August 30, Updated PFS Terronera Project

Transcription

1 August 30, Updated PFS Terronera Project TSX: EDR I NYSE: EXK I

2 Cautionary Note This presentation contains forward-looking statements within the meaning of the United States private securities litigation reform act of 1995 and forward-looking information within the meaning of applicable Canadian securities legislation. Such forward-looking statements and information herein include but are not limited to statements regarding Endeavour s anticipated performance in 2018, the timing and results of various future activities, the reliability of mineral resource estimates, the economic analysis and proposed development of the Terronera mine. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Endeavour and its operations to be materially different from those expressed or implied by such statements. Such factors include, among others, the reliability of Terronera mineral resource and reserve estimates, economic analysis and estimates for the Terronera, changes in national and local governments, legislation, taxation, controls, regulations and political or economic developments in Canada and Mexico; operating or technical difficulties in mineral exploration, development and mining activities; risks and hazards of mineral exploration, development and mining; the speculative nature of mineral exploration and development, risks in obtaining necessary licenses and permits, and challenges to the Company s title to properties; as well as those factors described in the section risk factors contained in the Company s most recent form 40F/Annual Information Form filed with the S.E.C. and Canadian securities regulatory authorities. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to the reliability of mineral resource and reserve estimates and economic analyses for the Terronera mine, the continued operation of the Company s mines, no material adverse change in the market prices of commodities, mining operations will operate and the mining products will be completed in accordance with management s expectations and achieve their stated production outcomes, and such other assumptions and factors as set out herein. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or information, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended. There can be no assurance that any forward-looking statements or information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements or information. Accordingly, readers should not place undue reliance on forward-looking statements or information. The Company does not intend to, and does not assume any obligation to update such forward-looking statements or information, other than as required by applicable law. The 2018 Updated PFS report and the updated Mineral Resource and Reserve Estimates were prepared in compliance with National Instrument (NI ) and will be filed on SEDAR and EDGAR within 45 days of Endeavour Silver s News Release dated August 30, All currency references herein are in US$. 2 GROWTH WITH INTEGRITY

3 Endeavour Silver Overview Mid-tier precious metals producer with four high grade silver gold mines in Mexico. The Company has a compelling pipeline of exploration and development projects to fuel future growth to become a premier senior silver producer. 4 operating mines mil oz Ag Eq production forecast +1,600 employees Sierra Madre Occidental Silver & Gold Belt Guadalupe y Calvo Chihuahua Parral Production Development Exploration Guanaceví $58.9M working cap, no debt 2 $35.7 million ATM Financing to advance Terronera to fund equity portion of CAPEX US$305M market cap 3 El Compas Terronera Durango Zacatecas Lourdes Guanajuato Jalisco Mexico City Bolañitos El Cubo 1. Silver equivalents based on 75:1 silver: gold ratio 2. As at June 30, Cash position of US$31.1 million 3. As at August 28, GROWTH WITH INTEGRITY

4 Terronera Project Overview A New District Scale Exploration & Mining Opportunity Location - NW Jalisco State, near town of San Sebastian, 40 Km NE of Puerto Vallarta, Jalisco state, Mexico Access 1.5 hour drive from Puerto Vallarta via Highway acquired option to purchase from Grupo Mexico, one of the largest mining companies in Mexico 2011 commenced exploration 2012 discovered Terronera mineralization 2013 exercised option to acquire 100% interest in the San Sebastián Properties Further consolidated land package in the area, expanded resources, completed PEA & PFS View overlooking the local town of San Sebastian Total purchase price - $2.75 million, subject to 2% NSR Property currently comprised of 21 mineral concessions, totalling 16,691 hectares 4 GROWTH WITH INTEGRITY

