Endeavour Silver Corporation

Thank you for standing by. This is the conference operator. Welcome to the Endeavor Silver 2024 year-end 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 for pressing star, then 0. I would now like to turn the conference over to Alison Pettit, Director of Investment 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 financial statements are available on our website at edrsilver.com. On today's call, we have Dan Dixon, Endeavour Silver's Chief Executive Officer, Elizabeth Sinez, our Chief Financial Officer, and Don Bray, Endeavour's Chief Operating Officer. Following Dan's formal remarks, we'll open the call for questions. And now, over to Dan.

Thank you, Alison, and welcome, everyone. As we commence this year's earnings call, it's important to acknowledge the dynamic landscape that shaped the mining sector in 2024. Gold prices surged 27%, closing the year at $2,624 per ounce, the largest annual rise since 2010. Gold hit a record of $2,786 per ounce in October and surpassed $2,900 earlier this year due to global tensions, economic slowdown fears, and concerns over U.S. trade policies. Silver often mirrors gold's movement, and we expect this correlation to continue. Silver's rise has been driven by industrial demand and supply constraints. The global shift to electrification, renewable energy, and electric vehicles is driving demand for silver and solar panels, batteries, and key technologies. At the same time, supply deficits have emerged as new production struggles to keep pace with mine depletion. Rising industrial demand and supply changes continues to put upward pressure on silver prices. We also expect demand as a safe haven asset to have a greater impact on the silver market going forward. Endeavor Silver is well positioned to benefit from these favorable market dynamics. Now let's discuss production in more detail. In 2024, Endeavor Silver produced 7.6 million ounces of silver equivalent, achieving the higher end of the revised guidance range. of 7.3 to 7.6 million ounces. Guidance was lowered in Q3 2024 due to a trunnion failure at the Guanacivi mine, which impacted throughput from August to December. The team worked tirelessly to resolve the issue, and by December, Guanacivi resumed operations at its usual rate of 1,200 tons per day. I'd like to extend my sincere gratitude to our operations team for their swift and effective actions in overcoming this challenge. While Guantanamo had its challenges, Polonidos continued to remain steady with increased gold production driven by higher gold grades, offset by the lower silver production due to slightly lower silver grades. In 2024, the company reported total revenue of $218 million, up 6% compared to 2023, with cost of sales of $176 million, Mine operating earnings at $42 million and mine operating cash flow is $72 million. Endeavor recognized an adjusted net earnings of $8 million or an adjusted earnings per share of 3 cents. After excluding loss on derivative contracts, mark to market deferred share units, gain on disposal and unrealized foreign exchange and investment losses. Cost of sales increased approximately 4% compared to the previous year. While there are a number of drivers, including lower economies of scale from lower throughput, fixed costs incurred during the trend and failure at Guantanamo City and inflationary pressures early in 2024. The company did benefit from the weakening of the Mexican peso in the second half of the year. Direct operating costs per ton were up 8% for the year, primarily due to the lower throughput at Guantanamo City. Consolidated cash costs per ounce net of byproduct credits decreased by 4% to $12.99 in 2024, predominantly driven by higher byproduct gold sales. All in sustaining costs increased by 4% to $23.88 per ounce compared to the prior year. Again, the lower production of silver ounces partially offset by the lower cash costs. As of December 31st, 2024, the company's cash position was $106 million, and we had working capital of $79 million. Cash and working capital saw an increase in Q4 following a $73 million deal of financing aimed at advancing the Pizzeria project and strengthening general working capital. As a reminder, Pizzeria is the company's next major growth project. Located in Durango, Mexico, it's one of the largest undeveloped silver deposits globally with nearly 600 million ounces of silver. The company has allocated a $26 million budget to advance exploration, evaluation efforts, and underground development. This includes drilling and technical studies aimed at supporting an economic assessment by Q1 2026. While progress continues at Pizzeria, the company's primary focus remains on bringing Terra Nera online in Q2 2025. As of December 31, 2024, overall construction at Terra Nera reached 89%, with $302 million allocated budget spent. The total estimated project cost is $332 million, as announced by the company earlier this year. During the fourth quarter, 1.7 kilometers of underground mine development was completed for a total project development of 7.2 kilometers. The underground explosive magazine storage permit was also approved, improving development efficiencies. Most of the upper platform construction was complete, with final punch list items to be addressed before being handed over to the commission operations team. The main area of focus continues to be the lower platform area, which was 42% complete at the end of the fourth quarter. The tailing storage facility's main embankment reached 1,185 meters of elevation, and the tailing filter swing plates were installed, and the first floor concrete was poured. The structural steel installation advanced to the second floor, preparing to install the filter press again at the end of the fourth quarter. The advanced Pondliner was installed and completed in January of this year, and the upper surface water diversion canal was nearly 90% complete. As we approach the wet commissioning phase at Terranera and prepare to bring Endeavour's next operating mine online, key critical path items include the tailing filter presses, which are on track for completion mid-April. 2024 marked a pivotal year for Endeavour. and 2025 promise to be a transformative milestone for the company. We extend our sincere gratitude to our shareholders and stakeholders for their steadfast support as we embark on this new era of growth and operational efficiency. As we advance, we remain committed to delivering sustained value, achieving operational excellence, and fostering a sustainable future for all our partners. For more wholesome construction update at Terranera, I encourage you to visit our website where you'll find our quarterly photo gallery showcasing the latest developments, progress, and information. With that, I'm happy to open this up to questions. Operator, please proceed to our Q&A session.

