Ahead of Endeavour Silver Corp.'s (EXK, Financial) (TSX:EDR, Financial) financial results for the third quarter, the Canadian precious metal mining company posted figures on silver and gold production as well as sales volume on its website.
Endeavour reported a 2% decrease in silver production from 1,284,646 ounces of silver produced in the third quarter of fiscal 2016 to 1,262,064 ounces of the gray metal produced in the third quarter. The year-over-year decline in gold production has been attributed by Endeavour to operating issues the company experienced at the Guanacevi mine and to lower throughput. The latter was a result of revised Endeavour’s annual mine plans.
On a quarter-on-quarter basis, the production in the third quarter increased, reported the company, because of “improved performance at the Bolañitos and El Cubo mines.”
The Canadian miner also reported a 5% decrease in the production of gold from 14,364 ounces of gold produced in the third quarter of 2016 to 13,648 ounces of the yellow metal produced in the third quarter of 2017.
Considering a silver-gold ratio of 70-1, third-quarter production of silver and gold led to a total volume of 2,217,424 ounces of silver equivalent, which represents a 3% decrease on a year-over-year basis.
The Canadian miner has also informed the shareholders about the sales volume of gold and silver.
In the third quarter, Endeavour sold 1,275,922 ounces of silver, a 6% increase year over year, and 13,759 ounces of gold, a 3% decrease from the comparable of fiscal 2016.
Endeavour derives its production from three mines that are located in Mexico. From Guanacevà mine the company made about 27.1% of its third-quarter consolidated production of silver equivalent, from Bolañitos about 32.1% and from El Cubo about 40.5%.
Bradford Cooke, CEO of Endeavour, said that “Guanacevi production and throughput should rise in fourth-quarter 2017,” that at Bolañitos “the outlook in the fourth quarter is for steady production” and that at El Cubo “the outlook in the fourth quarter is for slightly higher production driven by higher throughput, higher grades and lower dilution.”
Because of a lower gold price (-4.3%) and a lower silver price (-14.2%) in the third quarter compared to the same period of 2016, plus a 12% year-over-year decline in the throughput which will determine fixed costs to be spread over lower volumes and therefore operating costs to increase, Endeavour will likely report a lower margin per ounce of precious metal sold.
The Canadian mining company may miss expectations on earnings and revenue for the third quarter. Analysts expect Endeavour will close the quarter with an EPS of 1 cent and backed on a quarterly figure for revenue that is expected to be $35 million on average.
As forecasted by analysts, EPS and revenue for the third quarter already represent a 75% and 16.90% decrease from the comparable of 2016.
But the miss on expectations may produce a negative impact on the market value of Endeavour that is trading at $2.53 per share on the New York Stock Exchange, with a market capitalization of $322.47 million, a price-book (P/B) ratio of 2.26 and an EV-EBITDA ratio of 13.38.
An eventual pullback in the market value of Endeavour following the third-quarter earnings results may determine an opportunity to either establish or increase the position in this precious metal stock that has – according to the most recent analysts’ estimates on its target price – a nearly 82% likelihood of upsides in the current market value.
The average analyst foresees Endeavour will reach $4.60 per share within the next 12 trading months. The recommendation rating is 2.3 out of a total of 5.
Disclosure: I have no positions in Endeavour.
