Endeavour Silver(EXK) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue decreased by 35% and earnings declined by 275% due to a strategic decision to withhold the sale of a significant amount of metal, resulting in approximately 1.6 million silver equivalent ounces in finished goods inventory valued at nearly $35 million [7][8] - Operating cash flow before working capital fell by 60% [7] - Cash costs averaged a little over $10 per ounce and all-in sustaining costs averaged a little over $19.50 per ounce net of the gold credit [11] Business Line Data and Key Metrics Changes - Silver production increased by nearly 30%, driven by strong performance at the Guanacevi mine, while gold production decreased by 17% due to the closure of the El Compas mine [9] - The company increased its annual production outlook to 7.6 to 8.0 million silver equivalent ounces for the year, reflecting better-than-anticipated operating performance at Guanacevi [13] Market Data and Key Metrics Changes - The S&P is down 20%, gold and silver equities are down 30%, and the company's stock is trading down about 30% despite robust operational performance [6] - The company expects a bullish environment for gold and silver as peak rate expectations are nearing and inflation remains persistent [6] Company Strategy and Development Direction - The company is focusing on cost control and efficiency improvements, particularly in development operations, to mitigate inflationary pressures [14][25] - A significant priority is the development of the Terronera project, with an additional $23 million approved for development expenditures [15][17] - The acquisition of the Pitarrilla project, the world's largest undeveloped silver deposit, is expected to enhance the company's growth potential and regional expertise [18] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the long-term strength of silver prices and is taking an opportunistic stance on potential M&A opportunities despite having a full plate [35] - The company acknowledges ongoing inflationary pressures but has locked in prices for much of its long lead items to mitigate these costs [38][40] Other Important Information - The company is working on engineering construction of access roads and site clearing for the Terronera project [16] - The exploration team will focus on verifying historic resources at the Pitarrilla project and exploring additional targets [18] Q&A Session Summary Question: Can you break down where you think you can bring out some efficiencies out of the business? - Management indicated that quantifying savings by category is difficult but is focusing on development side efficiencies, particularly in bolting and meshing costs due to inflation in steel [22][24] Question: How do you think about the impact of cost inflation on the Terronera project? - Management is mindful of inflation but has locked in many lead items and is comfortable with the $175 million estimate, although adjustments may be necessary [38][40] Question: What percentage of the $175 million has already been locked in? - Approximately 25% to 30% of the costs have been locked in [42] Question: How many tonnes of third-party ore did you process in the first half? - About 13% of total tonnes processed were third-party ore, with 15% in Q2 and 11% in Q1 [49] Question: When will drilling at Bruner Gold begin? - Drilling is scheduled for late Q3 to early Q4, with results expected by the end of the year or early next year [52]