Four years of production growth for Endeavour Silver

Vancouver – For Endeavour Silver (EDR-T), 2008 marked four years of rising silver production and the company plans to keep growing in 2009.

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

Endeavour increased its silver output for the fourth year in 2008, producing 2.3 million oz. silver, and also posted four consecutive quarters of falling production cash costs. In the fourth quarter of 2007 it cost the company US$11.09 to produce an ounce of silver; a year later that cost had fallen to US$7.50.

Cash costs fell for two reasons. First, Endeavour invested considerably in capital development in the first half of 2008, boosting throughput and recoveries at both of its operations. Second, as a company operating in Mexico Endeavour benefited from the weakness of the peso against the American dollar.

Capital investments led directly to increased production: in the first quarter of 2008 the company produced 505,000 oz. silver while in the fourth quarter production came in at 695,000 oz. Better recoveries also helped with that production increase: from the first to the fourth quarters consolidated silver recoveries improved from 66% to 82%.

At Guanajuato, mine rehabilitation and shaft safety upgrade programs led to a substantial throughput increase. Throughput rose to 431 tonnes per day buy the end of the year from just 125 tonnes per day at the beginning.

The Guanacevi production profile remained flat over 2008 as a result of Endeavour’s decision to back off on production growth in the fourth quarter, when the price of silver fell. Throughput actually fell slightly, to 634 tonnes daily, but increasing ore grades and recoveries more than made up the difference in silver output.

All told, Endeavour spent US$12.5 million on capital projects in 2008, including US$6.8 million on mine development, US$3.7 million on plant improvements, and US$2.1 milion on equipment, vehicles, and buildings. Guanacevi saw more of those funds then Guanajuato.

At Guanacevi, underground mine workings were advanced more than 5,000 metres, a 292-metre ventilation shaft was built, the leach circuit was expanded, the flotation circuit rehabilitated, the tailings dam expanded, and a new silver refinery constructed. Guanajuato’s underground workings grew by 2,200 metres and the company upgraded four safety shafts, rehabilitated mine equipment and the crushing circuit, and expanded the tailings dam.

Endeavour expects to increase its silver production levels for the fifth consecutive year in 2009. Specifically, the company plans to produce 2.7 to 2.9 million oz. silver and 10,000 by-product oz. gold, up 20% from 2008 levels. Like last year, production will remain flat for the first two quarters as new capital projects get underway but will jump in the third and fourth quarters as three new mines currently under development at Guanacevi enter production.

The company will spend US$16.8 million on capital projects in 2009. The focus will again be on Guanacevi, where Endeavour will spend almost US$15 million on new mine development, additional mining equipment and facilities, and plant improvements. Guanajuato will see just US$2 million, enough to develop certain newly discovered zones and to expand the processing plant.

For the last four years, Guanacevi has sourced all of its ore from the Porvenir mine. During 2009 Endeavour plans to bring three other orebodies into production, called Alex Breccia, Santa Cruz, and Porvenir Dos.

By the end of 2009 Endeavour expects to process 1,000 tonnes of ore daily at Guanacevi and 600 tonnes daily at Guanajuato. The next phase of expansion, planned for 2010, will boost daily throughputs to 1,200 tonnes at Guanacevi and 800 tonnes at Guanajuato.

Endeavour closed a $14-million convertible debenture offering in late February, leaving the company well financed to fund its expansion projects. Endeavour says it has US$15 million on hand.

And its exploration plans are not minimal either. In 2008 the company drilled 41,160 metres in 172 holes testing 14 exploration targets. And its exploration resume is strong.

Within six months of acquiring the 955-hectare Guanacevi property in 2004 Endeavour discovered the North Porvenir orebody and immediately put it into production. By 2007 the company had delineated four high-grade silver orebodies along an initial 4-km long stretch of the Santa Cruz silver vein. As of March, 2008, Guanacevi hosted 14.2 million oz. silver in proven and probable reserves, 13.6 million oz. of measured and indicate resources, and 8.5 million oz. in inferred resources.

In 2008 drilling extended each of the North Porvenir, Santa Cruz, and Alex Breccia orebodies to the northwest and at depth. Endeavour did not drill at Porvenir North in 2008.

Endeavour did drill also drill the San Pedro area of Guanacevi, though, which sits to the north of the Porvenir mine. Drills encountered vein systems where, compared to the rest of Guanacevi, veins are narrower but more numerous and carry higher lead-zinc grades. And where the vein systems intersect a sub-horizontal geological contact, the mineralization spread along the contact as mantos, which have not been seen in the area before.

Endeavour picked up the 2,000-hectare Guanajuato property in 2007. As of March, 2008, the company had defined 700,000 oz. silver reserves, 300,000 oz. silver as indicated resources, and 2.2 million oz. silver as inferred resources.

In 2008 drilling focused on targets along the Veta Madre vein structure close to the Cebada mine and targets along the La Luz vein structure close to the Bolanitos mine. The effort revealed new high-grade mineralization in five areas, one near Cebada and four near Bolanitos.

Compared to Guanacevi, the Guanajuato veins tend to grade lower in silver but higher in gold. The Veta Madre vein forms a central lode for the district, with hangingwall and footwall splay occupying a major fault structure. The La Luz veins form a swath of sub-parallel lines in lesser fault structures.

In 2009 Endeavour plans to conduct a two-phase exploration program focused on San Pedro at Guanacevi and three of the discoveries at Guanajuato from 2008.

In the first half of March Endeavour’s share price has sat near $1.60. The company has a 52-week trading range of $1 to $4.30 and has 51 million shares outstanding, 58 millio fully diluted.