Endeavour Silver (NYSE:EXK) just announced a small land acquisition adjacent to its Guadalupe Y Calvo Property in Chihuahua, Mexico called La Bufa. It is purchasing this land--2,311 hectares--from a small mining company called Lincoln Mining (OTC:LNCLF) for 90,000 shares of stock--currently worth $480,000. The land package is subject to a 2% NSR royalty due to Almaden Minerals (NYSEMKT:AAU).
While the deal is small it speaks to my bullish thesis put forth a year ago tomorrow, namely that Endeavour Silver has a long history of relentless expansion. While the La Bufa Project doesn't currently have any NI 43-101 resources, the adjacent property--Guadelupe Y Calvo--has an estimated 7 million ounces of silver and 140,000 ounces of gold. Furthermore, the region has a history of gold and silver production--roughly 28 million ounces of silver and 2 million ounces of gold have been produced there.
The fact that Endeavour Silver is making this move in such a lousy market suggests that management is looking to expand, and it is looking to exploit the available values in the gold and silver space. It is also interesting that management is using its stock as currency. While the shares are only a couple percent higher than my initial recommendation point I did argue last August that the shares weren't cheap, and that you are betting on management's ability to expand production and resources. Furthermore, gold and silver prices are down from a year ago. Given that Endeavour Silver has ample liquidity to make such a small deal we might infer from this that management thinks the stock is somewhat overvalued, and I would tend to agree. I think investors should therefore wait for the stock to fall to below $5/share before initiating/adding to their positions.
Disclosure: The author is long EXK.
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