With its existing silver machines beautifully tuned and properly honed, reliable growth provider Endeavour Silver (NYSE: EXK) laid out its plans this week to assign its signature stamp of impeccable quality onto the newly acquired El Cubo mine.
Mere days after delighting shareholders with year-over-year production growth of 22% for silver and a thrilling 59% for gold in the second quarter, Endeavour has laid out its plan to yield nearly 7 million silver-equivalent ounces during 2012 now that El Cubo has entered the fold. It's clear Endeavour has identified fundamental efficiencies it can bring to the El Cubo operations and that the mine will soon yield far higher production grades than it did under management by AuRico Gold (NYSE: AUQ).
In a nutshell, Endeavour intends to tweak the El Cubo operations to reduce dilution of the high-grade ore by right-sizing equipment and extraction methods to the ore veins as they present themselves underground. The proposed transformation is very reminiscent of the recent improvements executed by Brigus Gold (NYSE: BRD) at its Black Fox mine in Canada's Ontario province. Both transformations involved retraining of mine personnel to adapt to the geological characteristics of the orebody, improving control of production grades by field geologists, increasing the number of stopes available for production, and matching the right equipment with the underground tasks at hand.
Simultaneously, Endeavour has issued an initial resource estimate for El Cubo that takes a decidedly more conservative and grade-focused approach to the asset. The result is a resource with "significantly fewer tonnes at significantly higher grades," and a property that retains excellent promise of future expansion through continued exploration drilling. Relative to AuRico's last resource estimate for El Cubo, the revised estimate yields a remarkable 78% improvement in reserve grade for silver, and a 51% grade-increase for gold. Even with the reduction in tonnage of ore, the addition of El Cubo increases Endeavour's estimated global resource by 44% to some 149 million SEOs.
Tossing that all into a revised mine plan that includes substantial improvements to the mine's El Tajo mill facility, Endeavour expects El Cubo to yield more than 1 million SEOs during the second half of 2012 alone. The revised consolidated forecast of 6.74 million to 6.92 million SEOs places Endeavour's expected volume ahead of Silvercorp Metals' (NYSE: SVM) realized output for its fiscal 2012, and keeps Endeavour out in front of the industry's fastest-growing producer: Aurcana (OTC: AUNFF.PK).
I have witnessed first-hand how Endeavour's meticulous pursuit of growth and quality turned its Guanajuato mine (now renamed "Bolanitos" after the El Cubo acquisition) into one of the best-run operations in the business, and as a shareholder I am excited to see the value Endeavour can add to El Cubo through its top-notch management team. I have retained my bullish CAPScall on Endeavour Silver since mid-2007, and I have every intention of keeping that pick open for many years to come... just as I will guard my own shares closely.
- Add Endeavour Silver to My Watchlist.
- Add Brigus Gold to My Watchlist.
- Add Silvercorp Metals to My Watchlist.
- Add AuRico Gold to My Watchlist.
