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

Thank you for standing by. This is your conference operator. Welcome to the conference call for Endeavour Silver acquisition of Minera Kolpa. [Operator Instructions] The conference call is being recorded. I would now like to turn the conference over to Ms. Allison Pettit, Director of Investor Relations. Please go ahead, ma'am.

Thank you, operator, and good morning, everyone. We're here today to discuss the exciting announcement of Endeavour Silver's acquisition of Minera Kolpa. Before we begin, I would like to remind everyone that certain statements made on today's call may be forward-looking, and we encourage you to refer to our public filings and disclosures for a more detailed discussion of potential risks related to these statements. On the call today, we have Endeavour Silver's CEO, Dan Dickson, who will share more about the strategic rationale behind this acquisition, the expected benefits and further details around the transaction. We won't be taking calls -- or we won't be taking questions on today's call as the company is currently undertaking a distribution of securities, so we cannot discuss anything further than what is in the presentation. All material information regarding the company and the offered securities is set out in the company's public disclosure record. With that, I'll turn it over to our CEO, Dan Dickson, who will begin by providing an overview of the transaction.

Thank you, Allison, and good morning, everyone. I'm pleased to be here today to discuss this new exciting chapter for Endeavour. As part of our ongoing strategy to become a senior silver producer, we are thrilled to announce our acquisition of the Minera Kolpa, a fully funded mine in Peru that has produced just over 31 million ounces of silver equivalents since 2016. This acquisition underscores our team's dedication and strategic vision. It goes beyond enhancing our production portfolio and represents a critical step in positioning the company for continued growth and success in an increasingly dynamic market. We are excited about this new venture, along with Terronera, as it strategically positions us to deliver outstanding results and ensure long-term success for our shareholders, stakeholders and employees. Kolpa is a producing mine located in the prolific mining region of Peru. It bodes a history of consistent production with significant potential for resource expansion. The mines' infrastructure is extensive. The land package is substantial with over 25,000 hectares covered by 143 mining rights, giving the project a strong foundation for both current operations and future exploration potential. Geologically, Kolpa is a rich silver polymetallic mineralization with significant zinc, lead and copper, and yields 3 main types of concentrates, lead silver, zinc silver and copper silver, giving it a diverse production profile. The underground mine uses sublevel stoping with cut and fill mining methods, and processing is done through conventional flotation, producing 3 concentrates. In 2024, Kolpa processed approximately 685,000 tonnes, producing 2 million ounces of silver, 20,000 tonnes of lead, 12,500 tonnes of zinc and over 500 tonnes of copper; in silver equivalent terms 5.1 million silver equivalent ounces. In 2024, Kolpa's cost per tonne processed was $133, cash costs on a byproduct basis were $12.58 and all-in sustaining costs were $22.80 per ounce. The 2024 all-in sustaining cost includes $9.5 million of exploration expenditures for newly discovered mineralization. Turning to Slide 6. I'd like to highlight the key points of our acquisition of the Kolpa Mine in Peru. Endeavour Silver is acquiring Kolpa for $145 million with $80 million in cash and $65 million in shares. There's also a contingent payment of up to $10 million based on delivering a current 43-101 resource estimate and $20 million in debt will remain outstanding inside Kolpa. Funding will come from a $35 million streaming deal with Versamet Royalties and the $40 million Bought Deal Financing announced this morning, which was upsized to $45 million as it was significantly oversubscribed. We expect the transaction to close in Q2 of 2025, subject to standard approvals and closing conditions. Kolpa represents a strategic step forward in Endeavour's vision to become a senior silver producer. This fully funded operating asset is expected to contribute approximately $5 million silver equivalent ounces, aligning well with our production plan and marks our first project in Peru. Since its early days as an 800 tonne per day operation, Kolpa has steadily grown, now running over 1,800 tonnes per day with plans underway to expand to 2,500 tonnes, including a submission of a permit applications. One of Kolpa's key strengths is its synergies with Endeavour's technical capabilities. Our underground operating expertise, combined with the team that has a deep longstanding experience at this mine, position us well for operational success. There's also significant exploration upside. Kolpa has a solid track record of growing resources beyond depletion with near mine targets that offer potential for new discoveries. And finally, the project is located in an active mining district, giving us a strong platform for continued growth in a region known for its prospective geology and ongoing mining activity. This acquisition adds a third producing underground mine to our portfolio and one with meaningful exploration potential. Beyond output, it offers strong leverage to silver prices, providing valuable upside in a rising price environment. This mine is already fully funded and generating positive cash flow to make it financially attractive from day one. From a broader perspective, this deal also marks our entry into a new country. As a management team, we are very