Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp Second Quarter 2023 Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press Star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star and zero. I would now like to turn the conference over to Galina Meleger, Vice President of Investor Relations. Please go ahead. Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website at edrsilver.com. With us on today's call is Dan Dickson, Endeavour's CEO, Christine West, our Chief Financial Officer, and Don Gray, Endeavour's COO. Following Dan's formal remarks, we will open the call for questions. Now over to Dan. Thank you, Galina. Welcome everyone. I would like to start by acknowledging the tremendous achievements we made at Terronera in Q2, which advances our strategy in pursuing high-margin production growth. During the quarter, we obtained formal board approval, committed to project loan financing, established a seasoned team, and now construction is well underway. Terronera is a unique opportunity that will reposition the company to generate significant free cash flow, bringing us one step closer to achieving our mission of becoming a premier senior silver producer. Nevertheless, despite continued positive production performance, the headline for this quarter continues to be pressure on costs. As a company with operations in Mexico, we are facing the challenge of rising costs, for which we remain vigilant to mitigate the impacts. Like all our peers, macroeconomic factors such as industry-wide inflation and a strengthening Mexican peso, have continued to put pressure on consumables and labor costs across our operations. Unfortunately, we expect these trends to continue for the near term. In terms of production, consolidate Q2 silver equivalent production was up 8% year-over-year to 2.3 million silver equivalent ounces, bringing us to 4.7 million silver equivalent ounces for the first half of the year. This performance puts us well and in line to achieve this year's production guidance of 8.6 million-9.5 million silver equivalent ounces. Compared to the same period prior year, both silver and gold production are up 10% and 6% respectively. While our Guanacevi operation was generally in line, higher tons milled were offset by lower grades. Adjustments to the mine sequencing during the quarter resulted in lower grades compared to our plan in recent quarters. However, we expect to return to higher grades for both the third and fourth quarters. As compared to Q1, both silver and gold grades had decreased by 20% in Q2. The performance of our other operating mine, Bolanitos, remains steady. Increased gold production was offset by lower silver production in Q2. The Bolanitos operation seems continued a strong effort to meet or beat their targets, including mined and processed tons. Moving to our financials, we reported top-line revenue of $50 million, with a cost of sales of $37.5 million for operating earnings of $12.5 million. After exploration, G&A and other expenses, we reported a net loss of $1.1 million or negative $0.01 per share. Excluding non-cash mark-to-market adjustments on marketable securities, our adjusted earnings totaled $2.1 million, or $0.01 per share this quarter. At the site level, Guanacevi delivered mine free cash flow of $5 million, and Bolanitos was pretty much breakeven. Regarding operating costs, we've seen pressures across several inputs. Our direct costs per ton were up 15% this quarter. At the time of guidance, our inflation assumptions were 5%. However, year-to-date, we've seen the costs of key inputs like steel used for ground support and consumables such as zinc and cyanide, continuing to increase well above our assumption. Additionally, lab-labor costs are having a significant effect with the strengthening of the Mexican peso. The peso has strengthened to a 7-year high. Originally, our 2023 guidance had assumed a 20 to 1 Mexican peso to US dollar exchange rate. We're currently looking at 17 to 1. This is up 14% year-to-date, which is increasing our local costs in US dollar terms. All these factors manifest themselves into overall higher costs. Both quarterly cash costs and the all-in sustaining costs are above our upper bounds of our guidance, at $13.52 per ounce for cash costs and $22.15 per ounce for silver or all-in sustaining costs per ounce. As a result, management expects costs to be higher than cost metrics previously provided in our 2023 guidance. Inflation is an industry-wide issue that's expected to persist throughout the year. We're closely reviewing our purchasing practices to see where and how we can mitigate the impact. Containing costs will continue to be a key focus as we work to improve the efficiencies of our operations. Management anticipates cost metrics for the remainder of the year to align with H1 2023 actual costs. At June thirtieth, we had cash on hand of $43 million and a working capital of $78 million. To maintain flexibility on project execution, we initiated a $60 million ATM filing in Q2. Completion of the definitive loan documentation for the $120 million senior secured debt facility is expected soon, with closing and drawdown expected in Q3. After the quarter, we further enhanced our liquidity by selling a 1% stake in Capstone's Cozamin royalty to Gold Royalty Corp. This sale will bring in a cash injection of $7.5 million in Q3. We originally obtained that royalty through a concession transfer agreement back in 2017 for less than $500,000. Let me give you a quick update on construction at Terronera. At the end