Silver Prices Rise, But Endeavour Silver's Profitability Remains Elusive Amid Inflationary Pressures and Higher Costs

Endeavour Silver Corp. reported solid Q3 revenue of $85.3mln, beating expectations, but missed EPS estimates with a loss of 3 cents. The company cited lower silver production, lower realized silver prices, and higher costs and project spending as reasons for the loss. Despite a sharp rise in silver spot prices, the company's profitability remains elusive due to its provisional pricing contracts.

Endeavour Silver Corp. (NYSE: EXK) reported solid Q3 revenue of $85.3 million, exceeding expectations by $3.92 million. However, the company missed earnings per share (EPS) estimates, posting a loss of 3 cents per share. The company cited lower silver production, lower realized silver prices, and higher costs and project spending as reasons for the loss.

The company's silver production decreased due to lower ore grades, mine sequencing issues at Guanaceví, and delays in accessing higher-grade stopes. Despite a sharp rise in silver spot prices, the company's profitability remains elusive due to its provisional pricing contracts. These contracts allow buyers to pay a provisional price at shipment, with the final settlement adjusted weeks or months later based on the market price. If silver prices drop between shipment and final settlement, the company takes a negative adjustment, reducing the average realized price.

The company's all-in sustaining costs (AISC) rose due to inflationary pressures, higher labor and energy costs, and continued capital spending on the Terronera project, which has yet to contribute revenue. The integration of the newly acquired Kolpa mine is progressing well, with production aligning with historical performance, but the company faces challenges in achieving commercial production at Terronera.

Despite the mixed results, Endeavour Silver Corp. remains bullish on its growth prospects. The Terronera mine is on track for 2025/2026 production, and higher-grade zones are coming online at Guanaceví and Bolañitos. The company is also highly sensitive to silver price movements and expects tighter supply-demand dynamics to drive cash flow improvements.

Analysts remain bullish on EXK stock, with a consensus price target of $8.33, a gain of more than 51%. However, investors must decide whether to endure another year of uneven results or diversify exposure.

[1] https://finance.yahoo.com/news/endeavour-silver-corp-exk-q2-071223094.html
[2] https://www.investing.com/analysis/endeavour-silver-profits-elusive-despite-rising-silver-prices-200665463