Endeavour Silver Corp. (EDR) Earnings Call Transcript & Summary

Good afternoon. Thanks for joining us today. We have a presentation with Endeavour Silver. We had them last, I believe, it was in April or May. So a bit of an update and an overview of the company. Since then, they've had a new CEO come in, Dan Dickson. So it would be great to get to know him and the Endeavor Silver story. But before we get started, as always, this presentation will contain forward-looking statements. You can find out more about those on the company's website in their presentation. And there will be a Q&A section at the end. [Operator Instructions] And with that out of the way, I'd like to introduce Dan. Dan, thanks for joining us today.

Thanks for having me.

Yes. Really excited to get to know you and the story. So maybe you could start with a little bit of background on yourself.

Yes. I've been with Endeavor 14 years. I joined as -- February 1, 2007, so a long time. My first year was the controller. And then times were booming, couldn't get a warm body, and they gave me a tag of interim CFO in, I think, 2008, early 2008. I don't know if they ever took the interim tag off. And I used to often joke with Brad, my predecessor, that I was the interim CEO. So in May, we made the change. Growing up almost in this company, I've got a family and kids and spent a lot of time actually out marketing early on with Brad; and then when kind of the family start to grow, spent a little bit more time in Vancouver and just traveling to the sites and staying out of the capital markets, Investor Relations discussions, unless he needed help and to be picked up. And here I am, kind of over the last 2 years have been picking it up again and starting to do more. I'm an accountant by trade. I believe in the bottom line. I believe in profits. I think the biggest mandate for me in the first 6 months has been focusing on our internal culture. We're not changing the company. We're not changing what we've done. I've been a part of that, obviously, for the last 13 years as the executive management team. But there's just things that will be different from me compared to Brad. Brad's an exploration geologist [ by heart ]. He loves rocks. He loves the junior space. It's going to free up time for him. He's going to -- he's become our Chairman. He'll be focusing -- helping us still with some M&A opportunities and looking at projects and then focus on his personal things. And for me, it's -- the first 6 months, as I say, is focused on internal and our culture and our safe production program. We want safety to become an integral part to what we do. And not that we have a safety team, that everybody is the safety team, and safe production is a fabric of what we do. And then, again, from an operating standpoint, human resources, we have our human resource department that's trying to make each manager and superintendent a human resource person, which is easier said than done. So we're going through a lot of behavioral organizational stuff and training in that sense. Because at the end of the day, what makes this company go and what's made it go for the last 14 years that I've been here are the people. And we're going to come into a time, and we saw that from '08 to 2012, where people were hard to come by and wages really increase. And we want to kind of get ahead of that with what we're seeing coming in the silver and gold space to get ahead of that and work on retaining our people through what we call Te Cuido, which is, I care for you, you care for me, is effectively the operating program. So that's been my focus here in the first 6 months and now kind of getting back out into the marketplace with what we've come on. We came out with a new feasibility study on September 7, which we call for our Terronera project. I'm sure when Brad gave the update back in April, he would have talked about that coming. And we had expected it to be out early summer and ended up being late summer. But nevertheless, it's done, and we're close to getting financing package in place. We have a formal construction decision by the end of this year and hit the ground running for 2022. So without ado -- further ado, who we are? Endeavor, we're a mid-tier silver producer. 60% of our revenues come from silver, 40% comes from gold. So no base metals. We did see an increase in our costs in the second quarter, always looking to optimize our operations. And part of that cost increase for a number of factors. We are seeing a little bit of increase in wages in geologists and professionals, and that's going to continue. And again, try to focus on retaining our people as best we can. This company has been built through the drill bit. That's not going to change. We still have significant exploration program this year, and we'll have another one next year. We have a lot of items in our portfolio and our pipeline that we want to grow and ultimately bring into production. We are a silver company. So we have some of the best leverage to silver in the space, one of the best betas in the space when it comes to silver. There's been a lot of companies that have purchased silver or gold -- silver companies that purchased gold assets over the last -- over 3 to 5 years. You've seen a lot of silver companies take that premium in their stock, buy gold assets from a cash flow standpoint. But what it's left is quite a scarcity in silver, [ buying ] primary silver companies. Our focus has remained that. We've only seen a couple of assets come to market in the last couple of years and Terronera project for us is going to be one of those. We are based mainly in Mexico. We do have a footprint in Chile. We have 3 exploration properties in Chile. And we actually just acquired an exploration property in Nevada in the last month. So we are growing, but where we've really built an advantage is in Mexico. Our Guanaceví mine, we've been there 15 years. Brad, we've talked about that. Bolañitos, we've been there 14 years, underground vein mine, never had more than 2 years reserve life. But ultimately, as we mine, we've replaced those reserves. We've replaced those resources