Endeavour Silver Corp (EXK) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Endeavour Silver Corp. fourth quarter financial statement review conference call.

I would like to turn the meeting over to Mr. Hugh Clarke, Vice President, Corporation Communications. Please go ahead, Mr. Clarke.

Good morning everybody. Or good afternoon for those on the East Coast, and this is our fourth quarter review and teleconference call. This is an event we have been doing now for several years, and it is something we really enjoy. Gives us a chance to talk to interested parties, and also more importantly, a chance for those people to ask those questions of us. I am going to give a very brief preamble, just touch on some of the highlights announced yesterday. Bradford Cooke, our Chairman, is on the line as well from another city, and he will talk a moment, and then we will open things up for questions.

So the highlights from 2008 is that our fourth consecutive year of rising mineral sales or revenue, up 22% to over $39 million. Mine operating cash flows jumped 44% to $11.5 million. Cash costs fell for the year by 4% to $9.03 per ounce of silver produced. And here is something I find very significant, and that is that our fourth quarter cash costs fell 26% to $7.43 an ounce. This is a very encouraging sign for us. We are very pleased about that.

A fourth consecutive year of growing silver production, up another 10% to 2.3 million ounces in 2008, plus about 8,300 ounces of gold. Our silver resources increased. Our silver reserves decreased a proportional amount. We will touch on that as we get into the presentation. Our fourth consecutive year of higher silver reserves and resources, including gold as an equivalent. They are up 24% to 62.1 million ounces.

Silver production rose 38% from the first quarter in 2008 to 695,000 ounces in the fourth quarter, as a direct result of the capital improvements that we have instituted at both operations in Mexico. In addition, we have made some exciting new discoveries at our operations in Mexico. Our exploration team came up with three or four last year that we are very excited about.

One of the highlights there is the fact that at our Guanajuato operation, we made a discovery in September called Lucero. We started development work in November, and by January that particular district was in production. Once again, proving the business model of finding new discoveries, new zones, and immediately bringing them into production. Notwithstanding rotten share prices last year, we really had a very good year in 2008, and I think we have set the table for an even better year in 2009. So those are the highlights from this end.

Bradford, do you have any comments, please?

I think all I would like to add is that I would like to reiterate that I think we are the only silver Company to actually drive our cash costs down quarter-on-quarter, for each quarter last year. Tough to do quarter-on-quarter this year, but we are certainly going to try, and we do see costs continuing to decline, not only this year, but through until we reach the capacity of the two plants. So costs were an issue for us in 2007/2008, and I see them now continuing this positive trend, downward trend. We also have on the line by the way, our President and COO, Godfrey Walton, and CFO, Dan Dickson.

So at this time, Hugh, I think we should open it up for questions.

Sure. Questions please.

Thank you. We will now take questions from the telephone lines. (Operator Instructions). There will be a brief pause while participants register. Thank you for your patience. (Operator Instructions). There are no questions registered at this time, Mr. Clarke. We do have a question from Adam, no, he removed himself from the question queue.

Very shy group here today.

(Operator Instructions).

While we are waiting, I would like to add another comment. In recent presentations, I have been asked more than once when Endeavour will actually report earnings, and I would just like to remind everybody that we have now for over four years focused purely on growth.

We have used all of our cash flow for growth, and a good chunk of our cash for growth. Growth meaning finding reserves and resources, because we didn't have any when we started five years ago, growth meaning developing the mines in the ore bodies that we have found, North Porvenir of course being the first one in Guanacevi, but our three new ore bodies now under development in Guanacevi [inaudible] will facilitate this year's production and growth, those ore bodies being the Alex Breccia, the Santa Cruz, and Porvenir Dos, so there are new declines, ramps going into those three ore bodies this year, to achieve production from each of those ore bodies.

And in Guanajuato, which is our smaller but more recent acquisition, we have only had really one good year of drilling there, last year, but we did come up with a number of material discoveries. As Hugh mentioned, one of them is already in production. So we have confidence that these two districts hold much more than the 63 million silver equivalent ounces discovered and reported to date. And now the exercise is to try and ramp up the mine production to fill the two plants, and that will take another approximately two years. Do we have any other questions?

We do have a question from Bob [McCleary], private investor. Please go ahead.

Hi, there.

Hello, Bob.

Good to hear from you guys again.

Good to hear your voice too.

I don't have any particular question. I just want to kind of say thank you for all your efforts, and it sounds like we are steered in the right direction.

Well, we have been working hard, Bob, and it has been a challenge for all the gold and silver companies out there, in terms of cash costs, and we are quite pleased with the fact, that it looks like we have turned the corner on that. And we do really appreciate the support we get from a very broad base of shareholders like yourself, so thank you for that, and thanks for calling in today.

