Endeavour Silver Sails Into Sustained Growth

Like the legendary HMS Endeavour that carried Captain Cook on his maiden voyage of discovery, Endeavour Silver (NYSE: EXK  ) continues to carry investors on a fair wind into following seas. With CEO Bradford Cooke at the helm, this voyage appears destined to become a legend in its own right.

Following the commissioning of its new plant expansion at Guanajuato, Endeavour delivered a noteworthy 30% sequential increase in silver production over third-quarter output and a corresponding 43% jump in gold output. With the newly expanded plant retaining a further 60% upside from fourth-quarter utilization to reach full throughput capacity of 1,600 tons per day, it's no wonder Endeavour is guiding for another solid year of production growth in 2012 with expected production of 5.6 million silver-equivalent ounces.

The crafty navigators at Endeavour executed a bold maneuver during the quarter to avoid the full wrath of the corrective storm that battered silver prices during the period. In a move that I wish more of its peers would emulate, Endeavour held back a portion of its production as inventory to await the improved price environment of early 2012 that did indeed materialize. Before shedding a tear over the company's underwhelming fourth-quarter earnings result -- a marginal loss of $0.03 per share -- investors will wish to consider that Endeavour ended the period with a mineral inventory of 980,000 ounces of silver and 5,400 ounces of gold. As the company points out in this week's earnings release: "Metal prices did rebound in Q1, 2012 and management subsequently sold most of the metal held in inventory at prices significantly higher than the December prices."

Well-played, Captain Cooke! Actually, after speaking with President and COO Godfrey Walton during my visit to Endeavour's Guanajuato operation last October, I believe he deserves much of the credit for Endeavour's knack for outperforming average market prices with strategically tweaked average realized prices of sales. Every captain worth his salt, after all, has a capable first mate standing watch beside him.

I follow the voyages of multiple explorers and miners of silver, and the best-maintained vessels made my list of top 10 silver stocks for 2012. My visit to Fortuna Silver Mines' (NYSE: FSM  ) San Jose mine in December helped to recognize another epic voyage in the making. Others are just setting sail with a world of promise laid out before them. My recent interview with First Majestic Silver (NYSE: AG  ) CEO Keith Neumeyer (stay tuned for the article) revealed that this seasoned navigator has no intention of returning to port. Silver Wheaton (NYSE: SLW  ) has not ventured into a new silver stream contract in quite a while now, and yet the spoils of prior journeys keep its production growth pouring in. Personally, I would willingly board any of these vessels in my quest for hard-won investment gains in silver. After inspecting the hull of Endeavour Silver by visiting the Guanajuato mines, that is one ship I will sail on with confidence.

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 Endeavour Silver, First Majestic Silver, and Silver Wheaton. 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.


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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 March 20, 2012, at 3:45 PM, Jellywig wrote:

    Thanks Sinch. As a shareholder of EXK, where do you see a conservative price estimate for 2012 and do you think adding to the position is good idea right now? Since I'm on the subject, how about PPP as well?

  • Report this Comment On March 20, 2012, at 4:47 PM, PetitMartinique wrote:

    Any opinion on Primero as we head into March 28 report? Shares cheaper and cheaper each day. Thanks for all you do here on fool.

  • Report this Comment On March 20, 2012, at 7:54 PM, XMFSinchiruna wrote:

    Jellywig and PetitMartinique,

    I don't dabble in one-year price estimates, as I am a long-term buy-and-hold investor selecting quality vessels to sail with for the entire trade-winds voyage we call this secular bull market for precious metals. Beneath $10 I consider Endeavour a very solid value; particularly on the basis of its full mineral resource potential. Relative to existing compliant reserves and resources, it does not come out on the cheapest end of the industry's spectrum, but I consider that modest growth premium pretty reasonable.

    As for Primero Mining (PPP), I believe the market is likely pressing the shares lower in anticipation of some loss of reserve ounces as a result of the revised mine plan that will soon be forthcoming. Because one can not know in advance the ultimate scope of any lost reserve ounces, nor for that matter the presence/absence of any potential new reserve ounces resulting from recent exploration that could conceivably lighten the blow, the market is trading blind to some extent here. Personally, I am content to stand back and await better information in the form of the revised mine plan.

    Despite the surprising depth of this sell-off in Primero's shares, I remain utterly convinced of the long-term productive potential of the San Dimas asset, and the fundamental valuation disconnect that arguably exists between the current marklet cap and the as-yet undocumented portion of the properties full mineral potential. It remains my third-largest equity holding.

    Sinchi (long EXK and PPP)

  • Report this Comment On March 22, 2012, at 9:59 PM, jgraham300 wrote:

    Sinch, you said Primero remains your third-largest equity holding. I am curious to know what is first and second?

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