Endeavour Silver's (EXK) Q4 2016 Results - Earnings Call Transcript

| About: Endeavour Silver (EXK)
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Endeavour Silver Corp. (NYSE:EXK) Q4 2016 Earnings Conference Call March 2, 2017 1:00 PM ET

Executives

Meghan Brown - Director, IR

Dan Dickson - CFO

Analysts

Mark McGarry - UBS

Howard Flinker - Flinker & Company

Operator

Welcome to the Endeavour Silver Fourth Quarter and Year End 2016 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Meghan Brown, Director of Investor Relations. Please go ahead Ma'am.

Meghan Brown

Thank you, operator. Good morning everyone and welcome to the Endeavour Silver 2016 Conference Call. On the call today, we have the company's VP Corporate Development, Dale Mah; and our CFO, Dan Dickson; who will walk you through the financial result. Our CEO, Brad Cooke; will be joining the call shortly and he will be available for the questions period.

Before we get started, I'm required to remind you that certain statements on this call will contain forward-looking information within the meaning of applicable Securities Laws. These may include statements regarding Endeavour's anticipated performance in 2017 and future years, including revenue and cost forecasts, silver and gold production, grades and recoveries, and the timing and expenditures required to develop new silver mines in mineralized zones. The Company does not intend to and does not assume any obligation to update such forward-looking statements or information other than as required by applicable law.

With that, I'll turn the call over to Dan Dickson.

Dan Dickson

Thanks, Meg and thanks for everyone on the call for joining into our 2016 annual release. I think today's format I'll go through our financial highlights for the year, I want to remind all our participants when Endeavour came into 2016 silver price was down in the $14 range. And we focused on ensuring that we maximize our cash flow from our operations. And really for the first six months of 2016, we limited our investment at all three operations to ensure that we strengthen our balance sheet. We successfully did that in the first six months and in July we came back in the market with revised guidance to increase our production. And then, actually on an annualized basis had a very good year; we delivered on all-in sustaining costs meaning our guidance, we beat our guidance on cash costs and we met our silver equivalent guidance for production for the year.

So with that, net earnings went up being $0.03 a share at $3.9 million. EBITDA was $27. 8 million down from last year because of the reduction in production across all three operations as planned. Cash flow from operations was $24 million and mine offering cash flow was just under $53 million for the year. Revenue decreased 15% to $157 million. However realized prices increased and we realized $1,685 for 2016 on silver and $1,253 on gold.

As I touched on cash costs significantly big guidance coming at $6.78 per payable silver a 19% decrease to 2015. Additionally all-in sustaining costs came in at $12.43, a significant drop from 2015. At the end of the year, we did hold on to little bit more volume that we've had in the part, just driven by the trend that happened inQ4 with silver and gold prices. But it's needless to say our cash and cash equivalents increased 254% percent for the year up to $72.3 million and our working capital increased $81.6 million.

So we're able to reduce our debt from $22 million down to $9 million and we are able to raise $53 million through public financing. So overall, on a 2016 basis, I'll reiterate we met our production guidance. We beat our cash cost guidance so we met our all and during that are all in dating violence on it on the 2016 basis. For the fourth quarter, as I said in July we announced that we were going to reinvest. We saw an opportunity for growth for the company. Opportunity to extend mine lines and we took that opportunity with the cash and the balance sheet that we had.

In Q4 we saw a little bit more spending. Our exploration expenditures went up to $4.45 million for the quarter and we reinvested in mine development and each operation I want us to be El Cubo and Bolanitos which is why we've seen increase in all in sustaining costs for the quarter. From a financial standpoint, we lost $0.04 cents per share and $5.2 million loss in the quarter.

Our EBITDA decreased to -$1.8 million again that's just stems from increase of our exploration expenditures which are expense on the income statement. Cash flow from operations, which includes our exploration expenditures dropped to --$1.1 million and revenue fell 32% year-over-year to $29 million. Again we increased our bullion inventory, we had about $6 million worth of market value of inventory that we held at year end and realized price for the quarter $1,703 which was consistent with the Q4 spot price and gold prices was slightly below the quarterly price at $1,139. Cast costs still $9.39 a decrease from Q4 2015. All-in sustaining cost jumped 16% to 2011. Again, that comes from the investments that we're making, primarily in the fourth quarter here for the future of Endeavour.

