Thank you for standing by. This is the conference operator. And welcome to the Endeavour Silver Second Quarter 2022 Financial Results Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to, Galina Meleger, Vice President of Investor Relations. Please go ahead.

Good morning, everyone and welcome to today's call. Before we get started, I would ask that you 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 under our disclosure portal. You will have seen that there was a retransmission to today's news release that went through about 30 minutes ago. The amendment was with regards to a correct estimate for our 2022 all-in sustaining cost forecast of $20 to $21 per ounce net of the gold credit. This is the only change made to the news release. With us on today’s call we have Dan Dickson, Endeavour Silver’s CEO and Christine West, our CFO. On behalf of Endeavour Silver, I'd like to thank you again for joining our call today. And I'll now turn it over to our CEO, Dan for his formal remarks.

Thank you, Galina, and welcome everyone to this conference call for the second quarter of 2022. Before we discuss our Q2 results, I'd like to touch on current market conditions. While our operational performance has been strong, our stock price has been impacted by sell-off across equities in both the broader markets and in the precious metals. The gold miner equities have disconnected from the actual metal prices and have underperformed their underlying commodities. Year-to-date, the S&P is down 20%, gold and silver equities are down 30% and similarly our stock is trading down about 30%, despite our robust operational performance. We remain confident that the current environment is bullish for gold and silver, especially as we are nearing peak rate expectations in this hiking cycle and inflation remains persistent. Recently, we've seen positive movements in our space. We expect this trend to accelerate in the second half of this year with the potential for precious metals to make a strong rebound. So with that view on pricing, we have once again made a strategic decision to withhold the sale of a meaningful amount of metal. At the end of June, we were carrying approximately 1.6 million silver equivalent ounces in finished goods inventory with a market value of almost $35 million. Given that almost one full quarter's worth of metal remains in finished goods, our financial metrics were negatively impacted. Revenue decreased by 35%, earnings declined by 275%, and operating cash flow before working capital fell by 60%. With the benefit of having more than $115 million in cash on the balance sheet and no material debt, we have both the liquidity and flexibility to support the short-term sales strategy. However, we do expect to put cash back on the balance sheet by selling our finished goods inventory when…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Heiko Ihle with H.C. Wainright. Please go ahead.

Hi, everyone. This is Marcus Giannini calling in for Heiko. Thanks for taking my questions. Congrats on the good quarter with raising guidance. So, you guys speak about cost control in the release. Obviously, it's not easy to do in the current environment with a key focus of the firm right now and pretty much for everyone else in the industry as well. Out of curiosity, can you break down where you think you can bring out some efficiencies out of the business and maybe even quantify the savings category?

Yeah. It will be difficult Marcus to quantify some of the savings by category. Some of the things that we're looking at is mainly on our development side, with the amount of meshing and bolting we're doing. So we're seeing a high increase in our bolting and meshing costs, which is really the inflationary we're seeing in steel. We're kind of relooking at how we can better deploy that going forward. Obviously, the biggest thing for us is that, Guanaceví and it's really an economies of scale. You can see that our mining rate actually hasn't hit what our plan has been for the year. And ultimately, our processing tonnes also haven't hit as planned. For the year, we're slightly below on a tonnes per day, or on the lower end of our original guidance for tonnes per day through the plant. And that's a function of a couple of things that we did in the first half of the year. One changing out a cone crusher, other stuff has been maintenance on leach tanks. And a lot of that work has been done and the cone crusher is installed and I think that's going to allow us to get closer to 1,200 tonnes per day. As we get up to the 1,200 tonnes per day for Guanaceví, we're going to see our cost per tonne come down, and ultimately that will make its way through. And that's some of the efficiencies that we've been looking at for the second half of the year is ensuring that we're hitting our throughput tonnes to get the economies of scale in some of those inflationary things. Things like, diesel and power costs there is very little we can do. We're obviously accepting those costs as is it's just finding efficiencies and productivity throughout the operations. And I think, there's still a lot of opportunity at Guanaceví to be able to do that. Secondly, as prices have come down, our royalty costs at Guanaceví are going to come down as well. A big portion of our costs is the royalties that come from El Curso. Again, when silver was over $25 we paid a 16% royalty on it between $20 to $25 we paid 13%. And below $20 we paid 9%. So ultimately, we are getting some cost savings in the royalties with these lower prices that will help push down some of our costs going forward as well. But of course, we would prefer to have higher prices and paying higher royalties.

Okay. Perfect. Yeah. That was really helpful. And then lastly, congrats on Pitarrilla, would you be willing to venture a guess as to how much you've spent on the site since closing and an approximate estimate as to what you expect to see for the remainder of the year on a monthly basis? And then I guess, pushing a little bit further here. Any idea how to use combined funds breakdown into labor and claims fees, et cetera?

