Each one in plain English, with the numbers worked through for a shareholder.
16 July 2012production update● NeutralMajor
Endeavour issued its own reserve and resource estimate for El Cubo (to June 1, 2012): 7.04 million oz silver and 112,100 oz gold in proven and probable reserves, lifting company silver reserves 42% to 23.848 million oz. It says this is far fewer tonnes at higher grades than AuRico's figures (it was more conservative, and dropped Las Torres because the lease expires next year), yet still adds value per share. It plans over 50,000 m of drilling at El Cubo over two years (10,000 m in 2012), and will treat Guadalupe y Calvo as an exploration project and not rely on AuRico's historic estimate. The existing Guanajuato mine is renamed Bolanitos. El Cubo currently produces about 200,000 oz silver per quarter at cash costs of US$9-10 per oz of silver. These El Cubo reserves are far below the 18.5 million oz AuRico had reported, so the April deal rationale is contradicted on size.
13 July 2012asset acquisition disposition● NeutralMajor
Endeavour completed the purchase of El Cubo and Guadalupe y Calvo from AuRico, paying US$200 million: US$100 million cash and US$100 million in 11,037,528 new Endeavour shares (deemed price $9.06). AuRico now holds about 11% of Endeavour's shares and may still receive up to US$50 million in cash if certain events occur over three years. This resolves the April pending deal and dilutes existing holders by about 11%, contrary to the earlier hope of little or no dilution (the share part was at Endeavour's election, and it chose the maximum).
29 June 2012asset acquisition disposition● Neutral
Endeavour and AuRico agreed to push the closing of the El Cubo and Guadalupe y Calvo purchase out to July 13, 2012. Endeavour says it is still doing a detailed assessment of El Cubo and will release its own reserve and resource estimate shortly, with new guidance and plans after closing. The deal terms are unchanged in this filing; the closing is delayed from the 45-business-day expectation, and no reason for the extension is given.
Drilling at San Sebastián (Jalisco) found a new high-grade zone in the Terronera vein, with 1,489 gpt silver and 0.85 gpt gold over 5.66 m true width in hole TR02-1, and 500 gpt silver and 1.15 gpt gold over 11.48 m in TR12-1. This is stronger than the moderate-grade zones reported from 2011 drilling on the optioned property; one rig continues to define the extent.
Endeavour signed a definitive agreement to buy 100% of AuRico Gold's El Cubo mine (Guanajuato) and the Guadalupe y Calvo exploration project (Chihuahua) for up to US$250 million. At closing it pays US$200 million, with up to US$100 million in Endeavour shares (at its election) and the rest in cash, plus up to US$50 million more in cash on certain events within three years. The company says it has about US$170 million of working capital and is arranging a bank credit line for the maximum cash needed; closing needs regulatory approvals, including Mexican competition review, and is expected within 45 business days. This is the company's largest deal in this history and adds a third mine near its existing Guanajuato mine.
Endeavour reported record Q1 2012 production of 1,072,491 oz silver (up 19%) and 6,321 oz gold (up 26%), with revenue up 39% to US$49.0M. It holds 925,100 oz silver and 3,927 oz gold in inventory rather than selling at what it called depressed prices. The final reserve and resource report to Dec 31, 2011 (Micon) made only minor Guanajuato adjustments, closing the pending update: proven and probable reserves are 16.8 Moz silver and 67,500 oz gold. Management keeps 2012 guidance of 4.3 Moz silver and 26,000 oz gold. The Lucero South ramp connected to the Lucero Main workings, and the new power line to Guanacevi was energized.
Endeavour's 2011 exploration review says it drilled 71,440 m in 315 holes and found new veins at Guanajuato (La Joya, Belen), a new Milache discovery at Guanacevi, and moderate-grade zones at San Sebastián. The Chile properties (La Presidenta, Lomas Bayas) disappointed and the company plans to drop those options. A $15.0M, 70,000 m, 250-hole program is planned for 2012, with the long-awaited reserve/resource update said to be due in a few weeks. Guanajuato is to be expanded from 1,000 to 1,600 tpd in 2012, and landholdings are now 2,538 ha at Guanajuato and 4,076 ha at Guanacevi.