5 Property Geology The San Sebastian veins range up to 30 meters thick and carry high grade silver gold mineralization up to 1,000 s gpt Ag Eq San Sebastian - historic mining district dating back to 1542 Situated in the Sierra Madre volcanic belt that hosts the majority of Mexico s Au & Ag deposits > 50 historic mines on > 20 known veins Production was halted by due to Mexican Revolution Grupo Mexico conducted minor exploration drilling in late 1980 s early 1990 s but district largely unexplored by modern methods Low sulphidation epithermal vein system in 4 mineralized vein sub-districts Each vein cluster spans ~3km x 3km in area Mineralization down to 400 m depth Veins average 2-8 m thick, up to 30 m in places 5 GROWTH WITH INTEGRITY

6 Property Mineralization Low sulfidation, epithermal, bonanza silver-gold mineralization Hosted in Cretaceous andesite volcanics Ore minerals are argentite-pyrite (galena-sphalerite-pyrargyrite) in ginguro bands Vein minerals are quartz-adulariacalcite- barite (sericite) Amenable to both flotation and agitated leach recoveries 80-90% Grades typically range gpt Ag and 1-5 gpt gold 6

7 Exploration Drilling From drill holes & + 90,000 meters have been drilled 2010 Commenced exploration activities drilling on Real Alto & Quiteria West Veins drilling on Terronera vein, initial government permitting including PEA 2016 exploration of new drilling targets around the Terronera Project and discovery of high grade La Luz vein 2017 Exploration focused on La Luz, and PFS on the Terronera Project 2018 Infill drilling along Terronera vein, final government permitting and updated PFS Terronera mineralization 1,400 meters long, 400 meters deep and 3-16 meters thick and still open along strike and at depth 7 GROWTH WITH INTEGRITY

8 Updated Mineral Resources 2018 vs Ag Eq Indicated Mineral Resources increased 23% to 60 million oz with higher tonnes (10%), silver grades (3%) and gold grades (16%) Ag Eq Inferred Mineral Resources increased 55% to 14.8 million oz with higher tonnes (49%), and gold grades (61%) Classification 2018 Indicated Estimates Tonnes ( 000s) Ag g/t Au g/t Ag Eq g/t (2) Contained Ag oz ( 000 s) Contained Au oz ( 000 s) Contained Ag Eq oz ( 000 s) (2) Terronera 4, , ,083 La Luz , ,904 Total 4, , ,987 Compared to 2017 Indicated Estimates Terronera 3, , ,920 % Change 10% 3% 16% 11% 13% 28% 23% 2018 Inferred Estimates Terronera 1, , ,825 La Luz , ,994 Total 1, , ,819 Compared to 2017 Inferred Estimates Terronera , ,533 % Changed 49% -18% 61% 4% 21% 141% 55% 1. The updated 2018 Mineral Resource and Mineral Reserve Estimates include drill results for the Terronera vein completed before the November 2017 cut-off date and since the October 31, 2016 cut-off date for the 2017 Mineral Resource and Reserve Estimates. It also includes all drill results for the La Luz vein discovered in 2016 and drilled in Refer to Cautionary Language in the Appendix for full disclosure. Cut-off grade of 150 g/t Ag Eq. Mineral Resources are exclusive of and in addition to Mineral Reserves 2. Silver equivalents based on 75:1 silver: gold ratio 8 GROWTH WITH INTEGRITY

9 Long Sections Silver Eq Grades TERRONERA VEIN - LONGITUDINAL SECTION SILVER EQUIVALENT GRADE DISTRIBUTION NW SE AGEQ= AG + (AU x 75) W LA LUZ VEIN - LONGITUDINAL SECTION SILVER EQUIVALENT GRADE DISTRIBUTION E 9 GROWTH WITH INTEGRITY

10 Long Sections Vein Widths TERRONERA VEIN - LONGITUDINAL SECTION WIDTH VEIN MAP NW SE W LA LUZ VEIN - LONGITUDINAL SECTION WIDTH VEIN MAP E 10 GROWTH WITH INTEGRITY

