Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. Second Quarter 2024 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 question. [Operator Instructions] I would now like to turn the conference over to Allison Pettit, Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A precautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Our MD&A and financial statements are available on our website at edrsilver.com. On today's call, we have Dan Dickson, Endeavour Silver's CEO; Elizabeth Senez, our Chief Financial Officer; and Don Gray, Endeavour's COO. Following Dan's formal remarks, we will open the call for questions. And now over to Dan.

Thank you, Allison, and welcome, everyone. It's been a productive second quarter at Endeavour Silver as gold reached new all-time highs and with silver starting to follow the company's cash flow and financial position should continue to benefit from these higher prices. At Terronera, there was significant advance of the upper platform surface infrastructure and the overall project progress reached 65% at June 30. Terronera is on track for commissioning in Q4 2024, and we're excited for it to contribute to our production profile next year and become a cornerstone asset. Q2's silver equivalent production totaled 2.2 million ounces or 1.3 million ounces of silver and 10,500 ounces of gold. We are in great position to meet the upper range of our 2024 production guidance. Silver equivalent grades have been in line with expectations, with gold grades slightly higher and silver grades slightly lower. This is expected to be similar going forward, and therefore, we expect a similar production profile for the second half of the year. We reported top line revenue of $58 million, up 17% year-over-year due to higher metal prices compared to Q2 2023. Cost of sales totaled $48 million, up 28% from Q2 2023 due to the strength in Mexican peso contributing to higher labor, power and consumable costs and continued inflationary effects from 2023 that flowed into 2024. At Guanacevi, purchased material from local miners increased to 18% of throughput and accounted for $5 million of our cost of sales. In Q2 2023, purchased material was $1.5 million. With higher purchased metal prices, the availability and costs of the purchased material have both increased. There are a number of benefits of purchasing the local material and management expects the purchase of materials remain elevated for the foreseeable future. The higher prices also means higher royalty…

Thank you. [Operator Instructions] First question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Hey, Dan and team, thanks for taking my question.

No problem, Jake. Happy to take them.

So just starting with the finished goods build during the quarter. I'm just curious were ounces withheld for higher prices this quarter or is this just a function of timing?

Just the timing function. I believe our last shipments kind of went out about 28, we didn't sell anything in advance. And, obviously, because of where we are in the position of building Terronera we're not holding back sales and don't expect to hold back sales at this time.

Okay. That's helpful. And then just on foreign exchange. I'm just curious; do you think the peso has weakened to a level where you might start putting in broader company hedges in place? Or do you want to see a bit more weakness there?

I do think there's a little bit more weakness coming in the Mexican peso just based on policy of government, but it's always difficult to determine when that weakness will show up and how long it will persist for. At this time we have no plans to enter into any more FX hedges. We were required to enter into FX hedges under our build, under the debt facility and we are required to enter into when we go into operations some operational FX hedges but we haven't made a determination when we'll put that in place. Again I think we'll see some more weakness in the Mexican peso but we'll see.

Got it. Okay. That’s all for me. Thanks again.

Thanks for the questions, Jake.

The next question comes from Lucas Pipes with B. Riley. Please go ahead.

Thank you very much, operator. Good afternoon, everyone. My first question is kind of higher level on the operating environment in Mexico. Obviously there was an election. New administration has yet to take office. But I wondered if maybe with the election in the rearview mirror there's a bit more clarity as to the priorities from a regulatory standpoint on the incoming administration? Thank you very much.

