Endeavour Silver awash in record profits

Endeavour Silver (EDR-T, EXK-N) ended 2010 with more than US$100 million in working capital, no debt, falling cash costs, and rising silver production.

It was the sixth consecutive year of growing silver production, up 26% from 2009 to 3.29 million payable silver oz., while cash costs declined for the third consecutive year, down 5% to US$5.71 per oz. silver. Gold production rose 33% year-on-year to 17,713 oz.

This year Endeavour forecasts production of 3.7 million oz. silver at a cash cost of less than US$5.70 per oz. silver, net of byproduct credits. Assuming prices of US$24 per oz. silver and US$1,320 per oz. gold, the company expects revenues in 2011 will reach US$113.9 million.

“Cash costs are expected to continue declining into the mid-US$5 per oz. range and if we assume a US$30 average silver price in 2010, our mine operating profit margin will be around US$24 per oz. – remarkable by any standards,” Bradford Cooke, Endeavour’s chairman and CEO, said in a statement.

In 2010 net earnings came in at US$7.1 million, or US11¢ per share, compared with a net loss in 2009 of US$1.9 million. Operating cash flow jumped 167% to US$32.7 million and revenues advanced 70% to US$86.5 million 

Realized silver prices rose 27% to US$19.62 per oz. sold, while year-end working capital reached US$102 million with cash and short-term investments of US$88 million. 

Silver reserves decreased 19% to 13.4 million oz., while indicated silver resources climbed 16% to 27.4 million oz., and inferred silver resources soared 62% to 29.7 million oz.

Endeavour owns and operates two high-grade underground silver mines, Guanacevi in Durango state and Guanajuato in Guanajuato state. The company invested US$30.1 million on capital projects last year, including US$18.7 million on mine development, US$6.8 million on plant improvements and US$4.6 million on equipment, vehicles and buildings. 

The main focus was at Guanacevi (US$19.4 million) where more than 6 km of mine development were completed, including the new Santa Cruz and Porvenir Cuatro mines, and the plant was expanded to 1,000 tonnes per day. At Guanajuato, capital expenditures (US$10.7 million) targeted completing more than 5 km of mine development, including the new Lucero South access ramp.

For 2011, Endeavour will focus on accelerating mine development, making additional plant improvements at Guanacevi including a new dry stack tailings facility, expanding the plant at Guanajuato to 1,000 tonnes per day from 600 tonnes per day, and upgrading the latter’s mining equipment.  

Total indicated resources for Guanacevi and Guanajuato at the end of 2010 stood at 3.09 million tonnes grading 214 grams silver per tonne for 21.27 million oz. contained silver and 1.31 grams gold per tonne for 130,700 oz. gold. In the inferred category, the two mines together have 2.90 million tonnes of 207 grams sil-ver for 19.33 million oz. cont-ained silver and 1.37 grams gold for 127,500 oz. gold.

In terms of discoveries, Endeavour uncovered the Epsilon and La Blanca veins in the San Pedro area of Guanacevi, and added three properties at Guanacevi totaling 25 hectares. In the Guanajuato district, Endeavour identified three new veins – Karina, Fernanda and Daniela – and expanded the company’s land position with the addition of four properties totaling 2.43 sq. km.

At the San Juanico property in the Parral district, drilling expanded indicated resources to 1.63 million tonnes containing 2.6 million oz. silver and inferred resources to 1.30 million tonnes containing 2.7 million oz., plus significant gold, lead and zinc
resources. 

This year Endeavour will spend US$9.2 million on a 47,000-metre, 175-hole exploration program to test targets in three of the mining districts and on some of its latest property acquisitions.

In Toronto at presstime, Endeavour was trading at $9.66 per share. Over the last year, it has traded between $3.15 (March 25, 2010) and $10.02 per share (March 7, 2011). The company has 80.9 million shares outstanding.