Endeavour Silver Reports Second Quarter 2012 Financial Results; Arranges $75 Million Revolving Bank Line of Credit With Scotiabank; Q2 2012 Conference Call at 10 am PDT, Wednesday, August 8, 2012
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/07/12 -- Endeavour Silver Corp. (TSX: EDR)(NYSE: EXK)(FRANKFURT: EJD) announced today its financial and operating results and unaudited condensed consolidated interim financial statements for the Second Quarter, 2012. Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico: the Guanacevi Mine in Durango State and the Bolanitos Mine (previously called the Guanajuato Mine) in Guanajuato State. The Company acquired a third high-grade, underground, silver-gold mine, the El Cubo Mine, located near the Bolanitos Mine subsequent to the end of the 2nd quarter so its Q2, 2012 performance is not reported herein.
Net earnings were $7.5 million and operating cash-flow was $12.2 million from revenues totaling $40.4 million in the Second Quarter, 2012. The Company reported adjusted earnings (a non-IFRS measure(1)) of $5.9 million ($0.06 per share) Silver sales averaged $29.21 per ounce (oz) and the cash costs of production were $5.46 per oz net of gold credits, generating a gross margin of $23.75 per oz of silver produced in Q2, 2012.
Highlights of Second Quarter, 2012 (Compared to Q2, 2011)
-- Net earnings decreased 56% to $7.5 million ($0.09 per share) compared to
$17.0 million
-- Adjusted earnings(1) fell 44% to $5.9 million ($0.06 per share) compared
to $10.6 million
-- Operating cash-flow before working capital changes dipped 9% to $16.9
million
-- Mine operating cash-flow(1) increased 2% to $24.1 million
-- Revenues rose 11% to $40.4 million on sales of 1,075,000 oz silver and
5,650 oz gold
-- Working capital improved 19% to $159.0 million, up from $133.6 million
-- Silver production up 22% to 1,040,026 oz
-- Gold production up 59% to 7,695 oz
-- Silver equivalents production up 31% to 1.46 million oz (at a 55:1
silver:gold ratio)
-- Realized silver price fell 22% to $29.21 per oz sold (consistent with
average spot price for Q2)
-- Realized gold price up 5% to $1,599 per oz sold (consistent with average
spot price for Q2)
-- Cash costs(1) decreased 22% to $5.46 per oz silver payable (net of gold
credits)
-- Metal held in inventory at period-end included 896,501 oz silver and
6,124 oz gold compared to 177,935 oz silver and 2,291 oz gold
(1) Adjusted earnings, mine operating cash-flow and cash costs are non-IFRS measures which are reconciled in the Company's management discussion and analysis.
Bradford Cooke, CEO and Director, commented, "Endeavour continues to post profitable quarterly financial and operating results notwithstanding the current correction in metal prices. Revenues were up in Q2, 2012 thanks to higher silver and gold production and cash costs were down due to the economies of scale of increased throughput at Bolanitos and higher gold credits at Guanacevi."
"Quarterly cash-flow and earnings were both down due to a combination of lower metal prices, a lower derivative liability gain, lower other income and a higher foreign exchange loss. However, the Company's working capital remains strong, even after paying $100 million upon closing the acquisition of our third operating silver-gold mine in Mexico, the El Cubo mine in Guanajuato State. Our capital and exploration programs for all three mines are being funded out of cash-flow so the new $75 million bank line of credit simply enhances our access to cash on an as needed basis."
"Endeavour is well on track to meet its production guidance for 2012. As in previous years, our capital expansion programs at Guanacevi and Bolanitos commenced in the 1st Quarter and are scheduled for completion in the 3rd and 4th Quarters, respectively. New initiatives are now underway to effect a turn-around of operations at El Cubo and a capital expansion program is being evaluated."
"In exploration, we currently have five drill rigs working, three at Bolanitos and one each at Guanacevi and the San Sebastian project in Jalisco. New property acquisitions in each of the two districts we operate in are currently in progress, and some exciting new property acquisitions elsewhere are being evaluated. Additional results from our exploration and acquisition programs are expected this quarter."
