Endeavour Silver Corp.
(“Endeavour” or the
“Company”) (NYSE: EXK; TSX: EDR) is
pleased to announce the Board of Directors (the
“
Board”) of the Company has made the decision to
proceed with the construction of an underground mine and mill at
the Terronera Project in Jalisco state, Mexico. To date, the
Company made significant progress on development activities, with
long-lead item procurement well advanced and a seasoned team of
development personnel established on the ground. Additional
activities include onsite delivery of mobile mining equipment,
assembly of initial project infrastructure and advanced earthworks
with commencement of underground mine access development. All
references to dollars ($) in this news release are in United States
dollars.
Project Loan Facility
The Company has entered into a Commitment Letter
with Societe Generale and ING Bank N.V. with certain definitive
terms agreed to for a senior secured debt facility for up to $120
million (the “Debt Facility”). Artemis Capital
Advisors has acted as the financial advisor to the Company
regarding this transaction, with ING Capital LLC (together with ING
BANK N.V. “ING”) and Societe Generale acting as
Joint Lead Arrangers. A summary of the key terms of the Debt
Facility are as follows:
- Up to $120 million principal
amount
- Term of 8.5 years, including a
2-year grace period during the construction phase
- Interest rate of US Secured
Overnight Financing Rate (“SOFR”) + 4.50% per
annum prior to completion (SOFR + 3.75% per annum upon
completion)
- First security ranking over the
Terronera Project
- Principal payments are payable in
quarterly installments commencing three months after attaining
completion of the Terronera Project
- Cash sweep will be applied to 35%
of excess cash flow after debt service from completion onwards
until $35 million of loan principal has been prepaid
- Certain hedging arrangements are
required including hedging up to 68,000 ounces of gold over the
initial three operating years
- No hedging requirements apply to
the silver production
- Customary financial and debt
servicing covenants
“With official Board approval now in hand, the
path is cleared to advance construction of the Terronera Project,
which will be Endeavour’s next producing mine,” said Dan Dickson,
Endeavour’s CEO. “We are very pleased with the financial
commitments that Societe Generale and ING have made towards the
development of the Terronera Project. After undergoing a
comprehensive due diligence process, we secured very competitive
financing terms with quality financiers that protect the upside for
our shareholders.”
The Debt Facility will include standard and
customary project finance terms and conditions regarding fees and
conditions precedent to closing (including satisfaction of
remaining customary due diligence and other approvals) and remains
subject to the completion and execution of definitive loan
documentation. Closing of the transaction is expected to occur in
the third quarter of 2023. Further details of the Debt Facility
will be released upon signing of the final documentation.
Technical, environmental, and social due diligence has been
completed by Societe Generale and ING to issue their Commitment
Letter.
Prior to the Company securing this commitment,
the Board approved early expenditures focused on deliberately
advancing the Project in a disciplined manner to de-risk various
aspects prior to the final construction decision. Proceeding with
these early expenditures has reduced inflationary and timing
pressures and has also advanced key work that will facilitate
ramp-up to full construction.
Updated Development Plans and Initial
Capital Costs
Since the Company filed its feasibility study
entitled “NI 43-101 Technical Report on the Feasibility Study of
the Terronera Project, Jalisco State, Mexico” dated October 21,
2021 with an effective date of September 9, 2021 (the
“Terronera Feasibility Study”), the Company has
further evaluated various operating scenarios, cost-benefit
initiatives and technologies to optimize the Terronera Project’s
operating flexibility and economics. Since 2021, additional cost
pressures have emerged from systemic inflation and constrained
global supply chains, which have contributed to increased costs of
inputs within the mining sector. The Company’s move to assemble an
experienced development team has worked to mitigate some of these
impacts, and management believes the Company is well-equipped to
navigate the current business environment.
Management recommended and the Board has
approved the construction of an optimized Terronera Project
scenario (the “Revised Scenario”), consisting of a process plant
with 2,000 tonne per day (tpd) capacity and an initial capital
expenditure cost of $230 million, partially offset by a decrease in
sustaining capital to $88.3 million over the life of the
mine. Endeavour expects a 21-month construction period,
including 3 to 6 months ramp up to full production with initial
production expected in the fourth quarter of 2024.
