UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2023
Commission File Number: 001-33153
ENDEAVOUR SILVER CORP.
(Translation of registrant's name into English)
#1130-609 Granville Street
Vancouver, British Columbia, Canada V7Y 1G5
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
[ ] Form 20-F [ x ] Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Incorporated by Reference
Exhibits 99.1 and 99.2 to this Form 6-K of Endeavour Silver Corp. (the "Company") are hereby incorporated by reference as exhibits to the Registration Statement on Form F-10 (File No. 333-272755) of the Company, as amended or supplemented.
SUBMITTED HEREWITH
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Endeavour Silver Corp. |
|
(Registrant) |
|
|
|
Date: November 7, 2023 |
By: |
/s/ Daniel Dickson |
|
|
Daniel Dickson |
|
Title: |
CEO |
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited - prepared by management)
(expressed in thousands of US dollars)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
Notes |
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
40,957 |
|
$ |
83,391 |
|
Other investments |
4 |
|
6,192 |
|
|
8,647 |
|
Accounts and other receivables |
5 |
|
16,664 |
|
|
13,136 |
|
Income tax receivable |
|
|
1,264 |
|
|
4,024 |
|
Inventories |
6 |
|
27,601 |
|
|
19,184 |
|
Prepaids |
|
|
37,508 |
|
|
16,951 |
|
Loans receivable |
8 (c) |
|
1,250 |
|
|
1,000 |
|
Total current assets |
|
|
131,436 |
|
|
146,333 |
|
|
|
|
|
|
|
|
|
Non-current deposits |
|
|
717 |
|
|
565 |
|
Non-current income tax receivable |
|
|
3,570 |
|
|
3,570 |
|
Non-current other investments |
4 |
|
- |
|
|
1,388 |
|
Non-current IVA receivable |
5 |
|
17,476 |
|
|
10,154 |
|
Non-current loans receivable |
8 (c) |
|
2,273 |
|
|
2,729 |
|
Right-of-use leased assets |
|
|
819 |
|
|
806 |
|
Mineral properties, plant and equipment |
8, 9 |
|
276,864 |
|
|
233,892 |
|
Total assets |
|
$ |
433,155 |
|
$ |
399,437 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
43,416 |
|
$ |
39,831 |
|
Income taxes payable |
|
|
7,296 |
|
|
6,616 |
|
Loans payable |
9 |
|
4,339 |
|
|
6,041 |
|
Lease liabilities |
|
|
436 |
|
|
261 |
|
Total current liabilities |
|
|
55,487 |
|
|
52,749 |
|
|
|
|
|
|
|
|
|
Loans payable |
9 |
|
5,500 |
|
|
8,469 |
|
Lease liabilities |
|
|
678 |
|
|
812 |
|
Provision for reclamation and rehabilitation |
|
|
9,582 |
|
|
7,601 |
|
Deferred income tax liability |
|
|
16,273 |
|
|
12,944 |
|
Other non-current liabilities |
|
|
1,016 |
|
|
968 |
|
Total liabilities |
|
|
88,536 |
|
|
83,543 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
Common shares, unlimited shares authorized, no par value, issued, issuable |
|
|
|
|
|
|
and outstanding 199,700,826 shares (Dec 31, 2022 - 189,995,563 shares) |
Page 4 |
|
684,736 |
|
|
657,866 |
|
Contributed surplus |
Page 4 |
|
4,597 |
|
|
6,115 |
|
Retained earnings (deficit) |
Page 4 |
|
(344,714 |
) |
|
(348,087 |
) |
Total shareholders' equity |
|
|
344,619 |
|
|
315,894 |
|
Total liabilities and shareholders' equity |
|
$ |
433,155 |
|
$ |
399,437 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Approved on behalf of the Board:
/s/ Margaret Beck |
/s/ Daniel Dickson |
________________________________________ |
________________________________________ |
Director |
Director |
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(unaudited - prepared by management)
(expressed in thousands of US dollars, except for shares and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
Notes |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
11 |
$ |
49,432 |
|
$ |
39,649 |
|
$ |
154,964 |
|
$ |
128,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct production costs |
|
|
34,020 |
|
|
24,510 |
|
|
86,014 |
|
|
71,059 |
|
Royalties |
|
|
4,821 |
|
|
2,821 |
|
|
17,105 |
|
|
9,332 |
|
Share-based payments |
10 (b)(c) |
|
44 |
|
|
113 |
|
|
(118 |
) |
|
353 |
|
Depreciation, depletion and amortization |
|
|
7,855 |
|
|
5,753 |
|
|
20,704 |
|
|
16,234 |
|
Write down of inventory to net realizable value |
6 |
|
- |
|
|
1,323 |
|
|
- |
|
|
1,323 |
|
|
|
|
46,740 |
|
|
34,520 |
|
|
123,705 |
|
|
98,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine operating earnings |
|
|
2,692 |
|
|
5,129 |
|
|
31,259 |
|
|
29,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation |
12 |
|
4,155 |
|
|
4,023 |
|
|
12,678 |
|
|
11,023 |
|
General and administrative |
13 |
|
2,358 |
|
|
2,201 |
|
|
9,633 |
|
|
7,846 |
|
Care and maintenance costs |
|
|
- |
|
|
203 |
|
|
- |
|
|
582 |
|
Write off of mineral properties |
8 (e) |
|
- |
|
|
- |
|
|
435 |
|
|
500 |
|
|
|
|
6,513 |
|
|
6,427 |
|
|
22,746 |
|
|
19,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) |
|
|
(3,821 |
) |
|
(1,298 |
) |
|
8,513 |
|
|
9,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
316 |
|
|
311 |
|
|
1,090 |
|
|
945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss) |
|
|
(418 |
) |
|
841 |
|
|
3,326 |
|
|
1,363 |
|
Gain on asset disposal |
8(f) |
|
6,992 |
|
|
2,780 |
|
|
7,059 |
|
|
2,780 |
|
Investment and other |
|
|
(1,627 |
) |
|
(272 |
) |
|
(267 |
) |
|
(1,324 |
) |
|
|
|
4,947 |
|
|
3,349 |
|
|
10,118 |
|
|
2,819 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
810 |
|
|
1,740 |
|
|
17,541 |
|
|
11,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense |
|
|
2,250 |
|
|
1,186 |
|
|
11,137 |
|
|
3,526 |
|
Deferred income tax expense |
|
|
888 |
|
|
2,053 |
|
|
3,330 |
|
|
10,027 |
|
|
|
|
3,138 |
|
|
3,239 |
|
|
14,467 |
|
|
13,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) and comprehensive earnings |
|
$ |
(2,328 |
) |
$ |
(1,499 |
) |
$ |
3,074 |
|
$ |
(1,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
0.02 |
|
$ |
(0.01 |
) |
Diluted earnings (loss) per share |
10(f) |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
0.02 |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares outstanding |
|
|
194,249,283 |
|
|
189,241,367 |
|
|
192,003,752 |
|
|
180,655,842 |
|
Diluted weighted average number of shares outstanding |
10(f) |
|
194,249,283 |
|
|
189,241,367 |
|
|
193,875,315 |
|
|
180,655,842 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited - prepared by management)
(expressed in thousands of US dollars, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
Number of shares |
|
|
Share Capital |
|
|
Contributed Surplus |
|
|
Retained Earnings (Deficit) |
|
|
Total Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
|
|
170,537,307 |
|
$ |
585,406 |
|
$ |
6,331 |
|
$ |
(354,330 |
) |
$ |
237,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public equity offerings, net of issuance costs |
10 (a) |
|
9,293,150 |
|
|
43,096 |
|
|
- |
|
|
- |
|
|
43,096 |
|
Exercise of options |
10 (b) |
|
563,200 |
|
|
2,364 |
|
|
(766 |
) |
|
- |
|
|
1,598 |
|
Settlement of performance and deferred share units |
10 (c) |
|
1,014,999 |
|
|
1,361 |
|
|
(3,264 |
) |
|
- |
|
|
(1,903 |
) |
Issued on acquisition of mineral properties |
8 (c) |
|
8,577,380 |
|
|
25,589 |
|
|
- |
|
|
- |
|
|
25,589 |
|
Issued for deferred share units |
10 (c) |
|
3,527 |
|
|
17 |
|
|
(17 |
) |
|
- |
|
|
- |
|
Share-based compensation |
10 (b)(c) |
|
- |
|
|
- |
|
|
3,259 |
|
|
- |
|
|
3,259 |
|
Loss for the period |
|
|
- |
|
|
- |
|
|
- |
|
|
(1,760 |
) |
|
(1,760 |
) |
Balance at September 30, 2022 |
|
|
189,989,563 |
|
$ |
657,833 |
|
$ |
5,543 |
|
$ |
(356,090 |
) |
$ |
307,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public equity offerings, net of issuance costs |
10 (a) |
|
- |
|
|
20 |
|
|
- |
|
|
- |
|
|
20 |
|
Exercise of options |
10 (b) |
|
6,000 |
|
|
13 |
|
|
(4 |
) |
|
- |
|
|
9 |
|
Share-based compensation |
10 (b)(c) |
|
- |
|
|
- |
|
|
618 |
|
|
- |
|
|
618 |
|
Canceled options |
10 (b) |
|
- |
|
|
- |
|
|
(42 |
) |
|
42 |
|
|
- |
|
Earnings for the period |
|
|
- |
|
|
- |
|
|
- |
|
|
7,961 |
|
|
7,961 |
|
Balance at December 31, 2022 |
|
|
189,995,563 |
|
$ |
657,866 |
|
$ |
6,115 |
|
$ |
(348,087 |
) |
$ |
315,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public equity offerings, net of issuance costs |
10 (a) |
|
8,195,527 |
|
|
22,707 |
|
|
- |
|
|
- |
|
|
22,707 |
|
Exercise of options |
10 (b) |
|
1,097,900 |
|
|
3,758 |
|
|
(1,305 |
) |
|
- |
|
|
2,453 |
|
Settlement of performance and deferred share units |
10 (c) |
|
411,836 |
|
|
405 |
|
|
(2,817 |
) |
|
- |
|
|
(2,412 |
) |
Share-based compensation |
10 (b)(c) |
|
- |
|
|
- |
|
|
2,903 |
|
|
- |
|
|
2,903 |
|
Canceled options |
10 (b) |
|
- |
|
|
- |
|
|
(299 |
) |
|
299 |
|
|
- |
|
Earnings for the period |
|
|
- |
|
|
- |
|
|
- |
|
|
3,074 |
|
|
3,074 |
|
Balance at September 30, 2023 |
|
|
199,700,826 |
|
$ |
684,736 |
|
$ |
4,597 |
|
$ |
(344,714 |
) |
$ |
344,619 |
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(unaudited - prepared by management)
(expressed in thousands of US dollars)
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
Notes |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) for the period |
|
$ |
(2,328 |
) |
$ |
(1,499 |
) |
$ |
3,074 |
|
$ |
(1,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
10 (b)(c) |
|
864 |
|
|
760 |
|
|
2,904 |
|
|
3,259 |
|
Depreciation, depletion and amortization |
8 |
|
9,067 |
|
|
6,023 |
|
|
22,659 |
|
|
16,809 |
|
Write off of exploration properties |
8 |
|
- |
|
|
- |
|
|
435 |
|
|
500 |
|
Deferred income tax expense |
|
|
888 |
|
|
2,053 |
|
|
3,330 |
|
|
10,027 |
|
Unrealized foreign exchange loss (gain) |
|
|
(409 |
) |
|
89 |
|
|
1,205 |
|
|
(131 |
) |
Finance costs |
|
|
316 |
|
|
312 |
|
|
1,090 |
|
|
946 |
|
Accretion of loans receivable |
|
|
(87 |
) |
|
- |
|
|
(294 |
) |
|
- |
|
Write down of inventory to net realizable value |
|
|
- |
|
|
1,323 |
|
|
- |
|
|
1,323 |
|
Gain on asset disposal |
|
|
(6,992 |
) |
|
(2,826 |
) |
|
(7,059 |
) |
|
(2,780 |
) |
Loss on other investments |
4 |
|
1,944 |
|
|
1,097 |
|
|
1,997 |
|
|
3,366 |
|
Performance and deferred share units settled in cash |
|
|
- |
|
|
- |
|
|
(2,118 |
) |
|
- |
|
Net changes in non-cash working capital |
14 |
|
(2,650 |
) |
|
85 |
|
|
(22,158 |
) |
|
(20,957 |
) |
Cash from operating activities |
|
|
613 |
|
|
7,417 |
|
|
5,065 |
|
|
10,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on disposal of property, plant and equipment |
8(f) |
|
7,567 |
|
|
250 |
|
|
7,567 |
|
|
332 |
|
Mineral properties, plant and equipment |
8 |
|
(31,736 |
) |
|
(53,046 |
) |
|
(76,317 |
) |
|
(81,494 |
) |
Purchase of other investments |
|
|
- |
|
|
- |
|
|
- |
|
|
(2,119 |
) |
Proceeds from disposal of other investments |
4 |
|
- |
|
|
- |
|
|
1,846 |
|
|
- |
|
Redemption of (investment in) non-current deposits |
|
|
(57 |
) |
|
30 |
|
|
(152 |
) |
|
34 |
|
Cash used in investing activities |
|
|
(24,226 |
) |
|
(52,766 |
) |
|
(67,056 |
) |
|
(83,247 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of loans payable |
9 |
|
(1,522 |
) |
|
(1,268 |
) |
|
(4,671 |
) |
|
(3,565 |
) |
Repayment of lease liabilities |
|
|
(126 |
) |
|
(55 |
) |
|
(275 |
) |
|
(161 |
) |
Interest paid |
9 |
|
(206 |
) |
|
(204 |
) |
|
(659 |
) |
|
(585 |
) |
Public equity offerings |
10 (a) |
|
23,390 |
|
|
- |
|
|
23,390 |
|
|
46,001 |
|
Exercise of options |
10 (b) |
|
- |
|
|
20 |
|
|
2,453 |
|
|
1,598 |
|
Proceeds from loans receivable |
8(c) |
|
- |
|
|
- |
|
|
500 |
|
|
- |
|
Share issuance costs |
10 (a) |
|
(683 |
) |
|
(93 |
) |
|
(683 |
) |
|
(2,905 |
) |
Performance and deferred share units withholding tax settlement |
|
|
- |
|
|
- |
|
|
(294 |
) |
|
(1,903 |
) |
Cash from (used in) financing activities |
|
|
20,853 |
|
|
(1,600 |
) |
|
19,761 |
|
|
38,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents |
|
|
213 |
|
|
(84 |
) |
|
(204 |
) |
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
(2,760 |
) |
|
(46,949 |
) |
|
(42,230 |
) |
|
(34,165 |
) |
Cash and cash equivalents, beginning of the period |
|
|
43,504 |
|
|
116,226 |
|
|
83,391 |
|
|
103,303 |
|
Cash and cash equivalents, end of the period |
|
$ |
40,957 |
|
$ |
69,193 |
|
$ |
40,957 |
|
$ |
69,193 |
|
Supplemental cash flow information (Note 14)
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
1. CORPORATE INFORMATION
Endeavour Silver Corp. (the "Company" or "Endeavour Silver") is a corporation governed by the Business Corporations Act (British Columbia, Canada). The Company is engaged in silver mining in Mexico and related activities including acquisition, exploration, development, extraction, processing, refining and reclamation. The Company is also engaged in exploration activities in Chile and United States. The address of the registered office is #1130 - 609 Granville Street, Vancouver, B.C., V7Y 1G5.
2. BASIS OF PRESENTATION
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements and should be read in conjunction with the Company's consolidated financial statements as at and for the year ended December 31, 2022.
The Board of Directors approved the consolidated financial statements for issue on November 3, 2023.
The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
These consolidated financial statements are presented in the Company's functional currency of US dollars and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation of these subsidiaries.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Company's annual audited consolidated financial statements as at and for the year ended December 31, 2022.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that were applied to the annual audited consolidated financial statements for the year ended December 31, 2022 and should be read in conjunction with the Company's annual audited consolidated financial statements for the year ended December 31, 2022.
4. OTHER INVESTMENTS
|
|
|
September 30, |
|
|
December 31, |
|
|
Note |
|
2023 |
|
|
2022 |
|
Balance at beginning of the period |
|
$ |
10,035 |
|
$ |
11,200 |
|
Investment in marketable securities, at cost |
|
|
- |
|
|
2,305 |
|
Proceeds from disposals |
|
|
(1,846 |
) |
|
- |
|
Loss on marketable securities |
|
|
(1,997 |
) |
|
(3,470 |
) |
Balance at end of the period |
|
|
6,192 |
|
|
10,035 |
|
Less: Non-Current portion |
|
|
- |
|
|
1,388 |
|
Current other investments |
|
$ |
6,192 |
|
$ |
8,647 |
|
As at September 30, 2023 the Company held $6,143 in marketable securities that are classified as Level 1 and $49 in marketable securities that are classified as Level 3 in the fair value hierarchy (Note 17). Marketable securities classified as Level 3 in the fair value hierarchy are share purchase warrants and the fair value of the warrants at each period end has been estimated using the Black-Scholes Option Pricing Model.
During the year ended December 31, 2022, the Company acquired 6,600,000 units of Max Resource Corp ("Max") through a private placement with each unit consisting of one common share and ½ share purchase warrant. At the same time, the Company entered into a collaboration agreement with Max under which acquired shares and warrants of Max have certain transfer restrictions and cannot be liquidated before March 28, 2024. Accordingly, at inception these shares and warrants were classified as non-current and are classified as such in the comparative figures.
5. ACCOUNTS AND OTHER RECEIVABLES
|
|
|
September 30, |
|
|
December 31, |
|
|
Note |
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
Trade receivables (1) |
|
$ |
6,918 |
|
$ |
4,385 |
|
IVA receivable (2) |
16 |
|
8,741 |
|
|
8,062 |
|
Other receivables |
|
|
1,005 |
|
|
689 |
|
|
|
$ |
16,664 |
|
$ |
13,136 |
|
(1) The trade receivables consist of receivables from provisional silver and gold sales from the Bolañitos mine. The fair value of receivables arising from concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate period end closing prices on the measurement date from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value hierarchy (Note 17).
(2) The Company's Mexican subsidiaries pay value added tax, Impuesto al Valor Agregado ("IVA"), on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities' audit of certain of the Company's third-party suppliers. Under Mexican law the Company has legal rights to those IVA refunds and the results of the third-party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time improperly denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company's third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any improperly denied refunds.
These delays and denials have occurred in Refinadora Plata Guanaceví S.A. de C.V. ("Guanaceví,"). At September 30, 2023, Guanaceví holds $8,398 in IVA receivables which the Company and its advisors have determined to be recoverable from tax authorities (December 31, 2022 $6,402 respectively).
As at September 30, 2023, the total IVA receivable of $26,217 (December 31, 2022 - $18,216) has been allocated between the current portion of $8,741, which is included in accounts and other receivables, and a non-current portion of $17,476 (December 31, 2022 - $8,062 and $10,154 respectively). The non-current portion is composed of Guanacevi of $2,293, which is currently under appeal and is unlikely to be received in the next 12 months. The remaining $15,183 is IVA receivable for Terronera, which may not become recoverable until Terronera recognizes revenue for tax purposes.
The Company is in regular contact with the tax authorities in respect of its IVA filings and believes the full amount of its IVA receivables will ultimately be received; however, the timing of recovery of these amounts and the nature and extent of any adjustments to the Company's IVA receivables remains uncertain.
6. INVENTORIES
|
|
September 30, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Warehouse inventory(1) |
$ |
12,825 |
|
$ |
9,682 |
|
Stockpile inventory |
|
3,085 |
|
|
2,389 |
|
Finished goods inventory |
|
11,014 |
|
|
6,138 |
|
Work in process inventory |
|
677 |
|
|
975 |
|
|
$ |
27,601 |
|
$ |
19,184 |
|
(1) The warehouse inventory balances at September 30, 2023 and December 31, 2022 are net of a write down to net realizable value of $1,179 at the Guanacevi mine and $1,038 at the Bolañitos mine.
7. RELATED PARTY TRANSACTIONS
The Company previously shared common administrative services and office space with a company related by virtue of a former common director and from time to time incurred third party costs on behalf of related parties on a full cost recovery basis. The agreement for sharing office space and administrative services ended in May 2022. The charges for these costs totaled $nil for the three and nine months ended September 30, 2023 (September 30, 2022 - $nil and $9 respectively). The Company has a $nil net receivable related to these costs as of September 30, 2023 (December 31, 2022 - $nil).
The Company was charged $204 and $490 for legal services for the three and nine months ended September 30, 2023 by a legal firm in which the Company's corporate secretary is a partner (September 2022 - $57 and $402 respectively). The Company has $72 payable to the legal firm as at September 30, 2023 (December 31, 2022 - $10).
8. MINERAL PROPERTIES, PLANT AND EQUIPMENT
(a) Mineral properties, plant and equipment comprise:
|
|
Mineral |
|
|
|
|
|
Machinery & |
|
|
|
|
|
Transport & |
|
|
|
|
|
|
properties |
|
|
Plant |
|
|
equipment |
|
|
Building |
|
|
office equipment |
|
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
$ |
511,399 |
|
$ |
98,185 |
|
$ |
87,140 |
|
$ |
13,445 |
|
$ |
12,045 |
|
$ |
722,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
103,635 |
|
|
5,217 |
|
|
19,877 |
|
|
7,573 |
|
|
1,978 |
|
|
138,280 |
|
Disposals |
|
(14,966 |
) |
|
(6,542 |
) |
|
(757 |
) |
|
(662 |
) |
|
(746 |
) |
|
(23,673 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2022 |
$ |
600,068 |
|
$ |
96,860 |
|
$ |
106,260 |
|
$ |
20,356 |
|
$ |
13,277 |
|
$ |
836,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
50,251 |
|
|
5,660 |
|
|
7,748 |
|
|
1,715 |
|
|
1,834 |
|
|
67,208 |
|
Disposals |
|
(670 |
) |
|
- |
|
|
(417 |
) |
|
- |
|
|
(176 |
) |
|
(1,263 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2023 |
$ |
649,649 |
|
$ |
102,520 |
|
$ |
113,591 |
|
$ |
22,071 |
|
$ |
14,935 |
|
$ |
902,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
$ |
444,769 |
|
$ |
88,208 |
|
$ |
49,445 |
|
$ |
9,194 |
|
$ |
8,401 |
|
$ |
600,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
14,786 |
|
|
2,268 |
|
|
5,301 |
|
|
346 |
|
|
1,205 |
|
|
23,906 |
|
Disposals |
|
(13,574 |
) |
|
(6,442 |
) |
|
(326 |
) |
|
(159 |
) |
|
(493 |
) |
|
(20,994 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2022 |
$ |
445,981 |
|
$ |
84,034 |
|
$ |
54,420 |
|
$ |
9,381 |
|
$ |
9,113 |
|
$ |
602,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
15,468 |
|
|
1,293 |
|
|
5,064 |
|
|
285 |
|
|
1,185 |
|
|
23,295 |
|
Disposals |
|
- |
|
|
- |
|
|
(177 |
) |
|
- |
|
|
(145 |
) |
|
(322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2023 |
$ |
461,449 |
|
$ |
85,327 |
|
$ |
59,307 |
|
$ |
9,666 |
|
$ |
10,153 |
|
$ |
625,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2022 |
$ |
154,087 |
|
$ |
12,826 |
|
$ |
51,840 |
|
$ |
10,975 |
|
$ |
4,164 |
|
$ |
233,892 |
|
At September 30, 2023 |
$ |
188,200 |
|
$ |
17,193 |
|
$ |
54,284 |
|
$ |
12,405 |
|
$ |
4,782 |
|
$ |
276,864 |
|
Included in mineral properties is $80,085 in acquisition costs for exploration properties and $57,792 for acquisition and development costs for development properties (December 31, 2022 - $80,155 and $26,669 respectively), which are not subject to amortization.
As of September 30, 2023, the Company has $35,704 committed for capital equipment purchases, predominantly related to the ongoing construction and development in the Terronera project.
(b) Acquisition of the Pitarrilla Project
On January 17, 2022, the Company entered into a definitive agreement to purchase the Pitarrilla project in Durango State, Mexico, by acquiring all of the issued and outstanding shares of Minera Pitarrilla S.A. de C. V. (formerly SSR Durango, S.A. de C.V.) from SSR Mining Inc. ("SSR") for total consideration of $70 million (consisting of $35 million in Company's shares and a further $35 million in cash or in the Company's shares at the election of SSR and as agreed to by the Company) and a 1.25% net smelter returns royalty. SSR retains a 1.25% NSR Royalty in Pitarrilla. Endeavour will have matching rights to purchase the NSR Royalty in the event SSR proposes to sell it.
The acquisition was completed on July 6, 2022. Total consideration included 8,577,380 shares of the Company issued on July 6, 2022 and a $35.1 million cash payment. Fair value of the 8,577,380 common shares issued on July 6, 2022 was $25,589 at CAN$3.89 per share. The deemed value of the common shares issued, at the time of agreement, was $34.9 million. The shares are subject to a hold period of four months and one day following the date of closing.
The 4,950-hectares Pitarrilla exploration project is located in northern Mexico, consists of five concessions, has significant infrastructure in place and has access to utilities.
The acquisition is outside the scope of IFRS 3 Business Combinations, as the Pitarrilla project did not meet the definition of a business, and as such, the transaction was accounted for as an asset acquisition. The purchase price is allocated to the underlying assets acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition.
Pitarilla Project purchase consideration: |
|
|
|
|
|
|
|
Common shares issued(1) |
$ |
25,589 |
|
Consideration paid in cash |
|
35,067 |
|
Acquisition costs |
|
881 |
|
Total consideration |
$ |
61,537 |
|
Fair value summary of assets acquired and liabilities assumed: |
|
|
|
|
|
|
|
Assets: |
|
|
|
Current assets |
$ |
288 |
|
Buildings and equipment |
|
652 |
|
Mineral properties |
|
60,811 |
|
Total assets |
$ |
61,751 |
|
Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
|
170 |
|
Reclamation liability |
|
44 |
|
Total liabilities |
$ |
214 |
|
|
|
|
|
Net identifiable assets acquired |
$ |
61,537 |
|
(c) El Compas, Mexico
On September 9, 2022, the Company entered into an agreement to sell its 100% interest in Minera Oro Silver de Mexico, S.A. de C.V. ("MOS") to Grupo ROSGO, S.A. de C.V., ("Grupo ROSGO"). Minera Oro Silver holds the El Compas property and the lease on the La Plata processing plant in Zacatecas, Mexico.
Pursuant to the agreement, Grupo ROSGO assumed the Minera Oro Silver loan payable to the Company, in the amount of $5,000 payable in cash payments over a five year period with an initial payment of $250 and subsequent Instalment payments of $500 every six months other than the third payment, which will be $750. The payments are secured by a pledge of the shares of MOS. As of September 30, 2023, the carrying value of the loan receivable is $3,523, consisting of the current portion of $1,250 and non-current portion of $2,273 (December 31, 2022 - $1,000 and $2,729 respectively).
The carrying value of the net Minera Oro Silver's net assets at the date of the sale was $1,149 resulting in the Company recording a $2,733 gain on sale.