of Q2, we reached 30% completion. We have spent $70 million to the end of Q2 on direct development. Project commitments total $144 million, and we are tracking in line with the optimized plan, both on timing and on budget. During the quarter, we'd had steady momentum on engineering, surface construction at the plant site, mine development, and establishing internal processes to best execute the project. If you're interested in seeing photos of the construction progress, I encourage you to visit our website under the Terronera page. A quick recap. On-site personnel has increased to over 450 employees and contractors. Detailed mill and surface facilities engineering is set over 70% complete. Engineering was finalized to request proposals for the mill construction contract, including structural, steel, mechanical, piping, electrical, and instrumentation. Access road construction is substantially complete. The focus on early road improvements have greatly facilitated construction ramp-up, especially prior to the rainy season. The camp to accommodate 550 personnel is substantially complete. Nearly all dormitory units have been installed. Several live, final living units remain pending. Mine development is advancing on two fronts, with over 600 meters completed as at June 30th. In the meantime, a new portal is being prepped to access the lower part of the ore body. Bulk earthworks for the planter is nearing completion, with nearly 300,000 cubic meters of material moved. Excavations were completed for the coarse ore reclaim tunnel, grinding areas, and now rebar installation has begun. On the procurement side, deliveries are advancing on schedule, with shipments arriving at the company's laydown warehouse. Major equipment deliveries in Q2 include jaw and pebble crushers, vibrating screens, flotation cells, and the concentrate bagging system. Lastly, on the community side, we continue to partner with local schools to support education campaigns and cultural celebrations. Looking ahead, our main focus is now progressing mine development, advancing concrete work for the mill platform, and awarding the mill construction contract, which will kick off the next major phase of construction. I think that wraps up today's formal comments. Myself, Don, and Christine are happy to answer any questions that you may have. Operator, could you please open it up for Q&A? Thank you. We will now begin the question-and-answer session. To join the question queue, you may press Star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then 2. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead. Thank you, Galina, Dan, and team. I assume you can hear me okay? We can hear you well, Heiko. Excellent. Hey, on Terronera, I went through your July press release again earlier today, and I compared it with your note today. I mean, Dan, also, you obviously provided some more color earlier on this call as well, but I still got to ask, are there any factors that are giving you a bit of a headache, both from an availability and pricing point of view? It seems like the camp is mostly done and mine development continues at a good pace. Is there anything that we should maybe know about? I assume the answer is no, but I just want to double-check. No, it's a fair question. I mean, we're like I say, we're seeing a lot of inflation across our operations. I think Don and his team have done a really good job from a procurement standpoint and being ahead of the game and locking a lot of our key components in, and I've mentioned this in the prior calls and prior press releases, that our entire mobile fleet's already been on site. A lot of the key components to the plant have been procured quite early on and expect delivery here. Well, we got some in Q2 and back half of the year, the remaining will come. A lot of that, those components or key purchases have come in line with what our expectations were, have come in line with what our optimized plan is and, and the feasibility study. We did a really good job with that. There's always things that we get our concerned with, and that's our job as management and making sure that we hit our, our mine development headings and the rates, and, and executing on that over the next year, year and a half will help us be on time and on budget for Terronera. There's some things that we win on, and hopefully there's some things or things that we'll lose on, and hopefully there'll be things that we win on from a cost standpoint. At this point in time, and it's early, like I say, we're only 30% complete at Terronera, we feel like we're tracking very well to what budgets has, have been. That was a, a very nice lead over to my next question. Obviously, the Mexican peso has, has increased quite a bit. You, you mentioned it earlier on this call and, and also in your release. We were at 17.12 right now. What are you using in your model for the remainder of the year? I don't know if you have a longer-term modeling number for the peso as well, please. Yeah, for the remainder of our year, we're generally putting our cost guidance right around what we did with H1. We average just above $17 for H1, maybe it's closer to $18. $18 to 1 is probably where I'd be comfortable saying that. For long term, we'll look at that at the end of the year. We're kind of going through our budgets for 2024 at this point and just getting that kicked off. Through different discussions with various banks, we do expect the peso to continue that depreciation that we've seen for the last 20 years. Again, we don't have a crystal