Title

Presentation

Endeavour Silver Corp. misses on earnings expectations. Reported EPS is $-0.07 EPS, expectations were $-0.007.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp’s Third Quarter 2024 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there’ll be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Allison Pettit, Director of Investor Relations. Please go ahead.

Allison Pettit: Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website at edrsilver.com. On today’s call, we have Dan Dickson, Endeavour Silver’s CEO; Elizabeth Senez, our CFO, and Don Gray, Endeavour’s COO. Following Dan’s formal remarks, we will open the call for questions. And now, over to Dan.

Dan Dickson: Thank you, Alison, and welcome, everyone. It’s been a busy third quarter at Endeavour Silver. As gold reached new all-time highs, and with silver starting to fall, the company’s cash flow and financial position should continue to benefit from these higher prices. From an operational standpoint, Q3 brought an unexpected challenge as the company operated at reduced capacity due to a trending failure of the primary ball mill at the Guana City mine. Temporary modifications were completed in August, allowing processing to continue at roughly 50% of capacity. The estimated timeline back to full capacity remains at 15 weeks, with the mine being in full operation next month. I would like to extend my thanks to our operations team for their dedicated efforts in mitigating the issue.

Q3 silver equivalent production totaled 1.6 million ounces, or 875,000 ounces of silver and 9,300 ounces of gold, tracking well towards the updated 2024 production guidance of 7.3 million to 7.6 million silver equivalent ounces. Silver equivalent grades have been in line with expectations, with gold grades slightly higher and silver grades slightly lower. This is expected to be similar going forward, and we expect the production profile in the fourth quarter to be similar to Q3. At Terronera, substantial progress was made during the third quarter. Surface construction reached 77% at September 30th, with more than $258 million spent to date. The finish line is in sight as Terronera continues to remain on track for commissioning near the end of the year, and we are excited to have this transformative project added to our production profile in 2025.

Moving to our financials, we reported top line revenue of $53 million, up 8% year-over-year, benefiting from the higher precious metal prices compared to Q3 2023. Cost of sales totals $41 million, a decrease of 12% compared to Q3 2023, driven by lower silver ounces sold in the quarter, as well as cost management measures undertaken at Guanacevi following the trunnion failure, which also includes the termination of third-party contract mining activities. Direct operating costs on a per-ton basis and per-ounce basis were elevated due to the reduced operating capacity at Guanacevi. Because of the reduced operating capacity, management withdrew cost guidance for 2024 in August. The company reported a net loss of $17 million for the three-month period ended September 30, 2024, compared to a $2.3 million loss in Q3 2023.

Excluding certain non-cash and unusual items, and items that are subject to volatility which are unrelated to the company’s operations, adjusted income was $1.6 million, compared to an adjusted loss of $8.3 million in Q3 2023. As of September 30, the company’s cash position was $55 million, and working capital was $29 million. During the quarter, the company completed drawdowns of $25 million from the Senior Secure Debt Facility for Terronera, and subsequent to the quarter, the company completed its final drawdown of $35 million. As I mentioned earlier, the overall progress at Terronera reached 77%, with more than $258 million of the project’s budget spent to date. Project commitments totaled $270 million, which is 99% of the $271 million capital budget, and remains on track for commissioning near the end of Q4 2024.

During the third quarter, 1,050 meters of underground mine development was completed, for a cumulative total of 5,550 meters, and the team continued progressing portals 1, 2, and 4. With long-wall stokes being developed and an initial production plan for Q4. The underground explosive magazines were also completed, with the explosive use permit application submitted for approval and anticipated in the New Year. On the upper platform, surface mill and infrastructure construction is 90% complete, and continues to transition to operations. The Coarse ore stockpile reclaimed tunnel reached 100% completion, with pre-commissioning testing beginning in Q3, and the primary jaw crusher was commissioned with ROC in August, marking a major project milestone.

The excavation of the tailing storage facility embankment key trench is 100% complete, with the secondary key at 40% complete. Structural steel columns and beams were erected for the concentration filter building and equipment mechanical structures, and remains on the critical path for commissioning in Q4. Through September 30th, procurement was 99% complete, and the project team continues to excite pending arrivals. And lastly, from a community relations standpoint, with local community support continue to be a major commitment. In Q3, the company supported a series of local initiatives and investments, such as the inauguration of an early childhood development center, scholarships for university students in Santiago, municipal road maintenance, workshops for business entrepreneurship for local residents, environmental education programs for primary schools, community tree donations, and summer community workshops for children and youth.

