Endeavour Silver(US:EXK)2022-05-11 18:49Financial Data and Key Metrics Changes - Consolidated Q1 production increased by 4% year-over-year to 2 million silver equivalent ounces, offsetting the suspension of El Compas operations [5] - Revenue rose approximately 67%, attributed to the sale of unsold bullion from 2021 at significantly higher prices, contributing to cash flow from operating activities of over $22 million [8] - As of March 31, the company had $151 million in cash and no long-term debt aside from normal equipment leases, with working capital of $168 million [9] Business Line Data and Key Metrics Changes - Guanacevi experienced a strong quarter with higher silver and gold grades, expected to continue in the near term [6] - At Bolañitos, gold grades and ounces produced decreased, while silver ounces and grades increased significantly; production is expected to remain steady [7] Market Data and Key Metrics Changes - The company is facing inflationary pressures, particularly in power costs, which are the third largest expense, and labor costs, which are difficult to negotiate down due to union contracts [20] - Approximately 33% of operating costs are incurred in Mexican pesos, with the remaining 66% split between local and U.S. dollar costs [27] Company Strategy and Development Direction - The company is focused on securing financing for the Terronera project, which is expected to double production and halve cost profiles [12] - The acquisition of Pitarrilla, one of the world's largest undeveloped silver deposits, is anticipated to close by the end of June, with immediate work planned to define resources and advance the project [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and supply constraints but emphasized ongoing efforts to mitigate costs through combined purchasing practices [10][20] - The company is confident in its balance sheet, with a strong cash position and plans to secure project loan financing for Terronera [30][31] Other Important Information - A new sustainability strategy focusing on people, planet, and business was introduced, with a 2021 sustainability report set to be released [16] Q&A Session Summary Question: Can you provide examples of where negotiating with workers is working and where it isn't? - Management noted that power costs and labor are difficult to negotiate down, but they are exploring combined purchasing strategies to mitigate some inflationary pressures [20] Question: What is a safe cash basis G&A number for forecasting? - Management indicated that G&A expenses on a cash basis are budgeted between $6 million and $8 million, with Q1 typically having higher costs due to administrative activities [22] Question: How comfortable are you with the June target for the Pitarrilla acquisition? - Management expressed confidence in the June target, stating that they have answered all regulatory questions and expect to close soon [24] Question: Can you distinguish between inflation rates in local currency versus U.S. dollar rates? - Management explained that labor costs are incurred in pesos, while about half of the remaining costs are tied to the U.S. dollar, with inflation rates tracking similarly in both currencies [26][28] Question: How does the company view its balance sheet and the desire for more dry powder? - Management stated that the balance sheet is strong, with no immediate need for additional capital, focusing instead on the upcoming projects [30][32]