Endeavour Silver Reports Financial Results for Second Quarter, 2017; Updates on Development Projects and 2017 Guidance
VANCOUVER, BC - Endeavour Silver Corp. owns and operates three underground silver-gold mines in Mexico: the Guanacevi mine in Durango state, and the Bolanitos and El Cubo mines in Guanajuato state. The Company's financial performance in the Second Quarter, 2017 was impacted by lower production and increased exploration and development activities compared to the Second Quarter, 2016. Production was lower in Q2, 2017 compared to Q2, 2016 due to differences in the annual mine plans. In 2016, production was higher in H1 and declined in H2 whereas in 2017, production should rise incrementally from H1 to H2 with increased access to reserves at all three mines. Production in the Second Quarter, 2017 was higher than the First Quarter, 2017 due primarily to improved performance of the Bolanitos and El Cubo mines. Both mines are now performing in line with their operating plans for the year whereas Guanacevi continues to lag behind plan.
At Guanacevi, power outages in the first quarter caused pump failures and some flooding underground. Slower than planned mine development due to narrower vein widths than in the resource model also contributed to lower mine output than planned, while excess dilution of the ore resulted in lower than planned grades. In July, a lightning strike caused a repeat in the electrical issues just as electrical repairs were nearing completion, resulting in another pump failure and renewed flooding in the deeper workings. Recent completion of electrical and ventilation repairs and construction of a new underground pump station should help smooth production in H2, 2017. However, given these setbacks, we have concluded that Guanacevi will not meet its planned production this year and accordingly, we are reducing our consolidated production guidance and raising our consolidated cost guidance.
The company will continue to closely monitor the operating performance at Guanacevi. Returning Guanacevi to long-term profitability relies in part on developing two new orebodies, Milache and Santa Cruz Sur. Underground ramp access is already underway towards Milache and initial production is expected in the second half of 2018. Mine development at Santa Cruz Sur is scheduled to coincide with the development of Milache.
In January, management guided Guanacevi 2017 production to range between 2.4 to 2.6 million silver ounces and 5,300 to 6,300 gold ounces. Due to the narrower vein widths, management now estimates production will range from 800 to 900 tonnes per day, generating 1.0 to 1.1 million silver ounces and 2,100 to 2,200 gold ounces in the second half of 2017. As a result, the revised Guanacevi 2017 full year forecast production is 2.0 to 2.1 million ounces silver and 4,400 to 4,500 ounces gold.
At Bolañitos, silver grades improved during the Second Quarter but were below plan due to grade variations in the LL-Asuncion vein. The lower silver grades were offset by higher throughput than planned. Gold production exceeded plan due to higher throughput and gold grades. Management expects production on a silver equivalent basis to meet 2017 production guidance.
El Cubo reported both silver and gold grades were higher than plan, and throughput was slightly below plan. During the quarter, management made changes to both mining methods and ore control processes to reduce the dilution and provide higher-grade material to the plant. Grades are expected to stabilize and throughput should regain plan through year-end with the completion of a secondary ramp to access better grades. Management expects production on a silver equivalent basis to meet 2017 production guidance.
Work has begun at El Compas on installing project infrastructure, collaring the mine access ramp and refurbishing the plant. Project engineering is being refined and optimization studies are underway on mining methods and crushing and grinding alternatives. The Company is waiting for clarification from the state government of Zacatecas regarding an exemption from the new environmental taxes. The explosives permit may take until year-end due to a substantial slowdown in the government permitting process. In the interim, mine development will proceed using a form of low impact gunpowder. Management therefore anticipates an increase in the timeline to production compared to the PEA with mine and plant commissioning now expected to commence in the first quarter, 2018.
The Terronera, work is currently focused on refinement of the project engineering and optimization studies on mining methods, crushing and grinding alternatives and power options. Similar to El Compas, permitting delays have affected the explosives, mine dumps and plant tailings permits so management does not expect to break ground on mine development until the first quarter, 2018, with mine and plant commissioning now anticipated to commence in mid-2019.