Endeavour Silver Corp.
(NYSE: EXK) (TSX: EDR)
announces that the Company’s recent re-assessment of all aspects of
the Terronera Mine Project in Jalisco state, Mexico has resulted in
more robust economics in the final Pre-Feasibility Study (“2020
PFS”) compared to the earlier Pre-Feasibility Study released on
August 30, 2018 (“2018 PFS”).
Endeavour management worked with Ausenco
Engineering Canada Inc. (Ausenco) on the re-conceptualization and
re-engineering of the project to generate the significantly
improved 2020 PFS economics presented herein. Ausenco will
co-author the 2020 PFS Technical Report in compliance with National
Instrument 43-101, to be filed on SEDAR and EDGAR within 45 days of
this news release. All currency references herein are in US$.
The PFS base case assumes a two-year trailing
average silver price of $15.97 per ounce (“oz”) and a gold price of
$1,419 per oz with an implied 89:1 silver:gold ratio, and an
MXN:USD exchange rate of 20:1. The 2020 PFS also presents an
alternative spot case using the closing metal prices as of July
8th, 2020, with silver at $18.49 per oz and gold at $1,812 per oz
for a silver: gold ratio of 98:1.
Additional details and charts can be found in
the NI 43-101 Technical Report which will be posted on SEDAR and
the 2020 PFS webinar presentation available (here) on the Company
website.
2020 PFS Base Case
Highlights
- After-tax Net Present Value (“NPV
5%”) of $137 million
- After-tax Internal Rate of Return
(“IRR”) of 30.0%
- Life of Mine (“LOM”) Annual
Production averages 3 million oz silver and 32,800 oz gold for 5.9
million oz silver equivalent (“AgEq”) at an 89:1 silver:gold ratio
over an initial 10 year Mine Life
- LOM Cash Cost (“CC”) of $0.004 per
oz silver, net of the gold credit
- LOM Mine-Site All-in Sustaining
Cost (“MAISC”) of $2.10 per oz silver, net of the gold credit
- Initial Capital Expenditure
(“Capex”) of $99 million
- LOM Sustaining Capital Expenditures
of $60 million
- Payback Period (“Payback”) of 2.7
years
- Pre-tax cumulative undiscounted
free cash flow of $315 million
- After-tax cumulative undiscounted
free cash flow of $217 million
2020 PFS Spot Case
Highlights
- After-tax NPV 5% of $229
million
- After-tax IRR of 45.7%
- LOM CC of ($4.15) per oz silver,
net of the gold credit
- LOM Mine-Site All-in Sustaining
Cost (“MAISC”) of $($2.06) per oz silver, net of the gold
credit
- Payback of 1.7 years
- Pre-tax cumulative undiscounted
free cash flow of $514 million
- After-tax cumulative undiscounted
free cash flow of $342 million
Bradford Cooke, CEO, commented, “This final
iteration of our Terronera PFS adds real value to the project,
reducing the initial development capex and significantly enhancing
our financial returns. Endeavour’s Director of Project
Development Ernesto Lima worked with Ausenco to re-evaluate every
parameter in our previous Pre-Feasibility studies and the result is
very simply a better project, with low capital and operating costs,
quick payback period and robust financial returns.”
“At base case prices, the improved economics
include an NPV of $137 million, IRR of 30.0%, and payback period of
2.7 years. At current spot prices, the project exhibits the
exceptional economics that one would expect from such a shallow,
thick and rich silver-gold vein system. Endeavour now plans to
complete a Feasibility Study at an estimated cost of $1.8 million
over the next 12 months. Terronera represents our next core asset
and once built, should become our largest and lowest cost
mine.”
Location, Access, Physiography,
Infrastructure
Terronera is located approximately 50 kilometres
(km) northeast of the port city of Puerto Vallarta in Jalisco
state, Mexico, about a 1½ hour drive on Highway 70 to the town of
San Sebastian del Oeste. The property has excellent road access and
is situated in a mountainous region at elevations of 1,500-2,200
metres (m)above sea level. Supplies, water, power and labour
are all available locally however for mining operations, new water
wells, more power capacity and employee camps will be required.
