Endeavour Silver Reports Financial Results for Third Quarter, 2016; Conference Call at 11am PDT (2pm EDT) Today ______________________________________________________________________________
NEWS RELEASE Endeavour Silver Reports Financial Results for Third Quarter, 2016; Conference Call at 11am PDT (2pm EDT) Today ______________________________________________________________________________
Vancouver, Canada – November 3, 2016 - Endeavour Silver Corp. (NYSE: EXK; TSX: EDR) released today its financial results for the third quarter ended September 30, 2016. Endeavour owns and operates three underground silver-gold mines in Mexico: the Guanaceví mine in Durango state, and the Bolañitos and El Cubo mines in Guanajuato state.
The Company's financial performance in the Third Quarter, 2016 improved compared to the Third Quarter, 2015. Earnings were up as a result of higher metal prices and lower operating costs. Management continued to strengthen the balance sheet by generating free cash flow and completing its second ATM equity offering during the third quarter (click here for an audio review of Q3 highlights).
Highlights of Third Quarter 2016 (Compared to Third Quarter, 2015)
Financial
- Net earnings of $5.6 million(1) ($0.04 per share) compared to a net loss of $14.1 million (loss of $0.14 per share)
- EBITDA(2) increased 703% to $10.8 million
- Cash flow from operations before working capital changes increased 72% to $8.2 million
- Mine operating cash flow before taxes(1) increased 48% to $17.8 million
- Revenue decreased 1% to $42.1 million
- Realized silver price increased 31% to $19.16 per ounce (oz) sold
- Realized gold price increased 25% to $1,340 per oz sold
- Cash costs(2) decreased 35% to $5.27 per oz silver payable (net of gold credits)
- All-in sustaining costs (AISC)(2) decreased 24% to $11.47 per oz silver payable (net of gold credits)
- Raised net proceeds of $13.9 million in Q3, 2016 to complete second ATM equity financing
- Cash increased 308% to $83.2 million and working capital increased 433% to $91.9 million from year end
Operations
- Silver production decreased 29% to 1,284,646 oz
- Gold production decreased 6% to 14,364 oz
- Silver equivalent production was 2.4 million oz (at a 75:1 silver: gold ratio)
- Silver oz sold down 35% to 1,200,466 oz
- Gold oz sold down 3% to 14,228 oz
- Bullion inventory at quarter-end included 189,831 oz silver and 334 oz gold
- Concentrate inventory at quarter-end included 22,384 oz silver and 498 oz gold
- Acquired prospective Parral exploration properties in the Parral District, Chihuahua
- Raised 2016 production guidance to 9.0 million to 9.8 million oz silver equivalent, increased capital budget to $17.4 million and exploration budget to $10.1 million to accelerate growth projects, including 23,000 metres extra drilling
(1) The Consolidated Interim Financial Statements and Management’s Discussion & Analysis can be viewed on the Company’s website at www.edrsilver.com, on SEDAR at www.sedar.com and EDGAR at www.sec.gov. All amounts are reported in US$
(2) Mine operating cash flow, EBITDA, cash costs and all-in sustaining costs are non-IFRS measures. Please refer to the definitions in the Company’s Management Discussion & Analysis
Endeavour CEO Bradford Cooke commented, “Our financial performance in the third quarter was much improved thanks to higher metal prices and lower operating costs. Having successfully minimized our allin sustaining costs and boosted our free cash flows in recent quarters, management continued to focus on optimizing near-term production and long-term growth in Q3, 2016.
“As a result of our growing cash position in recent quarters, we elected to increase our exploration and development budgets in H2, 2106, which means our AISC should rise in Q4, 2016. Notwithstanding, we are well ahead of our production targets and below our cost targets for the year so we expect to readily meet our guidance on both in 2016.
“We currently have 12 drill rigs working on six projects to grow our resource base. With the recent acquisition of the Parral properties to our project pipeline, Endeavour now has one of the strongest organic growth profiles in the silver mining sector.”