(d) Baxter Gold
On July 18, 2023, the Company entered into a definitive agreement with Bravada Gold Corporation which grants the Company an option to earn an 85% interest in the Baxter gold and silver property ("Baxter"), by incurring $4,000 in exploration and development expenditures and paying $500 in option payments over a five-year period from the date of the agreement. Baxter is located directly north of the Company's Bruner project in Nevada's Walker Lane Gold trend. Baxter consists of 114 unpatented lode claims (approximately 920 hectares). Upon completion of the exploration and development expenditures and payment of the option payments, the Company can exercise the option and would have the right to form a joint venture with 85% of the interest belonging to the Company.
(e) Write-off of Paloma exploration property
In December 2018, the Company signed an option agreement to acquire up to a 70% interest in the Paloma project in Antofagasta Province, Chile. Agreement granted the Company the right to acquire its initial 51% interest by paying $750 and spending $5,000 over five years with the final payment due in 2023, followed by a second option to acquire 70% by completing a Preliminary Economic Assessment and a Preliminary Feasibility Study. In June 2023, the Company elected to not proceed with the final payment and the carrying value of $435 has been written off during the nine month period ended September 30, 2023.
(f) Sale of Cozamin Royalty
On August 31, 2023, Minera Plata Adelante SA de CV ("MPA") executed an agreement with Gold Royalty Corpand sold all of the MPA's interest in the 1% Cozamin royalty ("Royalty") for total consideration of $7,500 payable in cash. The Royalty applies to two concessions (Calicanto and Vicochea) on Capstone's Cozamin copper-silver mine, located 3.6 kilometres north-northwest of Zacatecas City in state of Zacatecas, Mexico. The Company obtained the Royalty through a concession division agreement signed in 2017 on seven wholly owned concessions which were acquired for $445. The Cozamin Mine, a copper-silver mine owned and operated by Capstone Copper in Zacatecas, Mexico, is located on two of the seven concessions. The sale agreement includes an option granted to Gold Royalty Corp to purchase any additional royalties which may be granted on the five remaining concessions under the 2017 concession division agreement.
9. LOANS PAYABLE
|
|
September 30, |
|
|
December 31, |
|
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
Balance at the beginning of the period |
$ |
14,510 |
|
$ |
10,494 |
|
Net proceeds from software and equipment financing |
|
- |
|
|
9,070 |
|
Finance cost |
|
599 |
|
|
726 |
|
Repayments of principal |
|
(4,671 |
) |
|
(5,054 |
) |
Repayments of finance costs |
|
(599 |
) |
|
(726 |
) |
Balance at the end of the period |
$ |
9,839 |
|
$ |
14,510 |
|
|
|
|
|
|
|
|
Statements of Financial Position presentation |
|
|
|
|
|
|
Current loans payable |
$ |
4,339 |
|
$ |
6,041 |
|
Non-current loans payable |
|
5,500 |
|
|
8,469 |
|
Total |
$ |
9,839 |
|
$ |
14,510 |
|
The Company currently has $23,313 in financing arrangements for equipment, with terms ranging from one to four years. The agreements require either monthly or quarterly payments of principal and interest with a weighted-average interest rate of 5.7%.
The equipment financing is secured by the underlying equipment purchased and is subject to various non-financial covenants. As at September 30, 2023 the Company was in compliance with these covenants. As at September 30, 2023, the net book value of equipment includes $21,799 (December 31, 2022 - $24,379) of equipment pledged as security for the equipment financing.
10. SHARE CAPITAL
(a) Public Offerings
On March 22, 2022, the Company completed a prospectus equity financing with the offering co-led by BMO Capital Markets and PI Financial Corp., together with a syndicate of underwriters consisting of CIBC World Markets Inc., B. Riley Securities Inc., and H.C. Wainwright & Co., LLC. The Company issued a total of 9,293,150 common shares at a price of $4.95 per share for aggregate gross proceeds of $46,001, less commission of $2,524 and recognized $361 of other transaction costs related to the financing as share issuance costs, which have been presented net within share capital.
In June 2023, the Company filed a short form base shelf prospectus that qualified for the distribution of up to $200 million of common shares, debt securities, warrants or units of the Company comprising any combination of common shares and warrants (the "Securities") over a 25 month period. The Company filed a corresponding registration statement in the United States registering the Securities under United States federal securities laws. The distribution of Securities could be effected from time to time in one or more transactions at a fixed price or prices, which could be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying prospectus supplement, including transactions that are "At-The-Market" ("ATM") distributions.
On June 27, 2023, the Company entered into an ATM equity facility with BMO Capital Markets (the lead agent), CIBC World Markets Inc, TD Securities (USA) LLC, National Bank of Canada Financial Inc., Raymond James (USA) Inc., B. Riley Securities Inc. and H.C. Wainwright & Co. LLC. (collectively, the "Agents"). Under the terms of this ATM facility, the Company could, from time to time, sell common stock having an aggregate offering value of up to $60 million on the New York Stock Exchange. The Company determined, at its sole discretion, the timing and number of shares to be sold under the ATM facility.
During the nine-month period ended September 30, 2023, the Company issued 8,195,527 common shares under the ATM facility at an average price of $2.85 per share for gross proceeds of $23,390, less commission of $468 and recognized $215 of other transaction costs related to the ATM financing as share issuance costs, which have been presented net within share capital.
Subsequent to September 30, 2023 an additional 6,828,796 common shares were issued under the ATM facility at an average price of $2.44 per share for gross proceeds of $16,638 less commission of $332.
(b) Stock Options
Options to purchase common shares have been granted to directors, officers, employees and consultants pursuant to the Company's current stock option plan, approved by the Company's shareholders in fiscal 2009 and amended and re-ratified in 2021, at exercise prices determined by reference to the market value on the date of grant. The stock option plan allows for, with approval by the Board, granting of options to its directors, officers, employees and consultants to acquire up to 5.0% of the issued and outstanding shares at any time. Prior to the 2021 amendment, the plan allowed for the granting of up to 7.0% of the issued and outstanding shares at any time.
The following table summarizes the status of the Company's stock option plan and changes during the period:
Expressed in Canadian dollars |
|
Nine months ended |
|
|
Year ended |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|
|
Number of options |
|
|
Weighted average exercise price |
|
|
Number of options |
|
|
Weighted average exercise price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of the period |
|
3,899,630 |
|
$ |
4.09 |
|
|
3,848,200 |
|
$ |
3.68 |
|
Granted |
|
1,079,000 |
|
$ |
4.12 |
|
|
736,986 |
|
$ |
6.24 |
|
Exercised |
|
(1,097,900 |
) |
$ |
3.05 |
|
|
(569,200 |
) |
$ |
3.57 |
|
Expired and forfeited |
|
(251,839 |
) |
$ |
5.65 |
|
|
(116,356 |
) |
$ |
6.63 |
|
Outstanding, end of the period |
|
3,628,891 |
|
$ |
4.31 |
|
|
3,899,630 |
|
$ |
4.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at the end of the period |
|
2,921,934 |
|
$ |
4.27 |
|
|
3,374,459 |
|
$ |
3.74 |
|
During the nine months ended September 30, 2023, the weighted-average share price at the date of exercise was CAN$4.49 (December 31, 2022 - CAN$6.77).
The following table summarizes the information about stock options outstanding at September 30, 2023:
Expressed in Canadian dollars |
|
|
|
|
Options Outstanding |
Options Exercisable |
|
Number |
Weighted Average |
Weighted |
Number |
Weighted |
|
Outstanding |
Remaining |
Average |
Exercisable |
Average |
Price |
as at |
Contractual Life |
Exercise |
as at |
Exercise |
Intervals |
September 30, 2023 |
(Number of Years) |
Price |
September 30, 2023 |
Price |
|
|
|
|
|
|
$2.00 - $2.99 |
960,600 |
1.4 |
$2.14 |
960,600 |
$1.42 |
$3.00 - $3.99 |
442,400 |
0.5 |
$3.23 |
442,400 |
$0.46 |
$4.00 - $4.99 |
976,600 |
4.5 |
$4.12 |
386,600 |
$4.45 |
$5.00 - $5.99 |
60,000 |
2.0 |
$5.60 |
60,000 |
$1.96 |
$6.00 - $6.99 |
1,189,291 |
3.0 |
$6.55 |
1,072,334 |
$2.93 |
|
3,628,891 |
2.6 |
$4.31 |
2,921,934 |
$2.24 |
During the three and nine months ended September 30, 2023, the Company recognized share-based compensation expense of $370 and $1,316 respectively (September 30, 2022 - $320 and $1,425 respectively) based on the fair value of the vested portion of options granted in the current and prior years.
The weighted-average fair values of stock options granted and the assumptions used to calculate the related compensation expense have been estimated using the Black-Scholes Option Pricing Model with the following assumptions:
|
Nine months ended |
|
September 30, 2023 |
September 30, 2022 |
Weighted-average fair value of options in CAN$ |
$2.21 |
$3.17 |
Risk-free interest rate |
3.84% |
2.19% |
Expected dividend yield |
0% |
0% |
Expected stock price volatility |
70% |
67% |
Expected options life in years |
3.79 |
3.80 |
(c) Share Units Plan
On March 23, 2021 the Company adopted an equity-based Share Unit Plan ("SUP"), which was approved by the Company's shareholders on May 12, 2021. The SUP allows for, with approval by the Board, granting of Performance Share Units ("PSU"s) and Deferred Share Units ("DSU"s), to its directors, officers, employees to acquire up to 1.5% of the issued and outstanding shares. The SUP incorporates any new PSUs and DSUs granted and are to be subject to cash, share settlement or a combination of cash and share procedures at the discretion of the Board of Directors.
Performance Share Units
The PSUs granted are subject to a performance payout multiplier between 0% and 200% based on the Company's total shareholder return at the end of a three-year period, relative to the total shareholder return of the Company's peer group.
|
|
Nine months ended |
|
|
Year ended |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|
|
Number of units |
|
|
Number of units |
|
|
|
|
|
|
|
|
Outstanding, beginning of period |
|
1,158,000 |
|
|
1,639,000 |
|
Granted |
|
471,000 |
|
|
316,000 |
|
Cancelled |
|
(140,000 |
) |
|
- |
|
Settled |
|
(611,000 |
) |
|
(797,000 |
) |
Outstanding, end of period |
|
878,000 |
|
|
1,158,000 |
|
There were 471,000 PSUs granted during the nine months ended September 30, 2023 (September 30, 2022 - 316,000) under the SUP. The PSUs vest at the end of a three-year period if certain pre-determined performance and vesting criteria are achieved. Performance criteria are based on the Company's share price performance relative to a representative group of other mining companies. 194,000 PSUs vest on March 4, 2024, 215,000 PSUs vest on March 24, 2025, 60,000 PSUs vest on or before June 30, 2024, and 409,000 PSUs vest on March 7, 2026.
On March 2, 2023, PSUs granted in 2020 vested with a payout multiplier of 200% based on the Company's shareholder return, relative to the total shareholder return of the Company's peer group over the three-year period and 205,918 PSUs were settled, through the issuance of 411,836 common shares and 405,082 PSUs were settled for $2,413 cash.
On August 16, 2022, vesting was accelerated on a pro-rata basis for 195,000 PSUs granted in 2020 and 67,000 PSUs granted in 2021. During the nine months ended September 30, 2023, 350,829 shares were issued for the settlement of these PSUs.
During the three and nine months ended September 30, 2023, the Company recognized share-based compensation expense of $476 and $938 respectively related to the PSUs (September 30, 2022 - $428 and $1,321 respectively).
Deferred Share Units
The DSUs granted are vested immediately and are redeemable for shares at the time of a director's retirement.
|
|
Nine months ended |
|
|
Year ended |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|
|
Number of units |
|
|
Number of units |
|
|
|
|
|
|
|
|
Outstanding, beginning of period |
|
104,596 |
|
|
- |
|
Granted |
|
216,520 |
|
|
109,634 |
|
Settled for shares |
|
- |
|
|
(5,038 |
) |
Outstanding, end of period |
|
321,116 |
|
|
104,596 |
|
There were 216,520 DSUs granted during the nine months ended September 30, 2023 (September 30, 2022 - 106,153) under the SUP. During the three and nine months ended September 30, 2023, the Company recognized share-based compensation expense of $18 and $650 respectively related to the DSUs (September 30, 2022 - $12 and $513 respectively).
(d) Deferred Share Units - Cash Settled
The Company previously had a Deferred Share Unit ("DSU") plan whereby deferred share units were granted to independent directors of the Company in lieu of compensation in cash or share purchase options. These DSUs vested immediately and are redeemable for cash, based on the market value of the units at the time of a director's retirement. Upon adoption of the SUP plan in March 2021, no new DSUs will be granted under this cash settled plan.
Expressed in Canadian dollars |
|
Nine months ended |
|
|
Year ended |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|
|
Number of Units |
|
|
Weighted Average Grant Price |
|
|
Number of Units |
|
|
Weighted Average Grant Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period |
|
1,044,204 |
|
$ |
3.19 |
|
|
1,348,765 |
|
$ |
3.24 |
|
Redeemed |
|
- |
|
$ |
0.00 |
|
|
(304,561 |
) |
$ |
3.41 |
|
Outstanding, end of period |
|
1,044,204 |
|
$ |
3.19 |
|
|
1,044,204 |
|
$ |
3.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at period end |
|
1,044,204 |
|
$ |
3.32 |
|
|
1,044,204 |
|
$ |
4.38 |
|
During the three and nine months ended September 30, 2023, the Company recognized a mark to market recovery on director's compensation related to these DSUs, which is included in general and administrative salaries, wages and benefits, of $482 and $823 respectively (September 30, 2022 - a mark to market recovery of $110 and $1,099 respectively) based on the fair value of new grants and the change in the fair value of the DSUs granted in the current and prior years. As of September 30, 2023, there are 1,044,204 deferred share units outstanding (December 31, 2022 - 1,044,204) with a fair market value of $2,552 (December 31, 2022 - $3,375) recognized in accounts payable and accrued liabilities.
(e) Share Appreciation Rights
As part of the Company's bonus program, the Company may grant share appreciation rights ("SARs") to its employees in Mexico and Chile. The SARs are subject to vesting conditions and, when exercised, constitute a cash bonus based on the value of the appreciation of the Company's common shares between the SARs grant date and the exercise date.
|
|
Nine months ended |
|
|
Year ended |
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|
|
Number of Units |
|
|
Weighted Average Grant Price |
|
|
Number of Units |
|
|
Weighted Average Grant Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period |
|
181,739 |
|
$ |
5.12 |
|
|
113,670 |
|
$ |
5.40 |
|
Granted |
|
- |
|
$ |
0.00 |
|
|
148,030 |
|
$ |
4.62 |
|
Exercised |
|
- |
|
$ |
0.00 |
|
|
(5,726 |
) |
$ |
3.17 |
|
Cancelled |
|
(86,256 |
) |
$ |
5.13 |
|
|
(74,235 |
) |
$ |
4.72 |
|
Outstanding, end of period |
|
95,483 |
|
$ |
5.10 |
|
|
181,739 |
|
$ |
5.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at the end of the period |
|
71,200 |
|
$ |
5.15 |
|
|
101,066 |
|
$ |
5.18 |
|
During the three and nine months ended September 30, 2023, the Company recognized a recovery related to SARs, which is included in operation and exploration salaries, wages and benefits, of $22 and $32 respectively (September 30, 2022 -recovery of $nill and $4 respectively) based on the change in the fair value of the SARs granted in prior years. As of September 30, 2023, there are 95,483 SARs outstanding (December 31, 2022 - 181,739) with a fair market value of $76 (December 31, 2022 - $111) recognized in accounts payable and accrued liabilities.
(f) Diluted Earnings per Share
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
(2,328 |
) |
$ |
(1,499 |
) |
$ |
3,074 |
|
$ |
(1,760 |
) |
Basic weighted average number of shares outstanding |
|
194,249,283 |
|
|
189,241,367 |
|
|
192,003,752 |
|
|
180,655,842 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
- |
|
|
- |
|
|
672,447 |
|
|
- |
|
Equity settled deferred share units |
|
- |
|
|
- |
|
|
878,000 |
|
|
- |
|
Performance share units |
|
- |
|
|
- |
|
|
321,116 |
|
|
- |
|
Diluted weighted average number of share outstanding |
|
194,249,283 |
|
|
189,241,367 |
|
|
193,875,315 |
|
|
180,655,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
$ |
0.02 |
|
$ |
(0.01 |
) |
As of September 30, 2023, there 2,876,185 anti-dilutive stock options (September 30, 2022 - 2,833,740).
11. REVENUE
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver sales (1) |
$ |
32,863 |
|
$ |
25,541 |
|
$ |
103,027 |
|
$ |
81,123 |
|
Gold sales (1) |
|
17,063 |
|
|
14,852 |
|
|
53,882 |
|
|
49,383 |
|
Less: smelting and refining costs |
|
(494 |
) |
|
(744 |
) |
|
(1,945 |
) |
|
(2,335 |
) |
Revenue |
$ |
49,432 |
|
$ |
39,649 |
|
$ |
154,964 |
|
$ |
128,171 |
|
(1) Changes in fair value from provisional pricing in the period are included in silver and gold sales.
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue by product |
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate sales |
$ |
13,528 |
|
$ |
11,614 |
|
$ |
39,273 |
|
$ |
42,192 |
|
Provisional pricing adjustments |
|
523 |
|
|
(443 |
) |
|
(66 |
) |
|
(400 |
) |
Total revenue from concentrate sales |
|
14,051 |
|
|
11,171 |
|
|
39,207 |
|
|
41,792 |
|
Refined metal sales |
|
35,381 |
|
|
28,478 |
|
|
115,757 |
|
|
86,379 |
|
Total revenue |
$ |
49,432 |
|
$ |
39,649 |
|
$ |
154,964 |
|
$ |
128,171 |
|
Provisional pricing adjustments on sales of concentrate consist of provisional and final pricing adjustments made prior to the finalization of the sales contract. The Company's sales contracts are provisionally priced with provisional pricing periods lasting typically one to three months with provisional pricing adjustments recorded to revenue as market prices vary.
12. EXPLORATION AND EVALUATION
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
$ |
(147 |
) |
$ |
143 |
|
$ |
448 |
|
$ |
348 |
|
Share-based compensation |
|
125 |
|
|
117 |
|
|
368 |
|
|
328 |
|
Exploration salaries, wages and benefits |
|
791 |
|
|
330 |
|
|
2,211 |
|
|
1,423 |
|
Direct exploration expenditures |
|
1,599 |
|
|
1,541 |
|
|
4,653 |
|
|
3,353 |
|
Evaluation salaries, wages and benefits |
|
616 |
|
|
487 |
|
|
1,622 |
|
|
1,632 |
|
Direct evaluation expenditures |
|
1,171 |
|
|
1,405 |
|
|
3,376 |
|
|
3,939 |
|
|
$ |
4,155 |
|
$ |
4,023 |
|
$ |
12,678 |
|
$ |
11,023 |
|
13. GENERAL AND ADMINISTRATIVE
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Depreciation and depletion |
$ |
63 |
|
$ |
57 |
|
$ |
179 |
|
$ |
156 |
|
Share-based compensation |
|
694 |
|
|
530 |
|
|
2,654 |
|
|
2,577 |
|
Salaries, wages and benefits |
|
971 |
|
|
852 |
|
|
3,131 |
|
|
3,067 |
|
Directors’ DSU recovery |
|
(482 |
) |
|
(110 |
) |
|
(823 |
) |
|
(1,099 |
) |
Direct general and administrative |
|
1,112 |
|
|
872 |
|
|
4,492 |
|
|
3,145 |
|
|
$ |
2,358 |
|
$ |
2,201 |
|
$ |
9,633 |
|
$ |
7,846 |
|
14. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net changes in non-cash working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and other receivables |
$ |
(1,878 |
) |
$ |
2,205 |
|
$ |
(10,850 |
) |
$ |
(91 |
) |
Income tax receivable |
|
(1,098 |
) |
|
(1,255 |
) |
|
2,760 |
|
|
(2,297 |
) |
Inventories |
|
1,798 |
|
|
(2,049 |
) |
|
(7,495 |
) |
|
(8,473 |
) |
Prepaids |
|
(3,149 |
) |
|
197 |
|
|
(4,898 |
) |
|
(6,234 |
) |
Accounts payable and accrued liabilities |
|
1,670 |
|
|
1,351 |
|
|
(2,355 |
) |
|
(4,265 |
) |
Income taxes payable |
|
7 |
|
|
(364 |
) |
|
680 |
|
|
403 |
|
|
$ |
(2,650 |
) |
$ |
85 |
|
$ |
(22,158 |
) |
$ |
(20,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Reclamation included in mineral properties, plant and equipment |
$ |
(9 |
) |
$ |
- |
|
$ |
(654 |
) |
$ |
- |
|
Fair value of exercised options allocated to share capital |
$ |
- |
|
$ |
(11 |
) |
$ |
(1,305 |
) |
$ |
(766 |
) |
Fair value of performance share units allocated to share capital |
$ |
- |
|
$ |
(555 |
) |
$ |
(405 |
) |
$ |
(1,361 |
) |
Fair value of capital assets acquired under finance leases |
$ |
- |
|
$ |
(2,745 |
) |
$ |
- |
|
$ |
7,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other cash disbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
$ |
3,094 |
|
$ |
2,733 |
|
$ |
5,623 |
|
$ |
3,184 |
|
Special mining duty paid |
$ |
- |
|
$ |
- |
|
$ |
2,654 |
|
$ |
2,272 |
|
15. SEGMENT DISCLOSURES
The Company's operating segments are based on internal management reports that are reviewed by the Company's executives (the chief operating decision makers) in assessing performance. The Company has two operating mining segments which are located in Mexico, Guanaceví and Bolañitos, and formerly the El Compas mine which was on care and maintenance until the sale of the mine on September 9, 2022. The Company has one development project in Mexico, Terronera, as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico, Chile and the USA. Exploration projects that are in the local district surrounding a mine are included in the mine's segments. Prepaids as well as the accounts payable and accrued liabilities in Terronera segment are predominantly related to the ongoing construction and development in the Terronera project.
September 30, 2023 |
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
Terronera |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
18,126 |
|
$ |
7,166 |
|
$ |
12,042 |
|
$ |
1,756 |
|
$ |
1,867 |
|
$ |
40,957 |
|
Other investments |
|
6,192 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
6,192 |
|
Accounts and other receivables |
|
1,053 |
|
|
476 |
|
|
6,280 |
|
|
8,847 |
|
|
8 |
|
|
16,664 |
|
Loans receivable |
|
3,523 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,523 |
|
Income tax receivable |
|
19 |
|
|
1,124 |
|
|
72 |
|
|
48 |
|
|
1 |
|
|
1,264 |
|
Inventories |
|
139 |
|
|
|
|
|
21,810 |
|
|
5,625 |
|
|
27 |
|
|
27,601 |
|
Prepaids |
|
989 |
|
|
396 |
|
|
882 |
|
|
234 |
|
|
35,007 |
|
|
37,508 |
|
Non-current deposits |
|
251 |
|
|
2 |
|
|
332 |
|
|
93 |
|
|
39 |
|
|
717 |
|
Non-current income tax receivable |
|
3,570 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,570 |
|
Non-current IVA receivable |
|
- |
|
|
- |
|
|
2,293 |
|
|
- |
|
|
15,183 |
|
|
17,476 |
|
Right-of-use leased assets |
|
435 |
|
|
- |
|
|
- |
|
|
183 |
|
|
201 |
|
|
819 |
|
Mineral properties, plant and equipment |
|
611 |
|
|
81,692 |
|
|
72,515 |
|
|
26,888 |
|
|
95,158 |
|
|
276,864 |
|
Total assets |
$ |
34,908 |
|
$ |
90,856 |
|
$ |
116,226 |
|
$ |
43,674 |
|
$ |
147,491 |
|
$ |
433,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
4,978 |
|
$ |
592 |
|
$ |
16,211 |
|
$ |
4,899 |
|
$ |
16,736 |
|
$ |
43,416 |
|
Income taxes payable |
|
- |
|
|
- |
|
|
6,258 |
|
|
1,038 |
|
|
- |
|
|
7,296 |
|
Loans payable |
|
- |
|
|
- |
|
|
351 |
|
|
624 |
|
|
8,864 |
|
|
9,839 |
|
Lease obligations |
|
669 |
|
|
18 |
|
|
- |
|
|
215 |
|
|
212 |
|
|
1,114 |
|
Provision for reclamation and rehabilitation |
|
- |
|
|
44 |
|
|
4,847 |
|
|
3,787 |
|
|
904 |
|
|
9,582 |
|
Deferred income tax liability |
|
- |
|
|
- |
|
|
15,976 |
|
|
297 |
|
|
- |
|
|
16,273 |
|
Other non-current liabilities |
|
- |
|
|
8 |
|
|
508 |
|
|
488 |
|
|
12 |
|
|
1,016 |
|
Total liabilities |
$ |
5,647 |
|
$ |
662 |
|
$ |
44,151 |
|
$ |
11,348 |
|
$ |
26,728 |
|
$ |
88,536 |
|
December 31, 2022 |
|
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
Terronera |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
38,466 |
|
$ |
1,935 |
|
$ |
32,997 |
|
$ |
7,371 |
|
$ |
2,622 |
|
$ |
83,391 |
|
Other investments |
|
10,035 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
10,035 |
|
Accounts and other receivables |
|
383 |
|
|
669 |
|
|
5,824 |
|
|
6,246 |
|
|
14 |
|
|
13,136 |
|
Loans receivable |
|
3,729 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,729 |
|
Income tax receivable |
|
17 |
|
|
- |
|
|
3,934 |
|
|
73 |
|
|
- |
|
|
4,024 |
|
Inventories |
|
120 |
|
|
- |
|
|
14,094 |
|
|
4,942 |
|
|
28 |
|
|
19,184 |
|
Prepaids |
|
1,685 |
|
|
144 |
|
|
1,155 |
|
|
536 |
|
|
13,431 |
|
|
16,951 |
|
Non-current deposits |
|
150 |
|
|
2 |
|
|
321 |
|
|
92 |
|
|
- |
|
|
565 |
|
Non-current IVA receivable |
|
- |
|
|
- |
|
|
1,505 |
|
|
- |
|
|
8,649 |
|
|
10,154 |
|
Non-current income tax receivable |
|
3,570 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
3,570 |
|
Right-of-use leased assets |
|
512 |
|
|
- |
|
|
- |
|
|
294 |
|
|
- |
|
|
806 |
|
Mineral properties, plant and equipment |
|
616 |
|
|
81,660 |
|
|
67,261 |
|
|
28,106 |
|
|
56,249 |
|
|
233,892 |
|
Total assets |
$ |
59,283 |
|
$ |
84,410 |
|
$ |
127,091 |
|
$ |
47,660 |
|
$ |
80,993 |
|
$ |
399,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
6,837 |
|
$ |
743 |
|
$ |
19,875 |
|
$ |
5,327 |
|
$ |
7,049 |
|
$ |
39,831 |
|
Income taxes payable |
|
65 |
|
|
282 |
|
|
5,539 |
|
|
730 |
|
|
- |
|
|
6,616 |
|
Loans payable |
|
- |
|
|
- |
|
|
1,025 |
|
|
2,092 |
|
|
11,393 |
|
|
14,510 |
|
Lease obligations |
|
780 |
|
|
- |
|
|
293 |
|
|
- |
|
|
- |
|
|
1,073 |
|
Provision for reclamation and rehabilitation |
|
- |
|
|
44 |
|
|
4,103 |
|
|
3,203 |
|
|
251 |
|
|
7,601 |
|
Deferred income tax liability |
|
- |
|
|
- |
|
|
12,647 |
|
|
297 |
|
|
- |
|
|
12,944 |
|
Other non-current liabilities |
|
- |
|
|
69 |
|
|
443 |
|
|
437 |
|
|
19 |
|
|
968 |
|
Total liabilities |
$ |
7,682 |
|
$ |
1,138 |
|
$ |
43,925 |
|
$ |
12,086 |
|
$ |
18,712 |
|
$ |
83,543 |
|
Three months ended September 30, 2023 |
|
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
|
Terronera |
|
|
Total |
|
Silver revenue |
$ |
- |
|
$ |
- |
|
$ |
30,054 |
|
$ |
2,810 |
|
|
$ |
- |
|
$ |
32,864 |
|
Gold revenue |
|
- |
|
|
- |
|
|
5,326 |
|
|
11,737 |
|
|
|
- |
|
|
17,063 |
|
Less: smelting and refining costs |
|
- |
|
|
- |
|
|
- |
|
|
(495 |
) |
|
|
- |
|
|
(495 |
) |
Total revenue |
$ |
- |
|
$ |
- |
|
$ |
35,380 |
|
$ |
14,052 |
|
|
$ |
- |
|
$ |
49,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
$ |
- |
|
$ |
- |
|
$ |
2,592 |
|
$ |
2,381 |
|
|
$ |
- |
|
$ |
4,973 |
|
processing |
|
- |
|
|
- |
|
|
1,339 |
|
|
643 |
|
|
|
- |
|
|
1,982 |
|
administrative |
|
- |
|
|
- |
|
|
1,626 |
|
|
846 |
|
|
|
- |
|
|
2,472 |
|
share-based compensation |
|
- |
|
|
- |
|
|
31 |
|
|
13 |
|
|
|
- |
|
|
44 |
|
change in inventory |
|
- |
|
|
- |
|
|
428 |
|
|
125 |
|
|
|
- |
|
|
553 |
|
Total salaries, wages and benefits |
|
- |
|
|
- |
|
|
6,016 |
|
|
4,008 |
|
|
|
- |
|
|
10,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
|
- |
|
|
- |
|
|
10,040 |
|
|
3,309 |
|
|
|
- |
|
|
13,349 |
|
processing |
|
- |
|
|
- |
|
|
4,674 |
|
|
1,659 |
|
|
|
- |
|
|
6,333 |
|
administrative |
|
- |
|
|
- |
|
|
1,990 |
|
|
950 |
|
|
|
- |
|
|
2,940 |
|
change in inventory |
|
- |
|
|
- |
|
|
1,174 |
|
|
244 |
|
|
|
- |
|
|
1,418 |
|
Total direct production costs |
|
- |
|
|
- |
|
|
17,878 |
|
|
6,162 |
|
|
|
- |
|
|
24,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and depletion |
|
- |
|
|
- |
|
|
3,633 |
|
|
3,090 |
|
|
|
- |
|
|
6,723 |
|
change in inventory |
|
- |
|
|
- |
|
|
1,051 |
|
|
81 |
|
|
|
- |
|
|
1,132 |
|
Total depreciation and depletion |
|
- |
|
|
- |
|
|
4,684 |
|
|
3,171 |
|
|
|
- |
|
|
7,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
- |
|
|
- |
|
|
4,754 |
|
|
67 |
|
|
|
- |
|
|
4,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
$ |
- |
|
$ |
- |
|
$ |
33,332 |
|
$ |
13,408 |
|
|
$ |
- |
|
$ |
46,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write off of mineral properties |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes |
$ |
2,273 |
|
$ |
(2,368 |
) |
$ |
2,048 |
|
$ |
644 |
|
|
$ |
(1,787 |
) |
$ |
810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax expense (recovery) |
|
- |
|
|
750 |
|
|
1,398 |
|
|
102 |
|
|
|
- |
|
|
2,250 |
|
Deferred income tax expense (recovery) |
|
- |
|
|
- |
|
|
888 |
|
|
- |
|
|
|
- |
|
|
888 |
|
Total income tax expense (recovery) |
|
- |
|
|
750 |
|
|
2,286 |
|
|
102 |
|
|
|
- |
|
|
3,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
2,273 |
|
$ |
(3,118 |
) |
$ |
(238 |
) |
$ |
542 |
|
|
$ |
(1,787 |
) |
$ |
(2,328 |
) |
The Exploration segment included $352 of costs incurred in Chile for the three months ended September 30, 2023 (September 30, 2022 - $347).
