Endeavour Silver Boosts Revenues, Production

Endeavour Silver (EDR-T, EXK-X) seemed to defy gravity last year with revenues up 22% to US$39.3 million, production up 10% to 2.3 million oz. silver, and cash costs that fell 4% to US$9.03 per oz. silver produced.

But the four-year-old, small-cap silver miner with two operating mines in Mexico, still incurred a net loss for the year ended Dec. 31. That loss, totalling US$18 million, was up from a net loss of US$12.2 million in 2007.

Last year’s production gains were due primarily to a US$12.6-million capital investment program in mine development and plant upgrades, which enabled Endeavour to ramp up mine output and ore grades at Guanajuato, in Guanajuato state, and silver recoveries at Guanacevi, in Durango state.

Of the US$12.6 million in spending, US$11 million went into Guanacevi, where more than 5 km of underground mine development and a 290-metre ventilation shaft were completed. Leach, flotation and refining circuits were also expanded at the Guanacevi plant.

Largely as a result, consolidated silver production rose to about 695,000 oz. in the fourth quarter of 2008 from about 505,000 oz. in the first, while consolidated silver recoveries improved to 82% in the fourth quarter from 66% in the first.

Meanwhile, consolidated cash costs of production fell to US$7.43 per oz. silver in the fourth quarter from US$11.09 per oz. in same quarter of 2007.

Endeavour has two production facilities in Mexico — Guanacevi in northwestern Durango state and Guanajuato in north-central Guanajuato state. Each process plant sources feed from several nearby, high-grade mines.

Other milestones during the year included new silver discoveries at the Noche Buena mine and Milache- Veronica-La Blanca prospect areas at San Pedro (part of Guanacevi), and in the Lucero, San Jose, and Bolanitos veins at the Bolanitos mine (at Guanajuato).

Endeavour drilled 41,160 metres in 172 drill holes testing 14 silver prospects with a total exploration budget of US$8.6 million last year. Silver resources grew 47% year-on-year to 39 million oz. and silver-equivalent reserves and resources rose 24% to 62.1 million oz.

Looking ahead, Endeavour expects to post its fifth consecutive year of growing silver production in 2009, up a forecasted 20% to 2.7- 2.9 million oz., with about 10,000 oz. gold as a byproduct.

Three new mines under development in Guanacevi will start production this year with cash costs expected of US$7.50-$8 per oz.

Assuming a US$12.50 to US$13- per-oz. average silver price this year, Endeavour expects to generate US$12-16 million in operating cash flow in 2009.

Endeavour believes it is well capitalized for growth. It recently closed a $3-million special warrant offering and a $14-million subordinated unsecured redeemable convertible debenture offering.

The company says it now has US$15 million in working capital, some of which will be used to evaluate merger and acquisition opportunities.

At presstime, Endeavour was trading at $1.96 per share. The company has a 52-week trading range of $1-3.85 and 51.5 million shares outstanding.