Endeavour Silver Corp. (EXK, Financial) has inked a sales agreement with a syndicate of bankers led by BMO Capital Markets that allows the miner to sell up to $35.7 million of its common shares.
The sale of ordinary shares is at Endeavour Silver’s discretion and will be executed by the company every now and then as long as the agreement is in place.
The ordinary shares will be disseminated through U.S.-based stock exchanges at prevailing market prices. The company says that no offers or sales of ordinary shares will be made on any Canadian stock market.
The net proceeds are expected to increase the liquidity available on hand. As of the most recent quarter of 2018, cash on hand amounted to $38.45 million. That amount of cash on hand together with inflows from operations will enable the miner to move on with its plans to advance operations at its Terronera project, which is located in the Mexican state of Jalisco.
Endeavour Silver relies a lot on Terronera, as the project can potentially add a sizeable amount of silver equivalent to the company’s total annual production. The company is expected to prepare an optimized version of a prefeasibility study for the Terronera project.
Recent estimates show that Terronera will produce about 2.5 million ounces of equivalent silver in 2019 and about 5 million ounces of equivalent silver in 2021. The all-in sustaining cost (AISC) is projected at $4.76 per ounce of equivalent silver and the total cash cost is anticipated at $3.44 per ounce of equivalent silver. Estimates have been computed based on a silver-to-gold ratio of 70 to 1.
The project will require the employment of $69 million in financial resources. It will take another $36 million in resources during the second stage.
At $1,260 per ounce of gold and $18 per ounce of silver, the after-tax internal rate of return of the project is 21.2%.
Part of the gross proceedings will also be used for general corporate purposes.
The stock in Endeavour Silver has a share price of $3.24 and is trading above the 200, 100 and 50-SMA line. The share price has climbed 12% for 52 weeks of trading.
The stock has a market capitalization of $413 million and the 52-week range is $1.94 to $3.30 per share.
The recommendation rating is 2.4 out of a total of 5. The average target price is $4.53 per share. That is a mean value of four estimates ranging from $2.84 to $6.00 on the price target. It represents a nearly 40% increase from the current share price.
Other indicators on Endeavour Silver:
· The price-book ratio is 2.76 times versus an industry median of 2.06. The enterprise value to earnings before interst, taxes, depreciation and amortization is 13.92 times versus an industry average of 9.90. The Ebitda margin is 17.4% versus an industry median of 25%.
(Disclosure: I have no positions in Endeavour Silver Corp.)
