to Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Heiko Ihle of H.C. Wainright & Co.

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Marcus Giannini, [2]

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This is Marcus Giannini calling in for Heiko. He's on the road and couldn't make the call. First question, we're not looking for an overly detailed answer here, but I think it might be worthwhile given the withdrawal of short-term guidance. We went through the longer-term cash cost per tonne figures you have in your MD&As. So thinking longer term, where are your investment objectives on a mine-by-mine basis relative to where they were at the beginning of the year?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [3]

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Marcus, where our investment expectations going forward, is that effectively your question?

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Marcus Giannini, [4]

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Yes, essentially.

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [5]

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Yes. Right now, we're -- the biggest question, Mark, for us is El Cubo and you can see the grades kind of through the year, we've fallen from effectively 183 grams at the beginning of the year and fell to about 130 grams silver and gold was averaging about 1.9 at the beginning of the year and in Q3, we did about 1.3. We continue to see those lower grades here in October. And ultimately, it's a question of meeting a sufficient amount of throughput in 2020 to have economies of scale to make it worthwhile. And Cubo's actually had negative cash flow for the first time in a long time in Q3.

So ultimately, we're currently looking at what we can do for 2020. And quite frankly, it might also include the possible closure of the El Cubo asset just from a reserves and resources standpoint. So the investment (technical difficulty) could effectively be quite low, which is what we're working through. From Guanaceví and Bolañitos standpoint, we have long expected mine lives, you'd be seeing something similar. So historically, we spent about $10 million at Guanaceví for sustaining capital, and I expect that to continue. And Milache and Santa Cruz Sur are new ore bodies for us. We have -- do have development left to go to get to the bottom of those ore bodies. And then adjacent to historical ore body of ours called Porvenir Cuatro, we signed a deal with Frisco in the second quarter for adjacent property called El Curso, which we know we have extensions on, and we've actually been drilling that extension for the last 1.5 months, and we expect to have news out on El Curso's drill results in the coming weeks. So I expect Guanaceví to be similar going forward, about $10 million of mine development. We've replenished the fleet. It's a question of when some of that gets delivered.

And then at Bolañitos, we continue to have some drill success there, we expect to extend. But this year, we're spending about $4 million on mine development, and I think we'll spend that again. But we come out with all this information, typically in January -- mid-January to late January for guidance for 2020, and we'll be able to give more detail on that at that time.

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Marcus Giannini, [6]

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Okay, cool. And then sort of building on that, I guess, longer term, call it, 3 to 5 years outlook, where do you expect to spend your 2020 focus that may not have been the case, say, 2 to 3 quarters ago? And again, that might be answered like you said in January, but...

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [7]

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But yes, from a 3- to 5-year standpoint, it's hard to see changes at Guanaceví or Bolañitos, as ultimately, we hope that our focus is actually on Terronera, and ultimately, by that time, 3 to 5 years, Parral. We've continued to have exploration success at Parral. We put out a news release in the third quarter, highlighting that exploration success. So we're very encouraged with where Parral is going. We are putting a PEA together this quarter for Parral, and that ultimately, the future of the company is Terronera and Parral. So on a long-term outlook, it's that. I mean, we remain inquisitive in the space. Obviously, prices we feel are still depressed and are going to increase. So our VP of CorpDev and Bradford Cooke are always inquisitive, and we're always looking at things, and we still want to grow the company. We want it to be a long-term future for Endeavour Silver. So we expect to grow.

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Marcus Giannini, [8]

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Okay. And then lastly, on a different note, the payments you make under your royalties are getting quite a bit lower. At what point would it maybe make sense to walk up to a seller and make a low-ball offer to buy them back? Is that something considered at all?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [9]

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Well, I would never tell the royalty holder that it's a low-ball offer. So we always look at those things. And ultimately, the guys on the other side have to agree to a deal and typically holders of royalties are pretty sophisticated. So when we ever have the opportunity to buy back our royalty, it's probably going to be at pretty fair price. We look at those things all the time. It's just a matter of get one of those things done is difficult. You need to remember, a part of our royalty structure is to the Mexican government of 25% on any precious metals that are mined in Mexico. And then ultimately, it's been the vendors of the properties that hold those other royalties.

