Seeking Alpha
Contrarian, macro, gold & precious metals
Profile| Send Message|
( followers)  

Instead of going off on a rant about what's wrong with the economy I'd like to show you something that might get your juices flowing.

Last year at the end of Q3 2012 stock in Endeavour Silver Corp (NYSE:EXK) was selling for $10.73 per share. That was about 40 weeks ago. Here, after Q2 2013, shares of EXK are selling just north of $3.50 per.

What's wrong with this picture? I can't say exactly except that all miners have been hammered with the bottoming of precious metals' prices. Actually, what is really wrong here is outside the scope of this article. However, by the end of this essay my thesis will reveal what is right with this picture.

Vancouver, British Columbia based, Canadian mining company Endeavour Silver Corp., operating three primary silver mines in northwest and central Mexico has just set new company records for silver and gold production in Q2 2013.

This year's Q2 totals were 1,535,873 ounces of silver (1,535,873M oz. Ag), a 48% increase over last year's production. Also gold production up a staggering 159% to 19,914 ounces processed (19.91K oz. Au) compared to Q2 2012. In fact, revenues bumped up in Q2 2013 57% to US$63.5 million as a result of increased mine production.

Impressively, this revenue increase is despite the considerable decrease in metals' prices across the board this year. Silver had fallen 35% to $19.08 per ounce (the price at which the company sold) while gold tumbled 28% to $1,151 per oz. sold.

Also consider this; over-all silver and equivalents produced by Endeavour increased 76% to 2.61 million ounces in Q2 2013 - and this at a generous 60:1 silver to gold ratio.

But wait, for more than 300 years it took some 16 ounces of silver to buy one ounce of gold, and the modern ratio of 50 something plus per oz. Au has been acceptable thus far, so…

..how out of whack is 60 to one?

That Endeavour Silver Corp. could weather a storm at a magnitude that has sent many miners scurrying for cover and still be able to advance and expand their business, is a very good indicator for the future of this company as well its staunch shareholders.

A very solid Endeavour Silver Corp. is directed by CEO Bradford Cooke, an intelligent businessman who effectively reduced costs, expanded production at one of the company's money-maker mines boosting cash flow, and successfully off-set the market's sharply reduced metals' prices.

It is also important to note that Endeavour Silver and Bradford Cooke believe in creative in-house financing, and advanced exploration.

The company was able to complete their CapEx program for the newly acquired El Cubo mine property, plant and surface infrastructure on time and budget by relying on revenue from the sale of stockpiled bullion. And despite cutting exploration expenditures by 25% the company still has eight spy drills turning on its properties - six in Mexico, one in Chile, and zone expansions at the three producing mine properties in Mexico; the Guanacevi in Durango State and the Bolanitas and El Cubo in Guanajuato State.

In a conference call to shareholders last week, the CEO explained, "The bulk of our spending is behind us. Our capital spending, [and] our exploration spending are behind us. And as a result, I think you'll see that we should see improvements to our balance sheet going forward. Instead of increasing drawdowns on our short-term credit line now, we expect that the positive cash flow we're generating will start adding to cash and reducing debt as we go through the balance of the year."

Mr. Cooke who formed Endeavour Silver in 2003 to acquire advanced, high-grade silver/gold projects in Mexico, is a professional geologist with 35 years experience in the mining industry specializing in financing, acquisition, exploration and development of mineral deposits. He holds a Bachelor's and a Master's degree in Geology from two acclaimed Canadian universities, and with aces up his sleeve and plenty in the pipeline in both Mexico and (a million-ounce gold project) in Canada - of which we will discuss in a follow-up article - Bradford Cooke is a rising star.

Within six months of acquiring the Guanacevi Mine project in Durango in 2003, Endeavour discovered and developed into production the high-grade Porvenir silver mine. Today, Endeavour is one of the fastest growing primary producers of silver in the world.

Conclusion: If you believe, like so many economic and precious metals experts, that silver and gold will surge back to far out-perform a weakening dollar, Endeavour Silver Corp. is worthy of your precious investment capital.

If you're of a different mind set, perhaps then, good luck with your 10-year treasuries.

I fully intend to establish a half position in EXK this week and continue to buy on dips until I've loaded up. I see at least a four bag here or better, and when this train smokes from the station I am going to be onboard.

Source: Endeavour Silver: A Solid-Gold Investment