Thank you. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. The first question comes from Nick Giles with B-Riley Securities. Please go ahead.

Yeah, thank you very much, operator. Good morning, everyone. Guys, congrats on all the progress. I guess my first question, I wanted to work backwards a little bit and start with Pitcheria. Can you remind us of CapEx in 2025 and then How could we see that step up in 2026? Thanks very much.

Yeah, good question, Nick. Thanks for the positive comments. Pizzeria, as you likely know, we have a $26.6 million budget there in 2025. Ultimately, most of that budget regards $10 million allocated to drilling and 16 millions allocated to various budget items or capital items like mobile equipment and mine development and further evaluation and studies for an economic assessment uh that we expect delivering q1 of next year ultimately we're focused on 2025 so we don't have capital expenditure planned for 2026 until we see that that feasibility study completed um but as i said touched on and it is what we expect to be our next growth asset and fully expect a positive result from the economic assessment, but we can't really say much until we get there.

Fair enough. I appreciate that, Dan. And then maybe just on Terra Nera, apologies if I missed it, but, you know, should we still think about commercial production in the third quarter, and then, you know, are there any other puts and takes that you'd highlight just from a cost perspective for the balance of 2025?

Yeah, we haven't come off our $332 million budget. Things have been tracking extremely well since our news release January 8th, identifying timeline of early Q2. We are on track for that. It's expected to go to wet commission at the end of April. So, Everything is tracking well. Ramp-ups expected in Q2 and ultimately commercial production for Q3.

Dan, good to hear. I'll turn it over for now, but keep up the good work.

Thanks, Nick.

The next question comes from Rain Lab with TD Securities. Please go ahead.

Hey, thanks, guys. I'm just wondering if you could talk a bit about the cost pressures you're seeing in Mexico. Just wondering how much exposure you have to the peso in general and how much of those pressures might be offset by the weakness seen in the low currency.

