Endeavour Silver to increase El Cubo output to 2,220tpd
2015-03-17 07:36 ET - News Release
Mr. Bradford Cooke reports
ENDEAVOUR SILVER INITIATES MAJOR MINE EXPANSION AT EL CUBO; RAISES PRODUCTION GUIDANCE AND REDUCES COST GUIDANCE FOR 2015
Endeavour Silver Corp. has initiated a major expansion of its El Cubo mine in Guanajuato state, Mexico. The Company plans to ramp up mine output over the next four months from 1,550 tonnes per day (tpd), the current El Cubo plant capacity, to 2,200 tpd. The additional 650 tpd of mine production at El Cubo will come primarily from the V-Asuncion mine area, which has thicker mineralized zones amenable to long hole mining, and the Santa Cecilia mine area, which has narrower but higher grade veins, and will be processed at Endeavour's Bolanitos plant, located 18 kilometres away in the same district, which has available capacity and comparable circuits to El Cubo. Production at Bolanitos will be reduced by a small amount to accommodate more processing of El Cubo ore.
The main reason for the mine expansion is to drive operating costs lower and generate free cash flow at El Cubo by taking advantage of the available plant capacity at Bolanitos. As a result, El Cubo will become the Company's largest mine by metal production. Endeavour received the cooperation of the miners' union at El Cubo last week in finalizing a labour contract that facilitates the mine expansion and helps establish the short- and long-term viability of the mine.
Revised Production Guidance
The Company has revised its silver production estimate for 2015 upwards by 11% to a range of 6.3-7.0 million ounces (oz). Gold production guidance increases by 27% to the 60,000-66,000 oz range, and silver equivalent production is now forecast to be approximately 10.4-11.6 million oz (using a 70:1 silver:gold ratio), as shown in the table below.
Mine Ag (M oz) Au (K oz) Ag Eq. (M oz) Tonnes/Day (tpd)
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Guanacevi 3.1-3.3 6.0-7.0 3.5-3.8 1,200-1,300
Bolanitos 1.1-1.3 22.0-24.0 2.6-3.0 1,100-1,200
El Cubo 2.1-2.4 32.0-35.0 4.3-4.8 1,350-2,200
Total 6.3-7.0 60.0-66.0 10.4-11.6 3,650-4,700
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Revised Operating Costs
Consolidated cash costs of production, net of gold by-product credits, are now expected to be around $9-$10 per oz of silver in 2015. Consolidated cash costs for silver and gold on a co-product basis should come in around $13-$14 and $900-$975 per oz respectively. The lower cash cost guidance is largely a function of reduced unit costs at El Cubo due to increased productivity related to the mine expansion.
All-in sustaining costs (AISC) net of gold by-product credits, in accordance with the World Gold Council standard, are now projected to be $16.00-$17.50 per oz of silver in 2015. Although the El Cubo mine expansion requires an increase in mine development capital, management was able to reduce some minor capital projects to optimize the AISC. When non-cash items such as stock based compensation are excluded, AISC net of gold by-product credits should pull back to $15.50-$17.00 per oz of silver.On a co-product basis, AISC are predicted to be $18.00-$19.00 per oz silver and $1,150-$1,200 per oz gold. Direct operating costs are estimated to be in the $87-$90 per tonne range.
Revised Capital Budget
Endeavour plans to invest $36.5 million on capital projects in 2015, an increase of $3.8 million from the original estimate, in order to support the mine expansion at El Cubo. The total includes $30.0 million on mine development, infrastructure and exploration, $4.3 million on plant infrastructure, equipment and tailings and $2.2 million on miscellaneous items. The mine development capital is for accessing reserves and converting resources into reserves. Endeavour does not estimate reserves based on drill holes, only based on underground workings.
The Company has budgeted $18.7 million at El Cubo, up from the original estimate of $15.0 million. Capital spending at the other operations remains unchanged: $4.9 million at Bolanitos, $12.5 million at Guanacevi and $0.4 million for corporate items, all of which will be covered by the Company's anticipated 2015 cash flow.
Bradford Cooke, CEO of Endeavour Silver, commented, "We fulfilled our initial two year capital expansion and operating turn-around plans at El Cubo in December, but with precious metal prices still falling, it was clear we needed to do more to make El Cubo a viable mine. The current mine expansion will bring operating costs down further and should allow El Cubo to start generating free cash flow.
"Our revised production guidance for 2015 is now close to our 2014 performance, and our revised AISC cost guidance also matches our 2014 performance notwithstanding the substantially lower current value of the gold credits. Management continues to seek opportunities to optimize each of the mining operations to improve their financial performance.
"One example of this is our power cost at Bolanitos. Over the past three years, we installed a 15 km, 34 kva power line to connect with the high tension power grid and replace the rental diesel generators being used at the Bolanitos plant. The new power line was energized in early March and the diesel generators were decommissioned, which should drive our power costs lower at Bolanitos in 2015."
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