ball. When does that turn around so we no longer see appreciation in the peso. It's hopefully in the next six months, again, don't have a crystal ball on that. When we come out with guidance for 2024, we typically state what we're using for an FX rate at that time. Got it. Okay. Gareth, I'll get back into you. Appreciate your time. Thanks, Heiko. Thanks for the questions. Good to hear your voice. The next question comes from Craig Hutchison, with TD Securities. Please go ahead. Hi, guys. Thanks for taking my question. Hey, Craig, how are you? Doing well, thanks. Just on Terronera, with regards to the Mexican peso, can you give us a sense of how much is exposed to, I guess, domestic currency, the peso, versus how much is exposed, to the US dollar? Yeah, I mean, obviously, labor costs are significantly exposed to the peso compared to the U.S. dollar. A lot of the items that we've procured have been in U.S. dollars. We've committed $144 million of the $230 million. For the $90 million left to be exposed, we're expecting somewhere between $30 million and $50 million to be tied to the Mexican peso. Not significant at this point in time. Okay, great. Then in terms of your operations, what's the kind of rough breakdown to Guanacevi and Bolanitos just in terms of exposure? Yeah. Yep, 30%-35% of our, depending, I think Bolanitos hovers around 32%, and Guanacevi a little bit higher, around 34% or 35% of our costs are incurred in labor. Obviously, labor is completely exposed. Okay. remaining 65%, about half is tied to the Mexican peso. In total, you're looking at 55%-65% of our costs are tied to the Mexican peso. Okay. Just on the financing, I'm just going to talk about the inflation, and pressures you've seen on FX. Is there a potential to upsize that from the $120 million that's sort of been agreed to at this point? Has it sort of been finalized and, and that's the number we can expect? Yeah, no, it's been finalized. I think for us, as the management team, we think that's kind of the upper end that we want to take on from a debt standpoint. We did put in the $60 million ATM facility that we haven't drawn on to give ourselves protection. Ultimately, if we do end up above the $230 million, we'd prefer that to come from equity, just because we don't want to get too, too levered to debt. Okay. Yeah, that makes sense. All right. Thanks, guys. Thanks for the questions, Craig. The next question comes from Lucas Pipes with B. Riley Securities. Please go ahead. Thank you very much, operator. Good, good afternoon, everyone. I also wanted to start out on the cost side and, and, and maybe more broadly, kind of what, what, what sort of measures you're taking today to, to, ring-fence, cost inflation. Are there, are there things you're looking at, at the operational level? I would appreciate any additional color you might be able to share. Thank you. Yeah. Thanks, Lucas. It, it's a difficult thing to ring-fence inflation and ultimately the strengthening of the Mexican peso when it comes to labor. From an efficiency standpoint and making sure we're operating as best we can, I think we've done that well at Bolanitos. At Guanacevi, we can be better at that. We're looking at improving our ventilation, our pumping, reducing our electricity usage with pumping and being more efficient in that standpoint. We're also looking to be more efficient on our advances underground, making sure that we're using the right amount of explosives, the right amount of steel, rather than potentially using more than what we should have been. I think it's really an efficiency standpoint from our operations team, that we can find little wins here and there, and whether it's, it's about the inputs going in, so the number of units that we're using as opposed to those costs of those units. Because there's only so much you can do from a, like, for example, the strengthening of the peso, our labor costs, we need those laborers. It's question is, do we need as much labor as what we have? That's where we can make those adjustments. Of course, we've been kind of in a good fortunes, like Guanacevi, with the discoveries we made in 2019 in the high grade. I think some of that grade is gonna pick up in the back half of the year. That will improve our costs on a per-ounce basis. It's little things and, being vigilant on those little things and making sure we're operating as best we can. Thank you for that. A follow-up on Guanacevi. The, the, the higher grades with the El Curso ore body, how, how sustainable is that over the, you mentioned the back half of the year, but as we look into 2024, should we continue to see those benefits, improve or, or, or kind of stabilize at the second half level? Thank you. Yeah, I think it would stabilize. We do have a good life with El Curso remaining. I mean, obviously, we have Milache, we have Santa Cruz Sur, other areas that we're able to mine. Santa Cruz or El Curso is kind of the heart of where our production's coming from, and that will continue for the foreseeable future, especially into 2024 and 2025. I, I appreciate that. Thank you. One, one quick last one for me. Just, with Pitarrilla, I-Pitarrilla, what's the, what's the outlook there and, and, and, and major milestones, for the market to look forward to? Thank you. Yeah, no, that's a very fair question. I'm glad you brought that up. Well, for us, Pitarrilla, as most of our listeners probably know, we purchased that in 2023 for $70 million, and we've really been pushing there. The end of 2023 and early 2024, we did a lot of re-logging of the