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Operator [10]

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The next question comes from Joseph Reagor of Roth Capital Partners.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [11]

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A couple of different things I wanted to touch on. I guess, first one, just a point of clarity on the guidance for 2019. There was a revised guidance, which is listed in your MD&A is, are you saying the revised guidance won't be met? Or that you're just confident you won't meet the original guidance?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [12]

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No, Joseph. To clarify, we revised guidance in July. We don't think we're going to meet the low end of that revised guidance. If you take Q3's production, Guanaceví and Bolañitos both were behind plan. We don't expect it to be significantly different, but we do expect it to be better. It's just a question of whether we can get to the bottom end of that guidance, and we think we'll be about 100,000 ounces of silver equivalent short.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [13]

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Okay. Fair enough. And then, another point of clarity. On El Cubo, the review you're doing to determine if you're potentially need to shut the mine down. Can you give us a little bit more color about what the basis of the review is? And what the timing of any announcement there might be?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [14]

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Yes. I mean, at the end of the day, it's about reserves and resources, and we've seen falling grades for the year. We've already reduced output from 1,500 tonnes down to 750 tonnes per day. And with the falling grades, we actually had negative free cash flow. We did have an exploration program this year. We have extended grades -- extended the V-Ascuncion, which is the primary ore body where we're mining. Ultimately, those drill holes where we had intersections were narrow, okay width, but too narrow to get the tonnage output that we need. There is consolidation opportunity within the area. Fresnillo owns significantly around us. We do know extensions go across onto their land. However, obviously, we can't rely on any consolidations because it takes two to tango in that situation. So ultimately, if we're going to stay at these levels of grades, we're not going to be able to make money there. I mean, without reserves and resources or primary exploration targets, we have to consider shutting down the mine. And ultimately, there is a couple of steps that are required to that. And one is negotiations with the union, where we have 250 employees and trying to determine a time line with union of when we can shut down and ultimately lay everybody off. We are in discussions always with that union, and we're working towards that and would have a clarity on that, I would say, in the next 4 to 6 weeks.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [15]

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Okay. Switching to other mines. At El Compas, it seems like the cost on a per tonne basis are 30-ish percent, 35% above what the original plan was. What can you guys do to get those back down towards, I think, it was like $100 per tonne was kind of the target and it's been in the $130s?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [16]

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Yes, Joseph. The target through the PEA was about $110 per tonne, and we thought we could beat them. And you're right, we're sitting about $130 per tonne. We are looking at that for 2020. One of the things that we're looking at is actually replacing the contractor with our own equipment and our own people and that will save about 30% of our mining costs, so not the full $130 times 30%, but effectively, the mining portion of it. And we did have some severance that went through. We kind of ramped up and increased our workforce. We scaled that back at the end of the quarter. So as we hit our output levels, we think we can get closer and closer to that $110, especially going into 2020.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [17]

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Okay. And then one big picture question. With the Terronera financing kind of on deck, what do you guys have left on your ATM? And what is the current plan there as far as financing and then time line to production?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [18]

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Yes. ATM, we used about $10 million of the ATM in the third quarter. There's about $8.6 million remains on that ATM. We haven't had the ATM open for the last 2 months. Depending on where the market goes, that can't open or not open. Obviously, it's helped us protect our balance sheet for 2019. We have that ATM available to us until the end of March under our base shelf as is. As far as financing for Terronera going forward, we are looking at a form of debt anywhere $60 million to $80 million. We're trying to get finalized here in the next 4 to 6 weeks. And then it goes into construction. And construction time line hasn't significantly changed under the work we've done for the new PFS. Ultimately, we're still looking at about 18 months from when we start. And the first 6 months of that is just basically earthworks of cutting down a hill, so we can start building the plant. We've got all our permits in place. So it's a question of when we have financing in place and being comfortable with, say, go.

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Operator [19]

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The next question comes from Chris Thompson of PI Financial.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [20]

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A number of my questions have been answered. But I just want to just chime in on a couple of little things here. Firstly, wanted to be -- I mean, where are we right now in that ramp up to 1,200 tonne a day? I mean, obviously, sitting in early November, you've had -- we've seen October. Where are you right now as far as the production rates there?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [21]

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Yes, October came in just under 1,100 tonnes per day for mine. So we've seen, partly maybe of the confidence, hopefully, in my voice a little bit is between Q3 and now we've seen October have a good month. The other thing that worked so well to us, we think going forward is the El Curso property, which is rate adjacent to Porvenir Cuatro. So we have a ramp that goes through El Curso because we have a right-of-way access with Frisco to get down to Milache. So we do have a ramp that effectively crosses the El Curso property. And we've got about 10 drill holes into that property that we expect to release later on. And we believe El Curso will allow us the [flexibility] to make sure we're at 1,200 tonnes per day.

