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Endeavour Silver Reports Financial Results for the Second Quarter 2020; Conference Call at 10am PDT (1pm EDT) Today

Endeavour Silver Corporation
·19 min read

VANCOUVER, British Columbia, Aug. 04, 2020 (GLOBE NEWSWIRE) -- Endeavour Silver Corp. (NYSE: EXK; TSX: EDR) released its financial results today for the three month and six month periods ended June 30, 2020. The Company operates three silver-gold mines in Mexico: the Guanaceví mine in Durango state, the Bolañitos mine in Guanajuato state and the El Compas mine in Zacatecas state.

Bradford Cooke, Endeavour CEO, commented, “I am pleased to report that notwithstanding the suspension of mining operations during the 2nd quarter due to the COVID-19 pandemic, Endeavour was able to reduce its net loss quarter-on-quarter, as each mine generated positive Mine Free Cash Flow thanks to improved operating performance and higher precious metal prices. After the mines restarted, we were able to outperform our adjusted mine plans in June. We are now looking for opportunities to enhance safe production in H2, 2020.”

“We were pro-active in implementing our coronavirus prevention and response plan in mid-March to minimize its impact on our mining operations in Mexico. As a result, we have been able to stop the contagion at the mine gates, although our work force has been reduced due to higher risk employees staying home during this time. I commend our Mexico management and employees for responding positively when called upon by these extraordinary circumstances.”

2020 Second Quarter Highlights (all dollar amounts in US$)

  • Net Revenue: $20.2 million revenue from the sale of 634,839 oz of silver and 5,218 oz gold at average realized prices of $17.04 per oz silver and $1,862 per oz gold.

  • Cash Flow: $1.9 million cash flow from operations before working capital changes, and EBITDA(1) of $1.2 million, notwithstanding the suspension of mining for all of April and part of May.

  • Net Income: Loss of $3.3 million ($0.02 per share) which included $2.2 million in care and maintenance costs during the mine suspension period and $1.1 million in general and administrative expenses related to the mark to market of deferred share units due to the higher share price. Improved operating performance and higher precious metal prices significantly reduced losses both quarter-on-quarter and year-on-year.

  • Balance Sheet: Cash position of $30.5 million and working capital of $44.6 million. Term liabilities consist solely of equipment loans of $11.0 million to upgrade the mobile mining equipment. Raised $21.7 million in equity financing using the ATM facility, net of issuance costs.

  • Metal Production: Produced 596,545 oz silver and 5,817 oz gold, despite the government mandated suspension of mining operations, for a total of 1.1 million oz silver equivalent (AgEq) at an 80:1 silver:gold ratio.

  • Operating Costs: Cash cost(1) was $2.78 per oz payable silver and all-in sustaining cost (AISC)(1) was $14.91 per oz payable silver, both net of gold credits. Cash cost and AISC were substantially lower both quarter-on-quarter and year-on-year due to the improved operating performance at Guanacevi, and the higher realized gold price that increased the by-product credit. The lower AISC was partly offset by increased capital expenditures at Bolanitos to effect the operating turnaround.

  • Guanacevi Continued to Out Perform: Nothwithstanding the mine suspension period, Mine Free Cash Flow (Cash from operating activities less capital expenditures) was $2.7 million as processed tonnes, silver and gold grades and recoveries continued well above plan. The operational turn-around and transition to mining the new, higher grade El Curso, Milache and SCS orebodies had a significant positive impact on the operating performance. Ore stockpiles and prepared long hole stopes allowed for an expedited mining restart, while the testing of the newly installed cone crushers in April allowed for significant plant throughput in May.

  • Bolanitos Turning a Corner: Nothwithstanding the mine suspension period, Mine Free Cash Flow was $0.1 million as the re-start was slower than Guanacevi due to a smaller stockpile and greater focus on mine development and grade control during the ramp-up period. Gold grades rose during the quarter while silver grades remained low due to variations in the ore bodies.

  • El Compas Generated Free Cash Flow: Nothwithstanding the mine suspension period, Mine Free Cash Flow was $1.1 million as the re-start was slower than Guanacevi due to a smaller stockpile and greater focus on mine development and grade control during the ramp-up period. Gold grades trended higher during the quarter while silver grades remained low due to variations in the ore bodies.