Property, History, Geology,
Mineralization
Terronera consists of 24 mineral concessions
totalling 17,369 hectares. Discovered in 1542, the San
Sebastian district went through sporadic periods of small-scale
silver and gold production from more than 50 old mines on
approximately 20 mineralized veins. All mining halted around
1910-1912 during the Mexican Revolution and not much happened at
Terronera until Grupo Mexico acquired the project and conducted
some exploration work in the late 1980’s and early
1990’s.
Endeavour acquired an option from Grupo Mexico
to purchase Terronera for $2.75 million in 2010, and all
expenditures since inception including exploration and engineering
to date total $27.8 million. The Company commenced
exploration work in 2011 and discovered mineralization in the
Terronera Vein in 2012. High grade, silver-gold sulfide and
sulfosalt mineralization is hosted in multiple low sulfidation,
epithermal veins from 1 to 30 m thick over an area 12 km long by 6
km wide. The veins occur within late Cretaceous andesite to
rhyolite volcanic rocks within the Sierra Madre Occidental
metallogenic belt where it transects the Trans-Mexico Volcanic
Belt.
Reserves and Resources
The 2020 PFS provides a revised mine plan,
including revised mining dilution and recovery assumptions, which
resulted in slight reductions to tonnes, grades and oz in the
December 31, 2019 Mineral Reserve Estimate. Probable Mineral
Reserves totaled 5.563 million tonnes grading 201 gpt silver and
2.29 gpt gold or 405 gpt AgEq (89:1 silver:gold ratio) for 36.0
million oz silver and 410,000 oz gold or 72.5million oz AgEq.
Inferred Mineral Resources total 1.080 million tonnes grading 208
gpt silver and 2.28 gpt gold or 379 gpt AgEq for 7.2 million oz
silver and 79,000 oz gold or 13.2 million oz AgEq. Changes
from the 2018 PFS Mineral Reserve Estimate include tonnes up 18%,
silver grade down 10%, gold grade up 0.4%, silver oz up 6.5% and
gold oz up 20%, mainly due to infill drilling of the Terronera and
La Luz Inferred Mineral Resources to upgrade them to Probable
Mineral Reserves.
2020 PFS Base Case Compared to 2018
PFS
The following table compares the 2020 PFS
compared to the 2018 PFS.
TERRONERA PROJECT |
PFS Change |
|
|
|
|
|
|
2020 PFS Compared to 2018 PFS |
2020 |
|
2018 |
|
Change |
Silver Price |
15.97 |
|
17.00 |
|
(6%) |
Gold Price |
1,419 |
|
1,275 |
|
11% |
Silver:Gold Ratio |
89 |
|
75 |
|
19% |
Operating Statistics |
|
|
|
LOM Tonnes Processed LOM
(thousands) |
5,563 |
|
4,701 |
|
18% |
Process Capacity (tonnes per
day) |
1,600 |
|
1,500 |
|
7% |
Life of Mine (years) |
10.0 |
|
9.5 |
|
5% |
Average silver grade
(gpt) |
201 |
|
224 |
|
(10%) |
Average gold grade (gpt) |
2.29 |
|
2.26 |
|
1% |
Silver equivalent grade
(gpt) |
405 |
|
394 |
|
3% |
Average silver recovery |
84.9% |
|
84.6% |
|
0% |
Average gold recovery |
82.3% |
|
80.4% |
|
2% |
LOM payable Ag ounces produced
(millions) |
29.8 |
|
27.9 |
|
6% |
LOM payable Au ounces produced
(thousands) |
328 |
|
268 |
|
18% |
LOM payable Ag Eq ounces
produced (millions) |
59.0 |
|
48.0 |
|
19% |
Avg annual payable Ag ounces
produced (millions) |
3.0 |
|
2.9 |
|
1% |
Avg annual payable Au ounces
produced (thousands) |
33 |
|
28 |
|
14% |
Avg
annual payable Ag Eq ounces produced (millions) |
5.9 |
|
5.1 |
|
14% |
Capital Expenditures |
|
|
|
Initial Capital Expenditure
(millions) |
99.1 |
|
115.0 |
|
(14%) |
LOM Sustaining Capital |
62.4 |
|
25.8 |
|
142% |