Three months ended September 30, 2022 |
|
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
El Compas |
|
|
Terronera |
|
|
Total |
|
Silver revenue |
$ |
- |
|
$ |
- |
|
$ |
23,241 |
|
$ |
2,300 |
|
$ |
- |
|
$ |
- |
|
$ |
25,541 |
|
Gold revenue |
|
- |
|
|
- |
|
|
5,237 |
|
|
9,615 |
|
|
- |
|
|
- |
|
|
14,852 |
|
Less: smelting and refining costs |
|
- |
|
|
- |
|
|
- |
|
|
(744 |
) |
|
- |
|
|
- |
|
|
(744 |
) |
Total revenue |
$ |
- |
|
$ |
- |
|
$ |
28,478 |
|
$ |
11,171 |
|
$ |
- |
|
$ |
- |
|
$ |
39,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
$ |
- |
|
$ |
- |
|
$ |
2,052 |
|
$ |
1,851 |
|
$ |
- |
|
$ |
- |
|
$ |
3,903 |
|
processing |
|
- |
|
|
- |
|
|
907 |
|
|
554 |
|
|
- |
|
|
- |
|
|
1,461 |
|
administrative |
|
- |
|
|
- |
|
|
1,625 |
|
|
1,016 |
|
|
- |
|
|
- |
|
|
2,641 |
|
stock based compensation |
|
- |
|
|
- |
|
|
56 |
|
|
57 |
|
|
- |
|
|
- |
|
|
113 |
|
change in inventory |
|
- |
|
|
- |
|
|
(736 |
) |
|
134 |
|
|
- |
|
|
- |
|
|
(602 |
) |
Total salaries, wages and benefits |
|
- |
|
|
- |
|
|
3,904 |
|
|
3,612 |
|
|
- |
|
|
- |
|
|
7,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
|
- |
|
|
- |
|
|
7,298 |
|
|
3,018 |
|
|
- |
|
|
- |
|
|
10,316 |
|
processing |
|
- |
|
|
- |
|
|
4,138 |
|
|
1,457 |
|
|
- |
|
|
- |
|
|
5,595 |
|
administrative |
|
- |
|
|
- |
|
|
1,742 |
|
|
1,079 |
|
|
- |
|
|
- |
|
|
2,821 |
|
change in inventory |
|
- |
|
|
- |
|
|
(1,870 |
) |
|
245 |
|
|
- |
|
|
- |
|
|
(1,625 |
) |
Total direct production costs |
|
- |
|
|
- |
|
|
11,308 |
|
|
5,799 |
|
|
- |
|
|
- |
|
|
17,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and depletion |
|
- |
|
|
- |
|
|
3,348 |
|
|
2,542 |
|
|
- |
|
|
- |
|
|
5,890 |
|
change in inventory |
|
- |
|
|
- |
|
|
(229 |
) |
|
92 |
|
|
- |
|
|
- |
|
|
(137 |
) |
Total depreciation and depletion |
|
- |
|
|
- |
|
|
3,119 |
|
|
2,634 |
|
|
- |
|
|
- |
|
|
5,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
- |
|
|
- |
|
|
2,762 |
|
|
59 |
|
|
- |
|
|
- |
|
|
2,821 |
|
Write down of inventory to NRV |
|
- |
|
|
- |
|
|
642 |
|
|
681 |
|
|
- |
|
|
- |
|
|
1,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
$ |
- |
|
$ |
- |
|
$ |
21,735 |
|
$ |
12,785 |
|
$ |
- |
|
$ |
- |
|
$ |
34,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care and maintenance costs |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
203 |
|
|
- |
|
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes |
$ |
837 |
|
$ |
(2,131 |
) |
$ |
6,743 |
|
$ |
(1,614 |
) |
$ |
(203 |
) |
$ |
(1,892 |
) |
$ |
1,740 |
|
Current income tax expense |
|
- |
|
|
- |
|
|
1,258 |
|
|
(72 |
) |
|
- |
|
|
- |
|
|
1,186 |
|
Deferred income tax expense |
|
- |
|
|
- |
|
|
2,053 |
|
|
- |
|
|
- |
|
|
- |
|
|
2,053 |
|
Total income tax expense |
|
- |
|
|
- |
|
|
3,311 |
|
|
(72 |
) |
|
- |
|
|
- |
|
|
3,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
837 |
|
$ |
(2,131 |
) |
$ |
3,432 |
|
$ |
(1,542 |
) |
$ |
(203 |
) |
$ |
(1,892 |
) |
$ |
(1,499 |
) |
The Exploration segment included $347 of costs incurred in Chile for the three months ended September 30, 2022 (September 30, 2021 - $341).
Nine months ended September 30, 2023 |
|
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
Terronera |
|
|
Total |
|
Silver revenue |
$ |
- |
|
$ |
- |
|
$ |
93,528 |
|
$ |
9,499 |
|
$ |
- |
|
$ |
103,027 |
|
Gold revenue |
|
- |
|
|
- |
|
|
22,228 |
|
|
31,654 |
|
|
- |
|
|
53,882 |
|
Less: smelting and refining costs |
|
- |
|
|
- |
|
|
- |
|
|
(1,945 |
) |
|
- |
|
|
(1,945 |
) |
Total revenue |
$ |
- |
|
$ |
- |
|
$ |
115,756 |
|
$ |
39,208 |
|
$ |
- |
|
$ |
154,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
$ |
- |
|
$ |
- |
|
$ |
6,987 |
|
$ |
7,005 |
|
$ |
- |
|
$ |
13,992 |
|
processing |
|
- |
|
|
- |
|
|
3,499 |
|
|
1,911 |
|
|
- |
|
|
5,410 |
|
administrative |
|
- |
|
|
- |
|
|
5,162 |
|
|
2,407 |
|
|
- |
|
|
7,569 |
|
stock based compensation |
|
- |
|
|
- |
|
|
(50 |
) |
|
(68 |
) |
|
- |
|
|
(118 |
) |
change in inventory |
|
- |
|
|
- |
|
|
(1,276 |
) |
|
(190 |
) |
|
- |
|
|
(1,466 |
) |
Total salaries, wages and benefits |
|
- |
|
|
- |
|
|
14,322 |
|
|
11,065 |
|
|
- |
|
|
25,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
|
- |
|
|
- |
|
|
24,481 |
|
|
10,080 |
|
|
- |
|
|
34,561 |
|
processing |
|
- |
|
|
- |
|
|
14,554 |
|
|
4,924 |
|
|
- |
|
|
19,478 |
|
administrative |
|
- |
|
|
- |
|
|
6,097 |
|
|
3,260 |
|
|
- |
|
|
9,357 |
|
change in inventory |
|
- |
|
|
- |
|
|
(2,618 |
) |
|
(269 |
) |
|
- |
|
|
(2,887 |
) |
Total direct production costs |
|
- |
|
|
- |
|
|
42,514 |
|
|
17,995 |
|
|
- |
|
|
60,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and depletion |
|
- |
|
|
- |
|
|
12,288 |
|
|
9,338 |
|
|
- |
|
|
21,626 |
|
change in inventory |
|
- |
|
|
- |
|
|
(749 |
) |
|
(173 |
) |
|
- |
|
|
(922 |
) |
Total depreciation and depletion |
|
- |
|
|
- |
|
|
11,539 |
|
|
9,165 |
|
|
- |
|
|
20,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
- |
|
|
- |
|
|
16,904 |
|
|
201 |
|
|
- |
|
|
17,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
$ |
- |
|
$ |
- |
|
$ |
85,279 |
|
$ |
38,426 |
|
$ |
- |
|
$ |
123,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write off of mineral properties |
|
- |
|
|
(435 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(435 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before taxes |
$ |
(605 |
) |
$ |
(8,115 |
) |
$ |
30,477 |
|
$ |
782 |
|
$ |
(4,998 |
) |
$ |
17,541 |
|
Current income tax expense |
|
- |
|
|
750 |
|
|
9,954 |
|
|
433 |
|
|
- |
|
|
11,137 |
|
Deferred income tax expense |
|
- |
|
|
- |
|
|
3,330 |
|
|
- |
|
|
- |
|
|
3,330 |
|
Total income tax expense |
|
- |
|
|
750 |
|
|
13,284 |
|
|
433 |
|
|
- |
|
|
14,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
(605 |
) |
$ |
(8,865 |
) |
$ |
17,193 |
|
$ |
349 |
|
$ |
(4,998 |
) |
$ |
3,074 |
|
The Exploration segment included $1,148 of costs incurred in Chile for the nine months ended September 30, 2023 (September 30, 2022 - $1,068).
Nine months ended September 30, 2022 |
|
|
|
Corporate |
|
|
Exploration |
|
|
Guanaceví |
|
|
Bolanitos |
|
|
El Compas |
|
|
Terronera |
|
|
Total |
|
Silver revenue |
$ |
- |
|
$ |
- |
|
$ |
70,401 |
|
$ |
10,722 |
|
$ |
- |
|
$ |
- |
|
$ |
81,123 |
|
Gold revenue |
|
- |
|
|
- |
|
|
15,978 |
|
|
33,405 |
|
|
- |
|
|
- |
|
|
49,383 |
|
Less: smelting and refining costs |
|
- |
|
|
- |
|
|
- |
|
|
(2,335 |
) |
|
- |
|
|
- |
|
|
(2,335 |
) |
Total revenue |
$ |
- |
|
$ |
- |
|
$ |
86,379 |
|
$ |
41,792 |
|
$ |
- |
|
$ |
- |
|
$ |
128,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
$ |
- |
|
$ |
- |
|
$ |
5,845 |
|
$ |
5,942 |
|
$ |
- |
|
$ |
- |
|
$ |
11,787 |
|
processing |
|
- |
|
|
- |
|
|
2,608 |
|
|
1,751 |
|
|
- |
|
|
- |
|
|
4,359 |
|
administrative |
|
- |
|
|
- |
|
|
4,417 |
|
|
3,044 |
|
|
- |
|
|
- |
|
|
7,461 |
|
stock based compensation |
|
- |
|
|
- |
|
|
176 |
|
|
177 |
|
|
- |
|
|
- |
|
|
353 |
|
change in inventory |
|
- |
|
|
- |
|
|
(1,789 |
) |
|
784 |
|
|
- |
|
|
- |
|
|
(1,005 |
) |
Total salaries, wages and benefits |
|
- |
|
|
- |
|
|
11,257 |
|
|
11,698 |
|
|
- |
|
|
- |
|
|
22,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
mining |
|
- |
|
|
- |
|
|
21,447 |
|
|
9,385 |
|
|
- |
|
|
- |
|
|
30,832 |
|
processing |
|
- |
|
|
- |
|
|
11,064 |
|
|
4,495 |
|
|
- |
|
|
- |
|
|
15,559 |
|
administrative |
|
- |
|
|
- |
|
|
5,092 |
|
|
3,300 |
|
|
- |
|
|
- |
|
|
8,392 |
|
change in inventory |
|
- |
|
|
- |
|
|
(7,847 |
) |
|
1,521 |
|
|
- |
|
|
- |
|
|
(6,326 |
) |
Total direct production costs |
|
- |
|
|
- |
|
|
29,756 |
|
|
18,701 |
|
|
- |
|
|
- |
|
|
48,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
depreciation and depletion |
|
- |
|
|
- |
|
|
10,285 |
|
|
7,842 |
|
|
- |
|
|
- |
|
|
18,127 |
|
change in inventory |
|
- |
|
|
- |
|
|
(2,316 |
) |
|
423 |
|
|
- |
|
|
- |
|
|
(1,893 |
) |
Total depreciation and depletion |
|
- |
|
|
- |
|
|
7,969 |
|
|
8,265 |
|
|
- |
|
|
- |
|
|
16,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties |
|
- |
|
|
- |
|
|
9,124 |
|
|
208 |
|
|
- |
|
|
- |
|
|
9,332 |
|
Write down of inventory to NRV |
|
- |
|
|
- |
|
|
642 |
|
|
681 |
|
|
- |
|
|
- |
|
|
1,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
$ |
- |
|
$ |
- |
|
$ |
58,748 |
|
$ |
39,553 |
|
$ |
- |
|
$ |
- |
|
$ |
98,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care and maintenance costs |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
582 |
|
|
- |
|
|
582 |
|
Write of of exploration properties |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
|
500 |
|
Earnings (loss) before taxes |
$ |
(5,972 |
) |
$ |
(5,452 |
) |
$ |
27,631 |
|
$ |
2,239 |
|
$ |
(582 |
) |
$ |
(6,071 |
) |
$ |
11,793 |
|
Current income tax expense |
|
- |
|
|
- |
|
|
3,189 |
|
|
337 |
|
|
- |
|
|
- |
|
|
3,526 |
|
Deferred income tax expense |
|
- |
|
|
- |
|
|
9,091 |
|
|
936 |
|
|
- |
|
|
- |
|
|
10,027 |
|
Total income tax expense |
|
- |
|
|
- |
|
|
12,280 |
|
|
1,273 |
|
|
- |
|
|
- |
|
|
13,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ |
(5,972 |
) |
$ |
(5,452 |
) |
$ |
15,351 |
|
$ |
966 |
|
$ |
(582 |
) |
$ |
(6,071 |
) |
$ |
(1,760 |
) |
The Exploration segment included $1,068 of costs incurred in Chile for the nine months ended September 30, 2022 (September 30, 2021 - $1,356).
16. INCOME TAXES
Minera Santa Cruz y Garibaldi S.A. de C.V. ("MSCG"), a subsidiary of the Company, received a MXN 238 million assessment on October 12, 2010 by Mexican fiscal authorities for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return, failure to provide appropriate support for loans made to MSCG from affiliated companies, and deemed an unrecorded distribution of dividends to shareholders, among other individually immaterial items. MSCG immediately initiated a Nullity action and filed an administrative attachment to dispute the assessment.
In June 2015, the Superior Court ruled in favour of MSCG on a number of the matters under appeal; however, the Superior Court ruled against MSCG for failure to provide appropriate support for certain deductions taken in MSCG's 2006 tax return. In June 2016, the Company received an MXN 122.9 million ($6,800) tax assessment based on the June 2015 ruling. The 2016 tax assessment comprised of MXN 41.8 million owed ($2,300) in taxes, MXN 17.7 million ($1,000) in inflationary charges, MXN 40.4 million ($2,300) in interest and MXN 23.0 million ($1,300) in penalties. The 2016 tax assessment was issued for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return and failure to provide appropriate support for loans made to MSCG from affiliated companies. The MXN 122.9 million assessment includes interest and penalties. If MSCG agrees to pay the tax assessment, or a lesser settled amount, it is eligible to apply for forgiveness of 100% of the penalties and 50% of the interest.
The Company filed an appeal against the June 2016 tax assessment on the basis certain items rejected by the courts were included in the new tax assessment, and a number of deficiencies exist within the assessment. Since issuance of the assessment interest charges of MXN 18.6 million ($1.1) and inflationary charges of MXN 27.8 million ($1,600) have accumulated.
Included in the Company's consolidated financial statements are net assets of $964 held by MSCG. Following the Tax Court's rulings, MSCG is in discussions with the tax authorities with regards to the shortfall of assets within MSCG to settle its estimated tax liability. An alternative settlement option would be to transfer the shares and assets of MSCG to the tax authorities. As of September 30, 2023, the Company's income tax payable includes an allowance for transferring the shares and assets of MSCG amounting to $964. The Company is currently assessing MSCG's settlement options based on ongoing court proceedings and discussion with the tax authorities. The Company has been advised that the appeal filed with the Federal Tax Court, against the June 2016 tax assessment has been rejected. The Company continues to assess MSCG's settlement options.
Compania Minera Del Cubo S.A. de C.V. ("Cubo"), a subsidiary of the Company, received a MXN 58.5 million ($2,900) assessment in 2019 by Mexican fiscal authorities for alleged failure to provide the appropriate support for depreciation deductions taken in the Cubo 2016 tax return and denied eligibility of deductions of certain suppliers. The tax assessment consisted of MXN 24.1 million ($1,200) for taxes, MXN 21.0 million ($1,100) for penalties, MXN 10.4 million ($500) for interest and MXN 3.0 million ($100) for inflation. At the time of the tax assessment the Cubo entity had and continues to have sufficient loss carry forwards which would be applied against the assessed difference of taxable income. The Mexican tax authorities did not consider these losses in the assessment.
Due to the denial of certain suppliers for income tax purposes in the Cubo assessment, the invoices from these suppliers have been assessed as ineligible for refunds of IVA paid on the invoices. The assessment includes MXN 14.7 million ($600) for re-payment of IVA (value added taxes) refunded on these supplier payments. In the Company's judgement the suppliers and invoices meet the necessary requirements to be deductible for income tax purposes and the recovery of IVA.
The Company has filed an administrative appeal related to the 2016 Cubo Tax assessment. The Company had previously provided a lien on certain El Cubo mining concessions during the appeal process. To facilitate the sale of the El Cubo mine and related assets, the Company elected to pay the assessed amount of $3,500 during Q1, 2021. During the appeal process the amount paid has been classified as a non-current income tax receivable. Since issuance of the assessment interest charges of MXN 9.9 million ($500) and inflationary charges of MXN 1.6 million ($100) had accumulated. The Company continues to assess that it is probable that its appeal will prevail, and no provision is recognized in respect of the Cubo tax assessment.
17. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
(a) Financial assets and liabilities
As at September 30, 2023, the carrying and fair values of the Company's financial instruments by category are as follows:
|
|
Fair value through profit or loss |
|
|
Amortized cost |
|
|
Carrying value |
|
|
Fair value |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
- |
|
|
40,957 |
|
|
40,957 |
|
|
40,957 |
|
Other investments |
|
6,192 |
|
|
- |
|
|
6,192 |
|
|
6,192 |
|
Trade and other receivables |
|
6,918 |
|
|
345 |
|
|
7,263 |
|
|
7,263 |
|
Loans receivable |
|
- |
|
|
3,523 |
|
|
3,523 |
|
|
3,523 |
|
Total financial assets |
|
13,110 |
|
|
44,825 |
|
|
57,935 |
|
|
57,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
2,627 |
|
|
40,789 |
|
|
43,416 |
|
|
43,416 |
|
Loans payable |
|
- |
|
|
9,839 |
|
|
9,839 |
|
|
9,839 |
|
Total financial liabilities |
|
2,627 |
|
|
50,628 |
|
|
53,255 |
|
|
53,255 |
|
(b) Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Level 1:
Other investments are comprised of marketable securities. When there is an active market are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security. As a result, $6,143 of these financial assets have been included in Level 1 of the fair value hierarchy.
Cash settled deferred share units are determined based on a market approach reflecting the Company's closing share price or share price at redemption date for any pending settlements.
Level 2:
The Company determines the fair value of the embedded derivatives related to its accounts and other receivables based on the quoted closing price obtained from the silver and gold metal exchanges and the fair value of the SARs liability is determined by using an option pricing model.
Level 3:
Included in other investments are share purchase warrants. Fair value of the warrants at each period end has been estimated using the Black-Scholes Option Pricing Model. As a result, $49 of these financial assets have been included in Level 3 of the fair value hierarchy.
Assets and liabilities as at September 30, 2023 measured at fair value on a recurring basis include:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
- |
|
|
6,918 |
|
|
- |
|
|
6,918 |
|
Other investments |
|
6,143 |
|
|
- |
|
|
49 |
|
|
6,192 |
|
Total financial assets |
|
6,143 |
|
|
6,918 |
|
|
49 |
|
|
13,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred share units |
|
2,552 |
|
|
- |
|
|
- |
|
|
2,552 |
|
Share appreciation rights |
|
- |
|
|
75 |
|
|
- |
|
|
75 |
|
Total financial liabilities |
|
2,552 |
|
|
75 |
|
|
- |
|
|
2,627 |
|
18. SUBSEQUENT EVENTS
On October 6, 2023, the Company, through its wholly owned subsidiary Terronera Precious Metals, S.A. de C.V., executed a credit agreement with Societe Generale and ING Bank N. V. with certain definitive terms agreed to for a senior secured debt facility for up to $120 million (the "Debt Facility). Proceeds from the Debt Facility will be used towards construction of the underground mine and mill at the Company's Terronera Project. The Debt Facility has a term of 8.5 years, including a 2-year grace period during the construction phase, and carries interest rate equal to US Secured Overnight Financing Rate ("SOFR") + 4.50% per annum prior to completion and SOFR + 3.75% per annum from completion of the Terronera project until the fifth anniversary of the loan, and 4.25% from the fifth anniversary onwards.
Repayment of the facility begins in the fourth quarter of 2025, in the form of quarterly installments, in addition a cash sweep will be applied to 35% of excess cash flow after debt service from project completion onwards until $35 million of loan principal has been prepaid.
The Debt Facility is subject to certain customary conditions precedent and debt servicing covenants, including requirement for the Company to enter into gold and foreign exchange hedging programs prior to initial drawdown. The Company is required to hedge 68,000 ounces of gold over the initial two operating years. The Company is also required to hedge 75% of the estimated remaining capital expenditures incurred in Mexican Pesos and thereafter, a foreign exchange protection program for operations for 70% of the projected operating costs incurred in Mexican pesos. Additionally, cost overrun funding is required in the form of cash, letter of credit issued by a Canadian financial institution or a combination of both for up to $48 million.
The Debt Facility is secured through corporate guarantees from the Company, certain of the Company's subsidiaries and a first ranking security interest over the Terronera project.
HEAD OFFICE Suite #1130, 609 Granville Street
Vancouver, BC, Canada V7Y 1G5
Telephone: (604) 685-9775
1-877-685-9775
Facsimile: (604) 685-9744
Website: www.edrsilver.com
DIRECTORS Margaret Beck
Ricardo Campoy
Daniel Dickson
Amy Jacobsen
Rex McLennan
Kenneth Pickering
Mario Szotlender
Christine West
OFFICERS Daniel Dickson - Chief Executive Officer
Donald Gray - Chief Operating Officer
Christine West - Chief Financial Officer
Greg Baylock - Vice-President, Operations
Luis Castro - Vice-President, Exploration
Dale Mah - Vice-President, Corporate Development
Galina Meleger - Vice-President, Investor Relations
Bernard Poznanski - Corporate Secretary
REGISTRAR AND Computershare Trust Company of Canada
TRANSFER AGENT 3rd Floor - 510 Burrard Street
Vancouver, BC, V6C 3B9
AUDITORS KPMG LLP
777 Dunsmuir Street
Vancouver, BC, V7Y 1K3
SOLICITORS Koffman Kalef LLP
19th Floor - 885 West Georgia Street
Vancouver, BC, V6C 3H4
SHARES LISTED Toronto Stock Exchange
Trading Symbol - EDR
New York Stock Exchange
Trading Symbol - EXK
This Management Discussion and Analysis ("MD&A") should be read in conjunction with the condensed consolidated interim financial statements of Endeavour Silver Corp. ("Endeavour" or "the Company") for the three and nine months ended September 30, 2023 and the related notes contained therein, which were prepared in accordance with IAS34 - Interim financial reporting if the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Company uses certain non-IFRS financial measures in this MD&A as described under "Non-IFRS Measures". Additional information relating to the Company, including the most recent Annual Information Form (the "Annual Information Form"), is available on SEDAR at www.sedar.com, and the Company's most recent annual report on Form 40-F has been filed with the U.S. Securities and Exchange Commission (the "SEC") on EDGAR at www.sec.gov. This MD&A contains "forward-looking statements" that are subject to risk factors set out in a cautionary note contained herein. All dollar ($) amounts are expressed in United States ("$") dollars and tabular amounts are expressed in thousands of U.S. dollars unless Canadian dollars (CAN$) or Mexican Pesos (MXN) are otherwise indicated. This MD&A is dated as of November 3, 2023 and all information contained is current as of August 3, 2023 unless otherwise stated.
