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Endeavour Silver Reports $19.9 Million Earnings in the Fourth Quarter, 2020 and $1.2 Million Earnings for the Full Year, 2020

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Endeavour Silver Corp. (NYSE: EXK) (TSX: EDR) released its financial results for the fourth quarter and year ended December 31, 2020. The Company operates three silver-gold mines in Mexico: the Guanaceví mine in Durango state, the Bolañitos mine in Guanajuato state and the El Compas mine in Zacatecas state. All dollar ($) amounts are reported in United States dollars (US$).

 

Bradford Cooke, Endeavour CEO, commented, “While 2019 was operationally the most challenging in our 16-year history as a producing company, 2020 was perhaps one of the most satisfying. Notwithstanding a government mandated two-month suspension of mining operations due to the COVID pandemic, we delivered higher production and lower costs at each of our three operating mines in 2020.”

 

“Lower costs coupled with higher metal prices drove significantly higher revenues, cash flow and earnings, which turned positive for the first time in three years thanks to our very strong performance in Q4, 2020. The operational turn-around programs implemented in 2019 have been a big success operationally and financially, a testament to the hard work, skill, passion and persistence of our operations team.”

 

“We remain alert regarding the COVID pandemic in Mexico and diligent with all our health and safety protocols, continuing to prioritize our employees’ safety as a key goal. I am pleased to report that Guanacevi, our largest mine, posted a second consecutive year with more than 1 million hours worked without a lost time accident.”

 

2020 Fourth Quarter Highlights

 

  • Gross Sales: $61.2 million, up 81% from $34.6 million in Q4, 2019 on the sale of 1.4 million ounces of silver and 13,850 oz gold at average realized prices of $24.76 per oz silver and $1,885 per oz gold.
  • Cash Flow: $21.6 million from operations before working capital changes, up from negative $7.9 million in 2019, mine operating cash flow before taxes(1) was $30.2 million up from $4.9 million in Q4 2019.
  • Net Income: $19.9 million ($0.13 per share), up from a net loss of $17.9 million in Q4, 2019, Q4 2020 EBITDA was $24.3 million.
  • Metal Production: 1,117,289 oz silver and 12,586 oz gold for 2.1 million oz silver equivalent, up 25% compared to 1,705,751 oz AgEq in Q4, 2019 using an 80:1 silver:gold ratio.
  • Cash Cost(1): $6.83 per oz silver payable net of gold credits, down 50% from $13.63 per oz in Q4, 2019. Direct cost per tonne increased due to higher royalty payments and third-party ore purchased at the Guanaceví mine, partly offset by lower costs at the Bolanitos and El Compas mines. Excluding royalties and special mining duties, operating cost per tonne declined in Q4, 2020 due to improved productivity.
  • All-in Sustaining Cost(1): $18.52 per oz silver payable net of gold credits, down 20% from $23.20 per oz in Q4, 2019.

 

2020 Full Year Highlights

 