through drilling as we get deeper into it. Our Terronera operation or project is in the west side of the Jalisco state, just an hour east of Puerto Vallarta. So a very attractive location. As I say, we brought our feasibility study. We do have a fully permitted. There's some amendments to some of the permits because of the changes from the pre-feasibility study to the feasibility study. But ultimately, we're construction-ready. We just need the financing in place. And we're working on that, and I'll get into that later on. And then we have a project in Chihuahua we call Parral. It's an exploration project. We have 40 million ounces of silver there. Our plan is to grow up to about 60 million, 65 million ounces of silver, and then ultimately bring that into an economic study and development stage after Terronera. Sustainability highlights from 2020. We've always thought, and a lot of mining companies that operate well, to have a social license, you have to have sustainability. So it's been a fabric of us for 15 years -- last 15 years. Health and safety is very important. Again, our Te Cuido program, we're just trying to instill a culture of safety, a culture of believing the person beside you. We've got our values program. All this is important, and it's very important primarily for Terronera, where we're developing -- we're going into a new community. We are going to be the largest employer in that community. We've done a phenomenal job the 7 years that we've been at Terronera kind of building those relationships. None of that changes. It's just become a thing to the forefront in the corporate world. We've had to do this just to operate at our other locations, and we think it's going to continue. And it's good that it's here. Of course, we want to take care of the planet and our people, and that's something we've always done. Some recent highlights. Our feasibility study, here, I've got highlights of the NAV of $175 million, NAV value using $20 silver and $15.75 gold, 3.5-year payback with an initial capital spend of $175 million. The life of mine is a 12-year life of mine. Cash costs will be about $0.59 per ounce of silver, and all-in sustaining costs will be $3.24. So this is a silver asset that produce about 60% of its revenue comes from silver, 40% comes from gold. And you can see on the lower right-hand side of this slide, our distribution between silver and gold revenues. We did recently complete the Bruner Gold acquisition, $10 million cash, very small. We do have exploration plans for 2022. The historical reserves or resources end up being about 300,000 ounces of silver and 13 million ounces of gold. But there's more work to do. There is a historical PA on that project, and it was very opportunistic from us. The company that held it before was running into debt problems with no cash, also put on some crypto tokens to tie to gold, gotten all that cleaned up and ultimately acquired this property that we think has a lot of opportunity going forward. Our H1 production, we are ahead of plan for the year. And we plan to do 6.5 to 7 -- or sorry, 6.1 million to 7.1 million silver equivalent ounces. Through the first half of the year, we've done 4 million ounces of silver equivalent. So we expect to exceed guidance in the back half of the year. Cash costs and all-in sustaining costs were a bit higher through the first half of the year compared to what our guidance was. So guidance on cash cost was $7.50, and we've come in at $10.50. Some of that's attributed to the price of silver. We pay a significant royalty at Guanaceví on an area that we recently discovered in 2019, and a lot of our production actually in the first half came from that area. We paid a 16% royalty when silver is over $25. It's to one of the richest men in Mexico. He's hard to negotiate with. They don't sell. But ultimately, we lease this property from them. It's positive in the fact that royalty is about $5 of Guanaceví's cost. But again, we're seeing an increase in that cost with increase of prices. We're also seeing increases in wages and salaries. And we also did a lot of OpEx development in the first half, OpEx development that doesn't have reserves bind up but we knew that there is going to be mineralization there. Ultimately, that hit our costs. We expect that to not be included in Q3 and Q4. So we do see our costs coming down in the back half of the year. All-in sustaining costs, $19.50, coming in at $22.69. Again, that's the operating cost that pushed us up, and we want to see that come down. The other item from this slide is our development budget. Our development budget was $9 million for the first half of the year. We spent $7 million. That's advancing Terronera. We've always set out to the market, and Brad probably touched on this in April, that we were pushing Terronera forward knowing that we are expecting that we're going to get a development decision with favorable results from our feasibility study. And again, company is built from the drill bit. We have a $10 million exploration budget across 5 different operating areas, exploration, brownfields and our project development. We spent $5 million through the first half of the year. So we're on track to spend what we expect to spend. Again, quick highlights of where we sit right now from a balance sheet standpoint. Our cash position is $125 million as of June 30 of this year, $147 million of working capital. Just an increase in improvement in earnings and cash flow all reflect of 2 things: rising prices up until June 30; and then new discoveries, new operating areas at Guanaceví and Bolañitos, our existing operations. We also sold one of our old assets, El Cubo. That closed in the first half of the year, acquired about $20 million of cash and stock which is also built into that working capital number. So I've touched on Guanaceví. It's 80% silver, 20% gold. Everything has been relatively steady state, except our cash costs increased here in the second quarter of 2021. You can see we went from $11 cash costs to $17 cash costs for a variety of reasons I've already touched on. Our plan is to get those costs down. The