Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silvercorp first quarter 2023 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 Galena Melliger, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Before we get started, I ask that you 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 at edrsilver.com. With us on today's call is Dan Dixon, Endeavour Silver's CEO, Christine West, our Chief Financial Officer, and Don Gray, Endeavour's COO. Following Dan's formal remarks, we will open the call for questions. Now over to Dan.

Thank you, Galena, and welcome everyone. 2023 is off to a strong start. Not only was it a good quarter for our operating minds, but we also attained a significant milestone towards building the long-term future of the company. Consolidate Q1 silver equivalent production was up 18% year-over-year to 2.4 million silver equivalent ounces. Ultimately, this performance puts us in great shape to achieve this year's production guidance of between 8.6 to 9.5 million silver equivalent ounces. Once again, from a production standpoint, Qantas V had a positive quarter, driven by robust silver and gold grades. Adam Finkelstein, Our middle performance was impacted to the extended maintenance of our on our mill liners and concentrate filter cloth changes in February, while throughput returned to plan levels in March, it was down 13% quarter over quarter averaging 1138 tons per day for the quarter. Adam Finkelstein, The performance of our other operating mind balanitos remain steady there is increased silver production offset by lower gold production. We continue to evaluate opportunities to increase mine life at Boloneros and are cognizant of Boloneros in the current landscape. Their operating team has done a good job meeting their targets. Moving to financials, we reported top line revenue of $56 million with cost of sales of $40 million for mine operating earnings of $16 million. After exploration and G&A, we reported net earnings of $6.5 million or $0.03 per share. At the site level, Guana City delivered mine free cash flow of $9 million, and Bolognese contributed just under $1 million for the quarter. Regarding operating costs, we've seen pressures across several inputs driven by foreign exchange and inflation. So our direct costs per ton were up 14%. Specifically, the maximum pace was strengthened substantially, up 7% from year end and 9% from Q1 2022. which increase our local costs in U.S. dollar terms. Additionally, Guana City and Baleno continues to increase labor costs, power and consumable costs in steel, and processing for items such as cyanide and zinc. Lastly, we source more production from royalty concession areas, which results in increased royalty fees. The combination of these cost pressures has placed both the quarterly cash costs and the all-in sustaining costs slightly above the upper bounds of our guidance. at $11.12 per ounce for cash costs and $20.16 per ounce for all-in sustaining costs. While inflation is an industry-wide issue that's expected to persist throughout the year, we're closely reviewing our purchasing practices to see where and how we can mitigate this impact. Containing costs will continue to be a key focus as we work to improve the efficiencies of our operations. The higher than planned ore grades continues to offset the higher direct costs per ton. And with the recent strengthening of the gold price, we benefit from a higher byproduct credit on a per ounce reporting metrics. But to be clear, cost improvement continues to be a focus. As at March 31st, we had a cash on hand of $62 million and working capital of $93 million. Cash decreased as $12 million was spent on development activities at Terra Nera, and prepaids went up to account for deposits and payments on various items. As mentioned earlier, we announced an exciting milestone in April. Board approval to formally proceed with the construction of an underground mine and mill at Terra Nera. The green light comes on the back of a financing commitment for $120 million in senior secured debt from SocGen and ING Capital. Overall, I'm very pleased with the terms and details of the project loan. We worked very hard to secure favorable terms to protect the upside of the project for our shareholders. The facility has a term of eight and a half years at a secured overnight financing rate of plus 3.75% once the project is in full production. The loan has a two-year grace period during the construction phase, and there are no hedging requirements on silver production. That said, there is a hedging program for foreign exchange and for up to 68,000 ounces of gold over the first two years of production at Terran Air. Given the additional cost pressures that the industry has faced, we updated our development plans and initial capital costs for Terran Air. As the last feasibility study was completed almost two years ago, The updated mine plan increases the initial capex to $230 million from 175, while the processing plant capacity increases to 2,000 tons per day from the 1,700 in the feasibility study. The updated plan provides increased operating flexibility, includes inflationary cost estimates, and brings forward capital investment. Life of mine sustaining capital estimates decreases to $88 million compared to 106 in the feasibility study, as those costs have been included in initial capex. The current plant design optimizes the recoveries while the construction schedule is 21 months with initial production expected in the fourth quarter of 2024. With a seasoned development team in place, we are committed to delivering on time and budget. With significant early works already underway, we've spent $58 million to date on direct development. If you're interested in seeing photos of the construction progress, I encourage you to visit our website under the Terra Nera page. Let me recap some of our recent developments. The full mobile mining fleet is now on site. We ordered all the major equipment, plant equipment, and expect most of that to arrive this summer. Upgrades to the access roads totaling almost seven kilometers is nearly complete. We're nearing completion of the permanent camp We are nearly finished excavating the plant site, and we are advancing underground mine access. Supported by these results, our main focus now is progressing mine development, finalizing earthworks, and pouring concrete for the mill platform before the rainy season. Through all these operational milestones and advances, we continue to demonstrate our commitment to responsible and sustainable mining. To learn more about these and other efforts, I encourage you to read our latest sustainability report, which we released yesterday. The report captures our efforts in 2022 to maximize our positive impacts on society and the environment. This past year, we started executing our 2022 to 2024 sustainability strategy. I'm pleased with how our team delivered on our priorities, especially in areas like health and safety and embedded ESG practices deeper into our operations. Let me highlight just a few examples. We continue to achieve commendable safety performance in 2022 as part of our four-year downward trend with our reportable injury rate dropping to 0.87. We recycled over 90% of water used in our operations, minimizing our fresh use of water. And we performed climate scenario analysis to assess potential climate related risks and impacts and prepared our inaugural climate report aligned to TCFD framework. Lastly, I want to touch on the recent development of the new Mexican mining laws. Of course, this has been a topic with a lot of uncertainty and unfortunately moved swiftly through the Mexican government. From an operating standpoint, our expectation is the new law will increase compliance requirements, specifically around water use and reclamation activities. but don't expect a disruption of our operations or construction activities. There is still uncertainty of the details, but unfortunately, these new laws could discourage future investment into Mexico's exploration sector. We will see these new laws challenged through the courts and ultimately have more clarity in the coming weeks and months with regarding its impact. I think that wraps up my formal comment for today. Myself, Don Gray, our COO, and Christine are happy to answer any questions that you may have. Over to you, operator, for Q&A.