Cautionary Note to U.S. Investors Regarding Mineral Reserves and Resources
This MD&A has been prepared in accordance with the requirements of Canadian provincial securities laws, which differ from the requirements of U.S. securities laws. As a result, the Company reports the mineral reserves and resources of the projects it has an interest in according to Canadian standards. Canadian reporting requirements for disclosure of mineral properties are governed by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI-43 101"). NI-43 101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These standards differ from the requirements of the SEC that are applicable to domestic United States reporting companies under subpart 1300 of Regulation S-K ("S-K 1300") under the Exchange Act. As an issuer that prepares and files its reports with the SEC pursuant to the MJDS, the Company is not subject to the requirements of S-K 1300. Any mineral reserves and mineral resources reported by the Company in accordance with NI 43-101 may not qualify as such under or differ from those prepared in accordance with S-K 1300. Accordingly, information included or incorporated by reference in this MD&A concerning descriptions of mineralization and estimates of mineral reserves and resources under Canadian standards may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of S-K 130.
Forward-Looking Statements
This MD&A contains "forward-looking statements" within the meaning of the U.S. Securities Litigation Reform Act of 1995, as amended and "forward-looking information" within the meaning of applicable Canadian securities legislation. Such forward-looking statements and information include, but are not limited to, statements regarding the development and financing of the Terronera project, including: anticipated timing of the project; anticipated timing of the completion of conditions precedent to drawdown under the Debt Facility, estimated project economics, Terronera's forecasted operations, costs and expenditures, and the timing and results of various related activities; estimation of mineral resources at Pitarrilla, prospects for Terronera, Pitarrilla and Parral, Endeavour's anticipated performance in 2023, including silver and gold production, financial results, timing and expenditures to develop new silver mines and mineralized zones, silver and gold grades and recoveries, cash costs per ounce (oz), capital expenditures and sustaining capital and the timing and results of various activities.. Forward-looking statements are frequently characterized by words such as "plan", "expect", "forecast", "project", "intend", "believe", "anticipate", "outlook" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward- looking statements are based on the opinions and estimates of management at the dates the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements.
The Company does not intend to, and does not assume any obligation to, update such forward-looking statements or information, other than as required by applicable law. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors and are based on assumptions that may cause the actual results, level of activity, performance or achievements of the Company and its operations to be materially different from those expressed or implied by such statements. Such factors and assumptions include, among others: to satisfy conditions precedent to drawdown under the Debt Facility; the ongoing effects of inflation and supply chain issues on the Terronera Project economics; fluctuations in the prices of silver and gold, fluctuations in the currency markets (particularly the Mexican peso, Chilean peso, Canadian dollar and U.S. dollar); changes in national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and Mexico; operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining (including, but not limited to environmental hazards, industrial accidents, unusual or unexpected geological conditions, pressures, cave-ins and flooding); inadequate insurance, or inability to obtain insurance; availability of and costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, diminishing quantities or grades of mineral reserves as properties are mined; the ability to successfully integrate acquisitions; risks in obtaining necessary licenses and permits; and challenges to the Company's title to properties; as well as those factors described under "Risk Factors" in the Company's Annual Information Form. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information.
Qualified Person
The scientific and technical information contained in this MD&A relating to the Company's mines and mineral projects has been reviewed and approved by Dale Mah, B.Sc., P.Geo., Vice President Corporate Development of Endeavour, a Qualified Person within the meaning of NI 43-101.
OPERATING HIGHLIGHTS
Nine Months Ended September 30 |
Q3 2023 Highlights |
Nine Months Ended September 30 |
2023 |
2022 |
% Change |
2023 |
2022 |
% Change |
|
|
|
Production |
|
|
|
1,148,735 |
1,458,448 |
(21%) |
Silver ounces produced |
4,266,280 |
4,132,610 |
3% |
9,089 |
9,194 |
(1%) |
Gold ounces produced |
28,250 |
27,178 |
4% |
1,140,597 |
1,445,880 |
(21%) |
Payable silver ounces produced |
4,231,064 |
4,095,696 |
3% |
8,929 |
9,039 |
(1%) |
Payable gold ounces produced |
27,749 |
26,705 |
4% |
1,875,855 |
2,193,968 |
(14%) |
Silver equivalent ounces produced(1) |
6,526,280 |
6,306,850 |
3% |
17.94 |
10.32 |
74% |
Cash costs per silver ounce(2)(3) |
13.80 |
10.21 |
35% |
24.10 |
14.31 |
68% |
Total production costs per ounce(2)(4) |
18.85 |
14.56 |
30% |
29.64 |
20.27 |
46% |
All-in sustaining costs per ounce (2)(5) |
23.41 |
20.24 |
16% |
214,270 |
202,745 |
6% |
Processed tonnes |
653,918 |
610,253 |
7% |
152.04 |
131.61 |
16% |
Direct operating costs per tonne(2)(6) |
140.76 |
128.99 |
9% |
176.37 |
146.30 |
21% |
Direct costs per tonne(2)(6) |
171.78 |
147.65 |
16% |
20.03 |
13.12 |
53% |
Silver co-product cash costs(7) |
17.09 |
14.15 |
21% |
1,626 |
1,144 |
42% |
Gold co-product cash costs(7) |
1,396 |
1,163 |
20% |
|
|
|
Financial |
|
|
|
49.5 |
39.7 |
25% |
Revenue ($ millions) |
155.0 |
128.2 |
21% |
1,370,032 |
1,327,325 |
3% |
Silver ounces sold |
4,337,112 |
3,647,987 |
19% |
8,760 |
8,852 |
(1%) |
Gold ounces sold |
27,769 |
27,025 |
3% |
23.99 |
19.24 |
25% |
Realized silver price per ounce |
23.75 |
22.24 |
7% |
1,948 |
1,678 |
16% |
Realized gold price per ounce |
1,940 |
1,827 |
6% |
(2.3) |
(1.5) |
(55%) |
Net earnings (loss) ($ millions) |
3.1 |
(1.8) |
275% |
(7.4) |
(3.1) |
(135%) |
Adjusted net earnings (loss) (11) ($ millions) |
(1.9) |
(1.1) |
(70%) |
2.7 |
5.1 |
(48%) |
Mine operating earnings ($ millions) |
31.3 |
29.9 |
5% |
10.6 |
12.3 |
(14%) |
Mine operating cash flow before taxes ($ millions)(8) |
51.8 |
47.8 |
9% |
3.3 |
7.3 |
(55%) |
Operating cash flow before working capital changes(9) |
27.2 |
31.6 |
(14%) |
8.8 |
7.9 |
11% |
EBITDA(10) ($ millions) |
39.5 |
29.2 |
35% |
75.9 |
101.6 |
(25%) |
Working capital (12) ($ millions) |
75.9 |
101.6 |
(25%) |
|
|
|
Shareholders |
|
|
|
(0.01) |
(0.01) |
0% |
Earnings (loss) per share - basic ($) |
0.02 |
(0.01) |
300% |
(0.04) |
(0.02) |
(100%) |
Adjusted earnings (loss) per share - basic ($)(11) |
(0.01) |
(0.01) |
0% |
0.02 |
0.04 |
(50%) |
Operating cash flow before working capital changes per share(9) |
0.14 |
0.17 |
(18%) |
194,249,283 |
189,241,367 |
3% |
Weighted average shares outstanding |
192,003,752 |
180,655,842 |
6% |
(1) Silver equivalents are calculated using an 80:1 (Ag/Au) ratio.
(2) The Company reports non-IFRS measures and ratios which include cash costs net of by-product revenue on a payable silver basis, total production costs per oz, all-in sustaining costs ("AISC") per oz, direct operating cost per tonne, direct cost per tonne, silver co-product cash costs and gold co-product cash costs in order to manage and evaluate operating performance at each of the Company's mines. These measures, some established by the Silver Institute (Production Cost Standards, June 2011), are widely used in the silver mining industry as a benchmark for performance, but do not have a standardized meaning. These measures are reported on a production basis. See Reconciliations to IFRS beginning on page 20.
(3) Cash costs net of by-product revenue per payable silver oz include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead, net of gold credits. See Reconciliation to IFRS on pages 23 and 24.
(4) Total production costs per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, amortization, depletion and amortization at the operation sites net of by-product revenues. See Reconciliation to IFRS on pages 23 and 24.
(5) AlSC per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, corporate general and administration expenses, on-site exploration, share-based compensation, reclamation and sustaining capital net of gold credits. See Reconciliation to IFRS on pages 25 and 26.
(6) Direct operating costs per tonne include mining, processing (including smelting, refining, transportation and selling costs) and direct overhead at the operation sites. Direct cost per tonne include all direct operating costs, royalties and special mining duty. See Reconciliation to IFRS on pages 23 and 24.
(7) Silver co-product cash cost and gold co-product cash cost include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead allocated on pro-rated basis of realized metal value. See Reconciliation to IFRS on page 26.
(8) Mine operating cash flow is calculated by adding back amortization, depletion, inventory write-downs and share-based compensation to mine operating earnings. Mine operating earnings and mine operating cash flow are before taxes. See Reconciliation to IFRS on page 21.
(9) See Reconciliation to IFRS on page 21 for the reconciliation of operating cash flow before working capital changes and for the operating cash flow before working capital changes per share.
(10) See Reconciliation of Earnings before interest, taxes, depreciation and amortization on page 22.
(11) Adjusted net earnings include adjustments to net earnings for certain non-cash and unusual items, that in the Company's judgement are subject to volatility as a result of factors that are unrelated to the Company's operation in the period and had a significant effect on reported net earnings. See Reconciliation to IFRS on page 21.
(12) Working capital is calculated by deducting current liabilities from current assets. See Reconciliation to IFRS on page 20.
The above highlights are key measures used by management, however they should not be the sole measures used in determining the performance of the Company's operations.
HISTORY AND STRATEGY
The Company is engaged in silver mining in Mexico and related activities including property acquisition, exploration, development, mineral extraction, processing, refining and reclamation. The Company is also engaged in exploration activities in Chile and Nevada, USA. Since 2002, the Company's business strategy has been to focus on acquiring advanced-stage silver mining properties in Mexico. Mexico, despite its long and prolific history of metal production, appears to be relatively under-explored using modern exploration techniques and offers promising geological potential for precious metals exploration and production.
The Company's Guanaceví and Bolañitos mines acquired in 2004 and 2007, respectively, demonstrate its initial business model of acquiring fully built and permitted silver mines that were about to close for lack of ore. Investing resources expertise needed to discover new silver ore-bodies, the Company successfully re-opened and expanded these mines to realize their full potential. The benefit of acquiring fully built and permitted mining and milling infrastructure is that, if new exploration efforts are successful, the mine development cycle from discovery to production only takes a matter of months instead of the several years normally required in the traditional mining business model.
In 2016, the Company acquired the El Compas silver-gold mine located in Zacatecas, Mexico, which was operated until August 2021. On September 9, 2022, the Company completed the sale of the El Compas mine to Grupo ROSGO, S.A. de C.V., ("Grupo ROSGO") for $5.0 million in cash payments over five years.
In February 2013, the Company acquired a 100% interest in the Terronera properties located in Jalisco State, Mexico for $2.75 million. In 2021, the Company released a positive feasibility study for the project and on April 18, 2023, the Company announced that it had made a formal decision to proceed with construction of an underground mine and mill at the Terronera project.
On July 6, 2022, the Company purchased the Pitarrilla project, a large undeveloped silver, lead, and zinc project, located in Durango State, Mexico, by acquiring all of the issued and outstanding shares of SSR Durango, S.A. de C.V. from SSR Mining Inc. for a total consideration of US$70 million (consisting of $35 million in Company's shares and a further $35 million in cash or in the Company's shares at the election of SSR Mining and as agreed to by the Company) and a 1.25% net smelter returns royalty Endeavour, will have matching rights to purchase the NSR Royalty in the event SSR Mining proposes to sell it.
The Company is advancing several other exploration projects in order to achieve its goal to become a premier senior producer in the silver mining sector.
The Company has historically funded its acquisition, exploration and development activities through equity financings, debt facilities and convertible debentures. In recent years, the Company has financed most of its acquisition, exploration, development and operating activities from production cash flows, treasury and equity financings. The Company may choose to undertake equity, debt, convertible debt or other financings, on an as-needed basis, in order to facilitate its growth.
As of September 30, 2023, the Company held $41.0 million in cash and $75.9 million in working capital. Management believes there is sufficient working capital to meet the Company's current obligations.
REVIEW OF OPERATING RESULTS
The Company operates the Guanaceví and Bolañitos mines.
Consolidated Production Results for the Three and Nine Months Ended September 30, 2023 and 2022
Three Months Ended September 30 |
CONSOLIDATED |
Nine Months Ended September 30 |
2023 |
2022 |
% Change |
|
2023 |
2022 |
% Change |
214,270 |
202,745 |
6% |
Ore tonnes processed |
653,918 |
610,253 |
7% |
183 |
248 |
(26%) |
Average silver grade (gpt) |
230 |
242 |
(5%) |
90.9 |
90.3 |
1% |
Silver recovery (%) |
88.4 |
87.1 |
1% |
1,148,735 |
1,458,448 |
(21%) |
Total silver ounces produced |
4,266,280 |
4,132,610 |
3% |
1,140,597 |
1,445,880 |
(21%) |
Payable silver ounces produced |
4,231,064 |
4,095,696 |
3% |
1.48 |
1.60 |
(8%) |
Average gold grade (gpt) |
1.50 |
1.55 |
(3%) |
89.4 |
88.4 |
1% |
Gold recovery (%) |
89.6 |
89.6 |
0% |
9,089 |
9,194 |
(1%) |
Total gold ounces produced |
28,250 |
27,178 |
4% |
8,929 |
9,039 |
(1%) |
Payable gold ounces produced |
27,749 |
26,705 |
4% |
1,875,855 |
2,193,968 |
(14%) |
Silver equivalent ounces produced(1) |
6,526,280 |
6,306,850 |
3% |
17.94 |
10.32 |
74% |
Cash costs per silver ounce(2)(3) |
13.80 |
10.21 |
35% |
24.10 |
14.31 |
68% |
Total production costs per ounce(2)(4) |
18.85 |
14.56 |
30% |
29.64 |
20.27 |
46% |
All in sustaining costs per ounce (2)(5) |
23.41 |
20.24 |
16% |
152.04 |
131.61 |
16% |
Direct operating costs per tonne(2)(6) |
140.76 |
128.99 |
9% |
176.37 |
146.30 |
21% |
Direct costs per tonne(2)(6) |
171.78 |
147.65 |
16% |
20.03 |
13.12 |
53% |
Silver co-product cash costs(7) |
17.09 |
14.15 |
21% |
1,626 |
1,144 |
42% |
Gold co-product cash costs(7) |
1,396 |
1,163 |
20% |
(1) Silver equivalents are calculated using an 80:1 (Ag/Au) ratio.
(2) The Company reports non-IFRS measures which include cash costs net of by-product revenue on a payable silver basis, total production costs per oz, AISC per oz, direct operating cost per tonne, direct cost per tonne, silver co-product cash costs and gold co-product cash costs in order to manage and evaluate operating performance at each of the Company's mines. These measures, some established by the Silver Institute (Production Cost Standards, June 2011), are widely used in the silver mining industry as a benchmark for performance, but do not have a standardized meaning. These measures are reported on a production basis. See Reconciliations to IFRS on page 20.
(3) Cash costs net of by-product revenue per payable silver oz include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead, net of gold credits. See Reconciliation to IFRS on pages 23 and 24.
(4) Total production costs per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, amortization, depletion and amortization at the operation sites net of by product revenues. See Reconciliation to IFRS on pages 23 and 24.
(5) AISC per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, corporate general and administration expenses, on-site exploration, share-based compensation, reclamation and sustaining capital net of gold credits. See Reconciliation to IFRS on pages 25 and 26.
(6) Direct operating cost per tonne include mining, processing (including smelting, refining, transportation and selling costs) and direct overhead at the operation sites. Direct cost per tonne include all direct operating costs, royalties and special mining duty. See Reconciliation to IFRS on pages 23 and 24.
(7) Silver co-product cash cost and gold co-product cash cost include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead allocated on pro-rated basis of realized metal value. See Reconciliation to IFRS on page 26.
(1) Silver equivalents are calculated using an 80:1 (Ag/Au) ratio.
Consolidated Production
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Consolidated silver production during Q3, 2023 was 1,148,735 oz, a decrease of 21% compared to 1,458,448 oz in Q3, 2022, and gold production was 9,089 oz, a decrease of 1% compared to 9,194 oz in Q3, 2022. Plant throughput was 214,270 tonnes at average grades of 183 grams per tonne (gpt) silver and 1.48 gpt gold, compared to 202,745 tonnes grading 248 gpt silver and 1.60 gpt gold in Q3, 2022. The 21% decrease in consolidated silver production, compared to Q3, 2022, is driven by a 22% decrease in silver production at the Guanaceví mine and a 15% decrease in silver production at the Bolañitos mine. Consolidated gold production decreased by 1% compared to Q3, 2022, due to a 13% decrease in gold production at the Guanaceví mine offset by a 7% increase in gold production at the Bolañitos mine. The decrease in silver and gold production at the Guanaceví mine was primarily due to a decrease of 27% in silver ore grade and 20% decrease in gold ore grade partially offset by a 6% increase in processed tonnes. This reduced productivity was the result of a significant reduction in silver and gold grades due to mine sequencing changes that were initiated to focus on improved access and ventilation. Although the processed ore was slightly higher than the comparable period, it was below original plan due to a scheduled maintenance shut down during the last week of September. It is expected that the grades will increase in Q4, 2023 as we return to accessing higher grade ore. At the Bolañitos mine the 15% decrease in silver production was attributable to a 15% decrease in ore silver grade and 5% decrease in recoveries, partially offset by a 6% increase in throughput. The 7% increase in gold production at the Bolañitos mine was attributable to a 1% increase in ore gold grade, the 6% increase in throughput and a 1% increase in gold recoveries. The difference in ore grade at Bolañitos is primarily due to the fluctuations of ore grades from accessing different areas of the mine.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Consolidated silver production during the first nine months of 2023 was 4,266,280 oz, an increase of 3% compared to 4,132,610 oz in the same period of 2022, and gold production was 28,250 oz, an increase of 4% compared to 27,178 oz in the first nine months of 2022. Plant throughput was 653,918 tonnes at average grades of 230 gpt silver and 1.50 gpt gold, compared to 610,253 tonnes grading 242 gpt silver and 1.55 gpt gold for the nine-month period ended September 30, 2022. The 3% increase in consolidated silver production, compared to the same period of 2022, is driven by a 5% increase in silver production at the Guanaceví mine offset by a 8% decrease in silver production at the Bolañitos mine. Consolidated gold production increased by 4% compared to the first nine months of 2022, due to a 4% increase at the Guanaceví mine and a 4% increase in gold production at the Bolañitos mine. The increase in silver production at the Guanaceví mine was due to the 10% increase in processed tonnes and a 3% increase in silver recoveries offset by a 7% decrease in ore silver grade. The increase in gold production at the Guanaceví mine was due to the 10% increase in processed tonnes, a 2% increase in recoveries partially offset by an 8% reduction in ore gold grade. The decrease in silver production at the Bolañitos mine was due to a 9% reduction in ore silver grade and a 3% reduction in silver recoveries partially offset by the 4% increase in ore tonnes processed. The increase in gold production at the Bolañitos mine was due to the 4% increase in processed tonnes, a 1% increase in ore gold grade partially offset by a 2% reduction in recoveries.
The Company believes that it is well positioned to complete this year within the previously stated production guidance of between 8.6-9.5 million silver equivalent ounces. Guanacevi ore grades are expected to increase in Q4, 2023 and be comparable to ore grades processed H1 2023, while plant throughput is expected to improve with the completion of the repairs and maintenance completed at the start of Q4, 2023.
Consolidated Operating Costs
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Direct operating costs per tonne in Q3, 2023 increased to $152.04, a 16% increase compared with $131.61 in Q3, 2022 due to both a strengthened Mexican peso and higher operating costs at both Guanaceví and Bolanitos. As the Mexican peso strengthens, the Company's Mexican peso denominated costs increased in US dollar terms. Guanaceví and Bolañitos have seen increased labour, power and consumable costs. At Bolanitos the increase in costs is primarily due to the strengthened Mexican peso and increased inflationary pressures. At Guanacevi the increase in costs is due to the strengthened Mexican Peso, increased inflationary pressures, increased royalties, additional operating development, decreased mine productivity, an increase in the purchase of third-party ore and additional repair costs associated with the plant shutdown. Including royalties and special mining duty, direct costs per tonne increased 21% to $176.37. Compared to Q3, 2022, royalties have increased 77% from $2.8 million to $4.8 million with the increase occurring at Guanaceví. At Guanaceví the increase in royalty expense recognized during Q3, 2023 is due to the increase in production coming from concessions subject to royalties and an increase in the realized silver price. The royalty increased to 13% from 9% when the realized silver price crossed a price threshold of $20 per oz. Consolidated cash costs per oz, net of by-product credits increased 74% to $17.94 driven by a 21% decrease in silver ounces produced, a 16% increase direct operating costs and the increase in royalties. All-In-Sustaining Costs ("AISC") increased by 46% on a per oz basis compared to Q3, 2022 primarily due to the decreased silver production at Guanacevi and the increase in cash costs partially offset by increased silver production and slightly lower sustaining capital expenditures.
On a co-product cash costs basis, silver cost per oz increased by 53% and gold cost per oz increased 42% compared to Q3, 2022. Decreased silver production had a significant impact on these metrics. They were also impacted by the higher operating costs. Gold co-product cash costs increased primarily due to the higher operating cost and by a slight increase in gold proportional costs resulting from an increase in proportional gold production.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Direct operating costs per tonne in the first nine months of 2023 increased to $140.76, an 9% increase compared with the same period of 2022 due to both a strengthening of the Mexican peso and higher operating costs at both Guanaceví and Bolanitos from increased inflationary pressures. As the Mexican peso strengthens, the Company's Mexican peso denominated costs increased in US dollar terms. Guanaceví and Bolañitos have seen increased labour, power and consumable costs. Including royalties and special mining duty, direct costs per tonne increased 16% to $171.78. Compared to the first nine months of 2022, royalties have increased 83% from $9.35 million to $17.1 million with the increase occurring in Guanaceví. At Guanaceví the increase in royalty expense during the nine-month period ended September 30, 2023 is due to the increase in production coming from concessions subject to royalties and a 19% increase in ounces sold. Consolidated cash costs per oz, net of by-product credits increased 35% to $13.80 driven by a 9% increase in direct operating costs per tonne, the 83% increase in royalties and a 55% increase in special mining duties, partially offset by an increase in by-product gold sales and increased silver production. All-In-Sustaining Costs ("AISC") increased by 16% on a per oz basis compared to the nine-month period ended September 30, 2022 due to increased costs partially offset by increased ounces produced.
On a co-product cash costs basis, silver cost per oz increased by 21% and gold cost per oz increased 20% compared to the nine months ended September 30, 2022. The higher operating costs was partially offset by increased silver production. Gold co-product cash costs increased due to the higher operating cost and an increase in proportional costs resulting from the increase in proportional gold production.
During the nine-month period ended September 30, 2023, costs have continued to be impacted by inflationary and industry cost pressures as well as being impacted by a strengthened Mexican Peso. From December 31, 2022 to September 30, 2023, the Mexican Peso has appreciated by 11%. Management anticipates these macro trends will continue for the near term and therefore expects actual cost metrics to be higher than cost metrics guided in January 2023 and align with H1 2023 actual cost metrics.
GUANACEVÍ OPERATIONS
The Guanaceví operation is currently producing from three underground silver-gold mines along a five kilometre ("km") length of the prolific Santa Cruz vein. Guanaceví provides steady employment to over 540 people and engages over 350 contractors.
In July 2019, the Company acquired a 10 year right to explore and exploit the El Porvenir and El Curso concessions from Ocampo Mining SA de CV ("Ocampo"), a subsidiary of Grupo Frisco. The Company agreed to meet certain minimum production targets from the properties, subject to various terms and conditions and pay Ocampo a $12 fixed per tonne production payment plus a floating net smelter return royalty based on the silver spot price. The Company pays a 4% royalty on sales below $15.00 per silver oz, 9% above $15.00 per silver oz, 13% above $20.00 per silver oz, and a maximum of 16% above $25 per silver oz, based on the current realized prices. On December 12, 2021, the Company executed an amendment to the agreement whereby two additional concessions, adjacent to the existing and historic mine workings, were included in the existing agreement.
Production Results for the Three and Nine Months Ended September 30, 2023 and 2022
Three Months Ended September 30 |
GUANACEVÍ |
Nine Months Ended September 30 |
2023 |
2022 |
% Change |
|
2023 |
2022 |
% Change |
103,345 |
97,728 |
6% |
Ore tonnes processed |
322,628 |
292,998 |
10% |
341 |
468 |
(27%) |
Average silver grade (g/t) |
416 |
446 |
(7%) |
91.9 |
90.6 |
1% |
Silver recovery (%) |
88.8 |
87.1 |
2% |
1,041,211 |
1,332,190 |
(22%) |
Total silver ounces produced |
3,833,558 |
3,660,190 |
5% |
1,038,087 |
1,328,193 |
(22%) |
Payable silver ounces produced |
3,822,057 |
3,649,209 |
5% |
1.03 |
1.29 |
(20%) |
Average gold grade (g/t) |
1.18 |
1.28 |
(8%) |
92.4 |
89.9 |
3% |
Gold recovery (%) |
91.8 |
89.6 |
2% |
3,161 |
3,642 |
(13%) |
Total gold ounces produced |
11,234 |
10,799 |
4% |
3,152 |
3,631 |
(13%) |
Payable gold ounces produced |
11,200 |
10,766 |
4% |
1,294,091 |
1,623,550 |
(20%) |
Silver equivalent ounces produced(1) |
4,732,278 |
4,524,110 |
5% |
20.47 |
10.64 |
92% |
Cash costs per silver ounce(2)(3) |
15.29 |
11.03 |
39% |
24.23 |
13.06 |
86% |
Total production costs per ounce(2)(4) |
18.46 |
13.76 |
34% |
29.06 |
17.79 |
63% |
All in sustaining costs per ounce (2)(5) |
22.48 |
18.60 |
21% |
215.13 |
174.69 |
23% |
Direct operating costs per tonne(2)(6) |
187.71 |
166.64 |
13% |
264.10 |
205.42 |
29% |
Direct costs per tonne(2)(6) |
248.78 |
203.81 |
22% |
21.03 |
12.17 |
73% |
Silver co-product cash costs(7) |
16.89 |
13.13 |
29% |
1,708 |
1,061 |
61% |
Gold co-product cash costs(7) |
1,380 |
1,079 |
28% |
(1) Silver equivalents are calculated using an 80:1 (silver/gold) ratio.
