Endeavour Silver imposes austerity measures

Endeavour Silver (TSX: EDR; NYSE: EXK) is reducing expenditures and temporarily adjusting its exploration, development and mining activities until gold and silver prices rebound.

The measures are expected to boost production and reduce operating and capital costs in the fourth quarter.

“Enhanced cost discipline is the prudent course of action for mining companies during times of lower metal prices, especially when investing to develop new mines,” Bradford Cooke, Endeavour’s CEO, states in a press release. “This austerity program is our proactive response to the current metal prices.”

Cook has scheduled a conference call on Aug. 30 to discuss the plans in greater detail.

The company-wide initiative to reduce capital, operating and other costs at head office and at the mine level “is the first line of defence Endeavour has in the currently depressed precious metals price environment,” BMO analyst Ryan Thompson comments in a research note. “That said, reductions for prolonged periods have potential to weigh on future production.”

Endeavour reviewed all of its mine operations and projects in Mexico and is making changes at Guanacevi, Bolanitos, El Cubo, El Compas and Terronera.

At El Compas, 1 km south of Zacatecas City, where it is commissioning its fourth mine in Mexico, production has been suspended at the plant. The company explains that over the last two months, plant commissioning has encountered excess clay in the ore and higher than normal precipitation. After an independent engineering review, the plant was suspended to allow the company to dewater the tailings area and to remove the clay for better drainage. Until the primary tailings facility is ready for recommissioning in September, Endeavour is excavating a second tailings storage area within the permitted tailings area for the “clayey tailings”.

Adjustments at its three other mines should help compensate for missing guidance at El Compas, Endeavour says.

At Guanacevi, near the town of Guancevi, 260 km northwest of Durango, the company will switch from cut-and-fill mining to long-hole mining in certain stopes at the main Santa Cruz mine, which will increase daily ore tonnage and lower operating costs.

Endeavour will move from footwall development to in-vein development to reduce capital costs. The upper Santa Cruz area will be developed ahead of plan to open up a new source of high-grade ore to take the pressure off current producing areas. The company also plans to bring the new Milache orebody online at the end of September in order to provide another new, high-grade source of ore.

In addition, it plans to start developing the high-grade SCS area in the fourth quarter and start production in 2019, replace some mine development contractors by re-assigned employees to improve productivity and lower capital costs. The goal, it says, is to boost daily production from 850 tonnes per day to the 1200 tonne per day capacity of the plant at lower capital and operating costs.

At Bolanitos, 12 km northwest of Guanajuato City, the revised mine plan involves increasing daily production from 1200 tonnes per day to 1400 tonnes per day. It has moved footwall development to in-vein development in several areas of the mine, reduced mine development contractors and non-critical maintenance items.

At El Cubo, 10 km east of Guanjuato City, it has also moved footwall development to in-vein development in several areas of the mine, cut development contractors and non-critical maintenance work, and developed some recently discovered high-grade vein splays in the Villalpando-Asuncion area ahead of schedule to open up a new source of high-grade ore.

Endeavour says it’s still on track to unveil the findings of an updated pre-feasibility study on Aug. 30 for its Terronera mine, 40 km northeast of Puerto Vallarta. But the development group at Terronera has delayed hiring for certain positions and will not start already permitted earthworks on the road and plant site until it receives final approval for permits at the mine dumps and plant tailings.

The company says it is forecasting production this year of 10.2-11.2 million oz. silver-equivalent.

As for exploration, the company says the exploration group “has already achieved most of its goals for the year and will cease all drilling activities at the end of the month.”