Yeah, that's a very good question. Obviously, there's a lot of concern around the world right now, especially in North America with the What seems to be a tariff order that's been kicking off. We've taken a lot of questions with regards to the cost pressures that will put on our operations in Mexico. And then ultimately what that means from a currency standpoint and probably expectations that you'll see more devaluation in the Canadian dollar and the Mexican peso. From a Mexican peso standpoint, about 33% of our costs are tied to labor. And that's been generally the case at Guanis, the Imbolitos for the last 15 years. And we expect that similar ratio at Terranera. From the remaining costs, the 67%, historically, it's been about 50-50 between U.S. dollars and pesos. And that moves back and forth. So roughly about 50% to 60% of our costs are tied to the Mexican peso, and if we see further devaluation of the peso, obviously that benefits Endeavor from a cost standpoint. From a supply chain standpoint, we still don't know if there would be reciprocal tariffs put in place and what that impact has on costs. We don't think it will have a significant impact because after labor, power costs, which is obviously incurred in-country, is our second and our third highest cost is actually cyanide, which we source out of Mexico as well. So again, it's all dynamic and things will change, but ultimately we've seen overall cost pressures decrease primarily because of the devaluation of the Mexican peso over the last six months of 2024. And if that continues, I think that's a benefit for us on a cost per ton basis.

Okay, perfect. Thanks for the detail. And then maybe at Terranera, how have things progressed with the construction of the e-houses? And with the tailings construction, are the filter presses the remaining ball neck here? And once that's complete in mid-April, you guys roll right into commissioning?

Yeah, our e-houses are in place. I don't think there's much more to add to that. As you're probably aware, Wayne, that we have an LNG vaporization plant that we will be building and that will go into ultimately Q3. But again, we're on diesel gensets as we start up and until the LNG vaporization plant's complete. uh you're correct and to say it's the filter presses that is the bottleneck that's a critical path item our concentrate filters are coming to completion uh here in in march and ultimately the filter presses the structure steel structures have been in place so it's really going to come down to electrical and piping and then ultimately turning on both filter presses and start putting ore through from crusher all the way on to that tailings dam so Just as a reminder for those, at December 31st, our upper platform was relatively complete, and we were doing a lot of dry commissioning and pre-commissioning, and it was the lower platform that ultimately was the delay and pushed us into effectively Q2 2025. Again, from January until today, March 10th, things have progressed right on plan, and The filter presses, which was the critical path then, still remains the critical path now, and those seem to be going in relatively smoothly. So hopefully in April, we can turn everything on and start putting ore, like I say, onto the tailings dam.

Okay, perfect. And then maybe just last one for me. At Guantanamo, can you give us an idea of the difference in the royalty structure from the ore mine from the El Curso concessions? And then What percentage of feed to the mill is that expected to be this year?

Yeah, that's a very good question. El Perso, for those that aren't familiar with Wayne's question, is ultimately leased land that we signed in October 2019 with Monera Frisco, which is a company owned by Carlos Slim. We pay a sliding scale royalty there. When silver was below $15, we paid 4% NSR. And it's scaled all the way up to over $25, which is obviously where we sit now. We pay a 16% NSR. So it's a very significant royalty. It's north of $55 per ton, north of $5 per ounce of silver. And about 80% of our production is coming from El Curso. We still have our Malache area that we do source some ore from, and then we obviously have that purchase store. So it's a significant part of our cost structure, and like I say, I'll curse those over 80% of our actual production, Wayne.

Okay, perfect. Thanks for taking my questions, and nice to see the share price performance today.

Yeah, thanks a lot for the questions, Wayne.

Once again, if you have a question, please press star, then 1. The next question comes from Aiko Ile with HC Wainwright. Please go ahead.

Hey, Dan. Hey, team. Thanks for taking my questions and congratulations on all of the progress on Terra Nera. Thanks, Aiko. I'm going to do my follow-up first because it actually goes well with the last question that was asked here. Your progress at Terra Nera obviously was 89.4% as of December 31st. Is there anything that hasn't been physically received at the site? I mean, you discussed the filter press earlier, but that's presumably a component that's made specifically for you. I mean, I guess besides you, anything stuck with customs, anything stuck in the wrong village? You mentioned electrical and piping still needed, but I guess that's probably mostly just off-the-shelf stuff that's sitting in big boxes and just waiting, right?

