Shares of Endeavour Silver (EXK 0.85%), a silver- and gold-mining company with assets in both North and South America, surged as much as 13% on Wednesday after the company released its first-quarter earnings results before the opening bell.
For the quarter, Endeavour Silver produced 1.9 million silver-equivalent ounces (SEO), with total silver production declining 29% year over year and gold production falling 27% from the prior-year quarter. Based on what was sold, Endeavour wound up generating $36.4 million in quarterly revenue, a 12% decline from Q1 2016. Endeavour's weaker production is likely a carryover from its reduced capital expenditures, which were a result of falling precious-metal prices. However, lower production was mitigated by a 17% increase in silver's average per-ounce price.
In terms of its bottom line, Endeavour reported $6 million in net earnings, or $0.05 per share, which was a 230% improvement over the $1.8 million, or $0.02 per share, it reported in the year-ago period. Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased a considerably more modest 4%, to $9 million. Comparatively, Wall Street had been looking for a profit of just $0.01 per share, so this $0.04-per-share beat has brought out Endeavour's luster on Wednesday.
Though Endeavour Silver's bottom line showed a clear year-over-year improvement, Wall Street and investors are probably going to need to see some sizable improvement in production before pushing shares of this stock considerably higher.
The good news on that front is that Endeavour is beginning to get more aggressive with its exploration spending. As noted in its Q1 press release, Endeavour recently decided to move forward with development of the El Compas mine, and it could soon give the thumbs-up to the development of Terronera as its fifth mine. The big question is going to be whether Endeavour can keep its costs under control as it undertakes this major expansion. Cost-cutting has helped it deliver decent results, but cost-cutting isn't an effective long-term strategy for a mining company.
Endeavour has an opportunity to be a diamond in the rough for patient long-term investors, but we're probably a good two or three years away from seeing its expansionary efforts translate into significant bottom-line expansion.