Endeavour Silver Corp. Aktie

Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver First Quarter 2026 financial results conference call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Allison Pettit, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A for 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 at edrsilver.com.

On today's call, we have Dan Dickson, Endeavour Silver's CEO; Elizabeth Senez, our CFO; and Luis Castro, 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. Endeavour Silver delivered excellent results in the first quarter of 2026, setting new records in both production and revenue. The strong performance generated significant cash flow, underscoring the company's remarkable growth trajectory. With the Kolpa plant expansion substantially complete and Terronera's operations performing near design expectations, we are entering an exciting phase for the company, and we look forward to building on this momentum as we progress throughout the year.

In Q1, Endeavour produced nearly 2 million ounces of silver and 12,000 ounces of gold with base metals, totaling 3 million silver equivalent ounces. This represents a 78% increase compared to Q1 2025 with the additions of Kolpa and Terronera. We reported revenue of $210 million, an increase of 230% compared to prior year with cost of sales of $116 million, mine operating earnings of $94 million, and mine operating cash flow of $115 million before taxes, a 400% increase from Q1 2025.

Our all-in sustaining costs net of byproduct credits were $37 this quarter. This represents a 51% increase compared to Q1 2025 wherein Kolpa and Terronera had not yet joined Endeavour's production portfolio. It's also worth noting that these costs were 9% lower than Q4 2025 primarily due to the ramp-up of operations at Terronera with gained efficiencies throughout the quarter, and we anticipate further reductions in these costs as we continue to optimize operations throughout the year and capital expenditures become normalized.

In Q1, Endeavour recognized adjusted net earnings of $59 million or an adjusted earnings per share of $0.21. Both direct operating cost per tonne and direct costs per tonne were elevated this quarter. To clarify how we define these costs, our direct operating cost per tonne include direct input costs associated with mining, milling and site-level G&A. Our definition of direct costs per tonne includes royalties, mining duties and purchase of third-party material. Changes in the metal prices have a meaningful impact on our direct cost per tonne. For an example, a $1 increase in silver, cost per tonne rise by about $0.90 at Terronera, Guanacevi $3.80 and $0.50 at Kolpa. Obviously, due to the higher royalties, the mining duties, third purchase costs and fairly required profit sharing.

Our direct operating cost per tonne rose by 30% in Q1 compared to Q1 last year as a result of the inclusion of Kolpa and Terronera into our portfolio. Both assets carried higher operating costs in Q1 than what is expected going forward. During the first quarter, Kolpa installed and commissioned a new three-stage crusher in ball mill, increasing plant capacity to above 2,500 tonnes per day. There remains additional plant expansion expenditures. However, these will dissipate as we move through 2026, and we expect to see benefits on cost metrics starting this quarter. In Peru, we've experienced pressures on attracting and retaining skilled labor, impacting labor costs, training costs and overall efficiencies. We expect this to continue, but the additional costs will be offset by the efficiencies of an updated and expanded operation.

At Terronera, we're in the infancy of operations. In Q1, we made a significant transition from a construction and start-up team to an operations team, adjusting and reducing personnel. Mine and plant metrics have steadily improved through continuous measurement, review and adjustments. As the operation settles into consistent day-to-day rhythm, cost efficiencies are expected. As onetime capital investments are completed in the first half of the year, we expect operating cost metrics to decrease with higher ore grades expected in the second half. We also expect significant improvements on a cost per ounce basis. Exploration drilling has restarted at Terronera, and we expect to provide an update later this quarter. I should note, we have not transitioned our power generation to the LNG plant, but expect to before the end of this quarter. We have the necessary authorizations and plan to commission the LNG vaporization plant this month.

At Guanacevi, cash flows were north of $20 million this quarter. The mine incurred higher operating cost per tonne, largely due to lower throughput with minor increases in our absolute costs. As an operation, the royalties, purchased ore mining duties and profit share is a significant part of that cost structure, and thus, we saw increases. Step-out drilling has commenced, and also, we expect to provide results later this quarter. As of March 31, our cash position was over $232 million. Working capital was north of $173 million, which gives us a strong and stable foundation to drive our ongoing initiatives. We remain committed to advancing progress at Pitarrilla, where studies -- where steady investment in exploration, studies and economic evaluation continues to move forward with the expectation to provide economic evaluation in the third quarter.

In closing, our strong financial footing and successful expansion of the Kolpa plant and the steady improvements at Terronera put Endeavour in an excellent position to meet our production targets this year. These achievements reflect our unwavering focus on operational excellence and our ongoing dedication to delivering long-term value for our shareholders. I would like to thank everyone for their continued support and engagement.

And with that, I'm happy to open up to questions. Operator, let's proceed to the Q&A session.

[Operator Instructions] The first question comes from Heiko Ihle with H.C. Wainwright.

This is Case Bongirne filing in for Heiko. He's on a flight right now. First question, the great step up at Terronera. Next week, we'll be halfway through the second quarter. Any views of what you've seen with grades at site during this period so far?

Yes. We have Q1 and Q2 grades a little bit similar. Q2, we expect to be slightly higher than Q1. Ultimately, the real step-up in grade is the back half of Q3 into Q4.

Okay. Great. And second question, maybe a bit of a philosophical one. The Terronera approaches nameplate capacity. Could you maybe talk about what you saw and learned during the ramp-up phase that maybe will be useful as you move other assets into production? And I guess, as a sweetener to that anything you expect to add to the Pitarrilla feasibility study that you may not have expected a year ago?

Yes. I mean, how much time do you have of things that we learned during the Terronera build-out phase. I mean I think as an organization, it's our first build from scratch, and there's a lot of learning. And I think we can apply a lot of that. And in fact, in Q4 into Q1, we did a postmortem or post review of construction of things that we can improve. So we can take that over to Pitarrilla. Obviously, continuity is a very important part. And this year, Don Gray retired, and we replaced Don with Luis Castro, who's been with the company for 21 years. But there are a lot of people that remain in the company that were involved with the construction of Terronera. If we can move Pitarrilla along in accordance with what we think is our time line sometime in 2027, starting that construction, we can benefit from it. From processes and protocols and procedures that would be put in place at Terronera, I think those will be stronger going forward. And just a lot better position as a company to take on a second build, so to speak. And so we're well positioned. The biggest part of that is really understanding all the permits and permits that are required. I mean, as we went through, we originally got our MIA at Terronera about 2015, 2016, Pitarrilla already has its MIA. There are some other permits that are required around MIA specifically around the tailings storage facility, and we're going through that process to try to obtain that by Q1 of next year. But behind all that, there's about 100 -- other 30-some-odd permit that you learn to go through and how to navigate that through the government. And I think we have the ability to do that a lot quicker than what we did at Terronera. So we're excited about what we gained from a knowledge standpoint at Terronera, and we think we can apply it up to Pitarrilla. And then for your second part of that question. At this point, there's nothing new that's surprising at Pitarrilla. There's a lot of work that was done. SSR invested $145 million. They've done a pre-feasibility study on underground operation in '09. They did a lot of work on an open-pit operation in the feasibility study that was 2012. I mean we've been looking at this now for 3 years. And so there hasn't been anything, I'd say, in the last 6 months to 8 months that have jumped out that's been surprising to us. We have a good indication of what the plant is going to look like, and what the capacity of the mine is, and that will come out in due course when we put out effectively the feasibility study or 43-101 feasibility study later this year.

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

Congratulations on all the increased production and bringing cash and all the good things. Some other companies in Mexico have had bumps in the road, one company had their plane shot down a month ago. Another company has a very tragic incident in January. You've got at least four locations where you're operating, is there any particular secret to your operational success and good security results? I get some parts in Mexico are so much better than others.

Yes. But I think that's the specifics to it all is there are parts in Mexico that are more secure than others. And I mean it's not to say that we haven't had our issues. In February, there was a code red in the State of Jalisco, when one of the captains of the cartel was killed. And that on the Sunday following, they put blockades into 22 different states. And Puerto Vallarta or the State of Jalisco and around Puerto Vallarta was significantly impacted with blockades of the highways. Now I don't think there is a lot of -- there is some unfortunate incidents with citizens. But generally, citizens weren't targeted. It was just the target to the government to show power, I guess, of that cartel. And for us, it impacted our supply chains, and we shut down operations for three days to make sure that if we had any safety incidents, we could get to a hospital. So like I say, it's not to say that we have not been impacted. But I'd say, generally, our areas that we operate haven't had significant violence, but we're -- we've got a team in place, a security team in place that provides us intelligence, and we make various decisions based on what's happening in Mexico and what's happening in various states. So again, we've been at Guanacevi for 20 years and very low impact to all that. We actually sold our Bolanitos operation in January. So we're no longer in Guanajuato. And then in Jalisco, like I say, we're an hour in Puerto Vallarta, which is considered a very safe area other than that 2-day event. And there's about 3 million Americans and Canadians that visit that area on an annualized basis, and we're very happy to operate there, but we keep our eyes open and ears to the ground and just trying to understand what's all happening.

Are there any variations in cost between your locations due to logistical costs where you maybe avoid a bad neighborhood or anything like that?

Yes. Nothing that would be significant. I can recall back in '08 or '09, we made sure we didn't drive by a certain town, which added about 35, 45 minutes of driving time up to Guanacevi, which was about 4 hours away. But ultimately, the costs associated with our security between Terronera and between Guanacevi and ultimately also now at Kolpa, are very similar. I mean a lot of the same procedures and protocols are in place. So from a significant standpoint, I would say no.

And I apologize for even asking these questions, but...

No, those were fair questions.

We got to thank investors' minds.

Yes. No, it's a very fair question. We get them often in our meetings with investors. So happy to answer them.

The next question comes from Soundarya Iyer with B. Riley.

Congratulations on the quarter. I was on another call, so I don't know if this question has been answered. But -- so on Guanacevi, I mean the grades have come pretty low year-over-year. So -- and like third-party material purchase have also increased almost 1/3. At what point does this ore economics change and start to dilute margins that we stop purchasing third-party ore, or we continue doing that?

Yes. I mean, with the higher prices, obviously, allows us to go after lower grade material. And the great thing is we mined Guanacevi now for 20 years, and there's areas of the old parts in the mines, North Porvenir, and what we call Santa Cruz, South and Central Porvenir that would have material left behind that would have been running 225-, maybe even 250-gram silver equivalent material that you can go back and mine. And as prices go up, your cutoff grades come down. Some of the grades that we're pulling right now, we had 275 grams more from the depth of El Curso, which is on the Frisco ground. We pay significant royalty there, too. As we move through the year, we're going to be going into an area called Malache, which is 100% controlled by us. We've got an area near Porvenir Dos, which we mined up in 2015. We've been working in there. Some of that's on Frisco's ground, some of it's on ours. Obviously, as a management team, we continually look at grades and cutoff grades and ultimately, margins. And as provided that Guanacevi is going to still continue to be profitable. And as I say, we did north of $20 million of free cash flow there this quarter. We're going to continue to operate it. So right now, we don't have a huge reserve base. We know we can get into 2027 and maybe into '28, probably extend that. We're going through that work. We started some drilling in various areas. We start to go back into other areas and build out our resources, and we'll have a plan in place for the end of the year of how long -- much longer we'll be at Guanacevi. And I suspect we can get there for quite a while, especially at these prices.

Got it. That's really clear. And just one more on Pitarrilla FS. So is it still on -- I mean, is it still targeted before 3Q 2026, I mean given that the spend -- $1.8 million spend in 1Q was pretty low. So how do we...

Yes. We've made a lot of commitments. Our spend is a little lower in Q1 than we expected, but we've started to push that work. We would be probably a handful of weeks behind, not a significant amount. We're still hoping Q3 of 2026. Maybe it ends up being more of the back half of Q3 rather than the front half of Q3, but we'll see how all that progresses over the next couple of months.

The next question comes from Craig Stanley with Raymond James.

I think you indicated you expect grades to pick up a bit at Terronera in the second half of this year. Is that -- are you going to be mining La Luz?

