Endeavour arranges $50 million financing and ups bid for Cream

Endeavour Silver (edr-t, exk-a) is topping up its treasury with a bought deal financing worth $50 million.

Led by CIBC, a group of underwriters agreed to purchase 8.2 million shares priced at $6.15 apiece, with an overallotment option for up to an additional 15%.

Endeavour intends to use the proceeds to finance its capital projects, potential acquisitions and for general corporate purposes. At the end of the third quarter, Endeavour was sitting with US$19.6 million in cash.

Endeavour is a small-cap silver mining company focused in Mexico. It owns and operates two high-grade underground silver mines, Guanacevi in Durango state and Guanajuato in Guanajuato state.

Silver production in the third quarter was 797,000 oz, up 20% over the same period a year ago, but off 4% from the previous quarter. Gold production of 4,607 oz. represented a 28% gain over a year ago and a 3% increase over the second quarter. Cash costs of $5.93 per oz. silver produced, net of gold credits, were 14% higher than a year ago but unchanged from the second quarter.

Silver production for the nine months to date totals 2.4 million oz., a 31% increase over the comparable period in 2009, while gold production is up 47% at 12,842 oz.

“Plant production should climb and cash costs should fall one again in Q4 2010 as our mining operations approach the 1,000-tonne-per-day capacity at Guanacevi and the 600-tonne-per-day capacity at Guanajuato,” stated Bradford Cooke, chairman of Endeavour Silver.

The company reported net earnings of US$127,000 on sales of US$20.1 million for the three-month period ended Sept. 30, versus a loss of US$1.5 million on sales of US$9.8 million for the same period in 2009. For the nine-month period, Endeavor shows a net profit of US$1.4 million on revenue totaling US$58 million.

Mine operations generated a cash flow of US$9.2 million for the third quarter, compared to US$3.3 million for the 2009 quarter.

“Endeavour Silver’s record financial performance in Q3 2010 can be attributed to our growing silver-gold production, improving cash costs and higher metal prices,” commented Cooke.

The company plans to invest a total of US$29 million on capital projects in 2010, with the continued focus on refurbishing and expanding the Guanacevi plant, as well as developing mine access ramps at both mine operation. Expenditures for the nine-month period to date total US$25 million.

In late September, Endeavour made an unsolicited takeover bid for Cream Minerals (cma-v), with a cash offer of 12 cents per share, representing a 76% premium to the 10-day average trading price prior to the offer.

Endeavor revised its formal offer for Cream on November 9 in response to a competing offer by Minco Silver (msv-t). Endeavor is now offering 14 cents in cash or 0.02575 of a common share of the company for each share of Cream. The bid is subject to at least 50.1% of the shares being tendered.

Cream’s main asset is its 100% owned Nuevo Milenio exploration gold-silver project in Mexico’s Nayarit state. The project contains an inferred mineral resource of 271,000 oz. gold and 41.1 million oz. silver in 5.1 million tonnes averaging 1.66 grams gold and 251 grams silver per tonne.

Under Minco Silver’s proposed deal, it would purchase a 50% interest in the Nuevo Milenio project for $5 million cash and acquire an option for an additional 20% by spending another $5 million developing the project. Cream would hold the remaining 30%.

“Endeavour amended its offer to acquire Cream Minerals yesterday with the support and recommendation of the Cream board,” stated Cooke in the third-quarter news release dated November 10. “If successful, our bid to acquire control of Cream is an integral part of our acquisition growth strategy.”

Endeavour Silver currently has 70.2 million shares outstanding. At press time, the company was trading at $6.24, down 50 cents on the day, in a 52-week range of $3.05-7.14.