  • Gross Revenue: $140.3 million, up 15% from $121.7 million in 2019 on the sale of 3.5 million oz of silver and 35,519 oz gold at average realized prices of $21.60 per oz silver and $1,846 per oz gold.
  • Cash Flow: $28.8 million from operations before working capital changes, up from negative $8.9 million in 2019, mine operating cash flow before taxes(1) was $56.2 million up from $14.9 million in 2019.
  • Net Income: $1.2 million ($0.01 per share), up from a net loss of $48.1 million in 2019, full year EBITDA(1) was $29.4 million.
  • Metal Production: 3,513,767 oz silver and 37,139 oz gold for 6.5 million oz AgEq, down 9% from 7.1 million oz AgEq in 2019 using an 80:1 silver:gold ratio primarily due to the suspension of operations at the El Cubo mine on November 30, 2019.
  • Cash Cost(1): $5.55 per oz silver payable net of gold credits, down 57% from $12.85 per oz in 2019.
  • All-in Sustaining Cost(1): $17.59 per oz silver payable net of gold credits, down 17% from $21.19 per oz in 2019. Direct cost per tonne increased due to higher royalty payments and toll ore purchases at the Guanaceví mine, partly offset by lower costs at the Bolanitos and El Compas mines. Excluding royalties and special mining duties, operating cost per tonne declined due to improved productivity.
  • Balance Sheet: Year-end cash balance was $61.1 million, working capital was $70.4 million. Only long term debt consist of equipment loans of $6.1 million used to upgrade our mobile fleet. Raised net $25.3 million in proceeds from an ATM equity offering in the first seven months of 2020 with a new ATM of $60 million currently in place and available for use.
  • Guanacevi Continued to Outperform: Operating costs increased due to purchasing more toll ore from small miners, while the higher prices and profitability increased royalty payments and special mining duties. Delivered free cash flow of $20.8 million.
  • Bolanitos Continued to Improve: Higher prices and improved profitability resulted in higher special mining duties which increased direct costs per tonne. Direct operating costs improved from 2019 due to increased productivity in 2020. Delivered free cash flow of $3.2 million.
  • El Compas Costs Improved: Cost profile improved compared to prior quarters, while throughput remained steady.
  • Terronera Pre-Feasibility Study Finalized: Represents the Company’s next core asset with a low CAPEX, low operating costs, short payback period and exceptional financial returns, feasibility study now half way towards completion in Q3, 2021.
  • Expanded Land Position and Resumed Greenfields Exploration at Terronera: Acquired two adjacent mineral concessions spanning 4,959 hectares, covering multiple mineralized vein structures, and resumed drilling of untested veins.
  • Delivered Positive Brownfields Exploration Results: Drilling continued to intersect high-grade gold-silver mineralization in the Santa Cruz vein at Guanacevi, the Melladito and San Bernabe veins at Bolanitos, and the Misie and Calicanto veins in the El Compas district.

(1) Mine operating cash flow, direct cost per tonne, direct operating cost per tonne, cash costs and all-in sustaining costs are non-IFRS measures. Please refer to the definitions in the Company’s Management Discussion & Analysis.

 

Financial Overview

 

In 2020, revenue, net of smelting and refining costs, increased 18% to $138.4 million as sharply higher metal prices were partly offset by 9% lower silver equivalent production year on year. Mine operating cash flows, operating cash flows, earnings and EBITDA all substantially increased compared to 2019. Net earnings improved to $1.2 million compared to a net loss of $48.1 million in 2019, including $19.9 million earnings in Q4, 2020.

 

A Company-wide review of operations in early 2019 identified several opportunities to improve operating performance. As a result, management initiated multiple remedial measures including changes of mine-site management and mining contractors, changes to shift and contractor supervision, renting used mining equipment, leasing new mining equipment and reducing the work force.

 

The goal of these remedial measures was to improve safety, boost productivity, reduce operating costs and generate free cash flow. Management notes that the remedial measures had a positive impact on mine operating performance, the operational turn-arounds were completed last year and the benefit of these initiatives was realized in the second half of 2020. These improvements accommodated increased health protocols and new government restrictions related to the COVID-19 global pandemic (COVID-19), including the temporary suspension of mining operations in April and May of 2020.

 

Direct costs per tonne in 2020 increased 4%, to $114.57 compared with 2019 due to higher royalties, special mining duties and toll ore purchases offset by improved productivity at the Guanaceví and Bolañitos operation, the depreciation of the Mexican Peso and the exclusion of the El Cubo operation, which suspended activities in Q4, 2019. Direct operating cost per tonne, which excludes royalties and special mining duties, was 6% lower at $101.17 per tonne compared to $107.96 per tonne in 2019.

 

Consolidated cash costs per oz, net of by-product credits, decreased 57% to $5.55 primarily due to higher ore grades and higher a realized gold price that increased the by-product credit compared to 2019. All-in sustaining cost decreased 17% to $17.59 per oz in 2020 as a result of lower operating costs partly offset by higher corporate general and administrative costs and increased capital expenditures to accelerate mine development. General and administrative costs increased $2.7 million primarily due to a $3.5 million expense related the mark to market of deferred share units.

