Fool Exclusive: Endeavour Silver and the Art of Perfection

With so much information to relate from my recent tour of Endeavour Silver's (NYSE: EXK  ) operations in Mexico's Guanajuato silver district, I scarcely know where to begin. But every story has a beginning, and the birth of Endeavour's tremendous success story traces its ancestry through two doting parents: the company's unbelievably favorable geology and its pervasive culture of excellence.

Endeavour to grasp the complete geological picture
If Endeavour Silver can be viewed as an offspring of favorable geology, then its mother is the Veta Madre (Mother Vein) that has supported centuries of historical silver production while apparently leaving plenty behind for generations yet to come. It is one of the world's more noteworthy epithermal vein structures, hosting segments of absolute bonanza silver grades within broader high-grade deposits that thus far extend to depths of 600 meters or more with no signs of bottoming out!

The Veta Madre, the district's principal vein structure that forms the backbone of operations for Great Panther Silver (AMEX: GPL  ) and also hosts Endeavour Silver's Cebada mine. Flanking the legendary Veta Madre are concentrations of smaller vein systems that host AuRico Gold's (NYSE: AUQ  ) El Cubo mine on one side and on the other, Endeavour's growing camp of new discoveries that are already driving substantial silver production growth along with exceptional grades of gold.

Like its deeply undervalued neighbor Great Panther, Endeavour Silver began by acquiring historical mines in the area that, despite their historical pedigree, had never been subject to adequate exploration with modern equipment and techniques. As CEO Bradford Cooke explained to attendees of the recent mine tour, the company soon discovered that "there are actually large tracts of prospective land that have never been drilled." While the Veta Madre reveals its course through this hilly terrain through both frequent surface outcroppings and historical mine works, the cluster of ultra-high-grade veins spurring the next phase of Endeavour's impressive growth spurt is primarily the product of intensive exploration drilling near known vein structures.

The portal to Endeavour's Lucero Mine is nestled discreetly into a hillside, and even though some of the deposits begin at very shallow depth, the surrounding landscape provides virtually no indication of the high-grade treasures that lie beneath.

Over the past couple of years, Endeavour has enjoyed tremendous success in discovering new vein structures just a couple hundred meters from the southern extension of the Bolanitos vein that hosts Endeavour's mine and processing plant of the same name. Named after the exploration geologist who helped interpret the initial discovery, the Lucero mine formed a new locus of exploration and rapid underground development that has since yielded an array of epithermal veins with names like Karina, Fernanda, and Daniela. Walking into the Lucero portal, Endeavour's staff led the group of visitors to an emerging superstar of this expanding vein cluster: Daniela. In September, assay results from drilling at Daniela yielded an astounding 14 grams per tonne gold and 448 gpt silver over a 4.6-meter intersection. When we reached the active production stope at Daniela, Cooke grabbed his pick hammer and began lopping off chunks of ultra-high-grade silver and gold ore from the rock face. A boisterous "woo-hoo" could be heard when one piece of ore was split apart to reveal the light-gray banding that indicates bonanza grades of silver sulphides.

Following one of several "woo-hoo" moments, CEO Cooke examines a piece of high-grade silver and gold ore from the Daniela vein.

Next, we proceeded through well-constructed ramps to the Karina vein, where assays released in June included 1.1 kilograms of silver per tonne alongside 3.37 gpt gold over a 1.2-meter interval. As we traversed Endeavour's ramps, I was struck by the substantial strike length of economic ore that was visible overhead as underground development proceeded into the heart of these vein structures. Considering how new these discoveries are, the pace of development is impressive.

As the company races to ramp up production over the coming year to take advantage of its state-of-the-art processing plant's expanded throughput capacity, additional exploration targets hover on the long-term investor's horizon. Endeavour's property hosts another historical mine on-site called Ascuncion, and the company looks forward to rehabilitating that old mine shaft to allow for underground exploration. And just off to the northeast of the Daniela vein, Endeavour's exploration team -- led by former Hecla Mining (NYSE: HL  ) geologist Barry Devlin -- has traced a vein structure called La Joya through surface outcroppings over an eye-catching strike length. Ascuncion and La Joya merely jumped-out at me as holding some particular promise, but in reality, the company boasts a solid pipeline of exploration targets left to test within its property package in Guanajuato.