For a fulsome construction update at Terronera, I encourage you to visit our website, where you’ll find our quarterly photo gallery, showcasing the latest developments, progress, and information. With that, I’m happy to open up to questions. Operator, please proceed to our Q&A session.

Operator: Certainly. We’ll now begin the question-and-answer session. [Operator Instructions] Our first question is from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle: Hey, Dan and team. I assume you guys can hear me okay?

Dan Dickson: We can hear you really well, Heiko. It’s nice to hear from you.

Heiko Ihle: Perfect. I was going through your October 21st press release regarding Terronera earlier today again. Just a few follow-ups from the release. You hinted at a few of them earlier on this call. You mentioned that you’re recruiting and training team members. How many folks are currently on the payroll? And can you maybe give a trajectory for staffing levels with the timeline from now until full employment at the site?

Dan Dickson: I can tell you that full employment at the site when we’re in operations is about just over 500 people. Currently, we’re well over 750 people at site. In fact, we have a second ship coming to help push us to the end of the year here with regards to our tailings filter press. As far as the ramp-up of where we’re exactly right now compared to where we’re going to be when we’re in full operations, I think we have about 250 Endeavour Silver employees. And I think there’s actually 800 contract workers on site trying to push to get us to the end here.

Heiko Ihle: Impressive numbers. Building on all of that, and again, you had some talking points and preempted some of this in your prepared remarks. Are you seeing community embracement from all of this? I mean, there’s still a decent amount of local job creation from all of this. What are you seeing? Can you maybe give some examples? And obviously, you’re doing the scholarships and you’re doing all sorts of stuff. Is it working? Are they embracing it?

Dan Dickson: Yeah, I’ll touch on it a bit, maybe pass it to Don, who’s at site a bit more than I am. But ultimately, we’ve had a community relations group on site since 2013 when we really acquired the property. And I got to hand it to our explorations team that did a phenomenal job of incorporating things that would help the community benefit from our mine, and ultimately incorporating them with understanding what we’re doing at Terronera. I’d say over our last four or five years, we’ve had great engagement with the community. I think Santiago de los Pinos will benefit greatly, and I think they’re greatly involved. We’ve hired people there and ultimately brought a lot of direct and indirect jobs to the community. As far as the programs that we have, and it’s similar to what we’ve always done at Guanacevi and Bolanitos.

I mean, we feel like we’re neighbors, and to be a good neighbor, you’ve got to be part of the community and help out where we can. Obviously, I touched on some in my talk with tree donations, community support for various days, like Day of the Dead. We’re always involved with that, and we’re always looking for ways to incorporate ourselves in the community. Because obviously, having a social license to operate is the foundation of Endeavour, and I think that’s going to continue to be the case. Don, I don’t know if there’s anything else you want to add, or other community programs that we’re doing that you see as being greatly beneficial.

Don Gray: I think I mentioned we have a phased training program for our mill operators. Many of the people in the area don’t have experience, and so we’re bringing them in for early training. When we first started the program, we had a few vacancies in there. And then as the word got around that the training was good and the company was serious, we filled out all the slots. I think that’s a real tribute to our guys putting together good programs and working with the community.

Heiko Ihle: Very good. And then just a completely different follow-up on something else. Can you give some color on where we should model G&A for the remainder of the year, and maybe even 2025, assuming the share price stays where it is, given the revaluation of the DSU liabilities, the cash settled one that you encountered this quarter, please?

Dan Dickson: Yeah, no, for sure. I’m not going to get too much into 2025, but ultimately, if you look back at the history of Endeavour, our G&A from a cash perspective has always been about $8 million to $10 million. And then you can put in the DSUs and mark-to-market on DSUs or stock-based comps. I don’t know why our G&A would ramp up significantly in 2025 compared to 2024, and I believe we’re tracking right along those lines of $8 million to $10 million in cash G&A.

Heiko Ihle: Very good. I’ll get back to you. Thank you so much.

Dan Dickson: Thank you, Heiko for your questions.

Operator: The next question is from Lucas Pipes with B. Riley Securities. Please go ahead.

Nick Giles: Thank you so much, Operator. This is Nick Giles asking questions on behalf of Lucas. Dan and team, congrats on all the progress at Terronera so far. Maybe a question for both Dan and Don. Just would love to get a little bit more color about the ramp process, how to think about timing, and ultimately, what would you consider the largest potential bottlenecks during that process? Thank you very much.

