Endeavour Silver Corp. (NYSE:EXK)(TSE:EDR) reported its ninth straight year of increasing precious metals production in 2013 on improving grades, recoveries and throughputs at all of its three operating mines, but despite this, earnings were hit by lower metals prices and the impact of new mining tax laws in Mexico.
In the final quarter of 2013, the company reported a net loss of $115.8 million, or $1.16 per share, compared to a net profit of $14.8 million, or 15 cents per share, in the year-ago period.
Excluding the impacts of the decline in gold and silver prices last year, the Mexican tax reform and a reduction in estimated reserves and resources at its Guanacevi mine, its adjusted loss was $12.1 million, or 12 cents per share.
Cash flow from operations, before working capital changes, declined 12% to $18.0 million. Revenue increased 2% to $67.9 million, on more metals sold, despite realized prices for silver falling 38% to $20.52 per ounce, and gold dropping 28% to $1,246 per ounce.
Silver equivalent production jumped 49% in the fourth quarter, to 3.0 million ounces, as pure silver output increased 56% and gold production rose 37%. The company said plant throughputs, ore grades and metal recoveries were higher at all of its three mines, which include the Guanacevi mine in Durango state, and the Bolanitos and El Cubo mines in Guanajuato state in Mexico.
Cash costs improved as well, dropping 39% to $7.46 per silver payable ounce, Endeavour said, while all-in sustaining costs, fell 49% to $14.24 per ounce.
For the year, the company also swung to a net loss on impairments of $104.3 million, but made its commitment to improve operations evident, as silver equivalent production rose 67% to 11.3 million ounces, an annual record. Revenue increased 33% to $276.8 million in spite of a 25% decline in realized silver prices and an 18% fall in gold prices.
“We delivered another record year of silver and gold production and revenue in 2013,” said Endeavour CEO Bradford Cooke, in a statement announcing the financial figures late Monday.
“In spite of achieving higher throughput, grades and recoveries at all three mines, our earnings were hit by lower metal prices and reduced carrying values at El Cubo and Guanacevi plus a deferred tax liability related to the new mining taxes in Mexico.
“Nonetheless, significant progress was made in 2013, particularly in the El Cubo mine performance and operating costs. The single digit cash costs are what management originally modelled long term for El Cubo when it acquired the mine in 2012. The operating turn-around at El Cubo still has two quarters to completion but the transformation thus far has been very satisfying.”
Indeed, cash costs at its El Cubo mine, where a major mine and plant capital reconstruction program was completed last year, fell a whopping 83% to $6.65 per payable silver ounce in the fourth quarter of 2013.
This year will see Endeavour continue to hone its mining operations, boosting profit margins and returning its focus to discovering and delineating ore at all of its three mines, as well as at the new high grade discovery at its San Sebastian property.
The company is looking to hold its silver production relatively steady, in the range of 6.5 to 6.9 million ounces in 2014, compared to the 6.8 million ounces produced in 2013. Silver equivalent production is expected between 10.4 to 11.0 million ounces.
All-in by-product sustaining costs of production, including sustaining capex, exploration and general and administrative costs, are forecasted to be approximately $19 per ounce of silver produced.
Endeavour is planning to invest $43.9 million on capital projects this year, all of which should be covered by the company’s anticipated cash flow in 2014. This includes $34.6 million on mine development, infrastructure, equipment and exploration, plus $9.3 million on plant upgrades, infrastructure, equipment and plant and exploration buildings.
It has budgeted US$20.9 million at its El Cubo mine in Guanajuato, and $11.7 million at Guanacevi in Durango state — its mine that posted its highest ever annual production in 2013. It is also forecasting to spend $9.9 million at its Bolanitos mine, which has become known as a turnaround wonder for the company, with Endeavour doubling production at the mine just two years after its purchase in 2007.
Endeavour’s main opportunity to expand production this year is at El Cubo, where the plant is currently operating at 1,200 tonnes per day (tpd), compared to its capacity of 1,550 tpd. A steady ramp up of the plant is planned for 2014 as mine development opens up the new Villalpando-Asuncion deposit, and as grades are expected to keep rising slowly.
The company is also looking to spend US$10.7 million on exploration, including 54,000 metres of drilling for the testing of brownfields targets and for underground mine exploration drilling. Endeavour, like many precious metals miners, suffered a reserve depletion last year due to the decline in metals prices, with management looking for ways to allocate more funds to replenish reserves and accelerate mine development this year.
The Vancouver, British Columbia-based miner has also said it will continue the exploration of the Terronera vein at the San Sebastian property, following an extension of a thick, high grade silver-gold vein discovery there last year. The company ended 2013 with cash and equivalents of $35 million, up 88% over 2012.
So far this year, Endeavour’s stock has climbed nearly 50%, closing Monday at $5.68 on the Toronto Stock Exchange. It has a 52-week trading range of $3.03 to $6.76.