(2) The Company reports non-IFRS measures which include cash costs net of by-product revenue on a payable silver basis, total production costs per oz, AISC per oz, direct operating cost per tonne, direct cost per tonne, silver co-product cash costs and gold co-product cash costs in order to manage and evaluate operating performance at each of the Company's mines. These measures, some established by the Silver Institute (Production Cost Standards, June 2011), are widely used in the silver mining industry as a benchmark for performance, but do not have a standardized meaning. These measures are reported on a production basis. See Reconciliations to IFRS on page 20.
(3) Cash costs net of by-product revenue per payable silver oz include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead, net of gold credits. See Reconciliation to IFRS on pages 23 and 24.
(4) Total production costs per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, amortization, depletion and amortization at the operation sites net of by product revenues. See Reconciliation to IFRS on pages 23 and 24.
(5) AISC per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, corporate general and administration expenses, on-site exploration, share-based compensation, reclamation and sustaining capital net of gold credits. See Reconciliation to IFRS on pages 25 and 26.
(6) Direct operating costs per tonne include mining, processing (including smelting, refining, transportation and selling costs) and direct overhead at the operation sites. Direct cost per tonne include all direct operating costs, royalties and special mining duty. See Reconciliation to IFRS on pages 23 and 24.
(7) Silver co-product cash cost and gold co-product cash cost include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead allocated on pro-rated basis of realized metal value. See Reconciliation to IFRS on page 26.
Guanaceví Production Results
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Silver production at the Guanaceví mine during Q3, 2023 was 1,041,211 oz, a decrease of 22% compared to 1,332,190 oz in Q3, 2022, and gold production was 3,161 oz, a decrease of 13% compared to 3,642 oz in Q3, 2022. Plant throughput was 6% higher in Q3, 2023 with 103,345 tonnes at average grades of 341 gpt silver and 1.03 gpt gold, compared to 97,728 tonnes grading 468 gpt silver and 1.29 gpt gold in Q3, 2022. The decrease in silver and gold production at the Guanaceví mine was primarily due to the 27% reduction in ore silver grade and a 20% reduction in ore gold grade, partially offset by a 6% increase in processed tonnes and a 1% and 3% increase in silver and gold recoveries, respectively. Production was also impacted by a scheduled maintenance shutdown of the process plant during the last week of September. Mine sequencing changes to improve access and ventilation during Q2 2023 resulted in lower grades compared to plan and historical comparisons. It is expected that the grades will increase in Q4, 2023.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Silver production at the Guanaceví mine during the nine-month period ended September 30, 2023 was 3,833,558 oz, an increase of 5% compared to 3,660,190 oz oz in the same period of 2022, and gold production was 11,234 oz, an increase of 4% compared to 10,799 oz in the same period of 2022. Plant throughput was 10% higher in 2023 with 322,628 tonnes at average grades of 416 gpt silver and 1.28 gpt gold, compared to 292,998 tonnes grading 446 gpt silver and 1.28 gpt gold in the nine-month period ended September 30, 2022.
The increase in silver and gold production at the Guanaceví mine was primarily due to the 10% increase in processed tonnes and a 2% increase in silver and gold recoveries offset by a 7% reduction in ore silver grade and an 8% reduction in ore gold grade. Mine sequencing changes during Q2 2023 have resulted in lower grades compared to plan and historical comparisons. It is expected that the grades will increase in Q4, 2023.
Guanaceví Operating Costs
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Direct operating costs per tonne for the three months ended September 30, 2023 increased 23% to $215.13 compared with the same period in 2022, resulting from a strengthened Mexican peso and increased labour, power and consumables costs slightly offset by increased throughput tonnes in Q3 2023. At Guanacevi the increase in costs is also due to increased royalties, additional operating development, decreased mine productivity, an increase in the purchase of third-party ore and additional repair costs associated with the plant shutdown. The local third-party ore contributed $34.41 per tonne during Q3, 2023 compared to $20.62 per tonne in Q3, 2022. Including royalty and special mining duty costs, direct cost per tonne increased 29% to $264.10 compared with $205.42 in the same period in 2022. There was an 72% increase in royalty expense recognized during Q3, 2023 due to an increase in 2023 in production from concessions that are subject to royalties and an increase in the realized silver price, which increased the royalty from 9% to 13%. Royalty expense increased from $2.8 million to $4.8 million, which are included in cost per tonne and oz metrics.
Cash costs per oz, net of by-product credits, increased to $20.47 compared to $10.64 for the same period in 2022, driven by the decreased silver production and higher direct costs. AISC per oz increased 63% to $29.06 per oz for the three months ended September 30, 2023, due to the decreased silver production and the increase direct costs.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Direct operating costs per tonne for the nine months ended September 30, 2023 increased 13% to $187.71 compared with the same period in 2022, resulting from a strengthened Mexican peso and increased labour, power and consumables costs partially offset by higher throughput. The local third-party ore contributed $23.26 per tonne during the nine-month period ended September 30, 2023 compared to $25.64 per tonne in the same period in 2022. Including royalty and special mining duty costs, direct cost per tonne increased 22% to $248.78 compared with $203.81 in the same period in 2022. There was a 85% increase in royalty expense recognized during the nine-month period ended September 30, 2023 due to an increase in production from concessions that are subject to royalties and increased sales. Royalty expense increased from $9.1 million to $16.9 million, which is included in cost per tonne and oz metrics. There was also an increase in special mining duty from $1.8 million to $2.8 million resulting from the increase in sales and the strengthening of the Mexican Peso.
Cash costs per oz, net of by-product credits, increased to $15.29 compared to $11.036 for the same period in 2022, driven by the higher direct costs per tonne partially offset by increased silver production. AISC per oz increased 21% to $22.48 per oz for the nine-month period ended September 30, 2023, due to the increase in direct costs along with an increase in allocated corporate general and administrative expenses partially offset by slightly lower sustaining capital expenditures.
BOLAÑITOS OPERATIONS
The Bolañitos operation encompasses three underground silver-gold mines and a flotation plant. Bolañitos provides steady employment for over 490 people and engages over 175 contractors.
Production Results for the Three and Nine Months Ended September 30, 2023 and 2022
Three Months Ended September 30 |
BOLAÑITOS |
Nine Months Ended September 30 |
2023 |
2022 |
% Change |
|
2023 |
2022 |
% Change |
110,925 |
105,017 |
6% |
Ore tonnes processed |
331,290 |
317,255 |
4% |
37 |
43 |
(15%) |
Average silver grade (g/t) |
48 |
53 |
(9%) |
82.6 |
87.0 |
(5%) |
Silver recovery (%) |
84.6 |
87.4 |
(3%) |
107,524 |
126,258 |
(15%) |
Total silver ounces produced |
432,722 |
472,420 |
(8%) |
102,510 |
117,687 |
(13%) |
Payable silver ounces produced |
409,007 |
446,487 |
(8%) |
1.89 |
1.88 |
1% |
Average gold grade (g/t) |
1.81 |
1.79 |
1% |
87.9 |
87.5 |
1% |
Gold recovery (%) |
88.3 |
89.7 |
(2%) |
5,928 |
5,552 |
7% |
Total gold ounces produced |
17,016 |
16,379 |
4% |
5,777 |
5,408 |
7% |
Payable gold ounces produced |
16,549 |
15,939 |
4% |
581,764 |
570,418 |
2% |
Silver equivalent ounces produced(1) |
1,794,002 |
1,782,740 |
1% |
(7.68) |
6.73 |
(214%) |
Cash costs per silver ounce(2)(3) |
(0.12) |
3.42 |
(104%) |
22.74 |
28.41 |
(20%) |
Total production costs per ounce(2)(4) |
22.51 |
21.04 |
7% |
35.54 |
48.21 |
(26%) |
All in sustaining costs per ounce (2)(5) |
32.16 |
33.66 |
(4%) |
93.26 |
91.53 |
2% |
Direct operating costs per tonne(2)(6) |
95.03 |
94.23 |
1% |
94.63 |
91.28 |
4% |
Direct costs per tonne(2)(6) |
96.79 |
95.79 |
1% |
17.83 |
15.71 |
13% |
Silver co-product cash costs(7) |
17.59 |
16.71 |
5% |
1,447 |
1,369 |
6% |
Gold co-product cash costs(7) |
1,437 |
1,373 |
5% |
(1) Silver equivalents are calculated using an 80:1 (silver/gold) ratio.
(2) The Company reports non-IFRS measures which include cash costs net of by-product revenue on a payable silver basis, total production costs per oz, AISC per oz, direct operating cost per tonne, direct cost per tonne, silver co-product cash costs and gold co-product cash costs in order to manage and evaluate operating performance at each of the Company's mines. These measures, some established by the Silver Institute (Production Cost Standards, June 2011), are widely used in the silver mining industry as a benchmark for performance, but do not have a standardized meaning. These measures are reported on a production basis. See Reconciliations to IFRS on page 20.
(3) Cash costs net of by-product revenue per payable silver oz include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead, net of gold credits. See Reconciliation to IFRS on pages 23 and 24.
(4) Total production costs per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, amortization, depletion and amortization at the operation sites net of by product revenues. See Reconciliation to IFRS on pages 23 and 24.
(5) AISC per oz include mining, processing (including smelting, refining, transportation and selling costs), direct overhead, corporate general and administration expenses, on-site exploration, share-based compensation, reclamation and sustaining capital net of gold credits. See Reconciliation to IFRS on pages 25 and 26.
(6) Direct operating costs per tonne include mining, processing (including smelting, refining, transportation and selling costs) and direct overhead at the operation sites. Direct cost per tonne include all direct operating costs, royalties and special mining duty. See Reconciliation to IFRS on pages 23 and 24.
(7) Silver co-product cash cost and gold co-product cash cost include mining, processing (including smelting, refining, transportation and selling costs), and direct overhead allocated on pro-rated basis of realized metal value. See Reconciliation to IFRS on page 26.
Bolañitos Production Results
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Silver production at the Bolañitos mine was 107,524 oz in Q3, 2023, a decrease of 15% compared to 126,258 oz in Q3, 2022, and gold production was 5,928 oz in Q3, 2023, an increase of 7% compared to 5,552 oz in Q3, 2022. Plant throughput in Q3, 2023 was 110,925 tonnes at average grades of 37 gpt silver and 1.89 gpt gold, compared to 105,0174 tonnes at average grades of 43 gpt silver and 1.88 gpt gold in Q3, 2022. At the Bolañitos mine the 15% decrease in silver production was attributable to a 15% decrease in ore silver grade and 5% decrease in recoveries, partially offset by a 6% increase in throughput. The 7% increase in gold production at the Bolañitos mine was attributable to a 1% increase in ore gold grade, a 1% increase in gold recoveries and the 6% increase in throughput. The difference in ore grade at Bolañitos is primarily due to the fluctuations of ore grades from accessing different areas of the mine.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Silver production at the Bolañitos mine was 432,722 oz in the nine-month period ended September 30, 2023, a decrease of 8% compared to 472,420 oz in the same period of 2022, and gold production was 17,016 oz in the nine-month period ended September 30, 2023, an increase of 4% compared to 16,379 oz in the same period of 2022. Plant throughput was 331,290 tonnes at average grades of 48 gpt silver and 1.81 gpt gold, compared to 317,255 tonnes at average grades of 53 gpt silver and 1.79 gpt gold in of the nine-month period ended September 30, 2022. The decrease in silver production at the Bolañitos mine was due to a 9% reduction in ore silver grade and a 3% reduction in silver recoveries partially offset by the 4% increase in ore tonnes processed. The increase in gold production at the Bolañitos mine was due to the 4% increase in processed tonnes, a 1% increase in ore gold grade partially offset by a 2% reduction in recoveries. The difference in ore grade at Bolañitos is primarily due to the fluctuations of ore grades from accessing different areas of the mine.
Bolañitos Operating Costs
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
Direct costs per tonne in Q3, 2023 increased 2% to $93.26 per tonne, compared to $91.28 in the same period of 2022, primarily due to higher direct costs partially offset by a 6% increase in ore tonnes processed. Cash costs, net of by-product credits, were negative $7.68 per oz of payable silver in Q3, 2023 compared to $6.73 per oz in Q3, 2022 due to increased gold production and realized gold prices. AISC decreased 26% in Q3, 2023 to $35.54 per oz primarily due to the increased production a decrease in sustaining capital.
On a co-product cash costs basis, silver cost per oz increased 13% compared to Q3, 2022 and gold co-product costs increased 6% to $17.83 per silver oz and $1,447 per gold oz, respectively. The increases in the silver and gold costs on a co-product basis were primarily driven by the higher direct costs per tonne and the silver co-product cost was also impacted by the 15% decrease in silver production.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
Direct costs per tonne for the nine months ended September 30, 2023 increase 1% to $96.79 per tonne, compared to $95.79 in the same period of 2022, primarily due to a 4% increase in ore tonnes processed offset by increased direct costs. Cash costs, net of by-product credits, were negative $0.12 per oz of payable silver in the nine-month period ended September 30, 2023 compared to $3.42 per oz in the same period of 2022 due to the increased gold production and an increase in the realized price of gold compared to the same period in the prior year offset by increased costs and reduced silver production. AISC decreased 4% in the nine-month period ended September 30, 2023 to $32.16 per oz primarily due to the decrease in cash costs net of by-product, and a decrease in sustaining capital
On a co-product cash costs basis, silver cost per oz increased 5% compared to the nine-month period ended September 30, 2022 and gold co-product costs increased 5% to $17.59 per silver oz and $1,437 per gold oz, respectively. The increases in the silver and gold costs on a co-product basis were primarily driven by the higher direct costs per tonne and the silver co-product cost was also impacted by the 8% decrease in silver production.
DEVELOPMENT ACTIVITIES
Terronera Project
The Terronera project, located 40 km northeast of Puerto Vallarta in the state of Jalisco, Mexico, features a high-grade silver-gold mineral resource in the Terronera vein, which is now over 1,400 metres long, 400 metres deep, 3 to 16 metres thick, and remains open along strike to the southeast and down dip.
Wood PLC completed an independent feasibility study entitled "NI 43-101 Technical Report on the Feasibility Study of the Terronera Project, Jalisco State, Mexico" dated October 21, 2021 with an effective date of September 9, 2021 (the "Terronera Feasibility Study" or "FS"), and filed on SEDAR and EDGAR and posted to the Company's website on October 25, 2021. The FS base case assumed a silver price of $20 per oz and a gold price of $1,575 per oz with an implied 79:1 silver to gold ratio, and a Mexico peso to U.S. dollar exchange rate of 20:1. At base case prices, the improved economics estimated an after-tax net present value of $174.1 million at a 5% discount rate, internal rate of return of 21.3%, and payback period of 3.6 years. Initial capital expenditures were estimated to be $175 million with capital expenditures during production estimated to be $108.5 million. The 12-year life of mine was estimated to produce an average of 3.3 million silver oz and 32,874 gold oz per year generating $476 million pre-tax, $311 million after-tax, free cash flow.
Following the completion of the Terronera Feasibility Study, the Company commenced initial earthworks and the procurement of long lead items and prior to making a formal construction decision, which was subject to completion of a financing package and receipt of additional amended permits. While the Company advanced financial due diligence, the Board approved certain early expenditures to de-risk various aspects of the project in a deliberate and disciplined manner to minimize risk prior to the final construction decision. Proceeding with these early expenditures has reduced inflationary and timing pressures and has also advanced key work that has facilitated the ramp-up to full construction.
Updated Development Plans and Initial Capital Costs
Since the Company filed the Terronera Feasibility Study the Company further evaluated various operating scenarios, cost-benefit initiatives and technologies to optimize the Terronera Project's operating flexibility and economics. Since 2021, additional cost pressures have emerged from systemic inflation and constrained global supply chains, which have contributed to increased costs of inputs within the mining sector. The Company's move to assemble an experienced development team has worked to mitigate some of these impacts, and management believes the Company is well-equipped to navigate the current business environment.
In Q2, 2023 the Company approved the construction of an optimized Terronera Project scenario (the "Revised Scenario"), consisting of a process plant with 2,000 tonne per day (tpd) capacity and an initial capital expenditure cost of $230 million, partially offset by a decrease in sustaining capital to $88.3 million over the life of the mine. Endeavour planned a 21-month construction period, including 3 to 6 months ramp up to full production with initial production expected in the fourth quarter of 2024.
Area |
2021 Feasibility Study |
2023 Revised Scenario |
Life of Mine |
% Change |
(millions) |
Initial Capex |
Sustaining |
LOM |
Initial Capex |
Sustaining |
LOM |
Variance |
|
Mining |
$61.6 |
$102.5 |
$164.1 |
$69.9 |
$88.3 |
$158.1 |
($6.0) |
(4%) |
Mineral Processing Plant |
37.8 |
3.1 |
40.9 |
48.0 |
|
48.0 |
5.0 |
17% |
Site Infrastructure |
24.5 |
|
47.6 |
47.6 |
|
47.6 |
21.7 |
94% |
Total Direct Costs |
123.9 |
105.6 |
229.5 |
165.5 |
88.3 |
253.7 |
24.1 |
11% |
Owner Costs |
21.7 |
|
21.7 |
27.6 |
|
27.6 |
5.9 |
27% |
Project Indirect Costs |
17.2 |
|
17.2 |
19.9 |
|
19.9 |
2.7 |
16% |
Contingency |
12.2 |
|
12.2 |
17.6 |
|
17.6 |
5.4 |
45% |
Total Indirect Costs |
51.1 |
|
51.1 |
65.1 |
|
65.1 |
14.0 |
27% |
Total (Direct & Indirect) |
$175.0 |
$105.6 |
$280.6 |
$230.5 |
$88.30 |
$318.8 |
$38.10 |
14% |
The increased operating scale and optimization is expected to result in slightly lower operating costs on a per tonne basis compared to the Terronera Feasibility Study. Below is a summary of the optimization work that has been completed on the project cost structure and key components:
- The mine design has been redesigned and mine plan optimized to reduce initial underground mine access development including changing portal locations. These changes were aimed at increasing development efficiencies, improving early ventilation, and reducing surface haulage. Pre-production development quantities increased for scaling the mine to 2,000 tpd.
- The processing plant and tailing storage facility initial capital expenditures have increased primarily for equipment required to achieve 2,000 tpd. These include a SAG Mill, concentrate regrind, and an additional tailings filter. Additional increases have resulted from inflationary costs for steel and other required materials for construction. Further metallurgical testing completed during the basic engineering design phase for the process plant indicate increased estimated silver and gold recoveries by 1.6% and 2.5% respectively, compared to the recoveries in the Terronera Feasibility Study. Certain sustaining capital costs in the Terronera Feasibility Study are now included as operating costs.
- Site infrastructure now includes the Company's ownership of the liquified natural gas ("LNG") vaporization and power generation equipment rather than leasing, which was included as an operating lease in the Terronera Feasibility Study. The site infrastructure increase from the Terronera Feasibility Study is also due to additional access road improvements.
- The owner's costs, project indirect costs and contingency increased based on updated estimates of detailed engineering and overhead expenses. The contingency estimate was revised based on updated quotes and increased confidence in certain estimates and committed costs to date.
The revised metrics for the 2,000 tpd plant as compared to the 1,700 tpd plant contained in the 2021 Terronera Feasibility Study are set out in the following table. The Company does not consider these changes to be material to the Company.
2023 Revised 2,000 TPD Plant Compared to 2021 FS |
Internal - FS Change |
|
2023 |
2021 |
% Change |
|
|
|
|
Silver Price |
$20.00 |
$20.00 |
0% |
Gold Price |
$1,575 |
$1,575 |
0% |
Silver: Gold Ratio |
79 |
79 |
0% |
Operating Statistics |
|
|
|
LOM Tonnes Processed LOM (thousands) |
7,382 |
7,380 |
0% |
Life of Mine (Years) |
10.0 |
12.0 |
(17%) |
Average silver grade (g/t) |
196 |
197 |
(1%) |
Average gold grade (g/t) |
2.13 |
2.25 |
(5%) |
Silver equivalent grade (g/t)(1) |
364 |
374 |
(3%) |
Average silver recovery |
89.5% |
87.7% |
2% |
Average gold recovery |
78.7% |
76.3% |
2% |
LOM payable Ag ounces produced (millions) |
39.9 |
39.3 |
0% |
LOM payable Au ounces produced (thousands) |
384 |
393 |
(2%) |
LOM payable Ag Eq ounces produced (millions) |
69.7 |
70.3 |
(1%) |
Avg annual payable Ag ounces produced (millions) |
4.0 |
3.3 |
20% |
Avg annual payable Au ounces produced (thousands) |
38 |
33 |
17% |
Avg annual payable Ag Eq ounces produced (millions) |
7.0 |
5.9 |
18% |
Capital Expenditure Statistics |
|
|
|
Initial Capital Expenditure (millions) |
230.4 |
175.0 |
32% |
Process Capacity (tonnes per day) |
1,990 |
1,700 |
17% |
LOM Sustaining Capital |
88.3 |
105.6 |
(16%) |
Total LOM Project Capital |
318.7 |
280.6 |
14% |
Operating Cost Metrics (2) |
|
|
|
LOM Gross Revenue (millions) |
1,403.2 |
1,406.2 |
0% |
LOM Gross COS (millions) |
596.4 |
642.5 |
(7%) |
LOM EBITDA (millions) |
806.9 |
756.6 |
7% |
After Tax LOM Free Cash Flow (millions) |
316.9 |
311.4 |
2% |
Cash costs by Product (per silver ounce) |
(0.20) |
0.59 |
(134%) |
All in sustaining (per silver ounce) |
2.15 |
3.24 |
(34%) |
Cash costs by Silver Equivalent (per silver ounce) |
8.50 |
9.14 |
(7%) |
All in sustaining Silver equivalents (per silver ounce) |
9.84 |
10.62 |
(7%) |
Total Direct Production Costs (per Tonne) |
80.43 |
87.06 |
(8%) |
Mining Costs (per tonne) |
29.26 |
30.96 |
(7%) |
Processing Costs (per tonne) |
23.38 |
25.47 |
(8%) |
General and Administrative (per tonne) |
9.32 |
10.90 |
(14%) |
Treatment & Refining Charges (per tonne) |
14.36 |
15.26 |
(6%) |
Royalty Costs (per tonne) |
4.47 |
4.46 |
0% |
(1) Silver equivalents are calculated using an 79:1 (silver/gold) ratio.
(2) Non-GAAP measures - For a detailed description of each of the Non-IFRS measures refer to the "Non-IFRS Measures" section beginning on page 20. As these items are forward-looking we do not currently have comparable forward looking IFRS measure to report and therefore no reconciliation of these items is presented. The comparable measures under IFRS for these items would be net earnings, net operating earnings and direct production costs which would be divided by silver ounces produced or silver equivalent ounces produced, respectively. LOM EBITDA represents LOM Net earnings plus LOM Depreciation and LOM Taxes. After Tax LOM Free Cash Flow represents LOM Net operating earnings plus LOM Taxes and LOM Capital Costs. Management believes these Non-IFRS measures are important measures of the potential economics of the proposed mine plan and demonstrate potential mine economics with factors like depreciation and taxes which can vary over LOM. The important factors in determining IFRS comparable measures which remain unknown at this time include mining, processing and indirect costs, and mining processing and indirect labour costs which may require adjustments to IFRS from estimates provided in the Life of Mine ("LOM").
On October 6, 2023, the Company executed a credit agreement with Societe Generale and ING Bank N.V. with certain definitive terms agreed to for a senior secured debt facility for up to $120 million (the "Debt Facility"). Artemis Capital Advisors has acted as the financial advisor to the Company regarding this transaction, with ING Capital LLC (together with ING BANK N.V. "ING") and Societe Generale acting as Joint Lead Arrangers. A summary of the key terms of the Debt Facility are as follows:
- Up to $120 million principal amount
- Term of 8.5 years, including up to a 2-year grace period during the construction phase.
- Interest rate of US Secured Overnight Financing Rate (“SOFR”) + 4.50% per annum from completion of the Terronera project until the fifth anniversary of the loan, and 4.25% from the fifth anniversary onwards.
- Principal payments are payable in quarterly installments commencing in the fourth quarter of 2025. Cash sweep will be applied to 35% of excess cash flow after debt service from completion onwards until $35 million of loan principal has been prepaid
- Prior to initial drawdown, Terronera is to enter into a hedging program for 68,000 ounces of gold over the initial two operating years
- Prior to initial drawdown, Terronera is required to enter into a hedging program for managing exposure to the Mexico Peso during construction. The program requires approximately 75% of the remaining capital expenditure incurred in Mexican Pesos to be hedged. Prior to initial production, a hedging program is required for managing exposure to the Mexican Peso during operations. Under this program 50% of the projected operating costs incurred in Mexican Pesos are hedged prior to completion. Thereafter, the foreign exchange protection program for operations will rise to 70% of the projected operating costs incurred in Mexican Pesos.
- Cost overrun funding is required in the form of cash, letter of credit issued by a Canadian financial institution or a combination of both for up to $48 million
- The Debt Facility is subject to certain customary conditions precedent and debt servicing covenants. The Debt Facility is secured through corporate guarantees from Endeavour and certain Endeavour subsidiaries and a first ranking security interest over the Terronera project.
The Company is well-positioned to satisfy the financing requirements of the Project, having already invested over $95 million in direct development expenditures to the end of Q3 2023. The Company may consider various additional alternatives to raise the required capital as required by the terms of the Debt Facility and expected to draw down on the Debt Facility in Q1, 2024.
Construction and Development Highlights
- Overall construction progress is 38% complete. Project commitments total $160 million and are tracking in-line with our optimized plan and the workforce has increased to 91 employees and 430 contractor workers.
As at September 30, 2023, site works and activities to date have included, but are not limited to:
- Our strong safety focus at site continues. Key safety initiatives have included improved accident investigation procedures, accident prevention measures, and development of on-site emergency brigade. During the recent rainy season, hazard control lightening control measures were reinforced.
- Overall, engineering progress is 97% complete. The mine waste rock dump design is nearing completion. Final design for the tailings storage facility, as well as the filters, LNG and warehouse areas, is pending completion of geotechnical site investigation.
- Site road access is now established following extensive improvements over the last year. Equipment access and materials deliveries to site remained unaffected during the annual rainy season.
- All permanent camp dormitory units have been installed for accommodation of 550 personnel. Fully operational facilities include the dining, laundry, medical clinic, and training areas.
- During Q3, Portal 1 mine yard excavation reached the design elevation of 1,475 metres allowing mine development to advance on four fronts: Portal 1, Portal 2, and Portal 4 (incline & decline). Over 1,300 metres of underground development have been completed to the end of Q3. As planned, mining advance rates increased as Portals 2 and 4 passed through the fault zone and ground conditions improved.
- Concrete work and rebar installation continued in the SAG and ball mill grinding, coarse ore stockpile and floatation areas, and concrete work began for the primary crusher. Excavation work started in the tailing thickener area.
- Procurement - Most long-lead major equipment is anticipated to be received by year's end. Purchase order contracts were executed for initial structural steel support. During Q3, 2023, the request for bid proposal for the mill construction contract was released, which includes structural steel, mechanical, piping, electrical and instrumentation.
- During Q3, 2023 community relations focused on local municipality support to maintain and improve municipal roads from the state highway to the site area, as well as assistance with a municipal landfill facility. Additionally, local community suppliers continue to be integrated into the Terronera value chain. Summer initiatives included several cultural and sports activities.
- Environmental and social assessment initiatives continued as outlined under the Equator Principal requirements set forth withing the Debt Facility. Items completed during Q3 included the flora and fauna baseline study, integrated pest management plan, rainy season biodiversity monitoring, and the visual baseline report. In addition, development of a comprehensive reclamation and closure program is in progress.