new area, new high-grade zone that we discovered that I touched on was the El Curso zone. You can see it's right beside -- adjacent to our Porvenir Cuatro mine, which was our highest-grade mine at Guanaceví; and then sandwiched to where we're actually mining as well, Milache. But for El Curso, that some of our highest-grade material that's coming out running north of 400 grams silver equivalent on average. So again, with this discovery now at Guanaceví where we've historically only had 2 years reserve life, although we've been there 15 years, now we're sitting on 4 to 5 years and have a horizon of 6 to -- or sorry, 8 to 10 years here at Guanaceví going forward. So success that we can continue to stay in these districts to operate there a long time, continue to make discoveries and continue to fill -- feed our mill. The Bolañitos mine is now a gold mine. 80% of our revenue comes from gold, 20% comes from silver. We have 3 main operating areas we call Lucero, San Miguel, La Luz. Bolañitos is really a steady-state operation at this point. We're running 1,200 tonnes per day. We had a little spike of cost per tonne in the second quarter compared to Q1 and ultimately historically. But again, that had to do with some one-off items, one thing being bonuses for exceeding guidance in 2020 that came through into Q2. But ultimately, we see Bolañitos with a bit of shorter mine life than what we have at Guanaceví. We have 4 to 5 years of horizon, but opportunity to explore and make more discoveries still exists at Bolañitos. Again, steady state, what we've done. The El Compas, I'll touch on this quickly. We opened up El Compas at 250 tonnes per day in 2019. Unfortunately, we closed it this year. We thought we could get to 500 tonnes per day. We didn't have the same exploration success that we've historically had at Guanaceví or Bolañitos. But nonetheless, we did make some positive cash flow. We weren't making cash flow at the end, so ultimately, we made the decision to shut it down. There's a lot of opportunity in the area, a lot of junior Canadian companies around us. So we'll look to see some alternatives going forward at Compas and see what happens here. So ultimately, what we're talking about when we go out to our markets and our shareholders and our stakeholders is our Terronera project. Again, our feasibility study was released in September, and it's going to basically double the production of the company and cut our cost profile in half. So ultimately, we're considered a higher-cost mining operations with tighter margins and with contracting prices makes it difficult for Endeavour to operate. Terronera completely changes that for us. We've invested over $30 million over the last 7 years and come out with a feasibility study this year that shows a robust project over 12-year mine life doing 3.3 million ounces of silver and 33,000 ounces of gold over those 12 years, running 1,700 tonnes per day. So Guanaceví runs 1,200 tonnes. Bolañitos currently is running 1,200 tonnes but historically did 1,600 tonnes per day. The El Cubo asset runs 1,600 to 1,800 tonnes per day. So right in the wheelhouse of what we do, this epithermal vein mining, underground veins that we're going to work on, how we've done now for 15 years. So not hugely different to what we're doing. The only aspect is that Terronera is actually higher grade and thicker vein. So it should be relatively easier once we get into production. The feasibility study has got robust economics. And ultimately, what we're most excited about, it puts us in the lowest quartile from a cash cost perspective. So it's going to cost us $0.59 per ounce of silver to produce and $3.24 all-in sustaining costs produced over those 12 years at Terronera. Ultimately, with that, I'd probably go to a slide showing today's -- at spot price of maybe 2 weeks ago at $24 over $1,800 gold. The NAV value gets just shy of $300 million. IRR is 30%. Payback period's 2.5 years. The cash cost net of gold by-products ends up being negative, so all the gold pays for silver and some. All-in sustaining cost is about $1 per ounce of silver. Annual after-tax cash flow is $52 million using spot cases, which puts us overall about just shy of $500 million of cash flow after all expenditures, including capital at the Terronera operation. So it completely changes our company of who we are and what we've done. It gives us a 12-year mine life. It gives us extremely low cost structure, and significant exploration potential remains at Terronera. As I've touched on, Guanaceví, we've been there 15 years. We've never had more than 2 years reserve life. At Bolañitos, we were there 14 years, never had more than 2 years reserve life. At Terronera, we've got a 12-year mine plan that were open along strike and to depth. You can see on the right side the longitudinal sections, the highest-grade material being in the purple. You can see, once we get in there, we can drill below our existing envelope. It's likely we can extend mine life here. We expect to be at Terronera 15, 20, 25 years when it's all said and done. On the left side of this slide, you can see production in the first 4 years, we're actually going to produce 7.5 million silver equivalent ounces, grading 456 grams, significant grade. A lot of that grade is going to come from the La Luz vein, again, open along strike and to depth, some of the highest-grade material. It's running about 13-gram gold. It's really a gold vein just adjacent to Terronera, very prolific area. And again, like I say, once we get in there, we expect that resource to be able to grow with drilling underneath what we're able to do from surface. Here's a quick snapshot of where we sit compared to our peer group. At $0.59 using base case price of $20 and $15.75 puts us in the lowest quartile, and all-in sustaining cost puts us in the lowest decile amongst primary silver producers. The time line to build Terronera is going to be about 2 years. We'll have a formal construction decision here, what we expect by December 15. We do have a budget put in place, $13 million that was approved by the Board in July to continue to advance Terronera