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Endeavour Silver Corp Intersects High Grade Ore at Terronera in Mexico

- By Alberto Abaterusso

On Wednesday Endeavour Silver Corp. (EXK), a mid-tier gold and silver mining company, informed the market that it has encountered high-grade silver-gold mineralization during explorations on the Terronera property in the Mexican State of Jalisco.

The exploration team has collected mineral samples through 17 drillings made within the Terronera vein system. Test lab results indicated that the true width of mineralization in the Terronera vein ranges between 0.1 and 9.8 meters and averages 2.4 meters. The most frequently occurring true width of mineralization was 0.5 meters.

The vein system contains a gold concentration that ranges between 0.7 grams and 32 grams per ton. The peak resulted from the seventeenth drill hole. The average gold grade is 6.43 grams per ton of ore and the most frequent occurrence stands at 2.6 grams of gold per ton of mineralized rock.

The silver concentration range is 10 grams to 9,810 grams per ton. The peak was achieved with the fifth drill hole. The average silver grade is 740.18 grams per ton and the mode is 189 grams.

According to a silver/gold ratio of 75:1, those results return a concentration of equivalent silver of 129 grams to 10,466 grams per ton of mineral.

The best drilling result was included in hole TR11-8, which indicates a concentration of 1,367 grams of silver equivalent in one ton of mineral over a true width of 6.1 meters.

To date mineralization within the Terronera vein system has been intersected over a zone 1400 meters long and 500 meters deep. In addition, the exploration results tell that the mineralization remains open at depth.

Why are these results important to investors of Endeavour Silver Corp?

First, they will be included in a revised resource and reserve estimate that it aims to issue sometime in the first quarter of 2019. The release may drive an increase in the market value of the stock because an increase in mineral reserves means new nourishment to the company's future production and an extension of the overall life of mine.

Second, since the upper mineral category of measured and indicated resources will be upgraded with one million tons from the lower category of inferred resources, the mine plan for Terronera will be updated with an additional 16.3 million to 16.5 million ounces of equivalent silver. That is about 30% of Endeavour Silver's total mineral resources as of Dec. 31, 2017. Since the one million tons of additional resources are value accretive, the asset base of Endeavour Silver Corp will upgrade. The market will for sure notice that.

Endeavour Silver Corp. was $2.27 per share at close Tuesday. The share price has fallen 6% for the 52 weeks through Sept. 18 and is now trading below the 200-, 100- and 50-day simple moving average lines. The market capitalization is about $294 million.

The 52-week range is $1.94 to $3.35. The price-book ratio is 1.99 versus an industry median of 1.74 and the EV-to-Ebitda ratio is 10.32 versus an industry median of 9.3.

The company has an Ebitda margin of nearly 16% of revenue versus an industry median of 23%.

The recommendation rating is 2.4 out of 5 and the average target price is $4.53 per share.

Disclosure: I have no positions in any security mentioned in this article.

This article first appeared on GuruFocus.