Endeavour Silver cuts guidance on Mexico mine setbacks

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Thursday, August 3, 2017

Endeavour Silver lowered production guidance for 2017 following a string of setbacks at its Guanaceví mine in Mexico.

The Durango state silver-gold operation was hit by power outages in Q1 which caused pump failures and underground flooding, Endeavour CEO Bradford Cooke (pictured) told the company's earnings call.

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A lightning strike in July caused a repeat of electrical issues as repairs following a previous outage neared completion, resulting in another pump failure and flooding in deeper levels, he said.

In addition, mine development was slowed due to narrower vein widths than those in the resource model, contributing to lower production.

"Different issues keep coming up and we keep fixing them," Cooke told the call. "There are no guarantees we won't get hit by lightning again but we are optimistic that operations are going to start regularizing."

Repairs to the electrical and ventilation systems are under way, along with installation of a new pump station which should help smooth production in H2, Cooke said.

The mine produced 468,741oz silver and 1,079oz gold in Q2, down 26% and 21%, respectively, compared to the same quarter last year, with all-in sustaining costs (AISCs) rising 36% to US$27.40/oz silver.

GUIDANCE

Vancouver-based Endeavour reduced 2017 production guidance to 4.8-5.2Moz silver and 49,100-51,200oz gold from 5.2-5.7Moz and 50-53,000oz, respectively, as a result of lower output at Guanaceví, with AISCs rising to US$15.25-16.25/oz from US$14-15/oz previously.

LONGER-TERM

Endeavour is currently developing two new orebodies at the mine which are due to begin production in mid-2018.

"Guanaceví will look like a very different mine in a year than it does today, both from a production and cost profile," Cooke added. "There's a very healthy future for the mine."

RESULTS

Companywide production was 1.14Moz silver and 13,058oz gold in Q2, down 26% and 17%, respectively, from the same period last year.

Endeavour's three mines are located in Mexico, along with its Terronera and El Compás projects.

The company recorded a US$16,000 net loss compared to net earnings of US$1.7mn, with revenue down 27% to US$32.7mn. AISCs increased 94% to US$20.46/oz silver.