Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. Year-End 2021 Financial Results Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. I would now like to turn the conference over to Trish Moran, Interim Head of Investor Relations. Please go ahead.

Thank you, and good day, everyone. Before we get started, I ask that you please view our MD&A, the cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website edrsilver.com. With us on today's call is Dan Dickson, Endeavour Silver’s CEO; as well as Christine West, our Chief Financial Officer; Don Gray, Endeavour’s COO; Dale Mah, VP Corporate Development; and Luis Castro, our VP Exploration. Following Dan’s formal remarks, we will open up the call for questions. And now over to you, Dan.

Thank you, Trish, and welcome, everyone. 2021 was a good year for Endeavour Silver both financially and operationally. Guanacevi and Bolañitos each performed well and the performance offset the impact of suspending the operations at our El Compas midyear. In 2021, on a consolidated basis, we produced 8.3 million ounces of silver equivalents, a 27% increase over the prior year. This put us above the top end of our guidance, which we revised upwards in October. Last year's strong performance was driven primarily by 2 factors: first, increases in the volume of ore processed, ore throughput and recoveries; and secondly, more importantly, a higher average realized silver grade. Revenue rose by 20%, marking a 5-year best bolstered by volume and price growth. Most importantly, this higher revenue translated into increased profit and cash flow with earnings per share of $0.08 and more than $32 million in operating cash flow before changes in working capital. Our cost per ounce metrics were higher than our previous year and above guidance. All-in sustaining costs and cash costs were higher than guidance by 1% and 3%, respectively. Industry-wide inflation has been and continues to be challenged. In 2021, it impacted everything from labor to power to consumables across our operations. Additionally, Guanacevi saw higher expenses associated with third-party ore purchases and operating development. Additionally, royalties were higher, we triggered a special mining tax due to Guanacevi significant production to higher silver prices and profitability. Our financial performance led to a strong balance sheet at year-end. We had cash of $103 million and no long-term debt aside from normal course leases. The total working capital of $121 million, including unsold bullion inventory held at a cost of over $15 million, this bullion had a market value of about $31 million at December 31. With the…

[Operator Instructions]. The first question comes from Joseph Reagor with ROTH Capital Partners.

So big picture question that's been being asked on a lot of these calls is just how are you guys handicapping the impact of supply chain inflation? Like are you guys doing anything proactively to prevent any impact on that? And then kind of a second question to that. What inflation rate do you guys assume on costs across the board for this year compared to last?

Yes. Thanks for the question, Joseph. I mean the two-pronged for 2022 in our budgets, we had 6% to 9% inflation just depending on what the -- whether it was labor or whether it was direct cost input. We had seen power costs increase significantly last year towards the end of the year, and that was all included in our budgeted information. So it ranges depending on what widgets going into the product. Like I say, labor was 6% to 8%, power costs were up almost 28%. And ultimately, we saw that in our 2021 cost as well. So some of that's been dealt with and dealt with in our budgets. But of course, the actual probably quite different than what we've actually estimated into our budgets, and we'll see how that plays out. On a bigger picture, what we're expecting from inflation, I think it's going to continue, and we get a lot of questions on inflation with regards to our capital expenditures and ultimately, Terronera. I think we've done a good job with Terronera with the fact that we've procured some long lead items, most notably our mobile fleet. Some of it's already on site. We have more coming in March. And we ordered that stuff midyear and kind of start moving to make sure that we could get some of these prices locked in. But nonetheless, we're not going to be able to lock in everything. So steel with regards to the plant. It's going to be there. We do have contingencies built into our feasibility study as we work through that. We'll update the market toward we think prices will end up. I think we've done a really good job of trying to keep this moving forward to try to keep the costs in line to where our expectations will be, which is along the lines of the feasibility study. So we'll do our best. I mean of course, inflation is prevalent through all the industry, not just to us. And I think that is going to continue through 2022.

Okay. Kind of a follow-up to that and specifically with like Terronera. Would you guys consider delaying the start of construction if -- I think a lot of people believe some of the supply chain inflation is temporary. Do you guys think about that as like maybe it's in the best interest of the long-term value of the project to kick the can until the inflation pulls back a touch.

Yes. I mean, of course, you consider that. But in our instance, how imperative and transformational Terronera is going to be to us, we aren't going to delay it. We're trying to push it through. And ultimately, the fact that it's going to double our production and cut our cost profile in half, it will completely change kind of our profile as a company. Terronera right now in our feasibility studies got a 12-year mine life. But ultimately, we expect it to be there 20, 25 years. And I know kind of trying to time markets or try to time inflation. At the end of the day, if inflation is up 10% in 2022, slightly still up 2020 -- it's not we're not going to see deflation in 2023 or 2024. So we're going to keep pushing it forward, and it's critical to our company.