Operations Update
At Guanaceví, plant throughput of 892 tonnes per day (tpd) in Q3, 2016 continued to lag behind plan as the mining contractor focused on accelerating mine development, and company personnel focused on improving underground services, including power, dewatering and ventilation. Due to variations in the ore-bodies, grades were lower than plan for the quarter. Management expects throughput to improve in the fourth quarter.
The Company is initiating a $2.8 million capital investment program in Q4, 2016, as part of a three-year, $8.4 million capital investment for mine development and ramp down into the Santa Cruz Sur ore-body. This investment will provide access to an indicated resource of over 650,000 tonnes grading 250 g/t silver and 0.70 g/t gold. The currently defined ore-body is open to the south and at depth.
At Bolañitos, plant throughput averaging 1,442 tpd in Q3, 2016 continued to exceed plan due in part to the draw-down of an historical ore stockpile and mining of new extensions of the LL-Asunción ore-body in and around historic mine workings. Bolañitos is significantly ahead of production guidance for the year.
The Company commenced a $1.7 million capital investment program in Q3, 2016 to develop the Plateros orebody located close to the existing LL-Ascunción mine workings. The development is accessing an indicated resource of over 130,000 tonnes grading 116 g/t silver and 1.61 g/t gold, still open at depth.
At El Cubo, plant throughput of 1,531 tpd in Q3, 2016 also exceeded plan, as development opened up new areas for mining at Santa Cecilia. Production is expected to continue close to 1,500 tpd in the fourth quarter. El Cubo is also significantly ahead of production guidance for the year.
The Company commenced a $1.6 million program in Q3, 2016 to extend the V-Asunción ramp to depth an additional 1.6 km in order to access an indicated resource of more than 300,000 tonnes grading 141 g/t silver and 1.55 g/t gold. The V-Asunción ore-body extends well south of the current mine plan.
Financial Results
For the third quarter ended September 30, 2016, the Company generated revenue totaling $42.1 million (2015 - $42.7 million). During the quarter, the Company sold 1,200,467 silver oz and 14,228 gold oz at realized prices of $19.16 and $1,340 per oz respectively, compared to sales of 1,844,556 silver oz and 14,599 gold oz at realized prices of $14.67 and $1,074 per oz respectively in Q3, 2015.
After cost of sales of $26.9 million (2015 - $40.6 million), mine operating earnings amounted to $15.2 million (2015 –$2.1 million) from mining and milling operations in Mexico. Excluding depreciation and depletion of $2.8 million (2015 - $9.8 million), and share-based compensation recovery of $0.2 million (2015- $0.1 million expense), mine operating cash flow before taxes was $17.8 million (2015 – $12.0 million) in Q3, 2016. Net earnings were $5.6 million (2015 – net loss of $14.1 million) after exploration expense of $2.4 million (2015 – $1.1 million) and corporate general and administrative costs of $2.8 million (2015 – $1.8 million).
Consolidated cash costs of production were $5.27 per oz, net of gold by-product credits in Q3, 2016, significantly lower than the $8-9 per oz guidance due to higher throughput, depreciation of the Mexican peso, and higher gold prices impacting the gold credit. Management expects cash costs to rise slightly in the fourth quarter but on an annual basis should be significantly lower than company guidance.
All-in sustaining costs (AISC) in accordance with the World Gold Council standard were $11.47 per oz, net of gold by-product credits, in Q3, 2016, substantially lower than the $12-13 per oz AISC guidance due to reduced cash operating costs and lower sustaining investments. Management expects AISC to rise in the fourth quarter with an increase in sustaining mine development and exploration expenditures but on an annual basis should be lower than company guidance.
Cash holdings at the end of Q3, 2016 grew to $83.2 million and working capital rose to $91.9 million which is sufficient for the Company to meet its short- and medium-term growth goals.
Conference Call
A conference call to discuss the results will be held on Thursday, November 3 at 10am PDT (1pm EDT). To participate in the conference call, please dial the following:
Toll-free in Canada and the US: 1-800-319-4610 Local Vancouver: 604-638-5340 Outside of Canada and the US: 1-604-638-5340
No pass-code is necessary to participate in the conference call.