Total
LOM Project Capital |
161.5 |
|
140.8 |
|
15% |
Financial Metrics |
|
|
|
LOM Revenue (millions) |
942.7 |
|
815.8 |
|
16% |
LOM EBITDA (millions) |
476.4 |
|
447.7 |
|
6% |
After Tax LOM Free Cash Flow
(millions) |
217.4 |
|
193.2 |
|
13% |
After Tax Project Net Present
Value (millions) |
137.1 |
|
117.8 |
|
16% |
After Tax Internal Rate of
Return |
30.0% |
|
23.5% |
|
28% |
Pay Back Period (years) |
2.7 |
|
5.4 |
|
(50%) |
Cash costs by Product (per
silver ounce) |
0.004 |
|
0.15 |
|
(100%) |
Mine-site All in sustaining
(per silver ounce) |
2.10 |
|
1.36 |
|
54% |
Cash costs by Silver
Equivalent (per silver ounce) |
7.90 |
|
7.67 |
|
3% |
All in sustaining Silver
equivalents (per silver ounce) |
8.96 |
|
8.35 |
|
7% |
LOM Cost of Sales
(millions) |
466.3 |
|
368.1 |
|
27% |
Total Direct Production Costs
(per tonne) |
83.82 |
|
78.29 |
|
7% |
Initial and Sustaining
Capital
The initial capital cost of the project is $99
million, to be incurred over an 18 month period prior to the start
of commercial production. Initial capital is 14% lower than the
2018 PFS due to reducing initial mine development and equipment,
reducing the plant footprint, updating the plant flowsheet,
utilizing some used plant equipment from El Cubo, modifying the
tailings storage facility and moving some capex into sustaining
capital through lease financing. Cumulative sustaining capital is
estimated at $60 million with over 80% spent in years 1-4 for the
phased underground mine development.
Operating, Cash and All-in Sustaining
Costs
The average annual operating cost per tonne is
$83.82, or about 7% higher than the 2018 PFS due mainly to higher
processing costs and smelter charges. Cash cost is slightly
lower, however, MAISC is higher than the 2018 PFS, mainly due to
the re-allocation of initial mine development to sustaining mine
development.
EBITDA and FCF
The average annual EBITDA during commercial
production is $48 million and after-tax free cash flow is $31
million. The cumulative LOM EBITDA and after-tax free cash flow are
estimated at $476 million and $217 million, respectively 6% and 13%
higher than the 2018 PFS.
Project Sensitivities
At current spot prices, the after tax NPV and
IRR are most sensitive to metal prices and least sensitive to
initial capex and has approximately equal exposure to silver and
gold prices.
Sensitivity Table (Ratio 100:1) |
|
|
|
Gold Price |
Silver Price |
After Tax NPV |
After Tax IRR |
|
1,200 |
12.00 |
49.8 |
14.2% |
|
1,400 |
14.00 |
107.8 |
24.2% |
|
Base Case |
Base Case |
137.1 |
30.0% |
|
1,600 |
16.00 |
164.5 |
34.9% |
|
1,800 |
18.00 |
220.9 |
44.4% |
|
2,000 |
20.00 |
277.3 |
53.9% |
|
Sensitivity Table |
Movement |
OPEX NPV |
OPEX IRR |
CAPEX NPV |
CAPEX IRR |
-20% |
173.2 |
36.2% |
150.4 |
38.1% |
-10% |
155.2 |
33.1% |
143.8 |
33.6% |
Base Case |
137.1 |
30.0% |
137.1 |
30.0% |
10% |
118.9 |
26.7% |
130.4 |
26.9% |
20% |
100.7 |
23.4% |
123.7 |
24.3% |
Mining Operations
Both Terronera and La Luz will be mechanized
ramp access underground mines capable of producing an average of
1,600 tpd to meet the plant capacity. Mining operations were
improved to defer some initial capital as well as reduce the
operating cost. Four pieces of mining equipment were deemed
redundant under the updated layout. Operating cost was
reduced by increasing long-hole mining in both deposits and
decreasing the re-handling of waste and backfill inside the mine to
minimize transport cost.