Area(millions) |
2021 Feasibility Study |
2023 Revised Scenario |
Life of Mine |
% Change |
Initial Capex |
Sustaining |
LOM |
Initial Capex |
Sustaining |
LOM |
Variance |
|
Mining |
$61.6 |
$102.5 |
$164.1 |
$69.9 |
$88.3 |
$158.1 |
($6.0) |
(4%) |
Mineral Processing Plant |
$37.8 |
$3.1 |
$40.9 |
$48.0 |
|
$48.0 |
$5.0 |
17% |
Site Infrastructure |
$24.5 |
|
$47.6 |
$47.6 |
|
$47.6 |
$21.7 |
94% |
Total Direct Costs |
$123.9 |
$105.6 |
$229.5 |
$165.5 |
$88.3 |
$253.7 |
$24.1 |
11% |
Owner Costs |
$21.7 |
|
$21.7 |
$27.6 |
|
$27.6 |
$5.9 |
27% |
Project Indirect Costs |
$17.2 |
|
$17.2 |
$19.9 |
|
$19.9 |
$2.7 |
16% |
Contingency |
$12.2 |
|
$12.2 |
$17.6 |
|
$17.6 |
$5.4 |
45% |
Total Indirect Costs |
$51.1 |
|
$51.1 |
$65.1 |
|
$65.1 |
$14.0 |
27% |
Total (Direct & Indirect) |
$175.0 |
$105.6 |
$280.6 |
$230.4 |
$88.3 |
$318.7 |
$38.1 |
14% |
The increased operating scale and optimization
should result in slightly lower operating costs on a per tonne
basis compared to the Terronera Feasibility Study. Below is a
summary of the optimization work that has been completed on the
project cost structure and key components:
- The mine design has been redesigned
and mine plan optimized to reduce initial underground mine access
development including changing portal locations. These changes were
aimed at increasing development efficiencies, improving early
ventilation, and reducing surface haulage. Pre-production
development quantities increased for scaling the mine to 2,000
tpd.
- The processing plant and tailing
storage facility initial capital expenditures have increased
primarily for equipment required to achieve 2,000 tpd. These
include a SAG Mill, concentrate regrind, and an additional tailings
filter. Additional increases have resulted from inflationary costs
for steel and other required materials for construction. Further
metallurgical testing completed during the basic engineering design
phase for the process plant indicate increased estimated silver and
gold recoveries by 1.6% and 2.5% respectively, compared to the
recoveries in the Terronera Feasibility Study. Certain sustaining
capital costs in the Terronera Feasibility Study are now included
as operating costs.
- Site infrastructure now includes
the Company’s ownership of the liquified natural gas
(“LNG”) vaporization and power generation
equipment rather than leasing, which was included as an operating
lease in the Terronera Feasibility Study. The site infrastructure
increase from the Terronera Feasibility Study is also due to
additional access road improvements.
- The owner’s costs, project indirect
costs and contingency increased based on updated estimates of
detailed engineering and overhead expenses. The contingency
estimate was revised based on updated quotes and increased
confidence in certain estimates and committed costs to date.
“The optimization work on the Project over the
past year has captured opportunities for higher throughput and
improved metallurgical recoveries. At the same time, technical
risks have been mitigated by further study, engineering, testing
and early works,” said Don Gray, Endeavour’s COO. “Overall, we are
very fortunate we started with pre-development activities well in
advance of this construction decision. This has significantly
de-risked the Project, as we have been able to secure several
procurement contracts before certain inflationary cost spikes and
supply chain constraints. Like others in the industry, we are
dealing with inflation on the remaining unawarded work. However,
such inflation affects a smaller portion of the overall Terronera
Project.”
The Company is well-financed to satisfy the
financing requirements of the Project, having already invested over
$58 million in direct development expenditures to the end of Q1
2023. However, the Company may consider various additional
alternatives to raise the required projected capital as required by
the terms of the Debt Facility, including a potential cost overrun
facility. The revised metrics for the 2,000 tpd plant as compared
to the 1,700 tpd plant contained in the 2021 Terronera Feasibility
Study are set out in the following table. The Company does not
consider these changes to be material to the Company.
2023 Revised 2,000 TPD Plant Compared to 2021 FS |
|
|
2023 |
2021 |
% Change |
Silver Price |
20.00 |
20.00 |
0% |
Gold Price |
1,575 |
1,575 |
0% |
Silver: Gold Ratio |
79 |
79 |
0% |
Operating Statistics |
|
|
|
LOM Tonnes Processed LOM (thousands) |
7,382 |
7,380 |
0% |
Life of Mine (Years) |
10.0 |
12.0 |
(17%) |
Average silver grade (g/t) |
196 |
197 |
(1%) |
Average gold grade (g/t) |
2.13 |
2.25 |
(5%) |
Silver equivalent grade (g/t) |
364 |
374 |
(3%) |
Average silver recovery |
89.5% |
87.7% |
2% |
Average gold recovery |
78.7% |
76.3% |
2% |
LOM payable Ag ounces produced (millions) |
39.9 |
39.3 |
0% |
LOM payable Au ounces produced (thousands) |
384 |
393 |
(2%) |
LOM payable Ag Eq ounces produced (millions) |
69.7 |
70.3 |
(1%) |
Avg annual payable Ag ounces produced (millions) |
4.0 |
3.3 |
20% |
Avg annual payable Au ounces produced (thousands) |
38 |
33 |
17% |
Avg annual payable Ag Eq ounces produced (millions) |
7.0 |
5.9 |
18% |
Capital Expenditure Statistics |
|
Initial Capital Expenditure (millions) |
230.4 |
175.0 |
32% |
Process Capacity (tonnes per day) |
1,990 |
1,700 |
17% |
LOM Sustaining Capital |
88.3 |
105.6 |
(16%) |
Total LOM Project Capital |
318.7 |
280.6 |
14% |
Operating Cost Metrics |
|
LOM Gross Revenue (millions) |
1,403.2 |
1,406.2 |
(0%) |
LOM Gross COS (millions) |
596.4 |
642.5 |
(7%) |
LOM EBITDA (millions) |
806.9 |
756.6 |
7% |
After Tax LOM Free Cash Flow (millions) |
316.9 |
311.4 |
2% |
Cash costs by Product (per silver ounce) |
(0.20) |
0.59 |
(134%) |
All in sustaining (per silver ounce) |
2.15 |
3.24 |
(34%) |
Cash costs by Silver Equivalent (per silver ounce) |
8.50 |
9.14 |
(7%) |
All in sustaining Silver equivalents (per silver ounce) |
9.84 |
10.62 |
(7%) |
Total Direct Production Costs (per Tonne) |
80.43 |
87.06 |
(8%) |
Mining Costs (per tonne) |
29.26 |
30.96 |
(7%) |
Processing Costs (per tonne) |
23.38 |
25.47 |
(8%) |
General and Administrative (per tonne) |
9.32 |
10.90 |
(14%) |
Treatment & Refining Charges (per tonne) |
14.36 |
15.26 |
(6%) |
Royalty Costs (per tonne) |
4.47 |
4.46 |
(0%) |
Community Activities
The Company’s Terronera community relations team
maintains an active community relations program, social engagement
programs and environmental management program. A recruitment
campaign has been initiated to hire local workers from communities
in the direct area of influence within the region and a training
program for locals is in development to prioritize the hiring of
locals. Additionally, the team has held, and continues to hold,
multi-stakeholder meetings with different levels of government.