Endeavour to appreciate a culture of excellence
As a long-standing shareholder, I've been well-aware for years now that Endeavour Silver's management team is pure gold. My August 2010 interview with Cooke confirmed for me the high caliber of individual standing at the helm of this endeavor. Both Brad and President and COO Godfrey Walton are accomplished mineral geologists who bring an outstanding degree of technical expertise to the table when charting the company's course to continually "upgrade and expand." The company has gone the extra mile to promote a better-informed investment community using a series of instructional videos that are well-received by my readers. Over the course of my regular conversations with Endeavour's vice president for corporate communications, Hugh Clarke, I have come to view him as quite simply the best in the industry at sharing a sincere excitement for his company's growth story. During my trip to Mexico, not only was I able to get to know these folks a whole lot better, but I enjoyed a front-row seat to observe the way a discernible culture of excellence at Endeavour Silver pervades every aspect of their operations. And from what I could gather, the group of about 25 visitors emerged from the tour with a similarly high regard for Endeavour's palpable culture of excellence.

David Howe, Endeavour's head of operations in Mexico, is an affable character with a quick wit, but it's very clear he runs a tight ship in every sense of the word. Safety is more than a buzzword here; it's the core imperative around which all other priorities seem to revolve. Also more than a catch phrase is Cooke's assertion that "Endeavour embraces the philosophy of continuous improvement." From major installations like Endeavour's recently inaugurated 1,000 tpd processing circuit at Bolanitos, to smaller details like the preservation of Spanish colonial-era ruins adjacent to the plant, Endeavour exhibits a commitment to quality at every level of its operations that was visible during every moment of our expansive tour.

In a pleasant juxtaposition of old and new, Endeavour Silver's Bolanitos processing plant abuts the ruins of a Spanish colonial-era structure. Instead of razing it to make way for the plant, Endeavour worked around it to preserve its historical character. For its part, neighbor Great Panther Silver has done a phenomenal job restoring the site of the historical Valenciana silver mine, as a service to the local community. The old mines flanking Guanajuato are, collectively, a UNESCO World Heritage site. As an investor, I enjoy observing quality in those sorts of voluntary initiatives.

Because Endeavour Silver is born of a marriage between highly favorable mineral geology and an culture of excellence involved with every aspect of its operations, I emerge from my tour of the company's operations with extreme confidence in the continued success of this exciting silver growth story. I intend to retain my investment stake in this company for the very long haul, just as I intend to do with neighbor Great Panther Silver. Although I have not yet visited their operations, everything I have heard and read regarding First Majestic Silver (NYSE: AG  ) and Fortuna Silver Mines (NYSE: FSM  ) suggests that these four Mexican silver miners count among the more noteworthy standouts for operational excellence within this highly profitable and competitive industry. Among Mexico's primary gold miners, my focus remains with my current top pick, Primero Mining (NYSE: PPP  ) , and my prior top pick, AuRico Gold. But if it's silver you seek, it would seem hard to go wrong with Endeavour Silver.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of AuRico Gold, Endeavour Silver, First Majestic Silver, Great Panther Silver, Hecla Mining, and Primero Mining. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (37)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2011, at 11:14 AM, BullionBullsBoot wrote:

    I enjoyed Brads pick in hand antics also. He was certainly excited, loves his job and organization. Nice write up again. I just posted my accounting of things also. If you wish a perusal.

    http://bullionbullscanada.com/index.php?option=com_content&a...

    Well done sir.

  • Report this Comment On November 07, 2011, at 11:23 AM, XMFSinchiruna wrote:

    Brian, thanks very much for providing a link to your commentary, which I thoroughly enjoyed.

    I am glad to confirm that I did not presume too much to state that the tour group as a whole was thoroughly impressed with Endeavour's management team. :)

    I enjoyed your wording, and I couldn't agree more:

    "The jist of what I sensed over the day or two I spent with Endeavour staff, is that they are proud of their company, and are quite happy with development. I know from serving for many different organizations that this isn't a fluke. There was never a sharp word or a condescending glance. They do not lead through fear, coercion or punishment. This is a group that has a climate set for caring, communication and mutual respect. Team building is evident at all levels. This is an extension of Brad Cooke, his vision and leadership style. He has gathered a top-notch team, and they are empowered to achieve in a creative way."

  • Report this Comment On November 07, 2011, at 11:28 AM, BullionBullsBoot wrote:

    David Howe deserved the accolades you gave him also. Sharp manager, and funny. Gotta be great to work for.

  • Report this Comment On November 08, 2011, at 10:46 AM, BullionBullsBoot wrote:

    I thought this would be the beginning of the discussion. Hmmm. Chris, what did you think of their foray into the bulk tonnage possibility in Chile? Lomas Bayas.

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