Plant Flowsheet
The plant flowsheet with a 1,600 tpd capacity,
consists of three stage crushing, grinding, flotation (flash,
rougher, scavenger and cleaner), thickening and filtration of
concentrate, tailings filter plant and a filtered-tailings (dry
stack) storage facility. Plant operations were also improved to
reduce capital. Construction capital was reduced by shrinking
the plant footprint, reducing earthworks, eliminating the crusher
building and regrind circuit, reducing the thickener size,
utilizing used equipment from El Cubo and lease financing some new
equipment. Operating cost was reduced by increasing plant capacity
by 7%, simplifying the flowsheet, better utilizing equipment and
reducing the power consumption and cost.
Surface Infrastructure
Surface infrastructure to be constructed at
Terronera includes conventional gravel roads, underground haul
roads, power generation plant, reclaim and fresh-water dams, waste
and ore stockpiles, ancillary buildings, communications and camp
facilities. The estimated power requirement for the project is
4.9MW and an additional 1MW for the camp. The power to the camp
will be provided either by the national grid, CFE or as part of the
project power supply which will be powered through a liquified
natural gas generating station in tandem with a solar power plant
built and maintained by a Mexican power provider.
Project Schedule
Management now plans to proceed with a
Feasibility Study over the next 12 months at an estimated cost of
$1.8 million to further de-risk the project and access additional
project debt financing alternatives. Once a development decision is
made, the Terronera Project will take approximately 18 months to
construct and commission to commercial production. These
timeframes do not take into account any further disruptions to the
labour market and supply chain due to the COVID 19 pandemic.
Sustainability Initiatives
The Community Relations team has been successful
in mitigating risk and obtaining support from the local
communities, mainly focusing on the two closest towns, Santiago de
los Pinos and San Sebastian del Oeste
(combined population of 1,250). The Company has completed
the following initiatives:
- Social Impact Assessment -
82.6% of the people surveyed agreed with mining activities in the
area and support job creation and positive economic benefits that
will result from mining
- Social Management System -
designed to build and maintain positive relationships in the
communities, including a Social Grievance Mechanism designed to
receive, investigate and respond to complaints and concerns in the
local communities.
- Urban Development Project -
developing a Municipal Urban Plan to facilitate the
influx of employees, contractors, suppliers and other stakeholders
for the life of mine, including essential infrastructure (water
supply, water treatment, roads, accommodations, etc.
- Government Engagement - through
agreements with local, municipal, state and federal ministries to
develop cultural, educational, health, family, employment and other
programs in the community
- Ejido Engagement – through
agreements with the communal land association
to provide access across their land during the
exploration, development and exploitation
Government Permits
Endeavour Silver has in place the following
government permits for the development of the
Project:
- Mine and plant permits
(received Q3, 2017)
- Tailings and dumps permit (received
Q2, 2019)
- MIA (EIS) from SEMARNAT
(Mexican Environmental Authority) previously received in
Q1, 2017, is being extended.
- Additional permit applications will
be filed as needed based on the Feasibility Study
Exploration Potential
Exploration at Terronera has identified several
areas of interest with high discovery potential. The main Terronera
and La Luz Vein orebodies are both open to a certain extent to
surface and at depth. There are three main areas with
significant potential to increase Mineral Resources, the deep
central area, the central-north part and the shallow part of the
Santa Gertrudis – El Hundido area.
The La Loma-Los Pajaros Veins located close to
the footwall of the Terronera Vein have returned economic grades
over mineable widths from surface rock chip sampling, however they
have not yet been drilled. These vein targets range up to 500
m long by up to 3 m thick.