  • Continued Exploration Success: Positive exploration drill results from the El Curso area at Guanacevi and the Melladito area at Bolanitos.

(1) Mine operating cash flow, cash costs and all-in sustaining costs are non-IFRS measures. Please refer to the definitions in the Company’s Management Discussion & Analysis.

Financial Results (Consolidated Statement of Operations Appended Below)

For the three-month period ended June 30, 2020, the Company generated net revenue totaling $20.2 million (Q2, 2019 - $28.3 million). During the period, the Company sold 634,839 silver oz sold and 5,218 oz gold at realized prices of $17.04 and $1,862 per oz respectively, compared to sales of 1,100,065 oz silver and 9,416 oz gold at realized prices of $15.02 and $1,366 per oz respectively in the same period of 2019. The Company decreased its finished goods silver and increased its gold inventory to 235,100 silver oz and 1,953 gold oz, respectively at June 30, 2020 compared to 279,320 oz silver and 1,452 oz gold held at March 31, 2020.

Cost of sales for Q2, 2020 was $17.1 million, a decrease of 50% over the cost of sales of $34.4 million for the same period of 2019. The 50% decrease in cost of sales was primarily related to the suspension of the El Cubo operation in Q4, 2019 and the temporary suspension of the Guanacevi, Bolanitos and El Compas operations due to COVID-19 as consolidated throughput fell 52%.

After cost of sales of $17.1 million (Q2, 2019 - $34.4 million), mine operating earnings was $3.1 million (Q2, 2019 – loss of $6.1 million) from mining and milling operations in Mexico.

Exploration expenses decreased in Q2, 2020 to $1.7 million from $3.2 million for the same period of 2019 as the Mexico health decree resulted in a month and half of suspension of all activities. General and administrative expenses increased to $3.1 million in Q2, 2020 compared to $2.0 million for the same period of 2019, primarily due to mark-to-market fluctuations for director’s deferred share units. The quarter included $2.9 million of care and maintenance expense of which $0.7 million related to the shutdown El Cubo operation and $2.2 million related to the temporary suspension of the Guanacevi, Bolanitos and El Compas operations due to COVID-19.

Excluding depreciation and depletion of $4.0 million (Q2, 2019 - $7.1 million), stock-based compensation of $0.1 million (Q2, 2019- $0.1 million) and the inventory write off of $0.5 million (Q2, 2019- $1.5 million) mine operating cash flow before taxes was $7.6 million in Q2, 2020 (Q2, 2019 – $2.6 million). Operating loss was $4.6 million (Q2, 2019 – loss of $11.3 million) after exploration expenditures of general and administrative expense and care and maintenance costs.

Net loss amounted to $3.3 million (loss of $0.02 per share) compared to a net loss of $10.1 million (loss of $0.08 per share) in Q2, 2019.

Direct production costs per tonne in Q2, 2020 decreased 4%, to $109.74 compared with Q2, 2019 due to lower operating costs at the Guanaceví operation, offset by the slightly higher costs at the Bolañitos and El Compas operations and the exclusion the El Cubo operation which suspended activities in Q4, 2019.

Consolidated cash costs per oz, net of by-product credits (a non-IFRS measure and a standard of the Silver Institute) decreased 80% to $2.78 primarily due to lower operating costs per tonne, higher gold grades and higher realized gold price that increased the by-product credit compared to the same period in 2019. The higher proportional gold production, and rising gold price, which increased 36% compared to the same period ended in 2019, were significant drivers in the lower cash cost net of by-product credits.

On a co-product cash costs basis, both silver and gold cost per ounce improved compared to the Q2, 2019. Silver co-product cash costs fell 28%, while gold co-product costs fell 13% to $10.16 per ounce and $1,111 per ounce respectively. The improvement was primarily driven by improved cost per tonne, the higher grade ore and improved gold recoveries.

All-in sustaining costs (also a non-IFRS measure) decreased 29% to $14.91 per oz in Q2, 2020 as a result of lower operating costs offset by higher corporate general and administrative costs and increased capital expenditures at Bolañitos to accelerated mine development. General and administrative costs increased due to mark to market deferred share units and were allocated for the entire operating period despite suspension activities during April and May.

