Data to dig into...
The rain finally stopped here in the California desert. In order to get a crop of peas before summer, I'll be planting today rather than typing. So, what follows is text lifted from Jason Hommel's email of yesterday morning. Be aware that Jason's emails (and his website where you can sign up for the email, silverstockreport.com ) have more Bible than some may care for, but nowhere else will you find his approach of evaluating companies in terms of how today's stock price expressed in ounces of silver relates to the quantity of proven/ probable/ possible ounces in the ground.
silverstockreport.com
********text follows********
Endeavour Silver Corp. (TSX.V: EDR) (EDRGF U.S. pink sheets) is one such junior silver mining company. Focusing on exploration, development, and acquisition of mineral properties in Mexico, Endeavour has a talented management team with rich experience and notable credentials. Management has experience at Homestake, Echo Bay, Kinross, Eskay-Creek, Shell, Chevron, Noranda, Canarc, Newmont Peru, and many other mines. Some would call this a ‘dream team.” With corporate offices in Vancouver BC., Endeavour has three silver projects in Mexico, the top silver producing nation in the world.
With a share price of C.D. $2.40, Endeavour's market cap is only about $67 million Canadian Dollars, or U.S. $54 million. The company has outstanding warrants at the following strike prices, 3.5 million at C.D. $2.00, 1.1 million at C.D. $2.10, and 775k at C.D. $0.35. Option strike prices vary from C.D. $0.22 - $1.60. If these warrants and options were exercised it would increase working capital by C.D. $10 million. Current working capital is C.D. $5 million, providing a nice cushion for explorations, acquisitions, and development.
Endeavor’s Capital Structure
- Shares issued 20.6 million
- Warrants / options 7.2 million
- Owned by insiders 5.0 million
Fully diluted shares 27.8 million
Endeavour's main project is the Santa Cruz mine in Mexico. The company signed a formal option in May of 2004 allowing the company to buy up to a 100% ownership before January of 2008, in the producing Santa Cruz silver mine and the Guanacevi mill in Durango, for U.S. $7 million.
In January 2005, Endeavour Silver exercised its first option to acquire 51% of the Santa Cruz mine property and mill, by purchasing 51% of the Minera Santa Cruz y Garibaldi S.A. de C.V. shares, and a 51% of the Guanacevi plant from Metalurgica Guanacevi S.A. de C.V. Price, for $3 million dollars. To completely appreciate the value of the Santa Cruz property, valuations from a recent engineering audit, in which Endeavour received good grades, the Guanacevi process plants calculated substitute value was U.S. $19.4 million, or about 40% of company market cap. Essentially, Endeavour purchased the plant for a value of 40 cents on the dollar, and received the Santa Cruz property free.
Highlights of the Santa Cruz include
-- Current production – 300,000 + oz/yr silver
-- High grade ore, 500+ grams/ tonne Silver = 14.6 oz/ ton
-- Historic cash cost of $3.50 ounce
-- Eight prospective mineralized zones for drilling
-- Mining widths of smooth 3 meter average/ lower mining costs
-- Large plant w/ 1400 tonne/day capacity
The structure of the acquisition for the Santa Cruz mine and plants is unique. The Endeavour team has the ability to finance exploration, development, and complete the purchase of the Santa Cruz, from mining profits. With working capital of $5 million, Endeavour is capitalized to purchase the remaining $4 million, 49% position in the Santa Cruz property, with no further share dilution. Canarc Resource Company (CCM –TSX) is a minority shareholder of Endeavour.
What makes Endeavour's management team really shine? Cash Flow on the Santa Cruz. Acquiring the option on the Santa Cruz less than a year ago, production is above 300,000 ounces of silver a year. With a mining cash cost close to $3.50 per ounce, with a modest silver price of $7.30, the company makes $3.70 of profit per ounce of silver mined. Expecting to produce nearly 2 million ounces of silver by the end of 2005, at $3.70 profit per ounce, a year of total mining profits may be around U.S. $7.4 million (of which 51% would be to Endeavour), notable cash flow for a silver exploration company.
The business plan at Endeavour is to be a top 5 silver producer by 2008. Past mine production was 25,000 ounces per month. In December of 2004, monthly production was 66,350 ounces. Endeavour is increasing production to meet their development goals, and expects to finish 2005 with 160,000+ ounces of monthly production, for an annualized 1.92 million ounces of silver. The Guanacevi plant is geared to process 4 million ounces a year. Endeavour plans to develop the Santa Cruz mine sequentially, increasing production by a factor of 12. Endeavour has current silver resources of 5 million ounces. The company will need additional silver resources to maintain increased production of 3.6 million oz./year.
Endeavour employs 250 people. The company plans to assay the eight prospective mineral zones on the Santa Cruz mine property in 2005, to increase inferred resources. They have also recently acquired two other exploration properties that offer potential as gold -silver deposits. The first property, the El Taco property was explored by Noranda in the 1990’s and is a gold deposit. The second, the San Jose property consists of 50 hectares. Recent sampling of San Jose returned assays of 59.3 gpt silver, and 1.09 gpt gold on sample width of 18.6 m; higher grade grab samples were as high as 22.5 gpt gold and 1500 gpt silver. These properties are currently in the early period of exploration and Endeavour may choose to have partners drill the properties.
The knowledgeable and experienced management team, and their belief in a rising silver price, makes Endeavour a compelling silver play. They are building silver production, exploring and finding reserves, and acquiring mineral properties in Mexico. With working cash flow from ongoing mining, the company has all the elements to develop Endeavour into a successful silver mining company.
Please do your own research, your due diligence, to confirm anything you may read here, before making an investment decision.
To contact Endeavour Silver (Stock Symbol: EDR – TSX.V)
edrsilver.com
Investor Relations: Hugh Clarke hugh@edrsilver.com
Telephone: (604) 685-9775 / Toll Free: 1 877 685-9775
Don Sauder is a business student. Do your own due diligence, this is not investment advice. Sauder has not been paid to write this article by Endeavour, and does not work for the company. Sauder does not currently own shares in Endeavour. You can contact Sauder at emailthat@earthlink.net
I, Jason Hommel, believe management at Endeavour understands silver. They understand that their product, silver, is money. In fact, they are withholding a portion of silver production, and choosing to hold silver as money, in preference to paper money. I think this shows that management has the right perspective.
***end of text***
Now, where are those seeds?
Gordon
PS:
gold-eagle.com
edrsilver.com |