Dan Dickson: Thanks, Nick. I can help out a little bit with Don. Ultimately, we expect kind of a three-month ramp-up. We’re hoping to go a little bit quicker, and I’ll leave it to Don. He expects the bottlenecks could be, but I’m sure there’s many that come through his head.

Don Gray: Yeah, I mean, it’s normal. You have the normal startup items, and we do have much of the upper platform completed, so there’s a lot of things we can get pre-checked in advance. Where we’ll have the focus is on the, especially on the concentrate and the tailing filters there. We want to get one circuit up and running real well. And then we can complete a lot of the commissioning. So our focus will be there, and we feel we brought in the right talent, have the vendor support. So we think it’ll go along as planned.

Nick Giles: Don, that’s great to hear. I appreciate the color. Any updated view on cash costs or on sustaining just based on current gold and silver prices?

Don Gray: Yeah, I’m guessing, Nick, you’re asking for 2025 in relation to [indiscernible]?

Nick Giles: That’s correct.

Don Gray: Yeah. Our plan will be once we get into commissioning and into ramp-up, we’ll come out with 2025 guidance early next year. Ultimately, our feasibility study that came out in 2021, we updated that. Great prior to the start of the build, we’re ultimately making our investment decision. And our cost per ton at the time was $81, and we fully understand that we’ve seen a lot of inflationary pressures over the last two years. And we’ve seen that at our existing operations Guanacevi and Bolanitos. As we get into going through all our budgeting and making sure our cost driver is right, it’ll take a little bit of time, and we want to make sure we understand all the numbers and then the timelines to come out with that. You can bear with us. We expect it to come out, like I said, in January, February of next year.

Nick Giles: Fair enough. I appreciate that. If I can squeeze one more in, maybe a question for Elizabeth. It would be great to get your perspective on target liquidity, cash on balance sheet, just as Terronera reaches full run rates.

Elizabeth Senez: As you saw at the end of September, we had $55 million in cash, and then obviously during the month of October, we’ve been continuing to build Terronera. But what we’re seeing is that a lot of the deposits that were made in advance with our vendors are now being applied to our activities. The cash burn at Terronera has been slowing down, so we do anticipate a smooth cash position as we move into 2025 and start that ramp-up process and see cash flows coming in at Terronera early in 2025.

Nick Giles: Great. That’s super helpful. Dan, Elizabeth, Don, to you and the rest of the team, continue best of luck. Thanks so much.

Dan Dickson: Thanks, Nick. Good questions.

Operator: The next question is from Nicholas Clarke with TD Cowen. Please go ahead.

Nicholas Clarke: Hi, Dan and team. Thanks for taking my questions. Nick Clarke here asking on behalf of Craig Hutchison. Just one question, if I could circle back on Terronera, and maybe this is just a little more clarification, but if we’re looking at about 99% of that $271 million budget being committed currently, would it be fair to kind of think of that remaining 23% left on a fiscal completion as being covered by those commitments, or would there be a little bit of a delta there? Thank you.

Dan Dickson: Yeah, I’m happy to answer that. I mean, Elizabeth and Don are sitting right now in Mexico. Ultimately, the $270 million committed and the $258 million spent, includes prepays and advances that Elizabeth touched on with Nick Giles’ question there. Ultimately, with what’s left, and it’s a very dynamic question because we have a lot going on with regards to our LNG vaporization plant. Ultimately, we’ve been staying in the market. That’s going to be ready in 2025 or open by the end of the first quarter, but we could ultimately be in commercial production before that’s completed. We have the embankment on our tailings dam. Originally, it’s estimated to be $40 million in that $271 million. We think we can start up with a lower embankment.

Of course, we’re trying to hit what our percentage completion was, or actual expectation, and then mine development. Depending on that commissioning timeline, it’s difficult, but we do know we’re in the ballpark. We’re not coming out with a commitment of exactly what our spend will be, but we’re on good track right now.

Nicholas Clarke: Got it. Thank you. Just to clarify, if we look at 77% of $271 million, that’s around $209 million, but that is not suggesting that you guys are $50 million off of where you were hoping to be?

Dan Dickson: Correct.

Nicholas Clarke: Great. Thanks, guys.

Operator: The next question is from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Jake Sekelsky: Hey, Dan and team. Thanks for taking my question.

Dan Dickson: I’m happy to take your questions, Jake.