11 Updated Mineral Reserves 2018 vs Ag Eq Probable Mineral Reserves increased 32% to 59.4 million oz with higher tonnes (16%) silver grades (8%) and gold grades (17%) Classification Tonnes ( 000s) Ag g/t Au g/t Ag Eq g/t (2) Contained Ag oz ( 000 s) Contained Au oz ( 000 s) Contained Ag Eq oz ( 000 s) (2) 2018 Probable Estimates Terronera 4, , ,832 La Luz , ,621 Total 4, , ,453 Compared to 2017 Probable Estimates Terronera 4, , ,877 % Change 16% 8% 17% 15% 25% 34% 32% 1. The updated 2018 Mineral Resource and Mineral Reserve Estimates include drill results for the Terronera vein completed before the November 2017 cut-off date and since the October 31, 2016 cut-off date for the 2017 Mineral Resource and Reserve Estimates. It also includes all drill results for the La Luz vein discovered in 2016 and drilled in Refer to Cautionary Language in the Appendix for full disclosure. Cut-off grade of 150 g/t Ag Eq. Mineral Resources are exclusive of and in addition to Mineral Reserves 2. Silver equivalents based on 75:1 silver: gold ratio 11

12 Current Exploration in infill drilling has generated better than anticipated results Drill 5,400 m to extend mineralization in Terronera vein Infill 20,000 m with a goal to upgrade approx. 1 million tonnes of inferred resources to measured and indicated resources and to expand the inferred resources at depth The deepest mineralized hole drilled to date intersected 618 gpt silver and 3.2 gpt gold over 21.2 m true width in hole TR11-4 at 430 metres vertical depth, and remains open at depth. 12

13 Surface Layout Terronera Project San Sebastián Jalisco - Mexico Tailings Dam Mine Camp Santiago de los Pinos La Luz Mine Plant Waste Dump El Rayo Terronera Mine San Sebastián Km

14 Mining Method Underground Mine Operations Accessed via Ramp: Terronera ramp access will connect to haulage drift initial production rates of 750 tpd (Year 1&2) La Luz ramp access will connect centrally to deposit - double production in Year 3 to 1,500 tpd onwards by including La Luz deposit until the end of mine life Mining Method: Terronera drift & fill mining method for veins 1-10 m in width (each cut & fill will be 300m long) Main access level is 1,380 EL main haulage drift; Deposit divided into 5 mining blocks (M1-M5) La Luz Resue mining method for narrower vein widths Backfill: blend of tailing and waste rock and cement 14

15 Ramp Access 15 GROWTH WITH INTEGRITY

16 Equipment & Power UG Mining Equipment Fleet comprised of: Jumbo Drills Scooptrams Haulage trucks Mechanized bolters Scissor Decks Loaders Small & Large longhole drills Jackleg drills Power Supply will be provided by the National Grid operated by the Comisión Federal de Electricidad (CFE) 23kV powerline runs through the Terronera Property however Endeavour has an arrangement with CFE for the construction of a new 115kV powerline with a new substation, which will take 18 months to build Leased generators will be installed on site to provide power during construction and phase 1 of 750tpd operations Trade off studies underway to evaluate opportunities for LNG, solar & diesel 16

17 Camp & Office Santiago Mine Camp Surface View A construction camp will be established near the site to provide accommodation, meals, and ancillary services for construction and operations personnel. The camp will service 410 people at its peak. 17

18 Process Flow Sheet Two Stage Crushing Circuit followed by closed circuit grinding to achieve a flotation feed grind size of 80 % passing 150 mesh (100 microns) currently optimizing the grinding circuit to increase particle size Flash Flotation target recoveries of 84.6 Ag/ 80.4% Au Regrind Circuit provides improved liberation of precious metals mineralization and higher concentrate grade 18

