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« U.S. Debt: Has its Past Become its Future? | Main | The Real Banking Crisis »

Endeavour Silver Corp: One for your Core Holdings

EXK Chart 04 August 2011.JPG

We initially bought Endeavour Silver Corporation (EXK) for $3.97 many moons ago and have maintained a core position ever since with our average purchase price standing at around $4.00. Today Endeavour closed at $10.61 so we are more than pleased with the progress this stock has made.

A quick look at the chart and we can see that this silver producer is up ten fold in a few short years and in our opinion is now set to go further as mine development and new discoveries continue to be reported.

As we see it this company forms one of the foundation stones of our core position and we intend to add to that position in the near future.

We'll now take a look at the latest results starting with this comment from Bradford Cooke, Chairman and CEO:

"Endeavour posted healthy financial and operating results in the Second Quarter, 2011 and continued to grow its cash position and working capital thanks to a robust and rising gross profit margin. As a result of rising silver and gold production and substantially higher precious metal prices, our sales revenues, operating cash-flow, and adjusted earnings were all up sharply compared to Q2, 2010."

"Endeavour is well on track to meet its 2011 guidance for silver production (3.7 million oz) and cash costs (< $5.70 per oz), with our better than expected First Quarter results being partially offset by a slower Second Quarter. Cash costs of production did jump in Q2, 2011 as industry-wide cost pressures caught up to us during the quarter. While costs such as labour, power and consumables will likely continue their slow rise, we expect our cash costs of production to start falling again once the economies of scale from our new mine and plant expansion at Guanajuato take effect."

Cash costs are currently running at $6.98 per oz silver produced leaving lots of room to generate profits going forward.

Highlights of Second Quarter, 2011 (Compared to Q2, 2010)

Adjusted Earnings (non-IFRS measure) escalated to $10.6 million ($0.12 per share) compared to a $1.4 million loss (see IFRS comment below)

Net Earnings (IFRS measure) increased to $17.0 million ($0.20 per share) compared to a $3.2 million loss

Operating Cash-Flow jumped 553% to $21.3 million

Mine Operating Cash-Flow rose 151% to $23.6 million

Revenues climbed 85% to $36.4 million

Silver production up 3% to 850,476 oz

Gold production up 8% to 4,831 oz

Silver equivalent production up 4% to 1.04 million oz (40:1 silver: gold ratio, no base metals)

Realized silver price up 102% to $37.65 per oz sold, realized gold price up 26% to $1523 per oz sold

Cash cost up 6% to $6.98 per oz silver produced (net of gold credits)

Gross profit margin up 241% to $30.67 per oz silver

Working capital up 31% to $133.6 million, with cash and short term investments of $108.9 million

Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico, the Guanacevi Mines in Durango State and the Guanajuato Mines in Guanajuato State. The outlook for the Third Quarter, 2011 is as follows:

In Q3, 2011, Endeavour anticipates its financial performance will continue to improve, reflecting still rising silver and gold prices, a modest increase in precious metal production once the new expanded mill and flotation circuits at the Guanajuato plant are commissioned during the quarter, and falling cash costs related to the new economies of scale at Guanajuato. However, industry-wide cost pressures such as rising labour, power, fuel and consumables costs will likely continue to partially offset the Company's progress towards cost reductions at its two mining operations.

Similar to 2010, the first two quarters of silver production in 2011 were relatively flat as forecast, with the operations team focused on the mine development and plant expansion capital programs. Silver production is expected to start rising again late in the third quarter, once the mine and plant expansion at Guanajuato is completed. 

To read this news release in full, which contains a lot more in the way of detail please click here.

Endeavour owns and operates two high-grade, underground, silver-gold mines in Mexico, the Guanacevi Mines in Durango State and the Guanajuato Mines in Guanajuato State.

Finally, we were in touch with Hugh Clarke, Vice-President Corporate Communications, who summarized their position as follows:

Look for increased production starting in the latter half of Q3 as we bring the new circuit online at our operations in Guanajuato. Cost pressures are evident throughout the industry and this is not going to abate any time soon. We plan to combat this through higher production, higher recovery rates and increased efficiencies.

We are actively drilling and we expect to have a steady flow of drilling results over the coming weeks and months. As well, we will be announcing new acquisitions of exploration properties in the near future.

As usual, the company is in excellent financial condition.....rising profits, $133 million in working capital (mostly cash and short term investments) and no debt with only 85 million shares issued.

Hugh Clarke.JPG
Hugh Clarke

Endeavour Silver Corporation is traded in Canada, USA and Europe on the following three stock exchanges:



(DB-Frankfurt: EJD)

So they have plenty of exposure to the investment market

Regarding We have now placed a number of trades in the options arena and they are all showing a healthy profit, all aboard!

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals

Our model portfolio is up 338.11% since inception

An annualized return of 117.00%

Average return per trade of 40.41%

81 closed trades, 78 closed at a profit

Average trade open for 46.27days

sk chart 22 May 2011.JPG

The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG

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