In the Real Alto area, more than 12 veins have
been identified. Real Alto is located about 20 km at southeast of
the Terronera Vein at elevations 500 to 600 m higher than the
Terronera orebody. These vein structures are hosted in the same
favorable volcanic rock formations and with the same structural
patterns as Terronera. These vein targets range from 500 m to 1,000
m long with previous rock chip and shallow drill results returning
up to 150 gpt Ag. Since these low sulfidation epithermal vein
deposits occur within bonanza zones with well-defined elevation
controls, deeper drilling is needed to test the Real Alto targets
down to the elevations of the Terronera and La Luz orebodies.
Opportunities to Enhance
Value
Several opportunities to enhance value for the
Terronera Project have been identified and will be further
evaluated during the Feasibility Study. These include:
- Expand Property
Size – complete the process of applying for new
concessions and acquiring existing third-party concessions covering
mineralized areas proximal to the current properties
- Expand Mineral Resources
and Reserves – plan additional exploration drilling, both
within the current resource footprint to convert Inferred Mineral
Resources to Probable Reserves, and to test multiple other veins
such as the La Loma-Los Pajaros and Real Alto Vein systems
- Expand Mine and
Plant – evaluate the potential to expand to 2,000 tpd
subject to expanding the Mineral Reserves
- Optimize Mining
Method – with more geotechnical drilling, additional long
hole mining may be possible, current model assumes a combination of
long hole mining (in thicker zones with stronger wall-rocks), cut
and fill mining (in narrower zones with weaker wall-rocks) and
resuing (in very narrow high grade veins)
- Optimize Ore
Transport – evaluate an automated underground rail haulage
system to haul ore to the plant which would benefit both haulage
costs and ventilation requirements
- Optimize Mining
Equipment – evaluate electric equipment instead of diesel
which would benefit both fuel costs and ventilation
requirements
- Optimize Metallurgical
Recoveries – continue to evaluate grind sizes vs flotation
stages vs metal recovery
- Reduce Operating
Costs – Evaluate pre-concentration technologies to reduce
the unit operating costs
- Optimize Tailings
Transport – evaluate alternatives such as conveyor or
pipeline vs trucks to move tailings from the plant to the dry stack
storage facility
- Optimize Power
Capacity – re-evaluate power needs once other power
applications are optimized
Next Steps
Endeavour plans to complete a Feasibility Study
(FS) for the Terronera Project with some activities as overlapping
instead of sequenced. These include:
- Feasibility Study
- Consultant bidding and selection process is already underway and
scheduled to conclude in August. The Feasibility Study is estimated
to take 9 to 12 months.
- EPC Process -
Endeavour has defined its EPC strategy and initiated contacts with
potential contractors to commence the process of contractor bidding
and selection process for the project engineering, procurement and
construction.
- Government
Permitting – some permits such as mine access ramp
portals, temporary waste rock storage areas and construction camp
will be modified now the PFS is concluded, but these are not
expected to delay the construction phase
- Long Lead Items –
Endeavour has received and warehoused the main ball mill components
and will evaluate the possibility to commence early underground
development of the main three km long haulage-way to access the
main Terronera orebody
- Project Financing
– continue to evaluate staged financing, with current cash and ATM
to fund the FS and long lead items, and debt, convertible, equity
and other alternatives to fund the initial capex
Video Webcast and Q&A – 2020 PFS
Webinar
A video webcast to discuss the updated economics for the 2020
PFS is scheduled for Tuesday July 14, 2020,at 10:00 a.m. Pacific
time (1:00 p.m. Eastern time). Those interested in participating,
are invited to join online:
https://www.edrsilver.com/terroneraPFS2020webinar
A Question and Answer period will follow. Participants can
submit a question through the webcast webform via “Submit a
Question” button. The PowerPoint presentation will also be
available (here) or on the homepage of the Company’s website and
under the Investor Relations, Events and Webcast sections. The
webcast will also be archived for replay.
Qualified Persons and QA/QC
Godfrey Walton, M.Sc., P.Geo., Endeavour’s
President and COO, is the Qualified Person who reviewed and
approved this news release and supervised the engineering work
supporting the 2020 NI 43-101 Technical Report, Prefeasibility
Study for the Terronera Project. The PFS team Ausenco Engineering
Canada Inc - Robin Kalanchey, P.Eng., P&E Mining Consulting -
Eugene Puritch, P.Eng. FEC. CET, David Burga P.Geo., Yungang Wu,
P.Geo., D. Gregory Robinson P. Eng., Wood Engineering - Humberto
Preciado, P.E., Eugenio Iasillo P.E., JDS Mining - Mike Levy
P.E., P.Eng., Moose Mountain – Mike Petrina P.Eng., are the
Independent Qualified Persons for the 2020 PFS who have reviewed
and approved the technical contents of this news release.
