Mexico mine expansion to lower Endeavour's costs
Endeavour Silver plans to boost production and lower costs through an expansion of its troubled El Cubo mine.
The Vancouver-based company will lift throughput at the Guanajuato state operation to 2,200t/d from the current 1,550t/d over the coming four months in a bid to generate free cash flow, the company said in a statement.
High costs at El Cubo have weighed on Endeavour's results in recent quarters, with all-in sustaining costs (AISCs) of US$35.04/oz silver in Q4, more than double the current spot price.
The company announced last year it was considering three possible options for the mine, with cutting production by half or care and maintenance being the alternatives to a high-grade expansion.
EXPANSION PLANS
The additional 650t/d ore for the expansion will come mainly from the V-Asunción and Santa Cecilia zones, with the former having thicker mineralized zones amenable to long-hole mining and the latter narrower but higher-grade veins.
The ore will be processed at the Bolañitos plant 18km from El Cubo, which has available capacity and comparable circuits to El Cubo.
The expansion will make El Cubo Endeavour's biggest producer, raising 2015 silver output to 2.1-2.4Moz from previous guidance of 1.5-1.7Moz, and gold production to 32,000-35,000oz from 19,000-21,000oz, with silver equivalent output at 4.3-4.8Moz, up from 2.8-3.2Moz. Production at the Bolañitos mine will dip slightly to 2.7-3.1Moz silver equivalent.
Endeavour will spend US$18.7mn at El Cubo in 2015, US$3.8mn more than originally budgeted, to fund the expansion.
LOWER COSTS, HIGHER OUTPUT
As a result of the El Cubo expansion, Endeavour's total silver output will increase 11% to 6.3-7.0Moz and gold by 27% to 60,000-66,000oz, with AISCs at US$16-17.50/oz silver, net of by-product gold credits, down from US$18-19/oz previously guided.
"The current mine expansion will bring operating costs down further and should allow El Cubo to start generating free cash flow," CEO Bradford Cooke said.
The company continues to focus on improved financial performance at its three Mexico operations, with a new power line expected to lower costs at Bolañitos from 2015.
ANALYSIS
Endeavour will hope the expansion draws a line under problems at El Cubo, with high costs at the operation impacting the company's bottom line as silver and gold prices dropped.
But further efficiency gains or price improvements will be needed to push Endeavour back into the black, with forecast 2015 AISCs of US$16-17.50/oz substantially above the Tuesday's London spot price of US$15.56/oz.
The company reduced its adjusted loss to US$11mn in Q4 from US$12.1mn in the same quarter of 2013, with the figures excluding non-cash items.
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