Endeavour Silver Is on the Verge of a Turnaround

Endeavour Silver [stock_market_widget type="inline" template="generic" color="default" assets="EDR.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] has seen a remarkable turnaround in its fortunes on the stock market in the past few months. Shares of the silver miner have jumped 21% in the last three months thanks to favourable silver pricing sentiment, though there is not much to like about the company’s operational profile.

In such a scenario, does it make sense to hold Endeavour Silver stock in your portfolio? Or will investors be better off putting their money somewhere else? Let’s take a look.

A Lot of Red Flags at Endeavour Silver Make It a Risky Bet

There’s a reason why Endeavour Silver was struggling to gain traction on the stock market in the early part of the year. The company’s production is in free-fall mode and that makes it incapable of taking advantage of high silver prices.

For instance, in the second quarter of fiscal 2019, Endeavour Silver produced 1,059,322 ounces of silver. This was a 22% decline over the prior-year quarter’s output. Endeavour put the blame for this massive drop in its silver production on a planned reduction at El Cubo, as well as weak throughput and lower grades at the Bolanitos mine.

However, Endeavour pointed out that it witnessed higher production at the Guanacevi mine, as well as the beginning of commercial production at the El Compas mine. The company also pointed out that it is taking steps to improve production and the overall operating performance of its mines. According to CEO Bradford Cooke:

After a challenging first quarter, we initiated multiple measures in the second quarter to improve the operating and financial performance at each mine.  As a result, we saw increases in mine and plant throughput, silver and gold grades and recoveries at El Compas and both grades and recoveries at Guanacevi. We expect tonnes and grades at Guanacevi and grades at El Compas to continue to rise towards plan in Q3.

Endeavour has also pointed out that its exploration program at the Parral project in Chihuahua, Mexico, has delivered positive results. The company recently reported that it has extracted channel samples from 462 underground veins at the mine. The grade of silver sampled from these channels came in at 346 grams per ton.

This is notable considering Endeavour’s consolidated silver grade in the second quarter of 2019 came in at 157 grams per ton. So the fact that the new project has the potential for a much more superior grade profile indicates that Endeavour’s output could improve in the long run at a lower cost base.

What Should Investors Do?

Endeavour Silver might have delivered weak operating results of late, but the company’s guidance for the remainder of the year shows that it is on track to get better. According to Endeavour, the company’s production in the second half of the year is anticipated to be better than the first half of the year.

What’s more, Endeavour forecasts a lower cost profile in the second half of 2019 as compared to the first half. As such, there’s a good chance that the company will be able to sustain its momentum on the stock market thanks to a potential improvement in the operational profile, giving investors a reason to continue holding the stock.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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