historical data. For this year, we had $3.3 million budget, and most of that's to push the ramp to what we think is or what our predecessors thought was a manto zone. It was about 300 meters away to get there. We've had some delays. We've had some workarounds on the old historical ramp. It looks like we're gonna have to push a parallel ramp, which means rather than being 300 meters, we'll have to be 500-600 meters ourselves, which will delay our drilling program and end up being either late Q4, more likely into 2024. We're not gonna have as much news on Pitarrilla this year, which was expected kind of the end of the year from a drilling standpoint, and then economic analysis next year. I'll push into next year just because of this ramp. But we do have big expectations still with Pitarrilla. Obviously, we've defined a resource of over 600 million ounces, but we are with looking at an expectation of seeing if we can make this an underground operation, similar to what Silver Standard had looked at back in 2009. Obviously, I always wish things went faster than what sometimes they do, and hopefully we can still get through that an economic analysis in 2024. Really appreciate all the color and detail, to you and to team. Best of luck. Thanks, Lucas. Thanks for the questions. Hope all is well. Thanks. The next question comes from Justin Stevens with PI Financial. Please go ahead. Hey, everyone. Most of my questions have been crossed off. I got one last one. Obviously, the GCV grades took a hit Q2. You're expecting an uptick in Q3 and beyond. Was the sequencing, sequencing impact there mostly development related? If so, do you think you'll be able to sort of stay ahead and keep enough stopes in the high grade sections to keep that grade pretty flat going forward? Yeah, two factors went into that sequencing. We actually lost our, one of our high grade stopes, and we've had spent a lot of Q2 cleaning that up and refixing up so we can go back in here in Q3. Development's been a little bit behind, but not terribly behind, but we have a recovery plan to make sure our development stays ahead, so we don't have these changes in our, our plans, our mine plan sequencing. It's kind of the bugaboo of all underground operations and making sure that we have sufficient mine development and not getting ahead of ourselves and pulling out more ore, because eventually, that always catches up to you. We do expect Q3, Q4 to stabilize and again, grades to be slightly below Q1. I thought Q1 was pretty high grades and we really significantly beat plan, but it'll somewhere be between Q2 and Q1. Just on that, the, the high-grade stope, was that just like an isolated ground condition issue or? Yeah, we believe it was isolated. always looking at that, but, we've had very good ground in, in El Curso. Yeah. to expect to have good ground. Great. I guess one other just, maybe an idea of timing, potentially. I know, you've been looking to twin some holes at Bruner, and sort of, yeah, re-opt that resource. Is that just sort of, should we expect that just by the end of the year? No, I think that's gonna fall into 2024. We haven't really pushed on Bruner this year. We did get all our drilling permits, again, there's no plans. Yeah. We want to make sure that we keep that. Priority is obviously on Terronera and everything. Yeah, exactly. Yeah. Exactly. Great. All right, thanks, and. Awesome. looking forward to seeing the, the, the uptick back in Q3. Thank you. Thanks for the questions, Justin. The next question comes from Cosmos Chiu with CIBC. Please go ahead. Hi. Thanks, Dan and team. Maybe my first question is on Bolanitos. I think in the MD&A you mentioned that, you know, Q2 experienced higher gold grades, increased throughput, offset by lower silver production and lower silver grades. I guess my question is, that higher gold grade and lower silver grade, is that gonna continue, and is that gonna revert sometime into the future? Yeah, thanks for the questions, Cosmos. I mean, we actually get quite variations between Bolanitos, between gold and silver. In general, I think our silver equivalent grades were in line with expectations, with budget, and Bolanitos was performing as expected. Q3, Q4, it would probably line up pretty good with H1's gold grades and silver ratio, and then going forward, similar at that point. Great. Then, you know, looking at your guidance, Dan, as you mentioned, you know, production guidance has been maintained, cost guidance has been maintained. As we talked about on this call, you know, there's a lot of questions about inflation, foreign exchange, FX rates, and you, I guess, in the MD&A, you know, make the comment that, you know, some of these inflationary pressures are expected to continue in the near term, expect actual cost metrics to be higher than cost metrics previously provided by the company 2023 guidance. What does that mean? Are we potentially looking at, for the full year, cost to, you know, potentially come in higher, or, you know, is that just looking out into Q3? I wasn't too sure what the, the wording around that... No, yeah. Kind of- I, I can be more clear on that, Cosmos. Ultimately, as you said, from a production standpoint, we're at 4.7 million silver equivalent ounces produced. Our upper bound range is 9.5 million silver equivalent. We're tracking really well from a production standpoint to the upper bound. Unfortunately, from a cost standpoint, all-in sustaining costs have been $22.15. cash costs have been near $12 or $12.21 for the first half of the year. We're