Project Timeline and Next Steps
The Company remains focused on advancing its Terronera Project to initial production. Upcoming major milestones include:
- Advancing mill area concrete work on schedule with the electromechanical contractor mobilization schedule with handover in early 2024.
- Electromechanical contract award and mobilization in Q4 2023
- Waste Dump area two earthworks in Q4 2023
- Commence excavation of the filtration and LNG power plant area platform in Q4 2023
- Complete Portal 4 incline breakthrough to surface in Q4 2023
- Develop Portal 2 and Portal 4 declines for initial ore access in Q1 2024
- Continue developing Portal 1 decline to establish main haulage and lower ore access
EXPLORATION RESULTS
At Guanaceví, the Company drilled 6,073 metres in 30 holes at a total expense of $1.1 million focusing on the El Curso - Alondra properties, establishing lateral and vertical extensions of the mineralized zone towards Porvenir Cuatro and continued testing the deep northwest extension of the Porvenir Dos orebody. Drilling results confirmed expectations and intersected significant mineralization with similar grades and vein widths to historical results. The Company will incorporate these drill results into its year end resource estimation and life of mine plan.
At Bolañitos, the Company drilled 8,204 metres in 43 holes at a total expense of $1.0 million to target the Candelaria, El Puertocito and Fortuna veins in the Golondrinas area located in Bolañitos South. The Company intersected significant mineralization with resource average grades over mineable widths. The Company will incorporate these drill results into its year end resource estimation and life of mine plan.
At Parral, the Company drilled 29 holes totalling 7,626 metres, with a cost of $1.5 million to continue targeting various areas of Veta Colorada. We have extended systems in the Sierra Plata, El Verde and San Joaquin areas and the San Patricio vein system. The additional drilling is expected to support the commencement of a preliminary economic assessment.
At Pitarrilla, the Company continued underground development to advance the kilometre long decline and lateral drifts that will be used to drill 5,000 metres to test the resource at various angles and conduct geological mapping activities. The advancement of the decline was slowed due to ground conditions, with drilling expected to commencement in Q1 2024.
At Terronera, the site remains focused on development with exploration regional activities completed including geological mapping conducted in the El Padre, Katia, Ermita and Real Alto areas. Management plans to resume drilling activities once Terronera project is in operation.
In Chile, the Company conducted mapping, sampling and surface exploration and preparation for drilling at the Aida project and conducted general exploration activities at the Paloma, Constanza and Anastasia properties.
On July 18, 2023 the Company entered into a definitive agreement with Bravada Gold Corporation which grants the Company an option to earn an 85% interest in the Baxter gold and silver property ("Baxter"), by incurring $4.0 million in exploration expenditures and paying $0.5 million in option payments over a five-year period from the date of the agreement. Baxter is located directly north of the Company's Bruner project in Nevada's Walker Lane Gold trend. Baxter consists of 114 unpatented lode claims (approximately 920 hectares). Upon completion of the exploration and development expenditures and payment of all of the option payments, the Company can exercise the option and will form a joint venture with 85% of the interest belonging to the Company.
On July 31, 2023, Minera Plata Adelante SA de CV ("MPA") entered into an agreement with Gold Royalty Corp. to sell all of MPA's interest in the 1% Cozamin royalty ("Cozamin Royalty") for total consideration of $7.5 million, payable in cash. The Cozamin Royalty applies to two concessions (Calicanto and Vicochea) on Capstone's Cozamin copper-silver mine, located 3.6 kilometres north-northwest of Zacatecas City in state of Zacatecas, Mexico. The Company obtained the Cozamin Royalty through a concession division agreement signed in 2017 on seven wholly owned concessions which were acquired for $0.4 million. The Cozamin Mine, a copper-silver mine owned and operated by Capstone Copper in Zacatecas, Mexico, is located on two of the seven Concessions. The sale agreement includes an option granted to Gold Royalty Corp to purchase any additional royalties which may be granted on the five remaining concessions under the 2017 concession division agreement. The definitive agreement was subject to standard closing conditions with the sale was completed on August 30, 2023.
CONSOLIDATED FINANCIAL RESULTS
Three months ended September 30, 2023 (compared to the three months ended September 30, 2022)
In Q3, 2023, the Company's mine operating earnings were $2.8 million (Q3, 2022 - $5.1 million) on revenue of $49.5 million (Q3, 2022 - $39.6 million) with cost of sales of $46.7 million (Q3, 2022 - $34.5 million).
In Q3, 2023, the Company had an operating loss of $3.8 million (Q3, 2022 -$1.3 million) after exploration and evaluations costs of $4.2 million (Q3, 2022 - $4.0 million) and general and administrative expense of $2.4 million (Q3, 2022 -$2.2 million). In the three months ended September 30, 2022, the operating loss also included $0.2 million in care and maintenance costs related to the suspension of the operations at the El Compas mine.
The earnings before taxes for Q3, 2023 was $0.8 million (Q3, 2022 -$1.7 million) after gain on asset disposal of $7.0 million (Q3, 2022 - $2.8 million), finance costs of $0.3 million (Q3, 2022 - $0.3 million), a foreign exchange loss of $0.4 million (Q3, 2022 -foreign exchange gain of $0.8 million) and investment and other expenses of $1.6 million (Q3, 2022 -$0.3 million). The Company realized a net loss for the period of $2.3 million (Q3, 2022 -net loss of $1.5 million) after an income tax expense of $3.1 million (Q3, 2022 - $3.2 million). In Q3, 2023 earnings were impacted by a $1.9 million mark-to-market adjustment resulting in an unrealized loss on investments included in investment and other expense (Q3, 2022 - $1.1 million).
Revenue of $49.5 million in Q3, 2023, net of $0.5 million of smelting and refining costs, increased by 25% compared to $39.6 million, net of $0.7 million of smelting and refining costs, in Q3, 2022. Gross sales of $49.9 million in Q3, 2023 represented a 24% increase over the gross sales of $40.3 million for the same period in 2022. The 3% increase in silver ounces sold during the period, combined with a 25% increase in the realized silver price resulted in a 29% increase to silver sales. Gold oz sold decreased 1% with a 16% increase in realized gold prices resulting in a 15% increase in gold sales. Gold oz sold decreased primarily due to the 1% decrease in gold ounces produced as finished goods inventory levels remained stable. During the period, the Company sold 1,370,032 oz silver and 8,760 oz gold, for realized prices of $23.99 and $1,948 per oz, respectively, compared to sales of 1,327,325 oz silver and 8,852 oz gold, for realized prices of $19.24 and $1,678 per oz, respectively, in the same period of 2022. For the three months ended September 30, 2023, the realized prices of silver and gold were within 2% of the London spot prices. Silver and gold London spot prices averaged $23.57 and $1,928, respectively, during the three months ended September 30, 2023.
The Company decreased its finished goods to 424,217 oz silver and slightly increased its finished goods gold inventory to 1,689 oz gold at September 30, 2023 compared to 637,439 oz silver and 1,519 oz gold at June 30, 2023. The cost allocated to these finished goods was $11.0 million as at September 30, 2023, compared to $13.8 million at June 30, 2023. At September 30, 2023, the finished goods inventory fair market value was $12.9 million, compared to $17.6 million at June 30, 2023.
Cost of sales for Q3, 2023 was $46.7 million, an increase of 35% over the cost of sales of $34.5 million for Q3, 2022. The increase in the cost of sales compared to the prior period was driven by, a strengthened Mexican peso and higher labour, power and consumables costs as the Company, as well the industry, has experienced significant inflationary pressures. Additionally, the Company incurred increased royalty costs during Q3, 2023 compared to the prior period. At Guanacevi the additional operating development, decreased mine productivity, an increase in the purchase of third-party ore and additional repair costs associated with the plant shutdown also negatively impacted costs. Including royalties and special mining duty, direct costs per tonne increased 21% to $176.37. Compared to Q3, 2022, royalties have increased 77% from $2.8 million to $4.8 million with the increase occurring at Guanaceví. At Guanaceví the increase in royalty expense recognized during Q3, 2023 is due to the increase in production coming from concessions subject to royalties and an increase in the realized silver price. The royalty increased to 13% from 9% when the realized silver price crossed a price threshold of $20 per oz.
Exploration and evaluation expenses were $4.2 million, increase of 5% compared to $4.0 million incurred in the same period of 2022 primarily due to the additional exploration expenditures on the newly acquired Pitarrilla project and timing of exploration activities. General and administrative expenses of $2.4 million in Q3 2023 were 9% higher compared to the $2.2 million incurred for the same period of 2022. During Q3 2023 there are additional costs due to investment in a new ERP system and during Q3 2022, there was a mark-to-market impact of cash-settled director's deferred share units, which comparatively decreased costs by $0.3 million.
The Company incurred a foreign exchange loss of $0.4 million in Q3, 2023 compared to a gain of $0.8 million in Q3, 2022 due to a weakening of the Mexican peso at the end of the quarter, which decreases the US dollar value of Mexican peso denominated working capital. The Company incurred $0.3 million in finance charges primarily from interest on loans related to mobile equipment and accretion of reclamation and rehabilitation liabilities, compared to $0.3 million in the same period in 2022. The Company recognized $1.7 million in investment and other expenses compared to $0.3 million in investment and other expenses in Q3, 2022, primarily resulting from recognizing an unrealized loss on marketable securities and warrants of $1.9 million (Q3, 2022 - loss of $1.1 million), $0.2 million in interest income (Q3, 2022 - $0.4 million) and $0.1 million in other expenses (Q3, 2022 - other income of $0.1 million). The nine-month period ended September 30, 2022 additionally included $0.3 million in royalty income. The Company recognized a $7.0 million gain on the sale of the Cozamin Royalty in Q3, 2023 (Q3, 2022 - $2.8 million gain on the sale of the El Compas mine).
Income tax expense was $3.1 million in Q3, 2023 compared to $3.2 million in Q3, 2022. The $3.1 million tax expense is comprised of $2.2 million in current income tax expense (Q3, 2022 - $1.2 million) and $0.9 million in deferred income tax expense (Q3, 2022 - $2.0 million). The current income tax expense consists of $0.4 million in special mining duty taxes and $1.8 million of income taxes. The deferred income tax expense of $0.9 million is derived from changes in temporary timing differences between deductions for accounting versus deductions for tax. During 2022, the changes in deferred taxes were driven primarily by the utilization of loss carryforwards at Guanacevi and during 2023 there were no further loss carryforwards available to offset against current income tax.
Nine months ended September 30, 2023 (compared to the nine months ended September 30, 2022)
For the nine-month period ended September 30, 2023, the Company's mine operating earnings were $31.3 million (2022 - $29.9 million) on revenue of $155.0 million (2022 - $128.2 million) with cost of sales of $123.7 million (2022 - $98.3 million).
The Company had operating earnings of $8.5 million (2022 -$10.0 million) after exploration and evaluations costs of $12.7 million (2022 - $11.0 million), general and administrative expense of $9.7 million (2022 -$7.8 million) and a write off of mineral properties of $0.4 million (2022 - $0.5 million). In the nine-month period ended September 30, 2022 operating earnings also included $0.6 million in care and maintenance costs related to the suspension of the operations at the El Compas mine.
Earnings before tax was $17.5 million (2022 -$11.8 million) after finance costs of $1.1 million (2022 - $0.9 million), a foreign exchange gain of $3.3 million (2022 -$1.4 million) and investment and other expense of $0.3 million (2022 -investment and other expense of $1.4 million). The Company realized net earnings for the period of $3.1 million (2022 -net loss of $1.8 million) after an income tax expense of $14.4 million (2022 - $13.5 million).
Revenue of $155.0 million for the nine-month period ended September 30, 2023, net of $1.9 million of smelting and refining costs, increased by 21% compared to $128.2 million, net of $2.3 million of smelting and refining costs in the same period of 2022. Gross sales of $156.9 million in 2023 represented a 20% increase over the gross sales of $130.5 million for the same period in 2022. Silver oz sold increased 19% due to both the withholding of a significant amount of silver finished goods inventory during Q3, 2022 and the 3% increase in silver production in 2023 compared to 2022. The 19% increase in ounces sold during the period, combined with a 7% increase in the realized silver price resulted in a 27% increase to silver sales. Gold oz sold increased 3% with a 6% increase in realized gold prices resulting in a 9% increase in gold sales. Gold oz sold increased 3% primarily due to the 4% increase in gold ounces produced during the period. During the period, the Company sold 4,337,112 oz silver and 27,769 oz gold, for realized prices of $23.75 and $1940 per oz, respectively, compared to sales of 3,647,987 oz silver and 27,025 oz gold, for realized prices of $22.24 and $1,827 per oz, respectively, in the same period of 2022. For the nine-month period ended September 30, 2023, the realized prices of silver and gold were within 2% of the London spot prices. Silver and gold London spot prices averaged $23.40 and $1,930 respectively, during the nine-month period ended September 30, 2023.
The Company slightly decreased its finished goods silver to 424,217 oz silver and slightly decreased it finished goods gold inventory to 689 oz gold, at September 30, 2023 compared to 530,250 oz silver and 1,707 oz gold at December 31, 2022. The cost allocated to these finished goods was $11.0 million at September 30, 2023, compared to $6.1 million at December 31, 2022 and $22.1 million at September 30, 2022. At September 30, 2023, the finished goods inventory fair market value was $12.9 million, compared to $15.8 million at December 31, 2022.
Cost of sales for 2023 was $123.7 million, an increase of 26% over the cost of sales of $98.3 million for the same period of 2022. The increase in cost of sales in 2023 in the current period compared to the prior period, was driven by a strengthened Mexican peso, higher labour, power and consumables costs as the Company, as l the industry, has experienced significant inflationary pressures. Additionally, the Company incurred increased royalty costs recognized during 2023 compared to the prior period as there was increased production at Guanacevi coming from the El Curso and El Porvenir concessions, which are subject to royalties, and there has been an increase third-party ore purchased.
Exploration and evaluation expenses were $12.7 million, increase of 15% compared to $11.0 million incurred in the same period of 2022 primarily due to the additional exploration expenditures on the newly acquired Pitarrilla project and timing of exploration activities. General and administrative expenses of $9.7 million in 2023 were 24% higher compared to the $7.8 million incurred for the same period of 2022. During 2023 there are additional costs due to investment in a new ERP system, inflationary pressure on salaries and during Q3 2022, there was a mark-to-market impact of cash-settled director's deferred share units, which comparatively increased costs by $0.3 million.
The Company incurred a foreign exchange gain of $3.3 million in 2023 compared to a foreign exchange gain of $1.3 million in the same period in 2022 due to a strengthening of the Mexican peso during 2023 which increases the US dollar value of Mexican peso denominated working capital. The Company incurred $1.1 million in finance charges primarily from interest on loans related to mobile equipment and accretion of reclamation and rehabilitation liabilities compared to $0.9 million in the same period in 2022. The Company recognized $0.3 million in investment and other expense compared to $1.4 million in investment and other expense in 2022, primarily resulting from recognizing a loss on marketable securities and warrants of $2.0 million (2022 -$3.4 million), $1.2 million in interest income (2022 - $0.8 million), $0.5 million in royalty income (2022 - $0.5 million). The nine-months period ended September 30, 2022 additionally included $0.7 million in other income. The Company recognized also a $7.0 million gain on the sale of the Cozamin Royalty in Q3, 2023 (Q3, 2022 - $2.8 million gain on the sale of the El Compas mine).
Income tax expense was $14.4 million in 2023 compared to $13.5 million in 2022. The $14.4 million tax expense is comprised of $11.1 million in current income tax expense (2022 - $3.5 million) and $3.3 million in deferred income tax expense (2022 - $10.0 million). The current income tax expense consists of $3.2 million in special mining duty taxes and $7.9 million of income taxes. The deferred income tax expense of $3.3 million is derived from changes in temporary timing differences between deductions for accounting versus deductions for tax. During 2022, the changes in deferred taxes were driven primarily by the utilization of loss carryforwards at Guanacevi and during 2023 there were no further loss carryforwards available to offset against current income tax.
NON-IFRS MEASURES
Non-IFRS and Other Financial Measures and Ratios
We have included certain non-IFRS financial measures and ratios in this MD&A, as discussed below. We believe that these measures, in addition to conventional measures prepared in accordance with IFRS, provide investors an improved ability to evaluate the underlying performance of the Company. The non-IFRS measures and ratios are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These financial measures and ratios do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to other issuers.
Non-IFRS financial measures are defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure ("NI 52-112") as a financial measure disclosed that (a) depicts the historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) is not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar representation.
A non-IFRS ration is defined by 52-112 as a financial measure disclosed that (a) is in the form of a ratio, fraction, percentage or similar representation, (b) has a non-IFRS financial measure as one or more of its components, and (c) is not disclosed in the financial statements.
Working capital is a non-IFRS measure that is a common measure of liquidity but does not have any standardized meaning. The most directly comparable measure prepared in accordance with IFRS is current assets and current liabilities. Working capital is calculated by deducting current liabilities from current assets. Working capital should not be considered in isolation or as a substitute from measures prepared in accordance with IFRS. The measure is intended to assist readers in evaluating our liquidity.
Expressed in thousands US dollars |
|
As at September 30, 2023 |
|
|
As at December 31, 2022 |
|
|
|
|
|
|
|
|
Current assets |
$ |
131,436 |
|
$ |
146,333 |
|
Current liabilities |
|
55,487 |
|
|
52,749 |
|
Working capital |
$ |
75,949 |
|
$ |
93,584 |
|
Adjusted earnings and adjusted earnings per share ("EPS") are non-IFRS measures that supplement information to the Company's consolidated financial statements. The Company believes that, in addition to the conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the Company's underlying core operating performance. The presentation of adjusted earnings and adjusted earnings per share is not meant to be a substitute of net income and net income per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures.
The Company defines the adjusted earnings as net income adjusted to include certain non-cash and unusual item, and items that in the Company's judgement are subject to volatility as a result of factors which are unrelated to the Company's operation in the period. Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and, conversely, items no longer applicable may be removed from the calculation. During the current period, the Company has included changes in the fair value of its investments in marketable securities and made retroactive adjustments to prior periods for the same. The following table provides a detailed reconciliation of net income as reported in the Company's financial statement to adjusted earnings and adjusted earnings per share.
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
(except for share numbers and per share amounts) |
2023 |
2022 |
2023 |
2022 |
Net earnings (loss) for the period per financial statements |
($2,328) |
($1,499) |
$3,074 |
($1,760) |
Gain on sale of Cozamin royalty |
(6,990) |
- |
(6,990) |
- |
Gain on disposal of El Compas mine and equipment, net of tax |
- |
(2,733) |
- |
(2,733) |
Change in fair value of investments |
1,944 |
1,097 |
1,997 |
3,366 |
Adjusted net earnings (loss) |
($7,374) |
($3,135) |
($1,919) |
($1,127) |
Basic weighted average share outstanding |
194,249,283 |
189,241,367 |
192,003,752 |
180,655,842 |
Adjusted net earnings (loss) per share |
($0.04) |
($0.02) |
($0.01) |
($0.01) |
Mine operating cash flow before taxes is a non-IFRS measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Mine operating cash flow is calculated as revenue minus direct production costs and royalties. Mine operating cash flow is used by management to assess the performance of the mine operations, excluding corporate and exploration activities and is provided to investors as a measure of the Company's operating performance.
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
|
2023 |
2022 |
2023 |
2022 |
Mine operating earnings per financial statements |
$2,692 |
$5,129 |
$31,259 |
$29,870 |
Share-based compensation |
44 |
113 |
(118) |
353 |
Amortization and depletion |
7,855 |
5,753 |
20,704 |
16,234 |
Write down of inventory to net realizable value |
- |
1,323 |
- |
1,323 |
Mine operating cash flow before taxes |
$10,591 |
$12,318 |
$51,845 |
$47,780 |
Operating cash flow before working capital changes per share is a non-IFRS measure that does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Operating cash flow per share is calculated by dividing cash from operating activities by the weighted average shares outstanding. Operating cash flow per share is used by management to assess operating performance on a per share basis, irrespective of working capital changes and is provided to investors as a measure of the Company's operating performance.
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
(except for per share amounts) |
2023 |
2022 |
2023 |
2022 |
Cash from (used in) operating activities per financial statements |
$613 |
$7,417 |
$5,065 |
$10,602 |
Net changes in non-cash working capital per financial statements |
(2,650) |
85 |
(22,158) |
(20,957) |
Operating cash flow before working capital changes |
$3,263 |
$7,332 |
$27,223 |
$31,559 |
Basic weighted average shares outstanding |
194,249,283 |
189,241,367 |
192,003,752 |
180,655,842 |
Operating cash flow before working capital changes per share |
$0.02 |
$0.04 |
$0.14 |
$0.17 |
EBITDA is a non-IFRS financial measure, which excludes the following from net earnings:
- Income tax expense;
- Finance costs;
- Amortization and depletion.
Adjusted EBITDA excludes the following additional items from EBITDA:
- Share based compensation;
- Non-recurring impairments (reversals);
- Change in fair value of investments;
- Significant non-routine items.
Adjusted EBITDA per share is calculated by dividing Adjusted EBITDA by the basic weighted average number of shares outstanding for the period.
Management believes EBITDA is a valuable indicator of the Company's ability to generate liquidity by producing operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures. Management uses EBITDA for this purpose. EBITDA is also frequently used by investors and analysts for valuation purposes whereby EBITDA is multiplied by a factor or "EBITDA multiple" based on an observed or inferred relationship between EBITDA and market values to determine the approximate total enterprise value of a Company.
EBITDA is intended to provide additional information to investors and analysts. It does not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of operating performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined by IFRS. Other companies may calculate EBITDA and Adjusted EBITDA differently.
Certain items that become applicable in a period may be adjusted for, with the Company retroactively presenting comparable periods with an adjustment for such items and, conversely, items no longer applicable may be removed from the calculation. During the current period, the Company has included changes in the fair value of its investments in marketable securities and made retroactive adjustments to prior periods for the same.
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
|
2023 |
2022 |
2023 |
2022 |
Net earnings (loss) for the period per financial statements |
($2,328) |
($1,499) |
$3,074 |
($1,760) |
Depreciation and depletion - cost of sales |
7,855 |
5,753 |
20,704 |
16,234 |
Depreciation and depletion - exploration |
(147) |
143 |
448 |
348 |
Depreciation and depletion - general & administration |
63 |
57 |
179 |
156 |
Depreciation and depletion - care & maintenance |
- |
10 |
- |
70 |
Finance costs |
170 |
194 |
658 |
583 |
Current income tax expense |
2,250 |
1,186 |
11,137 |
3,526 |
Deferred income tax expense |
888 |
2,053 |
3,330 |
10,027 |
EBITDA |
$8,751 |
$7,897 |
$39,530 |
$29,184 |
Share based compensation |
863 |
760 |
2,904 |
3,259 |
Impairment (reversal) of non-current assets, net of tax |
- |
- |
- |
- |
Gain on sale of Cozamin royalty |
(6,990) |
- |
(6,990) |
- |
Gain on disposal of El Compas mine and equipment, net of tax |
- |
(2,733) |
- |
(2,733) |
Change in fair value of investments |
1,944 |
1,097 |
1,997 |
3,366 |
Adjusted EBITDA |
$4,568 |
$7,021 |
$37,441 |
$33,076 |
Basic weighted average shares outstanding |
194,249,283 |
189,241,367 |
192,003,752 |
180,655,842 |
Adjusted EBITDA per share |
$0.02 |
$0.04 |
$0.20 |
$0.18 |
Cash costs per silver oz, total production costs per oz, direct operating costs per tonne and direct costs per tonne are measures developed by precious metals companies in an effort to provide a comparable standard; however, there can be no assurance that the Company's reporting of these non-IFRS measures and ratios are similar to those reported by other mining companies. Cash costs per oz, total production costs per oz and direct costs per tonne are measures used by the Company to manage and evaluate operating performance at each of the Company's operating mining units. They are widely reported in the silver mining industry as a benchmark for performance, but do not have a standardized meaning and are disclosed in addition to IFRS measures. Direct operating costs include mining, processing (including smelting, refining, transportation and selling costs) and direct overhead at the operation sites. Direct costs include all direct operating costs plus royalties and special mining duty. Cash costs include all direct costs less by-product gold sales and changes in finished gold inventories. Total production costs include all cash costs plus amortization and depletion, changes in amortization and depletion in finished goods inventory and site share-based compensation. Cash costs per silver ounce and total production costs per ounce are calculated by dividing cash costs and total production costs by the payable silver ounces produced. Direct operating cost per tonne and direct costs per tonne are calculated by dividing direct operating costs and direct costs by the number of processed tonnes. The following tables provide a detailed reconciliation of these measures to the Company's direct production costs, as reported in its consolidated financial statements.