Yes, Craig, good question. We're actually drilling La Luz right now. As you probably know, it's about 150,000 to 250,000 tonnes in our mine plan -- in our feasibility mine plan. So right now, we're actually drilling a little bit to depth, so we can come up with a more efficient mine plan just because of the scale and trying to figure that out. So we took the rigs out. We were drilling Terronera this past quarter, and those rigs are going back to La Luz now that we have assays, and that will drill La Luz probably until midyear and then start building a mine plan for that. So I suspect because of how things are going in Terronera that La Luz will get pushed to Q1 or Q2 of next year. But again, we'll have drill results out before this quarter is out at Terronera and maybe some La Luz as well.

Okay. And then when you think on Pitarrilla, you're sort of hoping to get the final permits in the first half of next year and then start construction later in 2027?

Yes. Ultimately, we have a very good idea because of what Pitarrilla is and the resources that's there and the underground sulfide resources that we'd be mining it from an underground standpoint, I don't necessarily think the economic evaluation is going to be that far off than what we've historically known. But really, the gating item is the permit to build the tailings storage facility, which is going to be a dry stack facility. We've been going back and forth with the authorities on that, hoping we can get through it relatively quickly. Now at the beginning of the year, we thought maybe Q1 2027, we could get that permit. Things have seemed to be still sticky when it comes to permits in Mexico. We've heard a lot of our peers expecting permits in Q1, and that never came to fruition, then it was going to be early Q2, and we're almost halfway through Q2. So I'm getting a bit nervous on time lines when it comes to permits, just because it still have -- we haven't seen a real floodgates open, so to speak. But that's what we were targeting. And if we could start building in next year, that would be great. Now we are still continuing forward with our construction camp this year. So we have ultimately a plan of 800 beds. I don't -- I think we're putting in maybe a little bit less than that to start like 250 to 300 beds, and we're still making our movements to purchase mobile equipment and plant equipment, so we can do the basic and detailed engineering properly when it comes to the plant. So we're still pushing ahead, but the real kicker for a construction decision is that tailings and permit.

Okay. And then just the last thing for me. When you're out talking to institutional investors, does M&A come up more in regards to Endeavour Silver being a potential target? And because when you look at the silver space, you have a lot of these companies with much larger market caps like Pan American, Coeur, Hecla, First Majestic and then it sort of drops off, and you're sort of in this sort of middle stage before you get that into sort of the real smaller producers. Just curious like Terronera has now ramped up, is that something that's in discussion, again, more with clients.

Yes. I mean, with the investors, people always ask, like how do we want to grow? And we say we want to be a senior silver producer. And yes, Terronera has ramped up hitting criteria through the plant. I think once those grades really start coming through, and we get our costs down to expectations, I think there's a lot more value in our shares there. We want to build that value in our shares. Ultimately, we're a pretty young management team. I think we're pretty still hungry to grow and find things, never say never. But it's such a small space. There's only a handful of people that can actually look at us, and there's only a handful of things that we can look at. So we have a pretty good corporate development guy. Some days, he works hard. He's sitting right in front of me. So we are always looking at things and trying to figure out the right combination for Endeavour.

We have a follow-up question from Soundarya Iyer with B. Riley.

Sorry for another question. Just curious on the capital...

No problems at all.

Curious on the capital allocation part. You had $200 million -- $250 million in cash. And then this has been a record operating cash flow. Is it -- how are you thinking about like some dividend buybacks, not this year, maybe, but in the future?

Yes, I think it's very clear -- yes, that's a fair question. I mean, for us, we're still on a growth trajectory. We're really excited about what we have at Pitarrilla. I think the market is going to understand that when a feasibility study comes out in Q3. The expectations, the cost to build is going to be somewhere between $500 million and $600 million. If we keep generating cash at this rate, we'll have a good chunk of that built into our balance sheet by the end of the year and then obviously, cash flows into 2027. Until Pitarrilla is built and operating and providing its cash flow is probably the time we'd start looking at dividends or share buybacks. But at this point in time, our -- we feel like the rate of return that we can get out of Pitarrilla will be very valuable for our shareholders, and that's what the cash that we're generating is going to be used for.

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.

Well, thank you, operator, and thanks for all our listeners today. I think Q1 was a good quarter for Endeavour, but we still have more expectations going back to the year. As you say, Terronera's grade should pick up in the second half of the year. Kolpa will be operating close to 2,500 tonnes per day, and we'll get more rhythm at Guanacevi, Terronera and Kolpa that ultimately, we expect a very strong next 3 quarters and specifically the second half of the year. So we're excited with what we have. We're excited where we're going and look forward to getting the feasibility study out on Pitarrilla in the second half of the year as well. So thanks for joining today.

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

Thank you, for standing by. This is the conference operator. Welcome to the Endeavour Silver Fourth Quarter and Year-end 2025 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Allison Pettit, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A for 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 at edrsilver.com.

On today's call, we have Dan Dickson, Endeavour Silver's CEO; Elizabeth Senez, our CFO, 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. Before reviewing our 2025 results, I'd like to provide a brief update on Terronera. Operations were temporarily impacted by recent security events in Mexico and Jalisco's Code Red mandate, which requires civilians to shelter in place. To comply with the mandate, the uncertainty surrounding the event and to ensure the safety of our people, we paused Terronera's operations Sunday evening. Operations resumed Wednesday, February 25, once supply routes were confirmed to be secure. We will continue to monitor developments closely and the safety of our employees and contractors remain our top priority.

With that, I'd like to briefly touch on the current silver and gold market. Over the past year, we've seen exceptional gains in renewed investor interest in precious metals, driven by inflationary pressures, global economic uncertainty and ongoing political tensions. Silver and gold continue to be viewed as a safe haven assets with silver also benefiting from rising industrial demand especially in the green energy and technology spaces.

This momentum has continued into 2026 as gold trades well above $5,000 and silver is elevated above $90, reflecting ongoing confidence and reinforcing the importance of our strategic initiatives and our commitment to delivering value for our shareholders. We are extremely well positioned to benefit from the current silver prices and believe there is substantial runway remaining in this cycle.

Moving over to the specifics of the company. 2025 was a transformational year for Endeavour Silver. We took a major step forward with the acquisition of Kolpa in May, Terronera achieving commercial production in October and agreed to the sale of the Bolanitos Mine, which closed in January.

In December, we raised $350 million through convertible debt offering, strengthen our balance sheet and positioning ourselves to advance the Pitarrilla development asset. These milestones lay a solid foundation for performance and sustained growth as we look ahead to the future and position ourselves as a stronger company within the industry.

In 2025, Endeavour produced 11 million ounces of silver equivalent metal, including base metal production from Kolpa making a 48% increase compared to 2024. In Q4, Endeavour produced 2 million ounces of silver and 14,000 ounces of gold, totaling just shy of 4 million silver equivalent ounces. This represents a 146% increase compared to Q4 of 2025 due to the addition of Kolpa, Terronera and the higher grades at Bolanitos. Excluding Kolpa and Terronera, this was a 27% increase compared to the same period last year.

In 2025, the company reported record revenue of $468 million up 115% compared to 2024 with cost of sales of $385 million, mine operating earnings of $83 million and mine operating cash flow before taxes of $156 million. Mine operating cash flow before working capital changes rose by 116%, while cash costs increased to $19 per ounce of payable silver primarily driven by the substantial changes in our production profile.

In Q4, Endeavour recognized adjusted net earnings of $4.8 million or an adjusted earnings of $0.02 per share. Due to realized losses from derivative contracts and higher financing costs in relation to the early repayment of the debt facility. Direct operating costs per ton increased by 8% this year, primarily driven by elevated costs at Terronera during its initial quarter of production. Looking ahead, we anticipate a substantial reduction in these costs as we transition from diesel to liquefied natural gas in Q2 of 2026, complete the demobilization of our construction team, benefit from workforce and logistics optimization plans implemented in January and maintain a throughput at 2,000 tonnes per day through 2026.

Kolpa will also see an improved cost efficiency as its plant expands 2,500 tonnes per day here in Q1. For clarity, our direct operating cost per ton include direct input costs associated with mining, milling and site level G&A. Our definition of direct cost per ton includes royalties, mining duties and the purchase of third-party material. Changes in the metal prices have a meaningful impact on our direct cost per ton. For example, for every dollar increase in silver, our cost per ton rise by about $0.90 of Terronera, $0.50 at Kolpa and $3.80 per ton at Guanacevi, mainly due to the higher royalties, duties and third-party purchase costs.

All-in sustaining costs net of byproduct credits were elevated this quarter with higher royalties duties, third-party ore purchases, elevated corporate G&A and the addition of Terronera. Terronera incurred higher costs due to higher sustaining capital expenses during the first quarter of operations.

Terronera's all-in sustaining costs includes capital expenditures of $16.3 million for the quarter which worked out to approximately $48 all-in sustaining cost per ounce. And this includes onetime investments related to new mining operations. These costs are expected to decrease as we move through 2026. The elevated corporate G&A was impacted by the divestiture of Bolanitos, the appreciation of deferred share units and the integration of all our new operations.

As of December 31, 2025, the company's cash position stood at $215 million, providing us with the financial strength and flexibility to advance our strategic initiatives. This robust foundation allows us to remain nimble and responsive to new opportunities while staying focused on driving progress at Pitarrilla, where we continue to invest in exploration, technical studies and the economic evaluation. As we move through 2026, our attention remains focused on several operational investment priorities across our main operations and projects, each serving as a catalyst for our continued success and growth in 2026. At Terronera, our primary focus is disciplined execution as we transition into higher grade zones in the second half of the year. We are seeing gradual improvements towards designed operating parameters, including nameplate throughput, recoveries and mine output. Grades are aligning with plan and operations are beginning to establish a consistent rhythm rather than the volatility of a typical ramp-up. As we eliminate ramp-up or start-up costs, we expect direct cost per ton to improve through the year.

Secondly, at Kolpa, we are actively advancing our expansion initiative, increasing capacity from 2,000 tonnes per day to 2,500. We anticipate achieving this milestone in the coming weeks, which will enhance our throughput and support our growth objective. Additionally, we remain focused on delivering a resource estimate later this year. At Pitarrilla, the company's next major development project and one of the world's largest undeveloped silver deposits, our commitment remains very strong with a planned $68 million investment in 2026. This includes the completion of an NI 43-101 feasibility study targeted for completion in Q3 2026, along with early works such as commencement of the construction camp, continued ramp advancement through the manto and procurement of long lead equipment to support the basic and detailed engineering. We are positioning the project to have a well-informed construction decision in early 2027, supporting our strategic strategy of significant organic growth. 2025 marked a defining chapter in our story. As we continue on this exciting path, I want to extend our gratitude to our valued shareholders and stakeholders for your confidence and partnership. We remain committed to creating lasting value, driving operational excellence and building a premier senior silver company. Thank you for your continued support and engagement.

And with that, I'm happy to open this to questions. Operator, please proceed to our Q&A session.

[Operator Instructions] The first question comes from Wayne Lam with TD Securities.

I'm just wondering, just on the updates operations like Terronera. Can you discuss the mill availability and what happened with the electrical interruptions? If I recall, you guys also had an electrical issue in late September, which kind of resulted in the delay to commercial production. So just wondering exactly what's going on there? And have you seen an improvement on those issues? Have those been resolved in the first 2 months of this year?

Yes. Thanks for the question, Wayne. I mean the quick answer is yes, we have seen a lot of improvement in January and February. We've done very well from a throughput standpoint. As you recall, back in September, we had resistors that we had to replace early October, and it took 6, 7 days for those to come in as they are onetime items. And we had a lot of electrical disruptions just because we're on diesel gen sets.

We were at max power and we had to make some adjustments in Q4 to that, and we're getting lots of starts and stops. So losing maybe 1 hour or 2 hours on various days that really impacted. Starting and stopping impacts recoveries, obviously impacts throughput. We've seen that kind of stabilize late December and obviously through January and February. The most important part to those temporary diesel gen sets is we have received our permits to operate our LNG plant. So we are allowed to vaporize our liquefied natural gas into natural gas and ultimately electricity. We are completing that connection point here in Q1. The provider of the liquefied natural gas has obtained their permit to transport, and they're waiting on a storage permit on site that we're going to look at here over the next or we expect to receive over the next couple of weeks.

