Endeavour Silver sorting out Q2 problems

Endeavour Silver (EDR-T) has been tackling problems from a disappointing second quarter that included recovery rate and production shortfalls with hopes that it doesnt fall further astray from its planned growth rate goals.

At the beginning of the year Endeavor projected it would produce 2.8 million oz. silver at a cash cost of US$5.50 per oz., as well as increase resources by an additional 20 million oz.

While that wont happen, the company anticipates it will increase silver production by 50% compared to 2006, to 2 million oz. silver with cash costs at US$6 per oz. by the end of the year.

To demonstrate how its increasing its resources, Endeavour today released an update on its exploration and acquisition programs in Mexico.

The company plans to do 35,000 metres of diamond drilling by the end of 2007, with about 17,000 metres already completed.

In September, Endeavour began drilling at the Porvenir mine, which is part of the Guanacevi mines project in Durango. The company produced 1.35 million oz. from Guanacevi last year and projected it would produce 1.8 million oz. silver this year.

Endeavour has allotted 10,000 metres of drilling for Guanacevi. A surface drill is testing the northwest extensions of the Porvenir ore body that is now in production. The company is also looking for an underground rig to test the depth extent of the central part of the Porvenir ore body, as well as the northwest and depth extensions of the Santa Cruz deposit, which was discovered last year.

Production ore grades at Porvenir have been lower than the 400-grams-silver-per-tonne target as a result of higher than expected mine dilution and lower grade stockpiles.

The most significant delays at Guanacevi relate to the construction of an expanded agitation, filtration Merrill Crowe silver refinery, tailings thickeners and lined tailings pond facilities, which should come online shortly.

The problems were a result of engineering, labour, equipment and supply shortages, which held production to less than 600 tonnes per day instead of the 800 tonne-per-day average the company planned.

Endeavor says it should be able to get production up to 1,000 tonnes per day by the second quarter of 2008.

Metal recoveries also dropped recently because the old agitation leach and Merrill Crowe recovery circuits lacked adequate residence time but should rebound to the 75-80% range by the fourth quarter.

In October, Endeavour plans to do 7,500 metres of drilling at the producing Cebada mine, which is part of the Bolantitos mines project in Guanajuato. The company produced 256,000 oz. silver and 3,350 oz. gold from Bolanitos in 2006.

The company will test four main prospect areas along a 5 km stretch of the Veta Madre vein.

Capital development projects are now underway at Bolanitos, where access has been limited to lower grade reserve blocks.

Endeavour is developing a new mine plan that includes a new rigorous grade control program to increase both production grades and output, with estimates that the mine will produce 250 tonnes per day on average for the year which is half of the plant capacity.

Output should rise to 450 tonnes per day next year, the company says, as existing shafts, ramps and drifts are rehabilitated to provide access to higher-grade ore.

The 10-year-old Bolanitos plant is already showing results from the capital improvements. A cone crusher was repair and a second new cone crusher has been ordered as a back-up unit. The flotation circuit has also been rearranged to be more efficient. Metal recoveries have improved from 65 to 70% to 80 to 85% in recent months.