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TABLE OF CONTENTS Feb 3 - 9, 2014 Volume 99 Number 51 - 0 comments

Endeavour Silver hits all the right notes in 2013

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VANCOUVER — An impressive fourth quarter capped off a strong year for mid-tier producer Endeavour Silver (TSX: EDR; NYSE: EXK) at its trio of Mexican silver mines. The company announced on Jan. 9 that its fourth-quarter production was up 56% year-on-year, which contributed to a 52% jump in annual silver output, compared to 2012.

Endeavour cranked out 6.8 million oz. silver and 75,600 oz. gold in 2013, which compares to production of 4.5 million oz. silver and 38,700 oz. gold in 2012. The results well exceed Endeavour’s annual guidance figures, which were pegged at 6 million oz. silver and 68,000 oz. gold.

As a result the company boosted its revenues by 33% year-on-year despite a 25% fall in average realized silver prices and an 18% fall in realized gold prices, which dropped to US$23.10 per oz. and US$1,375 per oz. Endeavour registered 2013 revenue of US$277 million on sales of 7.2 million oz. silver and 81,120 oz. gold.

One of the company’s goals was to boost cash flows by reducing costs in order to weather a period of lower metal prices. Endeavour succeeded in a large part due to better-than-expected head grades and recoveries across all three of its operations. Higher grades were especially prominent to end the year.

At the company’s Guanacevi mine in Durango state, head grades rose 2% to 253 grams silver per tonne, and hit a high of 272 grams silver during the fourth quarter. Milling circuits also improved, with Guanacevi’s silver and gold recoveries jumping to 78.2% and 80.7%. The mine produced 2.8 million oz. silver and 6,800 oz. gold during the year.

Meanwhile, Endeavour’s flagship Bolanitos operation in Guanajuato state registered similar improvements, as the mine achieved both quarterly and annual production records. Head grades for the year came in at 149 grams silver and 2.63 grams gold. Milling was again the main driver, however, as Bolanitos realized a notable boost in gold and silver recoveries. Silver jumped 10% to 84.6%, while gold rose 9% to 86%. Bolanitos cranked out 2.9 million oz. silver and 51,700 oz. gold in 2013.

CEO Bradford Cooke acknowledged in the release that last year was a challenging one for Endeavour in light of falling precious-metal prices, and the company’s launch of a major mine and plant-reconstruction program at its newly acquired El Cubo operation in Guanajuato state. Cooke said the company completed the project “one time and under budget” on account of the enhanced cash flows from its other operations.

Endeavour reports that the operational adjustments at El Cubo have “gained traction and appear to be sustainable.” Though the company did not process new material through El Cubo’s mill during the fourth quarter, it recovered ounces from residual material in the circuit, which resulted in 10% of higher-than-expected recoveries. El Cubo accounted for 1.2 million oz. silver and 17,100 oz. gold over the past year.

BMO Capital Markets analyst Andrew Kaip — who has a “market perform” rating on Endeavour, along with a $5.75-per-share price target — noted on Jan. 9 that the company’s payable silver production of 2.2 million oz. was 41% higher than BMO Research’s forecast, while gold sales were 34% higher than forecast at 19,000 oz. Kaip also said that “the company is demonstrating consistent incremental progress at El Cubo.”

Operating activities provided Endeavour with US$51 million in cash over the first three quarters of 2013, and the company reported cash and equivalents of US$25 million at the end of September.

Endeavour shares have traded within a 52-week window of $3.03 and $8.02, and closed up 7% on Jan. 10 at $4.27 per share.

The company had 100 million shares outstanding at press time for a $424-million market capitalization.

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Endeavour Silver's El Cubo silver-gold mine in Guanajuato, Mexico, produced 1.2 million oz. silver and 17,142 oz. gold in 2013. Credit: Endeavour Silver
Endeavour Silver's El Cubo silver-gold mine in Guanajua...

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