SL_Photography/iStock Editorial via Getty Images We’re nearing the finish line for the Q4 Earnings Season for the Silver Miners Index ( SIL ), and one of the most recent companies to report was Endeavour Silver ( EXK ). The company had an outstanding year and beat its upwardly revised FY2021 output guidance, though this was partially overshadowed by inflationary pressures, which eroded expected margin gains. The good news is that Terronera should fix this and could double production by 2025. With one of the best growth profiles sector-wide, EXK is a name to keep an eye on, but at ~1.90x P/NAV, I see better bets elsewhere from a relative value standpoint. Endeavour Silver Operations (Company Presentation) Endeavour Silver (“Endeavour”) released its Q4 and FY2021 results last week, reporting quarterly production of ~1.44 million ounces of silver and ~9,500 ounces of gold. This translated to the best quarter for silver production in years, more than offsetting the slight decline in gold production, which dipped 25% on a year-over-year basis. Given the strong finish to the year, Endeavour trounced its FY2021 guidance midpoint, which is even more impressive given that this was upwardly revised guidance. Let’s take a closer look at the results below: Endeavour Silver – Quarterly Metals Production (Company Filings, Author’s Chart) As shown in the chart above, Endeavour saw a massive improvement in production year-over-year, helped by the fact that it was lapping a temporary closure of operations related to COVID-19. However, while the company was up against easier comps, this was still a very solid year, and the main reason for the increased production was much higher grades at its Guanacevi Mine. In fact, Guanacevi’s gold and silver grades were above plan according to the company, coming in at 370 grams per tonne silver and 1.09 grams per tonne gold last year. Guanacevi Quarterly Production (Company Filings, Author’s Chart) Combined with 20% higher throughput, the operation produced 40% more silver-equivalent ounces [SEOs] on a year-over-year basis, with production soaring to ~5.4 million SEOs. The chart above clearly shows that grades at Guanacevi have been exceptional and continue to trend higher, with silver grades hitting a new high of 417 grams per tonne in Q4, while gold grades soared to 1.21 grams per tonne gold. This outstanding performance from Endeavour’s flagship operation more than offset El Compas heading into care & maintenance, with contribution from just two assets in Q4 (Bolanitos & Guanacevi).
Moving over to Bolanitos, the company had a strong year here as well, with production up 32% to ~2.47 million SEOs. This was driven by higher silver grades and higher gold and silver recovery rates, but primarily due to a sharp increase in throughput to ~418,500 tonnes for the year. Like Guanacevi, the operation was up against relatively easy year-over-year comps due to the temporary shutdown, but this was still a solid year for the asset. The company noted that the improved recovery rates last year were due to improved ore blending. Revenue & Margins
Moving over to revenue, the headline number in Q4 likely disappointed investors, with revenue dropping 20% year-over-year despite the strong finish to 2021. However, this was due to the decision to withhold inventory, evidenced by Endeavour ending the year with ~1.03 million ounces of silver in inventory and over 1,000 ounces of gold. Besides, revenue came in at $165.3 million on a full-year basis despite the decision to withhold some sales due to depressed metals prices. This represented a 19% increase year-over-year, driven by higher gold and silver ounces sold combined with a higher average realized silver price ($25.22/oz vs. $21.60/oz). Endeavour Silver Quarterly Revenue (Company Filings, Author’s Chart) Unfortunately, there was some negative news to report, and this was from a cost standpoint. While the cost increases were largely out of the company’s control and were related to inflationary pressures (labor, fuel, consumables), cash costs rose to $9.31/oz in FY2021 and $8.65/oz in Q4 despite the 4% increase in SEO production (Q4 2021 vs. Q4 2020). This translated to a 27% increase in costs year-over-year. On an all-in sustaining cost [AISC] basis, costs rose 5% to $19.48/oz in Q4 and $20.34/oz in FY2021, up 5% and 16%, respectively.
The increase in AISC was the most significant at Guanacevi, where costs rose 14% to $19.46/oz in FY2021. This was related to higher cash costs due to inflationary pressures and higher royalties/third-party ore purchases. Combined with increased capital expenditures related to mine development and increased exploration expenditures, AISC was up sharply despite what […]
source Endeavour Silver: Industry-Leading Growth, But At A Price
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