 

Financial Results (Consolidated Statement of Operations Appended Below)

 

For the year ended December 31, 2020, the Company generated net revenue totalling $138.4 million (2019 – $117.4 million). During the year, the Company sold 3,460,638 silver oz and 35,519 gold oz at realized prices of $21.60 and $1,846 per oz respectively, compared to sales of 4,054,652 oz silver and 39,151 oz gold at realized prices of $16.29 and $1,422 per oz respectively in 2019.

 

Cost of sales for 2020 was $111.1 million, a decrease of 18% over the cost of sales of $134.8 million for 2019. The 18% decrease in cost of sales was primarily related to the 21% decrease in tonnes processed and the depreciation of the Mexican Peso while cost cutting and efficiency measures implemented during 2019 were partly offset by inefficiencies of the suspension and re-start of activities due to COVID-19 and higher royalty expense with the rising prices. Royalties increased 301% to $8.2 million due to higher realized prices and the increased mining of the high grade El Curso property at the Guanacevi operation which is subject to significantly higher royalty rates.

 

Mine operating earnings was $27.3 million compared to a loss of $17.4 million in 2019. Excluding depreciation and depletion of $28.1million (2019 – $31.5 million), stock-based compensation of $0.3 million (2019- $0.2 million) and the inventory write off of $0.4 million (2019- $0.6 million) mine operating cash flow before taxes was $56.2 million in 2020 (2019 – $14.9 million).

 

Operating losses before taxes was $0.8 million (2019 – loss of $43.9 million) after exploration expenditures of $9.8 million (2019 – $12.0 million), general and administrative expense of $12.7 million (2019 – $10.0 million), care and maintenance expense for the shutdown of the El Cubo mine of $3.0 million and $2.2 million in care and maintenance costs related to the temporary suspension of the Guanaceví, Bolañitos and El Compas operations due to COVID-19 in Q2, 2020. In 2020, the operating loss included impairments, net of impairment reversals, of non-current assets of $0.4 million related the value in use estimates of the Guanacevi and El Compas operations. The operating loss for 2019 included a severance expense of $4.6 million related to the suspension of operations at El Cubo at the end of 2019.

 

There was an income tax recovery of $2.2 million in 2020 compared to an income tax expense of $4.1 million in 2019. The $2.2 million tax recovery is comprised of $3.0 million in current income tax expense (2019 – $2.7 million) and $5.2 million in deferred income tax recovery (2019- $1.4 million deferred income tax expense). The current income tax expense consists of $2.0 million of special mining duty taxes and $1.0 million of income taxes. In 2019, the Company did not pay special mining duty due the losses generated at the operations. The deferred income tax recovery of $5.2 million is primarily due recognition loss carry forwards as the future profitability of the Guanacevi operation has significantly increased with the recent increase in reserve estimates.

 

About Endeavour Silver

 

Endeavour Silver Corp. is a mid-tier precious metals mining company that owns and operates three high-grade, underground, silver-gold mines in Mexico. Endeavour is currently advancing the Terronera mine project towards a development decision and exploring its portfolio of exploration and development projects in Mexico and Chile to facilitate its goal to become a premier senior silver producer. Our philosophy of corporate social integrity creates value for all stakeholders.

 

 

 