from now until December 15. Cutting hills, early engineering work, stuff so we can hit the ground running in January, make sure we can hit this time line. Ultimately, we've sourced some long-lead items, including our ball mills already on site. We've got Sandvik already building our equipment, which we'll expect to be here in December. So there are a number of things that we've done to make sure that we can hit the schedule for H1 2024 production. We do have a good balance sheet. We have $125 million cash on our balance sheet. And ultimately, I'm working on a financing project that we expect December 15 -- to be done for December 15 to put about $80 million to $100 million of debt on our books. That's what's going to lead to the formal construction decision. The Board wants to see that commitment letter. We've been working with Canadian banks, European banks and Asian banks. Looks like we're probably going to go with one of the European banks at very favorable terms that's going to be better for our shareholders. This slide is the exploration upside for Terronera. In June, we put out results for -- significant results actually. In the southeast area, you can see -- if you can see my cursor, Terronera is right in the middle of the screen. La Luz is adjacent to it. On the southeast, we start drilling some of these veins and had significant results. San Simon, Fresno, Lindero, Pendencia are all separate veins. We've done early explorations, early holes hit, ultimately showing that we're going to have more than our 12-year mine life. We expect to be there 15, 20, 25 years. Additionally, we picked up some concessions we call Los Cuates. Drilling highlights were released in June. We're continuing to drill that area. And again, just showing the exploration potential for the area and the district and why we know we can be here a lot longer than the 12-year mine life. The other aspect to Terronera that's very important. I'm new to the CEO role in May. A lady who worked behind me as our VP, Controller, she -- we moved her up to CFO. But we also brought in a new Chief Operating Officer last September. He's been with us for a year. He's worked through that feasibility study. He's done a good job of making sure that Terronera is going to be operable and flexible. And ultimately, our initial CapEx increased significantly from our PFS from $100 million to $175 million. But we know we can operate this. Don Gray, the COO, has come out of just building the Buritica mine in Colombia, which was sold to a Chinese group. Before that, he was in Guatemala actually building the Tahoe mine, Escobal. So his last 2 projects were built and very well received in the marketplace, and no one across our industry has a good mine builder. We're not done with Parral -- or sorry, we're not done with Terronera. We also have Parral. Parral is a silver asset in northern part of Mexico. Lead and zinc, so for the first time, we've seen base metals. But ultimately, we've got a $2 million budget here. We have 40 million ounces in the ground defined. We're trying to grow to 60 million, 65 million ounces, and then we'll put an economic study on it. So we think we could be at about 60 million, 65 million ounces by the middle of next year, and then put a study on it so we have a study for the end of 2022. It's a prolific area. There's mines all around us. Permitting will be relatively easy because it was a historical mine in this area, doing about 4 million ounces of silver a year. But again, just building out our portfolio, having a pipeline to be able to continue to deliver silver projects. Because as we know, mines are finite, and you do need to have a pipeline to replace when production comes off-line at other areas. And additionally I'd touch on, we're in Chile. We have 3 projects. Aida, it's on the East Coast of Chile. It is in the Bolivian silver belt. The good news is it's in Chile, not Bolivia. Cerro Marquez is a porphyry gold, copper deposit. We've done early works there. We're trying to get some majors in there. It's been difficult to get them in due to COVID. Chile has been very restrictive on entry into the country. And Paloma's a gold asset, world-class, completely different than what we've been doing in Mexico where its underground veins operating. These would be open pit. Leaching significantly changed that, but it's early days. We're excited about them, but lots of work left to be done. So I'll leave -- we're a sector-leading organic growth strategy. There's our operations, development exploration and our discoveries potentials. Always talk about this. It's our pipeline. It's how we grow the company, how we add value to our shareholders. We do have 170 million shares outstanding. Current prices, we're just shy of $4.69 when we put this together. So we're around $750 million U.S. market cap at this time. We have great volumes. We have great liquidity on the TSX and the New York Stock Exchange, very healthy balance sheet. We do have some of the best beta to silver. We're very volatile. We have good entry points. We have good coverage out of Canada and United States. And ultimately, I'll leave our viewers and listeners -- I mean, we're always looking out to optimize operations. The big thing for us is Terronera. It's going to double our production, cut our cost profile in half. I mean, the cost profile for Terronera, like I say, is going to be in the lowest decile from an all-in sustaining cost standpoint. We're not done at Guanaceví. We're not done at Bolañitos, still discoveries to be made. And then we're looking and always inquisitive on trying to add to our portfolio. I touched on earlier, a lot of silver companies have added gold assets to their portfolio. We're not opposed to that. But ultimately, we're looking for silver. And we want to maintain our primary silver development, which there's not a lot of silver companies have done that recently. So with that, I'll hand it back for Q&A. Happy to answer any questions. I think -- I always think these are better with the Q&A aspect to it and always try to open -- answer as openly and honestly as possible and tell you what we can.