The Company retained essential personnel at operations during the suspension period to maintain safety protocols, environmental monitoring, security measures and day-to-day maintenance. $2.1 million of costs were incurred from April 1st until the May re-starts and were allocated to care and maintenance expenses and excluded from mine operating costs or the corresponding metrics.

The Mexican government declared mining as an essential business, however in Mexico positive COVID-19 cases continue to rise at a significant rate to date. A local outbreak, an impediment to the supply chain or market logistics, or a change in government health orders remains a significant risk. The mines are operating under strict safety protocols with the expectations of operating near throughput capacity. Due to the continued uncertainty, management will not provide second half guidance at this time.

The Condensed Consolidated Interim Financial Statements and Management’s Discussion & Analysis can be viewed on the Company’s website at www.edrsilver.com, on SEDAR at www.sedar.com and EDGAR at www.sec.gov. All amounts are reported in US$.

Conference Call

A conference call to discuss these results will be held today, Tuesday, August 4 at 10am PDT (1pm EDT). To participate in the conference call, please dial the numbers below. No pass-code is necessary.

Toll-free in Canada and the US: 1-800-319-4610
Local Vancouver: 604-638-5340
Outside of Canada and the US: +-604-638-5340

A replay of the conference call will be available by dialing 1-800-319-6413 in Canada and the US (toll-free) or +604-638-9010 outside of Canada and the US. The required pass-code is 4879#. The replay will also be available on the Company’s website at www.edrsilver.com.

About Endeavour Silver – Endeavour Silver Corp. is a mid-tier precious metals mining company that owns and operates three high-grade, underground, silver-gold mines in Mexico. Endeavour is currently advancing the Terronera mine project towards a development decision and exploring its portfolio of exploration and development projects in Mexico and Chile to facilitate its goal to become a premier senior silver producer. Our philosophy of corporate social integrity creates value for all stakeholders.

SOURCE Endeavour Silver Corp.

Contact Information:
Galina Meleger, Director Investor Relations
Toll free: (877) 685-9775
Tel: (604) 640-4804
Email: gmeleger@edrsilver.com
Website: www.edrsilver.com

Follow Endeavour Silver on Facebook, Twitter, Instagram and LinkedIn

Cautionary Note Regarding Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of the United States private securities litigation reform act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation. Such forward‑looking statements and information herein include but are not limited to statements regarding Endeavour’s anticipated performance in 2020 including changes in mining operations and production levels, the timing and results of various activities and the impact of the COVID-19 pandemic on operations. The Company does not intend to and does not assume any obligation to update such forward-looking statements or information, other than as required by applicable law.

Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, production levels, performance or achievements of Endeavour and its operations to be materially different from those expressed or implied by such statements. Such factors include but are not limited to the ultimate impact of the COVID-19 pandemic on operations and results, changes in production and costs guidance, national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and Mexico; financial risks due to precious metals prices, operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining; the speculative nature of mineral exploration and development, risks in obtaining necessary licenses and permits, and challenges to the Company’s title to properties; as well as those factors described in the section “risk factors” contained in the Company’s most recent form 40F/Annual Information Form filed with the S.E.C. and Canadian securities regulatory authorities.

Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the Company’s mining operations, no material adverse change in the market price of commodities, mining operations will operate and the mining products will be completed in accordance with management’s expectations and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information.

ENDEAVOUR SILVER CORP.
COMPARATIVE HIGHLIGHTS

Three Months Ended June 30

Q2 2020 Highlights

Six Months Ended June 30

2020

2019

% Change

2020

2019

% Change

Production

596,545

1,059,322

(44

%)

Silver ounces produced

1,454,204

2,130,677

(32

%)

5,817

9,558

(39

%)

Gold ounces produced

14,293

19,613

(27

%)

590,618

1,039,596

(43

%)

Payable silver ounces produced

1,440,409

2,089,811

(31

%)

5,717

9,332

(39

%)

Payable gold ounces produced

14,037

19,141

(27

%)