So our expectation is that we'll be on our LNG plant in Q2. Obviously, it does a significant thing for our stability of electrical continuity, but also from a cost standpoint. Going from diesel gen sets into the LNG plant takes us from $0.33 per megawatt hour to $0.17, almost $8 a ton at this point. So we're excited to get on that for a number of reasons. Obviously, reliability and cost being the first -- the main two.

Okay. Great. And then maybe just on the grade profile at Terronera. You guys had previously guided the 122 grams per tonne silver and 2.5 grams per tonne gold through the first 6 months of operation. But the guidance for this year implies that you'll average 120 grams per tonne through the entirety of 2026. I know you guys had talked about some mining of the lower-grade stock works driving that. But -- just wondering if you might have any guidance on grades in terms of a split in H1 versus the prior 122 grams per tonne and where we should think about that with the higher grades you're projecting into H2? And then just are the lower grades entirely being driven by that lowering of the cutoff? Or is there some attribution as well to greater dilution or lower reconciliation versus the block model?

Yes. I think the first couple of questions. block model reconciliation has been relatively strong, better as we move forward, and we've got deeper into the mine plan. We do have lower silver grades and ultimately gold grades because of some of that stock work. But right now, that software isn't a significant amount. And as we're -- as you know, in the back half of the year, we get into the main shoot of Terronera, and that's the goal. That's where our highest grade points are, and that's where our biggest splits are. As far as the breakdown between H1 and H2, I don't have that rate in front of me, but it is a gradual increase of Q1, Q2, Q3 to Q4. Each quarter gets better as we bring more and more of that shoot in -- for those that are listening, we made the decision about almost a year ago now, maybe 9 months ago, that we would go into a lower grade part of the ore body as we start with initial production.

Obviously, because we didn't want to end up having ounces of silver and gold into our tailings dam, ultimately as we go through kind of your regular start-up issues and building up our recovery. So this was by design, Wayne. Again, it's lining up relatively well to plan. We're slightly lower because we are taking that stockwork. It's very difficult to speak to that stockwork. and the impact overall. But as we go through the year, we'll bring more and more into the plan and more of the high-grade stuff and hopefully go back to that stockwork later on.

Okay. And maybe just as a follow-up to that, the mine plan in the early years of operation is in the realm of 230 to, let's call it, 280 grams per tonne silver, like when would we expect that type of material to be mined and processed through the mill. Is that more of a '27 thing?

Exactly, 2027.

Okay. Okay, good. Maybe just last one for me. Just on the guided capital spend this year. There's been quite a bit of spend budgeted at Terronera, particularly towards additional mine development, which is driving your higher ASIC. Just wondering if that reflects a catch-up on development that was anticipated to have been completed through the initial construction period. And if that drops off substantially as we progress through the year. Or would you see your development meter still as relatively behind where you'd like to be through the early stages of the operation?

Yes. We're a little bit behind, but not relatively behind. You'll see that in our guidance that we put out in January, we had a $56 million capital budget for Terronera. And then similarly, I think we spent almost $17 million in Q4 at Terronera, which we define as sustaining capital. Obviously, moving from commercial production into -- from construction into commercial production, we have had some capital programs slosh into Q4 and ultimately Q1, Q2. As we move forward through Terronera, we expect that to come down.

There are onetime activities that are included in this CapEx. For example, as we already talked about, the LNG plant and the completion of that. We're waiting on a CONAGUA permit for waste dump 2 that's going to reduce our trucking capacity, and we would have some development around waste dump 2. We expect that. We have a backfill plant that we're currently leasing we're going to buy that. So there's a number of onetime items in our sustaining CapEx that you could argue is related to the actual build of Terronera. Obviously, we're taking that through sustaining CapEx. We don't want to play with numbers and start calling certain things growth or sustaining. So at this point, it is what it is, but do you expect that to come down as we move through 2026 and ultimately 2027, we expect to be at a regular sustaining CapEx break.

The next question comes from Heiko Ihle with HC Wainwright.

So Terronera commercial production, obviously, was October 1. So we'll be in March 1st here in the very near future. So it's 5 months later, you want to just maybe provide the audience here with a little bit of color on how things went since then, maybe things that went better if things that went worse? Any sort of bottlenecks in supply chains or at site or just things that came a little bit different from your expectations, again, not necessarily just worse. But also, I assume some things went substantially better than you thought.

Do you mean over the course of the construction period or just over operations in the last 5 months, Heiko?

Operations over the last 5 months.

Yes. I mean, to be honest, I mean, it's our first time doing an initial build. Our first mine that we brought into commercial production. Obviously, there's things have gone extremely well, things that we wish could be better. I mean I think that's normal through a ramp-up phase that is 2 steps forward, 1 step back. It's through all of our past experiences and Don's experiences. There's things that we felt like we can improve on maybe from an initial start-up and ramp-up, better knowledge almost of going to the initial plan. Everybody has different ideas and it's sticking to the original plan. And then from that, starting with the variables are trying different reagents at different times, putting various options through it. Because of the terrain around Terronera, the topography at all, it's very mountainous, we don't have a lot of flexibility with laydown yards.

So we only have about 80,000 tons, even less than that right now, a stockpile that sits near the plant. So what comes out of the mine kind of gets fed right into the plant. So we're continually learning about the ore body trying to find what's best from a recovery standpoint. But again, January, February, we've seen very good throughput up until Sunday night. We obviously shut down for a couple of days. But again, going forward, we expect that to be very good and it's the gradual ramp-up of recoveries. We've been running lower silver grades, as Wayne kind of pointed out, and those will improve through we go the year, and we expect recoveries to improve with that. I think our team has been phenomenal at finding flexible ideas using plans B and C to get to where we need to get to. But now we want to get into the rhythm and kind of be steady state and get into normal course operations. We look forward to that.

Fair enough. And then just like, I guess, a little bit more touchy-feely, as silver is at $94 right now. I mean assuming silver prices stay here or maybe even go up a little bit more, is there an impact a quantifiable impact of where you mine across your asset base? And what you internally are envisioning a mining costs like direct costs for labor and [indiscernible] activity across your asset base?

It's a very broad question of with $94 first off, it's a phenomenal environment, and we expect cash flow to be very significant. There's a big impact to us at Guanacevi because we pay a significant royalty at Guanacevi 16% to Minera Frisco that owns the main concessions of that. Further with there, we toll ore, I think in Q4, we did close to 20% of our throughput was toll ore. That's going to continue. Obviously, there's a lot of family run operations. The government built in 1981, that Guanacevi plant, and we're required to take up to 10%. And quite frankly, it extends the life of our mine. We get good margins on some of that tolled ore. It's just expensive to buy.

And then flip side of that, Special Mining Duty, which is an EBITDA tax, and that's included in our cost per ton in our direct cost per ton. So with higher prices, and we kind of put this in our guidance news release, it's going to drive our direct cost per ton. Again, for our audience, we have a direct operating cost per ton, which is mining, milling and our indirect costs and then our direct costs include royalties, duties and purchased ore. Those last 3 items go up with higher prices. It's great. We still have great margins, but it means rising cost per ton. We get a lot of questions of wire costs rising.

For the cost that we can control, we've been through our negotiations with our unions out of Mexico, and our general increase is about 6%, which is a bit higher than our budgeted number of 5%. It was all included in guidance. Of course, we're going to start seeing pressure on our inputs. I think that's just natural at these prices. It's our job as management to work through that. That's all included in our guidance numbers. I think it's imperative at Kolpa and Terronera, we have a lot smaller royalties there, so it's easier to contain those costs. But of course, as we evaluate projects going forward, we're looking at these higher prices and what's the impact long term on costs. I don't know if that fully answers your question, Heiko. But again, in our guidance news release, we kind of touch on that in depth a it.

Yes. Yes. No, you did. You got exactly where I wanted to go with this.

Next question comes from Soundarya Iyer with B.Riley.

Congratulations on the quarter. My question is more on this derivative hedge. I mean, there is a good amount of detail in the MD&A. But could you help me understand the remaining notional exposure and the cash settlement cadence over the next 12 months? And how -- what about the risk management strategy in order to manage this strength in precious metals?

I'm happy to talk about that. I mean, it's an important part right now on our balance sheet that we -- under the project loan facility that we borrowed to build the Terronera mine. We borrowed $135 million from 2 lenders. When we went into that facility agreement back in 2022, we were required to hedge 68,000 ounces of gold, and we locked that gold price and in March of 2024 at $2,325.

Today or at December 31, we had about 50,000 ounces of that gold hedge remaining. That gold hedge is going to unwind through 2026 and into 2027. I think we're through it in Q2 of 2027. Ultimately, on our balance sheet, you can see that we do a mark-to-market adjustment that holds that difference, that liability sits on our balance sheet. We recognize that loss on that derivative liability through the income statement in the year. So a very significant amount, and we try to adjust it for adjusted earnings purposes. Again, we, as a company, have a policy that we would not like to hedge our silver, we have a small hedge in place from a collar again from that project loan facility. But we have a policy to try to remain unhedged. And of course, from a silver standpoint, if you're make an investment in the silver company, you believe silver price likely going higher. We want to give that upside, and we feel like there's a lot of upside there in silver.

So we hedged the gold, which was a byproduct. And again, we're through that mid-2027.

Just one more on this Mexican peso appreciation, which was again a headwind on the cost this year, right? Any hedging or risk management strategy to cover that for 2026? And is there any sensitivity at what exchange rate does this currency that impact meaningfully margins or costs?

Soundarya, this is Elizabeth. I'll take that question on the foreign exchange. So as you see, we do have some Mexican peso hedges in place. And I believe at the end of 2025, they were around 19 pesos to the dollar remaining. We don't have very many left. And with lower prices, we haven't put many on recently. It's hard to hedge at 17 pesos to the U.S. dollar. But we are taking opportunities to hedge where it is appropriate for the Mexican peso. One of the advantages with adding Kolpa to our portfolio is that we have reduced our percentage exposure to the peso as well. And the sol -- the Peruvian sol is more steady for us. So we do have that diversification as well.

The next question comes from Cosmos Chiu with CIBC.

Maybe my first question is -- sorry, also on Terronera. But just I'm trying to kind of quantify it. Terronera costs were fairly high in Q4, $50, $65, $70 an ounce. And Dan, you talked about onetime costs, LNG plants and stuff. But in 2026, you're guiding to 28% to 29%. And so I'm just trying to understand how it can drop in 2026. Is it going to be more back-end weighted? You're going to have some quarters that might be over $29, some quarters below $29 an ounce or -- because if you have another [ quarter of $65 ], it'd be hard to average out to $28 to $29 for the full year.

Well, the good news is $65 was in Q4 of 2025. Our guidance is only for 2026. We don't expect Q1 to be as elevated as it was in Q4. We've got some severance costs of moving off from various construction people in January, but we do expect that cost to decrease over the year. So Q1 will be higher than Q2. Q2 will be higher than Q3. Q3 and Q4, we have higher grades coming in.

So on a per ounce basis, that cost per ton or that cost per ounce can improve, the cost per ton won't become as drastic. I would point out that Q4 has the onetime expenditures of $16 million, not necessarily onetime CapEx expense of $16 million, $17 million in Q4. That includes onetime initial CapEx that flowed into Q4. We have that in Q1. We'll have less of that in Q2. Q3, Q4, we should get pretty flattened out sustaining CapEx. That is going to be the biggest driver of our cost per ounce increase at all-in sustaining costs.

Similarly, our cost per ton as we get more rhythm at site, we expect that to come in a move from LNG plant to the -- temporary diesel gen sets to the LNG plant that's cost improvement. So there's a number of things that are going to come through cost that are going to come through the year. So we've been saying out to the market and to analysts, look, Q1 is our first quarter of production. It's not indicative of what the future is going to hold at Terronera. And again, we expect Q1 to be better. We expect Q2 to be better than Q1, and I think that's going to come through.

