Endeavour Silver Corporation

Endeavour Silver Corp. (NYSE: EXK) is a Canada-based mid-tier precious metals mining company. The Company's portfolio consists of two producing mines, which are silver/gold mines in Mexico: Guanacevi and Bolanitos; one development project, which is a proposed silver/gold mine that is under construction in Jalisco: Terronera, and five exploration projects located in Mexico, Chile and United States: Pitarrilla, Parral, Bruner, Aida and Lourdes.

Recent Financial and Business Updates:

Robust Operational Overview and Strategic Milestones Achieved in Q3 2023: In the third quarter of 2023, the company achieved a production milestone of 1.9 million ounces of silver equivalent, demonstrating resilience and adherence to operational guidance. Despite challenges, revenue and cash flow remained strong, reflecting the company's commitment to strategic goals.

Financial Performance and Investment Initiatives: With revenue amounting to USD 49.4 million, the company showcased a solid financial performance through the sale of silver and gold. Despite facing a net loss, strategic investments in development activities at Terronera and successful equity issuances underscored a forward-looking approach.

Challenges at Guanacevi: Navigating Cost Escalations: Production challenges at the Guanacevi mine led to increased costs, with cash costs and all-in sustaining costs affected. External factors such as inflation and currency fluctuations compounded the challenges. Management, however, remains focused on mitigating these challenges and anticipates improved metrics.

Strategic Management and Fiscal Responsibility: Despite ongoing challenges, the company maintained a robust balance sheet with USD 41.0 million in cash and USD 75.9 million in working capital. A strategic focus on development activities at Terronera was supported by successful equity issuances, reinforcing fiscal responsibility.

Terronera Development Update and Project Financing Success: The company achieved significant progress in the development of the Terronera project, with construction reaching 38% completion. Notably, securing a USD 120 million project financing from Societe Generale and ING Capital LLC exemplifies strategic financial planning and strengthens the outlook for future growth.

Sales Performance and Inventory Management: In Q3 2023, the company reported a 25% increase in revenue, driven by a 24% rise in gross sales. Careful management of finished goods inventory, including silver and gold adjustments, reflects a strategic approach to optimize costs and market conditions. 

Cost Dynamics: Analyzing Influences on Operating Expenses: Increased costs, including a strengthened Mexican peso, higher operating expenses, and augmented royalties, impacted the cost of sales. The company faced an operating loss, emphasizing the need for proactive cost management amid industry-wide inflationary pressures.

Earnings and Tax Dynamics: Balancing Profitability: Earnings before income taxes stood at USD 0.8 million, with a net loss of USD 2.3 million. A detailed analysis of income tax expenses and the impact on profitability provides insights into the company's fiscal health and tax strategy.

Cost Per Tonne and Cash Costs: Evaluating Operational Efficiency: Direct operating costs per tonne increased by 16%, reaching USD 152.04, reflecting the influence of currency exchange rates and rising operating costs. Consolidated cash costs per ounce and all-in sustaining costs witnessed fluctuations, indicating the need for operational adjustments.

Technical Observation (on the daily chart)

The Relative Strength Index (RSI), calculated over a 14-day span, stands at 39.65, currently recovering from oversold zone, signifying the likelihood of either more consolidation or an upward momentum. Adding to this, the stock presently finds itself positioned below both the 21-day and 50-day Simple Moving Averages (SMA), which could function as a dynamic short-term resistance levels. Now, the stock's price is currently consolidating inside zone of USD 1.40-USD 1.55, with expectations of an upside movement with a breakout on the upside.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to Endeavour Silver Corp. (NYSE: EXK) at the closing market price of USD 1.47, as of February 29, 2024.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 29, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.