Yeah. I mean, you're not pushing too much. Claim fees and labor most of our costs that we're carrying there's 28 individuals that work – that we've acquired when we acquired the Pitarrilla project. On a monthly basis, our burn rate there is about $100,000 to $200,000 just with keeping the plant -- or sorry the camp, and those individuals employed and going through that. Since we've acquired it, which closed shortly after Q2 here, we haven't incurred all that much. I mean we're kind of mobilizing our exploration team to start a project. And at the beginning of the year, we've had a $1.8 million exploration budget for Pitarrilla. We think we are going to come close to that $1.8 million, in the six months, depending on how we can get mobilized. As far as the breakdown between labor and actual costs I would say, probably about $1.8 million. Labor costs can be somewhere between $500,000 to $700,000. Some of that would be on new exploration geologists contractors in there. But I don't know, if I need to give much more breakdown in those terms for Pitarrilla. We do have good plans. Like I said, we have to prove out the historic resource. That will take some time. And then ultimately, we have a couple of plans with regards to exploration. Once there's an exploration ramp it's about 1.1 kilometers in, it needs to work around. It's come through a fault that's collapsed. We'll have to work on that. And then there's targets from surface, that we're going to consider. And ultimately we'll get some of that work done here in the next four to five months, and then come up with a new plan for 2023 for Pitarrilla.

All right.

The carrying costs and sorry the last question, which is claims. The carrying costs on, claims is very small I'd say less than $200,000 for the year. That would have been all paid normally, that's paid in January and July.

Got it. Okay. Perfect. Thanks a lot. that’s it from me

Thanks for the questions, Marcus.

The next question is from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Hi, Dan and team. Thanks for taking my questions. Obviously, you had a strong first half on the back of higher grades. And you mentioned they'll moderate a bit Dan, in the second half, but still remains a little bit elevated. Are you able to quantify thi,s but I'm just trying to get a handle on what type of profile we might see in the second half?

Yes. I think we're just always concerned that, some of the grades that we're seeing come through Guanaceví have been higher than what our reserve grades are. We are continually seeing the grades in this area being higher. And you can even point to some of the drill results that we put out earlier this year, on an extension of El Curso, which had a significantly higher grades even that we've mined. And ultimately, we do think there'll be a reversion to what the reserves actually are and we want to be kind of protective to that. But still again, we expect that we're going to be higher than planned. I don't know -- I can't put a specific number on it, at this point. I think we averaged close to 450 grams per tonne of silver equivalents, in the last quarter and I think that would come down almost kind of 8% to 10%. So we're closer to the 400 grams silver equivalent per tonne.

Okay. That's, helpful. And then just looking at the disconnect, that you mentioned between precious metals equities and where prices are right now. Realizing that development is accelerating at Terronera, you just closed on Pitarrilla, do you think you'll continue to take an opportunistic stance from an M&A standpoint, or do you sort of feel that your plate is kind of full right now?

No. Yes, our plate is definitely full right now. But at the same time, we haven't put down the pens with regards to potential that's out there to build the company. Ultimately, I think being opportunistic is a good approach to take especially on M&A. And we do have a long-term view that silver prices are going to be higher than where they are now. And ultimately. we think that will persist for a long time. It's hard to find silver assets -- predominantly silver assets in the space. And I don't think it's prudent to kind of put pens down and not look at things. So, we continue to look at things. Of course as we grow, cash flow is going to become more meaningful and trying to find cash flow in operations would probably take a priority over development project just on you'd be able to use of funds. But at the same time we don't stop looking at those things because if there's value to be had, we want to be able to take advantage of that.

Got it. Okay, that’s all for me. Thanks again.

Thanks for the question Jake.

The next question is from Joseph Reagor with ROTH Capital Partners. Please go ahead.

Hey Dan and team. Thanks for taking my questions. I think -- most of the stuff I want to touch on was already touched on by the prior two people. But maybe a little bit more detail on cost inflation. How do you guys think about the impact of these cost inflation you're seeing when it comes to the Terronera project? Do you feel that the estimates you have out there publicly you're comfortable with? Do you expect that you'll have to change them? Do you take a proactive approach of doing a larger financing package? Like what are the puts and takes there?

Yes. Thanks Joe. I think that's a very fair question. It's something that we are very mindful of. I think the good news from our standpoint with Terronera is we've locked in a lot of lead items. So, our mobile equipment fleet with Sandvik I think 22 of 33 pieces of equipment have arrived and are on site. We've procured a number of plant equipment items that have locked in those prices. So, really it's going to come down to the inflation on the infrastructure. And we've looked at it. And it's not that we're uncomfortable with the $175 million that's in that feasibility study. But things have obviously changed over the past year with regards to inflation and I think that's going to come its way through. I think when we come out with a development decision for Terronera we're going to be able to come up with a new estimate from a capital standpoint taking into consideration what we've already purchased, which would be locked in and then inflationary costs that would be built into the project. Again I think we'll come out with that when we come out with a development decision. But there's definitely been inflation across the space and we're quite mindful of that. I want to make sure that when we go to build Terronera we have a budget that's actually reflective of what's happened out there and what we can purchase for and be able to guide the market appropriately.

