Endeavour Silver Corp. (NYSE: EXK) (TSX: EDR) is pleased to announce its unaudited financial and operating results for the three and nine months ended September 30, 2022. All amounts reported are in United States (US) dollars.
Dan Dickson, CEO, commented, “This quarter is a continuation of our strong operational performance. With production guidance reaffirmed, and a strong fourth quarter expected, we are feeling confident about our 2022 production results. Like the rest of the industry, profit margins are under pressure. The strength of the USD is weighing on commodity prices, and inflation is increasing direct costs. We are fortunate that the elevated grade profile at Guanacevi and strong operational performance has allowed us to stay within or near our guided cost ranges on a per ounce basis.”
“We continue to focus on business improvement and cost management initiatives, while being mindful of the future. Continuing to advance the Terronera project in a deliberate and disciplined manner towards a construction decision and the completion of the Pitarrilla acquisition, are both significant developments towards the future of the Company.”
Q3 2022 Highlights
Financial Overview (see appendix for consolidated financial statements)
|Three Months Ended September 30||Q3 2022 Highlights||Nine Months Ended September 30|
|2022||2021||% Change||2022||2021||% Change|
|1,458,448||1,305,399||12%||Silver ounces produced||4,132,610||3,427,223||21%|
|9,194||10,541||(13%)||Gold ounces produced||27,178||32,816||(17%)|
|1,445,880||1,295,126||12%||Payable silver ounces produced||4,095,696||3,394,103||21%|
|9,039||10,328||(12%)||Payable gold ounces produced||26,705||32,177||(17%)|
|2,193,968||2,148,679||2%||Silver equivalent ounces produced(1)||6,306,850||6,052,503||4%|
|10.32||8.16||27%||Cash costs per silver ounce(2)(3)||10.21||9.59||6%|
|14.31||13.14||9%||Total production costs per ounce(2)(4)||14.56||15.84||(8%)|
|20.27||17.46||16%||All-in sustaining costs per ounce (2)(5)||20.24||20.70||(2%)|
|131.61||115.57||14%||Direct operating costs per tonne(2)(6)||128.99||116.14||11%|
|146.30||130.38||12%||Direct costs per tonne(2)(6)||147.65||133.12||11%|
|13.12||13.98||(6%)||Silver co-product cash costs(7)||14.15||15.86||(11%)|
|1,144||1,020||12%||Gold co-product cash costs(7)||1,163||1,078||8%|
|39.7||34.6||15%||Revenue ($ millions)||128.2||116.8||10%|
|1,327,325||699,539||90%||Silver ounces sold||3,647,987||2,443,184||49%|
|8,852||9,925||(11%)||Gold ounces sold||27,025||30,398||(11%)|
|19.24||24.56||(22%)||Realized silver price per ounce||22.24||26.26||(15%)|
|1,678||1,791||(6%)||Realized gold price per ounce||1,827||1,784||2%|
|(1.5)||(4.5)||(67%)||Net earnings (loss) ($ millions)||(1.8)||14.4||(112%)|
|(3.1)||(1.5)||106%||Adjusted net earnings (loss) (11) ($ millions)||(1.1)||(5.2)||78%|
|5.1||8.3||(38%)||Mine operating earnings ($ millions)||29.9||24.1||24%|
|12.3||13.2||(7%)||Mine operating cash flow before taxes ($ millions)(8)||47.8||43.7||9%|
|7.3||7.7||(4%)||Operating cash flow before working capital changes(9)||31.6||21.6||46%|
|7.9||4.4||81%||EBITDA(10) ($ millions)||29.2||44.2||(34%)|
|101.6||128.7||(21%)||Working capital (12) ($ millions)||101.6||128.7||(21%)|
|(0.01)||(0.03)||(67%)||Earnings (loss) per share – basic ($)||(0.01)||0.09||(111%)|
|0.04||0.04||(14%)||Operating cash flow before working capital changes per share(9)||0.17||0.13||35%|
|189,241,367||170,432,326||11%||Weighted average shares outstanding||180,655,842||166,201,727||9%|
(1) Silver equivalent (AgEq) is calculated using an 80:1 silver:gold ratio.
(2) These are non-IFRS financial measures and ratios. Further details on these non-IFRS financial measures and ratios are provided at the end of this press release and in the MD&A accompanying the Company’s financial statements, which can be viewed on the Company’s website, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
For the three months ended September 30, 2022, net revenue, increased by 15% to $39.7 million (Q3 2021: $34.6 million).