Expressed in thousands US dollars |
Three Months Ended September 30, 2023
|
Three Months Ended September 30, 2022 |
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Direct production costs per financial statements |
$23,863 |
$10,157 |
$34,020 |
$15,156 |
$9,354 |
$24,510 |
Smelting and refining costs included in net revenue |
- |
494 |
494 |
- |
744 |
744 |
Opening finished goods |
(10,257) |
(962) |
(11,219) |
(16,164) |
(681) |
(16,845) |
Closing finished goods |
8,627 |
656 |
9,283 |
18,080 |
195 |
18,275 |
Direct operating costs |
22,233 |
10,345 |
32,578 |
17,072 |
9,612 |
26,684 |
Royalties |
4,754 |
67 |
4,821 |
2,762 |
59 |
2,821 |
Special mining duty (1) |
306 |
85 |
391 |
241 |
(85) |
156 |
Direct costs |
27,293 |
10,497 |
37,790 |
20,075 |
9,586 |
29,661 |
By-product gold sales |
(5,326) |
(11,737) |
(17,063) |
(5,237) |
(9,615) |
(14,852) |
Opening gold inventory fair market value |
1,629 |
1,268 |
2,897 |
4,662 |
1,061 |
5,723 |
Closing gold inventory fair market value |
(2,345) |
(815) |
(3,160) |
(5,368) |
(240) |
(5,608) |
Cash costs net of by-product |
21,251 |
(787) |
20,464 |
14,132 |
792 |
14,924 |
Amortization and depletion |
4,684 |
3,171 |
7,855 |
3,119 |
2,634 |
5,753 |
Share-based compensation |
31 |
13 |
44 |
56 |
57 |
113 |
Opening finished goods depreciation and depletion |
(2,318) |
(288) |
(2,606) |
(3,733) |
(199) |
(3,932) |
Closing finished goods depreciation and depletion |
1,509 |
222 |
1,731 |
3,776 |
60 |
3,836 |
Total production costs |
$25,157 |
$2,331 |
$27,488 |
$17,350 |
$3,344 |
$20,694 |
|
Three Months Ended September 30, 2023
|
Three Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Throughput tonnes |
103,345 |
110,925 |
214,270 |
97,728 |
105,017 |
202,745 |
Payable silver ounces |
1,038,087 |
102,510 |
1,140,597 |
1,328,193 |
117,687 |
1,445,880 |
|
|
|
|
|
|
|
Cash costs per silver ounce |
$20.47 |
($7.68) |
$17.94 |
$10.64 |
$6.73 |
$10.32 |
Total production costs per ounce |
$24.23 |
$22.74 |
$24.10 |
$13.06 |
$28.41 |
$14.31 |
Direct operating costs per tonne |
$215.13 |
$93.26 |
$152.04 |
$174.69 |
$91.53 |
$131.61 |
Direct costs per tonne |
$264.10 |
$94.63 |
$176.37 |
$205.42 |
$91.28 |
$146.30 |
Expressed in thousands US dollars |
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Direct production costs per financial statements |
$56,886 |
$29,128 |
$86,014 |
$40,837 |
$30,222 |
$71,059 |
Smelting and refining costs included in net revenue |
- |
1,945 |
1,945 |
- |
2,335 |
2,335 |
Opening finished goods |
(4,953) |
(245) |
(5,198) |
(10,093) |
(2,857) |
(12,950) |
Closing finished goods |
8,627 |
656 |
9,283 |
18,080 |
195 |
18,275 |
Direct operating costs |
60,560 |
31,484 |
92,044 |
48,824 |
29,895 |
78,719 |
Royalties |
16,904 |
201 |
17,105 |
9,124 |
208 |
9,332 |
Special mining duty (1) |
2,800 |
379 |
3,179 |
1,767 |
286 |
2,053 |
Direct costs |
80,264 |
32,064 |
112,328 |
59,715 |
30,389 |
90,104 |
By-product gold sales |
(22,228) |
(31,654) |
(53,882) |
(15,978) |
(33,405) |
(49,383) |
Opening gold inventory fair market value |
2,740 |
354 |
3,094 |
1,900 |
4,784 |
6,684 |
Closing gold inventory fair market value |
(2,345) |
(815) |
(3,160) |
(5,368) |
(240) |
(5,608) |
Cash costs net of by-product |
58,431 |
(51) |
58,380 |
40,269 |
1,528 |
41,797 |
Amortization and depletion |
11,539 |
9,165 |
20,704 |
7,969 |
8,265 |
16,234 |
Share-based compensation |
(50) |
(68) |
(118) |
176 |
177 |
353 |
Opening finished goods depreciation and depletion |
(862) |
(60) |
(922) |
(1,965) |
(635) |
(2,600) |
Closing finished goods depreciation and depletion |
1,509 |
222 |
1,731 |
3,776 |
60 |
3,836 |
Total production costs |
$70,567 |
$9,208 |
$79,775 |
$50,225 |
$9,395 |
$59,620 |
|
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Throughput tonnes |
322,628 |
331,290 |
653,918 |
292,998 |
317,255 |
610,253 |
Payable silver ounces |
3,822,057 |
409,007 |
4,231,064 |
3,649,209 |
446,487 |
4,095,696 |
|
|
|
|
|
|
|
Cash costs per silver ounce |
$15.29 |
($0.12) |
$13.80 |
$11.03 |
$3.42 |
$10.21 |
Total production costs per ounce |
$18.46 |
$22.51 |
$18.85 |
$13.76 |
$21.04 |
$14.56 |
Direct operating costs per tonne |
$187.71 |
$95.03 |
$140.76 |
$166.64 |
$94.23 |
$128.99 |
Direct costs per tonne |
$248.78 |
$96.79 |
$171.78 |
$203.81 |
$95.79 |
$147.65 |
(1) Special mining duty is an EBITDA royalty tax presented as a current income tax in accordance with IFRS.
Expressed in thousands US dollars |
September 30, 2023 |
|
September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Closing finished goods |
8,627 |
656 |
9,283 |
18,080 |
195 |
18,275 |
Closing finished goods depletion |
1,509 |
222 |
1,731 |
3,776 |
60 |
3,836 |
Finished goods inventory |
$10,136 |
$878 |
$11,014 |
$21,856 |
$255 |
$22,111 |
AISC per oz and all-in costs per oz are measures developed by the World Gold Council (and used as a standard of the Silver Institute) in an effort to provide a comparable standard within the precious metal industry; however, there can be no assurance that the Company's reporting of these non-IFRS measures are similar to those reported by other mining companies. These measures are used by the Company to manage and evaluate operating performance at each of the Company's operating mining units and consolidated group, and are widely reported in the silver mining industry as a benchmark for performance, but do not have a standardized meaning and are disclosed in addition to IFRS measures. The following tables provide a detailed reconciliation of these measures to the Company's cost of sales, as reported in the Company's consolidated financial statements.
Expressed in thousands US dollars |
Three Months Ended September 30, 2023 |
Three Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Cash costs net of by-product |
$21,251 |
($787) |
$20,464 |
$14,132 |
$792 |
$14,924 |
Operations share-based compensation |
31 |
13 |
44 |
56 |
57 |
113 |
Corporate general and administrative |
1,087 |
514 |
1,601 |
1,200 |
414 |
1,614 |
Corporate share-based compensation |
475 |
219 |
694 |
405 |
125 |
530 |
Reclamation - amortization/accretion |
77 |
69 |
146 |
64 |
52 |
116 |
Mine site expensed exploration |
362 |
339 |
701 |
316 |
305 |
621 |
Equipment loan payments |
189 |
489 |
678 |
245 |
489 |
734 |
Capital expenditures sustaining |
6,697 |
2,787 |
9,484 |
7,212 |
3,439 |
10,651 |
All-In-Sustaining Costs |
$30,169 |
$3,643 |
$33,812 |
$23,629 |
$5,674 |
$29,303 |
Growth exploration and evaluation |
|
|
3,476 |
|
|
3,142 |
Growth capital expenditures |
|
|
22,252 |
|
|
6,240 |
All-In-Costs |
|
|
$59,540 |
|
|
$38,685 |
|
Three Months Ended September 30, 2023 |
Three Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Throughput tonnes |
103,345 |
110,925 |
214,270 |
97,728 |
105,017 |
202,745 |
Payable silver ounces |
1,038,087 |
102,510 |
1,140,597 |
1,328,193 |
117,687 |
1,445,880 |
Silver equivalent production (ounces) |
1,294,091 |
581,764 |
1,875,855 |
1,623,550 |
570,418 |
2,193,968 |
Sustaining cost per ounce |
$29.06 |
$35.54 |
$29.64 |
$17.79 |
$48.21 |
$20.27 |
All-In-costs per ounce |
|
|
$52.20 |
|
|
$26.76 |
Expressed in thousands US dollars |
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Cash costs net of by-product |
$58,431 |
($51) |
$58,380 |
$40,269 |
$1,528 |
$41,797 |
Operations share-based compensation |
(50) |
(68) |
(118) |
176 |
177 |
353 |
Corporate general and administrative |
4,931 |
1,869 |
6,800 |
3,668 |
1,445 |
5,113 |
Corporate share-based compensation |
1,924 |
730 |
2,654 |
1,849 |
728 |
2,577 |
Reclamation - amortization/accretion |
235 |
197 |
432 |
198 |
158 |
356 |
Mine site expensed exploration |
1,068 |
1,002 |
2,070 |
1,028 |
863 |
1,891 |
Intangible payments |
- |
- |
- |
29 |
12 |
41 |
Equipment loan payments |
679 |
1,465 |
2,144 |
736 |
1,466 |
2,202 |
Capital expenditures sustaining |
18,687 |
8,008 |
26,695 |
19,908 |
8,653 |
28,561 |
All-In-Sustaining Costs |
$85,905 |
$13,152 |
$99,057 |
$67,861 |
$15,030 |
$82,891 |
Growth exploration and evaluation |
|
|
9,792 |
|
|
8,456 |
Growth capital expenditures |
|
|
49,622 |
|
|
16,778 |
All-In-Costs |
|
|
$158,471 |
|
|
$108,125 |
|
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Throughput tonnes |
322,628 |
331,290 |
653,918 |
292,998 |
317,255 |
610,253 |
Payable silver ounces |
3,822,057 |
409,007 |
4,231,064 |
3,649,209 |
446,487 |
4,095,696 |
Silver equivalent production (ounces) |
4,732,278 |
1,794,002 |
6,526,280 |
4,524,110 |
1,782,740 |
6,306,850 |
Sustaining cost per ounce |
$22.48 |
$32.16 |
$23.41 |
$18.60 |
$33.66 |
$20.24 |
All-In-costs per ounce |
|
|
$37.45 |
|
|
$26.40 |
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
|
2023 |
2022 |
2023 |
2022 |
Capital expenditures sustaining |
$9,484 |
$10,651 |
$26,695 |
$28,561 |
Growth capital expenditures |
22,252 |
6,240 |
49,622 |
16,778 |
Property, plant and equipment expenditures per Consolidated Statement of Cash Flows |
$31,736 |
$16,891 |
$76,317 |
$45,339 |
Expressed in thousands US dollars |
Three Months Ended September 30 |
Nine Months Ended September 30 |
|
2023 |
2022 |
2023 |
2022 |
Mine site expensed exploration |
$701 |
$621 |
$2,070 |
$1,891 |
Growth exploration and evaluation |
3,476 |
3,142 |
9,792 |
8,456 |
Total exploration and evaluation |
4,177 |
3,763 |
11,862 |
10,347 |
Exploration depreciation and depletion |
(147) |
143 |
448 |
348 |
Exploration share-based compensation |
125 |
117 |
368 |
328 |
Exploration and evaluation expense |
$4,155 |
$4,023 |
$12,678 |
$11,023 |
Silver co-product cash costs and gold co-product cash costs are measures used by the Company to manage and evaluate operating performance at each of the Company's operating mining units and consolidated group, but do not have a standardized meaning and are disclosed in addition to IFRS measures. The following tables provide a detailed reconciliation of these measures to the Company's cost of sales, as reported in its consolidated financial statements.
Expressed in thousands US dollars |
Three Months Ended September 30, 2023 |
Three Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Direct production costs per financial statements |
$23,863 |
$10,157 |
$34,020 |
$15,156 |
$9,354 |
$24,510 |
Smelting and refining costs included in net revenue |
- |
494 |
494 |
- |
744 |
744 |
Royalties |
4,754 |
67 |
4,821 |
2,762 |
59 |
2,821 |
Special mining duty (1) |
306 |
85 |
391 |
241 |
(85) |
156 |
Opening finished goods |
(10,257) |
(962) |
(11,219) |
(16,164) |
(681) |
(16,845) |
Closing finished goods |
8,627 |
656 |
9,283 |
18,080 |
195 |
18,275 |
Direct costs |
$27,293 |
$10,497 |
$37,790 |
$20,075 |
$9,586 |
$29,661 |
|
|
|
|
Three Months Ended September 30, 2023 |
Three Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Silver production (ounces) |
1,041,211.00 |
107,524 |
1,148,735 |
1,332,190 |
126,258 |
1,458,448 |
Average realized silver price ($) |
23.99 |
23.99 |
23.99 |
19.24 |
19.24 |
19.24 |
Silver value ($) |
24,976,320 |
2,579,260 |
27,555,580 |
25,634,615 |
2,429,515 |
28,064,130 |
|
|
|
|
|
|
|
Gold production (ounces) |
3,161 |
5,928 |
9,089 |
3,642 |
5,552 |
9,194 |
Average realized gold price ($) |
1,948 |
1,948 |
1,948 |
1,678 |
1,678 |
1,678 |
Gold value ($) |
6,157,094 |
11,546,742 |
17,703,836 |
6,110,595 |
9,315,217 |
15,425,812 |
|
|
|
|
|
|
|
Total metal value ($) |
31,133,414 |
14,126,002 |
45,259,417 |
31,745,210 |
11,744,732 |
43,489,942 |
Pro-rated silver costs (%) |
80% |
18% |
61% |
81% |
21% |
65% |
Pro-rated gold costs (%) |
20% |
82% |
39% |
19% |
79% |
35% |
|
|
|
|
|
|
|
Pro-rated silver costs ($) |
21,895 |
1,917 |
23,008 |
16,211 |
1,983 |
19,140 |
Pro-rated gold costs ($) |
5,398 |
8,580 |
14,782 |
3,864 |
7,603 |
10,521 |
|
|
|
|
|
|
|
Silver co-product cash costs ($) |
21.03 |
17.83 |
20.03 |
12.17 |
15.71 |
13.12 |
Gold co-product cash costs ($) |
1,708 |
1,447 |
1,626 |
1,061 |
1,369 |
1,144 |
Expressed in thousands US dollars |
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Direct production costs per financial statements |
$56,886 |
$29,128 |
$86,014 |
$40,837 |
$30,222 |
$71,059 |
Smelting and refining costs included in net revenue |
- |
$1,945 |
$1,945 |
- |
2,335 |
2,335 |
Royalties |
16,904 |
201 |
17,105 |
9,124 |
208 |
9,332 |
Special mining duty (1) |
2,800 |
379 |
3,179 |
1,767 |
286 |
2,053 |
Opening finished goods |
(4,953) |
(245) |
(5,198) |
(10,093) |
(2,857) |
(12,950) |
Finished goods NRV adjustment |
- |
- |
- |
- |
- |
0 |
Closing finished goods |
8,627 |
656 |
9,283 |
18,080 |
195 |
18,275 |
Direct costs |
80,264 |
32,064 |
112,328 |
59,715 |
30,389 |
90,104 |
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2023 |
Nine Months Ended September 30, 2022 |
|
Guanaceví |
Bolañitos |
Total |
Guanaceví |
Bolañitos |
Total |
Silver production (ounces) |
3,833,558 |
432,722 |
4,266,280 |
3,660,190 |
472,420 |
4,132,610 |
Average realized silver price ($) |
23.75 |
23.75 |
23.75 |
22.24 |
22.24 |
22.24 |
Silver value ($) |
91,065,202 |
10,279,202 |
101,344,404 |
81,394,368 |
10,505,555 |
91,899,922 |
|
|
|
|
|
|
|
Gold production (ounces) |
11,234 |
17,016 |
28,250 |
10,799 |
16,379 |
27,178 |
Average realized gold price ($) |
1,940 |
1,940 |
1,940 |
1,827 |
1,827 |
1,827 |
Gold value ($) |
21,798,062 |
33,017,253 |
54,815,316 |
19,733,100 |
29,929,479 |
49,662,579 |
|
|
|
|
|
|
|
Total metal value ($) |
112,863,264 |
43,296,455 |
156,159,719 |
101,127,468 |
40,435,034 |
141,562,501 |
Pro-rated silver costs (%) |
81% |
24% |
65% |
80% |
26% |
65% |
Pro-rated gold costs (%) |
19% |
76% |
35% |
20% |
74% |
35% |
|
|
|
|
|
|
|
Pro-rated silver costs ($) |
64,762 |
7,612 |
72,899 |
48,063 |
7,895 |
58,494 |
Pro-rated gold costs ($) |
15,502 |
24,452 |
39,429 |
11,652 |
22,494 |
31,610 |
|
|
|
|
|
|
|
Silver co-product cash costs ($) |
16.89 |
17.59 |
17.09 |
13.13 |
16.71 |
14.15 |
Gold co-product cash costs ($) |
1,380 |
1,437 |
1,396 |
1,079 |
1,373 |
1,163 |
(1) Special mining duty is an EBITDA royalty tax presented as a current income tax in accordance with IFRS.
QUARTERLY RESULTS AND TRENDS
The following table presents selected financial information for each of the most recent eight quarters:
Table in thousands of U.S. dollars except for share numbers and per share amounts |
2023 |
2022 |
2021 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Gross Sales |
$49,926 |
$50,866 |
$56,117 |
$82,683 |
$40,393 |
$31,719 |
$58,394 |
$48,875 |
Smelting and refining costs included in net revenue |
494 |
795 |
656 |
694 |
744 |
937 |
654 |
358 |
Total Revenue |
49,432 |
50,071 |
55,461 |
81,989 |
39,649 |
30,782 |
57,740 |
48,517 |
Direct production costs |
34,020 |
25,478 |
26,516 |
42,821 |
24,510 |
19,828 |
26,721 |
26,013 |
Royalties |
4,821 |
5,749 |
6,535 |
8,479 |
2,821 |
2,194 |
4,317 |
4,285 |
Mine operating cash flow before taxes |
10,591 |
18,844 |
22,410 |
30,689 |
12,318 |
8,760 |
26,702 |
18,219 |
Share-based compensation |
44 |
(294) |
132 |
89 |
113 |
113 |
127 |
87 |
Amortization and depletion |
7,855 |
6,596 |
6,253 |
8,945 |
5,753 |
4,175 |
6,306 |
5,014 |
Write down on inventory |
|
- |
- |
- |
1,323 |
- |
- |
896 |
Mine operating earnings (loss) |
$2,692 |
$12,542 |
$16,025 |
$21,655 |
$5,129 |
$4,472 |
$20,269 |
$12,222 |
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
($0.01) |
($0.01) |
$0.03 |
$0.04 |
($0.01) |
($0.07) |
$0.07 |
$0.00 |
Diluted earnings (loss) per share |
($0.01) |
($0.01) |
$0.03 |
$0.04 |
($0.01) |
($0.07) |
$0.07 |
$0.00 |
Weighted shares outstanding |
194,249,283 |
191,446,597 |
190,274,768 |
189,993,085 |
189,241,367 |
180,974,609 |
171,557,220 |
170,518,894 |
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
($2,328) |
($1,054) |
$6,456 |
$7,961 |
($1,499) |
($11,923) |
$11,662 |
($471) |
Amortization and depletion |
7,771 |
6,967 |
6,593 |
9,279 |
5,963 |
4,354 |
6,491 |
5,194 |
Finance costs |
170 |
229 |
259 |
233 |
194 |
212 |
177 |
22 |
Current income tax |
2,250 |
4,442 |
4,445 |
2,850 |
1,186 |
1,325 |
1,015 |
1,005 |
Deferred income tax |
888 |
766 |
1,676 |
2,345 |
2,053 |
1,752 |
6,222 |
4,992 |
EBITDA |
$8,751 |
$11,350 |
$19,429 |
$22,668 |
$7,897 |
($4,280) |
$25,567 |
$10,742 |
The following table presents selected production information for each of the most recent eight quarters:
|
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Processed tonnes |
214,270 |
228,575 |
211,073 |
224,289 |
202,745 |
201,361 |
206,147 |
213,492 |
Guanaceví |
103,345 |
116,908 |
102,375 |
119,305 |
97,728 |
94,017 |
101,253 |
108,334 |
Bolañitos |
110,925 |
111,667 |
108,698 |
104,984 |
105,017 |
107,344 |
104,894 |
105,158 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Silver ounces |
1,148,735 |
1,494,000 |
1,623,545 |
1,830,835 |
1,458,448 |
1,359,207 |
1,314,955 |
1,443,199 |
Guanaceví |
1,041,211 |
1,352,423 |
1,439,924 |
1,680,363 |
1,332,190 |
1,194,150 |
1,133,850 |
1,301,941 |
Bolañitos |
107,524 |
141,577 |
183,621 |
150,472 |
126,258 |
165,057 |
181,105 |
141,258 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
365 |
Silver grade |
183 |
226 |
279 |
296 |
248 |
246 |
231 |
235 |
Guanaceví |
341 |
398 |
511 |
512 |
468 |
465 |
407 |
417 |
Bolañitos |
37 |
45 |
61 |
50 |
43 |
54 |
61 |
48 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Silver recovery |
90.9 |
90.1 |
85.7 |
85.8 |
90.3 |
85.4 |
85.9 |
89.4 |
Guanaceví |
91.9 |
90.4 |
85.6 |
85.6 |
90.6 |
85.0 |
85.6 |
89.6 |
Bolañitos |
82.6 |
87.6 |
86.1 |
89.2 |
87.0 |
88.6 |
88.0 |
87.0 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Gold ounces |
9,089 |
9,819 |
9,342 |
10,370 |
9,194 |
9,289 |
8,695 |
9,446 |
Guanaceví |
3,161 |
3,885 |
4,188 |
4,936 |
3,642 |
3,680 |
3,477 |
3,885 |
Bolañitos |
5,928 |
5,934 |
5,154 |
5,434 |
5,552 |
5,609 |
5,218 |
5,502 |
El Compas |
- |
- |
- |
- |
N/A |
- |
- |
59 |
Gold grade |
1.48 |
1.47 |
1.56 |
1.57 |
1.60 |
1.58 |
1.46 |
1.52 |
Guanaceví |
1.03 |
1.10 |
1.42 |
1.44 |
1.29 |
1.37 |
1.19 |
1.21 |
Bolañitos |
1.89 |
1.85 |
1.70 |
1.72 |
1.88 |
1.77 |
1.73 |
1.83 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Gold recovery |
89.4 |
91.1 |
88.0 |
91.5 |
88.4 |
90.6 |
89.6 |
90.8 |
Guanaceví |
92.4 |
94.0 |
89.6 |
89.4 |
89.9 |
88.9 |
89.8 |
92.2 |
Bolañitos |
87.9 |
89.3 |
86.8 |
93.6 |
87.5 |
91.8 |
89.4 |
88.9 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Cash costs per oz (1) |
$17.94 |
$13.52 |
$11.12 |
$11.65 |
$10.32 |
$10.08 |
$10.21 |
$8.65 |
Guanaceví |
$20.47 |
$14.53 |
$12.25 |
$12.40 |
$10.64 |
$10.35 |
$12.22 |
$10.74 |
Bolañitos |
($7.68) |
$3.34 |
$1.67 |
$2.85 |
$6.73 |
$8.01 |
($2.95) |
($10.69) |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
AISC per oz (1) |
$29.64 |
$22.15 |
$20.16 |
$19.38 |
$20.27 |
$19.56 |
$20.90 |
$19.48 |
Guanaceví |
$29.06 |
$20.81 |
$19.28 |
$18.05 |
$17.79 |
$17.66 |
$20.52 |
$18.74 |
Bolañitos |
$35.54 |
$35.64 |
$27.45 |
$35.06 |
$48.21 |
$34.10 |
$23.39 |
$27.46 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
Direct costs per tonne (1) |
$176.37 |
$169.59 |
$169.49 |
$177.35 |
$146.30 |
$148.11 |
$148.53 |
$136.62 |
Guanaceví |
$264.10 |
$232.58 |
$251.83 |
$249.23 |
$205.42 |
$201.84 |
$204.08 |
$193.87 |
Bolañitos |
$94.63 |
$103.64 |
$91.84 |
$95.67 |
$91.28 |
$101.05 |
$94.91 |
$77.68 |
El Compas |
- |
- |
- |
- |
- |
- |
- |
- |
(1) Cash cost per oz, AISC per oz and direct costs per tonne are not-IFRS measures.
(2) El Compas operations were suspended in August 2021.
Key Economic Trends
Precious Metal Price Trends
The prices of silver and gold are the largest single factor in determining profitability and cash flow from operations. The financial performance of the Company has been, and is expected to continue to be, closely linked to the prices of silver and gold.
During the nine-month period ended September 30, 2023, the average price of silver was $23.40 per ounce, with silver trading between $20.09 and $26.03 per oz based on the London Fix silver price. This compares to an average of $21.92 per oz for the nine-month period ended September 30, 2022, with a low of $17.77 and a high of $26.18 per oz. For the nine-month period ended September 30, 2023, the Company realized an average price of $23.65 per silver oz compared with $23.95 for the nine-month period ended September 30, 2022.
During the year ended December 31, 2022, the average price of silver was $21.73 per ounce, with silver trading between $17.77 and $26.18 per oz based on the London Fix silver price. This compares to an average of $25.14 per oz for the year ended December 31, 2021, with a low of $21.53 and a high of $29.59 per oz. During 2022, the Company realized an average price of $22.07 per silver oz compared with $25.22 in 2021.
During the nine-month period ended September 30, 2023, the average price of gold was $1,931 per oz, with gold trading between $1,811 and $2,048 per oz based on the London Fix PM gold price. This compares to an average of $1,824 per oz for the nine-month period ended September 30, 2022, with a low of $1,634 and a high of $2,039 per oz. For the nine-month period ended September 30, 2023, the Company realized an average price of $1,937 per oz compared with $1,900 for the nine-month period ended September 30, 2022.
During the year ended December 31, 2022, the average price of gold was $1,800 per oz, with gold trading between $1,629 and $2,039 per oz based on the London Fix PM gold price. This compares to an average of $1,799 per oz during the year ended December 31, 2021, with a low of $1,684 and a high of $1,943 per oz. During 2022, the Company realized an average price of $1,814 per oz compared with $1,800 in 2021.
The silver and gold markets have been impacted by changes in investment demand and the silver market is impacted due to the monetary aspects of silver, rising demand as a "green" metal and rising geopolitical tension. Central banks' increase of interest rates utilized as a tool in an attempt to offset inflation concerns, has impacted the price of silver and gold in 2022 and 2023.
Currency Fluctuations
The Company's operations are located in Mexico and therefore a significant portion of operating costs and capital expenditures are denominated in Mexican pesos. The Company's corporate activities are based in Vancouver, Canada with the significant portion of these expenditures being denominated in Canadian dollars.
During the nine-month period ended September 30, 2023, the Mexican peso strengthened against the U.S. dollar with a slight weakening towards then end of the period. The average foreign exchange rate was $17.80 Mexican pesos per U.S. dollar, with the peso trading within a range of $16.67 to $19.48. This compares to an average of $20.25, with a range of $19.52 to $21.35 Mexican pesos per U.S. dollar during the nine-month period ended September 30, 2022.
During the year ended December 31, 2022, the Mexican peso was relatively flat and has maintained its strength in comparison with the U.S. dollar. The average foreign exchange rate was $20.15 Mexican pesos per U.S. dollar, with the peso trading within a range of $19.22 to $21.35. This compares to an average of $20.27, with a range of $19.61 to $21.90 Mexican pesos per U.S. dollar in 2021.
During the nine-month period ended September 30, 2023, the Canadian dollar was relatively flat against the U.S. dollar. The average foreign exchange rate was $1.346 Canadian dollars per U.S. dollar, with the Canadian dollar trading within a range of $1.315 to $1.382. This compares to an average of $1.283, with a range of $1.248 to $1.374 Canadian dollars per U.S. dollar for the same period of 2022.
During the year ended December 31, 2022, the Canadian dollar was relatively flat but weakened in Q3 and Q4 of 2022. The average foreign exchange rate was $1.296 Canadian dollars per U.S. dollar, with the Canadian dollar trading within a range of $1.25 to $1.388. This compares to an average of $1.253, with a range of $1.204 to $1.292 Canadian dollars per U.S. dollar in 2021.
Cost Trends
The Company's profitability is subject to industry wide cost pressures on development and operating costs with respect to labour, energy, consumables and capital expenditures. Underground mining is labour intensive and approximately 33% of the Company's production costs are directly tied to labour. In order to mitigate the impact of higher labour and consumable costs, the Company focuses on continuous improvement by promoting more efficient use of materials and supplies and by pursuing more advantageous pricing while increasing performance and without compromising operational integrity. During 2022, mining, processing and indirect costs all increased due to inflationary and industry cost pressures. During Q4, 2022 the cost per tonne was impacted by royalty costs recognized upon sale of higher than usual finished goods inventory that had been held during Q2 and Q3 of 2022. During the nine-month period ended September 30, 2023, costs have continued to be impacted by inflationary and industry costs pressures as well as being impacted by a strengthened Mexican Peso. From December 31, 2022 to September 30, 2023, the Mexico Peso has appreciated by approximately 11%.
ANNUAL OUTLOOK
2023 Production and Cost Guidance
|
|
Guanaceví |
Bolañitos |
Consolidated |
Tonnes per day |
TPD |
1,150 - 1,250 |
1,150 - 1,250 |
2,300 - 2,500 |
Silver Production |
M oz |
5.2 - 5.7 |
0.5 - 0.6 |
5.7 - 6.3 |
Gold Production |
K oz |
15.0 - 17.0 |
21.0 - 23.0 |
36.0 - 40.0 |
Silver Eq Production(1) |
US$/oz |
6.4 - 7.0 |
2.2 - 2.4 |
8.6 - 9.5 |
Cash Costs, net of gold by-product credits(2) |
US$/oz |
|
|
$10.00 - $11.00 |
AISC, net of gold by-product credits(2) |
US$/oz |
|
|
$19.00 - $20.00 |
Sustaining Capital Budget |
US$M |
|
|
$34.7 |
Exploration Budget |
US$M |
|
|
$9.3 |
(1) 2023 silver equivalent production is calculated using an 80:1 silver:gold ratio
(2) Non-GAAP measures - See Non-IFRS measures beginning on page 20
The Company's costs during 2023 have been significantly impacted by the strengthening of the Mexican Peso and is currently tracking to exceed the guidance for Cash Costs and AISC.