Drilling east of the Lucero-Karina-Fernanda-Daniela area found two new silver-gold veins at Guanajuato: La Joya (463 gpt silver, 6.83 gpt gold over 2.00 m, hole LJ15S-1) and Belen (497 gpt silver, 5.19 gpt gold over 1.08 m, hole BL0-3). Endeavour says it expects a substantial increase in Guanajuato reserves and resources at year-end, which should allow expansion from 1,000 to 1,600 tpd in 2012. It also states the plant expansion (600 to 1,600 tpd) was completed on time and budget in 2011, with throughput reaching 1,000 tpd in October, which fulfils the Q3 2011 expansion plan noted earlier.
More Daniela vein drilling at Guanajuato's Lucero South area, with best results of 391 gpt silver and 6.56 gpt gold over 3.70 m true width (hole DN-31) and 167 gpt silver and 3.32 gpt gold over 7.23 m (DN-26). Management says the high-grade mineralization now extends over more than 600 m of the Daniela vein, up from the September 2011 results, and two rigs keep drilling its northern extent.
This filing is identical to the other September 19, 2011 report on Daniela vein drilling at Guanajuato (448 gpt silver and 14.0 gpt gold over 4.61 m in hole DN-17), so it appears to be a duplicate and adds nothing new.
Drilling in the Lucero South area at Guanajuato kept finding high grades in the Daniela vein, including 448 gpt silver and 14.0 gpt gold over 4.61 m true width (hole DN-17) and 170 gpt silver and 7.73 gpt gold over 7.14 m (DN-21). Daniela was first reported in November 2010 with uncertain width; these results give true widths and show the vein extending north. Two rigs are working at Guanajuato, down from three.
Endeavour acquired several new properties at the south end of the Guanacevi district, which it says more than triple its land holdings there. It took an option on the La Brisa and La Brisa 2 properties (90 ha) for $220,000 in cash over 3 years and staked 2,746 ha around them, and took an option on four El Cambio-area properties (37 ha) in San Pedro for $150,000 over 2 years. Phase 1 drilling is planned for Q3 at La Brisa and Q4 at El Cambio once permits arrive; this continues the Guanacevi land consolidation.
Endeavour's 2010 exploration review says it drilled about 41,400 m in 148 holes and plans a $9.2 million, 47,000 m, 175-hole program for 2011. It says it has commenced a major expansion of the Guanajuato plant to 1,000 tonnes per day in Q3 2011, which settles the open question of the 2011 expansion decision. The next reserve and resource update is expected in a few weeks, and an updated combined El Cometa/San Juanico resource is expected shortly. Management plans to seek a partner or buyer for Arroyo Seco, saying it lacks enough silver potential to interest Endeavour, and surface drilling is to start at San Sebastián.
More Guanajuato drilling south of Bolanitos extended the Lucero and Karina veins, with best results of 249 gpt silver and 4.90 gpt gold over 2.33 m (hole LC35) and 156 gpt silver and 7.73 gpt gold over 3.29 m (KA-18). Three rigs are still drilling and management repeats it is considering a major mine and plant expansion at Guanajuato in 2011. The release also notes the company was added to the S&P/TSX Index effective December 20, 2010 (the exhibit list says so; no detail is given in the text shown).
Endeavour's revised Cdn$0.12-per-share takeover bid for Cream Minerals expired on December 7, 2010 because its conditions were neither met nor waived, so it was terminated and no tendered shares will be taken up. Endeavour instead invited Cream to a property deal on Nuevo Milenio: US/Cdn amount not specified in the text, $5 million cash for 50%, a firm $1.5 million of exploration in the first 12 months for a 51% total, a further $3.5 million option over 2 years, and after $5 million of exploration an option to pay $2.5 million for 70% in total. This ends the hostile bid thread and replaces it with a proposal that needs both boards, a formal agreement and TSX-V approval.
Further Guanajuato drilling found a swarm of new gold-silver veins in the footwall of the Karina and Fernanda veins. Hole KA-15 hit 14 veins, including a new Daniela vein of 7.14 gpt gold and 179 gpt silver over 9.10 m core length; its true width is not yet known. Three drill rigs are now working at Guanajuato, and management repeats that it is considering a major mine and plant expansion there in 2011. This continues the Lucero-Karina-Fernanda discoveries from earlier in the month.