A replay of the conference call will be available by dialing 1-800-319-6413 in Canada and the US (tollfree) or 1-604-638-9010 outside of Canada and the US. The required pass-code is 0867#. The audio replay and a written transcript will also be made available on the Company’s website at www.edrsilver.com.
About Endeavour – Endeavour is a mid-tier silver mining company focused on growing production, reserves and resources in Mexico. Since start-up in 2004, Endeavour has posted nine consecutive years of accretive growth of its silver mining operations. Endeavour’s three silver-gold mines in Mexico combined with its strategic acquisition and exploration programs should facilitate Endeavour’s goal to become a premier senior silver producer.
Contact Information - For more information, please contact:
Meghan Brown, Director Investor Relations Toll free: 1-877-685-9775 Tel: 604-640-4804 Fax: 604-685-9744 Email: [email protected] Website: www.edrsilver.com
Cautionary Note Regarding Forward-Looking Statements
This news release contains “forward-looking statements” within the meaning of the United States private securities litigation reform act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities legislation. Such forward-looking statements and information herein include but are not limited to statements regarding Endeavour’s anticipated performance in 2016 and the timing and results of various activities. The Company does not intend to, and does not assume any obligation to update such forward-looking statements or information, other than as required by applicable law.
Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Endeavour and its operations to be materially different from those expressed or implied by such statements. Such factors include, among others, changes in national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and Mexico; operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining; the speculative nature of mineral exploration and development, risks in obtaining necessary licenses and permits, and challenges to the Company’s title to properties; as well as those factors described in the section “risk factors” contained in the Company’s most recent form 40F/Annual Information Form filed with the S.E.C. and Canadian securities regulatory authorities.
Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the Company’s mining operations, no material adverse change in the market price of commodities, mining operations will operate and the mining products will be completed in accordance with management’s expectations and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward- looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information.
ENDEAVOUR SILVER CORP.
COMPARATIVE HIGHLIGHTS
Three Months Ended September 30 Nine Months Ended September 30 Q3 2016 Highlights 2016 2015 % Change 2016 2015 % Change Production
1,284,646 1,820,282 (29%) Silver ounces produced 4,346,562 5,445,901 (20%) 14,364 15,319 Gold ounces produced 45,973 44,557 (6%) 3%
| 1,258,408 | 1,773,459 | (29%) | Payable silver ounces produced | 4,243,199 | 5,305,309 | (20%) |
| 13,939 | 14,961 | (7%) | Payable gold ounces produced | 44,657 | 43,512 | 3% |
| 2,361,946 | 2,892,612 | (18%) | Silver equivalent ounces produced | 7,794,537 | 8,564,891 | (9%) |
| 5.27 | 8.11 | Cash costs per silver ounce | 6.13 | 7.96 |
(35%) (23%)
| 7.28 | 13.57 | (46%) | Total production costs per ounce | 8.92 | 13.48 | (34%) |
| 11.47 | 15.05 | (24%) | All-in sustaining costs per ounce | 11.01 | 15.07 | (27%) |
| 355,611 | 404,878 | Processed tonnes | 1,141,362 | 1,157,415 |
(12%) (1%) 71.18 75.07 (5%) Direct production costs per tonne 72.89 80.05 (9%) 11.06 10.33 Silver co-product cash costs 10.60 10.68 7% (1%) 773 756 Gold co-product cash costs 808 774 2% 4%
Financial
| 42.1 | 42.7 | (1%) | Revenue ($ millions) | 128.1 | 141.6 | (10%) |
| 1,200,466 | 1,844,556 | (35%) | Silver ounces sold | 4,205,575 | 5,619,126 | (25%) |
| 14,228 | 14,599 | (3%) | Gold ounces sold | 44,847 | 44,195 | 1% |
| 19.16 | 14.67 | Realized silver price per ounce | 16.80 | 16.05 |
31% 5%
| 1,340 | 1,074 | 25% | Realized gold price per ounce | 1,281 | 1,163 | 10% | |
| 5.6 | (14.1) | 140% | Net earnings (loss) ($ millions) | 9.1 | (13.7) | 167% | |
| 15.2 | 2.1 | 34.4 | 18.0 | ||||
| 622% | Mine operating earnings (loss)($ millions) | 91% | |||||
| 17.8 | 12.0 | 48% | Mine operating cash flow ($ millions) | 46.5 | 48.0 | (3%) | |
| 8.2 | 4.8 | 72% | Operating cash flow before working capital changes | 25.1 | 29.6 | (15%) | |
| 10.8 | 1.3 | 703% | Earnings before ITDA | 29.6 | 28.6 | 4% | |
| 91.9 | 20.4 | 350% | Working capital ($ millions) | 91.9 | 20.4 | 350% |
Shareholders
0.04 (0.14) 129% Earnings (loss) per share – basic 0.08 (0.13) 100% Operating cash flow before working capital changes per 0.07 0.05 40% 0.22 0.29 (24%) share 125,277,591 101,976,901 23% Weighted average shares outstanding 114,426,580 101,976,901 12%
1) Silver equivalent ounces calculated using 75:1 ratio in 2016 and 70:1 in 2015
2) Cost metrics, EBITDA, mine operating cash flow, operating cash flow before working capital changes are non-IFRS measures.