Gross sales of $40.4 million in Q3 2022 represented a 15% increase over the $35.0 million in Q3 2021. Silver oz sold increased by 90%, due to both a 12% increase in silver production and a significantly smaller buildup of finished goods inventory during Q3, 2022 compared to Q3, 2021. There was a 22% decrease in the realized silver price resulting in a 48% increase to silver sales. Gold oz sold decreased 11% with a 6% decrease in realized gold prices resulting in a 16% decrease in gold sales. The decrease in gold sales is primarily driven by the decreased gold grades at the Bolañitos mine and the suspension of production from the El Compas mine. During the period, the Company sold 1,327,325 oz silver and 8,852 oz gold, for realized prices of $19.24 and $1,678 per oz, respectively, compared to sales of 699,539 oz silver and 9,925 oz gold, for realized prices of $24.56 and $1,791 per oz, respectively, in the same period of 2021. For the three months ended September 30, 2022, the realized prices of silver and gold were within 3% of the London spot prices. Silver and gold London spot prices averaged $19.23 and $1,729, respectively, during the three months ended September 30, 2022
The Company increased its finished goods silver and finished goods gold inventory to 1,530,319 oz silver and 3,353 oz gold, at September 30, 2022 compared to 1,411,764 oz silver and 3,167 oz gold at June 30, 2022. The cost allocated to these finished goods was $22.1 million at September 30, 2022, compared to $20.8 million at June 30, 2022 and $18.3 million at September 30, 2021. At September 30, 2022, the finished goods inventory fair market value was $34.7 million, compared to $34.5 million at June 30, 2022. Earnings and other financial metrics, including mine operating cash flow(2), operating cash flow(2) and EBITDA(2) were impacted by the withholding of sales during Q3 2022.
Cost of sales for Q3, 2022 was $34.5 million, an increase of 31% over the cost of sales of $26.3 million for Q3, 2021. The cost of sales in Q3, 2022 was impacted by increased input costs and slightly impacted by the delay in recognition of costs associated with the increase in the quantity of silver ounces in finished goods at the end of the period. Overall costs for Q3, 2022 were impacted by higher labour, power and consumables costs as the Company is experiencing significant inflationary pressures. During Q3, 2022, the Company also recorded an allowance on the valuation of warehouse inventory of $1.3 million (Q3, 2021 – Nil).
In Q3, 2022, the Company had an operating loss of $1.3 million (Q3, 2021 – operating earnings of $3.0 million) after exploration and evaluations costs of $4.0 million (Q3, 2021 – $4.7 million), general and administrative expense of $2.2 million (Q3, 2021 – expense recovery $0.5 million), and care and maintenance expense of $0.2 million (Q3, 2021 – $0.4 million). In the three months ended September 30, 2021 operating earnings included $0.7 million in severance costs related to the suspension of the operations at the El Compas mine.
The earnings before taxes for Q3, 2022 was $1.7 million (Q3, 2021 – loss $0.8 million) after finance costs of $0.3 million (Q3, 2021 – $0.2 million), a foreign exchange gain of $0.8 million (Q3, 2021 –foreign exchange loss of $1.2 million), gain on assets disposal of $2.8 million (Q3, 2021 -$Nil) and investment and other expense of $0.3 million (Q3, 2021 –$2.4 million).
The Company realized a net loss for the period of $1.5 million (Q3, 2021 –$4.5 million) after an income tax expense of $3.2 million (Q3, 2021 – $3.7 million). In Q3, 2022 earnings were impacted by a $1.1 million mark-to-market adjustment resulting in an unrealized loss on investments included in investment and other expense (Q3, 2021 – $3.0 million).
Current income tax expense increased to $1.2 million (Q3 2021 – $0.7 million) due to increased profitability impacting the income tax and special mining duty, while deferred income tax expense of $2.0 million is primarily due to the estimated use of loss carryforwards to reduce taxable income generated at both Guanaceví and Bolañitos (Q3 2021 – $3.0 million).
Direct operating costs(2) on a per tonne basis increased to $131.61, up 14% compared with Q3 2021 due to higher operating costs at Guanaceví and Bolañitos and a reduction in ore tonnes processed. Guanaceví and Bolañitos have seen increased labour, power and consumables costs and at Guanaceví, increased third party ore purchased and operating development have increased compared to the prior year.
Consolidated cash costs per oz(2), net of by-product credits increased 27% to $10.32 driven by increased direct costs per tonne(2) and a reduction in by-product gold sales, offset by increased ore grades. AISC(2) increased by 16% on a per oz basis compared to Q3, 2021 as a result of the increased cash costs(2) and increased allocated general and administrative costs offset by a slight reduction in sustaining capital expenditures
The complete financial statements and management’s discussion & analysis can be viewed on the Company’s website, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. All shareholders can receive a hard copy of the Company’s complete audited financial statements free of charge upon request. To receive this material in hard copy, please contact Investor Relations at 604-640-4804, toll free at 1-877-685-9775 or by email at firstname.lastname@example.org.
About Endeavour Silver
Endeavour is a mid-tier precious metals mining company that operates two high-grade underground silver-gold mines in Mexico. Endeavour is currently advancing the Terronera project towards a development decision, pending financing and final permits and exploring its portfolio of exploration and development projects in Mexico, Chile and the United States to facilitate its goal to become a premier senior silver producer. Our philosophy of corporate social integrity creates value for all stakeholders.
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