Drilling at Guanajuato found two new high-grade silver-gold veins, Karina and Fernanda, in the footwall of the Lucero vein. Best results include 421 gpt silver and 3.56 gpt gold over 2.03 m true width (hole KA-10A). Because both lie within 100 m of the Lucero South mine being developed for production next year, engineers plan to develop them as part of it. Management says it is now considering a major mine and plant expansion at Guanajuato in 2011, building on the Lucero results and the earlier 600/800 tpd expansion plans.
Endeavour formally launched its Cdn$0.12 per share cash offer for Cream Minerals, open until 8:00 a.m. Pacific on November 9, 2010 unless extended or withdrawn. The offer is conditional on at least 50.1% of shares being deposited, no material adverse change, and no material change in the status of the Nuevo Milenio Property. Endeavour says Cream's board rejected five separate offers, including one on September 25, 2010, after Cream had turned down a June 2009 cash-and-shares offer for the property, so Endeavour went directly to shareholders. The offer price per share is the only cost figure given; no total is stated. This continues the September 27 announcement.
Endeavour announced it intends to make an all-cash offer of Cdn$0.12 per share for all of Cream Minerals (TSX-V: CMA), a 76% premium to its 10-day average price of $0.068. About 88.3 million Cream shares are estimated outstanding, and the offer needs at least 50.1% of shares on a fully diluted basis deposited. Cream's main asset is the Nuevo Milenio exploration property in Nayarit State. This is a new thread: the first announced takeover bid by Endeavour, outside its earlier option deals, and it is only an intention at this point, not yet a formal offer.
Endeavour identified three new silver veins (La Blanca, Mi Nina, San Joachin) and acquired three small properties (Epsilon 7.1 ha, Elizabeth 17.0 ha, El Calvario 1.3 ha) in the San Pedro area of Guanacevi. The release does not give prices or terms for the acquisitions. Drilling in San Pedro is planned to restart in Q4 2010. The release also says Porvenir Cuatro is now being developed as a mine, and that Guanacevi produced 622,385 oz silver in Q2 2010, up 40% on Q2 2009. This continues the 2010 strategy of consolidating land at Guanacevi.
New drilling south of the Bolanitos mine at Guanajuato has joined the Lucero Extension and Lucero South zones, extending the Lucero vein's high-grade silver-gold mineralization 500 m south of the Lucero mine workings. Best holes are LC-20 (169 gpt silver, 2.14 gpt gold over 9.88 m true width) and LC-21 (11.87 gpt gold, 94 gpt silver over 3.79 m). Management plans a separate access ramp and ventilation shaft at Lucero South this year as part of the 2010 capital expansion program, continuing the Lucero story from the January 2010 results.
Endeavour took an option to buy the San Sebastián silver-gold properties (3,320 hectares) in Jalisco State from IMMSA (Grupo Mexico). It opens a third area of Mexican exploration alongside Guanacevi and Guanajuato, although the Parral project already existed. To own 100% it must pay US$2.75 million cash and spend US$2.0 million on exploration over three years, and IMMSA keeps a 2% royalty on production. The properties surround the small operating Santa Quiteria mine. The CEO calls this the first step in a 2010 acquisition strategy, with exploration fieldwork starting shortly and drill targets readied later in the year.
Endeavour's 2009 exploration review says it drilled about 18,000 m in 61 holes on 6 targets and plans a 36,000 m, 125-hole program for 2010. New results include 3,960 gpt silver and 92.8 gpt gold over 0.25 m (hole LC-4) south of the Lucero ore-body at Guanajuato, and 1,205 gpt silver over 0.69 m at San Pedro in Guanacevi. Management expects the next reserve and resource update in a few weeks, and a Phase 1 drill program at San Juanico is planned for 2010. Cometa figures are restated as of March 2009 (1.5 million oz silver indicated, 1.0 million oz inferred). The El Cometa property option was exercised in 2009. This pairs the Porvenir Cuatro and San Juanico threads with a larger 2010 drilling plan.