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Godfrey J. Walton, Endeavour Silver Corp. - President & COO [22]

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Chris, this is Godfrey. Just add to that as well. We've actually now built a stockpile at Guanaceví, which we haven't had for many years. We've had a few maintenance issues in the plant, which is why we haven't hit 1,200 already. But we're very confident that those will be behind us here in another couple of weeks. And so for the balance of Q4, we should be at capacity.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [23]

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Great. Just I guess, looking at the -- when you are fully ramped, I guess, as far as Milache and Santa Cruz Sur, what sort of blended grade to the mill are you anticipating?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [24]

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The blended grades the mill would be about 255 grams silver and 0.661 grams gold with SCS and Milache blended going through the mill. The big thing that we're going to see when those ramp up is the reduction of the Santa Cruz Sur ore, which has been running lower grade closer to the 200 grams per tonne silver and about 0.5 gold.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [25]

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Great. And then just closing the loop, I guess, on one for the unit cost, what do you see as a sort of a nice steady state figure?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [26]

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I've touched on this in the past. If we get to 1,200 tonnes per day, I don't see any reason why we can't get back to the $95 cost per tonne. Obviously, this quarter, we are about $118 cost per tonne. We still average lower than 1,000 tonnes per day. Having the new equipment arrive and the reduction that we're going to see in maintenance costs will help us there. But I can -- provided we hit our targets, $95 to $100 cost per tonne is still our goal.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [27]

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Okay. Great. And then just moving on to Bolañitos. I think that this -- I guess, how you handle the high arsenic ore in hand at the moment? Or has this come as a bit of a surprise to you?

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Godfrey J. Walton, Endeavour Silver Corp. - President & COO [28]

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Chris, thanks for the question. This is Godfrey. We've been up and down on the arsenic. One month, we figure we've got it handled and the next month, we continue to have issues. But it's an area within the different horizons that have all come together. So both in La Luz and Lucero, we're seeing higher arsenic given the actual ore. We do expect to be able to reduce it from where it is now, which is coming at about 1.3% arsenic, back down to the 0.95, which is what we had anticipated. But we're changing some of the flotation, the concentration ratios to make those adjustments. And so we're still working on it, but we do feel optimistic that we can get it resolved.

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [29]

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Just to add to that, Chris. We're all coming out of 2019. So every year, we signed agreements with our concentrate buyers where we set kind of the rates and what we're allowed to have effectively from the arsenic level in our concentrate. So once we come out of 2019, and we're in the process now for 2020 of fitting and signing for concentrate deals next year, which, obviously, we can build a better range in for ourselves going forward.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [30]

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Okay. Just on the mining rates, I mean, you say you want to -- you're anticipating them, I guess, to revert to historical levels in the Q4 here. Would that be the 1,200 mark?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [31]

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We're shooting for the 1,200 mark here in Q4. Whether we can get there or not, even getting to 1,100 or 1,000 to 1,100 is, obviously, advantageous for us. But 1,200 is still the goal.

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Godfrey J. Walton, Endeavour Silver Corp. - President & COO [32]

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We've actually also got a stockpile for the Bolañitos plant as well. And the only issue there is just making adjustments in the flotation circuit for the arsenic and -- we are optimistic that we'll be at 1,200 in Q4.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [33]

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All right. So you are expecting any, obviously, a reduction in unit cost as you sort of get to that 1,200 mark from the Q3 levels?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [34]

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Yes.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [35]

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Okay, perfect. All right. And then the final question, I guess, and this is the thing I really struggle with, I guess, with Bolañitos is your grades. I mean, I look at your reserves, resources from the mine, and they're significantly higher than what you're delivering right now. How would you -- or can you talk to that, please?

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Godfrey J. Walton, Endeavour Silver Corp. - President & COO [36]

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Chris, this is Godfrey again. Yes, we -- a number of the areas where we're mining are actually down near the bottom of the routes of both Lucero, Daniela. And those are typically higher gold but lower silver. And we're also seeing that as well in La Luz. So it just comes down to the areas that we're mining and not having the silver that we had anticipated. But we're doing better with the gold.

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Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research [37]

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Right. I mean, if I would have sort of -- I mean, I'm looking at my model, and it looks -- I don't know what it used to be quite honest with you based on your (technical difficulty) anymore. I mean, are we -- can we anticipate that's going to be the sort of the plan moving forward?

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Godfrey J. Walton, Endeavour Silver Corp. - President & COO [38]

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I think we're going to see more of those kind of numbers going forward. Yes, a little lower silver, just because of where we are in the systems.

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Operator [39]

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(Operator Instructions) The next question comes from Mark Reichman of NOBLE Capital Markets.

