Today we were in touch with Hugh Clarke, VP Corporate Communications of the Endeavour Silver Corporation (EXK) regarding Endeavour's 4th Quarter results.
We were also particularly interested in the company's decision to withhold some of its silver and gold production from the market.
Hugh very kindly responded with the following comments:
“Once again, we’ve been able to meet or exceed our annual production goals. As a lot of your readers know, a number of the other silver producers were forced to reduce their targets for the year. Consistency and execution are difficult objectives in the silver mining business and Endeavour Silver stands out for its track record in meeting the expectations of its shareholders.
We’ve employed the strategy of withholding our silver and gold from the market in the past, searching for and receiving higher prices for our metals. Our accumulation of silver and gold over the past 2 quarters is a continuation of this policy. We’re expecting higher prices during the early part of 2012 and hopefully we’ll be able to crystallize better prices during this period than were available in the latter part of 2011. We’ll provide guidance later this month and I can tell you that your readers can expect Endeavour Silver to achieve another year of record production of silver and gold at low cost in 2012.”
As our own expectations for 2012 include a hike in silver prices we are pleased that Endeavour has taken this decision to withhold some of its product with the view that a more profitable sale lies ahead. We are also pleased to see that they intend to make 2012 the eight consecutive year of record production growth. Given that they have achieved seven out of seven, then we see no reason why this target cannot be beaten once again. All good news for the stock holders.
The highlights are as follows:
In Q4, 2011, silver production was up 25% to 1,120,780 ounces (oz) and gold production was up 45% to 7,045 oz compared to the Fourth Quarter, 2010.
Production Highlights - Fourth Quarter, 2011 (Compared to Fourth Quarter, 2010)
Silver production up 25% to 1,120,780 oz.
Gold production up 45% to 7,045 oz.
Silver and equivalents production up 29% to 1.4 million oz. (at a 45:1 silver: gold ratio)
Revenues down 39% to US$17.5 million due to reduced metal sales (see below)
Metal held in inventory at year-end included 980,000 oz. silver and 5,400 oz. gold
Due to the correction in metal prices in the 4th quarter 2011, Endeavour management elected to hold a significant portion of the Q4 silver and gold production in inventory rather than sell at the lower prices. Management plans to monitor the metal prices closely and sell some or all of the silver and gold in inventory at appropriately higher metal prices, or if the need arises for more cash.
As a result, the company sold only 400,000 oz silver and 4,000 oz gold in Q4, 2011 and metal inventories rose to 812,000 silver oz and 3,000 gold oz in bullion and another 168,000 oz silver and 2,400 oz gold recoverable from concentrate as of December 31, 2011. Therefore, revenues dipped 39% in the 4th quarter to US$17.5 million and Endeavour's 4th quarter and 2011 annual earnings will not reflect the ounces withheld from sale and currently in inventory.
Endeavour delivered its seventh consecutive year of production growth and exceeded its production guidance of 3.7 million oz silver and 19,000 oz gold for the year. Silver production rose 14% to 3,730,127 oz silver and gold output escalated 23% to 21,810 oz compared to 2010.
Production Highlights - 2011 (Compared to 2010)
- Silver production up 14% to 3,730,127 oz
Gold production up 23% to 21,810 oz
Silver and equivalents production up 15% to 4.7 million oz (at a 45:1 silver:gold ratio)
Revenues up 48% to US$128 million
Annual realized silver price up 82% to US$35.61 per oz sold
Annual realized gold price up 27% to US$1,570 per oz sold
Bradford Cooke, Chairman and CEO, commented,
"Our operations team is to be congratulated for doing yet another outstanding job in 2011. Thanks to the successful completion of our Guanajuato mine and plant expansion to 1000 tonnes per day (tpd) on time and budget, Endeavour continued its track record of meeting its production guidance and delivering growth for its shareholders."
"Our exploration team is also to be congratulated for discovering multiple new high grade veins at Guanajuato such as the thick, high grade Daniela vein. As a result of these discoveries, management was able to open the new Lucero South mine in 2010 and expand the Guanajuato plant capacity to 1600 tpd in 2011 thereby leaving the door open for future mine expansion."
Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico, the Guanacevi Mines in Durango State and the Guanajuato Mines in Guanajuato State.
Endeavour Silver Corporation is a mid-cap silver mining company focused on the growth of its silver production, reserves and resources in Mexico. Since start-up in 2004, Endeavour has posted seven consecutive years of aggressive silver production and resource growth. The organic expansion programs now underway at Endeavour's two operating silver mines in Mexico combined with its strategic acquisition program should help Endeavour achieve its goal to become a premier, mid-tier silver mining company.
The company's market capitalization is $914.22 million with 93.1 million shares (fully diluted) outstanding. The 52 week trading range is $5.40 to $13.10 and the stock price closed at $10.47 on the NYSE Tuesday.Disclosure:
I am long EXK.