Endeavour took an option on the San Juanico properties (17.1 hectares) next to its El Cometa property in the Parral project. To own 100% it must pay US$130,000 in cash over 18 months plus a final payment at 24 months of US$300,000 to US$1.9 million, depending on the size of the resource. It also entered a joint venture with the owner for the 24-month option period and lent the owner US$150,000, secured by a first mortgage on the properties, to restart small-scale mining. Phase 1 drilling is planned for Q1 2010. The CEO says that if Cometa's resources can be doubled to 3 million tonnes, the combined properties could support the preliminary economic assessment that was pending in the Parral context.
Further drilling at Porvenir Cuatro near Guanacevi kept hitting high-grade silver-gold, with the best new hole PC50-3 at 727 gpt silver and 1.51 gpt gold over 3.44 m true width. The zone is now outlined by 11 holes over 200 m long by 200 m deep and is still open. Management approved a 75% increase in the 2009 exploration budget, with 5 more holes planned in Q4 2009 (16 already done) and a resource estimate and mine planning targeted by year-end. Early leach tests on four samples recovered an average of 81.9% of silver and 79.2% of gold before optimization. This follows the September 2009 discovery and the June 2009 option purchase. Third-quarter results are due November 10, 2009, with a call on November 12.
Endeavour closed its public share offering (announced September 17, 2009), including the full over-allotment option, for about $18.5 million gross. It sold 6,152,500 units at $3.00, each with one share and half a warrant exercisable at $3.60 for 24 months; agents got a 6% cash commission plus agent warrants for 369,150 shares at $3.00. Proceeds are to expand exploration drilling, speed up mine development at both mines, refurbish and expand circuits at the Guanacevi plant, and evaluate a possible Guanajuato plant expansion. This is much larger than the roughly CA$3 million raised at CA$1.30 in early 2009, and it adds new shares and warrants for existing holders to be diluted by (the dilution is an inference; the filing does not discuss it). The filing does not say whether the Canadian prospectus mentioned earlier in context was this offering.
What it means for a shareholder
6.2m new shares at C$3.00 to raise about C$18.5m. Shares on issue before the raise aren't in the record, so the dilution can't be worked out.
First drilling at the newly acquired Porvenir Cuatro property near Guanacevi found a new high-grade silver-gold zone. Best hole PC50-2 returned 713 gpt silver and 3.85 gpt gold over 5.67 m true width. The zone is open along strike and down dip, and a 5,200 m, 16-hole Phase II program has been approved and is underway. Porvenir Dos is stated to be in development for production in Q4 2009. This follows the June 2009 option acquisition of the property.
The Lucero vein at Guanajuato, found in September 2008, has been in production since March 2009 and now supplies about half of the ore at the mine, per the CEO. Mining drifts show averages of 270 gpt silver and 2.58 gpt gold over 2.8 m, and 238 gpt silver and 2.46 gpt gold over 2.1 m. The CEO says Guanajuato silver production and cash costs are beating the year's forecast. Management has committed to expanding the plant 20% to 600 tonnes per day this quarter at about $250,000, and is planning a possible 800 tonnes per day expansion next year. This follows the December 2008 plan for 500 tpd and the Lucero development start.
Endeavour took an option to buy the El Porvenir Cuatro and La Brisa properties (55.5 hectares), about 2.5 km northwest of the Porvenir mine at Guanacevi, extending its land along the Santa Cruz vein to 4.5 km. It paid US$100,000 and issued 136,054 shares at signing, and owes US$400,000 in shares within 24 months for 100% ownership. A Phase 1 drill program of at least 6 holes (1,500 m) starts this month. The ground has never been drilled.
Updated estimates to December 31, 2008 show proven and probable reserves of 7.8 million oz silver (9.6 million oz silver-equivalent), indicated resources of 19.5 million oz silver and inferred resources of 19.5 million oz silver. Total silver-equivalent reserves and resources are up 24% on a year earlier after replacing 2008 mining depletion. Reserves are lower than the 14.9 million oz reported a year ago, though that figure is not directly comparable because it used different assumptions. Lucero and San Jose at Guanajuato went from discovery to initial production in January 2009. San Pedro near Guanacevi has initial resources, and the Cometa zone at Parral was re-estimated. This delivers the updated Guanajuato and Guanacevi estimates expected after year-end.