Thank you very much, Dan. That was a good overview. So I have a couple of audience questions, but I have one of my own actually. So you recently purchased an asset in Nevada, I believe you said.

Yes.

Is that a strategic move to start moving out of Mexico? Or was it just an asset that you thought was really incredible?

Yes. It's funny. It's funny. First off, it was opportunistic. And we're happy with Mexico. Mexico has been moving [ left ]. It's made it more difficult. You're hearing a lot of rhetoric out of the government. With other Canadian companies, we've been lucky. We've been kind of staying out of the news, so to speak. I think we do a great job socially. But for Bruner, funny story around it. It's a $10 million purchase. It was fully opportunistic. We saw a lot of value there for a company that was in a distressed situation. I actually got a phone call. I was at one of my son's baseball games, and I kept on getting phone calls from 7:00 a.m. until about 11:00, and people kept on congratulating me and ask me if we're going out of -- moving out to Mexico with such a significant purchase. And I was just confused, and I thought people were just being overly nice. And it turns out one of the websites carried it as a $100 million cash purchase.

Wow.

Yes. Likely, Galina called me and was like, "Hey, this has happened." And obviously, we contacted the editor. We contacted the website and made a lot more sense why so many people were calling me. But for Bruner, the 300,000 ounces of gold historically is great. We have to prove that out with our own drill results. We like it a lot. There's a historical PA on it that valued at about $90 million. So we do think we're being quite opportunistic there. I think we have work to do. There's probably 2 years of work to do. And now that we are in Nevada and we've put a little team in place there to kind of manage it, we are going to look around in the same Walker Lane district, so to speak, in Nevada and learn about it and try to understand it and see if it can be a part of us. I mean, we've been in Chile now 8 to 10 years. And we've picked up so many projects there and discarded them, which I think is important because you can waste money and spend bad money after -- or good money after bad money, and we don't want to do that down there. And the projects that we have coming on there, we're really excited about as well. So I'm happy about our pipeline and the amount of work we have to do. And if we grow more in Nevada, we grow more in Nevada, but that's not necessarily strategic to get out of Mexico.

Okay. That answers my question. And then in terms of strategy, would you consider yourself been an Americas-focused company? Would you look internationally? And in terms of Americas' focus, are you going to stick with Nevada if you do additional acquisitions? Are you looking at other states?

Yes. Because I do believe in scale, I think it's good to get some more assets in Nevada. We're not opposed. We've looked at assets in Canada and the United States, Arizona in particular. We looked in assets at Chile. Argentina has got great geology, and they got a terrible government system. Brazil, we haven't really looked at assets, but we want to stay in the Americas. We have a -- what we believe is an advantage. We have a lot of expertise to speak Spanish. We want to use that and go more south, so to speak, and ultimately go where the geology is. And finding silver assets is not easy, and finding silver assets of significance is even harder. So we'll focus on that, but I don't see us going overseas, either to Asia or to Africa or into Europe. It's just what we think we're good at is in the Americas, and it helps us manage it better, so to speak. Time zones get difficult when you're jumping from continent to continent, that's for sure.

Yes. There's been a lot of activity in Nevada over the past couple of years. Have you found it difficult to get rigs, to get labor, to hire people?

Yes. We're quite new in Nevada, and we're just working on our targeting plan, and we'll do some surface sampling and geophysics and then next year, focus on the drilling aspect. But in Mexico, we've started to see a squeeze on drilling and getting drillers in country, partly due to COVID, partly due to the increase of the exploration companies. And capital has allowed everyone to kind of move with the movement in silver and gold prices and ultimately other metals. Other areas in Peru and Chile, especially in Chile, getting drillers in country has been very difficult because of COVID restrictions. So it's not necessarily a squeeze on drilling. It's a squeeze on people and be -- and mobility of those people. And I suspect in Nevada, it would be similar. And ultimately, we're lucky in Mexico, we have a lot of good relationships. We've had a pretty good healthy general budget for the 15 years I've been around. Again, we're built off the drill bit. So we've always used that relationship, that leverage to make sure our drills are turning. In Nevada, we'll see how that goes.

Okay. And we talked about Mexico. You talked about Nevada. We haven't touched a lot on Chile, and I have a few questions just around the government tax increases. So has that changed your plans at all in the country?

Yes. It's given a pause, big time pause. I mean, for the [ years ], the royalty regime is only on copper. At this point, in any copper over $4, they wanted to put a royalty of 75% of NSR on, which just kills a company. Ultimately, that can't go through. It won't go through. You shut down all those operations. But it doesn't mean that some sort of royalty regime is not going to come in, and we'll see one. And that can't just be on copper because most copper deposits have by-products of gold, silver, that ultimately, you would move revenue one way. So to be able to close that loop, they're going to have to put a royalty on all of it. And where that royalty ends up? I don't know. I don't think a lot of people know at this point. And Chile's government definitely move towards the left, and it's concerning. And we've seen that improve as well, which is another historically great mining district or jurisdiction. And for us, with the projects that we have, they're world class. And we're going to continue to do the exploration work there even with what's coming in because we want to know what's there. And we've invested a little bit of money going there, and we'll complete that. But as far as looking for more opportunities in Chile, yes, I think we have to wait. And we have to wait until we see what the royalty regime that they're planning on putting in place that I think is going to come looks like. In Peru, again, we have to wait if we're looking at things to see where everything settles from a political standpoint in those jurisdictions. And it's frustrating. I think it'd be more frustrating for citizens of those countries, but at the end of the day, they made their vote. So it is what it is.