Okay. And then 1 final thing, if I could. What percentage of the overall cost structure at your mines is fuel, diesel?

Yes. It's underground vein mine, so it's less than 7%. I mean, it fluctuates somewhere between 6% and 9% on any given year depending on where fuel prices are. So Joseph with an open pit, diesel is a huge cost to us. Our second highest cost after labor is actually power costs through the Electricidad, the CFE in Mexico. So as far as diesel, like I say, it's 6% to 9%, so not a big proportion compared to open pits.

The next question comes from Lucas Pipes with B. Riley Securities.

This is actually Matt Key here asking a question for Lucas. My question is around the long-term grade expectations at Guanacevi. Obviously, really strong implied grade guidance for fiscal year 2022. But I was kind of wondering how we should be thinking about grades longer term. Is it possible that we get back to kind of 2018, 2019 levels in the near term or is that kind of past us at this point?

At this point, it's past us. So we put out guidance just for the following year, which right now, it's 2022. And the grades will be similar in 2022 is what we have in 2021. And if you look past that, it's really looking at our reserves and resources, which are in our AIF, the grades should continue that in 2023, 2024. But at this point in time, we're not there yet. We have had a significant discovery with El Curso. It continues to grow, and that's where some of those significant grades are coming from. So as prices can also get higher, which is our expectation this year and next year, you could see that grade come down because your cutoffs change in the mine as well. But right now, what we see in 2022 is similar as what we did this past year.

Got it. That's really helpful. And just last 1 from me. I was wondering if you could kind of help frame up what you're seeing as the most promising long-term exploration projects once we get past Terronera here in the next couple of years. And if you could also maybe kind of provide a potential time line on how you see that next big growth projects on the horizon kind of development.

Yes. I mean you're asking me to kind of pick against the kids that I have. But right now, we have 2 great growth pipeline assets behind Terronera. You got Parral, which is smaller that we're continuing to have exploration success there. And at the end of 2019, we had 40 million ounces defined plus lead and zinc. And ultimately, we've said to the market that we have to grow that to 60 million, 65 million ounces where we think it'd be enough of a scale to have an operation that's of significance to Endeavour and has significant scale to be cost-effective and economically viable. . In 2020, we didn't drill it because of COVID. In 2021, we started to drill it, and we have very good results that we put out earlier this year. We're going to continue to drill Parral 2022. And then halfway through the year, hopefully, we have a sufficient resource base that will put a preliminary economic assessment on that. Again, we need a certain scale for it to work, but we think we can get to there. The other asset with Pitarrilla is obviously potentially a Tier 1 asset. I mean, it's one of the world's largest undeveloped silver bodies, and we're excited, extremely excited about it. Obviously, we had a conference call now a couple of months ago when we acquired it from SSR Mining. We'll close that transaction here in Q2 and then build out that current resource. As far as time line between Pitarrilla and Parral, and it depends on prices in the future. And ultimately, we expect a 2-year build process for Terronera. And hopefully, one of those comes in right behind that 2-year build process. At Pitarrilla, we're going to redefine that resource. So right now, it's considered a historic resource done by silver standard. We're going to make that a current resource by doing the work ourselves and issuing a technical report, hopefully, by the end of this year. And then we'll do an economic study on Pitarrilla for 2023. So Pitarrilla, Parral, ultimately, you're looking at something in 2024, 2025 when you get into construction. But I think it's one of the leading sector growth profiles that you can see in our space.

The next question comes from Mark Reichman with Noble Capital Markets.

So the first question is just really on the Terronera financing. I know you were looking to put an $80 million to $100 million debt facility in place. I was just wondering whether that is still kind of the plan and how those negotiations are going? And if you think you'll have those wrapped up by the end of the second quarter, given that 24-month construction period.

Yes. You're exactly right. We are looking for debt to $80 million to $100 million. We have $100 million of cash and $120 million of working capital on our books. It went a little slower here in Q4 and in Q1 because of the coronavirus that impacted technical due diligence by the banks. But we're through all that stuff. It's always going a little bit slower than expected. But our hope is to have a commitment from the banks by the end of this quarter.

And then the second question is, your plate is pretty full at this point with a good pipeline of projects. But would you still entertain any smaller producing acquisitions and what does the landscape look like out there right now for M&A, I guess, in light of the higher prices?

Yes. I mean we have a corporate development group. Dale is on the call here with our management team today, and we're always looking whether it's a growth asset, whether it's a greenfield exploration asset for twofolds. One, we think we can always improve our asset base. And if there is an asset we can get at the right price, we'd absolutely entertain putting it into our portfolio, especially if it provides cash flow. The landscape, it's ever changing. I think in the world that we live in now, it changes faster than it ever has before. And there's a couple of deals that we've seen over the past year. There's a scarcity in the silver market. Ultimately, we're trying to maintain to be a primary silver producer to maintain our revenue mix above that 51% threshold, which not a lot of our peers have done. So we're interested in primary silver assets and trying to find them difficult and trying to find ones that are profitable are difficult, trying to find one that are cost effective and what we pay for it is also difficult. But nonetheless, we always look. And if there's something that makes sense, we'll pull trigger on it.