Before I open up for questions, I want to reiterate. Obviously we're seeing a change in the market silver price is down today and we're seeing a sell-off across the silver space. But particularly we're seeing a sell off here in Endeavour. Right now it's a one day event, probably more than what we expected with these results. Nonetheless I want to point to participants that we meet all our guidance for the 2016 and the fact we did our guidance on cash costs. We have revised our guidance upwards from a production standpoint in July and met that group to provide upward guidance.

So all in all we feel 2016 was a very successful year, we strengthened the balance sheet. Q4 we saw, like I said we saw the opportunity to reinvest in the company for the growth of mines and grow the company going forward because we do feel that sentiment changed halfway through the year, there is a lot more wind behind our backs with regards to prices, interest in the company and opportunities out there.

So with that operator, I'd like to open up to questions to our participants.

Question-and-Answer Session

Operator

Thank you. The first question is from Mark McGarry with UBS. Please go ahead.

Mark McGarry

Hi there, guys. I just wanted to confirm obviously the market's not taking today's numbers. Well, from my perspective just because of some of the fourth quarter component sort of stood out, maybe surprising but obviously not if you really think about what you guys are saying. But as far as your guidance for school 2017, can you discuss that and how that's going to still be in line with you with your previous statement in terms of all-in sustaining cost and production?

Dan Dickson

Yes, thanks Mark. We put out guidance for January 25, 2017. We had obviously a lot of that data when we put that guidance out, so we are well aware of where Q4's metrics were sitting. So we have no change to our 2017 guidance and these results haven't changed our thought patterns over the 2017 guidance. For those that aren't familiar with the press release, we guided that we do roughly similar production for 2017. 5.2 million ounces of silver to 5.7 million ounces of silver and 50,000 to 53 ounces of gold for the range on a silver equivalent basis to devote $8.9 to $9.7 million ounce of silver cord on.

On a cost basis we expect the cash cost to be somewhere between 6.50 and 7.50 on the year at all in sustaining costs. I believe we've got it would be a slightly higher all-in sustaining cost we thought we'd be between 1,450 and 1,150 in 2017 and that movement in the all-in sustaining cost for the 1,250 the 1,243 that we had for 2016 is a function of US reinvest in their operations so. For 20152016 when prices following and we were trying to protect our balance sheet long term future of the company. We had restrained from mine development operation. I think with any underground mining operation you have to reinvest into mine development for the long term benefit of those mines and one quarter investment of spending $4.5 million at Guanacevi isn't realized in one quarter that's going to be realized over the next three four years at Guanacevi.

So I don't get too caught up on quarterly metrics of all-in sustaining cost. It's not the silver that explains the company's future as an accountant, I take the whole financial statement and cash flows and what that long term benefit will be from that investment. So the 1,450 to 1,550 we've got to arise and consolidate all-in sustaining costs. So that's putting money back into the ground to further develop our bends and tap future production and then exploration to extend those mine lies at El Cubo, Bolanitos and Guanacevi.

So to shortly answer your question Mark, we don't expect our 2017 guidance to change from these results.

Mark McGarry

Thanks.

Operator

The next question comes from Howard Flinker from Flinker & Company. Please go ahead.

Howard Flinker

Remind me, I got a specific question and a bigger question. Remind me at what price did you sell stock in your financing?

Dan Dickson

Pardon me.

Howard Flinker

When you sold stock during the year, what was the price I forget?

Dan Dickson

Our average realized price was $250. That was done through an aftermarket facility where we sold stock over about six month's period.

Howard Flinker

$250, okay. This came up at another conference call and I'm kind of curious about this in a contrarily positive way. Have you heard stories about short sellers in your stock? If you've heard it all?

Dan Dickson

Yes, Howard. We hear stories here and there about it all the time I mean we don't have any hard evidence some of that stuff. But obviously throughout the industry, we see a lot of reports coming out now on short sellers and we're not aware of anything like that for Endeavour.

Howard Flinker

Okay. That's it from me. Thanks.

Dan Dickson

I should clarify regarding we actually did two ATM financing. The one we averaged out in the $2 and the second one where we raised $40 million, we averaged out about $4.

Howard Flinker

I see so it's not by 250% its $2 plus $4?

Dan Dickson

Yes.

Howard Flinker

Okay. Thanks.

Operator

There are no more questions at this time. This concludes the question and answer session. I would like to turn the conference back over to Dan for any closing remarks.

Dan Dickson

Thanks operator and thanks to our participants. We had a strong list of participants this quarter and for obvious reasons with what's happening out in the market today, I hope that anybody else has further questions they are more welcome to contact the company we're happy to help them answer those questions and get a story out there in the markets. So thank you again and I hope everyone has a good day.

Operator

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

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