Well, it seems like some of the rhetoric out the government is saying they're going to allow companies to operate profitably and not have a royalty structure that impacts that profitability too much. But I guess you're right. We just have to wait and see what's finalized.

You can't -- look, for us to make an investment decision, until you have certainty around the taxes, it's very difficult to deploy that capital until that certainty is there.

I had a question about your all-in sustaining cash costs. Where do you think that you could get them down to in the next 2 years? And how do you -- how would you go about doing that?

Yes. I mean, our guidance this year of $19.50 -- or effectively, it's $19 to $20 is our range, so $19.50. And in the first half, we're at $22.50. So those increases came from operations. And our existing assets are pretty mature. Guanaceví and Bolañitos, there's opportunities, specifically at Guanaceví with some of the thickness and grades that we're seeing at El Curso that we can drive Guanaceví's cash costs on an all-in sustaining basis to about $17, where right in the last quarter it was $25. Bolañitos is going to hover around $19. So realistically, on those 2 assets, we're looking at $18 all-in sustaining costs at these price levels. Inside that all-in sustaining cost is the royalty regimes that we pay. So the El Curso asset, we're paying a 16% royalty. We're going to be mining there for the next 4 or 5 years. Special mining duties, so with more profitability, we're paying more special mining duty to the Mexican government. That's an EBITDA tax at 7.5%. That's all built-in. So at these higher prices, we're going to have a higher all-in sustaining cost. If prices pull back, our costs are going to pull back. But with -- like I say, where those are for the next 2 years, it's when Terronera comes on after 2 years, and that's going to cut our gross profile in half. So ultimately, with cash costs of being $3 at Terronera compared to our $18, you're ultimately going to see it all -- around $10 to $12 all-in sustaining cost when Terronera comes online and we have those other assets there.

It's incredibly cheap.

Yes. We're excited.

Yes. That's great. I had one other question. Would you plan to continue to strategically hold back on silver sales when prices have pulled back?

Yes. We have a phenomenal balance sheet right now with no debt; significant cash, $125 million; and like I say, working capital over $150 million. And that's at the end of Q2. During Q3, we've added to that through our operations and cash flow. And -- but we have held back more silver. And partly, it's the ebbs and flows. We don't want to get too crazy and carry everything back, so we do sell some. But at the end of Q2, we had about close to 500,000 ounces held back. I think at the end of this quarter, we'll have a little bit higher than that. And gradually increase it because we do want to still pay for our operations, pay for what we're doing. And then ultimately, when Terronera starts building, we're going to have to start spending some of that cash. But right now, it's given us the affordability to hold back some silver and wait for higher prices. And we've had a correction over the last 5, 6 months. 2021 has not been a great year for silver, especially compared to 2020. But I think you got a COVID bump in 2020 that was coming anyway, and it just had to take a breather. And ultimately, we track a lot of gold pricing where we think gold is going to go. It's sitting just below $1,800. If you can get above that $1,800, I think there's a lot of runway there. And once gold moves, we're going to see silver moving. Historically, over the life of 40 years or 50 years, on a chart, you can see when gold moves, silver will lag, follow and overshoot it and will contract that ratio, and silver will get back into the high 20s. And if it gets into the 30s and the mid-30s, there's a lot of runway there. And I think we can see 30s by -- into next year. But I haven't talked about them, but we are a silver producer. But just all the fundamentals behind what the governments are doing from sovereign debt standpoint, GDP, where things are going, I think you're going to start seeing wage inflation. There are so many variables and factors that are happening that I am a believer in a significant move in silver in the next year, 1.5 years, for sure.

Yes. Same here. I'm not in the transitory camp at all.

No. No. I agree. I agree. Wage inflation's here. We're seeing it. There's no global mobility of people because borders are closed. Without that global mobility of people, there's going to be a lot of pressure on wages for non-skilled labor, simple.

Agreed. I was actually going to ask you, what do you think about what's happened over the last little while with the short squeeze and all the Reddit stuff on silver? Like what's your view on that? And how has that affected your marketing strategy, if at all?