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Mark La France Reichman, NOBLE Capital Markets, Inc., Research Division - Senior Natural Resource Analyst [40]

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I just wanted to focus a little bit on the -- on costs, on cash costs and all-in sustaining costs. I know that last quarter, you kind of expected the latter half of the year to be kind of in that $10 to $11 range for the full year and then lower than that in the latter half, net of any byproduct credits. So it seems to me that some of these -- for some mines, the answer is increasing production and others, I guess, in the case of El Cubo, it's not to produce. So just looking out, I mean, what are your -- I know you're not giving any guidance, but what are your expectations on getting these costs down because -- I mean, if I look out at 2020, you're going to have additional financing costs related to Terronera, costs associated with shutting down El Cubo potentially and even with a modest increase in commodity prices, the costs just aren't competitive?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [41]

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Yes. Mark, it's a fair question. It's something that -- I mean, obviously, as a management group, we look at all the time. The cost profile in the first half of the year, then ultimately, again, here in Q4 is not conducive to moving forward at these prices, and we managed the company at these prices, not what we expect silver prices to go. And obviously, for Guanaceví, it has been an output level. I mean, it's a mine that's got capacity at the plant to 1,200 tonnes per day and ultimately has the resources and from a labor standpoint for 1,200 tonnes per day, and we have the reserves and resources there to meet that output.

The absolute costs that we're spending is in line with what our budgets were, but what we are not hitting is our production targets. And some of that has to do with things that we've changed. And I think at the beginning of the year, we had -- we've determined this an overreliance on contractors. If we weren't hitting targets, we hired contractors to try to make it up and kept those employees that inflated our costs. We've now significantly reduced our contractor levels at Guanaceví and our employee level at Guanaceví, and we've seen tonnes come up, which is great and which should be reflected in Q4's costs and ultimately in 2020's costs. And if we can get back down to that profile of $95 to $100 per tonne, Guanaceví is cash flow positive.

From Bolañitos standpoint, it has been cash flow positive until Q3 of this year, and we had a small loss from a free cash flow standpoint, but we've been replenishing mining (technical difficulty) there to reduce our operating costs. Ultimately, what we're spending in our lease payments is less than what we are spending to repair equipment that we had on site. And I think just over the last 3 years in depressed metal prices like any mine, especially underground vein mine, you started to mine a little bit of capital and that's come home to roost to this year. And ultimately, we've made those changes to ensure that Bolañitos and Guanaceví going forward are cash positive and can contribute to the company as a whole rather than being a liability to the company. I think we'll be able to speak more of that when we come out with the 2020 guidance. We are going through all our budgeting process and cost profile for next year, and we present that to the Board in early or mid-December. And like I say, we always come out mid-January to it. I mean, it's about delivering on that output to make sure we can meet that cost profile.

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Mark La France Reichman, NOBLE Capital Markets, Inc., Research Division - Senior Natural Resource Analyst [42]

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So the emphasis is really kind of on Guanaceví and Bolañitos because you did show improvement from the second quarter into the third quarter on a cash cost basis. I guess, Bolañitos went the other way on all-in sustaining costs. El Cubo, next year, I guess, that would be kind of a onetime item. But what about El Compas? What are your thoughts on El Compas?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [43]

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Yes. No, El Compas, we touched on it a little bit earlier. I think Marcus had a question with regards to cost, and we're about $130 cost per tonne right now and trying to drive that down to $110. I think the reality for Compas is it's 1 million silver equivalent ounces a year. So right now, it's not an overly significant asset. We do expect that we did have positive free cash flow in Q3 about $1.4 million. In 2020, we expect Compas now to be a cash contributor. I mean, obviously, in Q1, via precommercial production and investing the final amounts into Compas. But for 2020, it will also be a cash contributor. I think Compas is smaller. It's been easier to manage and it's effectively a gold mine and gold prices that we used in the PA were about $1,375, and obviously, gold is getting closer to $1,500 right now. But it hasn't been, for a lack of better term, a problem child. Guanaceví has been a problem for about 2.5 years. And finally, I believe we've cracked that nut. In Bolañitos, we came up with this arsenic issue that's required us to recycle the mine and ultimately allowed us to kind of review everything at the mine, and it was determined that our fleet is too old, and we need to replace the fleet that will allow us to reduce operating costs, and it's managing that stuff and making sure it contributes cash at these prices going forward.

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Mark La France Reichman, NOBLE Capital Markets, Inc., Research Division - Senior Natural Resource Analyst [44]

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Is that $20 delta, between the $130 and the $110 million, is that just purely production?

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [45]

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No. Compas, it's not production, that's cost savings, reducing the use of contractors and putting our own equipment that will have potentially become available.

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Operator [46]

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This concludes the question-and-answer session. I would now like to turn the conference back over to Mr. Dan Dickson for any closing remarks.

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Daniel W. Dickson, Endeavour Silver Corp. - CFO [47]

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Well, thank you, everyone, for joining our call. I'm glad we had -- we're able to have lots of questions. I think Q4 is going to be a positive quarter for us. We do have some drill results coming in the coming weeks and then look forward to providing guidance for 2020 in the New Year. Thanks for your questions. And if anybody has questions, we are available off-line and happy to help any time. Thank you.

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Operator [48]

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This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.