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Endeavour Silver enjoyed a modest share price boost Tuesday following the release of a preliminary economic assessment for its Terronera project. It ended the day up $2.58, or 3.61 percent, on the TSX and up $2.16, or 4.85 percent, on the NYSE.
Map and flag of Mexico. Source: Wikimedia Commons.
Endeavour Silver (TSX:EDR,NYSE:EXK) enjoyed a modest share price boost Tuesday following the release of a preliminary economic assessment (PEA) for its Terronera project, formerly known as San Sebastian. It ended the day up $2.58, or 3.61 percent, on the TSX and up $2.16, or 4.85 percent, on the NYSE.
The PEA is based on an October 2014 resource estimate that points to an indicated 2.94 million tonnes containing 19.9 million ounces of silver and 156,000 ounces of gold, with that material grading 211 g/t silver and 1.65 g/t gold. The inferred category consists of 1.21 million tonnes containing 8.5 million ounces of silver and 54,000 ounces of gold grading 218 g/t silver and 1.39 g/t gold.
Looking at numbers from the PEA, it calls for pre-production capex of $65.4 million and a construction period of 12 months. Once in production, Terronera should generate operating revenue of $542 million from the sale of an estimated 20.4 million ounces of silver and 138,500 ounces of gold. Endeavour will require a silver price of $18 per ounce and a gold price of $1,260 per ounce to hit that number — both metals are currently not trading at quite those levels.
Total opex should come in at $287 million, with mine-site cash operating costs estimated at $3.93 per ounce of silver, net of gold credits; that’s based on total opex of $83 per tonne. Meanwhile, total sustaining capital is pegged at $75 million. Finally, the PEA points to an after-tax, base-case net present value of $48.6 million at a 5-percent discount and a base-case internal rate of return of 20 percent, also after tax. Terronera is estimated to have an after-tax, base-case payback period of 3.7 years.
Commenting positively on the news, Bradford Cooke, CEO of Endeavour, said in Tuesday’s release, “[w]e are pleased with the results of this preliminary economic assessment of the Terronera project. The study supports our expectations that Terronera can be a profitable silver-gold mine with ample potential for growth of the resources, expansion of the operations and improvement of the economics. Our Pre-Feasibility Study is advancing as planned, infill drilling of the Inferred resource is now underway and step-out drilling is scheduled in the second half of this year.”
It’s clear from Cooke’s comments that there’s a lot of work planned for Terronera. That’s significant given that it’s by no means Endeavour’s best-known project. In fact, the company has three producing mines — Guanacevi, Bolanitos and El Cubo, all of which are in Mexico — in addition to several other exploration properties. Given all of those initiatives and the fact that many companies have cut exploration spending due to low metals prices, it’s fairly significant that Endeavour continues to expand.
Whether that success continues of course remains to be seen, but at least for now Endeavour’s momentum seems strong. The company recently announced a “major expansion” for El Cubo, and in terms of Terronera has been moving forward at a good clip — it started exploration drilling there in 2011, and quickly moved to establish an initial resource, complete infill drilling and receive government approval for its environmental impact assessment.
Year-to-date Endeavour is up 1.57 percent on the TSX, while its share price is flat on the NYSE.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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Endeavour Silver’s El Cubo Expansion to Bring ‘Across-the-Board’ Improvements