On Thursday, the market reacted coldly to guidance for production and costs for Endeavour Silver Corp (EXK, Financial). As a result, the stock went unexplainably down 2% and closed at $2.49 per share on the New York Stock Exchange.
Endeavour Silver Corp. has some catalysts in store for 2018 but evidently the market needs more time to process them. I expect an upside in the market value of this miner over the next days of trading.
The company expects increases in the production of silver and gold. The yellow metal is anticipated at a volume of 58,000 to 64,000 ounces, which represents a growth of 9.4% to 21% from 2017. The production of silver will range between 5.8 million and 6.4 million ounces. This is a 39% to 53.4% growth from last year.
According to the company, 2018 production will be boosted by more silver and gold production than the company will make at all three of its existing mines. Also, the additional contribution from El Compas mine, where commercial production is expected to occur in late July, will support production in 2018.
The production levels for 2018 will lead to a volume of 10.2 million to 11.2 million ounces of silver equivalent. The silver equivalent has been calculated based on a silver to gold ratio of 75:1.
The chart below illustrates the trend in the company’s production of silver equivalent from 2013 to 2018 (estimated average output):
The table below shows the silver to gold ratio from 2013 to 2018.
| YEAR | 2013 | 2014 | 2015 | 2016 | 2017 | 2018E |
| Silver: Gold Ratio | 60:1 | 70:1 | 70:1 | 75:1 | 75:1 | 75:1 |
The company predicts costs for 2018 will decline. Endeavour Silver foresees an increase in the amount of funds that will be used to develop mineral projects at El Compas and at Guanacevi. On the contrary, the funds used for exploration activities will certainly be lower.
Besides the improvement in production and costs, other catalysts to watch in 2018 are contained in comments from Bradford Cooke, company's chief executive officer.:
“Over the next few months, we anticipate a number of potential material developments to catalyze our future growth, including:
Update of the El Compas project construction and optimized mine plan and economics
Completion of construction and commissioning of production at El Compas
Release of an optimized pre-feasibility study for Terronera
Receipt of the final government environmental permits for Terronera
Continued exploration results from Parral and other projects
Additional acquisitions to expand our development project pipeline”
Source: Endeavour Silver Corp’s News Release
Bradford Cooke anticipates a rewarding 2018 for the shareholders of Endeavour Silver as the miner is fully committed to a strategy of organic growth.
The average analyst forecasts a price target of $4.53 per share. This means that Endeavour Silver Corp. is expected to appreciate approximately 82% on the NYSE within the next 12 months of trading. Endeavour Silver Corp. has a recommendation rating of 2.4 out of 5.
For the 52 weeks through Jan. 25, Endeavour Silver Corp. lost 36.5% and underperformed the VanEck Vectors Gold Miners ETF (GDX, Financial) by 42%.
Source: Yahoo Finance
The share price is below the midst of the 52-week range of $1.94 to $4.90 per share.
The chart powered by GuruFocus shows that the stock is trading below the 200-SMA line, but above the 50 and 100-SMA lines:
Some other indicators on Endeavour Silver Corp:
- The price-book (P/B) ratio is 2.24 versus an industry median of 2.01
- The EV-to-EBITDA ratio is 17.44 versus an industry median of 10.14
- The EBITDA margin is 11.5% versus an industry median of 22.8%.
- The RSI (14 days) is 53.74.
(Disclosure: I have no positions in any security mentioned in this article.)