expecting our costs to be above the upper bound range of our guidance. so we're not. Got it. Restating the number, we do expect for the second half of the year, our cost metrics to be similar to H1, which again, puts us above the upper, upper bound range of our original guidance. Understood. I guess, Okay you know, Dan... Sorry, you were saying? No, no, it's good. I'm, I'm glad you understood. I just wanted to make that clear. Okay. I guess, you know, as we talked about, one of the key components, is the Mexican peso. I just looked at it again. I don't think right now you are hedged in any way in terms of Mexican peso. Dan, as you mentioned, you don't have a crystal ball, I don't have a crystal ball either. Is there any, you know, thinking behind potentially hedging away that risk, longer term, especially with, you know, some of the costs associated with Terronera? Yeah, it's a very good question. I, there's two parts to that almost. From an operating standpoint, we aren't gonna enter into any FX hedges for Guanacevi or Bolanitos. I think a lot of the literature that we still get is we expect peso to be, stay relatively strong through 2023, but the, to reverse course and get back on historical trend of depreciation against the US dollar. That's part of the thought patterns on why nothing in, from an operating standpoint. From a Terronera standpoint, it's different, right? Because we have a big occurrence, and because of the debt that we're putting in place, with SocGen and ING, it's $120 million. There is an FX component hedging with regards to Terronera. It's not significant. Craig, earlier, asked a question about what remains from an FX standpoint. We've provided that detail to those banks, and we'll have to incur some FX hedging in place for the, as a covenant for the loan facility. Again, for everybody else on the call, with that loan facility, there's also a gold hedge requirement for the first 2 to 3 years, amounts to between 50,000 and 60,000 ounces of gold, on that 3-year basis, so averaging 20,000 ounces of gold per year. We'll get into that detail when that gets all finalized, hopefully this quarter, Cosmos. Mm-hmm. Great. Then one last question. As you mentioned, rainy season is coming up in Mexico. You've gone through many rainy seasons, and so- Yes. I just wanna, you know, kinda talk about how have you prepared for it at the operations and also at Terronera. I'm reading there's, you know, upcoming major milestones at Terronera, but it's a lot of delivery, some concrete work. I don't see a lot of major earthworks. But again, how have you kind of, you know, thought about the, the risk around rainy season coming upon in Mexico? Yeah, obviously, as you stated, with our operations, we've dealt with rainy seasons for 17 years, 16 years, at the operations. I think they're pretty well adversed to, to handling it, and you don't see big changes in our production profiles because of the rainy season. We've had issues in the past various years, whether it's clay in, in the, in the crushers that impact it, but only on a, I'd say, minute level. From a, from a Terronera standpoint, I think we've done a very good job preparing for it. That's the reason we've put so much work into the roads, and the drainage around the roads and requirements for drainage. I'm probably gonna pass this question off to Don, who's sitting in Mexico, is on the call. He knows this very well, probably can give you a better answer than I can. Don, do you want to give Cosmos a little bit of color around the work we've done around rainy season for Terronera? Sure. There's quite a few things that we've done, similar to what we've done on other projects previously, simple things like we pour lean concrete down in the bottom of the excavation so that the contractor has something to work off of when it is rainy. Ready with pumps and things like that for excavations where they may, you know, they may accumulate rainfall, that kind of thing. The other thing is that we've done in some other places is put up some tent and overhead structures, real simple things. If the contractor's prepared, which our contractor is, that we have the concrete contractor on site now, then we can get through it. we've, we've been prepared for it, and, or are preparing for it, and, and, and anticipate we can meet the challenge. Great. Thanks, Don. As you look out the window right now, is it raining? Out the window right now, it's, I've got mostly, mostly blue sky and a little, and a little bit cro- cloudy. Afternoon, the clouds come in, and we get the afternoon rains, but it's kinda typical for right now in this part of the rainy season, so. Thank you, Don. Sorry for putting you on the spot here. Right. Again, thanks, Dan, for answering all my questions. No, those are great questions, Cosmos, and we're always happy to answer them, so. This concludes the question and answer session. I would like to turn the conference back over to Dan Dickson for any closing remarks. Well, thank you, operator, and thank you everybody listening to our Q2 financial results call. I can tell by the questions, I think everybody understands the importance of Terronera and executing on Terronera over the next year and a half for Endeavour. Of course, management's always eager to, happy to answer calls from analysts, and hopefully, we expect good results here in Q3 from a production standpoint, and we maintain our eye on cost and try to drive that down as best we can. Thanks, everyone, and have a good day. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.