Yeah. I mean, you're correct on June 2nd there is an election, the MORENA Party won and probably what was expected was even better than -- better results for them than what was originally expected, the new President, Claudia Sheinbaum. She is a successor to effectively AMLO and it will be interesting over the first couple of years in office how closely she follows the platform, which is expected to be relatively closely. She has privately and now kind of percolated out into the press, mining world, should be more pro-mining necessarily than AMLO, she is definitely more pro business. But the reforms that were put in place that have been lost through a bunch of [Indiscernible] we're still waiting on the Supreme Court decision. There's been some chatter that those will be repealed, but reput in front of the legislature in the fall. So there is still some uncertainty coming through the current government. How this changes we'll probably be able to see that better in the next six months, I think when it comes to Mexico there's been a lot of rhetoric coming out of AMLO. I think that's going to dissipate. But ultimately it's still one of the best jurisdictions in the world to operate from a mining standpoint. Again, I don't think some of the compliance requirements that are being put in or ultimately in those mining reforms will impact Endeavour significantly just because we have departments that can handle that. But again, until that comes through and actually gets properly approved or properly put through legislation, it's difficult to comment on it.

Really appreciate your perspective. That's helpful. You note the additional $45 million available at Terronera in the second half of 2024. And I wondered is there any specific project milestones attached to that release? And if so, if you could maybe comment and elaborate on those? Thank you.

No, there is no specific milestones required to it. The independent engineers represent the banks, they do the reports and they look at our monthly report and they go through that and we have the best estimations to do, but everything remains on track and we think that will be available over the next like I say six months.

Terrific. Dan, really appreciate your comments to you and the team. All the best. Best of luck.

Thanks for the questions, Lucas. Good to hear from you.

The next question comes from Craig Hutchison with TD Cowen. Please go ahead.

Hi, guys. Just wanted to know on the underground development rates. It looks like it did pick up nicely in the second quarter. In the past I think initially you had some underground to technical issues. But can you just probably comment in terms of how that's going? Are you tracking to plan ahead of time behind plans? Just any kind of sort of sense in terms of how the underground development work is going?

Yes. No it's a really good observation Craig. Ultimately we are tracking the plan now, initially with any outset when we started at it. And there's a little bit of a learning curve just understanding ground positions and water conditions. I think the ground conditions are we defined a bit better than expectations based on technical reports. Water and water management is really in line with expectations, if not a little bit less. So things have been going relatively well. We have good days, we have bad days but we're hitting our mark and expect to have the mine development complete, so we can kind of hit our tonnage expectations for 2025.

Okay. And just in terms of the overall progress 65% complete year-to-date. But can you give us some kind of sense of how you guys arrived at that number. I imagine it's a combination of dollars spent versus your budget and kind of the milestones. But just with sort of three or four months ahead of commissioning here I just want to get a sense to achieving the remaining 35-odd percent that's achievable really in the last three, four months stretch here

Yes and it's a very fair question. And just from a layman standpoint, if you look at we were at 53% at the end of the first quarter and now we are effectively 65%. It's obviously a delta of 12%. You apply that over the next two quarters that takes to 77% from 65% to 77% and to 90%. One of the items that's going to be not complete for well or commissioning but probably complete slightly after ultimately, will be our LNG and power generation plant. We had some delays of getting permits there. We are going to be on diesel generators for start of commissioning and possibly into commercial production. So ultimately, we're not tracking to 100% for commissioning. And as I say, there's some minor structures when that comes to mind as a maintenance shop that will be still being built while we're in commissioning. And our expectations is that it will still be lower in there. So thinking about as we're going to get to 100% complete prior to commissioning isn't the way to think about it it's probably more between 85% and 90% when we're there. And even as we go into commercial production, it's not necessarily that we'll be 100% complete either.

Okay. That's great. Maybe last question for me just with regards to the commissioning by year-end, do you anticipate producing sort of first concentrate at that point? Or is that more [indiscernible] early Q1 next year? Thanks.

Yes I mean that's getting into quite specifics. I think probably the other way I would hope to hear is that we expect to have some concentrate by the end of the year and that's kind of our expectation. Obviously, from commissioning to commercial production, it comes down to capacity and making sure, we're hitting our capacity numbers to declare commercial production but there'll be some tonnes produced during commissioning of course. It's just -- it's a matter of how much and exactly when that timing hits.

Great. Thanks, guys and good luck.