Great. And maybe broader scale, can we talk a bit about Mexico, Jalisco, certainly some volatility in the area. Has it resulted or necessitated any change in security protocols on site of Terronera? Has it necessitate any kind of changes to systems in place to make sure that it's kind of in response to the situation. And then on top of that, can you talk about supplies on site, consumables on site? Have you stocked up in light of what's happening in terms of fuel, in terms of consumables, in terms of spare parts, how should we look at it?

No, it was a very fair question [indiscernible] what we saw this past week. Obviously, unexpected, I think that was something we've never experienced in Mexico. Our biggest concern, obviously, first and foremost, is for our people and with Jalisco going to Code Red, shutting down Sunday night. The major thing about coming back from an operations is the supply lines out of Puerto Vallarta up to site. So we're about an hour and [ 15 ] 1.5 hours drive from Puerto Vallarata to site. Because of the topography of Terronera, we don't have a lot of storage space. We have about 1 week supply of food for the camp, 2 to 3 days supply of water. We had delivery of water on Monday that helped. Obviously, we're very concerned about diesel and transporting that.

Going forward, I don't suspect we'll change our security around the Terronera mine. It will continue as in. We have to look at our protocols on shipments. So shipments coming up, shipments coming out, our concentrate shipments. We already have security protocols around all the shipments going out. Some of the shipments coming up. I think we'll just have to look at that, maybe beef it up a little bit. We don't expect a dramatic increase in security costs at this time. Of course, we have to monitor what this impact will have across the region if there becomes instability with all these groups in Mexico. As of right now, we don't have a huge change, just an increase of presence around our transportation lines.

Great. And then maybe one last question, more of an accounting question. With Bolanitos, the sale closing in Q1, is there any kind of accounting nuances or impact that we should be aware of for Q1? Is there going to be some type of onetime gain or loss? And then can you talk about Mexican taxes as well? My understanding is that Mexico cash taxes are higher in the second -- in the first half or even in Q1. Is that what's happening here? And with the Terronera construction costs, the CapEx, does that help you offset some of those Mexican taxes?

Yes. Hold on, can we just clarify your second question about Bolanitos taxes? You said something around timing at end of the year.

Yes, overall, just more Guanacevi, sorry. So I guess, number one, Bolanitos, the deal is closing or closed in Q1. Is there any accounting sort of nuances or entries or impact that we should be aware of? Just, you know, overall Mexico taxes, how we should look at it in terms of quarterly. Sorry, Elizabeth.

Yes, this is Elizabeth -- I'll take that question. Yes, the Bolanitos sale closed January 15. And we will be recognizing that during our Q1 financials, obviously. And we are anticipating, as you saw, we sold it for approximately $50 million. For accounting, there's different adjustments to that, depending on the value of the shares that we acquired as a result. And then we were carrying it for around $25 million at the end of the year. So we are anticipating an accounting gain on that in Q1. And that math can be done using our year-end financial statements.

Your question about Mexico taxes. Guanacevi is paying Mexico taxes and pays installments regularly on those Mexico income profit taxes there. Terronera, as you commented, does have construction costs, which are recognized as tax losses. And as it starts to make taxable profits, those losses will offset those taxable profits during 2026. And then depending on how the silver price goes, drives how quickly those losses will be utilized, and then when we will start paying income taxes in cash in Mexico for Terronera.

Great. So there's no big true up in Mexico, Mexican cash taxes in the first half of 2026, where I see that somewhere else in other companies, but I guess not here.

No. On our sale of Bolanitos, we have historical losses that are designed or we can use that we won't have to pay a tax on our Bolanitos debt.

AT this point, that's our anticipation, yes.

The next question comes from Alex Terentiew with National Bank.

I guess I was a bit slow with my fingers, a lot of questions already asked. But nonetheless, one question still for me here on Kolpa. So can you just clarify for me then. As it comes to that mine with permitting and getting 2,500 tons per day, are you waiting for additional permits? Because I thought 2,500 tons per day is kind of the ultimate expansion rate that you want to get at. But based on your commentary guidance, it sounds like you're going to get there a lot sooner. So I just want to make sure I'm clear on the expectations there.

Yes. We are getting there a lot sooner. I think it's a testament to the team that we acquired when we bought Kolpa. They're very confident people. In December, they received the construction permit to build out the Kolpa plant, which is really a expansion, the crushing facility, new crusher, ball mill to go to 2,500 tons per day, then there's some additional flot cells that need to be done. It, of course, expanding the mine underground. They received that construction permit. They're almost through that. We expect to be testing the ball mill relatively shortly, so let's say March. In our guidance, we did have 2,400 tons per day throughput for the average for the year. We've been running just over 2,300 tons per day over the last couple weeks.

There has been a lot of rain in that area, and we've battling how much rain there's been here in Q1, so it slowed us down a little bit from a production standpoint. The construction standpoint, like I say, we've been very impressed with how it's gone. From the construction standpoint, we can operate it, but we do have to get an operating permit, which generally comes a month to two months, maybe three months after the construction phase is done. But we are allowed to test that circuit and go through that. Again, hopefully in Q2, we're approaching 2,500 tons per day.

The underground mine will be running around 2,300 tons per day. As we've talked about before, with the underground mine, it's opening up more faces, more employees, staff.

You're not going to get a lot of economies of scale from the underground portion of it. The additional tons for the first half of the year will come from a lower grade pit that's within the area, and we'll try to fill that with some contractor ore as well. So we are ahead upon the above ground surface. There's still some work to be done underground, but we are in very good shape right now.

Okay. Great to hear. And then just one last question on Pitarrilla. A lot is happening there this year. Can you remind any of permitting time lines or kind of what you're doing to advance that this year? And what news we maybe could expect whether later this year or early next year on the permitting for that project?

Yes. I'll give a quick overview, and I might pass it over to Donald Gray, our COO. I mean, obviously, we're spending $68 million at Pitarrilla. We really believe in the project. We like everything we've seen, thus far. What makes Pitarrilla kind of special is the volumes that you can get out in such a tight space. There's a manto that's got 7 million to 8 million tonnes of what would be ore once that feasibility study is complete and then 3 feeder structures that come up and through it. And we've been working on a mine plan, and that mine plan is going to dictate the scale of the plant.

Now the plant has already been permitted. Underground mining has already been permitted. We're waiting on a tailings storage facility permit. It's going to be a dry stack tailings. We've been working on the site. We've been working on the engineering. We've been going back and forth with the state level SEMARNAT on how to submit this and how to submit it most efficiently. I think right now, our projection is that we're aiming for Q1 2027 permit to receive that tailings storage facility permit. But beyond that, there's additional permitting that's required, such as CFP for power but that's something that we can work through during our construction timeline, as we did with Terronera. Of course, we will need temporary power source during the construction. It's a question of when we can bring on power sources at the end of that. Don, I don't know if we want to get in too much more detail of it, but there's a lot of permits that we've gone after. We've spent the past 12 months working on that permit to make sure we're getting ahead of where we effectively were when we started building Terronera. Don, do you have any color you want to add?

Just that I think the permitting schedule really lines up well with the, with the project work that we need to do to finish the feasibility, get into the basic engineering, get the, like we mentioned in the press release, the long lead items or the major pieces of equipment on order so we can do the detail engineering and then head into construction. I think what you'll see is really -- the engineering will be quite advanced by the time we go into construction, and we'll have a good idea on where the costs are and that kind of thing.

I think the main gating item is [indiscernible] from a construction standpoint is that last permit. So we'll be in very good shape. We feel when we can get that permit.

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.

Well, thank you, operator, and thanks, everyone, for attending our Q4 financial earnings call. Again, 2026 will be a big year for Endeavour. We're excited with what we can do with Terronera and getting that operation into a steady-state full rhythm by midyear. What Kolpa is going to do for us and ultimately advancing Pitarrilla to take us to where we need to go, and that's, again, our goal is to become a premier senior silver producer. Thanks a lot, and have a good day.

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

Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Allison Pettitt, Vice President 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 for 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 at edrsilver.com.

On today's call, we have Dan Dickson, Endeavour Silver's Chief Executive Officer; Elizabeth Senez, our Chief Financial Officer; and Don Gray, Endeavour's Chief Operating Officer. Following Dan's formal remarks, we will open the call for questions. And now over to Dan.

Thank you, Allison, and welcome, everyone. Q3 has been a transformational quarter at Endeavour Silver. With Terronera now in commercial production and Kolpa's first full quarter under production. Our production profile, we have significantly expanded our operational capabilities and strengthened our position in the market.

This progress sets the stage for continued growth and improved performance as we move forward. In Q3, Endeavour produced 1.8 million ounces of silver, 7,300 ounces of gold, totaling approximately 3 million silver equivalent ounces. This does not include Terronera and represents an 88% increase compared to Q3 2024, primarily due to the addition of the Kolpa mine and full quarter production from Guanacevi.

We reported revenue of $111 million, an increase of 109% compared to the prior year, benefiting from the higher precious metal prices and increased production profile. Mine operating cash flow before working capital changes rose by 102%, while cash costs increased to $18 of payable silver ounce. The increase is driven by the impact of higher royalties, higher profit participation and higher cost of third-party mineralized material during the quarter, coupled with lower grades processed at Guanacevi and Bolañitos.

All-in sustaining costs increased from the same quarter in 2024 to $30.53 per ounce, net of byproduct credits due to a number of factors, including elevated exploration at Kolpa to validate historical resources, initial capital investment to upgrade facilities and an increase in treatment and refining charges.

All-in sustaining costs include $2.3 million of mark-to-market charge in the quarter for deferred share units granted in previous periods within G&A. Mine operating earnings increased to $15.6 million from $12.5 million in Q3 2024 due to the higher operating earnings out of Bolañitos and Guanacevi as well as $3.9 million in operating earnings from Kolpa, offset by Terronera's mine operating loss of $3.6 million during the commissioning period.

The company reported a net loss of $37.5 million for the period after a loss on derivative contracts of $39 million.

As previously reported, the company entered into 4 gold sales as part of the project loan facility in March 2024 when gold was trading at $2,325. As of September 30, the company's cash position was $57 million. And on October 16, the company announced that Terronera was officially reached commercial production following a successful commissioning phase.

During commissioning, the operation performed at an average of 90% of its design capacity of 2,000 tonnes per day while also achieving at least 90% of its projected metal recoveries. This achievement not only underscores a transformational milestone for the company, but also represents a pivotal moment in our corporate strategy, further strengthening our position as a leading mid-tier silver producer.

The company forecasts throughput of approximately 350,000 tonnes over the next 6 months, with average grades estimated to be about 120 grams per tonne silver and 2.5 grams per tonne gold. This higher grade zones are scheduled to be accessed in mid-2026. During this period, the operating team will be working to refine and optimize the operating processes, incrementally improving throughput, recoveries and our operating processes and efficiencies.

In January of 2026, the company will issue annualized 2026 production and cost guidance for Terronera with our consolidated guidance. Since completing the Minera Kolpa acquisition on May 1, the integration of the asset and the team has progressed smoothly. On September 25, the company announced positive drill results from its ongoing exploration program at Kolpa, demonstrating outstanding potential. The exploration program is designed to target potential while also completing work to validate historical resource estimates.

Part of the acquisition agreement includes $12 million of exploration spend to validate the historical resources over 24 months. In Q3, we incurred $1.5 million, which is included for infill and step-out drilling. In Q3 2025, Kolpa produced 1.3 million silver equivalent ounces, including its base metals, continuing to remain on track to align with Kolpa's historical performance benchmarks of 5 million silver equivalent ounces.

Grades were marginally lower than expected. However, throughput was slightly higher, resulting in slightly higher cash cost per ounce than the historical site trend and management's expectations. Additionally, investments are being made to modernize some parts of the plant and surrounding infrastructure to support a potential increase in production.

The mine received permits to increase throughput to 2,500 tonnes per day, and the team is executing improvements in the mill and the mine to support an expansion.