Okay. And I think you've already kind of touched on this earlier on the Parral project that you already have the indicated and inferred resources there of [435 million], you're looking to kind of get to 60 million to 65 million. As it stands today, without any more additional drilling, what do you think you could end up with? I mean do you feel like at this point, you're pretty close to target, and so the updated report that you'll be putting out that there's pretty high confidence that you'll be meeting that threshold?

Yes. The 60 million to 65 million, been doing a PA, that's our plan, and we've budgeted PA for the end of the year. Now of course, drilling has to continue and has positive results, but we expect that. And I think if you look at our 2021 drill results, they are more favorable than what we released in 2016 to 2018 on Parral. And like I said, I expect that to continue, and if it does continue, we should hit that mark.

[Operator Instructions]. The next question comes from John Tumazos with John Tumazos Very Independent Research.

I was noticing that your tonnes processed through the year, mined and milled rose 17%. And the cost per tonne also rose 17%. Usually, the gain in volume helps to reduce the rate of increase in unit cost. Was there something special going on with the mine that was idled or a downtime or a special maintenance.

No, John. In our case, you're correct. Our processed tonnes were slightly up, and -- but ultimately, our cost per tonne and operating cost per tonne were up as well. And like I said earlier in the call, it's a function of inflation. And we saw it hit a little bit of everywhere, most notably in power costs. From August to December, our power costs on a monthly basis went up about 30%. And we saw labor cost increase last year and pressure on our professional labor, geologists and engineers. Ultimately, it's something that's prevalent right now through the industry that we are seeing cost pressures and we're trying our best to maintain as well as cost per tonne as best we can. And I think we had a very positive result and the fact that the grades out of Guanacevi are significantly higher. We also saw royalty costs increase last year because of the increased profitability. And ultimately, we paid a 16% royalty at our El Curso mine, which we leased from Frisco a couple of years ago. So like I say, of course, we'd like to keep our costs down as best we can. We're trying to manage it where we can, but we are seeing inflation and global supply constraints impact us.

If I can ask another. I was very excited for you when you bought the Bruner Project for $10 million cash. The predecessor company had permitted the project and represented that it was partly built. I don't know if they spent $25 million on it or $50 million on it. And initially, your disclosures were very succinct. I just assumed that you weren't talking much about it because you got such a good deal. Could you elaborate now that you've had possession of it for 6 months and is a thing that could be producing 40,000 ounces in a couple of years.

We like the Bruner Project. We were opportunistic. We love the price that we got it for. I mean for those that aren't familiar, it's got a historic resource of 300,000 ounces of gold, 13 million ounces of silver. It did have a historic PEA on it that had a NAV value of about 80 million, kind of contemplated 35,000 to 40,000 tonne or 35,000 to 40,000 gold ounce operation. There is nothing that's partly built on it. It is a greenfield exploration project. So there is no infrastructure substance. So I'm not sure exactly what the predecessors had said in the past, but I can assure you, it is a greenfield exploration project. We are advancing it this year. We'll turn that current -- or the historical resource into current resource. There are a lot of targets at Bruner that we're excited about, and we are excited about it. Like I say, a very opportunistic deal for us. The predecessor got into some debt trouble, and we were lucky enough to be able to acquire it for only $10 million. There's a lot of work left to be done there. We would like to acquire some more land and exploration potential around it. But nonetheless, we'll have more results from that at the end of this year.

So with this rank, fourth in your queue, after Pitarrilla, Parral, Terronera or would El Cubo will be ahead of it? Or sort of where does it rank in your pecking order of projects?

At this point, it probably ranks behind Parral and Pitarrilla just because where those have been advanced to. But ultimately, the work has got to be done. So we'll let the drill bit tell us where it ranks at the end of 2022.

This concludes the question-and-answer session. I would like to turn the conference back over to Dan Dickson for any closing remarks.

Well, thanks, operator, and thanks to everyone listening to our 2021 earnings call. I think 2022 is going to be a good year. Obviously, we see prices elevated, I hope things in Europe get a little bit more stable because ultimately, we want to -- hopefully, there will be a resolution there in the coming months. But we'll continue to do what we're doing, again, trying to advance our development project with Terronera and hopefully come to a construction decision on this shortly. And then ultimately, continue to advance Parral and Pitarrilla where we think we have one of the leading growth profiles in the sector. So thanks, everyone, attending, and I'm sure we'll talk again soon in the next coming months.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.