ENDEAVOUR SILVER CORP.
COMPARATIVE HIGHLIGHTS

Three Months Ended December 31 2020 Highlights Year Ended December 31
2020 2019 % Change 2020 2019 % Change
Production
1,117,289 939,511 19% Silver ounces produced 3,513,767 4,018,735 (13%)
12,586 9,578 31% Gold ounces produced 37,139 38,907 (5%)
1,108,848 923,540 20% Payable silver ounces produced 3,482,094 3,951,923 (12%)
12,314 9,397 31% Payable gold ounces produced 36,392 38,003 (4%)
2,124,169 1,705,751 25% Silver equivalent ounces produced(1) 6,484,887 7,131,295 (9%)
6.83 13.63 (50%) Cash costs per silver ounce(2)(3) 5.55 12.85 (57%)
14.58 20.43 (29%) Total production costs per ounce(2)(4) 14.01 20.73 (32%)
18.52 23.20 (20%) All-in sustaining costs per ounce(2)(5) 17.59 21.19 (17%)
237,389 236,531 0% Processed tonnes 757,160 954,886 (21%)
105.07 110.64 (5%) Direct operating costs per tonne(2)(6) 101.17 107.96 (6%)
129.66 113.47 14% Direct costs per tonne(2)(6) 114.57 110.09 4%
14.83 15.19 (2%) Silver co-product cash costs(7) 12.97 14.18 (9%)
1,129 1,312 (14%) Gold co-product cash costs(7) 1,109 1,238 (10%)
Financial
60.7 33.5 81% Revenue(11) ($ millions) 138.4 117.4 18%
1,419,037 1,050,157 35% Silver ounces sold 3,460,638 4,054,652 (15%)
13,850 10,803 28% Gold ounces sold 35,519 39,151 (9%)
24.76 17.45 42% Realized silver price per ounce 21.60 16.29 33%
1,885 1,507 25% Realized gold price per ounce 1,846 1,422 30%
19.9 (17.9) 211% Net earnings (loss) ($ millions) 1.2 (48.1) 102%
20.8 (3.8) 649% Mine operating earnings (loss) ($ millions) 27.3 (17.4) 257%
30.2 4.9 519% Mine operating cash flow ($ millions)(8) 56.2 14.9 277%
21.6 (7.9) 375% Operating cash flow before working capital changes(9) 28.8 (8.9) 424%
24.3 (4.8) 603% Earnings before ITDA(10) ($ millions) 29.4 (11.1) 364%
70.4 38.4 83% Working capital ($ millions) 70.4 38.4 83%
Shareholders
0.13 (0.13) 199% Earnings (loss) per share – basic 0.01 (0.36) 103%
0.14 (0.06) 250% Operating cash flow before working capital changes per share(9) 0.19 (0.07) 600%
157,536,658 140,054,885 12% Weighted average shares outstanding 150,901,598 135,367,129 11%

 

The above highlights are key measures used by management, however they should not be the sole measures used in determining the performance of the Company’s operations. The related definitions and reconciliations are contained in the Management Discussion and Analysis.

 

 

 

ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(expressed in thousands of U.S. dollars)

 

    Years ended
    December 31,   December 31,
    2020   2019
         
Operating activities        
Net earnings (loss) for the year   $ 1,159     $ (48,066 )
         
Items not affecting cash:        
Share-based compensation     3,003       3,195  
Depreciation, depletion and amortization     28,863       32,050  
Impairment of non-current assets, net     424        
Deferred income tax expense (recovery)     (5,206 )     2,358  
Unrealized foreign exchange loss (gain)     (1,032 )     (100 )
Finance costs     1,357       602  
Write off of IVA receivable           151  
Write off of mineral properties           45  
Write down of warehouse inventory           233  
Write down of inventory to net realizable value     405       576  
Loss on asset disposal     86       43  
Loss (gain) on other investments     (233 )     19  
Net changes in non-cash working capital     10,138       (684 )
Cash from (used in) operating activities     38,964       (9,578 )
Investing activities        
Proceeds on disposal of property, plant and equipment     190       11  
Mineral property, plant and equipment expenditures     (25,539 )     (21,519 )
Intangible asset expenditures           (280 )
Purchase of short term investments     (5,497 )      
Proceeds from disposal of marketable securities     1,032        
Redemption of (investment in) non-current deposits           3  
Cash used in investing activities     (29,814 )     (21,785 )
Financing activities        
Repayment of loans payable     (3,229 )     (1,343 )
Repayment of lease liabilities     (183 )     (247 )
Interest paid     (918 )     (391 )
Public equity offerings     26,367       23,557  
Exercise of options     6,910       343  
Share issuance costs     (1,112 )     (716 )
Deferred financing costs     (294 )      
Cash from (used in) financing activities     27,541       21,203  
         
Effect of exchange rate change on cash and cash equivalents     1,024       152  
         
Increase (decrease) in cash and cash equivalents     36,691       (10,160 )
Cash and cash equivalents, beginning of the year     23,368       33,376  
Cash and cash equivalents, end of the year   $ 61,083     $ 23,368  

This statement should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 and the related notes contained therein.