Okay. Thanks for having the meeting. Bye-bye.

Thank you. The next question is from Adam Graf from Dahlman Rose, please go ahead.

Thank you. I accidentally got dropped off the line before, and apologize if you guys have talked about this already, but just want to talk about the expansion potential at Guanacevi, and when that can come online?

Do you want to talk about it, Godfrey?

Godfrey might have been gone, dropped off the line.

Adam, I will tackle that one. Basically, this year's look is to take the tonnage throughput at the plant, from approximately 500 tons per day now, to 1,000 tons per day by year end. And in fact, the plant has the installed capacity, and what is needed of course, is to ramp up the mine production, hence the three new ore bodies, and we do see production coming from Alex Breccia here in Q2, from Santa Cruz and Porvenir Dos as early as Q4.

So certainly by year end we will see production from three new mines at Guanacevi. 1,000 tons per day, then that unit will produce well over 3 million ounces a year, 3.2 is the number in the cash flow model I believe, and there is still a little bit of room to squeeze out of the plant yet. We think there are 1,200 tons of capacity there with some more improvements on the front end, principally crushing.

And at Guanajuato, it is very interesting. This year's outlook is actually we are close to the plant capacity now at 450 tons per day. And we will be ramping that up to 600 tons per day, even though the capacity of the plant currently is 500 tons per day. We have approved a small capital budget, basically putting in another larger cone crusher, that will allow the plant capacity to rise 20% this year to 600 tons per day.

So this year's outlook is to have the capacity of doing 1,600 tons combined by year end, with a 2,000 ton combined outlook, once we finish our final improvements and expansions in the two plants. Does that answer your question?

Yes. I apologize, I am a little confused about Guanacevi. It looks like in '08 if you take your tonnage and divide it by assuming 365 days of operating, you guys were average operating about 950 tons a day. Am I am a little confused there. You are talking that you are only at 500 there now. I am a little confused.

We started off at 500 in January. We are actually doing 600 now here in April. And there will be an incremental ramp up each quarter to the 1,000 ton mark. Where did you get 950 from, though, I am curious?

Unless I am doing my math wrong here. That could be. I am just looking at my numbers. Yes, I think I had something wrong in my formula. I apologize. That happens. And then so when do you think at Guanacevi you can get up to 1,200 tons a day?

We won't get there until 2011. We won't get there next year. We do have that in the budget this year an extension of the crushing circuit. Hence this year's target of [inaudible] tons per day. And there is a final round of capital investments, principally in crushing in 2010, in order to facilitate full capacity in 2011.

And then beyond 1,200, what are the plans?

At Guanacevi it depends very much on our exploration success, so it is a bit early to say. We certainly have the room at the plant to continue expanding, and I guess thinking positively, when you ask me this question at next year's call, we will be talking about 1,500 tons per day. But it is premature at this time, and it is simply related to continuing growth of our reserve and resource base in Guanacevi.

As you know, we made a number of discoveries in the San Pedro area last year, and we are quite optimistic about some new properties that we acquired just recently on the Santa Cruz fault, that have never been drilled. So that is where we would look to for justification of further plant expansion.

Great. Thank you very much.

Thanks, Adam.

Thank you. (Operator Instructions).

Operator, while we are waiting for that, there is one thing I wanted to touch on. Over the last month or two, I have been getting a lot of calls, we have all been getting a lot of questions, regarding safety and security down in Mexico. There has been a lot of news coverage on the North American television channels about the issues going on in Mexico right now, specifically as it relates to the drug wars. And as most people know, there are two drug wars going on.

One war between two of the cartels, and then of course, the war by the Federal authorities against both those cartels. Most of that activity, the bulk of that of course is limited and confined to those northern cities along the American border, and justifiably so, it is a big concern for everybody. But nonetheless, in our two locations, it really is not an issue for us.

Literally at Guanacevi, we are at the end of the road. There is not much interest there, I wouldn't think, of the people like the drug dealers dealing up there, or going through there for transit purposes. It just doesn't make any sense to me. The same really applies to Guanajuato as well.

Having said that, it is something we are very conscious of, and we pay a lot of attention to. The #1 concern overall for the folks at Endeavour Silver is the safety of our personnel, and this is included in that. We are very conscious of what is happening in Mexico right now. We don't feel threatened by it, but nonetheless, it is something we are paying attention to, and are taking the steps necessary we think, to protect not only our personnel but also our plant, equipment, and our products.

If we have no more questions, then let's close.

There are no questions registered at this time.

Okay, Donna, I guess that is it for today, then. Thank you.

Thank you everybody for attending.

Thank you. The conference has now ended. Please disconnect your lines at this time. And thank you for your participation.