A Quality Control sampling program of reference
standards, blanks and duplicates is used to monitor the integrity
of all assay results. All samples are split at the local field
office and shipped to ALS-Chemex Labs, where they are dried,
crushed, split and 50 gram pulp samples are prepared for analysis.
Gold is determined by fire assay with an atomic absorption (AA)
finish and silver by aqua regia digestion and ICP finish,
over-limits by fire assay and gravimetric finish.
About Endeavour Silver –
Endeavour Silver Corp. is a mid-tier precious metals mining company
that owns and operates three high-grade, underground, silver-gold
mines in Mexico. Endeavour is currently advancing the Terronera
Mine Project towards a development decision and exploring its
portfolio of exploration and development projects in Mexico and
Chile to facilitate its goal to become a premier senior silver
producer. Our philosophy of corporate social integrity
creates value for all stakeholders.
SOURCE Endeavour Silver Corp.
Contact Information: Galina Meleger, Director,
Investor RelationsToll free: (877) 685-9775 Tel: (604) 640-4804
Email: gmeleger@edrsilver.com Website: www.edrsilver.com
Follow Endeavour Silver on Facebook, Twitter,
Instagram and LinkedIn
Cautionary Note Regarding
Forward-Looking Statements
This news release contains “forward-looking
statements” within the meaning of the United States private
securities litigation reform act of 1995 and “forward-looking
information” within the meaning of applicable Canadian securities
legislation. Such forward‑looking statements and information herein
include but are not limited to statements regarding Endeavour’s
anticipated performance in 2020 and future years including
statements regarding the economics analysis and production
estimates in the 2020 PFS, changes in mining operations and
production levels, the timing and results of various activities and
the impact of the COVID 19 pandemic on operations. 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.
Forward-looking statements or information
involve known and unknown risks, uncertainties and other factors
that may cause the actual results, level of activity, production
levels, performance or achievements of Endeavour and its operations
to be materially different from those expressed or implied by such
statements. Such factors include, among others, the reliability of
the Terronera economic analysis and production estimates for
Terronera, the ultimate impact of the COVID 19 pandemic on
operations and projects and results, changes in production
timelines and costs guidance, national and local governments,
legislation, taxation, controls, regulations and political or
economic developments in Canada and Mexico; financial risks due to
precious metals prices, operating or technical difficulties in
mineral exploration, development and mining activities; risks and
hazards of mineral exploration, development and mining; the
speculative nature of mineral exploration and development, risks in
obtaining necessary licenses and permits, and challenges to the
Company’s title to properties; as well as those factors described
in the section “risk factors” contained in the Company’s most
recent form 40F/Annual Information Form filed with the S.E.C. and
Canadian securities regulatory authorities.
Forward-looking statements are based on
assumptions management believes to be reasonable, including but not
limited to: the ability to achieve the revenue, costs and
production estimates in the Terronera 2020 PFS, the continued
operation of the Company’s mining operations, no material adverse
change in the market price of commodities, mining operations will
operate and the mining products will be completed in accordance
with management’s expectations and achieve their stated production
outcomes, no material impact of the COVID 19 pandemic on the
Terronera development plans provided for in the 2020 PFS, and such
other assumptions and factors as set out herein. Although the
Company has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking statements or information, there may be other
factors that cause results to be materially different from those
anticipated, described, estimated, assessed or intended. There can
be no assurance that any forward-looking statements or information
will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements or
information. Accordingly, readers should not place undue reliance
on forward-looking statements or information.
Endeavour Silver (NYSE:EXK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Endeavour Silver (NYSE:EXK)
Historical Stock Chart
From Apr 2023 to Apr 2024