Financial Results (see Consolidated Statement of Operations)
Revenues increased 11% to $40.4 million in Q2, 2012 (Q2, 2011 - $36.4 million) thanks mainly to higher silver-gold production. The Company sold 1,075,000 oz silver and 5,650 oz gold at average realized prices of $29.21 per oz and $1,599 per oz, respectively. Costs of Sales were up 22% to $20.9 million (Q2, 2011 - $17.1 million) primarily due to higher production and rising labour costs.
Mine Operating Cash-Flow increased 2% to $24.1 million (Q2, 2011 - $23.5 million), Mine Operating Earnings rose 2% to $19.5 million (Q2, 2011 - $19.1 million), and Operating Earnings fell 2% to $13.4 million (Q2, 2011 -$13.8 million). Operating Cash-Flow was $12.2 million (Q2, 2011 - $21.3 million).
Earnings Before Taxes were $12.0 million (2011: $22.7 million) after the Mark to Market Gain on Derivative Liabilities of $1.6 million (2011: $6.3 million), Foreign Exchange Loss of $3.4 million (2011: $0.1 million) and Investment and Other Income of $0.4 million (2011: $2.8 million). The Company realized Net Earnings for the period of $7.5 million or $0.09 per share (2011: $17.0 million) after an Income Tax Provision of $4.5 million (2011: $5.8 million).
Net Earnings include a mark to market derivative liability gain related to share purchase warrants issued in 2009 and denominated in Canadian dollars, while the Company's functional currency is the US dollar. Under IFRS, these warrants are classified and accounted for as financial liability at fair market value with adjustments recognized through net earnings.
Adjusted Earnings were $5.9 million ($0.06 per share) compared to $10.6 million in 2011 ($0.12 per share), excluding the derivative liability adjustment related to the warrants.
Cash Costs decreased 22% to $5.46 per oz silver produced in Q2, 2012 (Q2, 2011 - $6.98 per oz) mainly due to the economies of scale of increased throughput at Bolanitos and higher gold credits at Guanacevi. Endeavour reports its cash costs according to the Silver Institute cash cost reporting guidelines.
Capital investments totaled $11.9 million in property, plant and equipment during the Second Quarter, 2012. The main focus was on continued underground development at the Guanacevi and Bolanitos mines, expanding the mining fleet, and upgrading various circuits at the plants to handle increased throughputs.
Operating Results (see Consolidated Table of Operations)
Consolidated silver production climbed 22% to 1,040,026 oz and gold production jumped 59% to 7,695 oz in Q2, 2012 compared to Q2, 2011. The increased silver and gold production is primarily attributable to rising throughputs and, to a lesser extent, increasing silver recoveries offset by 22% lower silver grades and 8% higher gold grades. The increased throughputs are the result of plant expansions completed at both Guanacevi and Bolanitos in Q3, 2011. The decreased silver grades are due to rising throughput at Bolanitos, which has lower silver grades compared to Guanacevi, and the mining of lower grade silver ores at both operations due to normal grade variations within the ore-bodies and to take advantage generally higher metal prices. As a result, consolidated silver equivalent production rose 31% to 1.46 million oz (55:1 silver:gold ratio, no base metals) compared to Q2, 2011.
Consolidated plant throughputs in Q2, 2012 totaled 202,987 tonnes, up 48% compared to Q2, 2011 due to the 2011 plant expansions at both operations. The Guanacevi mine averaged 1,101 tpd and the Bolanitos mine averaged 1,129 tpd during the Second Quarter, 2012. Consolidated silver grades averaged 208 grams per tonne (gpt) silver and gold grades averaged 1.47 gpt. Consolidated silver recoveries averaged 76% and gold recoveries averaged 80%.
Guanacevi silver production for Q2, 2012 was 669,754 oz, up 8% compared to 618,083 oz in Q2, 2011 and gold production was 2,499 oz, an increase of 53% compared to 1,633 oz. Plant throughput was 100,208 tonnes at average grades of 269 gpt silver and 0.87 gpt gold compared to 85,594 tonnes grading 310 gpt silver and 0.69 gpt gold in Q2, 2011. The increased silver production is attributable to the 17% increase in plant throughput and higher recoveries.
