Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. Third Quarter 2023 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Galina Meleger, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and the financial statements are available on our website at edrsilver.com. With us on today’s call is Dan Dickson, Endeavour Silver’s CEO; Christine West, our Chief Financial Officer; and Don Gray, Endeavour’s COO. Following Dan’s formal remarks, we will open the call for questions. And now over to Dan.

Thank you, Galina, and welcome, everyone. I’d like to begin by saying that we navigated through a difficult third quarter. Not only were we hit with challenging market conditions that caused a sharp decline in the Silver Miners Index by nearly 20%, our cornerstone mine, Guanaceví had a difficult operating quarter. The impact of lower throughput, significantly lower grades, non-routine expenses related to repairs and maintenance and an increased operating development resulted in escalated costs on a per unit basis in Q3. Costs were further amplified by macro factors such as the ongoing industry-wide inflation pressures and a strong Mexican peso. While the headline for this quarter is our elevated costs, we’ve taken corrective measures to get Guanaceví back on track and not have issues affecting productivity persist. Of course, nobody likes to experience a lackluster quarter, but it’s an opportunity to learn and improve, such was the case for us as our new VP of Operations is taking steps to sustainably improve Guanaceví’s operating performance. I’m pleased to tell you that we’re seeing a significant improvement in mine productivity this quarter. Of course, during the past quarter, we continued to advance in the Terronera project. Terronera provides a clear path to margin expansion, repositioning the company to attain significant free cash flow once the mine is in production. Let’s discuss this year’s -- or this quarter’s production in more detail. Consolidated Q3 silver equivalent production was down 14% year-over-year to 1.9 million silver equivalent ounces, bringing us to 6.5 million silver equivalent ounces year-to-date. While this quarter’s results still put us on track to be within this year’s production guidance range, there’s a little room for setback in Q4. Guanaceví’s production shortfall is due to a number of factors. If you recall, we discussed initiating changes to our mine…

[Operator Instructions] The first question comes from Heiko Ihle with H.C. Wainwright.

It’s nice to see an 8-figure mine operating cash flow before taxes figure, even though this was obviously a challenging quarter. Building on all of that, you had a productive shortfall obviously due to mine sequencing changes required to focus on improved access and ventilation. Some of the maintenance there was completed in September, it’s now November, as per your release. So building all of that, which if any of the effects from the mine sequencing changes should we anticipate to last through the remainder of the year or maybe even into 2024? Phrasing it differently, I guess, more simple. Has your expectation for Q4 changed from what was two months ago and all the meaningful impacts that we should model out?

Sorry, Heiko. It’s good to hear from you. Just your question that muffled there a little bit at the end. I’m not sure I heard it properly.

The question ultimately is, building on the changes at Guanaceví, should we anticipate them to last through the remainder of the year or most of the impacts from them gone? And then, I phrase it a little differently. Has your expectation for Q4 for the site changed from where it was about two months ago?

Yes. It’s a very fair question, and it’s nice to hear from you, Heiko. Ultimately, our -- the designs of the change that we put through is to improve ventilation and improve our -- the management of our water. We’re getting more inflow down the El Curso concession than necessarily was expected about a year ago. And we’re making those changes. And ultimately, our throughput and our mine output have increased here in Q4. We expect that most of the work that we did in Q2 and Q3 would be lasting. So not only do we expect Q4’s production throughput -- production output from the mine and ultimately, throughput through the plant to meet plan, which is effectively around 1,200 tons per day, those changes should help benefit us for 2024 and beyond. And I say some of these things are preventable, the fact that we could have managed it better last year, made sure that we were advanced on our ventilation program and our water inflow program. It’s something we didn’t do. We can do better on it. It’s just that all this came kind of all at once, and ultimately impacted our production here in Q3. And with that impact on production in Q3 really showed in our financial results and, ultimately, our cost metrics at Guanaceví. I wouldn’t say it’s completely behind us. We’re still working on ventilation and water management. We expect that to be done here in Q4. But ultimately, our output is up. So, with our output up, we’ll at least meet our production plans.

I think that’s a very fair answer and reassuring as well. Completely different thing. You’re hosting a visit for Terronera in two weeks, and we’re obviously excited to attend. Construction progress at the site is 38% complete as per your release today of the site. Just going through the last release you had on the site, it stated that procurement efforts are on schedule with most long-lead major equipment anticipated be received by year’s end. And it was 1.5 weeks ago. What exactly is still missing and where exactly is it? Is it a custom and a shift? Is it the suppliers? Anything that’s concerning you or maybe should concern us? I assume the answer is no, but I just wanted to make sure.