19 Project Timeline Subsequent to Receiving Final Permits, 18 month construction schedule 19

20 Improved Operating Parameters Developing our 5 th and Largest Mine Parameter/ Result Updated 2018 PFS 2017 PFS % Change Silver price per oz (6%) Gold price per oz 1,275 1,260 1% LOM tonnes processed (thousands) 4,701 4,061 16% Life of Mine (Years) % Average silver grade (g/t) % Average gold grade (g/t) % Silver equivalent grade (g/t) Base Prices % Average silver recovery (%) (3%) Average gold recovery (%) % LOM payable Ag ounces produced (millions) % LOM Payable Au ounces produced (thousands) % LOM payable Ag Eq ounces produced (millions) % Avg annual Ag ounces produced (millions) (9%) Avg annual Au ounces produced (thousands) % Avg annual Ag Eq ounces produced (millions) % 20

21 Improved Financial Performance 2018 PFS shows higher Revenues, FCF, mine life, & NPV by 51% Updated 2018 PFS 2017 PFS % Change LOM Revenue ($, millions) % LOM EBITDA ($, millions) % LOM Free cash flow ($, millions) % Project after tax NPV (5%, $,millions) % After tax internal rate of return (%) % Payback period (years) % Direct Costs Per Tonne Projected Low Total Cash Cost & AISC G&A, $8.40 Royalty, $4.23 $1.36 / Ag oz Mining Costs Processing Costs G&A Royalty Total Cost $78.30 Mining Costs, $46.08 $0.15 / Ag oz Processing Costs, $19.58 Cash Costs (1) AISC (1) 1. Cash costs per ounce and AISC per ounce are examples of Non-IFRS measures. Costs are presented in US $, net of by-product credits. 2. Projected cash costs & AISC are based on Updated PFS to be filed in

22 Capital Costs Phase tpd, Phase 2 1,500 tpd in year 3 onward with the addition of Line B milling & flotation circuits CAPEX Requirements for Phase 1 ( 750 tpd operations in years 1 & 2 ) Plant and site infrastructure Mine development, infrastructure and equipment Owners cost, construction camp, engineering, procurement and construction management (EPCM) Contingency Total Initial Capital Expenditures $44.3 million $13.7 million $9.7 million $8.1 million $75.8 million CAPEX Requirements for Phase 2 Expansion ( 1,500 tpd operations in years 3 +) Power from state grid Underground mine development Plant expansion Owners cost, construction camp, and construction management (EPCM) Contingency Total Expansion Capital Expenditures $14.9 million $12.0 million $6.1 million $2.0 million $4.2 million $39.2 million 22

23 Sensitivity Analysis Operating Cost Initial Capital Metal Prices Variance NPV (5%) IRR Payback NPV (5%) IRR Payback NPV (5%) IRR Payback -20% $ % 5.0 $ % 5.1 $ % % $ % 5.2 $ % 5.2 $ % 6.1 Base Case $ % 5.4 $ % 5.4 $ % % $ % 5.7 $ % 5.6 $ % % $ % 6.1 $ % 5.8 $ %

24 After Tax Cash Flow US$ (000s) $200,000 $150,000 $100,000 $50,000 $- Year -1 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 -$50,000 -$100,000 After-Tax Annual Cash Flow After-Tax Cumulative Cash Flow Project Payback Period is 5.4 years 24

25 Upcoming Catalysts Final Permits + Debt Financing = Development Decision Revise Mine Plan to include new reserves Optimize Crushing Circuit to provide lowest energy requirement Optimize Grinding Circuit to increase particle size and recoveries Expand Tailings Facility to accommodate longer mine life Review Power Alternatives grid power vs LNG facility + solar and diesel power to reduce capital costs Continue Exploratory Drilling to Extend Mine Life on nearby mineralized ore bodies, given recent exploration success to extend the mine life Receive final tailings & dumps permits Finalize first tranche of debt facility Receive development decision from the Board Initiate Construction works including land clearing 25

