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TABLE OF CONTENTS Apr 28 - May 4, 2014 Volume 100 Number 11 - 0 comments

Endeavour Silver mines new high-grade zone at El Cubo

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VANCOUVER — Endeavour Silver (TSX: EDR; NYSE: EXK) has done it again.

The Mexico-focused silver producer achieved its ninth straight year of production growth in 2013 by sticking to a tactic that has worked again and again: find new mineralization near one of its operating mines, and within a year advance the discovery into production. In early 2014 it repeated this feat.

The latest locale to offer Endeavour new mineralization is known as V-Asuncion, part of the Villalpando vein system at the El Cubo mine in Guanajuato state. Endeavour acquired El Cubo in mid-2012 and quickly identified V-Asuncion as a promising area, based on old flooded mine workings, a small high-grade resource a few hundred metres northwest and knowledge that the bonanza horizon of the Villalpando vein ran just southeast in an area that had never been drilled.

Last year the company dewatered the V-Asuncion mine and sampled the underground workings. That’s when crews discovered the area offered not one but two veins within a strong dilation zone of the Villalpando vein. With a limited drill program Endeavour confirmed the two vein splays and hit into a nice body of high-grade silver–gold mineralization.

Within a year Endeavour transformed V-Asuncion from a discovery into a small reserve — and a producing one too, with crews mining the zone late last year.

This year Endeavour has three goals at V-Asuncion: use two surface drills to feel out the resource size, increase underground access and underground drilling, and boost throughput at El Cubo from 1,200 tonnes per day to 1,550 tonnes per day.

The company is already making progress on its first goal. Drills probing V-Asuncion have extended the zone’s strike to more than 800 metres while pulling nice intercepts. The highest grades came in hole 44, which cut 194 grams silver per tonne and 2.89 grams gold per tonne over 13.6 metres, including 10,843 grams silver and 99.2 grams gold over 0.15 metre.

El Cubo is Endeavour’s newest Mexican mine. When Endeavour took over the underground mine it was struggling to produce 65,000 oz. silver a quarter from 90 different development faces, and cash costs averaged US$29 per oz.

As it did with its other mines — such as the nearby Bolanitos mine and the Guanacevi mine in Durango state — Endeavour has transformed El Cubo. In the first quarter of 2014 the operation churned out 320,367 oz. silver and 5,606 oz. gold.

The ounces enhanced output from Bolanitos and Guanacevi and lifted Endeavour’s first-quarter output to 1.89 million oz. silver and 18,519 oz. gold, up 27% and 23%, compared to the first quarter of 2013.

The company experienced two fatal accidents within eight days at the end of the first quarter. On March 28 a miner died in a rockfall in the Porvenir Cuatro part of the Guanacevi mine. Then on April 5 an underground rock fall at V-Asuncion killed an El Cubo mine employee.

“The recent fatal accidents at Guanacevi an El Cubo prompted management to immediately implement a full safety retraining program at all three mines,” Endeavour CEO Bradford Cooke said in a statement. “Each mine will shut down for two days so each shift can receive a two-day refresher course on safety policies and practices. In addition, Endeavour will retain an underground mine-safety specialist to review the company’s safety programs and implement any recommended improvements.”

Despite producing 52% more silver and 95% more gold in 2013 than the year before, Endeavour recorded a net loss last year of US$89.5 million, compared with net earnings of US$42.1 million in 2012. Lower silver and gold prices deserve much of the blame because they meant lower realized sale prices. Endeavour recorded a US$104.3-million writedown after recalculating the Guanacevi reserves based on lower precious-metal prices.

But the company lowered its all-in sustaining costs by 21% in 2013 to US$18.31 per oz. silver, net of gold credits, and ended the year with US$35 million in the bank. Endeavour also invested US$88.6 million into its properties, spending US$48.5 million on the El Cubo refurbishment and splitting the rest between Guanacevi and Bolanitos.

In 2014 Endeavour plans to spend half as much on capital projects. El Cubo will again get the lion’s share, with US$20.9 million budgeted. Bolanitos will get US$9.9 million and Guanacevi will see US$11.7 million. The monies will fund mine development, infrastructure and equipment upgrades, and exploration.

On the exploration front, Endeavour plans to complete 54,000 metres of drilling in 120 holes testing multiple targets at all three mines. The effort is designed to replace reserves, expand resources and extend mine lives. Endeavour also plans to drill its San Sebastian property in Jalisco state, where the company is permitting a new mine.

Endeavour’s share price staged a remarkable rally in the first two months of 2014, rising from $3.40 to $6.50. In March shares moved sideways before dropping along with the silver price, to sit near $4.80. It recently closed at $4.76.

Endeavour has 100 million shares outstanding.

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Endeavour Silver's El Cubo silver mine in Mexico's Guanajuato state.  Credit: Endeavour Silver
Endeavour Silver's El Cubo silver mine in Mexico's Guan...

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