Opportunity Alert: The Multibagger Potential of Endeavour Silver

I can't issue a red alert, since only a copper stock would truly fit that bill. I could have gone with a silver alert, but somehow that just doesn't convey the sense of urgency I'm aiming for here.

Instead, I've opted for a Foolish opportunity alert to draw the attention of my fellow investors to one of the most glaring investment opportunities that I've perceived in a silver stock in quite some time. I have watched with fascination as the market punishes Endeavour Silver (NYSE: EXK  ) for tackling the ambitious task of reconstituting a thriving silver and gold mine at El Cubo from the wreckage of AuRico Gold's (NYSE: AUQ  ) badly mishandled operation of the mine.

The astonishing depth of the stock's retreat
At $9 per share, I could chalk up the market's chilly response to reasonable caution given the challenges inherent in the turnaround that Endeavour has undertaken at El Cubo. At $8 per share, the pullback still retained some context for me within a broad-based sell-off impacting all the miners of gold and silver in tandem. But here at the $7 mark, I'm digging in my heels to trumpet what I view as a phenomenal entry point into an expertly managed silver producer that has proven its capacity to successfully refurbish and expand ailing operations before.

In fact, Endeavour's flawless execution on the refurbishment and rapid expansion of its previously acquired assets in Mexico's Guanajuato state permitted me to pinpoint for my readers one of the silver industry's premier growth stories. Within eight months after I published this article, which was based on my timely interview with Endeavour CEO Bradford Cooke, Endeavour's stock nearly quadrupled! Since that time, I have visited Endeavour's Guanajuato-area operations on two separate occasions; with my most recent visit offering an insightful preview of early progress at El Cubo and the nearby mill complex.

An eight-year procession of growth marches on
Earlier this week, Endeavour Silver laid out the plan to deliver its ninth-consecutive year of production growth in 2013 with silver-equivalent output of between 7.3 million and 7.8 million ounces. Consolidated cash costs will climb a bit -- to the $9-$10 range per ounce of silver -- but that is entirely reasonable given the major overhaul under way at El Cubo. By the second half of the year, look for the cost structure at El Cubo to improve once the major capital projects are completed by mid-year.

Aside from the near-term production boost from El Cubo, Endeavour's shares hold the substantial longer-term promise for near-mine discoveries at each of the company's three operating mines. The market appears to have assessed little or no value, furthermore, to Endeavour's enticing portfolio of greenfield exploration projects: from the San Sebastian property in Jalisco state, to the company's under-explored assets in northern Chile.

Standing out amid a crowd of silver bargains
Amidst a painful pullback that's impacting most silver mining stocks across the board, Endeavour Silver is hardly alone in activating this Fool's bargain-hunting radar. I have added aggressively to my personal shareholdings in several of my top picks for silver in 2013, most notably: First Majestic Silver, Endeavour Silver, and Alexco Resource. Fortuna Silver Mines has come back into focus as well following a thorough thrashing of those shares.

But Endeavour Silver is a company I know particularly well. I've been a shareholder since 2007, I visited their operations two years in a row, and I have enormous respect for the caliber of senior management and their track record of solid growth execution. Accordingly, I consider the shares of Endeavour Silver near $7 apiece one of the clearest multibagger opportunities in the silver space today. Only one thing has changed since I shared my view that this ongoing turnaround at El Cubo will justify a $20 valuation: the potential for investment gain along the way has grown substantially greater. I have significantly increased my own position in the stock near current levels, and I urge investors to conduct their own due diligence before this gorgeous growth stock recaptures its interrupted upward momentum.

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Read/Post Comments (7) | Recommend This Article (27)

Comments from our Foolish Readers

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  • Report this Comment On February 01, 2013, at 4:36 PM, gaminsky wrote:

    Do you like this opportunity more than Impact Silver (with their two mines coming on soon)?

    I am asking because I can't add to EXK right now unless I sell some Impact (at a slight loss).

    Six on 1 hand and 1/2 dozen on the other?

  • Report this Comment On February 03, 2013, at 1:09 AM, blackmonday2007 wrote:

    silver mining looks like crap shoot take gold rush Todds indian creek maybe 1/10 size of a hecla HL mine needed 450+ ozs of gold for even; now = in silver 25000 oz of course Todd could not run a DQ either

  • Report this Comment On February 03, 2013, at 6:05 AM, skypilot2005 wrote:

    Sinchi wrote:

    “I can't issue a red alert, since only a copper stock would truly fit that bill. I could have gone with a silver alert, but somehow that just doesn't convey the sense of urgency I'm aiming for here.”

    Sinchi,

    How about a “Green” alert. Because:

    U. S. “Greenback dollar”. Aka U. S. Federal Reserve note – cash.

    Fellow investors will be “Green” with envy when comparing their investment returns to yours….

    There is “Greener “ pastures ahead for investors of EXK.

    An investment in EXK has the “green light” in my opinion……

    As you “endeavor” to add some “green” to your wallet.

    Sky

    Your Official Web Link Assistant

  • Report this Comment On February 03, 2013, at 6:27 AM, skypilot2005 wrote:

    On February 03, 2013, at 1:09 AM, blackmonday2007 wrote:

    "silver mining looks like crap shoot take gold rush Todds indian creek maybe 1/10 size of a hecla HL mine needed 450+ ozs of gold for even; now = in silver 25000 oz of course Todd could not run a DQ either"

    This post makes absolutely no sense grammatically or intellectually. Reading it was a complete waste of 3 seconds of my Foolish time.

    It appears blackmonday2007 has spilled soda on their key board once too many times and the keys are sticking or they have an aversion to using punctuation…….

    Come on.

    Sky

  • Report this Comment On February 03, 2013, at 7:19 AM, skypilot2005 wrote:

    On February 01, 2013, at 4:36 PM, gaminsky wrote:

    "Do you like this opportunity more than Impact Silver (with their two mines coming on soon)?

    I am asking because I can't add to EXK right now unless I sell some Impact (at a slight loss).

    Six on 1 hand and 1/2 dozen on the other?"

    Sinchi makes a compelling "case" for buying EXK. I don't want to diminish it in any way.

    But speaking of Impact, have you looked a Defiance Silver?

    http://www.defiancesilver.com/i/pdf/CorporatePresentations/C...

    Corporate Presentation January 2013

    Impact owns about 15%.

    See pages 18 & 19

    http://www.defiancesilver.com/i/pdf/factsheet.pdf

    January 2013

    http://www.defiancesilver.com/s/Home.asp

    As far as increasing the amount of funds you have available for investing, have you considered a wealthy “companion”? I’ve had the best results when she was fluent in English. But, that’s just me.

    Sky

    Relationship Expert and Official Web Link Assistant to Sinchi in an unofficial capacity

    Long Impact, Defiance

  • Report this Comment On February 04, 2013, at 12:36 PM, dcgatlanta wrote:

    TMFSinchiruna,

    Thanks for the opportunity alert. You state that EXK will produce 7M plus oz of silver at a consolidated cost of about $10 per oz. If silver remains at $30, can we infer that EXK will deliver $140M of EBITDA this year? If so, I agree EXK looks pretty compelling.

  • Report this Comment On February 04, 2013, at 8:49 PM, skypilot2005 wrote:

    http://finance.yahoo.com/news/beware-credit-supernova-loomin...

    Beware 'Credit Supernova' Looming Ahead : Gross

    2/4/13

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