Endeavour Constructs a Gorgeous Growth Pipeline

Building out from the foundation of a beautiful outlook for near-term organic growth, Endeavour Silver (NYSE: EXK  ) continues to expand an exciting portfolio of development properties to construct a sound fortress of sustained growth potential.

Like a skilled blacksmith, Endeavour will now have multiple irons in the fire from which to arrange its priority targets for future mine constructions, and this latest joint venture option looks like a sweet one. Endeavour will team up with fertilizer and lithium producer Sociedad Quimica y Minera de Chile (NYSE: SQM  ) to earn a 75% stake in that company's El Inca silver-gold development properties in northern Chile. Covering 447 hectares (1,104 acres), the properties are thought to reside within the southern extension of the same Bolivian silver-tin belt that hosts Coeur d'Alene Mines' (NYSE: CDE  ) San Bartolome mine and Silver Standard Resources' (Nasdaq: SSRI  ) Pirquitas mine.

The primary "El Inca" asset is known to host silver-lead-zinc sulphide mineralization, including four major vein structures of up to four meters in width "that outcrop for up to 1.6km along strike." Codelco, Chile's state-owned copper miner, encountered average silver grades of 227 grams per ton before mining at El Inca ceased in 1982, and by then Codelco had identified a resource of 7.6 million ounces of silver. Clearly, Endeavour is excited by a perceived exploration potential that would dwarf the asset's modest historical resource.

For that matter, the option agreement also covers two additional properties nearby that were likewise mined historically by Codelco until 1978, and which recorded a combined historical resource of 5.6 million ounces silver at an extremely attractive grade of 523 grams per ton. Together with Endeavour's 2011 options of the La Presidenta and Lomas Bayas properties, Endeavour has amassed a substantial set of attractive development properties in northern Chile. If only one of those prospects yields a deposit as rich in silver as San Bartolome or Pirquitas, Endeavour will have optioned its way into a phenomenal long-term growth trajectory.

Meanwhile, Endeavour is still delivering powerful organic growth, a 31% increase in silver-equivalent production for the second quarter. The company pulled in $7.5 million in profit, and once again took the strategic decision to hold back a portion of mine production from the market until prices improve somewhat. Just as it has done very successfully in recent quarters, Endeavour ended the quarter with a mineral inventory of more than 1.2 million silver-equivalent ounces, which is ready for sale as precious-metal prices inevitably improve.

As production from the El Cubo mine (recently acquired from AuRico Gold (NYSE: AUQ  ) with plenty of room for operational improvements under Endeavour's proven management team) enters the picture from the third quarter forward, I expect Endeavour's near-term-growth story alone to boost this stock during the second half while the market awaits its preliminary glimpses of exploration results from these newly optioned properties in Chile (and several in Mexico as well). I'll be heading back down to Mexico before too long for a timely inspection of the improvements that Endeavour will bring to El Cubo, and I encourage readers to watch for my report by bookmarking my article list or following me on Twitter.

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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 and Endeavour Silver. Motley Fool newsletter services have recommended buying shares of Sociedad Quimica y Minera. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (5) | Recommend This Article (18)

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 August 09, 2012, at 11:51 PM, msubulldogs wrote:

    You've noted in this article and several others about Endeavor's wisdom in holding back some of their inventory and waiting to sell until prices improve. Can you tell us some other companies who have been employing this strategy? For the life of me, I can't figure out why more companies don't do the same.

  • Report this Comment On August 10, 2012, at 7:13 PM, SilverSqueeze wrote:

    MSU -

    Two other companies, that I am aware of, do something similar. First Majestic Silver (AG) allocates a certain portion of their corporate cash holdings to buy shares in the Sprott Silver ETF (PSLV). McEwen Mining (MUX) is well known for retaining silver and gold bullion as part of their liquid assets.

    It would be great if more companies did this for two reasons. One, it shrinks the supply of available physical bullion which places additional pressure on the "paper" gold and silver manipulators. Two, if you believe that all paper currencies are debasing relative to gold and silver, the mining companies are preserving the value of their liquid assets by keeping as much of that category in the hard currency and less in the paper currency.

  • Report this Comment On August 15, 2012, at 7:26 AM, skypilot2005 wrote:

    Sinchi wrote:

    "Just as it has done very successfully in recent quarters, Endeavour ended the quarter with a mineral inventory of more than 1.2 million silver-equivalent ounces, which is ready for sale as precious-metal prices inevitably improve."

    - Metal held in inventory at period-end included 896,501 oz silver and 6,124 oz gold compared to 177,935 oz silver and 2,291 oz gold.


  • Report this Comment On August 15, 2012, at 11:13 AM, msubulldogs wrote:


    I agree. It's hugely disappointing that there aren't more companies following Endeavor and McEwen's lead in holding on to inventory until prices rise again. This is especially true since many of the quality miners have large cash surpluses on their balance sheets and can afford to wait for prices to rise again. Thanks for the information about First Majestic Silver. They have been on my radar for a while, but I just haven't picked up any shares yet.

  • Report this Comment On August 16, 2012, at 11:04 AM, XMFSinchiruna wrote:

    IAMGOLD holds a significant quantity of gold bullion within its treasury. It's tallied on the balance sheet at its cost basis of $97 million, but the current market value of that bullion is $215.4 million and poised to expand considerably.

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