No, there’s always things that concern us. I mean, the big thing that comes to mind right now is some delays in [indiscernible]. Those weren’t expected. I wouldn’t necessarily call them critical items, but they’re important items because every piece of equipment and parts matter to get the plant up and going. As I say, all our key components for the mine and key components to the plant were ultimately ordered quite early on, and most of that’s being delivered this year. There’s smaller equipment now that we’re going through. Right now, we’re going through ATCs on steel. That’s going to be kind of delivered out to suppliers and that expectation is going to come. But over the next year until we get into production or start up the plant, there’ll be always little things and our job is to manage that. And there’s always unforeseen items that we have to manage. And right now, it’s been fine. So, there’s been nothing critical, but something will come up and it will be our job to manage that.

The next question comes from Lucas Pipes with B. Riley Securities.

My first question is a follow-up on Guanaceví. And as you look out to 2024, what do you think could these measures you’ve taken mean when it comes to production and the cost profile? Thank you very much.

Yes. For us, for 2024, we’ll put out guidance in January, but Guanaceví, we’ve been there 18 years. The plant capacity is 1,200 tons per day. I mean now it’s pretty easy to make the assumptions that we’ll be able to do 1,200 tons per day for 2024. Ultimately, the measures we’ve taken in Q3 ensures that we can have a 1,200 ton per day operation. If we can maintain our production profile, it will allow us to meet guidance from a cost standpoint and our all-in sustaining cost is expected to be between $19 and $20 this year. That’s probably going to be a little bit higher next year because of the inflation factors, but we’ll come out with that guidance in January.

I appreciate those comments. Thank you very much. And then a question on Terronera. In terms of kind of your minimum cash and liquidity targets, while you do the development there, anything specific we should keep in mind as we model kind of cash flow over the coming quarters? Would appreciate your perspective. Thanks.

Yes. I think it’s important that we maintain a certain level of liquidity. Right now, we’re sitting on $76 million of working capital, and that’s what we look to when we’re looking at our liquidity, especially during this development cycle that we’re in with Terronera. I think it’s important to know that we do have to spend our cash first before we can draw down on our debt facility. And we expect to draw down our cash not to zero, but to a certain level, probably $20 million, $25 million before we draw down on that facility. And once we start drawing down that facility, hopefully, our cash builds with performance at Guanaceví and Bolañitos, and we’ll see that in 2024.

The next question comes from Trevor Ward, private investor.

Good morning. I’m calling from Hawaii. I’m a relatively new in terms of purchasing common stocks and I bought a substantial and -- a substantial position in Endeavour. So, I’m currently holding 40,000 shares at an average cost of $3.10. What I’m curious about is all this jargon and the numbers, for me, the bottom line is, in terms of, let’s say, over the next year and then looking forward, when do I expect to actually see Endeavour actually turn a profit and show a dividend?

Well, Trevor, you are lucky that you’re sitting in Hawaii right now. We’re here in Vancouver. So I do wish I was where you were. For Endeavour Silver, where we are right now from a growth profile standpoint is we’re investing in our Terronera project. And Terronera is going to take it from 9 million ounces of silver equivalent to 16 million ounces of silver equivalent production per year. Having that scale should improve our earnings. And we’ve had positive earnings over the years. This quarter in itself, of course, we lost $0.01. Obviously, we don’t want to be in that position. We want to be making money, no matter what price of silver is or what price of gold is. And I think Terronera is going to do that for us. As far as dividend, because of Terronera, that’s going to be in the future. I wouldn’t say in the near future because we also have the Pitarrilla project coming in behind that. Our goal is to advance Pitarrilla. Pitarrilla would be a significant scale project that we still have a lot of work to do on, but we are feeling confident with it. But again, any capital and cash flow that comes from Terronera, we’re probably going to reinvest in the Company. So unfortunately, if you’re looking for a dividend from Endeavor Silver, it’s probably not going to come in the near future. But what can happen in the silver price and ultimately, if you’re investing in Endeavour Silver, you’re investing in silver, that could change, and I hope it does. But like I say, currently, right now, with where we’re at with $23 silver, I don’t see a dividend in the near future until we’re fully invested with and exploit what we have with Pitarrilla, Parral our other exploration programs.

Right. So just a couple of more quick questions. It’s a little while ago, I saw -- watched a interview with yourselves and your projection, and your assumption at that time was that by the end of 2023, silver would hit $30 an ounce. Just quickly what projects to that? And also in terms of maybe a quick brief explanation of how the international silver market works. And then, the last question before I say goodbye is, what is your current position? And can you tell me since you’ve been in this position, what is your current holding of stock? And when was the last time you bought or sold the stock?