Jake Sekelsky: Can you just provide a bit of color on the return to steady state at Guanacevi, maybe on the timing and any hiccups you think you might encounter getting back to more normalized levels?

Dan Dickson: Yeah, I’ll happily pass that to Don.

Don Gray: I think, as Dan mentioned in the opening comments, our operating team did a really good job working on the milling circuit and keeping that going. Also, they’ve done equally as good a job on the repair work, maintaining close contact with the foundry because we did have to have some things put together. That’s continuing like we planned. I think we’re in good shape. We have the contractor lined up for when the parts get there and the components. We don’t expect any glitches there.

Jake Sekelsky: Okay, that’s helpful. Then just in a broad sense, with where precious metals prices are, I’m just curious, does that cause you guys to revisit any of the near-term or medium-term mine plans or how you’re looking at milling at Guanacevi?

Dan Dickson: Yeah, that’s a good question. It’s something that we look at every year. It’s that time of year right now, budgeting the mine plans and finalizing those for next year. I would say even at Terronera, it’s a dynamic with where prices are. Obviously, in our resource models, we have indicated ounces and we have inferred ounces. Often we as Endeavour, with our underground mining, have brought in inferred ounces and indicated ounces into the mine plans. Sometimes potential ounces aren’t even in our resource. With higher prices, it allows us to go in some areas that we may be abandoned in the past. Again, we’re going through a resource update for 2024, year-end 2024, and we’ll come out with that, probably in our MD&A or our information, but our AIF ultimately for year-end.

Jake Sekelsky: Okay, thanks for that. That’s all for me. Thanks again.

Dan Dickson: Thanks for the questions, Jake.

Operator: [Operator Instructions] The next question is from Stephen Soock with Stifel. Please go ahead.

Stephen Soock: Hi, Dan and team. Congrats on a good quarter despite some operational challenges. Kudos to all of you. I just wanted to ask about the underground at Terronera. Has there been any test mining or update on how the ore body and ground conditions look compared to expectations now that you’re well into it? Maybe just as a follow-on, how comfortable are you with the amount of underground development established now that we’re just ahead of the start of production?

Dan Dickson: Great question, Stephen. I’ll let Don respond. Okay.

Don Gray: We have developed an area to do a test stove. We’re actually close to beginning some blasting in that stove and extracting the ore. The good thing is that area, it’ll be a long hole stove. In that area originally in the feasibility, it was cut and filled. We have seen ground conditions in the veins better than what we anticipated from the feasibility study. So we’ve been looking at that, doing a lot of rock mechanics work and feel there’s some upside there. For the development, because we are finding more areas that we’ll put in the mine plan as long hole stoping that just takes the pressure off of so much development to get the cut and fill stopes ready. We’ll be in good shape.

Stephen Soock: That’s great to hear and hopefully continues. I know that has really positive implications on your ASIC number if you’re able to cut down that life mine development through more long holes. That’s great. Maybe just on a bit of a different note, can you give us a quick update on what’s happening at Pitarilla and maybe just what to look forward to there through 2025 at a high level?

Don Gray: Yeah, that’s a great question, actually, Stephen. Ultimately, which was in our original guidance for the year, we’re going to spend about $5 million at Pitarilla advancing an underground ramp that we had towards what’s called our Manto Zone. Then we feel like there’s some feeder structures there. We’ve been drilling there for the last almost three -months and we should have news out on Pitarilla in the coming weeks to push that forward. Ultimately, we really believe in what we have at Pitarilla. We think ultimately what we purchased two years ago from SSR Mining is a special asset. For those that aren’t familiar with Pitarilla, we have 600 million ounces of Silver-defined Plus Zinc and Lead. Ultimately, we’ve been looking at Pitarilla’s an underground operation or potential for an underground operation. Like I say, we should have some news out on that in the next couple of weeks. Great timing for that question, Stephen.

Stephen Soock: Perfect. I’ll stay tuned. That’s it for you guys. I appreciate the color.

Don Gray: Thanks for the questions.

Operator: This concludes the question and answer session. I would like to turn the conference back over to Dan Dixon for any closing remarks.

Dan Dickson: Thank you, Operator. Thanks for everyone attending our Q3 financial call. Like I said at the beginning of our call today, it was a bit of a challenging quarter with the trending. I think our operating team did a phenomenal job to mitigate that as best we could. Terronera continues to be on track and we’re excited to see what Q4 in 2025 brings for the company. Thank you, everyone, for attending.

Operator: This brings to an end today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.