Endeavour Silver Corp.

Endeavour Silver earns $4-million (U.S.) in Q1

2014-05-12 17:27 ET - News Release

Mr. Bradford Cooke reports

ENDEAVOUR SILVER REPORTS FIRST QUARTER, 2014 FINANCIAL RESULTS; BOARD OF DIRECTORS RE-ELECTED AT ANNUAL GENERAL MEETING; Q1 CONFERENCE CALL MOVED TO 12PM PDT (3PM EDT) ON MAY 13, 2014

Endeavour Silver Corp. is releasing its financial results for the period ended March 31, 2014. Endeavour owns and operates three underground silver-gold mines in Mexico, the Guanacevi mine in Durango state, and the Bolanitos and El Cubo mines in Guanajuato state.

The consolidated interim financial statements, and management's discussion and analysis, can be viewed on the company's website, on SEDAR and on EDGAR. All amounts are reported in U.S. dollars.

Highlights for the first quarter of 2014 (compared with the first quarter of 2013)

Financial:

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• Silver production increased 27 per cent to 1,898,999 ounces;
• Gold production increased 23 per cent to 18,519 ounces;
• Silver equivalent production increased 26 per cent to 3.0 million ounces (at a 60:1 silver:gold ratio);
• Bullion inventory at quarter-end included 295,839 silver ounces and 421 gold ounces;
• Concentrate inventory at quarter-end included 60,512 silver ounces and 1,113 gold ounces;
• Ore grades and metal recoveries were higher at all three mines;
• Guanacevi in particular had a strong first quarter, thanks to sharply higher ore grades at Porvenir Cuatro.

Endeavour chief executive officer Bradford Cooke stated: "We delivered another strong quarter of silver and gold production in the first quarter of 2014, which puts us well ahead of our production plan for the year. Both cash costs and all-in sustaining costs were well below guidance thanks to our cost cutting strategies initiated last year.

"However, our earnings were lower due to the sharply lower metal prices, in spite of achieving higher grades and recoveries at all three mines. We continue to work toward optimizing operating costs and improving profit margins given the current low silver and gold prices."

Financial results

For the first quarter ended March 31, 2014, the company generated revenue totalling $53.0-million (2013, $69.9-million). During the quarter, the company sold 1,537,665 silver ounces and 16,445 gold ounces at realized prices of $20.50 and $1,306 per ounce, respectively, compared with sales of 1,345,832 silver ounces and 13,037 gold ounces at realized prices of $29.38 and $1,613 per ounce, respectively, in the first quarter of 2013.

After cost of sales of $41.7-million (2013, $51.0-million), mine operating earnings amounted to $11.3-million (2013, $18.9-million) from mining and milling operations in Mexico.

Excluding depreciation and depletion of $14.1-million (2013, $12.1-million) and stock-based compensation of $100,000 (2013, $100,000), mine operating cash flow before taxes was $25.4-million (2013, $32.5-million, excluding the inventory writedown) in the first quarter of 2014. Net earnings were $4.0-million (2013, $14.4-million).

Net earnings also included a mark-to-market derivative liabilities loss related to share purchase warrants issued in 2009, denominated in Canadian dollars, while the company's functional currency is the U.S. dollar. Under IFRS, these warrants are classified and accounted for as a financial liability at fair market value with adjustments recognized through net earnings. The appreciation of these warrants, prior to being exercised in the quarter, resulted in a derivative liability loss of $1.4-million during the first quarter of 2014 (2013, gain of $1.5-million).

Excluding the mark-to-market derivative liabilities gain, adjusted earnings were $5.5-million (five cents per share), compared with $12.9-million (13 cents per share) in the same period of 2013. The drop in precious metals prices was the primary reason for the decrease in the company's earnings year over year.

Cost cutting initiatives that commenced in the second quarter of 2013 are now well established, which resulted in a 7-per-cent drop in direct production costs to $93 per tonne from the first quarter of 2013.

Cash costs per ounce, net of byproduct credits (a non-IFRS measure and a standard of the Silver Institute), fell 52 per cent to $4.87 per ounce of payable silver, compared with $10.04 per ounce in the same period of 2013. All-in sustaining costs per ounce (also a non-IFRS measure) fell 51 per cent to $12.15, due in part to lower exploration and mine development expenditures, compared with the first quarter of 2013. Exploration and mine development expenditures fluctuate quarter to quarter, and all-in sustaining costs are expected to increase in the second and third quarters, with higher planned exploration and mine development expenditures. Going forward, management expects cash costs per ounce to move closer to guidance as mined grades revert to reported reserve grades.

Annual general meeting of shareholders results

Shareholders voted in favour of all items of business, including the re-election of each director nominee by show of hands. A total of 63.4 million votes were submitted by proxy, representing 62.6 per cent of the outstanding common shares as of the record date.

Director              Votes for   Votes withheld  Per cent for  Per cent withheld

Ricardo M. Campoy    27,266,442          668,204        97.61%              2.39%
Bradford J. Cooke    27,149,666          784,980        97.19%              2.81%
Geoffrey A. Handley  27,248,581          686,065        97.54%              2.46%
Rex J. McLennan      27,508,899          425,747        98.48%              1.52%
Kenneth Pickering    27,277,032          657,614        97.65%              2.35%
Mario D. Szotlender  16,406,845       11,527,801        58.73%             41.27%
Godfrey J. Walton    27,663,567          271,079        99.03%              0.97%

Shareholders also voted 76.4 per cent in favour to reconfirm the shareholder rights plan. In addition, shareholders voted to reappoint KPMG LLP as auditor and to authorize the board of directors to fix the auditor's remuneration for the ensuing year.

At the board of directors meeting following the AGM:

                 COMPARATIVE HIGHLIGHTS

                                 Three months ended March 31,
                                          2014          2013
Production
Silver ounces produced               1,898,999     1,489,716
Gold ounces produced                    18,519        15,032
Payable silver ounces produced       1,844,165     1,459,706
Payable gold ounces produced            17,796        14,787
Silver equivalent ounces produced    3,010,139     2,391,636
Cash costs per silver ounce        $      4.87   $     10.04
Total production costs per
ounce                              $     13.07   $     18.07
All-in sustaining costs per
ounce                              $     12.15   $     24.60
Processed tonnes                       346,525       376,344
Direct production costs per
tonne                              $     92.93   $     99.63
Silver co-product cash costs       $     10.46   $     16.20
Gold co-product cash costs         $       666   $       889
Financial
(in millions of dollars,
except per-ounce and per-share
amounts)
Revenue                            $      53.0   $      69.9
Silver ounces sold                   1,537,665     1,345,832
Gold ounces sold                        16,445        13,037
Realized silver price per ounce    $     20.50   $     29.38
Realized gold price per ounce      $     1,306   $     1,613
Net earnings (loss)                        4.0          14.4
Adjusted net earnings                      5.5          12.9
Mine operating earnings                   11.3          18.9
Mine operating cash flow                  25.4          32.5
Operating cash flow before working
capital changes                           18.3          25.3
EBITDA                                    19.3          31.0
Working capital                           46.4          42.0
Shareholders
Earnings (loss) per share, basic   $      0.04   $      0.14
Adjusted earnings per share,
basic                              $      0.05   $      0.13
Operating cash flow before working
capital changes per share          $      0.18   $      0.25