Endeavour Silver (NYSE:EXK) will release its quarterly report on Monday, and investors have finally started to believe in the potential for a turnaround for the silver miner. Even though the company will likely post lower earnings compared to year-ago levels, Endeavour has outperformed even the impressive gains that Pan American Silver (NASDAQ:PAAS), Hecla Mining (NYSE:HL), and Silver Wheaton (NYSE:WPM) have experienced so far in 2014.

Endeavour has faced the same difficulties that its silver-mining peers have struggled with, as plunging silver prices have crushed profits. Yet, unlike many players in the silver industry, Endeavour actually expects to have seen revenue climb in 2013, thanks to a huge jump in production volume. Can the silver miner keep moving forward even with silver prices so much lower than they were in previous years? Let's take an early look at what's been happening with Endeavour Silver during the past quarter, and what we're likely to see in its report.

Endeavour's El Cubo site. Photo Credit: Christopher Barker.

Stats on Endeavour Silver

Analyst EPS Estimate


Change From Year-Ago EPS


Full-Year 2013 Revenue Estimate

$260.7 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can Endeavour earnings stop shrinking?
In recent months, analysts have gotten more optimistic about Endeavour earnings, reversing initial calls for a small loss in the fourth quarter and raising their full-year 2014 projections by $0.01 per share. The stock has soared, as well, climbing 40% since late November.

Endeavour has already given investors a good idea of how the fourth quarter went, with its release of preliminary production figures back in January. Endeavour said that it set a new quarterly production record during the fourth quarter, mining 1.93 million ounces of silver and almost 17,700 ounces of gold. Those figures were up 56% on the silver side and 37% for its gold production; and even with much lower prices for gold and silver, revenue nevertheless climbed 2% from the year-ago quarter.

Moreover, Endeavour expects that production levels in 2014 will remain relatively stable compared to 2013 levels. In total, silver production from its Guanacevi, Bolanitos, and El Cubo mines should total between 6.5 million and 6.9 million ounces, with gold production of between 65,000 and 69,000 ounces. Yet, in order to conserve cash, CEO Bradford Cooke noted in late January that Endeavour's capital budget would be significantly reduced this year to help improve free cash flow. Some expansion efforts at El Cubo could boost capacity by about 25% to 30%, but Endeavour might also cut back on production from Bolanitos.

But on one front, Endeavour faces a bigger challenge than Hecla, Pan American, and Silver Wheaton. Mexican legislators recently passed a tax on mining companies and, unlike its peers, all of Endeavour's mines in active production and most of its exploration projects are within Mexico's borders. By contrast, Hecla and Pan American have mining operations in other jurisdictions, while Silver Wheaton has interests in silver streams throughout the world. Without a base of production outside Mexico, Endeavour will have more trouble than its rivals in maintaining its profitability after paying the tax.

Still, the best news for Endeavour has come from rising silver prices. Just in the past month, silver prices have climbed from just above $19 to almost $21.50 per ounce, and signs are growing more optimistic that further gains could be in the cards. Endeavour had more to lose than its larger peers when silver prices plunged, but it also has the potential for much larger gains if silver continues its rebound.

In the Endeavour Silver earnings report, watch for signs that the first quarter of 2014 is going as well as the company had originally projected. Moreover, look to see what steps, if any, the company plans to take if rising silver prices improve its finances substantially from its projections from earlier this year.

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