Endeavour Silver’s 24% Output Drop Drives $17.3M Loss, Cost Pressures Mount
Endeavour Silver Corp. (TSX: EDR) reported mixed financial and operational performance for Q3 2024, shaped by production shortfalls, rising costs, and a complex balance sheet. The firm’s revenue for Q3 2024 reached $53.4 million, marking an 8% increase over the $49.5 million reported in the same quarter last year. However, this growth was largely attributable to favorable realized prices for silver and gold, rather than any increase in sales volume.
Silver ounces sold fell sharply by 26% to 1,017,392 ounces from 1,370,032 ounces in Q3 2023, primarily because of the production setback at Guanaceví mine due to a trunnion failure. Similarly, the silver equivalent production dropped by 14% year-over-year to 1.6 million ounces, down from 1.88 million ounces in Q3 2023.
Gold volumes were up by 7%, reaching 9,412 ounces sold, compared to 8,760 ounces in the previous year’s quarter, yet gold sales alone could not bridge the gap left by diminished silver production.
The company’s average realized silver price per ounce surged 24% from $23.99 to $29.63, while the average realized gold price rose 30% from $1,948 to $2,528 per ounce. This price advantage played a critical role in offsetting the revenue impact of lower silver volumes. However, these gains masked the underlying issue of reduced production and raised questions about Endeavour’s ability to stabilize its output levels in the near term.
Mine operating cash flow, excluding taxes, rose substantially by 85% to $19.6 million, compared to $10.6 million in Q3 2023. Direct operating costs per tonne increased by 2% year-over-year to $138.54, reflecting the impact of reduced processing volumes at Guanaceví, as well as inflationary pressures on inputs. Cash costs per silver ounce fell sharply to $11.35 from $17.94, reflecting a 37% decrease, largely due to a 39% rise in by-product gold sales, which helped cover part of the overhead.
The company reported a net loss of $17.3 million for the quarter, a significant decline from the $2.3 million net loss in Q3 2023. This widening loss was exacerbated by a $19.4 million loss on derivative contracts and currency effects tied to the weakening Mexican peso.
Adjusted net earnings showed a modest improvement, reaching $1.6 million in Q3 2024 compared to a loss of $8.3 million in the same quarter last year.
The all-in sustaining cost per silver ounce declined to $25.51, a 14% improvement over the $29.64 reported in Q3 2023. This was achieved mainly by reducing sustaining capital expenditures and focusing on cost controls, yet the sustainability of these reductions remains uncertain given the operational challenges that the company continues to face. Additionally, total production costs per silver ounce decreased by 23% from $24.10 to $18.65.
While these improvements reflect Endeavour’s efforts to mitigate cost inflation, they appear more temporary than structural, particularly since the company had to withdraw its annual cost guidance in August due to the unpredictable output and cost dynamics tied to Guanaceví’s reduced capacity.
Endeavour’s balance sheet showed mixed results, with cash on hand improving to $54.9 million, up from $35.3 million as of December 2023. This improvement was partly due to strategic drawdowns from the company’s senior secured debt facility to finance the Terronera project. However, working capital plummeted by 61%, from $75.9 million last year to $29.4 million at the end of Q3 2024, reflecting an increased debt burden and cash flow pressures from ongoing capital expenditures.
The Terronera project, which reached 77% completion with $258 million already spent, remains a central focus. The final $35 million drawdown from the debt facility completed post-Q3 demonstrates Endeavour’s commitment to the project, yet it also intensifies financial risks if production at Guanaceví and the project commissioning at Terronera fail to meet timelines or budget projections.
Endeavour Silver last traded at $6.59 on the TSX.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
