EXK - Endeavour Silver (EXK) - Better Than Expected 2Q Results; Increasing 2021 Estimates

Better than expected results. EXK reported a second quarter loss of $3.3 million, or $(0.02) per share compared to a loss of $10.1 million, or $(0.08) per share, during the prior year period and our loss estimate of $9.0 million, or $(0.06) per share. The variance to our estimate was due, in part, to lower operating costs. Second quarter results were negatively impacted by the temporary suspension of mining operations in Mexico due government-mandated work restrictions. Adjusted EBITDA amounted to $2.1 million compared with $(1.9) million during the prior year period.Updating estimates. We have narrowed our 2020 loss estimate to $(0.08) from $(0.11) per share and increased our 2021 EPS estimate to $0.16 from $0.11 per share. The revisions to our estimates reflect higher silver and gold prices and improved operating margin. We forecast 2020 and 2021 adjusted EBITDA of $19.5 million and $68.6 million, respectively.Improving cost structure. Compared to the prior year period and quarter, all in sustaining costs per ounce declined 28.7% and 18.9%, respectively, to $14.91. We have been impressed with the turnaround at the Guanacevi mine and we expect continued improvement at the Bolanitos mine.Rating is Market Perform. While precious metals prices may continue their ascent, near-term risks to the current valuation include a pullback in precious metals prices and/or unexpected COVID-19 impacts on operations. We note that Endeavour cited rising COV-19 cases in Mexico as a concern and is not providing second half guidance at this time. Presently, we believe the shares are fairly valued with risk and reward evenly balanced.Read More >>