Thanks for the questions, Craig

Our next question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Hi Dan, this is Kay [ph] from H.C. Wainwright. Heiko's traveling right now and can't make it into the question line. Thank you for taking our questions.

Happy to.

So the Terronera drawdown of the remaining $45 million, would you be able to give us some insight to when you expect to take the remainder? I assume you -- at least some of it will be needed this quarter?

Hi, this is Elizabeth Senez. Yes, we do plan to draw down this quarter.

Any idea how much or is it just played by year?

Yes, we'll see how the spend goes, but the majority of the construction spend will be incurred this quarter that's remaining. So yes, that would be the expectation.

Okay. Thank you very much. Just second question last one Dan, maybe a little bit of a philosophic question, but you guys have completed a good part of Terronera as of today obviously. Would you be able to maybe give us some color on things that went better? Maybe some things that got worse during the construction process? Maybe any line items that made the team change anything related to construction in the middle of the process?

Yes. I mean that's a big question. I mean every day there's things that feel like they go better and there are days that things feel like they go worse. And I think our operational team and our construction team has done a phenomenal job of always kind of finding plan Bs if needed to or even plan Cs and looking at alternatives, because obviously nothing is linear and nothing goes exactly as planned. Nothing specifically comes to mind with regards to big changes. It's just timing of different things where we make adjustments either from a concrete standpoint. Obviously the footprint that Terronera is on is very small and it takes a lot of planning with regards to when we bring equipment up because ultimately, we have a laydown yard down in Port Varta and things typically don't laydown up at Terronera for longer than 48 hours. So we call it just in time building and some of that stuff, some of the great engineering that we've done, obviously timing, we got some releases down in the tailings facility, it was later expected to [indiscernible] some market a lot of work that has to be done geotechnical work. I think every day there's things that guys make decisions on that are slightly different than what plan is. I got to commend on Gray [ph] and his team and how well that's gone. I even think about the mine plan and different iterations of the mine plan how we could be more efficient on that. And come up with seven different distinct mine plans and that will continue to change because even as we get into the Terronera, we're getting into with our reserves for the 96 million ounces and plummet of reserves at the base which is where [indiscernible] target and that's about 20 meters thick. It's not that the ore body ends there. It's just that that's where our estimated based on our confidence with drilling. As we get into that we're going to hopefully drill out and we find more depth and that will change our mine plans again. So I think our team has done a phenomenal job being flexible and making adjustments on the run. But it all lines up. And again we're tracking for commissioning in the fourth quarter.

The next question comes from Trevor Ward [ph] private investor. Please go ahead.

Obviously pretty shocking [indiscernible]. I'm a bit of a gambler. So I got a lot of eggs in one basket with Endeavour. So when we see your stock has tumble like it is today I mean I'm down personally almost 32000 on paper in one day. Fortunately since we last spoke actually up overall since I got my position. But I'm just curious as a layman as somebody who's not well educated especially in the buying and selling of stocks I decided to get into silver. But I have bought and sold things over time. And so if I manufacture something like I make surfboards and things out there if I make you a surfboard and let's say for instance with all my costs it costs me $23. Obviously that's not relative but say it costs me $23 after all my costs. And then I sell it for $29. I would say that I made $6. So maybe you can explain to me in layman terms why you don't make the adjustments whereby it's easier for us to understand how you lose money if your overall costs are way less than what you sold before? Can you explain that to me laymen terms and where these other interest costs come why the losses have been so huge in this quarter? I mean the overall consensus for the market was that you would show a profit of $0.04. Whereas why you're showing a loss of $0.06. I mean it's pretty devastating to investors. And then you said you're curious why the market has reacted the way it has. I mean I understand the whole market is down today but maybe you can enlighten me a little bit more in layman's terms how it's computed into such a big loss. Answer