Okay. Maybe a little bit further detail there. What percentage of the $175 million did you guys already lock in?

We've locked in almost. So, we've got a $41 million development budget, which includes equipment that we've already purchased. As far as the $175 million of what percentage is already locked in I don't have that in front of me, but I'm guessing it's more towards the 25%, 30% range.

Okay. Okay, fair enough. My figures enough in there. And then looking at Guanacevi, I think Jake tried to get up this too. Even with the guidance raise, it feels as though there's still some room to the upside there. If grades were even for silver at least 50 grams lower than they were even in Q1, you would easily get to the midpoint of guidance -- of the revised guidance there. And that's even at the low end of your tonnage guidance. So is it that you guys have some concerns with -- that the tonnage may end up being a little lighter than originally expected? I know you said you've been behind schedule, but is there some thought that you might not be able to catch up, or is the grade really going to fall that much? Like, how do I account for that?

Yes. No, I think, it's a fair question. And we don't expect our tonnage in the second half of the year to be lighter. In fact, we expect it to be better than the first half of the year, just because of the work that we've done in the plant and our expectations. One of the things that makes it difficult for us to guide is, how much a third-party ore comes to the plant. With the higher prices, more ore comes to the plant and we actually saw some of the highest grade ore delivered to the plant by third-party miners in the first half of the year. So that's one aspect of it that we have to be cautious of when we guide what grades are ultimately going forward. That can vary, like I say, just because of prices or we don't specifically have transparency into the minds of some of the third local miners of what grades they're going to have. And ultimately, they don't probably really know either. So it's -- we're taking a guesstimate there. And ultimately, as we move into down the El Curso ore body, we do have estimates done through reserves and we have to use that as a guide. Now, we have been seeing higher grades than those reserves, but we can't just go and change our reserve grades with the idea that it's going to improve, other than us putting out further data on it. And I think, we're being relatively cautious with our expectations of where grades are going to be in the second half of the year. But, yes, there's quite a possibility that we beat that middle of guidance for sure if grades continue to be elevated compared to what we had in our operating plan.

Okay. And then, on the third-party ore, just real quick. How many tonnes of third-party ore did you process in the first half?

In the first half, we did about 13% of our tonnes were in third-party ore. I think almost 15% in Q2 and 11% in Q1.

Okay. All right. Thanks. I’ll turn it over.

Thanks, Joseph. Very good questions. Thank you.

[Operator Instructions] The next question is from Justin Stevens with PI Financial. Please, go ahead.

Hey, guys. Yes. Congrats on a really solid start to the year here. I think I was going to start just by following on from Joe's question there. When you guys pay for third-party ore is that a percentage of metal content, or do you pay sort of a flat rate per tonne?

No, we pay at a percentage of metal content. So when it's delivered, we actually make a payment and it's about 60% to 66% just depending on what's in that ore of payment per tonne on metal content. So with the higher metal content coming in with higher prices, we pay more on a third-party ore basis and that shows up in our overall cost per tonne.

Got it. Yeah. That makes sense. I think the other, sort of, question I had was in terms of the El Curso, obviously, you guys are paying higher royalty rates for all the ore comes off that lease. Do you have a rough idea in terms of either tonnage or metal content in terms of the Guanaceví feed what is coming from the leased properties versus sort of the existing wholly-owned?

Yes. So we're required under our agreement with Frisco that over -- minimum 600 tonnes per day comes from El Curso. So ultimately almost half. I think we've been closer to 60% to 65% of our throughput related to the El Curso material rollout of first six months of the year.

Perfect. That's great. And, I guess, the only other question I had was, I know obviously you put out a couple of lines on Bruner Gold looking to twin some holes and sort of validate historical resource there. Any updates just on the time line or sort of how that's going?

Yes. We've got geologists on the ground. We actually don't have drills on the ground yet that was planned in the fourth quarter -- end of third quarter into the fourth quarter. With where prices are we could look to slow that down. But at this point in time, it's on schedule for like I say end of third quarter early fourth quarter.

That's for the drilling. And then by the time I guess you get results QA/QC and then actually look at the modeling it'd probably be into the next year then right?

Into next year or the end of Q4.

Got it. Great. All right. That’s it from me. Thank you so much.

Thanks, Justin. Good questions.

There seems to be no more questions. This concludes the question-and-answer session. I'd like to turn the conference back over to Dan Dickson, CEO for any closing remarks.

Thanks, operator and I want to thank everybody for attending today's call. I know it's the doldrums this summer. I think we put together a really good first half of the year with our operational performance and I expect second half of the year to be hopefully as good as the first half of the year. Of course, the main things that we're working on in this company is trying push an era forward and ultimately put a finance active together so we can announce development for us to continue to grow in the silver space, and keep pushing to what our goal is to become a senior silver producer. Thanks again for everybody attending and talking.

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