Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silver Corp Year-End 2021 Financial Results Conference Call. As a reminder, all participants are in the listen-only mode and the conference is being recorded. I would now like to turn the conference over to Trish Moran, Interim Head of Investor Relations. Please go ahead.

Thank you and good day, everyone. Before we get started, I ask that you please view our MD&A for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website, edrsilver.com. With us on today's call is Dan Dixon, Endeavor Silver's CEO, as well as Christine West, our Chief Financial Officer, Dawn Gray, Endeavor's COO, Dale Ma, BP Corporate Development, and Luis Castro, our VP Exploration. Following Dan's formal remarks, we will open up the call for questions. And now over to you, Dan.

Thank you, Trish, and welcome, everyone. 2021 was a good year for Endeavor Silver, both financially and operationally. Guantanamo and Bolognese each performed well, and the performance offset the impact of suspending the operations at El Compass mid-year. In 2021, on a consolidated basis, we produced 8.3 million ounces of silver equivalents, a 27% increase over the prior year. This put us above the top end of our guidance, which revised upwards in October. Last year's strong performance was driven primarily by two factors. First, increases in the volume of ore processed or throughput in recoveries. And secondly, more importantly, a higher average realized silver grade. Revenue rose by 20%, marking a five-year best, bolstered by volume and price growth. Most importantly, this higher revenue translated into increased profit and cash flow, with earnings per share of $0.08 and more than $32 million in operating cash flow before changes in working capital. Our cost per ounce metrics were higher than our previous year and above guidance. All-in sustaining costs and cash costs were higher than guidance by 1% and 3%, respectively. Industry-wide, inflation has been and continues to be challenging. In 2021, it impacted everything from labor to power to consumer roles across our operations. Additionally, Guantanamo City saw higher expenses associated with third-party ore purchases and operating development. Additionally, royalties were higher and we triggered a special mining tax due to Guantanamo City's significant production, the higher silver prices, and profitabilities. Our financial performance led to a strong balance sheet at year end. We had cash of $103 million and no long-term debt aside from normal course leases. With total working capital of $121 million, including unsold bullion inventory held at a cost of over $15 million, this bullion had market value of about $31 million at December 31st. With the current prices, we have started to draw down this balance in 2022. Our strong balance sheet sets us up well build out Terra Nera. Going into 2021, Terra Nera was an advanced exploration project. Last fall, it was reclassified as a development project following the completion of a feasibility study and confirmation of its economic viability. The study highlighted many improvements in the project, including increased production and throughput. Upon completion, we expect Terra Nera will nearly double our production and cut our cost profile in half. The updated study also increased our reserves by 33%, and we believe there is high potential for further growth. Ongoing drill campaigns are showing very encouraging results, and our goal is to publish the latest exploration results in the coming weeks. Clearly, Terranera is transformational. While we await the formal construction go-ahead, the project is moving forward. In 2021, $12 million was spent on land acquisitions, initial development, and mobile and processing equipment. There is an additional $9.5 million budget for the first quarter of 2022 for site clearing, final detailed engineering, early earthworks, temporary camp, and procurement of other long lead items. We'll be seeking board approval for construction upon completion of a debt financing package and receipt of some amended permits. I'd also like to highlight that while we've been delayed slightly by financing, we are still targeting the first half of 2024 to complete commissioning. With our eye on the future, last year we started rationalizing our portfolio and dealt with a couple assets that were no longer the right fit or were too small for us. Early in the year, Guadalupe Calvo Project was optioned to Ridgestone Mining and El Cubo was sold to Guanajuato Silver. In August, we suspended operations at our small El Compass operation. We also completed a couple smaller acquisitions to enhance our flagship assets. First, we added two more properties adjacent to the existing Hisar Gold Mine workings at Guanajuato. And secondly, at Perel, we bought out a 1% NSR royalty, which we now own 100% of with no royalty encumbered. As well, we purchased the Bruner Project, which is located in the well-known Walker Lane District of Nevada. Our focus is really still on the larger growth projects that will accelerate our vision of being a premier silver, senior silver producer, namely, which would be Terranera, Perel, and now Pizzeria. In mid-January, we announced the signing of the Defender Agreement to acquire the Pizzeria project from SSR Mining. Pizzeria is situated in Durango State, which has a long history of mining and is known as a mining-friendly jurisdiction in Mexico, with several mines in operation, including our Guanacini mine. It's one of the largest undeveloped silver deposits in the world, with a historic M&I resource of 525 million ounces of silver ingrained close to 100 grams per tonne, plus amounts of lead and zinc. There has been significant comprehensive work done by SSR to advance the project, and many key permits are in place. As a potential Tier 1 asset, PIT-3 is an exciting project for us. As soon as the transaction closes in Q2, work will immediately commence to redefine the historical resource to a current resource, assess the number of targets, and advance the project to an updated economic study. We've talked about previous year as well as our exciting future. Let's wrap things up with what's in store for 2022, starting with guidance for 2022. Our production outlook is on par with the average over the last three years, and managing costs will be a key focus as we try to offset the impact of rising costs. Quantity and volatiles are mature assets. We have plans to invest more than $34 million in sustaining capital to optimize performance and maximize output over the coming years. Equally important on the list of things to do is to further expand our mineral reserves and resources. Proven and probable silver and gold reserves increased by nearly 30% last year. We have 13 million earmarks across our exploration portfolio to continue our long, successful track record through the drill bit. 2022 is going to be an exciting year for the three cornerstones of our growth pipeline. Terranera, Perel, and Pizzeria, each of which provide a significant characteristic and opportunity to contribute to our future growth profile. As noted, Terranera is expected to move from funding and approval phase through to construction in the coming months. At Perel, we expect to initiate a PEA in the second half of 2022, and as mentioned earlier, the acquisition of Pizzeria is expected to close in the second quarter, and once closed, the work will begin. Our goal is to find a current resource by the end of this year. Overall, it's going to be another busy year. And with that, I'd like to open up the questions operator.