Yes. It's a very fair question Trevor. And I think part of it and one of the things in the mining space we talk about cash costs we've talked about all-in sustaining costs. Obviously cash cost is kind of on an operating basis all-in sustaining cost takes into account G&A which [indiscernible] costs exploration dollars that we spend to increase and extend mine life hopefully grow the mines. And then sustaining capital and sustaining capital obviously from an income stand income statement standpoint doesn't hit earnings. And we always try to have this one metric that solves or distinguishes the company and allows peer groups to kind of compare themselves relatively quickly. And I think as accounted by trade you need a balance sheet income statement and cash flow statement to fully understand what's actually happening with the company. And unfortunately there's in the IFRS world or the accounting principles world there's been a lot more noise that goes through the income statement now than there was before and makes it a lot more difficult for the layman's term to understand what's going through an income statement and ultimately our financial statements. In our case, for this quarter, we have a $9 million loss related to derivatives. And under our credit facility for Terronera, we're required to hedge 68,000 ounces of gold that we locked in at $2,325, I believe on March 28. Obviously, gold appreciated during the quarter, which is a great thing, great for the long-term benefit of Endeavour. But we do recognize a loss on those forward contract -- those contracts amounting to about $75 per ounce this quarter. That translates in the $7.5 million loss in derivatives, that's not impacting to our current operations and obviously, out of our hands. And as I say, long-term it's…

Okay. Yes. So what about in the future there? How many other derivatives -- not that I really understand what derivatives are. But going forward how much more of this are you still leverage for that? I mean how do we know that in the third quarter, the fourth quarter, you haven't got all these other derivatives that are stacking up further and of course, losses in future quarters?

Yes. And they'll be there. So, the 68,000 ounce gold contracts that we're going to sell are going to effectively roll out in 2025 and 2026. So those are going to be there. If gold price continues to appreciate and we're looking at gold at $2,800 I think you'd agree that's positive for the company long-term. Ultimately, if it goes down and then positive for the company long-term, but ultimately it's going to create losses going through our income statement until those roll out. If it goes the other way it's going to create gains to it. So they're going to be there. I would again from a layman standpoint they are non-cash items. It doesn't mean we're losing cash off our balance sheet. It means we're recognizing the decision that we've had to do through our credit facility that loss now for the future. Under IFRS we're required to do it from a mark-to-market standpoint and that's fine. Again it rolls out over the next two years. And so I can't promise that it won't be there.

Well, it helps. Okay. Thanks. All the best.

Thanks for the questions. Trevor.

Thanks, everyone.

[Operator Instructions] The next question comes from Henry Westenberg [ph] Private Investor. Please go ahead.

Good morning. Very interesting call. We're all very excited about Terronera. But could you give us a few words on this year's progress on Pitarilla. Is there anything moving there? Or you kind of get that in the bench until you get Terronera up and running?

Yes, it is moving and we've got a $5 million budget at Pitarrilla for 2024. We are starting to drill at Pitarrilla now. We have a one kilometer added at the beginning of the year we've extended that area. It's going to -- we expect it to go through some gains in a zone -- [indiscernible] zone in the back half of this year. So we'll have results and a plan put together for the marketplace hopefully by the end of this year. We are excited about it. Obviously it's one of the world's largest undeveloped silver deposits. It's got a resource defined close to 600 million ounces of silver plus one in Vic [ph]. We are looking at it from an underground standpoint. We are underground miners. I know Pitarrilla and a lot of people out in the market place understand Pitarrilla as an open-pit mine from a historical feasibility study that was done by Silver Standard or SSR Mining. Again, we're looking at it from an underground standpoint. It just started drilling to confirm some of the hypothesis that we have with regards to feeder structures and mantles. Again expect to have information out by the end of the year on that.

That’s terrific. Thank you.

Thanks for the question, Henry.

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

Thank you operator and thank you for everybody listening today. I think Q3 in the back half of the year is going to be an exciting time for Endeavour. We try to bring Terronera into commissioning and ultimately commercial production to significantly increase our production profile and ultimately cut our cost profile. So thank you again for listening and I hope to talk to you guys soon.

This brings to an end today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.