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Shares of Endeavour Silver (NYSE: EXK), a silver and gold mining company with three properties in Mexico, plummeted as much as 23% during Thursday's trading session after the company reported its fourth-quarter and full-year results before the opening bell.
For the fourth-quarter, Endeavour reported revenue of $28.7 million, representing a year-over-year decline of 32%. This $28.7 million was derived from the sale of 946,456 ounces of silver, with year-over-year spot prices relatively flat, and 11,004 ounces of gold, which included a 7% year-over-year spot price decline. Overall, silver production plunged 37% during the quarter, while gold production fell 26%.
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In terms of its bottom line, Endeavour announced an EBITDA reversal to a loss of $1.8 million, with a net loss of $5.2 million, or $0.04 per share. Comparatively, Endeavour lost only $2.2 million, or $0.02 per share, in the year-ago period on an adjusted basis. All-in sustaining costs (AISC), which are expressed in silver equivalent ounces, rose 16% to $20.11 per ounce.
Wall Street had been looking for Endeavour Silver to report a nominal profit, or about $0 per share, when rounded, as well as generate approximately $35 million in revenue. The company missed badly on both fronts.
CEO Bradford Cooke described the poor performance as being tied to decision in January 2016 to pull back on capital expenditures due to low precious-metal pricing (gold and silver were valued at around $1,060 per ounce and $14 per ounce, respectively, in January 2016). Even though Endeavour wound up ramping up its spending as the year wore on and precious-metal spot prices improved, it simply couldn't improve its production quickly enough to meet last year's results.
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Despite its reduced output in 2016 (24% fewer silver ounces produced), Endeavour still managed to produce a full-year adjusted profit of $0.03 per share, all while reducing its AISC to a manageable $12.43 per silver equivalent ounce. Understandably, this profit was a function of lower capital spending, but it demonstrates that management has levers it can pull to improve its bottom line if need be.
Endeavour's focus is going to be split between improving production at its three existing mines -- Bolanitos, El Cubo, and Guanacevi -- and developing/exploring a handful of others. Last year, Endeavour acquired the El Compas project for $6.8 million, which would allow for 500 tons of mining per day, as well as the Parral project for $5.3 million.
The good news is that Endeavour appears to have multiple channels with which to grow its production over the coming five years. On the flipside, it's going to mean the company spending more to get feasibility studies done and to develop these new mines to commercially viable entities. Translation: Endeavour's AISC could be challenging in 2017, but for patient investors this mid-tier gold and silver miner may be worth the wait.
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