During the nine-month period ended September 30, 2023, costs have continued to be impacted by inflationary and industry cost pressures as well as being impacted by a strengthened Mexican Peso. From December 31, 2022 to September 30, 2023, the Mexican Peso has appreciated by 11%. Management anticipates these macro trends will continue for the near term and therefore expects actual cost metrics to be higher than cost metrics guided in January 2023 and align with YTD 2023 actual cost metrics.
Operating mines
In 2023, silver production is expected to range from 5.7 to 6.3 million oz and gold production is expected to range from 36,000 to 40,000 oz. Silver equivalent production is forecasted to range from 8.6 to 9.5 million oz using an 80:1 silver:gold ratio.
Mine |
Ag (M oz) |
Au (K oz) |
Ag Eq (M oz) |
Tonnes/ Day (tpd) |
Guanaceví |
5.2 - 5.7 |
15.0 - 17.0 |
6.4 - 7.0 |
1,150 - 1,250 |
Bolañitos |
0.5 - 0 .6 |
21.0 - 23.0 |
2.2 - 2.4 |
1,150 - 1,250 |
Total |
5.7 - 6 .3 |
36.0 - 40.0 |
8.6 - 9.5 |
2,300 - 2,500 |
At Guanaceví, production will range between 1,150 tpd to 1,250 tpd and average 1,200 tpd from the Milache, SCS and El Curso orebodies. A significant portion of production will be mined from the Porvenir Cuatro extension on the El Curso concessions. The El Curso concessions are leased from a third party with no up-front costs but with significant royalty payments on production.
In 2023, plant throughput at Bolañitos is expected to range from 1,150 tpd to 1,250 tpd and average 1,200 tpd from the Plateros-La Luz, Lucero-Karina and Bolañitos-San Miguel vein systems.
Production remains on track to meet guidance.
Consolidated Operating Costs
In January 2023, management guided cash costs, net of gold by-product credits, were expected to be $10.00-$11.00 per oz of silver produced. Consolidated cash costs on a co-product basis were anticipated to be $13.00-$14.00 per oz silver and $1,100-$1,200 per oz gold. AISC, net of gold by-product credits, in accordance with the World Gold Council standard, were estimated to be $19.00-$20.00 per oz of silver produced. When non-cash items such as stock-based compensation and accretion are excluded, AISC was forecasted to be in the $18.00-$19.00 range. Direct operating costs per tonne were estimated to be $115-$120and direct costs, which include royalties and special mining duties were estimated to be in the range of $140-$145 per tonne. Management made the following assumptions in calculating its 2023 cost forecasts: $21 per oz silver price, $1,680 per oz gold price and 20:1 Mexican peso to U.S. dollar exchange rate.
During the nine-month period ended September 30, 2023, costs have continued to be impacted by inflationary and industry cost pressures as well as being impacted by a strengthened Mexican Peso. From December 31, 2022 to September 30, 2023, the Mexican Peso has appreciated by 11%. Management anticipates these macro trends will continue for the near term and therefore expects actual cost metrics to be higher than cost metrics guided in January 2023 and align with YTD 2023 actual cost metrics.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $83.4 million at December 31, 2022 to $41.0 million at September 30, 2023. The Company had working capital of $75.9 million as at September 30, 2023 (December 31, 2022 - $93.6 million). The $17.7 million decrease in working capital is primarily due to the $76.3 million invested in property, plant and equipment, $5.6 million in loan and lease payments and an increase in non-cash working capital of $22.2 million offset by $23.4 million in equity issuances, $2.5 million provided from exercise of options, $7.6 million in proceeds from disposals of property plant and equipment , $1.8 million in proceeds from the disposal of other investments, $0.5 million received in loan payments and $5.1 million generated from operating activities.
Operating activities provided $5.1 million during the nine-month period ended September 30,2023 compared to providing $10.6 million in same period of 2022. The significant non-cash adjustments to the net earnings of $3.1 million (2022 - net loss of $1.8 million) were amortization and depletion of $22.7 million (2022 - $16.8 million), share-based compensation of $2.9 million (2022 - $3.3 million), a deferred income tax expense of $3.3 million (2022 - $10.0million), finance costs of $1.1 million (2022 - $0.9 million), a loss on other investments of $2.0 million (2022 - loss on other investments of $3.4 million), $2.1 million paid for cash settlement of performance share units, a write off of exploration properties of $0.4 million (2022 - $0.5 million) and an increase in non-cash working capital of $22.2 million (2022 -$21.0 million). The nine-month period ended September 30, 2023 included $7.0 million gain on disposal of Cozamin royalty while the nine-month period ended September 30, 2022 included a non-cash adjustment resulting from a gain on the disposal of the El Compas mine of $2.8 million and a write down of warehouse inventory to net realizable value of $1.3 million. The increase in non-cash working capital is primarily a result of an increase in prepaids of $4.9 million, an increase in the carrying value of inventories of $7.5 million, increase in accounts and other receivables of $10.9 million and a decrease in accounts and tax payable of $1.1 million.
The Company's Mexican subsidiaries pay Impuesto al Valor Agregado ("IVA") on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities' audit of certain of the Company's third-party suppliers. Under Mexican law, the Company has legal rights to those IVA refunds and the results of the third-party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company's third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any denied refunds. The Company is in regular contact with the tax authorities in respect of its IVA filings and believes that the full amount of its IVA receivables will ultimately be received; however, the timing of recovery of these amounts and the nature and extent of any adjustments to the Company's IVA receivables remains uncertain.
Investing activities used net cash $67.2 million during the nine-month period ended September 30, 2023 compared to using net cash of $83.2 million in the same period in 2022. Capital investments totaled $76.3 million in property, plant and equipment during the nine-month period ended September 30, 2023, including $9.7 million in changes in working capital items used for purchases of equipment for Terronera, compared to capital investments totaling $81.5 million in the same period in 2022. The capital investments were primarily for sustaining capital at existing operations and for development capital at the Terronera Project. The Company received $7.6 million on the disposition of property plant and equipment, primarily on the disposal of the Cozamin royalty, compared to $0.3 million in the same period in 2022. The Company also received $1.8 million on the disposal of other investments compared to $nil in the same period in 2022. The Company used $nil million for investments in marketable securities during the first nine months of 2023 compared to using $2.1 million for investments in marketable securities in the same period in 2022.
At Guanaceví, the Company invested $18.7 million, with $11.9 million spent on 2.8 km of mine development and $3.5 million on mobile equipment. The Company continued to invest on upgrades for the plant and surrounding infrastructure, including $0.4 million on building and $2.5 million on plant upgrades, mine site improvements and the tailings facility and $0.4 million on office, building infrastructure and light vehicles.
At Bolañitos, the Company invested $8.0 million, with $6.7 million spent on 3.9 km of mine development and $1.0 million on mobile equipment. The Company continued to invest in upgrades for the plant and surrounding infrastructure, including $0.3 million on plant upgrades.
At Terronera, the Company invested $39.8 million, with $30.5 million spent on land payments, surface and mine development and infrastructure, $1.3 million spent on buildings, $4.0 million was invested in mine equipment and $1.2 million on light vehicles, office and IT infrastructure. An additional $9.7 million was invested in changes in working capital items, primarily deposits for purchases of equipment not yet delivered.
Exploration and general and administrative investments were $0.6 million spent on holding costs, mobile equipment, office, building infrastructure and light vehicles.
Financing activities for the nine-month period ended September 30, 2023 provided $19.8 million, compared to providing $38.5 million in the same period in 2022. During the nine-month period ended September 30, 2023 the Company received $23.4 million from public equity offering of shares, paid $0.7 million in share issuance costs, $2.5 million on the exercise of employee stock options, paid $5.6 million in interest and principal repayments on loans and leases, received $0.5 million in loan payments and paid $0.3 million in withholding taxes on equity settled performance share units. By comparison, during the same period in 2022, the Company raised gross proceeds of $46.0 million through a prospectus equity offering, paid $2.9 million in share issuance costs, received $1.6 million on the exercise of employee stock options, paid $4.3 million in interest and principal repayments on loans and leases and paid $1.9 million in withholding taxes on equity settled performance share units.
On June 16, 2023, the Company filed a short form base shelf prospectus that qualified for the distribution of up to US$200 million of common shares, debt securities, warrants or units of the Company comprising any combination of common shares and warrants (the "Securities") over a 25-month period. The Company filed a corresponding registration statement in the United States registering the Securities under United States federal securities laws. The distribution of Securities can be effected from time to time in one or more transactions at a fixed price or prices, which can be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying prospectus supplement, including transactions that are "At-The-Market" ("ATM") distributions.
On June 27, 2023, the Company entered into an ATM equity facility with BMO Capital Markets (the lead agent), CIBC Capital Markets Corp., TD Securities (USA) LLC, H.C. Wainwright & Co. LLC, B. Riley Securities Inc., Raymond James (USA) Ltd. and National Bank of Canada Financial Inc. (together, the "Agents"). Under the terms of this ATM facility, the Company can, from time to time, sell common stock having an aggregate offering value of up to $60.0 million on the New York Stock Exchange. The Company determines, at its sole discretion, the timing and number of shares to be sold under the ATM facility.
The Company has issued 8,195,527 common shares under the ATM facility at an average price of $2.85 per share for gross proceeds of $23.4 million, less commission of $0.5 million and recognized $0.2 million of other transaction costs related to the ATM financing as share issuance costs.
For the ATM Facility, the net proceeds as at September 30, 2023 have been used as follows:
Use of proceeds (thousands) |
|
|
|
Net proceeds received |
$ |
22,707 |
|
Terronera Construction |
|
(10,320 |
) |
Pitarrilla exploration |
|
(449 |
) |
Allocated to working capital |
$ |
11,938 |
|
Subsequent to September 30, 2023, an additional 6,828,796 common shares were issued under the ATM facility at an average price of $2.44 per share for gross proceeds of $16.6 million, less commission of $0.3 million.
Management of the Company believes that operating cash flow and existing working capital will be sufficient to cover 2023 capital requirements and meet its short-term obligations. The Company continues to assess financing alternatives, including equity or debt or a combination of both, to fund future growth, including the development of the Terronera project.
Contingencies
Minera Santa Cruz y Garibaldi SA de CV ("MSCG"), a subsidiary of the Company, received a Mexican peso ("MXN") 238 million assessment on October 12, 2010 by Mexican fiscal authorities for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return, failure to provide appropriate support for loans made to MSCG from affiliated companies, and deemed an unrecorded distribution of dividends to shareholders, among other individually immaterial items. MSCG immediately initiated a Nullity action and filed an administrative attachment to dispute the assessment.
In June 2015, the Superior Court ruled in favour of MSCG on a number of the matters under appeal; however, the Superior Court ruled against MSCG for failure to provide appropriate support for certain deductions taken in MSCG's 2006 tax return. In June 2016, the Company received a MXN 122.9 million ($6.8 million) tax assessment based on the June 2015 ruling. The 2016 tax assessment comprised of MXN 41.8 million in taxes owed ($2.3 million), MXN 17.7 million ($1.0 million) in inflationary charges, MXN 40.4 million ($2.3 million) in interest and MXN 23.0 million ($1.4 million) in penalties. The 2016 tax assessment was issued for failure to provide the appropriate support for certain expense deductions taken in MSCG's 2006 tax return and failure to provide appropriate support for loans made to MSCG from affiliated companies. If MSCG agrees to pay the tax assessment, or a lesser settled amount, it is eligible to apply for forgiveness of 100% of the penalties and 50% of the interest.
The Company filed an appeal against the June 2016 tax assessment on the basis that certain items rejected by the courts were included in the new tax assessment and a number of deficiencies exist within the assessment. Since issuance of the assessment interest charges of MXN 18.6 million ($1.1 million) and inflationary charges of MXN 27.8 million ($1.6 million) has accumulated.
Included in the Company's consolidated financial statements are net assets of $964,000 held by MSCG. Following the Tax Court's rulings, MSCG has been in discussions with the tax authorities with regards to the shortfall of assets within MSCG to settle its estimated tax liability. An alternative settlement option would be to transfer the shares and assets of MSCG to the tax authorities. The Company's income tax payable includes an allowance for transferring the shares and assets of MSCG amounting to $964,000. The Company is currently assessing MSCG's settlement options based on ongoing court proceedings and discussion with the tax authorities. The Company has been advised that the appeal filed with the Federal Tax Court and Supreme Court of Justice, against the June 2016 tax assessment has been rejected. The Company continues to assess MSCG's settlement options.
Compania Minera Del Cubo SA de CV ("Cubo"), a subsidiary of the Company, received a MXN 58.5 million ($2.9 million) assessment in 2019 by Mexican fiscal authorities for failure to provide the appropriate support for depreciation deductions taken in the Cubo 2016 tax return and denied deductions of certain suppliers. The tax assessment consists of MXN 24.1 million ($1.2 million) for taxes, MXN 21.0 million ($1.1 million) for penalties, MXN 10.4 million ($0.5 million) for interest and MXN 3.0 million ($0.1 million) for inflation. At the time of the tax assessment the Cubo entity had and continues to have sufficient loss carry forwards which would be applied against the assessed difference of taxable income. The Mexican tax authorities did not consider these losses in the assessment.
Due to the denial of certain suppliers for income tax purposes in the Cubo assessment, the invoices from these suppliers have been assessed as ineligible for refunds of IVA (value-added taxes) paid on the invoices. The assessment includes MXN 14.7 million ($0.7 million) for re-payment of IVA refunded on these supplier payments. In the Company's judgement, the suppliers and invoices meet the necessary requirements to be deductible for income tax purposes and the recovery of IVA.
The Company filed an administrative appeal related to the 2016 Cubo tax assessment. The Company had previously provided a lien on certain El Cubo mining concessions during the appeal process. To facilitate the sale of the El Cubo mine and related assets, the Company elected to pay the assessed amount of $3.5 million during Q1, 2021. During the appeal process the amount paid has been classified as a non-current income tax recoverable. Since issuance of the assessment interest charges of MXN 9.9 million ($0.5 million) and inflationary charges of MXN 1.6 million ($0.1 million) had accumulated. The Company continues to assess that it is probable that its appeal will prevail, and no provision is recognized in respect of the Cubo tax assessment.
The Company is required to use judgement to determine certain tax treatments in calculating income tax expense and IVA recoverable. A number of these judgements are subject to various uncertainties. From time to time, Mexican authorities may apply, re-interpret legislation or disregard precedents and it is possible that these uncertainties may be resolved unfavorably for the Company.
Capital Requirements
As of September 30, 2023, the Company held $41.0 million in cash and $75.9 million in working capital.
The Company may be required to raise additional funds through future debt or equity financings in order to finance the development of the Terronera Project and may need to raise additional funds to carry out other business plans. The Company will continue to monitor capital markets, economic conditions and assess its short term and long-term capital needs.
Contractual Obligations
The Company had the following undiscounted contractual obligations at September 30, 2023:
Payments due by period (in thousands of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations |
|
Total |
|
|
Less than 1 year |
|
|
1 - 3 years |
|
|
3 - 5 years |
|
|
More than 5 years |
|
Capital asset purchases |
$ |
35,704 |
|
$ |
35,704 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Loans payable |
|
10,564 |
|
|
4,777 |
|
|
5,685 |
|
|
102 |
|
|
- |
|
Lease liabilities |
|
1,236 |
|
|
486 |
|
|
447 |
|
|
303 |
|
|
- |
|
Other contracts(1) |
|
647 |
|
|
170 |
|
|
249 |
|
|
228 |
|
|
- |
|
Other Long-Term Liabilities (2) |
|
16,318 |
|
|
- |
|
|
- |
|
|
7,979 |
|
|
8,339 |
|
Total |
$ |
64,469 |
|
$ |
41,137 |
|
$ |
6,381 |
|
$ |
8,612 |
|
$ |
8,339 |
|
(1) Other contracts consist of office premises operating costs and short-term leases.
(2) The $15,679 of other long-term liabilities is the undiscounted cost estimate to settle the Company's reclamation costs of the Guanaceví and Bolañitos mines, the Terronera development project and the Pitarrilla exploration project in Mexico. These costs include land rehabilitation, decommissioning of buildings and mine facilities, ongoing care and maintenance and other costs.
TRANSACTIONS WITH RELATED PARTIES
The Company previously shared common administrative services and office space with Aztec Metals Corp., which was considered a related party company by virtue of Bradford Cooke, the Company's former Executive Chairman, being a common director. From time to time, the Company incurred third-party costs on behalf of related parties, which are charged on a full cost recovery basis. The agreement for sharing office space and administrative services ended in May 2021. The charges for these costs totaled $Nil for the three and nine months ended September 30, 2023 (September 30, 2022 - $Nil and $9,000 respectively). The Company had no receivable related to administration costs outstanding as at September 30, 2023 (December 31, 2022 - $Nil).
The Company was charged $218,000 and $286.000 for legal services for the three and nine months ended September 30, 2023 respectively by a law firm in which the Company's corporate secretary is a partner (September 30, 2022 -$57,000 and $402,000 respectively). The Company has $72,000 payable to the legal firm as at September 30, 2023 (December 31, 2022 - $10,000).
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
As at September 30, 2023, the carrying and fair values of Endeavour's financial instruments by category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value |
|
|
Amortized |
|
|
Carrying |
|
|
Estimated |
|
Expressed in thousands US dollars |
|
through |
|
|
cost |
|
|
value |
|
|
Fair value |
|
|
|
profit or loss |
|
|
|
|
|
|
|
|
|
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
- |
|
$ |
40,957 |
|
$ |
40,957 |
|
$ |
40,957 |
|
Other investments |
|
6,192 |
|
|
- |
|
|
6,192 |
|
|
6,192 |
|
Trade receivables |
|
6,918 |
|
|
- |
|
|
6,918 |
|
|
6,918 |
|
Other receivables |
|
- |
|
|
9,746 |
|
|
9,746 |
|
|
9,746 |
|
Loan receivable |
|
- |
|
|
3,523 |
|
|
3,523 |
|
|
3,523 |
|
Total financial assets |
$ |
13,110 |
|
$ |
54,226 |
|
$ |
67,336 |
|
$ |
67,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
2,627 |
|
$ |
40,789 |
|
$ |
43,416 |
|
$ |
43,416 |
|
Loans payable |
|
- |
|
|
9,839 |
|
|
9,839 |
|
|
9,839 |
|
Total financial liabilities |
$ |
2,627 |
|
$ |
50,628 |
|
$ |
53,255 |
|
$ |
53,255 |
|
Fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by no or little market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
Assets and liabilities as at September 30, 2023 that measured at fair value on a recurring basis include:
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Expressed in thousands US dollars |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Other investments |
$ |
6,192 |
|
$ |
6,143 |
|
$ |
- |
|
$ |
49 |
|
Trade receivables |
|
6,918 |
|
|
- |
|
|
6,918 |
|
|
- |
|
Total financial assets |
$ |
13,110 |
|
$ |
6,143 |
|
$ |
6,918 |
|
$ |
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred share units |
$ |
2,552 |
|
$ |
2,552 |
|
$ |
- |
|
$ |
- |
|
Share appreciation rights |
$ |
75 |
|
$ |
- |
|
$ |
75 |
|
$ |
- |
|
Total financial liabilities |
$ |
2,627 |
|
$ |
2,552 |
|
$ |
75 |
|
$ |
- |
|
Other investments
The Company holds marketable securities classified as Level 1 and Level 3 in the fair value hierarchy. The fair values of Level 1 investments are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the stock exchange that is the principal active market for the particular security, being the market with the greatest volume and level of activity for the assets. For Level 3 investments, which consist of share purchase warrants where inputs are not observable, they have an estimated value determined by using an option pricing model. Changes in fair value on available for sale marketable securities are recognized in earnings or loss.
Trade receivables
The trade receivables consist of receivables from provisional silver and gold sales from the Bolañitos mine. The fair value of receivables arising from concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted closing price on the measurement date from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value hierarchy.
Deferred share units
The Company has a cash settled Deferred Share Unit ("DSU") plan whereby deferred share units may be granted to independent directors of the Company in lieu of compensation in cash or stock options. The DSUs vest immediately and are redeemable for cash based on the market value of the units at the time of a director's retirement. The DSUs are classified as Level 1 in the fair value hierarchy. The liability is determined based on a market approach reflecting the closing price of the Company's common shares at the reporting date. Changes in fair value are recognized in general and administrative expenses.
Share appreciation rights
As part of the Company's bonus program, the Company grants share appreciation rights ("SARs") to its employees in Mexico and Chile. The SARs are subject to vesting conditions and, when exercised, constitute a cash bonus based on the value of the appreciation of the Company's common shares between the SARs grant date and the exercise date.
The SARs are classified as Level 2 in the fair value hierarchy. The liability is valued using a Black-Scholes option pricing model. Changes in fair value are recognized in salaries, wages and benefits.
Financial Instrument Risk Exposure and Risk Management
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management process. The types of risk exposure and the way in which such exposure is managed is provided as follows:
Credit Risk
The Company is exposed to credit risk on its bank accounts, accounts receivable and loan receivable. Credit risk exposure on bank accounts is limited through maintaining the Company's balances with high-credit quality financial institutions, maintaining investment policies, assessing institutional exposure and continual discussion with external advisors. Value-added tax receivables are generated on the purchase of supplies and services to produce silver, which are refundable from the Mexican government. Trade receivables are generated on the sale of concentrate inventory to reputable metal traders. The loan receivable is related to the remaining proceeds for the sale of the El Compas mine to Grupo ROSGO. There has been no indication of a change in the creditworthiness of the counterparty to the loan receivable since the initial recognition.
Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity risk by continually monitoring forecasted and actual cash flows. The Company has in place a planning and budgeting process to help determine the funds required to support its normal operating requirement and development plans. The Company aims to maintain sufficient liquidity to meet its short-term business requirements, taking into account its anticipated cash flows from operations, its holdings of cash and cash equivalents, and its committed and anticipated liabilities.
The Company's Mexican subsidiaries pay IVA on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities' audit of certain of the Company's third-party suppliers. Under Mexican law, the Company has legal rights to those IVA refunds and the results of the third-party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company's third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any denied refunds. The Company is in regular contact with the tax authorities in respect of its IVA filings and believes that the full amount of its IVA receivables will ultimately be received; however, the timing of recovery of these amounts and the nature and extent of any adjustments to the Company's IVA receivables remains uncertain.
Market Risk
The significant market risk exposures to which the Company is exposed are foreign currency risk, interest rate risk, and commodity price risk.
Foreign Currency Risk - The Company's operations in Mexico and Canada make it subject to foreign currency fluctuations. Certain of the Company's operating expenses are incurred in Mexican pesos and Canadian dollars; therefore, the fluctuation of the U.S. dollar in relation to these currencies will consequently have an impact upon the profitability of the Company and may also affect the value of the Company's assets and the amount of shareholders' equity. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks.
Interest Rate Risk - In respect of financial assets, the Company's policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash equivalents in order to maintain liquidity. Fluctuations in interest rates impact the value of cash equivalents. As at September 30, 2023 the Company has $0.3 million in equipment loans with interest rates that are linked to SOFR and, with other variables unchanged, a 1% increase in the SOFR rate would result in an additional interest expense of $3,000.
Commodity Price Risk - Gold and silver prices have historically fluctuated significantly and are affected by numerous factors outside of the Company's control, including, but not limited to, industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities and certain other factors. As at September 30, 2023, the Company has not engaged in any hedging activities, other than short-term metal derivative transactions less than 90 days, to reduce its exposure to commodity price risk. At June September, 2023, there are 42,116 oz of silver and 2,708 oz of gold, which do not have a final settlement price and the estimated revenues have been recognized at current market prices. As at September 30, 2023, with other variables unchanged, a 10% decrease in the market value of silver and gold would result in a reduction of revenue and the associated receivable of $0.6 million.
OUTSTANDING SHARE DATA
As of November 3, 2023, the Company had the following securities issued, issuable and outstanding:
- 206,529,622 common shares;
- 3,628,891 common shares issuable under stock options with a weighted average exercise price of CAD$4.31 per share expiring between March 3, 2024 and June 14, 2028;
- 878,000 performance share units with a weighted average grant price of CAD$5.41 vesting between March 4, 2024 and March 7, 2026; and
- 321,116 equity settled deferred share units with a weighted average grant prices of CAD$4.64 which are vested.
As at September 30, 2023, the Company's issued share capital was $684.7 million (December 31, 2022 - $657.9 million), representing 199,700,826 common shares (December 31, 2022 - 189,995,563), and the Company had options outstanding to purchase 3,628,891 common shares (December 31, 2022 - 3,899,630) with a weighted average exercise price of CAD$4.31 (December 31, 2022 - CAD$4.09).
The Company considers the items included in the consolidated statement of shareholders' equity as capital. The Company's objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through private placements, prospectus offerings, convertible debentures, asset acquisitions or return capital to shareholders. The Company is not subject to externally imposed capital requirements.
CHANGES IN ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Accounting standards adopted during the period:
The accounting policies applied in the Company's condensed consolidated interim financial statements for the three and nine months ended September 30, 2023 are the same as those applied in the Company's annual audited consolidated financial statements as at and for the year ended December 31, 2022.
Critical Accounting Estimates
The preparation of financial statements requires the Company to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management's judgment relate to the determination of mineralized reserves and resources, plant and equipment lives, estimating the fair values of financial instruments and derivatives, impairment of non-current assets, reclamation and rehabilitation provisions, recognition of deferred tax assets, and assumptions used in determining the fair value of share-based compensation.
See "Critical Accounting Estimates" in the Company's annual MD&A for the year ended December 31, 2022 for a detailed discussion on the areas in which critical accounting estimates are made.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company's management, with the participation of its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the design of the Company's disclosure controls and procedures. Based on the results of that evaluation, the Company's CEO and CFO have concluded that, as of September 30, 2023, the Company's disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports it files is recorded, processed, summarized and reported, within the appropriate time periods and is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
Management, including the CEO and CFO, has evaluated the Company's internal controls over financial reporting to determine whether any changes occurred during the period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
During the three and nine months ended September 30, 2023 there have been no significant changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Daniel Dickson, Chief Executive Officer of Endeavour Silver Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Endeavour Silver Corp. (the "issuer") for the interim period ended September 30, 2023.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (2013) (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 7, 2023
"Daniel Dickson"
_______________________
Daniel Dickson
Chief Executive Officer
Form 52-109F2
Certification of Interim Filings
Full Certificate
I, Christine West, Chief Financial Officer of Endeavour Silver Corp., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Endeavour Silver Corp. (the "issuer") for the interim period ended September 30, 2023.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (2013) (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2023 and ended on September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 7, 2023
"Christine West"
_______________________
Christine West
Chief Financial Officer
Endeavour Silver (NYSE:EXK)
Historical Stock Chart
From Apr 2024 to May 2024
Endeavour Silver (NYSE:EXK)
Historical Stock Chart
From May 2023 to May 2024