EXK - Endeavour Silver (EXK) - EXK Unveils Final Terronera Preliminary Feasibility Study
Highlights of the study. The final preliminary feasibility study (PFS) highlights enhanced project economics, including cumulative after-tax free cash flow of $217.4 million and a 30% internal rate of return based on silver and gold prices of $15.97 and $1,419 per ounce, respectively. The previous study released in 2018 forecast cumulative after-tax free cash flow of $193.2 million and a 23.5% IRR. Part of the difference is due to a 6.7% increase in processing capacity to 1,600 tons per day. Expected life of mine payable silver and gold ounces produced increased 6.8% and 22.4%, respectively, relative to the 2018 study.Next steps. Endeavour will proceed with a feasibility study over the next 12 months to bolster confidence in the project and enhance access to financing alternatives. Once a development decision is made, the project could take approximately 18 months to achieve commercial production. The estimated initial capital cost of the project is $99.1 million; a 13.8% reduction from the previous estimate due, in part, to reducing initial mine development, modifying the tailing storage facility, and deferring capital expenditures into sustaining capital through lease financing.Opportunities to enhance value. Management has identified additional opportunities to enhance the project economics which will be considered for the Feasibility Study. Among these are expanding plant capacity to 2,000 tonnes per day contingent on expanding mineral reserves and optimizing operations to lower costs and enhance recoveries. Higher commodity prices have a significant impact on project economics. For example, based on July 8th closing silver and gold prices of $18.49 and $1,812 per ounce, respectively, the project would generate cumulative after-tax free cash flow of $342 million and IRR of 45.7%.Rating remains Market Perform. The final PFS is another positive step toward bringing the Terronera mine to fruition. Our rating remains Market Perform based on our desire to see more progress toward reducing the company's all-in sustaining costs. EXK's second quarter earnings report and updated production and cost guidance should help to gauge the company's progress in lowering its operating costs.Read More >>