Bolanitos silver production for Q2, 2012 was 370,272 oz, up 59% compared to 232,393 oz in Q2, 2011 and gold production was 5,196 oz, an increase of 62% compared to 3,198 oz. Plant throughput was 102,779 tonnes at average grades of 149 gpt silver and 2.05 gpt gold compared to 51,364 tonnes grading 192 gpt silver and 2.48 gpt gold in Q2, 2011. The increased silver and gold production is attributable to the 100% increase in throughput, offset by lower grades.
Outlook for H2, 2012
In the second half of 2012, Endeavour anticipates its financial position will remain steady, reflecting current silver and gold prices, rising precious metal production, and higher capital, operating and exploration costs. Industry-wide inflationary pressures on operating costs should be offset by the new economies of scale attained at the Bolanitos and Guanacevi mines as well as the operational turn-around now underway at El Cubo.
Silver production and cash costs are both expected to rise in the 3rd quarter reflecting the addition of El Cubo. The Bolanitos mine expansion from 1,000 tonnes per day (tpd) to 1,600 tpd, the Guanacevi plant optimization from 1,000 tpd to 1,200 tpd, and the operational turn-around at El Cubo should each contribute to higher silver production and falling cash costs in Q4, 2012.
The Company has forecasted El Cubo to produce 600,000 - 700,000 oz silver and 7,500 - 9,000 oz gold (975,000 oz - 1,150,000 oz silver equivalent production at the current silver:gold ratio of approximately 50:1). As a result, the Company should produce 2.8 - 2.9 million silver oz and 17,500 - 19,000 gold oz over the next 6 months.
Bank Line of Credit
Endeavour has entered into a $75 million secured revolving credit facility ("Facility") with Scotiabank to enhance its access to cash, which should allow management to remain acquisitive while metal and stock prices are depressed. The Facility's interest rate ranges from 2.75% to 4.25% over LIBOR based on the Company's net debt to EBITDA ratio with a commitment fee for undrawn amounts. The El Cubo mine is expected to generate significant additional operating cash-flow over the next 6 months which should enable the Company to continue funding its capital and exploration projects from operating cash flow.
Q2, 2012 Conference Call at 10 am PDT (1 pm EDT) on Wednesday, August 8, 2012
A conference call to discuss the Q2, 2012 financial and operating results will be held at 1 pm Eastern Time (10 am Pacific Time) on Wednesday, August 8, 2012. To participate in the conference call, please dial the following:
-- 800-319-4610 Canada and USA (Toll-free)
-- 604-638-5340 Vancouver Dial In
-- 1-604-638-5340 Outside of Canada & USA
-- No passcode is necessary
A replay of the conference call will be available by dialing 1-800-319-6413 in Canada & USA (Toll-free) or 1-604-638-9010 outside of Canada and USA. The required pass code is 4890 followed by #.
ENDEAVOUR SILVER CORP.
Bradford J. Cooke, Chief Executive Officer
About Endeavour Silver Corp. - Endeavour Silver is a premier mid-tier silver mining company focused on the growth of its silver production, reserves and resources in Mexico. Since start-up in 2004, Endeavour has posted seven consecutive years of growing silver production, reserves and resources. The organic expansion programs now underway at Endeavour's three operating silver mines in Mexico combined with its strategic acquisition and exploration programs should facilitate Endeavour's goal to become the next premier senior silver mining company.
Cautionary Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the United States private securities litigation reform act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Such forward-looking statements and information herein include, but are not limited to, statements regarding Endeavour's anticipated performance in 2012, including revenue, cash cost and capital cost forecasts, silver and gold production, timing and expenditures to develop new silver mines and mineralized zones, silver and gold grades and recoveries, cash costs per ounce, capital expenditures, sustaining capital and working capital. The Company does not intend to, and does not assume any obligation to update such forward-looking statements or information, other than as required by applicable law.
Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Endeavour and its operations to be materially different from those expressed or implied by such statements. Such factors include, among others: fluctuations in the prices of silver and gold, fluctuations in the currency markets (particularly the Mexican peso, Canadian dollar and U.S. dollar); fluctuations in the price of consumed commodities, changes in national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and Mexico; operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological conditions, pressures, cave-ins and flooding); inadequate insurance, or inability to obtain insurance; availability of and costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, reliability of calculation of mineral reserves and resources and precious metal recoveries, diminishing quantities or grades of mineral reserves as properties are mined; the ability to successfully integrate acquisitions; risks in obtaining necessary licenses and permits, global market events and conditions and challenges to the Company's title to properties; as well as those factors described in the section "risk factors" contained in the Company's most recent form 40F/Annual Information Form filed with the S.E.C. and Canadian securities regulatory authorities.
Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to: the continued operation of the Company's mining operations, no material adverse change in the market price of commodities, mining operations will operate and the mining products will be completed in accordance with management's expectations and achieve their stated production outcomes, and such other assumptions and factors as set out herein.
Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information.
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited-Prepared by Management)
(expressed in thousands of US dollars)
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June 30, December
2012 31, 2011
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ASSETS
Current assets
Cash and cash equivalents $ 115,444 $ 75,434
Investments 12,466 34,099
Accounts receivable 8,514 7,392
Inventories 33,326 34,195
Prepaid expenses 4,815 3,773
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Total current assets 174,565 154,893
Non-current deposits 776 600
Mineral property, plant and equipment 106,268 93,528
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Total assets $ 281,609 $ 249,021
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 12,021 $ 9,084
Income taxes payable 3,511 3,482
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Total current liabilities 15,532 12,566
Provision for reclamation and rehabilitation 2,739 2,729
Deferred income tax liability 24,217 20,806
Derivative liabilities 6,418 13,130
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Total liabilities 48,906 49,231
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Shareholders' equity
Common shares, unlimited shares authorized, no par
value, issued and outstanding 88,065,018 shares
(Dec 31, 2011 - 87,378,748 shares) 265,707 259,396
Contributed surplus 11,497 8,819
Accumulated comprehensive income (loss) (5,067) (1,700)
Deficit (39,434) (66,725)
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Total shareholders' equity 232,703 199,790
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Total liabilities and shareholders' equity $ 281,609 $ 249,021
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ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited- Prepared by Management)
(expressed in thousands of US dollars, except for shares and per share
amounts)
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Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Revenue $ 40,434 $ 36,363 $ 89,480 $ 71,715
Cost of sales:
Direct production costs 15,890 12,109 32,501 22,468
Royalties 482 631 943 1,076
Stock-based compensation 216 132 275 167
Amortization and
depletion 4,328 4,247 12,824 8,190
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20,916 17,119 46,543 31,901
Mine operating earnings 19,518 19,244 42,937 39,814
Expenses:
Exploration 2,110 2,592 3,922 3,725
General and
administrative 3,977 2,900 6,714 5,145
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6,087 5,492 10,636 8,870
Operating earnings 13,431 13,752 32,301 30,944
Mark-to-market loss/(gain)
on derivative liabilities (1,632) (6,334) (1,775) 7,631
Finance costs 5 7 10 19
Other income (expense):
Foreign exchange (3,463) (118) 1,167 1,569
Investment and other
income 411 2,782 1,940 3,018
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(3,052) 2,664 3,107 4,587
Earnings before income
taxes 12,006 22,743 37,173 27,881
Income tax expense 4,501 5,777 9,893 10,430
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Net earnings for the period $ 7,505 $ 16,966 $ 27,280 $ 17,451
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Other comprehensive income,
net of tax
Net change in fair value
of available for sale
investments (3,680) (237) (3,367) 151
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Comprehensive income (loss)
for the period $ 3,825 $ 16,729 $ 23,913 $ 17,602
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Basic earnings (loss) per
share based on net
earnings $ 0.09 $ 0.20 $ 0.31 $ 0.21
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Diluted earnings (loss) per
share based on net
earnings $ 0.06 $ 0.12 $ 0.28 $ 0.21
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Basic weighted average
number of shares
outstanding 87,999,485 83,593,669 87,870,479 82,429,259
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Diluted weighted average
number of shares
outstanding 90,775,352 88,777,750 90,816,849 84,375,931
