You can learn more about a person's character during five minutes in crisis than you might learn in five years otherwise. Our true colors emerge when the chips are down, and the same can be said of the companies we invest in.
Endeavour Silver (NYSE: EXK ) spent about 24 hours in crisis mode this week, after some non-union workers at the El Cubo mine near Guanajuato, Mexico, launched a work stoppage and blockade of portions of the mine and leased facilities nearby. One short day later, Endeavour issued a second press release declaring that the stoppage and blockade had been lifted, and that the workers involved had returned to their afternoon shift.
In its response to (and swift resolution) of this crisis, Endeavour placed on display the refreshing caliber of its management culture that makes me so delighted to hold the company's shares and maintain a long-standing bullish Capscall on Motley Fool Caps. Specifically, we saw on-site management -- led by VP for Mexico Operations David Howe and El Cubo operations manager Richard Downes -- engage immediately in constructive dialogue, respond decisively to alleviate the workers' concerns, and convey the developments to investors both quickly and transparently.
As it turned out, the workers' concerns related to what CEO Brad Cooke described as "the irresponsible actions of an employment outsourcing company" that prior mine operator AuRico Gold (NYSE: AUQ ) had used. Endeavour was able to resolve the matter by bringing in another staffing company to hire the affected workers and honor their accrued benefits.
I visited the El Cubo mine just a couple of weeks ago, and I am of the opinion that the substantial challenges Endeavour will face in turning around this previously neglected operation represented an ideal fit for what I have found to be one of the mining industry's truly elite management teams.
Indeed, optimizing labor relations figured prominently into the list of priorities in Endeavour's turnaround plan, and the company will face another trial by fire when a collective bargaining agreement with the relevant union at El Cubo comes up for renegotiation early next year. No doubt those union representatives paid close attention to last week's events, and will have seen that Endeavour is a forthright and reasonable partner at the negotiating table. As South African gold majors AngloGold Ashanti (NYSE: AU ) and Gold Fields (NYSE: GFI ) grapple with crippling labor unrest that is likely to force the closure of some higher-cost mines, the often delicate tenor of mining union negotiations in Mexico is looking decidedly mild by comparison.
Finally, I hasten to add that Endeavour's world-class management culture can also be spotted in the company's third-quarter production data (released Monday). Even before considering the contribution from El Cubo, Endeavour's precious pair of pre-existing mines achieved a 20% increase in silver production over the prior-year period, and a monumental 104% increase in gold production! I look forward to reviewing the corresponding earnings report, which is set for release on Nov. 6, and I invite Fools to track my ongoing analysis of Endeavour by bookmarking my article list or following me on Twitter.
- Add Endeavour Silver to My Watchlist
- Add AngloGold Ashanti to My Watchlist
- Add Gold Fields to My Watchlist
- Add AuRico Gold to My Watchlist
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