Yes. Yes and no. The short squeeze in the run-up, I wasn't excited about it because I think those are short-term things. And I think -- and we saw it a little bit, a lot of Chinese investors got invested in silver back in 2011 when it kind of ran $48, $50 there. And they invest it, and ultimately, a lot of people kind of lost their shirts with that time horizon because it went from $48 down to $36 in a relatively short period. And I think some people made a lot of money off that silver Reddit. I don't think the gross population did, the people that were in behind it. I think people squeezed it before and then start talking about it on Reddit, and a lot of people ran in, and a few made money and not the rest. And I think now they've been burnt a little bit, and I worry about that long term. And the silver market is a very small market, and that it can be influenced. And of course, you see short-term manipulation, but over time, I always feel like that's going to work itself out. And banks at the end of the day have to be short silver in certain parts because they are counterparties of taking on cons or they're counterparties on loan debts, and they want to protect themselves. And there is a lot more paper silver out there than there is real silver. And over time, like I say, I always think that's going to work itself out, and it's going to come home to roost. The one good thing about the silver Reddit has got the message to a younger audience about silver. I just hope they didn't get burnt back in February when it ran like that. And it's a short-term blip. And the more people learn about silver and especially what's happening in the silver market and the greenification and wanting to go more electric and how silver plays in that is only a positive fundamental, which is part of the reason why I think we can easily see in 30s next year. But ultimately, a short answer with Reddit, great that it kind of got out there but nervous and anxiety a little bit that people got burnt by it and ultimately did profit, so you ultimately stay away from the metal from an investment vehicle standpoint.

Yes. And we saw a little bit of that in the uranium space over the last little while as well. I've found it kind of an interesting phenomenon. But I think you're right. Any attention for the space is good. And I tend to agree that it doesn't have a long-standing effect. I had another question from the audience. So mining out [ Curso ] looks exciting. Are you seeing other areas that are showing similar potential?

Yes. I mean, I kind of almost laughed. We've been at Guanaceví for 15 years. We're going to end up there 20, 25 years. For an old mine that was fully built, fully mined out or thought to be mined out and was under-explored, and that was our tagline for about 10 years. We can go into these old districts, and lo and behold, we can still be there. Like El Curso was discovered in October of 2019, we had good indication that it was there. There are other concessions that are not held by us that are held by the company that we signed that lease agreement with. We're always working with them. It's just timing of when to sign that so we can bring those areas in production. So there are still lots of concessions with potential. There's lots of parallel structures, but we're obviously focused on the main Santa Cruz vein. We've got drill plans there. This year, we had $2 million primarily on El Curso. But we'll have drill plans there again next year. And I can see for the next 3 or 4 years about $1.5 million to $2 million to continue to replace reserves as we mine those resources and convert it into reserves, we replace with the drill rigs. And we're not going to get bigger scale there. 1,200 tonnes per day is what's needed for there's a little town beside it. And it's just a cost benefit. We can dump in $20 million over the next 3 years to try to prove out this massive, long mine life. But we know the geology. We know what's there. We can just continually methodically do that, and it's kind of a better cost profile for our shareholders with how we do that.

I had another question from the audience today. Actually, it's along the same lines of the question that I had for you. So after the changing over of the CEO for Brad to yourself and Brad stepping in as Chairman, how involved is he in the company? Has there been any major changes in strategy? Maybe you can talk a little bit about the transition.

Yes. Yes. I mean, I touched on the strategy part of it. I'm part of the executive team for the last 13 years, so not a lot of changes from our strategy or big changes. I wanted to focus on the internal culture, connect with all our employees and try to build a stronger, what we call Te Cuido, a stronger connection with all our people. And it's a little bit different than Brad. And I'm an accountant by trade. I handle all the corporate governance stuff, the institutional filings, that world of things. And I think that stuff is important to me, but I've got to take a bigger step and approach. And Brad is still here. He's still going to office. He comes in 1 to 2 times a week. I think when it starts raining here more in Vancouver, that might go to 2 to 3 times a week. He's an avid golfer, loves it. But he won't retire from looking at rocks until he's 75, I'd say. So he's got a good 6 to 8 years left in him. He's focused. He's got a couple of junior companies that he's more focused on and gives him freedom to do that. He gets away from the proxy advisers, the corporate governance stuff. The bigger company stuff, he cannot concern himself near as much with. As the Chairman role, of course, it's important. But he can let me handle all that stuff and focus on the day-to-day, and he gets to kind of step back and take a breath and take semi retirement. So when it comes to M&A or looking at other projects, he's definitely going to be involved. He's very passionate about it. He's very opinionated about it. And he's a good mentor. I can ask him things, bounce ideas off him, what he thinks, what I think, and that will be there, hopefully, even past one day if he ever steps off the Board. But like I said, right from the get-go, we're still a silver company. Our focus is on silver, staying on it in the Americas, drive our costs down as best we can and continuing to find projects that will keep us in the lowest-cost quartile. So there's no big change there. We're inquisitive on M&A activities, but it's got to be the right asset that's accretive for our shareholders. They're not easy, but we hope we'll get something done and add cash flow into the company and grow.

Got it. Talking about adding cash to the company, I've noticed that a number of dual-listed companies or companies that are listed on the New York Stock Exchange do ATMs. Do you have one in place? And can you talk a little bit about that?

