Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silver Corp. First Quarter 2024 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 then 0. I would now like to turn the conference over to Galena Mulligan, 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 precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and the financial statements are available on our website at www.edrsilver.com. With us on today's call is Dan Dixon, Endeavor Silver's CEO, Libby Sinez, our Chief Financial Officer, and Don Gray, our Chief Operating Officer. Following Dan's formal remarks, we will open the call for questions. And now, over to Dan.

Thank you, Galena, and welcome, everyone. In 2024, we hit the ground running with a solid start. Market sentiment has heated up as gold's reached new all-time highs and silver is starting to follow. Our cash flow will benefit from these higher prices and our share prices outperformed our peer set thus far in 2024. From an operating standpoint, our operations are hitting their targets. Moreover, we made remarkable progress in the construction of our next cornerstone mine, Terranera, solidifying a bright future for the company. It's exciting to think that this time next year, TerraNero will be contributing production to our profile. Consolidated Q1 silver equivalent production totaled 2.3 million silver equivalent ounces, or 1.5 million ounces of silver and 10,000 ounces of gold. This puts us in great shape to achieve 2024's production guidance between 8.1 to 8.8 million silver equivalent ounces. The performance of both operating mines, Gowanus V and Bolanitos, remained steady and for lack of a better word, no script. Gold grades at both operations were slightly ahead of plan, offset by silver grades that were slightly below plan. Silver equivalents are flat and we expect similar grade profile throughout 2024. Moving to our financials, we reported top line revenue of $64 million, up 15% year over year. due to higher volume sold and their higher realized gold price compared to Q1 2023. Cost of sales totaled $52 million, also up 32% from Q1 2023, due to a combination of increased ounces sold, higher direct costs, and depreciation. Direct costs have stabilized and aligned well with our 2024 plan costs. Mine operating earnings totaled $12 million. After expiration, G&A, and income tax expense reported a net loss of $1.2 million, or one cent per share. At the site level, Guantanamo delivered mine-free cash flow pre-tax of $6.5 million, and Bolognese contributed $4.5 million. The higher gold price has significantly benefited our Bolognese operation. The full effect of the 2023 cost escalations and appreciation of the Mexican peso impacted direct operating costs compared to Q1 2023. As a result, our direct operating costs per time were significantly higher compared to last year. However, compared to 2024 budget, our direct operating costs aligned well with budget. To be clear for our listeners, our direct operating costs are defined as mining, processing, and indirect costs. Royalties, special mining duty, and purchase store are included in our direct cost metrics and are all impacted by the higher metal prices. These costs, again, included in our direct cost per ton, have all exceeded budget due to the higher metal prices. These account for roughly $50 per ton on our direct cost per ton. On a net basis, we did benefit from the higher byproduct gold credit, resulting in our cash costs and our all-in sustaining costs reporting below guidance. At March 31st, we had cash on hand of $35 million and working capital roughly $56 million. During Q1, we raised gross proceeds of $39 million by our ATM facility. As a reminder, it's essential to highlight that in adherence to our agreement for drawdown on the senior secure debt, we were committed to self-fund development for up to $150 million before gaining access to the $120 million credit facilities. After quarter ended, we satisfied this condition, which in turn enabled us to draw on the first installment of the $60 million of the $120 million committed. In connection with the draw, we also executed the final hedge contract terms to reduce financial risks on the project. First, capitalizing on the strong gold price environment, we executed forward sale contracts for 68,000 ounces of gold at $2,325 per ounce. This represents 55% of the planned gold byproduct production during Terranera's initial three years of operations. Second, we secured the cost of the pesos by entering forward purchases of $45 million of U.S. equivalent Mexican pesos, which covers the remaining construction period at a fixed rate of $16.56 per U.S. dollar. We're pleased with the terms of the debt package as our finance team dedicated significant effort to secure favorable terms while safeguarding the upside for our shareholders. We anticipate completing the remaining draw of $60 million in Q3, aligning with the completion of the Terra Nera build in Q4. Let me give you a quick update on construction progress at Terra Nera. By the end of Q1, we achieved a significant milestone by surpassing the halfway point of construction. achieving 53% completion, encompassing progress at both the surface construction and underground mine development. As I mentioned earlier, we spent $38 million towards development, bringing our total expenditure to $158 million. Our project commitment now stands at $225 million, representing 83% of the $271 million capital budget. With site activities advancing rapidly, we've concentrated our effort on structural steel installation, which is 80% complete, and major equipment installation for our upper mill platform. As our quarterly reporting is very comprehensive, I'll provide a few recent highlights of progress. Over the past year, we've emphasized the importance of accelerating mine development rates to four meters per day per critical heading, a goal we are steadily achieving to meet our production timeline. In this quarter alone, we completed over 1,000 meters of underground mine development, bringing our total to over 3,200 meters, keeping us on track for initial ore access in Q2. The majority of construction activities have progressed well at the upper plant site. Currently, surface construction stands at 56% complete. On the procurement front, our bulk materials purchasing is on track with the construction schedule, allowing us to install many components upon immediate arrival to site while making use of the project's lean footprint. Our COO has optimized a just-in-time delivery framework, which has proven highly effective, all while maintaining a steadfast focus on continuous safety measures. Thanks to a growing workforce at the site, which now totals 550 employees and contractors, This quarter saw the achievement of other significant milestones. This includes successful setting of both the sag and ball mills, placement of the regrind mill and flotation cells, and the commencement of installation for the crusher belt conveyors and apron feeders. Additionally, during Key 1, we initiated excavation of the TSF embankment, key trench, and the lower platform area, which are 60% and 45% complete respectively. Concrete work is anticipated to start in Q2 on the lower platform. And lastly, on the community relations side, a new minor trainer program for local community members was established to provide training and employment. If you're interested in viewing photos and video footage of the construction during progress, I encourage you to visit our website. You'll find our quarterly photo gallery showcasing the latest developments, as well as a video filmed in mid-March. Before we move to Q&A, I'd like to highlight that we recognize that our long-term success goes beyond achieving financial metrics. Next week, we will publish our 2023 Sustainability Report. It speaks to our ongoing actions to mine responsibly and help shape a more inclusive, sustainable future for our business and our stakeholders. 2023 marked the second year implementing our three-year sustainability strategy, and we will be reporting on our progress to date. I recommend you take time to view our new report after it's published online. Additionally, we're pleased to announce the nomination of a new board member, Angela Johnson, at our 2024 Annual Meeting of Shareholders to be held on May 28th. Her technical background and ESC experience is an exceptional fit for our existing board members and helps us achieve succession planning objectives to ensure core board competencies and expertise are in place. That wraps my formal comments for today. Together with the other members of our management team, we would be happy to take questions. Operator, please open the lines.