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ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited - Prepared by Management)
(expressed in thousands of U.S. dollars, except share amounts)
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Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Operating activities
Net earnings for the period $ 7,505 $ 16,966 $ 27,280 $ 17,451
Items not affecting cash:
Stock-based compensation 2,007 1,558 2,785 1,901
Depreciation and
depletion 4,386 4,280 12,927 8,261
Deferred income tax
provision 2,788 2,428 3,411 3,750
Unrealized foreign
exchange loss (gain) 1,829 (350) (901) (1,470)
Mark to market loss
(gain) on derivative
liability (1,632) (6,334) (1,775) 7,631
Finance costs 5 7 10 15
Loss (Gain) on marketable
securities - 91 (483) 91
Net changes in non-cash
working capital (4,659) 2,609 (2,265) (1,735)
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Cash from operating
activities 12,229 21,255 40,989 35,895
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Investing activites
Property, plant and
equipment expenditures (11,946) (12,004) (21,295) (19,368)
Investment in short term
investments (642) (4,942) (27,884) (18,571)
Proceeds from sale of
short term investments 14,721 631 46,633 631
Investment in long term
deposits 8 178 (176) 178
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Cash used in investing
activities 2,141 (16,137) (2,722) (37,130)
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Financing activities
Common shares issued on
exercise of options and
warrants 668 4,931 1,278 9,575
Share issuance costs - (94) - (103)
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Cash from financing
activites 668 4,837 1,278 9,472
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Effect of exchange rate
change on cash and cash
equivalents (978) (87) 465 1,467
Increase (decrease) in cash
and cash equivalents 15,038 9,955 39,545 8,237
Cash and cash equivalents,
beginning of period 101,384 67,873 75,434 68,037
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Cash and cash equivalents,
end of period $ 115,444 $ 77,741 $ 115,444 $ 77,741
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ENDEAVOUR SILVER CORP.
COMPARATIVE TABLE OF CONSOLIDATED MINE OPERATIONS
(Unaudited - Prepared by Management)
(expressed in thousands of U.S. dollars, except share amounts)
Comparative Table of Consolidated Mine Operations
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Cash Direct
Plant Ore Grades Cost Cost
T'put Ag Au Recovered Ounces Recoveries $ per $ per
Period Tonnes (gpt) (gpt) Ag(oz) Au(oz) Ag(%) Au(%) oz tonne
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Production
2012
Year:
Q1, 2012 193,759 229 1.33 1,072,491 6,321 75.2 76.2 6.26 92.44
Q2, 2012 202,987 208 1.47 1,040,026 7,695 76.5 80.3 5.46 86.32
Q3, 2012
Q4, 2012
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Total 396,746 218 1.40 2,112,517 14,016 75.9 78.4 5.86 89.31
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Production
2011
Year:
Q1, 2011 141,942 263 1.36 900,133 5,008 75.0 81.0 4.62 79.30
Q2, 2011 136,958 266 1.36 850,476 4,831 72.7 80.6 6.98 96.69
Q3, 2011 138,592 263 1.47 858,738 4,926 73.4 75.2 5.03 91.47
Q4, 2011 184,381 252 1.45 1,120,781 7,045 75.0 82.0 4.05 84.14
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Total 601,873 260 1.41 3,730,128 21,810 74.1 79.8 5.08 87.55
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Production
2010
Year:
Q1, 2010 112,963 270 1.34 766,210 3,775 78.3 78.7 6.69 79.45
Q2, 2010 123,825 267 1.32 826,439 4,460 77.6 84.9 6.57 86.69
Q3, 2010 126,599 265 1.45 797,054 4,607 73.8 77.8 6.11 81.35
Q4, 2010 143,623 267 1.37 895,931 4,871 72.6 76.7 5.08 80.86
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Total 507,010 267 1.37 3,285,634 17,713 75.4 79.4 6.08 82.10
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Q2, 2012 :
Q2, 2011 48% -22% 8% 22% 59% 5% 0% -22% -11%
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Q2, 2012 :
Q1, 2012 5% -9% 10% -3% 22% 2% 5% -13% -7%
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YTD
2012:YTD
2011 42% -17% 3% 21% 42% 3% -3% -50% -49%
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Contacts:
Endeavour Silver Corp.
Hugh Clarke
Vice President, Corporate Communications
(604) 685-9775 or Toll Free: 1-877-685-9775
hugh@edrsilver.com
Endeavour Silver Corp.
Lana McCray
Investor Relations
(604) 685-9775 or Toll Free: 1-877-685-9775
(604) 685-9744 (FAX)
lmccray@edrsilver.com
www.edrsilver.com