 

 

 

ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(expressed in thousands of US dollars, except for shares and per share amounts)

 

    Years ended
    December 31,   December 31,
    2020   2019
         
Revenue   $ 138,461     $ 117,421  
         
Cost of sales:        
Direct production costs     74,101       100,482  
Royalties     8,154       2,034  
Share-based payments     330       195  
Depreciation, depletion and amortization     28,136       31,495  
Write down of inventory to net realizable value     405       576  
      111,126       134,782  
         
Mine operating earnings (loss)     27,335       (17,361 )
         
Expenses:        
Exploration     9,756       12,001  
General and administrative     12,715       9,980  
Care and maintenance costs     5,233        
Impairment of non-current assets, net     424        
Severance costs           4,589  
      28,128       26,570  
         
Operating earnings (loss)     (793 )     (43,931 )
         
Finance costs     1,357       602  
         
Other income (expense):        
Write off of IVA receivable           (151 )
Foreign exchange     (1,553 )     101  
Investment and other     2,649       579  
      1,096       529  
         
Earnings (loss) before income taxes     (1,054 )     (44,004 )
Income tax expense (recovery):        
Current income tax expense     2,993       2,702  
Deferred income tax expense (recovery)     (5,206 )     1,360  
      (2,213 )     4,062  
         
Net earnings (loss) and comprehensive earnings (loss) for the year   $ 1,159     $ (48,066 )
         
         
Basic earnings (loss) per share based on net earnings   $ 0.01     $ (0.36 )
Diluted earnings (loss) per share based on net earnings   $ 0.01     $ (0.36 )
         
Basic weighted average number of shares outstanding     150,901,598       135,367,129  
Diluted weighted average number of shares outstanding     154,039,714       135,367,129  

This statement should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 and the related notes contained therein.

 

 

 

ENDEAVOUR SILVER CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(expressed in thousands of US dollars)

 

    December 31,   December 31,
    2020   2019
         
ASSETS        
         
Current assets        
Cash and cash equivalents   $ 61,083     $ 23,368  
Other investments     4,767       69  
Accounts and other receivable     20,144       18,572  
Income tax receivable     52       4,378  
Inventories     16,640       13,589  
Prepaid expenses     2,284       3,302  
Total current assets     104,970       63,278  
         
Non-current deposits     591       606  
Deferred financing costs     294        
Non-current IVA receivable     2,676       2,048  
Deferred income tax asset     12,753       7,136  
Intangible assets     492       975  
Right-of-use leased assets     861       1,337  
Mineral properties, plant and equipment     87,955       88,333  
Total assets   $ 210,592     $ 163,713  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
Current liabilities        
Accounts payable and accrued liabilities   $ 27,764     $ 19,775  
Income taxes payable     3,038       1,947  
Loans payable     3,578       2,958  
Lease liabilities     173       164  
Total current liabilities     34,553       24,844  
         
Loans payable     6,094       5,917  
Lease liabilities     921       1,074  
Provision for reclamation and rehabilitation     8,876       8,403  
Deferred income tax liability     1,077       682  
Total liabilities     51,521       40,920  
         
Shareholders’ equity        
Common shares, unlimited shares authorized, no par value, issued        
and outstanding 157,924,708 shares (Dec 31, 2019 – 141,668,178 shares)   517,711       482,170  
Contributed surplus     9,662       11,482  
Retained earnings (deficit)     (368,302 )     (370,859 )
Total shareholders’ equity     159,071       122,793  
Total liabilities and shareholders’ equity   $ 210,592     $ 163,713  
         

 

This statement should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 and the related notes contained therein.

 

Posted March 1, 2021

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