mindful of the impact on Endeavour. Peru is a well-known mining jurisdiction with great geology, great infrastructure and support for mining. Peru is a perfect fit in the evolution of Endeavour. Kolpa has a long offering history, existing infrastructure and a fully staffed team already in place, all of which will help in integrating this asset into our portfolio. We also recognized Terronera construction is in progress. Yesterday, we provided an update that construction is progressing on schedule, and we expect wet commissioning to commence early this quarter. On Slide 9, in 2024, Kolpa delivered 5.1 million silver equivalent ounces, up from 4.6 million in 2023. Again, that included 2 million ounces of silver, nearly 20,000 tonnes of lead, over 12,000 tonnes of zinc and 518 tonnes of copper. All-in sustaining costs were $22.80, slightly above 2023's $22, reflecting higher sustaining capital and exploration spending, both which were aimed for long-term growth. Cash costs on a byproduct basis were $12.58 per ounce in 2024. Kolpa is located in the Huachocolpa Mining District on the Eastern Bank of the Western Andes Cordillera. It's a polymetallic system rich in silver, lead, zinc and copper and has been in continuous production for over 25 years. Kolpa hosts several key deposits, including the Yauricocha, Corihuarmi and the Marta, the 16-kilometer infill drill program is underway to define and expand resources, alongside an additional 18 kilometers of brownfield drill program, aiming to provide -- prove out our resource base and deliver a current 43-101 resource estimate. We also expect ongoing in-mine and near-mine exploration program to support the long-term mine life extension similar to many underground mines. Geologically, Kolpa is classified as a Low Sulfidation Epithermal system like our existing assets, Guanacevi and Bolañitos with a vertiform structure where hydrothermal fluids have filled existing fractures. Looking at the historic resource table, Kolpa holds a combined 6.2 million tonnes of measured and indicated resources, with over 21 million ounces of silver, significant lead, zinc and copper content plus an additional 5 million tonnes of inferred resources. In 2024, Kolpa processed around 686,000 tonnes and reflects a doubling of throughput since 2016. Growing from 800 tonnes per day to 1,800 tonnes per day, the mill handles small-scale toll milling, which accounts for roughly 6% of total throughput. On the ESG front, Kolpa maintains a strong record in environmental, health and safety and social responsibility. Community support remains a priority with 43% of the workforce made up of local employees. And as the production chart shows, Kolpa has consistently increased output over the past several years, highlighting both growth momentum and operational reliability. Kolpa holds rights to 143 mining concessions across 25,000 hectares with a 366-hectare beneficiation concession. These include the core Huachocolpa Uno area, which comprises of 63 of those claims. That map highlights Kolpa's primary focus area where multiple active and planned operations are concentrated, offering strong potential for continued development and resource expansion. Moving to Slide 13. The district shows strong explorational potential, with mineralization extending beyond known deposits and remain open to long strike and to depth. The focus is on both in-mine and near-mine targets with additional greenfield exploration revealing new prospective zones. This structural understanding supports ongoing resource growth and future discovery opportunities across the Kolpa district. This cross-section highlights recent discoveries of high-grade tensional veins running parallel to the main system, suggesting the potential for a third mineralized corridor alongside the Buenaventura vein. Despite its size, only about 12% of land package has been explored so far with several promising targets already identified. Additionally, gold mineralization has been found in multiple veins, but yet hasn't been included in historical resource estimates, offering future upside as recovery methods improve. On Slide 15, we are lucky enough to partner with Versamet, and we entered into a $35 million Copper Stream agreement with Versamet Royalties covering refined copper for Kolpa over a 10-year term with automatic extensions in certain circumstances. Copper Stream scales down as deliveries reached 6,000 tonnes and 10,500 tonnes, respectively. We appreciate Versamet's support of Endeavour and the Kolpa project and look forward to our partnership in Peru. In closing, the acquisition of Kolpa marked a transformational step in our strategic growth plan. This fully funded cash flowing asset not only diversifies our portfolio but also positions us to significantly increase our silver equivalent production. By integrating Kolpa's experienced team and leveraging our underground mining expertise, we are well equipped to enhance operational efficiencies and drive future growth. We remain committed to responsible mining practices and fostering strong community relationships in Peru. As we move forward, we are excited about the opportunities this acquisition presents and are dedicated to delivering long-term value to our shareholders. Again, for those who are on the call, we won't be taking questions on today's call as the company is currently undertaking a distribution of securities, so we cannot discuss anything further than what is in the presentation. All material information regarding the company and the offered securities is set out in the company's public disclosure record. The presentation is available on our website, and we encourage those to have a further review. Thank you for everybody attending today's call.

This brings to an end today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.