Yes. We have done ATMs in the past. We don't have one in place right now. We raised $60 million through an ATM over the last year, probably finalized that in probably June -- May, June of 2021. It's been very good for us. It's kept a lot of the bankers in our space. You see a lot of bought deals for the Canadian companies. Those fees are higher, and the ATM gives really good competitive tension against those fees. Our cost to raise that $60 million effectively was 2%. You'll see a bought deal fee of 4% to 5%, plus your -- all your legal costs and then a discount to your share price. We sell in -- with that ATM, we sold into the market. It's interesting to know how it's going to go for other companies. I've had a number of CFOs contact me over the years. We've done 2 or 3 ATMs over the last 5 years as a way to raise capital. Again, much more efficient than historical overnight deals or bought deals out of Canada from a costing standpoint. We have great liquidity on our stock. We roll over Endeavour stock once a month fully. 170 million shares generally trade over a month. So that gives us the opportunity to sell a little bit of our treasury stock into the market to raise that capital. There's going to be a day if we needed a slug that we'd still go through the banks. But like I say, that ATM keeps the tension there. You're seeing more and more companies use it now, too. It's becoming more of a normal product for raising capital than the historical going through banks. So I'm an advocate for it. I think it's got the right time, right place. What we're working on now is putting debt into the company to build out Terronera. So we've been working with European banks for about $80 million to $100 million, which will give us kind of $225 million, $250 million of cash to get started on building that Terronera project. So we don't have an ATM in place now. We'll probably put one in place in the future again just to have that optionality there, but we'll see when we need capital for that.

Okay. Well, thanks for that. I don't see -- there's one other question. Somebody is asking what an ATM is. Do you want to explain what the structure is?

Yes. It's called at-the-market offering. So ATM is at the market, just the initials. It's opposite of a buyback program. We sell our shares directly over the New York Stock Exchange or the TSX to people looking to buy it. So we are competing with our shareholders, so to speak. But we're only about 10% of the market -- 5% to 10% of the market. 10% would be the maximum day. So if we trade 2 million shares in a day, and if we're selling stock to raise capital, we might sell 200,000 shares in -- over the exchange and raise capital that way. The benefits is it's lower cost, a lot cheaper than banks in it, where they look to sell a big slug typically to institutions. And then you're looking at -- if we're trading at $4, they're looking to sell that stock at $3.60, put significant pressure on our shares. And then ultimately, it's optionality. We can put an ATM in place, the ability to sell, say, 10 million shares over a 2-year time span. And again, to keep that competitive tension there with banks, or we don't need that 10 million amount of shares sold because we don't see an ability to deploy that capital, then we don't use it. So it's been beneficial to us. And like I say, you're going to see more and more of it. It's been come -- over the last 4 or 5 years, more companies have used it. Some of the big U.S. companies, Freeport-McMoRan use it as a way to raise capital, and Bank of America continually use this as a way to raise capital.

I think it's an interesting structure. And I think also it helps with you as shareholders that can't always buy on financings and things like that to give them some liquidity.

Yes.

And I do have one. Still in ATMs, like a continuing -- continuous offering memorandum, kind of, yes.

Yes.

Yes. Okay.

We have disclosed on a monthly basis how many shares we sold. We disclose it in our financial statements on a quarterly basis. And then there's an offering doc, it's called the base shelf that you put in that's good for 2 years. And then there's a prospectus supplement if you want to get really technical into it. But it's a lot more efficient way to raise capital. There are other -- a number of other ways. It's just another tool in the tool chest. So...

And you can be opportunistic with your share price in raising capital.

Yes, absolutely at times.

I like that flexibility. Okay. Well, I don't have any other questions from the audience or for myself. It was great meeting you, Dan. Congrats on the new role. I'm looking forward to seeing what you get up to with Endeavour. Maybe -- you did a great overview of the company, but maybe you could just remind us of the upcoming catalysts that you see over the next 3 to 6 months just so investors have an eye out for what news flow to expect.

Yes. I appreciate being on it, too. Thank you so much. But from a catalyst standpoint, the biggest thing will be a debt package put in place with the construction decision on Terronera. We put out drill results midyear on Guanaceví and Bolañitos, very positive ones. We put out drill results on Terronera. We expect some drill results out on Parral over the next couple of months, and again, some on Terronera, some on Guanaceví. But ultimately, the big thing for us is going to be going to a formal construction decision on Terronera, and that's predicated on putting debt in place hopefully by year-end. And then with that, it's going to be maintaining on schedule and on budget for Terronera. I think we'll get a re-rating maybe during construction if we can show we're on time. But I think a lot of people are skeptical of that. And then we would go into commissioning late 2023, and then ultimately, in production in 2024 from Terronera. Terronera completely changes the profile of our company. So that's the most critical stuff moving forward at this time.

Right. Well, looking forward to that. And yes, stay in touch, hopefully get an update in a few more months.

Thank you. Thanks for everyone's time.

Yes. Thanks, everyone, for participating. Somebody did mention about where the presentation can be found. I'm assuming it's on your website, and I will send it out to the attendee list as well.

Yes. It's on our website.

Okay. Great. And yes, thanks, to everyone.