Please refer to the definitions in the Company’s Management Discussion & Analysis.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended Sept. 30, Sept. 30 Sept. 30, Sept. 30 2016 2015 2016 2015
Operating activities
Net earnings (loss) for the period $ 5,586 $ (14,079) $ 9,114 $ (13,696) Items not affecting cash:
| Share-based compensation | 775 | 735 | 2,636 | 2,329 |
| Depreciation and depletion | 2,834 | 9,849 | 12,267 | 29,824 |
| Deferred income tax expense (recovery) | (654) | 3,110 | (711) | 5,188 |
| Unrealized foreign exchange loss (gain) | 723 | 48 | 589 | 196 |
| Loss on available for sale assets | - | - | 269 | - |
| Settlement of derivative liability | (1,372) | - | - | - |
| Finance costs | 345 | 338 | 926 | 950 |
| Write down of marketable securities | - | 4,785 | - | 4,785 |
| Net changes in non-cash working capital | 8,071 | (747) | (1,425) | (2,188) |
| Cash from (used in) operating activities | 16,308 | 4,039 | 23,665 | 27,388 |
Investing activites
| Property, plant and equipment expenditures | (5,508) | (9,291) | (12,717) | (27,308) | ||||
| Proceeds from disposition of available for sale assets | - | - | 448 | - | ||||
| Investment in long term deposits | - | - | 133 | - | ||||
| Cash used in investing activities | (5,508) | (9,291) | (12,136) | (27,308) |
Financing activities
| Repayment of revolving credit facility | (2,500) | (3,000) | (10,500) | (7,000) | ||
| Repayment of obligation under finance lease | (76) | (224) | (465) | (224) | ||
| Debt issuance costs | - | - | (474) | - | ||
| Interest paid | (243) | (257) | (632) | (706) | ||
| Public equity offerings | 14,229 | - | 55,353 | - | ||
| Exercise of options and warrants | 5,263 | - | 10,548 | - | ||
| Share issuance costs | (497) | - | (1,943) | - | ||
| Cash from (used in) financing activites | 16,176 | (3,481) | 51,887 | (7,930) | ||
| Increase (decrease) in cash and cash equivalents | 26,976 | (8,733) | 63,416 | (7,850) | ||
| Effect of exchange rate change on cash and cash equivalents | (584) | (235) | (589) | (383) | ||
| Cash and cash equivalents, beginning of period | 56,848 | 31,780 | 20,413 | 31,045 |
Cash and cash equivalents, end of period $
83,240 $ 22,812 $ 83,240 $ 22,812
This statement should be read in conjunction with the condensed consolidated interim financial statements for the period ended September 30, 2016 and the related notes contained therein.
CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(expressed in thousands of US dollars, except for shares and per share amounts)
Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2016 2015 2016 2015
Revenue $ 42,066 $ 42,737 $ 128,117 $ 141,565
Cost of sales:
| Direct production costs | 24,033 | 30,447 | 80,852 | 92,807 |
| Royalties | 247 | 304 | 732 | 795 |
| Share-based compensation | (208) | 109 | 78 | 349 |
| Depreciation and depletion | 2,761 | 9,768 | 12,059 | 29,604 |
| 26,833 | 40,628 | 93,721 | 123,555 | |
| Mine operating earnings | 15,233 | 2,109 | 34,396 | 18,010 |
Expenses:
| Exploration | 2,361 | 1,173 | 5,468 | 4,726 | |
| General and administrative | 2,827 | 1,812 | 8,010 | 6,215 | |
| 5,188 | 2,985 | 13,478 | 10,941 | ||
| Operating earnings (loss) | 10,045 | (876) | 20,918 | 7,069 | |
| Finance costs | 345 | 370 | 926 | 1,037 |
Other income (expense):
| Write down of marketable securities | - | (4,785) | - | (4,785) |
| Foreign exchange | (1,650) | (2,964) | (2,983) | (4,335) |
| Investment and other | (426) | 121 | (610) | 805 |
| (2,076) | (7,628) | (3,593) | (8,315) | |
| Earnings (loss) before income taxes | 7,624 | (8,874) | 16,399 | (2,283) |
Income tax expense (recovery):
| Current income tax | 2,731 | 2,095 | 7,622 | 6,225 |
| Deferred income tax | (693) | 3,110 | (337) | 5,188 |
| 2,038 | 5,205 | 7,285 | 11,413 | |
| Net earnings (loss) for the period | 5,586 | (14,079) | 9,114 | (13,696) |
Other comprehensive income (loss), net of tax Unrealized gain (loss) on available for sale investments 4 633 (58) (27) Reclassification of gain (loss) on available for sale investments, included in the net loss - 4,785 269 4,785 Total other comprehensive income (loss) for the period 4 5,418 211 4,758
Comprehensive income (loss) for the period $ 5,590 $ (8,661) $ 9,325 $ (8,938)
Basic earnings (loss) per share based on net earnings $ 0.04 $ (0.14) $ 0.08 $ (0.13) Diluted earnings (loss) per share based on net earnings $ 0.04 $ (0.14) $ 0.08 $ (0.13)
Basic weighted average number of shares outstanding 125,277,591 101,976,901 114,426,580 101,976,901 Diluted weighted average number of shares outstanding 127,414,848 101,976,901 115,916,906 101,976,901
This statement should be read in conjunction with the condensed consolidated interim financial statements for the period ended September 30, 2016 and the related notes contained therein.
CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
September 30, December 31, 2016 2015
ASSETS Current assets
Cash and cash equivalents $ 83,240 $ 20,413
| Investments | 108 | 614 |
| Accounts receivable | 25,924 | 24,343 |
| Inventories | 11,995 | 17,350 |
| Prepaid expenses | 1,230 | 2,510 |
| Total current assets | 122,497 | 65,230 |
| Non-current deposits | 798 | 855 |
| Deferred income tax asset | - | 223 |
| Mineral properties, plant and equipment | 56,193 | 47,925 |
| Total assets | $179,488 | $ |
114,233
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 16,138 $ 18,949
| Finance lease obligation | 276 | 1,180 |
| Income taxes payable | 4,147 | 5,844 |
| Credit facility | 10,000 | 22,000 |
| Total current liabilities | 30,561 | 47,973 |
| Credit facility - long term | 1,500 | - |
| Provision for reclamation and rehabilitation | 7,825 | 7,762 |
| Deferred income tax liability | 6,689 | 7,623 |
| Total liabilities | 46,575 | 63,358 |
Shareholders' equity
Share capital, unlimited common shares authorized, no par value, issued
| and outstanding 125,882,181 shares (Dec 31, 2015 - 102,776,470 shares) | 444,392 | 368,898 |
| Contributed surplus | 6,319 | 9,465 |
| Accumulated comprehensive income (loss) | 66 | (145) |
| Retained earnings (deficit) | (317,864) | (327,343) |
| Total shareholders' equity | 132,913 | 50,875 |
| Total liabilities and shareholders' equity | $179,488 | $ |
114,233
This statement should be read in conjunction with the condensed consolidated interim financial statements for the period ended September 30, 2016 and the related notes contained therein.