Yeah, no, it's a very fair question, and as of January 8th, when we put out the news release with regards to our timing, and if you recall, there was a steel beam that wasn't on site that we just determined in December, and that got delivered early January. We went through that process of what else could be missing. At this point in time, we think everything's either on site or in our lay-down yard, and that's To be honest, what we thought back in December, so we've gone through, did a double check on that. And as you say, the piping and electrical work, that's kind of off the shelf stuff and progressing. So everything's there that we need to get done for that filter press. And again, targeting April for that to be turned on so we can start wet commissioning.

Got it. I went through your release this morning and cash costs was all over the place. So it's like all over the place. So I control F4. It was listed 21 times in the release. Obviously costs were quite good given, you know, the gold credits and your figure used 2647 gold. We're at 2900 right now. But just maybe walk us through cash costs as Terra Nera comes online here in the very near future. and by quarter, maybe for the remainder of the year, as you see pricing from that side impact your company cash costs. I guess what I'm saying is walk me through how we should model the ramp-up without specifically making you say that.

Well, let me answer the second part of your question company-wide. We put out guidance in January on all-in sustaining costs and cash costs, We did use a $2,200 gold price in our assumptions. Obviously, if you take what we're at now, or even $2,800, $600 difference there times our 30,000 ounces of gold, that amounts to about $18 million of credit. And if we produce 7 million ounces... You're looking at almost three, four or two and a half to three dollars less compared to our stated guidance. Now, we like to be conservative in our guidance and maybe the 2200 was overly conservative. But again, we started doing all that back in October, November of last year. So I think Guanesa and Balneos can outperform. And the other side of that, Aiko, is the Mexican pesos. We, again, use an assumption of 18 to 1. We've been sitting north of 20 to 1, and it seems to be the peso will continue to devalue from there. So for existing operations, we've been there 19 years, 18 years, respectively. I think we have a really good handle on that. In our guidance, we were quite conservative, so allow us to probably perform better than that. And that's just math and pretty straightforward. With regards to ramp up of Terranera, we're trying to be cautious with that. And as we come into ramp up, we were going to put out more detail around a production totals for the year for 2025, because it really depends on when we actually hit commercial production, whether that's July or August. And then with that, that drives that cash cost and our cost per ton, how fast we can ramp up. So we're holding that back until the end of Q2 would be the expectations that we put that out in the marketplace. So I appreciate that you're asking the question of where we're going to be at. Right now, and I will still point to the feasibility study that showed that we had basically all the gold pays for the silver at Terranera. Our cost per ton will be obviously a little bit higher in the first year as we work through things. But as we get to our 10-year mine life, we expect costs to line up that it's going to be one of the lowest operating mines in our space. Lowest cost operating mines in our space.

Hopefully. Very helpful, very comprehensive answer. Again, congratulations, and I'll get back to you. Thanks, Heiko.

The next question comes from Craig Stanley with Raymond James. Please go ahead.

Thank you, and thanks for taking my call here. Pitoria, you're coming out with an economic assessment. What form will that take, like a PEA or PFS, and will the results be announced to the market?

Yeah, Craig, thanks for the question. We are trying to track towards a feasibility study. We just haven't come across that. There's a lot of information from the SSR days when they held it. As you probably know, the feasibility study they put out was on an open pit operation in 2012. We're looking at it from an underground standpoint. And in 2009, they put out a pre-feasibility study. We're going through that assessment with some of the technical studies that we're doing right now. And then later in the year, we'll be able to really identify whether we have enough information to go right to a feasibility study, but it is kind of our expectation at this time.

Awesome. Thank you.

Thanks for the question, Craig.

This concludes the question and answer session. I would like to turn the call back over to Dan Dixon for any closing remarks. Please go ahead.

Thank you, Operator. And thanks to all our investors that called in today. And 2024 was a very positive year for Endeavor. And ultimately, I think we've set up very well for 2025 to get Terran Air into production and ultimately take advantage of what we see is coming down the line with the silver price. So have a good day.

This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.