1,061,905

1,823,962

(42

%)

Silver equivalent ounces produced

2,597,644

3,699,717

(30

%)

2.78

13.67

(80

%)

Cash costs per silver ounce

5.77

13.11

(56

%)

10.33

22.87

(55

%)

Total production costs per ounce

13.88

21.49

(35

%)

14.91

20.90

(29

%)

All-in sustaining costs per ounce

16.96

20.15

(16

%)

114,120

237,640

(52

%)

Processed tonnes

313,447

484,159

(35

%)

109.74

114.40

(4

%)

Direct production costs per tonne

104.59

110.04

(5

%)

10.16

14.10

(28

%)

Silver co-product cash costs

10.99

13.82

(20

%)

1,111

1,282

(13

%)

Gold co-product cash costs

1,175

1,215

(3

%)

Financial

20.2

28.3

(29

%)

Revenue ($ millions)

42.1

56.3

(25

%)

634,839

1,100,065

(42

%)

Silver ounces sold

1,300,339

2,169,450

(40

%)

5,218

9,416

(45

%)

Gold ounces sold

12,672

18,975

(33

%)

17.04

15.02

13

%

Realized silver price per ounce

16.16

15.25

6

%

1,862

1,366

36

%

Realized gold price per ounce

1,727

1,340

29

%

(3.3)

(10.1)

68

%

Net earnings (loss) ($ millions)

(19.2)

(23.4)

18

%

3.1

(6.1)

151

%

Mine operating earnings (loss) ($ millions)

0.2

(11.9)

102

%

7.6

2.6

194

%

Mine operating cash flow ($ millions)

11.9

7.2

65

%

1.9

(1.0)

297

%

Operating cash flow before working capital changes

(3.1)

(3.1)

0

%

1.2

(2.7)

145

%

Earnings before ITDA ($ millions)

(5.5)

(7.3)

25

%

44.6

46.6

(4

%)

Working capital ($ millions)

44.6

46.6

(4

%)

Shareholders

(0.02)

(0.08)

75

%

Earnings (loss) per share – basic

(0.13)

(0.18)

28

%

0.01

(0.01)

200

%

Operating cash flow before working capital changes per share

(0.02)

(0.02)

0

%

147,862,393

132,158,891

12

%

Weighted average shares outstanding

144,836,300

131,779,448

10

%

The above highlights are key measures used by management, however they should not be the sole measures used in determining the performance of the Company’s operations. The related definitions and reconciliations are contained in the Management Discussion and Analysis.


ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of U.S. dollars)

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019

Operating activities

Net earnings (loss) for the period

$

(3,289

)

$

(10,123

)

$

(19,215

)

$

(23,401

)

Items not affecting cash:

Share-based compensation

848

851

1,593

1,850

Depreciation, depletion and amortization

4,213

7,314

10,481

14,541

Deferred income tax expense (recovery)

(514

)

(823

)

1,350

(1,173

)

Unrealized foreign exchange loss (gain)

(140

)

111

514

107

Finance costs

337

103

648

195

Write off of mineral properties

-

45

-

45

Write down of inventory to net realizable value

486

1,507

1,528

4,719

Loss on asset disposal

57

-

135

-

Unrealized loss (gain) on other investments

(107

)

55

(114

)

27

Net changes in non-cash working capital

(2,800

)

824

(178

)

(5,880

)

Cash from (used in) operating activities

(909

)

(136

)

(3,258

)

(8,970

)

Investing activities

Proceeds on disposal of property, plant and equipment

73

-

100

-

Mineral property, plant and equipment expenditures

(4,872

)

(5,740

)

(10,384

)

(9,663

)

Intangible asset expenditures

-

(1

)

-

(204

)

Cash used in investing activities

(4,799

)

(5,741

)

(10,284

)

(9,867

)

Financing activities

Repayment of loans payable

(554

)

(152

)

(1,326

)

(252

)

Repayment of lease liabilities

(49

)

(32

)

(92

)

(103

)

Interest paid

(243

)

(70

)

(461

)

(91

)

Public equity offerings

22,703

7,619

24,188

9,191

Exercise of options

8

-

20

-

Share issuance costs

(963

)

(223

)

(1,037

)

(288

)

Cash from financing activities

20,902

7,142

21,292

8,457

Effect of exchange rate change on cash and cash equivalents

314

65

(620

)

110

Increase (decrease) in cash and cash equivalents

15,194

1,265

7,750

(10,380

)

Cash and cash equivalents, beginning of the year

14,990

21,776

23,368

33,376

Cash and cash equivalents, end of the period

$

30,498

$

23,106

$

30,498

$

23,106

This statement should be read in conjunction with the condensed consolidated interim financial statements for the periods ended June 30, 2020 and the related notes contained therein.


ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(expressed in thousands of US dollars, except for shares and per share amounts)

Three months ended

Six months ended

June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019

Revenue

$

20,201

$

28,294

$

42,128

$

56,314

Cost of sales:

Direct costs

11,722

25,354

28,522

48,425

Royalties

834

336

1,691

653

Share-based payments

92

53

183

108

Depreciation, depletion and amortization

3,951

7,149

9,974

14,265

Write down of inventory to net realizable value

486

1,507

1,528

4,719

17,085

34,399

41,898

68,170

Mine operating earnings (loss)

3,116

(6,105

)

230

(11,856

)

Expenses:

Exploration

1,665

3,207

4,047

5,540

General and administrative

3,137

2,009

5,142

5,051

Severance costs

-

-

-

1,100

Care and maintenance costs

2,911

-

4,256

-

7,713

5,216

13,445

11,691

Operating earnings (loss)

(4,597

)

(11,321

)

(13,215

)

(23,547

)

Finance costs

356

103

666

195

Other income (expense):

Foreign exchange

740

646

(4,177

)

243

Investment and other

605

16

654

(193

)

1,345

662

(3,523

)

50

Earnings (loss) before income taxes

(3,608

)

(10,762

)

(17,404

)

(23,692

)

Income tax expense (recovery):

Current income tax expense

195

184

461

882

Deferred income tax expense (recovery)

(514

)

(823

)

1,350

(1,173

)

(319

)

(639

)

1,811

(291

)

Net loss and comprehensive loss for the period

(3,289

)

(10,123

)

(19,215

)

(23,401

)

Basic and diluted earnings (loss) per share based on net earnings

$

(0.02

)

$

(0.08

)

$

(0.13

)

$

(0.18

)

Basic and diluted weighted average number of shares outstanding

147,862,393

132,158,891

144,836,300

131,779,448

This statement should be read in conjunction with the condensed consolidated interim financial statements for the period ended June 30, 2020 and the related notes contained therein.


ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of US dollars)

June 30,

December 31,

2020

2019

ASSETS

Current assets

Cash and cash equivalents

$

30,498

$

23,368

Other investments

183

69

Account and other receivables

15,774

18,572

Income tax receivable

3,440

4,378

Inventories

13,823

13,589

Prepaid expenses

1,984

3,302

Total current assets

65,702

63,278

Non-current deposits

591

606

Non-current IVA receivable

2,812

2,048

Deferred income tax asset

5,899

7,136

Intangible assets

731

975

Right-of-use leased assets

1,152

1,337

Mineral properties, plant and equipment

90,273

88,333

Total assets

$

167,160

$

163,713

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued liabilities

$

16,649

$

19,775

Income taxes payable

695

1,947

Loans payable

3,621

2,958

Lease liabilities

158

164

Total current liabilities

21,123

24,844

Loans payable

7,397

5,917

Lease liabilities

936

1,074

Provision for reclamation and rehabilitation

8,590

8,403

Deferred income tax liability

788

682

Total liabilities

38,834

40,920

Shareholders' equity

Common shares, unlimited shares authorized, no par value, issued

and outstanding 154,926,622 shares (Dec 31, 2019 - 141,668,178 shares)

505,334

482,170

Contributed surplus

11,668

11,482

Retained earnings (deficit)

(388,676

)

(370,859

)

Total shareholders' equity

128,326

122,793

Total liabilities and shareholders' equity

$

167,160

$

163,713

This statement should be read in conjunction with the condensed consolidated interim financial statements for the period ended June 30, 2020 and the related notes contained therein.