Management expects to complete its evaluation of an expanded operation late this quarter. Lastly, before we open the call to questions, we continue to advance Pitarrilla and are excited for the next chapter as we move this project forward, focusing on the upgrading the inferred resources to indicate while engineers are working on various studies to support a tailings dam permit and a feasibility study to be published mid-2026. With that, operator, I'd like to open up to questions.

[Operator Instructions] The first question comes from Heiko Ihle with H.C. Wainwright.

I mean you hinted at some of this a bit earlier on the call, but maybe walk us through what you've been seeing with Kolpa versus expectations. And I know you can just talk about grades and costs, the obvious ones, but also like labor relations, equipment uptime, work you've seen with the communities, other unexpected impact actual versus anticipated 12 months ago, either better or worse than pre-acquisition.

Yes, there's a lot in there. I mean, obviously, the key drivers for a lot of our cost profile, it comes down to throughput. Our throughput was above 2,000 tonnes per day. Obviously, it's designed to be 2,000 tonnes per day and grades were just slightly lower.

I mean, obviously, we're seeing a higher price environment, and there's always opportunities to go into some lower grade areas. And I think we, as management, have to be very mindful that we're balancing that to extend mine life versus cash flow today. Obviously, when we took control as of May 1, we have some standards that we want to keep as a company with regards to what our assets and our facilities are, and we started some of those programs. And then a big chunk is that we're spending on exploration as well.

So the exploration has gone as expected, if not better. As I said, in early September, we put out results, and we'll continue to put out results as we go through our exploration program to really validate these historical resources. I think it's very important that we get that 43-101 estimate up to date and published so we can speak to guidance and cost profiles on the forward basis as opposed to always looking at benchmark going back.

Labor relations, community relations, we did a lot of work on that going into the acquisition of Kolpa, and those are aligned to what we saw. They've got very good community relations, very good labor relations. I think we're very impressed with the operating team they're very gunhoed to try to push this 2,500 tonne per day plant and expansion forward.

We're still trying to go through some of the cash flows and the ultimate benefits in ensuring that there's going to be economies of scale to really push that 2,500. So whether we have that capacity or how we push that for an underground mine is very important. But again, it's been 1 quarter.

Our expectation is that we will be delivering cash flow from Kolpa. If you look at it from a mining free cash flow because of the investments we've made in improvements in the plant and the exploration, it's higher than or lower than what we wanted. But ultimately, I think it will deliver us good cash flow in 2026 and beyond.

Fair enough. I promise the next one is a lot less loaded. And just a quick clarification. Terronera seems to have had 8 days of downtime in Q3 what happened? And also, we're halfway through Q4 at this point. Has there been any downtime this quarter so far? And same question, if so, what happened?

Yes. I mean that's a very fair question. We had very good results, I think, leading into September -- July, we did close to 2,000 tonnes per day. In August, we brought that back to around 1,800 to focus on recoveries or even 1,600 tonnes per day to focus on recoveries and then -- and did very well until about September 22, September 23, somewhere around that time line. We had a shutdown for 7 days.

And obviously, we expected to announce commercial production on October 1, just getting through September with that consistency and being shut down and it was an electrical issue, and we had to get some specific resistors, which is a very small investment, but ultimately something we didn't have on hand and they're made to order. So it wasn't that they're available off the shelf either.

And we had to wait for that, and it took a little bit longer, a couple of days longer than what we expected. But nonetheless, we started up that plant late September again and got going. Since October, we haven't had any up and down days in November here, we're about a week into November.

We had a half day, 1.5 days. We have had intermittent. We're not going to be running fully at 2,000, more like what we saw in Q3, which is still a great rate above 90%. Ultimately, we are in that kind of honeymoon phase now of, "Hey, we're in commercial production. We really need to hit our targets and our throughputs". And like I say, over the next 6 months, it's going to be about refining and optimizing that plant. We're still refining little things, but again, above what our threshold was for commercial production or declaring commercial production.

Very fair. As you know, I'm quite positive on the assets. So it's nice to see it all come together and actually seeing it in person last week.

Thanks for the question Heiko.

The next question comes from Wayne Lam with TD Securities.

Maybe just following up on Heiko's question, maybe at Terronera, do you have an update on maybe how the performance has gone in the month of October? And just curious what kind of stockpile you might have ahead of the mill. And then maybe just in terms of the grade, the mine plan in the early years had around double the initially guided grades here. So just wondering what you're seeing in terms of access to those higher-grade zones and reconciliation to date versus plan.

Yes, sure. Lots in there again. Thanks for the question, Wayne. For stockpile, and this we've been saying for a long time, we have room for about 60,000 tonnes. We can kind of push that to 80,000 tonnes. Because of the topography at Terronera and where we have laydown yards, we don't have the ability to carry 6 months of stockpile in front of us.

So it's about making sure we have sufficient stopes available underground and be able to go from underground rig to the crusher. Grades thus far, we're in an area where it's lower grade, and that's just a function in our -- ultimately, in our initial mine plans or feasibility study, it's about focus on IRR payback period. And ultimately, when you're kind of going through these refinements, nothing is perfect yet in that plant.

We want to make sure we're not putting metal into our tailings dam and getting the best recoveries we can on some of that higher-grade material.

Now we've had pretty decent recoveries, but again, there are still some minor issues that we work might be down for half an hour or an hour, and we want to make sure we don't have those surges. So we designed now that the plum of the resource, the Terronera plum, which is basically the middle shoot.

We're about 100 meters away from that area. And ultimately, we have plans that comes in mid-2026. So right now, we're putting through lower grade, what we deem to be lower grade. So as I said on -- earlier on the call, about 2.5 grams gold, 120 grams silver is our expectations for that next 6 months. And then we bring La Luz which is a high-grade deposit in that's about a kilometer away to supplement what's coming out of Terronera.

So again, midyear next year, we're going to see those grades pick up to what you're going to see in Q3, Q4, Q1, Q2, but we should start seeing that in Q2, Q3. Ultimately, grade reconciliation, there's a couple of things that have been happening that we've seen. A, on the vein, our grade reconciliation is relatively in line. We're getting a lot of stock work.

So for those on the call that aren't familiar, stockwork would be the mineralization between veins.

So we have a hanging wall footwall vein on Terronera. And in between, we have what grades to be about 150 to 200 grams silver equivalents. And obviously, that has a lot of value, and we've moved from either longitudinal stoping or cut and fill stoping doing some transverse stoping. And so in these areas that we should have been a little bit higher grade, we're bringing in lower grade, but we're getting more tonnes, more ounces and ultimately extend mine life.

And we are in no position to update resources. It's still relatively early days in it, and it's a question of how long these stock works continue on. As we get into that main shoot with the higher grade, bigger widths, we don't expect that stock work. So we expect those grades to come through. But otherwise, to answer that question, our grades have aligned relatively well to what our resource model has.

And then as far as October, October has been a pretty steady month, not any huge events, knock on wood. So it's kind of continuing on. And again, we want to make sure we refine and optimize what we can do in the plant and then really focus on driving down costs next year. It's a big push to get us through into commercial production, and I commend our team on doing that. And now it's really focusing on operating efficiencies and processes and making sure we hit our marks.

Okay. Perfect. That was great detail, Dan. Maybe just wondering on the balance sheet with Terronera now having declared commercial production, have you continued to execute on the ATM over the past month? And now that you're commercial, would you be able to refinance that facility for a larger amount? And what could be the time line beyond that?

Sure, Wayne, I'll take that. This is Elizabeth Senez, the CFO. So in terms of your first question on the ATM, no, we've not used the ATM in the past month. You can see in our Q3 that we used $15 million during Q3. But since the end of September, we've not used the ATM.

And then regarding your second question on the project finance and our plans, what to do with that now that we're in commercial production, yes, we are evaluating our options with how to refinance now that we are in commercial production. We anticipate doing that in the next 6 months.

Okay. That's great. And maybe just one last one for me. Just on the balance sheet flexibility. You guys were in a bit of a negative working capital position the past quarter. Do you have enough in terms of supplies and spares available at the various sites to mitigate or have any buffer to some of the -- any potential hiccup?

Yes, I'll take that, Wayne. Ultimately, we believe so. You'll see our warehouse inventory is a healthy number. Obviously, going into a new operation, mid- maxes has to be determined and if you get that experience and what those trends are. We have the idea that we have sufficient inventory and warehouse inventory to be able to work through that, giving us effectively that flexibility.

I say that and know that there's always something out there that will come up, and that's our job as management to kind of make sure that we manage that properly if there's something that we've not seen and comes up in that sense. But we feel like we have lots of flexibility. You're right about the negative working capital on our balance sheet for the last 2 quarters. A big portion of that is actually our derivative liabilities.

Again, I touched on the $39 million derivative liability based on the hedges that we put in from the project loan financing that we did in 2024, we put those hedges in. So again, we've seen gold prices come from $4,500 down to $4,000, that's reduced that a little bit. But ultimately, our goal is now to get our balance sheet in a strength position and we have positive working capital and hopefully see that sooner rather than later.

Next question comes from Alex Terentiew with National Bank.

Just got a couple of questions on spending. And first one really just on CapEx. It looks like CapEx spending so far this year relative to guidance has been a bit lower than planned. Am I correct in assuming we could see a bit of a catch-up in Q4? Or it's just spending a little bit below planned here? That's my first question.

Yes. No, it's a very good question. I think you're going to see pretty consistent at Bolañitos and Guanacevi. Obviously, at Kolpa, it probably will end up being a little bit similar as we finish off some of these projects going into the end of the year.

For Terronera, we haven't put out specific guidance around sustaining capital and what we need for mine development. But I don't see it being outsized. I think mostly to answer that question, it comes down to the existing ones operation. It's what we've seen is what you'll get in Q4.

Okay. And then just sticking with Kolpa, I mean, I know you guys are working towards evaluating that underground expansion. Can you -- in the past, you did give some guidance on spending there, but can you give us any color kind of maybe even over the next 6 months or a little bit how we can think about spending on that? I know you have the permit to construct.

Obviously, you're doing some underground development as well. I think it's -- from my view, it seems like it's pretty clear that you would go ahead. But until you officially made that decision, I guess, you can't say so. But I mean, any clarity on spending plans for the next 6 months?

Yes, part of that for the next 6 months is difficult to say because we're coming through that budget season. That's part of that evaluation aspect of it. And ultimately, we really need to know what that capital is, and that's going to be all part of our guidance that will come out in January. I don't want to jump the gun on what it necessarily is.

And a little bit of the background on that Kolpa and the expansion of 2,500. They have applied for the expansion prior to our acquisition, and they've actually made some commitments on that expansion. For example, a ball mill, 2,500-tonne ball mill was already committed to on site when we kind of acquired it. And our concern just comes down to ensuring that there's sufficient economies of scale, not through the plant, not through the indirect costs of the camps and support on site.

It's really down into the mine. And are we going to be able -- do we need to open up more stopes and have more labor, more equipment and not get economies of scale? Or are there some areas where we can get better tonnes out and be more efficient and actually see that benefit of economies of scale. And that's a process, like I say, we're kind of in the next 2 months.

Hopefully, we can make a final decision on that and then move forward. And again, that's part of all the trade-off studies of understanding what that total capital spend is. And like I say, should have that done by December and hopefully out in everybody's hands or minds by January or in January. So I can't give any more than that, right?

No, no, I understand. I know it's a time of year, and I was just pressing my luck and asking anyway. Last question, just on Kolpa. Q3 G&A, $2.245 million, I think, was the number there. And I noted that the deal closed in Q2. Is that kind of a number we should be expecting going forward on a quarterly basis? Or do you think that can come down a little?

Alex, it's Elizabeth. I'll take that question. So on the Q3 G&A, it was higher than anticipated because of the share price increase, which is affected the revaluation of our DSUs. So $2.7 million of expense during the quarter related to the DSUs. If you exclude that, from the quarterly G&A number, then that's our run rate going forward on corporate G&A.