Local municipal and ejido authorities are very
supportive of the Terronera Project, which they view as a welcome
source of employment for hundreds of people from the surrounding
communities. They recognize that the Company will bring skilled
employment to this region and create opportunities for local
sub-contractors, suppliers and other service providers.
In addition, to ensure responsible development
of the Terronera Project, the Company is adhering to the Equator
Principles (“EP4”), a risk management
framework that helps ensure that large scale development or
construction projects appropriately consider potential impacts on
society and the environment. As part of the process, we have been
working on the management plans for procurement, community
relations, environment, risk control, and health and safety for the
various stages of construction. We will complete the environmental
and social impact assessment in early 2024, which will identify
impacts on the different stages of the Project. For more details on
how the Company is applying EP4, you can learn more on the Company
blog here.
Technical Disclosure
The scientific and technical information
contained in this news release has been reviewed and approved by
Dale Mah, P.Geo., Vice President Corporate Development, and Don
Gray, SME-RM., Chief Operating Officer, both Qualified Persons as
defined under NI 43-101.
About Endeavour Silver –
Endeavour Silver Corp. is a mid-tier precious metals mining company
that operates two high-grade underground silver-gold mines in
Mexico. Endeavour is advancing construction of the Terronera
Project and exploring its portfolio of exploration projects in
Mexico, Chile and the United States to facilitate its goal to
become a premier senior silver producer. Our philosophy of
corporate social integrity creates value for all stakeholders.
About Artemis Capital Advisors
– Artemis Capital Advisors, based in New York City, is a financial
advisory firm providing tailored corporate and project finance
advice to companies in the metals and mining sectors. The Artemis
team has over 50 years of collective experience in mining
investment banking and proven expertise in commodity markets,
having executed transactions with a combined value of over $4
billion to date. To learn more visit www.artemis.llc
About Societe
Generale – Societe Generale has a longstanding and
well-established track record in providing financial advisory
services and arranging capabilities in relation to project
financing, in multiple sectors across the world, including the
Metals and Mining Industries. Societe Generale supports the entire
value chain from mining extraction to metals transformation to
downstream industries focused on decarbonization, sustainability
and full life cycle solutions.
About ING – ING serves
corporate clients and financial institutions in over 40 countries,
pairing local and global insight with sector knowledge and
financial expertise. As part of the Commodities, Food &
Agriculture sector group, through the Metals, Mining &
Fertilizers subsector, ING services clients who operate mines,
smelters, and refining facilities and produce tradable and
relatively liquid commodities. Through in-depth industry knowledge
ING seeks to add value to its clients through corporate and
structured financing solutions, as well as solutions related to
working capital management, trade finance, financial markets,
capital markets, and advisory services.
SOURCE Endeavour Silver Corp. Contact
InformationGalina Meleger, VP, Investor RelationsEmail:
gmeleger@edrsilver.comWebsite: 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 the development
and financing of the Terronera Project, including anticipated terms
and timing of the Debt Facility, estimated Project economics,
Terronera’s forecasted operations, costs and expenditures, and the
timing and results of various activities. 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 but are not limited to the
completion of Societe Generale’s and ING’s due diligence
requirements; the final terms of the Debt Facility and the
Company’s ability to successfully drawdown under the Debt Facility;
the ongoing effects of inflation and supply chain issues on Project
economics; 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 of the Company to successfully secure a
debt facility, the continued operation of the Company’s mining
operations, no material adverse change in the market price of
commodities, the Project’s forecasted economics as of 2023, mining
operations will operate and the mining products will be completed
in accordance with management’s expectations and achieve their
stated production outcomes, 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.
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