Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to Endeavor Silver Corp. Full Year 2022 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 1 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 Malager, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good day, everyone. Before we get started, I ask that you view our MD&A precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website at edrsilver.com. With us on today's call is Dan Vickson, Endeavor Silver's CEO, Christine West, our Chief Financial Officer, and Don Gray, Endeavor's COO. Following Dan's formal remarks, we will open up the call for questions. And now, over to Dan.

Thank you, Kalina, and welcome, everyone. I will keep today's call as brief as possible, as all the details were published in today's news release, but make sure I hit some of the key points for our investors. Endeavor Silver had a solid 2022 in what can be categorized as a challenging cost environment. Our production exceeded guidance, which helped alleviate the upward pressure on costs. Inflationary pressures across the entire spectrum of inputs were felt across the entire mining sector. and it was no different for us. We continued to de-risk and advance Terra Nera. Ideally, a financial package would be complete. However, things outside our control has pushed that into this year. I'm confident we will have clarity on this matter in short order. We continue to be excited about the acquisition of the Pizzeria project, both solidifying our presence in Mexico and furthering our strategy of delivering industry-leading growth. On a consolidated basis, We produced 9 million ounces of silver equivalent metal with both silver and gold production exceeding the upper range of guidance by 17% and 4% respectively. The second consecutive year, we've significantly exceeded production guidance. Quantis V was a star performer yet again, accounting for over 70% of consolidated production with silver and gold grades well above plan. In fact, Quantis V had record throughput grades averaging 512 grams per tonne silver and 1.44 grams per tonne gold, while the plant approached 1,300 tonnes per day average throughput in Q4. Overall, the mill performed well, with recoveries averaging just under 86% for silver and just below 90% for gold, demonstrating consistency and stability at the slightly higher throughput. The performance of our operating mine, Balanitos, remains steady. There was increased silver production offset by lower gold production. We continue to evaluate opportunities to increase mine life at Bolognese and are cognizant of Bolognese in the current landscape. The operating team has done a good job meeting their targets. Our strong operating performance enabled robust financial results. Particularly in Q4, as gold and silver prices strengthened, we were able to take advantage of the higher prices by selling most of the silver inventory. As a result, revenue rose by 27%, marking a 10-year best bolstered mostly by volume. The higher revenue translated into increased cash flow with mine operating earnings of $51.5 million, up 42% from 2021. Operating cash flow before working capital changes of $54 million, again, up 68% compared to 2021. And specifically at the site level, Kiwanis to be delivered mind free cash flow before taxes of $30 million and Bolo Nicos contributed just over a million dollars. Our earnings for the year were $6.2 million or three cents per share. I'm particularly pleased that we're able to deliver operating costs on a per ounce basis that are relatively in line with guidance, despite the industry wide inflationary pressures. We ended the year with cash costs of $10.65 per ounce, which is about 7% over our guidance, and all-in sustaining costs of $19.97 per ounce, which is below the lower-end guidance of $20 per ounce. However, industry-wide inflation has been and continues to be challenging. Our direct costs per time were up 16% compared to the previous year as we saw cost increases in a lot of our key inputs. Fortunately, the increased Guana Civic grades offset the increases in direct costs, but cost control will continue to be a key focus for the company going forward. Our financial performance led to a strong balance sheet at the year end. We had cash on hand of $84 million with no long-term debt, aside from normal course leases for equipment. Working capital totaled about $94 million, which includes unsold bullion held at costs of $6 million, but has a market value of $15 million. This past year, we were very busy and productive at Terranair preparing the site for full-scale construction. We spent $41 million on initial development using our own existing cash while we continue to confirm a viable debt package. During the year, the project team delivered several achievements. The full mobile mining fleet is now on site, comprised of 30 units. all the major plant equipment has been pre-ordered with the majority of the equipment scheduled to arrive in the first half of 2023 upgrades the road access totally seven kilometers are well advanced this work will improve slope stability stabilization and drainage as well as enhanced transportation access we commence construction of the permanent camp we commence the back excavation of the plant site and we convince first portal access We are optimistic and excited to provide the market with full details of the financing package in the near future and to announce a formal construction decision. The board has approved an additional $26 million in development expenditures for Q1 2023, while we continue to advance the project. At the outset of 2022, we began executing our three-year sustainability strategy, which is anchored on three pillars, people, planet, and business. We launched or expanded many initiatives to further embed sustainable practices across our organization and create real value for our stakeholders. We took several steps to increase employee development, engagement, and inclusion with positive results across the company. In addition, we amplified our community investments in Mexico, aligned with our priority areas of education and employability. Over the past year, we devoted a significant amount of time and effort across our organization to better understand the potential risks and opportunities related to climate change. These are discussed in our first climate disclosure report that will be published next week, aligning with the TCFD framework. While it's still early days on integrating climate initiatives, we are trying to be thoughtful and diligent in determining the most effective steps for us as we deepen our understanding of the the impact of climate change initiatives on our company. Most importantly, our view of climate change is not solely fixed on risk. There are also great opportunities in front of us. The world is beginning to realize the importance of metals to support the transition to a low-carbon economy. The products we provide sit at the very beginning of the supply chain for essentially everything needed and used in modern society. I encourage you to read our climate report when it's published next week. For 2023, our production outlook continues to be strong with another year of robust grades from GuanaCivi. We are targeting to produce between 8.6 and 9.5 million ounces of silver equivalents, a midpoint which marks a fourth consecutive year of production growth. The combination of higher consolidated throughput and produced ounces allows for a projected unit cost of $10 to $11 per ounce for cash costs and $19 to $20 per ounce for all-in sustaining costs. similar to 2022. At Guantanamo City and Balonitos, we have plans to invest more than $35 million in sustaining capital to optimize performance and maximize output. Of course, as everyone knows, this company has been built through the drill bit, and we are aiming to invest $10 million into exploration for 2023, with the largest portion, $3 million, being allocated to Pizzeria, while Perel has a $1.5 million budget. I want to emphasize how excited we are about the notion of unlocking value through exploration and advance both PITREA and PIREL. Both are expected to advance through economic studies early next year. The scale and impact of PITREA will be very significant for us. In December, we confirmed an indicated resource of nearly 600 million ounces of silver plus material amounts of lead and zinc. This year, we plan to extend a historical ramp to better understand the feeder structures we identified in the deposit. With continued exploration success, we ultimately hope to identify a business case to model an underground operation at Pit Theriault. In closing, it's going to be another busy year. I'm very excited about our outlook as we continue to exercise on our growth pipeline, particularly at a time when silver demand is beginning to strengthen. I think that wraps up my formal comments For today, let's open up the lines for questions. Operator.