I think it's a very good question on that, Alex, because that flows into Kolpa, and we had the internal discussions of, well, we have G&A out of Vancouver, and we've given out these DSUs historically that get mark-to-market. And in itself, when you look at the all-in sustaining cost for Kolpa, that includes those DSUs being allocated and how we do our allocation is a weighted calculation and how we distribute the cost out of Vancouver to that.

So that G&A is not cost at Kolpa. Kolpa's G&A cost in their indirect costs on a per tonne basis. So obviously, there's no right or wrong answer to how you allocate those ounces. That's how we've done it. That's how it'll consistently be. It's a noncash item, but we do include that as it is an expense that historically goes through. So again, not reflective of Kolpa's performance, just an allocation on that all-in sustaining cost.

The next question comes from Samaria Iyer with B. Riley Securities.

I just wanted to follow-up on the sustaining CapEx question asked earlier. So at Guanacevi, you spent about $13 million of the $19 million planned, and there is a considerable amount of development being done. So how critical is completing this development to maintaining production levels at Guanacevi? And what's the current pace of advancement over there?

Yes. No, fair, it's a very good question. So as you pointed out, we spent $13 million year-to-date over the 9 months, which is just about $3 million, just over $3 million per quarter, and that's what we were here in Q3. And again, we don't have a big catch-up in Q4.

A lot of the Guanacevi sustaining capital is mine development. And we always want to stay ahead for mine development, and that's ultimately underground mining. We have sufficient development to continue on. And obviously, we try to -- always try to get it a bit ahead. And I think we're always a little bit of ambitious on our total capital, so $19 million when we come in at $16 million. I think it's positive.

We've got the meters that we've needed to get this year thus far, and we expect that to come. Typically, what we see in Mexico is December slows down a little bit because of the Christmas. So we focus on ore extraction is less on mine development because of the kind of a 2-week period around Christmas.

At Bolanitos, similarly, we did have some mine equipment that we purchased early this -- early Q3, but most of the work that we do at Bolanitos is mine development. Again, if you look at guidance, we're slightly behind what we expect to spend, but we're hitting our meters. So we don't see an expected change in our operating profile because of mine development at either of those operations.

No, that makes sense. And just one more on this third-party ore purchases that has gone up and increased the cash cost. So could you just provide some context on the economics of these purchases? And how does that fit into like your own ore extracted at the mine versus this third-party ore?

Yes. Happy to give detail on that. We do have some third-party ore at Kolpa, which is a lot more lower impact ultimately to ounces and costs. But at Guanacevi, it's about 15% of our throughput now. And the Guanacevi plant was built in 1981 by the Mexican government. And under that original when it was passed on to who we bought it from, there's a requirement that 10% -- at least 10% of throughput can go through to local miners.

And in our district of Guanacevi, there's a lot of small local miners. And obviously, with higher prices, there's actually a lot more ore that's coming to our plant asking to be toll. The way we pay out, ultimately, we buy that toll ore for a percentage around 70%, and we have margins between 20% and 25% depending on the group, depending on recoveries and ultimately where prices end up.

It does place -- displace our own ore, obviously, but at the same time, it extends life at Guanacevi. And as price has gone up, that cost per tonne when we're buying that ore tonne is higher because of what it contains of silver and gold. So with the price increases, we've gotten similar grades, sometimes lower grades, but the actual cost for that ore tonne is higher. And how we incorporate that in is purchase ore.

So it's higher cost than our mine tonnes, but again, displaces ours, and we are making a profit somewhere around 20% to 25%. So we'll continue to do that. And again, more and more toll ore is coming to Guanacevi, and again, we're required to take at least 10%, and we've been taking higher than that. I hope that answers your question.

[Operator Instructions] The next question comes from Cosmos Chiu with CIBC.

Thanks for a lot of good details on this call today. But overall, I guess my question is, Dan, when should we start expecting the company to generate positive free cash flow? You got in Q3, but based on prices now, when would you expect is it next year? Clearly, we're hitting an inflection point for the company, but when can we expect positive free cash flow?

Yes, it's very fair. I mean, obviously, we averaged $38 on silver. This quarter, we're up in the $48 range. So I would fully expect free cash flow in Q4. It's all predicated now that Terronera has gone from commissioning to commercial production. We hit our numbers in Q4, Q1. We're going to have free cash flow out of Terronera. I think it's easier to always speak it separately.

Guanacevi and Bolanitos and Cosmos, I have had this conversation, the mature assets. I think where they are in their life cycle, we've got to make sure that the grades that we're pulling out of the grades that make free cash flow at this point in time. We can always go into back old areas and trade dollars, but it's also about harvesting and what our job as a management team is to deliver rate of return, right, rate of return on investment.

Guanacevi have done a phenomenal job for us to build our company. They are going to be high-cost assets going forward. The transition that we've gone through over the last 2 years and been a bit of a heavy lift some days is trying to find assets that are long life, low cost. Terronera in itself completely changes our profile.

As we go through Q4, Q1, Q2, it's going to be our job to work to get those cost profiles down to what we expected in the feasibility study. It's not going to be $88 that we have there. It's going to -- we've seen inflation 25%, 30%. So we can be around $120 to $130. I think that's going to be good. Of course, we want to be $88, but the world has changed.

Right now, we have aspects around Terronera that's making our cost higher. We're running diesel gensets because we're waiting for a permit from the Mexican government, the power arm to ultimately let us start using our LNG plant that's completed. So we've had the construction permit. Now we're waiting for our vaporization plant permit to be able to take the LNG, turn it into electricity.

We expect that relatively soon. We didn't have any setbacks in Mexico.

There was an LNG truck that exploded in Mexico City. It required everybody to put an emergency response plan. Hopefully, we get that before the year is out, but that's out of our control. But that diesel cost versus LNG costs, you're talking about $0.33 per kilowatt hour compared to LNG, our expectation of $0.17. Big savings that comes from that. Ultimately, we're trucking some waste, trucking some ore for the we want.

Part of that is our MEA regional permit that we received. We have [indiscernible] some Conagua stuff. Again, great dialogue through the authorities. We expect that to come. All that to say, over the next to answer your question on free cash flow, we expect it soon, and we expect those costs at Terronera to really improve over the -- partly from some of these permits, partly from our operational efficiencies.

So Q4, Q1 free cash flow, again, Kolpa is going to be in a great position again, we get that stuff out, and you'll see that in January. I hope that helps answer the question, Cos.

Yes, yes, that does. And I do have a follow-up. And Q4 and Q1 positive free cash flow, when can I start asking you about capital return in terms of potentially a dividend, share buybacks or a reverse ATM and other sort of capital return policy like that. Is that me asking about using your ATM? I can potentially ask you about share buybacks.

Yes. No, it's very fair, and I think we're still in that transition, right? So we're excited about what Terronera is going to deliver to us from a cash flow standpoint. And I can understand when you look at those numbers, it comes down dividends. What we haven't really talked about today is the opportunity with Pitarrilla.

So Pitarrilla, 600 million ounces in the ground, half of that sulfides. Obviously, I touched that we have a feasibility study out next year. There's the envelope numbers that you can look at for Pitarrilla, and it's a very compelling asset. We foresee any of the cash flow that we have at Terronera going into pushing on Pitarrilla. Our goal is to produce 30 million ounces by 2030, 30 by 30.

We think Pitarrilla being between 3,000, 4,000 tonne per day operation. The grades run around 300 grams. silver, silver equivalent, 60% of that silver. It could have a mine life of 10, 15, 20, 25 years, but ultimately being a low-cost asset. So round about saying that cash flow that we're going to generate is going to go into Pitarrilla and completely transform Endeavour Silver, and then we can start talking about returning cash to our shareholders.

I think it's very important that we deliver here at Terronera and hit our marks that will give us the ability to go out and build Pitarrilla. But I really think the numbers that we're going to see of the Pitarrilla feasibility study are going to be compelling and allow us to invest at that operation or that development project.

So investing in Pitarrilla likely come first before capital churn?

Yes.

Okay. But how about -- as you mentioned, Dan, you had to do it, but you had to put in some forward sales contracts in place, some hedges in place for part of your gold production and gold prices have now since done a lot better, and it's created some volatility for you in terms of accounting. Also mark-to-market, you're selling gold at lower price now. Any thoughts in terms of buying those back?

Yes. We talk about it all the time. And ultimately, as Elizabeth said in an earlier question, we have a project loan facility right now, and we're always looking to try to improve our cost profile, of course. That's our job as management and taking that project loan and trying to get it refinanced and put it at the corporate level is something that we're looking at.

Obviously, part of that whole discussion and security around everything is those hedge contracts that sit with those project loan providers. And that's part of our discussion. We haven't made any decision on how to handle those hedges going forward, whether we leave them fully in, fully take them out or partial. And when we figure that out, obviously, we'll announce that to the market. We don't have one way or the other at this point in our heads.

Okay. Sounds good. And maybe one last question. I don't know that Guanacevi was older than us the mill, but hopefully, it's aged okay. But on that, as you mentioned, Q3 throughput, higher grade, lower how should we look at throughput and grade into Q4? And then Bolanitos, as you mentioned, both throughput and grade were lower in Q3. How should we look at Q4?

Yes. Throughput would be similar. I mean we know they're pretty steady state between 1,100, 1,200 tonnes per day for both operations. Ultimately, grades have continued in October to be slightly lower. We always look at the trend for the year. I know for the year, we've trended relatively on plan.

If you look at our production profile that we put out for guidance at Guanacevi, Bolanitos, we're kind of trending towards the bottom end of that guidance, and that's because of the grades that we're seeing really out of Bolanitos and a little bit lower grades out of Guanacevi, but mostly the lower gold grades out of Bolanitos. I expect that to continue here in Q4.

The next question comes from Trevor [indiscernible] private investor.

It's been quite some time since I last spoke almost 2 years ago. Obviously, a lot has changed in 2 years. I will say, obviously, like I mentioned earlier, obviously, these other talking heads, it sounds to me, for the most part, a lot of them represent clients, whereas myself being a personal investor, obviously, it's rather disappointing to see my portfolio, which I'm mostly exposed with Endeavour.

So to fall so hard, so fast in 1 month. And it's -- I think it's almost 30% or thereabouts. So just a couple of questions in terms of going forward. Obviously, another big loss in this third quarter. And if I'm correct, I think I heard you say initially that this third quarter, you didn't include Terronera?

Correct.

Terronera -- so -- so when you say you didn't include Terronera in the third quarter, it didn't -- obviously, it didn't make any money or you just included the losses from there into the third quarter.

No. So let me clarify that then, Trevor. Yes, ultimately, in our income statement, Terronera is included, and it was going through the commissioning phase. We actually recognize the revenue, we recognize the cost of sales. Obviously, we incur it, sits on our balance sheet. The working capital numbers sit on our balance sheet. Where Terronera has not been included is in our production profile metrics. So as we've gone through construction into commissioning and commissioning now into commercial production, going forward, our cash costs, our all-in sustaining costs, our production profile will include Terronera's numbers.

Prior to that, it's unfair to kind of throw those in because they're so volatile. We've got days we're operating, not operating, we're testing different things. It's not reflective of what we see going forward at Terronera. So it's just not in our operating metrics when we report that or speak to that, speaking to numbers that aren't reflective of what we see going forward.

And I hear you from a standpoint on losses and a significant loss coming through on Q3, and I'm appreciative of that. And that's a big function of that, Trevor, is the loss derivatives that we're recognizing on a mark-to-market basis under accounting rules under IFRS. And ultimately, it was $39 million this quarter. That's a reflection of gold price going from $2,300 or $2,325 when we entered into these hedges.

And at the end of the quarter, I think gold sat around $4,400. So that delta of $2,000 plus times 68,000 ounces of gold, we recognize that immediately as it's happened. And it creates and go to the last question, it creates a lot of noise in that income statement and a lot of volatility. And unfortunately, those are the IFRS rules.

We don't change that. It is what it is. We have to report to that. it creates so much noise that sometimes it's nice pulling that out. And that's why you'll have various companies use adjusted earnings or adjusted EPS, et cetera, et cetera, to take away some of that noise that are onetime items or mark-to-markets that aren't actually cash.

