Mr. Bradford Cooke reports
ENDEAVOUR SILVER REPORTS FINANCIAL RESULTS FOR SECOND QUARTER, 2014; CONFERENCE
CALL AT 10AM PDT (1PM EDT) ON AUGUST 12, 2014
Endeavour Silver Corp. has released its financial results for the second quarter ended June 30, 2014. Endeavour owns and operates three underground silver-gold mines in Mexico: the Guanacevi mine in Durango state, and the Bolanitos and El Cubo mines in Guanajuato state.
The consolidated interim financial statements, and management's discussion and analysis can be viewed on the company's website, on SEDAR and on EDGAR. All amounts are reported in United States dollars.
Highlights of second quarter 2014 (compared with second quarter 2013)
Financial:
-
Net loss of $300,000 (nil per share) compared with $400,000
(nil per share);
- Adjusted loss of $300,000 (nil per share) compared with $2.7-million (three cents per share);
- EBITDA (earnings before interest, taxes, depreciation and amortization) decreased 20 per cent to $13.4-million;
- Cash flow from operations before working capital changes decreased 4 per cent to
$11.9-million;
- Mine operating cash flow before taxes decreased 25 per cent to $19.6-million;
- Revenue decreased 23 per cent to $54.8-million;
- Realized silver price decreased 6 per cent to $21.10 per ounce sold;
- Realized gold price increased 1 per cent to $1,308 per ounce sold;
- Cash costs decreased 6 per cent to $9.87 per ounce silver payable (net of gold
credits);
- All-in sustaining costs decreased 24 per cent to $20.48 per ounce silver payable
(net of gold credits);
- Cash and equivalents increased 26 per cent to $44-million compared with $35-million at year-end.
Operations:
-
Silver production increased 9 per cent to 1,669,609 ounces;
- Gold production decreased 24 per cent to 15,131 ounces;
- Silver equivalent production decreased 6 per cent to 2.6 million ounces (at a 60:1
silver:gold ratio);
- Bullion inventory at quarter-end included 119,866 silver ounces and 272
gold ounces;
- Concentrate inventory at quarter-end included 86,724 silver ounces and
1,266 gold ounces.
Operating results
Consolidated quarterly and year-to-date silver production rose 9 per cent and 18 per cent, respectively, compared with 2013 due mainly to higher silver grades and recoveries, offset by lower tonnage throughput. The company took advantage of the available capacity of the leased Las Torres plant near El Cubo last year to boost mine production from Bolanitos; however, the leased plant was relinquished in August, 2013, and as a result, the Bolanitos mine is now running at its own plant capacity.
Quarterly and year-to-date gold production declined 24 per cent and 4 per cent, respectively, compared with 2013 as a result of lower gold grades and tonnage throughput, offset partly by higher recoveries. Silver equivalent production was down 6 per cent quarterly but up 9 per cent year to date compared with 2013. The reduction in Bolanitos production this year has been largely offset by increases in production from Guanacevi and El Cubo, notwithstanding the production slowdowns in the second quarter at both mines, due to the temporary closures of the Porvenir Cuatro mine at Guanacevi and the Santa Cecilia mine at El Cubo following fatal accidents in late March to early April.
Bradford Cooke, chief executive officer of Endeavour, stated: "We delivered another solid quarter of silver and gold production in the second quarter; lower as forecast from our outstanding first quarter production, but still well ahead of our production plan for the year. We also completed independent safety reviews at each mine, hired a full-time safety specialist to work with our mine safety teams, and we have been implementing additional safety training and procedures.
"Cash costs drifted higher in the second quarter due to lower silver and gold production, and lower metal prices, but they are still within guidance thanks to our cost-cutting strategies initiated last year. We expect all-in sustaining costs to be higher in the second quarter and third quarter because these are typically the peak spending quarters for our capital and exploration programs each year. However, we remain on track to meet full-year guidance on both cash costs and all-in sustaining costs.
"Since completing the rebuild of the El Cubo mine, plant and infrastructure in the second quarter of 2013, management has focused on reducing our operating costs and expanding our profit margin to replenish the balance sheet. We generated strong free cash flow over the past 12 months and as a result, net cash and equivalents (less debt) totalling $33-million has been added to the balance sheet since June 30, 2013.
"Our outlook to year-end remains positive on both metal prices as well as silver and gold production, and we currently have 12 drill rigs working to boost reserves and resources. We aim to complete our operational turnaround of the El Cubo mine this year. At San Sebastian, we are focused on expanding the resource by drilling in advance of completing the mine permitting and an economic study later this year."
Financial results
For the second quarter ended June 30, 2014, the company generated revenue totalling $54.8-million (2013 -- $71.3-million). During the quarter, the company sold 1,774,302 silver ounces and 14,612 gold ounces at realized prices of $20.10 and $1,308 per ounce, respectively, compared with sales of 1,787,571 silver ounces and 25,477 gold ounces at realized prices of $21.38 and $1,297 per ounce, respectively, in the second quarter of 2013.