Sure. And there’s a lot of questions there, the overall market and my personal position. My personal position, I believe I hold about 400,000, 450,000 shares of Endeavour. My holding price would probably be between $4 and $5 and my carrying price would be. The last time I bought stock would have been last year about May or March of 2022. But that’s probably enough about me. With regards to me saying that silver price would have been $30, I couldn’t tell you when -- which YouTube or which interview you listened to, but I have said on in the past and ultimately, that would be based on where the gold price is. And if you look at the history of gold and silver ratio, the last 35 years has averaged about 35:1. Right now, gold is sitting just below $2,000, maybe at that time was $2,100. So to get to a ratio -- right now, I think we’re sitting 86:1, to get to a ratio similar to what we’ve seen historically, that would push silver up into the high-20s and ultimately $30. We hit $29 silver, a couple of years ago now, and we’ve really come off of that. And I mean it’s been very uncertain times. And with rising interest rates, silver price has not performed. But funny enough, gold has held on considerably well. I think that’s a positive thing for the silver price. I think if gold pushes up through $2,000 and $2,100, silver always eventually follows. It’s just the lag time and the lag period and sometimes that lag period is six months, sometimes that lag period is for one year. So with me forecasting or projecting that silver was going to be $30, I don’t think I’ve never -- not said that, I likely did maybe based on where gold price is. And then ultimately, how the silver market works in the world, that’s a huge question. I mean it’s a large market. There’s over 800 million ounces that are produced and sold. It’s sold through different exchanges in the United States, China, across everywhere. So, I don’t think I’ll get into that right now, Trevor. But happy to answer those questions through our info line. Give our IR a call, and we’ll take you through that another time. But I’ll move now to next question, operator.

The next question comes from Craig Hutchison with TD Securities. Please go ahead.

I was wondering if you guys can give us an update with respect to Pitarrilla, what some of the milestones are. I know you had some issues around ground control. But any kind of milestones in terms of the exploration work there and potential for an updated PEA?

Yes. No, that’s a great question, Craig. Thank you. Ultimately, we wished we were drilling at Pitarrilla this quarter. As you touched on, we had some ground issues, the fault that we’re getting through, we support it. But ultimately, there continue to be rock falls in the old pattern that was there. So we are doing a parallel add, and we’ve taken that drill program and ultimately put it into an added advance this year. So we will not be drilling Pitarrilla until January possibly February of next year. Still allows us to do that PEA or start doing economic studies on Pitarrilla next year. But we want to make sure we get that out complete, get the drilling done on what we think is some feeder zones and then ultimately look at this project as potentially a next development project after Terronera. And that would be, like I said, starting to make those economic studies, hopefully midyear to end of next year.

Okay. And just one other question for me. Just with regards to the debt funding, there’s a stipulation that you’ll need a cost overrun funding in the form of cash or letter of credit up to $48 million. How should we think about that? Is that a requirement? Would that effect become like restricted cash requirement you have to hold for a certain period, or how do we just understand that $48 million requirement?

Yes. It’s a very good question, fair question. It’s actually broken into two tranches. So the first $60 million of $120 million is available to us with costs overrun funding of $24 million. Ultimately, it wouldn’t be restricted. However, it’s almost treated like restricted cash. And then, of course, when the next $60 million funding comes of $120 million, another $24 million required. Now we’ll look at where we are from a project construction standpoint and whether the full $48 million of overrun funding is required, and we’ll do that with the independent engineers. So, we’ll come to that sometime, I guess, midyear in 2024. But your question, is that restricted? Possibly yes.

Okay. And maybe just maybe as a follow-up, I guess, would it be fair to say you have more to do on the ATM facility this quarter just to kind of get your cash position up ahead of that drawdown?

Yes, it’s very possible if the market allows it. Obviously, we want us to be performing as expected, and that impacts our balance sheet. Now I think our balance sheet is in great shape. We have over $41 million of cash at the end of the quarter with $76 million in working capital. There are some levers on our long term. We had -- about $18 million related to Terronera that hopefully we can get to current in relatively short order. So, that gives us more funding that’s available, almost $96 million of working capital if we include that. So I think we’re in really good shape, but it’s something that we have to be mindful of while we’re in development and with these markets, so, we will be, and I think we’re doing a good job managing that.

This concludes the question-and-answer session. I would like to turn the conference back over to Dan Dickson for any closing remarks.

Thanks, operator, and thank you, everyone joining our Q3 call. Again, I think it’s important to note that management is working to resolve some of these cost issues that we have at Guanaceví. I think that’s going to be done through getting our output up to where we expect it to be and on plan. Thank you, everyone. I look forward to having our Q4 call and financial release for 2023 and talk to everybody again in March 2024. Thank you.

This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.