So again, we'd love to have that go the other way. But if that is the other way, that means my revenue number goes down, the value of the company goes down. If you've held Endeavor for 2 years as we talked, I would argue that our share price is a lot higher.

I know there's movements over the last 30 days where silver hit 55, now we're sitting at $48. That's going to be reflected in our share price. And those movements are sometimes hard, but I think the volatility of Endeavor has attracted a lot of different shareholders into us. And over time, I hope our share price appreciates and you stick with us.

Yes, sure. So these derivatives going forward are kind of I kind of get it. I understand it to some extent where it went from $2,325, obviously, you're having to pay the difference there. I mean, obviously, I suppose you needed the input -- you needed the money, so you had to take this option, right?

Well, that's ultimately it. When we entered in the Project 1 facility in 2022, all the offers on the table, putting in $6,800 gold hedge. Our gold hedge on 68,000 ounces at $2,300 when gold was at $1,600, $1,700 felt like a good thing. At $4,400 probably feels a little bit differently, obviously.

So now going forward, what's the exposure to the same scenario happening in the next quarter, the following quarter, these recurring charges in terms of the derivatives how does that look going forward?

Yes. So right now, we originally entered into 68,000. I think we're sitting on about 57,000 in that. So it rolls off over time. We have no interest in entering any other gold hedges. But that means Pitarrilla comes and depending on the market, depending on how we want to finance that, we're going to look at it.

Our preference is to stay out of that hedge. If you're going to invest in Endeavour Silver, you believe in the silver price going up. That's the first hypothesis. I really believe that we want to -- we don't want to take that away from our shareholders. And there's times maybe little things in your quarters or whatever have you that we do things, but fully recognize that you're buying a silver company because you believe silver price is going up.

Sure. Okay. But I didn't quite understand that. How long -- how much -- what are you looking at? Let's just give an average price of this cost in the quarters going forward. I mean, $39 million is a big chunk. I mean how does that show in real terms on paper? Or I don't quite understand that.

Yes, maybe Yes. So we have 57,000 ounces sold at $2,325 over the next 18 months, 20 months, we'll roll out of that. And so ultimately, our cash flow coming in is going to be $2,325, and we recognize that loss on a mark-to-market basis that flows through as the price happens.

So if gold goes to $5,000 at the end of this quarter, you're going to see more loss go through, and that's that delta from $4,400 to $5,000. If gold goes from $4,400 to $4,000 like you've seen, you're going to see a reversal of that derivative liability. So you're going to have a gain in our income statement, $400 times the 57,000. Again, that rolls off, that noise goes away.

Is it not -- and there's no way you can buy yourself out of it or refund in somewhere else.

And that was Cosmos's question previously, can you buy yourself out of it. And again, right now, with where our cash is going, we're not in a position to go spend $90 million to buy out those hedges. And it's the right thing, wrong thing. We haven't made a decision on that at this point in time.

Okay. So that was -- because I didn't understand his question, but now I get to see it. So ultimately, the best thing to do would be hopefully to find the money somewhere to buy yourself out of the situation, considering that going forward, gold, silver could reach much higher prices, it's going to hurt even more.

Correct. But we just need to produce and deliver into those hedges. We're good. Thanks for the questions, Trevor. Much appreciate it, and thanks for being a shareholder.

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 I appreciate everybody listening in on our Q3 financial call. Again, a very transformational quarter for Endeavor with us bringing Terronera online.

We're very excited about what it's going to mean for us going forward. Q4, Q1, Q2 and ultimately get out guidance here in January on next year. And again, with where prices are, I expect, again, a big and ultimately exciting future for our company. Thanks a lot.

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

Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Allison Pettit, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Before we get started, I ask that you view our MD&A for 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 at edrsilver.com.

On today's call, we have Endeavour Silver's CEO, Dan Dickson; our CFO, Elizabeth Senez, and Endeavor's COO, Don Gray. Following Dan's formal remarks, we will open the call for questions. And now over to Dan.

Thank you, Allison, and welcome, everyone. Q2 marked an eventful quarter for Endeavour Silver. The commissioning of Terronera, the acquisition of Kolpa and its ongoing integration, this is transforming our company. As we move forward, our focus remains firmly on achieving commercial production at Terronera.

In Q2, Endeavor produced 1.5 million ounces of silver and 7,800 ounces of gold totaling approximately 2.5 million silver equivalent ounces, including some of our base metals now. This represents a 13% increase compared to Q2 of 2024 with the inclusion of our new mine in Peru, Kolpa. We reported revenue of $85 million, an increase of 46% compared to prior year, benefiting from the higher precious metal prices and increased production.

Mine operating cash flow before working capital changes rose by 21%, while operating costs remained below guidance with cash costs coming in at $15.35 per ounce of payable silver and all-in sustaining costs were $25 or $0.16 per ounce net of byproduct credits. Direct operating costs per ton were relatively flat compared to the same period last year. Mine operating earnings decreased to $7.7 million from $10.2 million in Q2 of 2024 impacted by a $6 million loss at Terronera during the commissioning phase and increased depreciation.

The company reported a net loss of $20 million for the period, primarily due to Terronera's operating losses during commissioning, increased G&A related to the acquisition of Kolpa, a $10 million noncash loss on derivatives with increased depreciation and tax expenses during the quarter. As of June 30, the company's cash position was $52 million. However, working capital was negative. If we excluded the noncash derivatives, there is a $14 million surplus, this is by design with Terronera nearing commercial production.

On August 5, the company gave an update on throughput and recoveries as the mine makes its way towards commercial production. With throughputs averaging between 1,900 and 2,000 tonnes per day and silver and gold recoveries averaging 71% and 67% during the second half of July, the company will be introducing higher-grade material to help enhance recoveries and sustain the design throughput of 2,000 tonnes per day. With ramp-up advancing, Terronera continues to move closer to commercial production, adding a long-term asset to our portfolio while reinforcing the company's position as a leading mid-tier silver producer.

Since the Minera Kolpa transaction closed on May 1, integration of the new asset and teams has been going well. The company has continued to work on validating updating the historical resources prepared by the previous owners and as such, is unable to provide production guidance for Kolpa until a current 43-101 resource exists. However, management expects a similar production profile to Kolpa's 2024 annual production of 5 million silver equivalent ounces.

Kolpa's May and June production annualized our production output track to align with Kolpa's historical performance, which would be annualized at 4.8 million ounces of silver equivalent production. Kolpa has continued to assess and is planning towards a 2,500 tonne per day operation, and we've included additional capital in our outlook to achieve these production levels next year.

When combined with Guanacevi and Bolanitos and with Terronera coming online in the near term, Endeavour is on track to achieve an annualized production profile of 20 million silver equivalent ounces and expect that in 2026.

Lastly, before we open this call to questions, we continue to advance the Pitarrilla project. Exploration work is focused on upgrading inferred resources to indicate it and engineers are working on various studies to support tailings dam permits and an economic study. Again, it's been a very eventful and busy quarter.

And with that, I'm happy to open this up to questions. Operator, please proceed to our Q&A session.

[Operator Instructions] The first question comes from Heiko Ihle with H.C. Wainwright.

Congratulations to Allison for becoming part of the management team, well done. Commercial production at Terronera is obviously nearing, in your experience and just knowing exactly what goes on at the site on a daily basis, can you maybe just give a bit of color on what you're seeing there right now? I mean your lease, you discussed 71% silver recoveries and 67% gold recoveries, but these figures are from 2 weeks ago. And the same thing with the 1,900 to 2,000 tonne per day throughput rate. Any idea what we're seeing this week more recently? And then more importantly, is the ramp-up going faster than what you had previously thought? Because its sure quicker than what we had in our model.

Yes. Thanks for the question, Heiko. I mean I'll be able to answer that past one. We had always said we thought we could be -- get through commissioning and ramp up in a relatively short period of time. And obviously, we were targeting kind of a commercial production July 31, and we're very close to that. We really want to see our recoveries kind of getting within kind of 90% of the historical life of mine recoveries.

If I recall correctly, over life of mine for Terronera in our optimized plan, it was about 88% or 89% recoveries of silver and 76% to 78% recoveries on gold. And obviously, we have kind of reached that from a gold standpoint. Silver grades have been slightly lower just on some of the ore lower grade ore that we're putting that through.

And then some design, not necessarily modifications, just getting the SAG mill and the Bol mill to grind size as designed. And with the grind size coming down, we'll see increased recoveries on silver. As far as the last couple of weeks on site, I haven't particularly been there. So there's nothing that I'm seeing. But on a daily reporting standpoint, we did bring back our tonnes a little bit just to focus on recoveries and make sure we get that grind size that we need again to align to the recoveries that we expect in the feasibility study on the work we've subsequently done.

I don't know -- I've got Don Gray sitting here with me. I don't know if you've had anything to add to that, Don, with regards to what's happening on site and things that we're seeing?

Yes. I think, like Dan said, the focus right now is on getting our -- especially our grind size to the design criteria that we had from the met testing. And the ore is very grind size dependent versus dependent on other things like reagents and things like that. So as we get the grind size zeroed in, like on the SAG mill, we'll see good recoveries on the flash cell, for example. So that's what they're focused on that site, and they're really zeroing in on that now.

Okay. And then I know this was a lot, so I'll keep the other one very brief. Just conceptually with Minera Kolpa, the integration, I assume, has taken a decent amount of everybody's time here on this call. Is that making you essentially unable to go after another target? Or are you still looking for additional things, meaningful acquisitions that are out there?

Yes, no problem. Heiko, that's a good question. I mean there's only so much capacity that we can pick up as a management team. Definitely, when we announced the acquisition of Kolpa on May 1, and obviously, April 1 and closed it on May 1, it takes up some of our executive time. The one thing that is great about Kolpa is its management team reported into 2 groups. One was a closed-end fund. The other was a property management or a real estate company that was actually listed in Lima. So they do have the administrative capabilities to kind of report in to us. We didn't have to add a lot of bodies.

Obviously, probably been working our team a little bit harder than what they want and what I want, but there's certain times in the company's history that those opportunities present themselves and we took a kick at it. And are we done? We're not done. We need a bit of a breather. We really need Terronera to be in commercial production and cash flows to generate positive free cash flow, improve our balance sheet forward and ultimately pay down debt and then focus on building our balance sheet to be able to take on something like Pitarrilla.

But Dale, our VP of Corporate Development, continues to review things. We've had a lot of various assets or various opportunities coming to our desk in Peru now just because of that acquisition. But we need a bit of a breather. We need to get where we need to be and then obviously, continue to see something that what we want to be as accretive and makes sense for Endeavour and to stay silver focused and continue to grow the company.

Our next question comes from Wayne Lam with TD.

Yes, maybe just a follow-up at Terronera. Obviously, a lot of focus around the impending commercial production enhancement. So I guess with the tonnage being essentially over 90% in the month of July of design capacity. So just to clarify, you guys are just kind of trying to optimize the recoveries to get closer to the design, and that's the only, I guess, impediment to a commercial production announcement? Or is there anything else? And just curious...

Yes, that's it, Wayne. I mean, we don't want to pigeon hole ourselves to that. From a concentrate spec standpoint, we want to hit that, but we're generally there. So it really comes down to hitting recoveries, getting design grind size down to design and need it for recoveries. And we expect that relatively short. We're moving in a good direction. And hopefully, we're close.

Okay. Yes. It seems like you guys are on the verge of an announcement and given the expectation that the recoveries would also improve alongside the grade as well. Maybe turning to Kolpa. The operating cost per ton this quarter seems to be a little bit higher relative to those -- under the prior operator in the past 2 years. So just wanted to ask what's driving that? And should we anticipate that to come down as you guys kind of sink your teeth a little bit more into the operations of the mine?

