Mr. Bradford Cooke reports
ENDEAVOUR SILVER FORECASTS NINTH CONSECUTIVE YEAR OF PRODUCTION GROWTH, EL CUBO MINE CAPITAL PROJECTS WELL UNDERWAY FOR COMPLETION IN Q2, 2013
Endeavour Silver Corp. is forecasting its ninth consecutive year of production growth for 2013. The company 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.
Production outlook
Endeavour's silver production in 2013 is forecast to rise 12 per cent to 18 per cent to five million to 5.3 million ounces, and gold production is anticipated to increase 19 per cent to 27 per cent to 46,000 to 49,000 ounces as shown in the table. Silver-equivalent production is expected to climb 14 per cent to 22 per cent to 7.3 million to 7.8 million ounces (at a silver-to-gold ratio of 50 to 1).
ESTIMATED 2013 PRODUCTION
Silver Gold
production production Tonnes per day
Mine (Moz) (koz) (tpd)
Guanacevi 2.4-2.5 6.5-7.0 1,250-1,350
Bolanitos 1.7-1.8 25.0-26.0 1,500-1,650
El Cubo 0.9-1.0 14.5-16.0 1,050-1,200
Total 5.0-5.3 46.0-49.0 3,800-4,200
Bradford Cooke, chief executive officer of Endeavour, commented: "Our recently acquired El Cubo mine will drive this year's production growth. Endeavour's current focus is on completing the main El Cubo mine and plant capital projects on time and budget in second quarter 2013, continuing the operational turnaround now well under way at El Cubo, and honing our operational costs and efficiencies at Guanacevi and Guanajuato.
"For that reason, the company is not forecasting any additional production growth at the Guanacevi and Bolanitos mines in 2013, although we will evaluate certain opportunities to expand the production in 2013. Once the El Cubo capital projects are completed, management will turn its attention to growth opportunities at the other two mines and elsewhere.
"Our strategy to acquire underperforming mines in historic districts for their turnaround and expansion potential does entail a certain amount of short-term pain, but our track record shows it can create exceptional long-term gain. I would like to thank our shareholders for their patience during this turnaround period at El Cubo."
The main opportunity to expand 2013 production is at Bolanitos, where the plant is currently operating at its 1,600-tonne-per-day capacity, but the mines have operated over the last two months at 1,800 tpd to build up the ore stockpiles. The Bolanitos mines are actually capable of producing up to 2,200 tpd with the current employees, contractors and equipment, and that is the opportunity management is now evaluating.
The El Cubo leased plant currently has 800 tpd of unused capacity and the El Cubo owned plant now under reconstruction will have 400 tpd of unused capacity upon completion. Endeavour is currently negotiating to sell to smelters on commercially attractive terms the extra silver-gold concentrates that would be generated by processing extra Bolanitos ores through the El Cubo plants.
At El Cubo, accelerated mine development and underground drilling commenced in third quarter 2012, new mining equipment was acquired in fourth quarter 2012 and three more scoop trams are scheduled to arrive within the next six weeks. The plant and surface infrastructure rebuild program also commenced in late third quarter 2012 and is currently on time and budget for scheduled completion in second quarter 2013. Shareholders are invited to visit the newly created El Cubo capital projects update page on the website for monthly updates.
Looking forward to 2014 and 2015, Endeavour recognizes additional opportunities to grow production at all three mines. While these growth opportunities are still at the conceptual stage, once the El Cubo capital programs are completed this year, management will prioritize these opportunities and commence planning for future mine and plant expansions.
At Guanacevi, the proposed underground development of the new Milache discovery is awaiting permitting for development in 2013 to 2014 and production starting in 2015. Initial indications are that mill throughput would stay constant but the higher ore grades at Milache would give Guanacevi production a small boost. Exploration will continue to test new targets in the district.
At Bolanitos, the Cebada, Bolanitos, Lucero, Karina, Fernanda, Daniela and Lana veins are capable of providing up to 2,200 tpd of mine output at the present time so management will consider another plant expansion later this year. New exploration targets in the La Luz, Plateros, La Joya and Puertocito veins give management encouragement that Bolanitos continues to offer excellent potential for new discoveries.
At El Cubo, the reconstruction of the wholly owned plant will operate initially at 1,200 tpd but will have a capacity of 1,600 tpd. The main bottleneck to higher production is the mine output (tonnes and grades), but given Endeavour's exploration programs have just gotten under way to test several exciting new targets over the next two years, management views El Cubo as also having excellent potential for new discoveries.
Operating costs
Consolidated cash costs of production (net of byproduct gold credits) are expected to increase from $6 (U.S.) to $7 (U.S.) per ounce to $9 (U.S.) to $10 (U.S.) per ounce in 2013, largely due to the rising production from the higher-cost El Cubo mine and the lower grades being mined at Guanacevi. However, El Cubo cash costs should decline in 2013 due to rising operating efficiencies and once the capital projects are completed.
Assuming $30 (U.S.) silver and $1,650 (U.S.) gold, Endeavour anticipates its mine operating (gross) profit margin will be around $20 (U.S.) to $21 (U.S.) per ounce in 2013. For every $100 increase in the price of gold, Endeavour's cash cost of production should drop by about 90 cents to $1 per ounce of silver produced and the mine operating profit margin should climb by a similar amount per ounce of silver production.
Capital budget
Endeavour plans to invest $85.8-million on capital projects in 2013, including $52.6-million on mine development, infrastructure, equipment and exploration in approximately equal amounts at all three mines, and $33.2-million on plant reconstruction, infrastructure, equipment and buildings primarily at El Cubo.
The company has budgeted $44.9-million (U.S.) at El Cubo, $21.4-million at Bolanitos and $19.5-million at Guanacevi, all of which should be covered by the company's anticipated 2013 cash flow. However, the bulk of the capital investments will be made in the first half of the year, so Endeavour expects to utilize its $75-million line of credit as needed until cash flows catch up later in the year.
Exploration expenditures
In 2013, Endeavour plans to spend $19.3-million on exploration at the three operating mines and five district-scale exploration properties. A total of 78,500 metres of drilling in about 180 to 200 holes is budgeted to test approximately 24 exploration targets, in addition to all of the underground mine exploration drilling.
Every year, management aims to acquire new properties, explore them, make new discoveries and fast-track them to production. This year, the company will continue to aggressively explore its property portfolio, including the emerging new high-grade silver-gold discovery in the Terronera vein on the San Sebastian property in Jalisco state. The 2012 exploration review, and reserve and resource update are now nearing completion for release in February.
Endeavour is on track to deliver its ninth consecutive year of production growth in 2013 thanks to the philosophy of continuous improvement. With $50-million (U.S.) in working capital, including substantial silver and gold inventories, the company is well positioned financially to execute its business plan in 2013.
Qualified person
Godfrey Walton, MSc, PGeo, president and chief operating officer of Endeavour, is the qualified person who reviewed and approved the technical information contained in this news release.
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