After cost of sales of $50.4-million (2013 -- $64.8-million), mine operating earnings amounted to $4.4-million (2013 -- $6.4-million) from mining and milling operations in Mexico. Excluding depreciation and depletion of $14.7-million (2013 -- $13.1-million), share-based compensation of $200,000 (2013 -- $200,000) and writedown of inventory of $400,000 (2013 -- $6.4-million), mine operating cash flow before taxes was $19.6-million (2013 -- $26.1-million) in the second quarter of 2014. Net losses were $300,000 (2013 -- $400,000).
Cost-cutting initiatives that commenced in the second quarter of 2013 have gained traction; however, these initiatives were offset by lower throughput at the El Cubo mine and the payment of the new Mexican special mining duty and environmental tax, resulting in a consolidated direct cost of $103 per tonne, 7 per cent higher than the same period in 2013.
Cash costs, net of byproduct credits (a non-IFRS measure and a standard of the Silver Institute), fell 6 per cent to $9.87 per ounce of payable silver, compared with $10.53 per ounce in the same period of 2013, as improved grades and recoveries offset the higher costs per tonne. All-in sustaining costs per ounce (also a non-IFRS measure) fell 24 per cent to $20.48 per ounce, due in part to lower exploration and mine development expenditures compared with the second quarter of 2013.
Conference call
A conference call to discuss the results will be held on Tuesday, Aug. 12, at 10 a.m. Pacific Time (1 p.m. Eastern Time). To participate in the conference call, please dial the numbers provided.
Toll-free in Canada and the U.S.: 1-800-319-4610
Local Vancouver: 604-638-5340
Outside of Canada and the U.S.: 1-604-638-5340
No passcode is necessary to participate in the conference call.
A replay of the conference call will be available by dialling 1-800-319-6413 in Canada and the U.S. (toll-free) or 1-604-638-9010 outside of Canada and the U.S. The required passcode is 4890 followed by the pound sign. The audio replay and a written transcript will also be made available on the company's website.
COMPARATIVE PRODUCTION HIGHLIGHTS
Three months ended Six months ended
June 30, June 30,
2014 2013 2014 2013
Silver ounces produced 1,669,609 1,535,873 3,568,608 3,025,590
Gold ounces produced 15,131 19,915 33,650 34,948
Payable silver ounces produced 1,620,189 1,479,828 3,464,354 2,939,533
Payable gold ounces produced 14,607 18,843 32,403 33,551
Silver equivalent ounces produced 2,577,469 2,730,773 5,587,608 5,122,470
Cash costs per silver ounce $ 9.87 $ 10.53 $ 7.21 $ 10.29
Total production costs per
ounce $ 19.19 $ 18.18 $ 15.93 $ 18.22
All-in sustaining costs per
ounce $ 20.48 $ 26.80 $ 16.05 $ 25.78
Processed tonnes 339,276 393,070 685,801 769,414
Direct production costs per
tonne $ 103.58 96.45 $ 98.19 $ 98.01
Silver co-product cash costs $ 13.24 $ 13.82 $ 11.74 $ 15.07
Gold co-product cash costs $ 862 $ 838 $ 756 $ 853
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(expressed in thousands of U.S. dollars except for-share and per-share amounts)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2014 2013 2014 2013
Revenue $ 54,774 $ 71,250 $ 107,774 $ 141,123
Cost of sales
Direct production
costs 34,849 44,746 62,069 81,633
Royalties 278 356 612 806
Share-based
compensation 219 202 287 277
Depreciation and
depletion 14,709 13,149 28,782 25,223
Writedown of
inventory to net
realizable value 365 6,383 365 7,878
50,420 64,836 92,115 115,817
Mine operating
earnings 4,354 6,414 15,659 25,306
Expenses
Exploration 2,806 4,978 4,974 9,168
General and
administrative 3,517 3,787 5,955 6,917
6,323 8,765 10,929 16,085
Operating earnings
(loss) (1,969) (2,351) 4,730 9,221
Mark-to-market
loss/(gain) on
derivative
liabilities -- (2,386) 1,434 (3,838)
Mark-to-market
loss/(gain) on
contingent
liability (14) (5,408) 27 (7,899)
Finance costs 256 531 702 778
Other income
(expense)
Foreign exchange 445 (2,439) 188 (1,039)
Investment and
other income 83 371 267 2,349
528 (2,068) 455 1,310
Earnings (loss)
before income taxes (1,683) 2,844 3,022 21,490
Income tax expense
Current income tax
expense 3,250 4,363 6,192 6,199
Deferred income
tax expense
(recovery) (4,644) (1,158) (6,918) 1,295
(1,394) 3,205 (726) 7,494
Net earnings (loss)
for the period (289) (361) 3,748 13,996
Other comprehensive
income (loss), net
of tax
Net change in fair
value of
available for
sale investments 68 (4,242) 76 (3,929)
Comprehensive income
(loss) for the
period (221) (4,603) 3,824 10,067
Basic earnings
(loss) per share
based on net
earnings $ (0.00) $ (0.00) $ 0.04 $ 0.14
Diluted earnings
(loss) per share
based on net
earnings $ (0.00) $ (0.00) $ 0.04 $ 0.10
We seek Safe Harbor.
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