Yes. Obviously, there's integration costs that are flowing through in May and June. When someone comes in, obviously, additional flights. Everybody is trying to -- whether it's IT systems, some of that gets expensed through that development changing their accounting policies a little bit of understanding everything. Obviously, our expectation is to be more aligned to what they did in 2024. There is obviously inflationary pressures when a new company comes in, they have additional asks. We want to be good custodians of that mine and kind of support them and improve -- there are some things we want to improve, but honestly, they did everything really well.

If we stayed at 2,000 tonnes for the next 6 months, I'd expect costs to come down and more aligned to 2024. But again, we are looking at going to 2,500 tonnes. We have put in kind of growth capital in our outlook. We haven't completely finalized when that's going to occur, some permits are required for that. But we do expect kind of an increase. And hopefully, next year, sometime in 2026, we're at 2,500, maybe it starts earlier, but we don't have enough information to kind of define that time line exactly yet.

Okay. Got it. Yes, I guess that would be my last question. Just on that comment on the expansion, which you guys have kind of telegraphed as potential optimization at the plant on the acquisition announcement. In terms of getting to the 2,500 tonnes a day, what is -- I guess, is that $12.5 million the incremental capital that you would need to get there? And then on the permitting side, what exactly would be needed for that incremental expansion?

Yes. So the $12.5 million is the incremental cost required to get there. In our sustaining capital -- we've included some capital in the sustaining that would -- if we didn't do an expansion, it still would contribute to 2,000 tonnes per day, so i.e., mine development or partly with tailings expansion. But there are parts of it, i.e. installing flotation cells and the actual mill is that $12.5 million. They have the permit to expand, they need the permit to operate.

I'll let Don clarify.

Yes. That -- that's correct. That it's in the process, and of course, you know in different countries with different agencies approved like the environmental permit and then approve the the operating permit. And that's kind of where we're at on the -- on some of the expansion items.

Okay. Perfect. Yes. It seems like a well time transaction and certainly looking forward to the optimization ahead.

Our next question comes from Nick Giles with B. Riley Securities.

This is Andrea here on behalf of Nick Giles from B. Riley Securities. If I may, I just wanted to touch on the financials. Like how are you thinking about hedging on a go-forward basis, given that the equity appears to be impacted by the volatility in financial statements? [indiscernible]

Yes. Yes, I'm happy to answer that. Right now, we do have some hedge contracts on our balance sheet. We have 68,000 ounces of gold that we sold effectively at $2,325 in March 2024. And that's our derivative liability and ultimately our derivative loss. Our preference is not to hedge precious metals. Obviously, we're a silver company. We believe people that want to buy the endeavor name and play. First and foremost, their hypothesis of silver is going up. If you think silver is going down, I don't think you could buy a silver company, and we want to give that exposure to our shareholders.

We do have some colors put in place that we did this quarter. We colored about 990,000 ounces of silver between $31 and $42, that's all designed around our lending facility, similar to our 6,000 to 8,000 ounces of gold. But as we start getting to cash flow at Terronera and start paying down that debt, I wouldn't expect us to really do any hedge programs around silver and ultimately, precious metals.

That's helpful. Just maybe one more on the working capital side. So how should we think about working capital over the second half of 2025? Like should we expect a release soon this year? Or it would be more towards achieving the throughput target?

Yes. I mean it's all tied to commercial production. Terronera and the cash flows that -- Terronera is going to generate. And obviously, as I said kind of in my [indiscernible] before the questions is it was by design that our working capital is going to get this low. I mean we have $52 million in cash, but we do have a significant payables and that's all part of building a mine and getting through commissioning and getting to positive cash flow.

So our expectation is Terronera gets to positive cash flow and that working capital improves over the next 2 quarters, 3 quarters and all beyond that, and we start lowering our debt that we're carrying. And and then ultimately looking at next transaction and next build, but again, expect working capital to improve in the second half of the year as Terronera goes into production.

[Operator Instructions] Our next question comes from Phil Ker with Ventum Financial.

Just a couple of questions on my end. Dan, at Bolanitos, the mill underperformed on the back of some component replacements. Have the -- has the throughput normalized now?

Yes, it's a great question. I'm glad you brought that up, Phil, actually. You're right. Like our throughput out of the mill in Q2 was lower than what we've seen over the last 4 or 5 years, replace some parts in the crusher, replace the motor on one of the mills, it costs us about 10 to 12 days. We are back up to the 1,200 tonnes per day. Ultimately, our cost of Bolanitos yields were higher because of that just with the lower throughput, same amount of costs over less tonnes.

Obviously, Bolanitos is in a big part going forward, but it's still important. They're a phenomenal little mine. It's been scrappy and continues to find resource and extend mine life. And and good gas costs. So we expect Q3 and Q4 to be back the line. And if you look at our guidance between Guanacevi and Bolanitos in January and where we're at, we're right in that range with Bolanitos being slightly behind plan, but again, we expect that to catch up here in Q3 and Q4.

Perfect. That's great. And over at Kolpa, now that you've taken the keys and gotten under the hood a little bit more, assuming that maybe you've give into some of the exploration potential there. Have you had a little bit more boots on the ground and evaluated some of the targets and opportunities there? And if you could highlight some of those [indiscernible], that would be -- that would be great.

Yes. Yes. That's another great question. Obviously, when we bought Kolpa, we had explained to kind of our audience that we really like the exploration potential. Luis Castro, our Senior Vice President of Exploration, has been down there a couple of times. We are kind of aligning and where we thought we could a lot of value was exploration and kind of coming up with a more systematic approach, a lot more service work. They did a lot of what we see in Latin America following the vein. It pinches out and doing cross cuts underground.

And Luis is kind of trying to get them to go back to surface and some geochem, geophysics, and identify that way with surface work and then be more systematic about how we're drilling and what we're doing that. Assays have to go out to third parties so we can include that into our current resource. They've been putting into their assay labs. So we are kind of reorganizing the exploration group. We do expect to get some exploration results out relatively soon. There's a thing called [indiscernible] that we touched on, on acquisition, seen good grades and good widths. But again, we want to get kind of a group of holes together, so it's actually meaningful, and we expect that to be up in the next couple of weeks.

Things have been lining exactly is our expectation. That -- when I say next couple of weeks, I mean sometime by mid-September. I'm getting eyes from our staff. The -- everything is lining up to our expectation. Work needs to continue to be done, but we're happy with the acquisition as it is now.

Very good. So fair to say that as you prioritize and evaluate the various targets that maybe a little bit more aggressive efforts will be laid out in 2026?

Yes. I mean under the agreement, there's a contingent payment of $10 million based on the resource that we publish. And if we published $100 million to $120 million, we pay a sliding scale payment up to $10 million. We have to spend $12 million on exploration over 24 months over that 2-year period. Otherwise, if we don't spend that $12 million, that goes towards the $10 million payment. So we expect a program of $12 million over the next 24 months.

Our next question comes from Alex Terentiew with National Bank. .

I apologize if you've already answered this question. I'm traveling at the moment, so I just got on a bit late. But at Kolpa on the expansion, you said that development capital you're spending about $13 million this year or that's your guidance. Is that -- I mean does that mean there is going to be more for an expansion to get 2,500 next year? Or I'm just trying to understand kind of timing of getting there, what would be required to operate at those levels?

Yes. So what we've included in our disclosure ultimately, it's -- we have $18 million in sustaining capital and $13 million in expansion. That $18 million, as I say, includes expansionary stuff. But if we didn't expand, it's part of sustaining and that has value going forward. The $13 million is effectively size and scale of the tailings, filter press and installation of the mill and flotation cells, and we talked about that a little bit earlier. We do expect that to get to 2,500 tonnes per day.

And as I say, it's just a question on timing and Don is hoping to -- there are some operating permits that are needed that are expected relatively soon, which impacts that timing. But we could get that all done and get to 2,500 if everything is aligned perfectly to [indiscernible].

Is there any other capital, Don, do you think that we would need next year?

And we're going through the budgeting right now. So we'll be evaluating that. But the the major push is for this expansion capital and getting that completed on time. And so that's our big push right now.

Yes, that's good. I was kind of assuming a bit more spending next year, but it seems like you've brought forward some of that this year instead. So that's fine.

You're correct, actually, on [indiscernible] things that maybe we've spoken in the past, the tailings facility and the expansion that was not originally in our forecast on May 1. And because of raining season and timing, we did bring some of that forward to try to get that done before rain season just for efficiencies.

Our next question comes from Craig Stanley with Raymond James.

A couple of quick questions for me. Terronera, how the filter press is working?

Well, thanks for the question. They're working really, really well. It took about a month to get the first filter press going. As you know, we have -- for those that don't know, we have about 4,000 tons capacity on our filters press is at the back end of the plant. We want to make sure we had redundancy for start-up and obviously into operations and eventually if we ever needed to increased production. So we have 2 kind of twin filter presses that do 2,000 tonnes per day each, we call it filter press 1, filter press 2, nothing special with that.

But with Filter Press 1 getting up and commissioning, we were taken centers and parts and Filter Press 2, and it took about a month to get it commissioned and operating as we expect it. And then [indiscernible] provided the parts and sensors that we needed for Filter Press 2 to get that going and that took about only a week to get up in commissioning and operating. We've switched between 1 and 2. And so like I say, we saw our numbers for July. And the filter presses have gone really well.

We bought a bunch of costs early on. We've been lucky in the sense that the first class we put on the filter press has gone well. The concentrate filter, we started up. We got our output pretty good. We're still working on some kinks there and starting to change some clause with regards to the specs of the concentrate. But I think, and Don will touch on this is, ultimately, I think it went a lot smoother than what we expected, which is a pleasant surprise.

Yes. I think anyone that's been involved with historically with filter press commissioning and operation sometimes is the bottleneck for your production. And it -- once it got up and running, it just wasn't neither the tailing or the concentrate filters. And now the concentrate filter is running really well. We're getting good moisture content, getting good moisture content on the [indiscernible] it went really well. We're really pleased with the performance there.

Kolpa, what would you think you put out a press release with the results of an updated technical report? [indiscernible] the initial 43-101, I guess, under you guys.

Yes. Well, on acquisition, we actually put out a 43-101. It just had resources and referred to the historical resources. We've engaged SGS to kind of go through that, and we have to twin holes. There's work to be done to validate all the work that they have [indiscernible] done. And obviously, we want to make sure that number aligns a little bit to what we expect it with their historical resource, and that's going to take some time. It's probably mid-2026. We try to really push for the beginning of next year. But it it looks difficult to get it done for that soon. But we'll see. We got -- like I said, we know what we're doing. We have an operating plan, but just to get clarity out there in the marketplace, and we want to make sure we get that current resource [indiscernible]. So it will take some time.

And then just finally, Pitarrilla, updated study still coming out here in the early new year?

Early New Year is probably optimistic at this point just because Terronera split a little bit on us, and we want to move some bodies from Terronera into the Pitarrilla. We do have various engineering groups, SRP, SGS, working on studies. The biggest thing that we've been focusing on is the tailings dam and the tailings dam site so we can get that all that work done. Part of that study and then ultimately into the government that is the one key permit that's needed.

Again, for everybody on the call. We have EMEA. We have our environmental impact assessment there. We have a permit to build the plant. We have permit for mining underground. We've got a 2-kilometer at it already into Pitarrilla. The biggest [indiscernible] from a permitting standpoint will be the [indiscernible]. We own over 5,000 hectares there. It's in a great jurisdiction grade state of Durango in Mexico. So it will take a little bit of work, but we feel like we'll be able to get that permanent and then hopefully moving and continue to advance Pitarrilla.

[Operator Instructions] We have no further questions at this time. I would like to turn the conference back over to Dan Dickson for any closing remarks.

Thanks, operator. Thanks to all our shareholders [indiscernible] Q2 had a lot going on, and we're getting very close on Terronera. We completely realize as a management team. The focus is on Terronera and delivering commercial production and ultimately, cash flows. And ultimately getting Terronera to what we expect it can do. And then beyond that, growth with Pitarrilla, but with Kolpa coming in and Guanacevi and Bolanitos continue to perform, we are on the track to improve our balance sheet significantly here over the next 6 months and then hopefully continue to grow after that. So have a good day, and talk to everybody soon.

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