The silver price has been rising from $15/ounce to $17/ounce in 2019 while the gold price has risen from $1300/ounce to $1500/ounce. This turnaround should be reflected in the financials of the precious metals miners.
Endeavour Silver (EXK) should also benefit from this rise in the price of gold and silver, but the company has been missing estimates on production on 2 of the 4 mines. The outlook isn't particularly rosy when you look at the total production numbers. Total production in Q3 2019 was 5% lower than in Q2 2019. The main problem is attributed to lower plant throughput. However, the gold price has risen 20% and the silver price has risen 15% quarter over quarter. So I expect that the financial results in Q3 2019 will be better than Q2 2019 (earnings neutral).
The following chart provides the current production results at the 4 producing mines: Guanacevi, Bolanitos, El Cubo and El Compas.
Guanacevi is on track to become profitable again in Q4 2019 as the new orebodies Milache and SCS are coming into production. Development at Milache is on budget while development at SCS is having some delays in development. The company also acquired an extension at Porvenir Cuatro and is now already drilling and starting to mine there. Grades will be increasing into Q4 2019, so I expect that this mine will grow its production going forward transferring from a non-profitable mine to a profitable one as plant capacity reaches 1200 tonnes a day again (currently 853 tonnes per day).
Bolanitos has a lot of problems as can be seen from the production chart. Its AISC has risen from $10/ounce last year to $19/ounce this year. Production was well below plan in Q2 and Q3 2019 due to lower tonnes and grades, high arsenic in concentrates, equipment availability issues and lack of stope access. The plant should be working at 1200 tonnes a day and it isn't working at full capacity right now (currently 778 tonnes per day). They have now brought back their operations manager from El Compas to Bolanitos and I expect grades and tonnage to go back up. The long term production trend seems to be down. The company will need to find new orebodies here to bring production back on track. This is exactly what they are doing now at Plateros and San Miguel. Drilling at these new discoveries is ongoing and will extend the mine life at Bolanitos. Let's hope they deliver on this plan.
El Cubo's production has dropped more than half from a high of 1.2 million ounces per quarter to a low of 400000 ounces per quarter. This was a planned decrease in production in order to find more reserves. The mine is profitable at an AISC of $11.48/ounce, but grades will continue to go down and the company didn't report significant new reserves from drilling.
El Compas has now been fully built and is running smoothly at half plant capacity. There is more room to increase production if they find more reserves.
As for the Terronera project, there is some good news here as the project has been fully permitted. Endeavour Silver is planning to raise $100 million for the Terronera project. With $20 million in cash, the company will need to raise $60-$80 million in debt to break ground through a bond offering. An equity offering is only second to this, so I don't expect a lot of dilution to shareholders. The final feasibility study will be delivered end this year and construction should start next year with production to start after 18 months of construction. This will double the current production and increase the profit margins of the company.
Drilling at Parral has delivered some great results. A PEA is expected at year end which will outline a two stage project. The first stage is a small scale, high grade toll mine averaging around 200-250 tonnes per day to generate cash flow while evaluating the possibility of a second stage, larger scale, 1,000-2,000 tpd high grade mine that could become a new core asset.
Last but not least, the company is planning to drill several exploration projects in Mexico and Chile in Q4 2019.
Endeavour Silver (EXK) should also benefit from this rise in the price of gold and silver, but the company has been missing estimates on production on 2 of the 4 mines. The outlook isn't particularly rosy when you look at the total production numbers. Total production in Q3 2019 was 5% lower than in Q2 2019. The main problem is attributed to lower plant throughput. However, the gold price has risen 20% and the silver price has risen 15% quarter over quarter. So I expect that the financial results in Q3 2019 will be better than Q2 2019 (earnings neutral).
The following chart provides the current production results at the 4 producing mines: Guanacevi, Bolanitos, El Cubo and El Compas.
Guanacevi is on track to become profitable again in Q4 2019 as the new orebodies Milache and SCS are coming into production. Development at Milache is on budget while development at SCS is having some delays in development. The company also acquired an extension at Porvenir Cuatro and is now already drilling and starting to mine there. Grades will be increasing into Q4 2019, so I expect that this mine will grow its production going forward transferring from a non-profitable mine to a profitable one as plant capacity reaches 1200 tonnes a day again (currently 853 tonnes per day).
Bolanitos has a lot of problems as can be seen from the production chart. Its AISC has risen from $10/ounce last year to $19/ounce this year. Production was well below plan in Q2 and Q3 2019 due to lower tonnes and grades, high arsenic in concentrates, equipment availability issues and lack of stope access. The plant should be working at 1200 tonnes a day and it isn't working at full capacity right now (currently 778 tonnes per day). They have now brought back their operations manager from El Compas to Bolanitos and I expect grades and tonnage to go back up. The long term production trend seems to be down. The company will need to find new orebodies here to bring production back on track. This is exactly what they are doing now at Plateros and San Miguel. Drilling at these new discoveries is ongoing and will extend the mine life at Bolanitos. Let's hope they deliver on this plan.
El Cubo's production has dropped more than half from a high of 1.2 million ounces per quarter to a low of 400000 ounces per quarter. This was a planned decrease in production in order to find more reserves. The mine is profitable at an AISC of $11.48/ounce, but grades will continue to go down and the company didn't report significant new reserves from drilling.
El Compas has now been fully built and is running smoothly at half plant capacity. There is more room to increase production if they find more reserves.
As for the Terronera project, there is some good news here as the project has been fully permitted. Endeavour Silver is planning to raise $100 million for the Terronera project. With $20 million in cash, the company will need to raise $60-$80 million in debt to break ground through a bond offering. An equity offering is only second to this, so I don't expect a lot of dilution to shareholders. The final feasibility study will be delivered end this year and construction should start next year with production to start after 18 months of construction. This will double the current production and increase the profit margins of the company.
Drilling at Parral has delivered some great results. A PEA is expected at year end which will outline a two stage project. The first stage is a small scale, high grade toll mine averaging around 200-250 tonnes per day to generate cash flow while evaluating the possibility of a second stage, larger scale, 1,000-2,000 tpd high grade mine that could become a new core asset.
Last but not least, the company is planning to drill several exploration projects in Mexico and Chile in Q4 2019.
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