Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp 2021 third quarter financial results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Galina Meliger, VP of IR, for opening remarks. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to the Endeavor Silver 2021 Third Quarter Financial Results Conference Call. With me on the line today, we have the company's Chief Executive Officer, Dan Dixon, our Chief Financial Officer, Christine West, and our Chief Operating Officer, Dawn Gray. Before we get started, I'm required to remind you that certain statements on today's call will contain forward-looking information within the meaning of applicable securities laws. These may include statements regarding Endeavor's anticipated performance in 2021 and future years, including revenue and cost figures, silver and gold production, grades and recoveries, and the timing and expenditures required to develop new mines in mineralized zones. We do not intend to and do not assume any obligation to update such forward-looking information other than as required by applicable law. So with that, and on behalf of Endeavour Silver, I'd like to thank you again for joining today's call, and I'll now turn it over to our CEO, Dan Dixon.

Thank you, Galena, and welcome everyone. It's been a solid year so far, and Q3 was no exception. Quarter over quarter, we saw higher silver and gold grades and our operating costs improved, decreasing to levels that are closer to our 2021 guidance. Year over year, silver production increased by nearly 40%, driven by record production at Guana City, and gold production also increased, up by 3%. As anticipated, during the quarter, we suspended operations at El Compass. This will result in minimal impact on our projections for the year, as it is a very small asset representing only 5% of our consolidated annual production. Overall, we are tracking to the upper end for our full year 2021 production guidance, which we revised upwards in October. Costs, while improving, are expected to come in the upper end of the respective ranges. Despite strong production this quarter, I want to highlight that our performance is not reflected in our financials. This is due to the fact that we continue to withhold metal sales as precious metal prices soften significantly during the quarter. Believing at the time that prices would rebound, which they have, and with the benefit of having more than $100 million in cash on the balance sheet, we made the decision not to sell into a falling market. As a result, at the end of September, we were carrying a larger than normal finished goods inventory. Given the inventories held on our balance sheet at a million dollars less than the estimated fair market value, this negatively impacted our third quarter revenue, earnings, and mine operating cash flow. Our plan is to sell down most, if not all, of the inventory in the coming months and finish the year on a high note. With operations running smoothly, we are laser focused on future growth, starting with the development of our next mine, Terra Nera. As our largest and lowest cost mine, the high-grade Terranera project will be a game changer for us. We recently issued an updated feasibility study on the project, where reserves grew by 33%, we extended the mine life from 10 to 12 years, and payable silver and payable gold increased by 32% and 20% respectively. We also incorporated a third portal into the mine plan to improve sequencing as well as increase long-haul mining. These design changes increase the capital cost of the project. However, they will yield more operational flexibility, resulting in better operational results. While there may be price pressures on some materials, we have sourced a number of long lead items and built in a contingency. Our team is focused on keeping the project on schedule, as this is a key driver to staying on budget. Our intent is to fund the Terran Air development project through a combination of cash on hand, operating cash flow, and debt financing. To this end, we have been working with commercial banks on an $80 to $100 million debt facility, and we expect to receive committed financing in the coming months. Once we have clarity on financing, the Board will approve construction and we can commence the 24-month build-out. Key permits required to begin construction are in place, although some amendments and normal course extensions have been filed to reflect the current design. In the meantime, the board approved an additional $13 million to be spent this year on early works, and the project is moving relatively quickly. During the quarter, we advanced initial earthworks, front-end engineering, procurement, site clearing, and started our temporary camp. There have been very few silver mines developed in the last five years, and very few are being planned. So needless to say, we are excited to get going on the construction tearing era and get it up and running. Upon completion of construction, Currently scheduled for the first half of 2024, Terran Air is expected to double our production profile and cut our cost profile in half. Simply put, Terran Air is a high-grade silver asset and it clearly repositions us to a low-cost, top, mid-tier producer. And we don't plan to stop there. As we've stated, our five-year strategic plan is to become a premier senior silver producer. To reach this milestone, we have a solid growth pipeline, which includes Peral, which could be our next development project in Mexico, a number of world-class exploration properties in Chile, and our most recent acquisition, the Bruner Gold Project. Bruner is an advanced-stage exploration property in Nevada with favorable geology. We paid $10 million in cash for Bruner, and based on historical resource estimates, we see a lot of upside potential for exploration discoveries and district consolidation. Our team will focus initially on verifying the historic resource, then turn their attention to the many exploration targets on this property. This is truly an exciting time for Endeavour Silver, and we have a great team in place focused on execution. For investors, there are several catalysts to look forward to in the coming months. Receipt of a committed project financing for Terranera, followed by a formal construction decision and exploration updates, to name a few. This includes my comments for this quarter. Let us stop there and open the lines for questions. Operator, over to you.