26 Operating Cost Comparison $25.00 Terronera est. LOM Cash Costs (1) vs. Operating Peer Group (2 ) $20.00 $19.50 $15.00 $10.00 $5.00 $- $0.03 $0.19 $1.25 $1.34 $4.86 $5.70 $6.07 $6.46 $6.92 $7.82 $8.10 $8.27 $10.09 $ $10.60 $10.67 $10.71 $11.29 $8.81 $9.06 $13.51 $14.18 $14.70 $14.99 $ $5.00 -$ $9.03 -$ $6.29 -$4.22 -$0.82 -$0.45 -$1.64 -$15.00 Terronera est. LOM AISC (1) vs. Operating Peer Group (2) $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $1.38 $2.56 $2.65 $3.25 $4.35 $5.07 $5.78 $6.79 $7.48 $7.88 $8.20 $8.84 $9.55 $9.74 $11.15 $11.36 $ $12.34 $12.95 $14.16 $16.94 $17.00 $15.98 $15.00 $19.30 $20.72 $25.11 $25.37 $- -$5.00 -$ Based on the Updated 2018 PFS for the Terronera Project, net of by product credits 2. The data presented for the operating peer group set is cash costs and AISC, net of by product credits, for the 6 months ended June 30, 2018 Source: S&P Global, as of August 28,

27 Community Engagement Employ 350 people during construction & 400 people in operations Reclaim Disturbed Areas Annually we have planted approximately 57,150 trees in the area Established a Wild Deer Farm- continue to support this as part of our environmental strategy Trained 25 Locals three month mine skills training program for future employees Hiring Local Contractors for opportunities related to construction of the site and local road construction Signed Collaboration Agreement with CONANP (Natural Protection Areas Commission) to co-operate on minimizing potential impacts Currently Hiring Key Managers to Advance Project : Community Relations General Manager Safety Purchasing Human Resources Electrical 27 GROWTH WITH INTEGRITY

28 Environmental Permitting Received MIA (EIS) from SEMARNAT Mexican environmental permitting authority in Q1, 2017 for 1,500 tpd plant and environmental monitoring before, during and after mine closure. Received Mine & Plant Permits Q3, 2017 Awaiting Final Tailings & Dumps Permits Expect to receive in 2018 Tailings storage facility will be designed to recycle water and store drystack tailings All required documents have been filed with Mexican government agencies 28

29 Summary Terronera Developing our 5 th and Largest Mine Core Asset Attractive both in size and grade; Deposit is shallow, thick and rich Robust Economics Large Mine Low Cost $117.8 million after tax NPV (5%), 5.4 payback period, 23.5% after tax IRR Annual phase 2 production est. 2.9 million oz Ag, 28,000 oz Au, for 5.1 million oz AgEq Estimated all-in sustaining cost, net of by product credits, of $1.36 per silver oz Exploration Upside High grade silver-gold discovery still growing; deposit open at depth; other prospective veins Long Mine Life 9.5 year mine life and growing 1. Gold ounces converted to silver equivalent ounces on a 75:1 ratio 29

30 Questions? 30

31 Base Case Assumptions for PFS Financial Notes Corporate Tax Rate 30.0% After allowable deductions Mining Special Duty Tax Rate 7.5% Applied to EBITDA, deductible against corporate tax Government Royalty 0.5% NSR on gross revenues after smelter charges Discount Rate 5.0% For NPV calculation PESOS:USD FX Rate 20 Approximate average Q Silver Price, US$/oz $17.00 Constant, LOM Gold Price, US$/oz $1,275 Constant, LOM Depreciation 11yr Units of production Property NSR Royalty 2.0% Payable to original property owner Technical Notes Silver Recovery to Con % 84.6% Forecast from detailed metallurgical tests Gold Recovery to Con % 80.4% Forecast from detailed metallurgical tests Con Silver Payable % 97.5% Based on current contracts Con Silver Payable % 97.5% Based on current contracts Mining Cost per Tonne $46.08 Applicable to stoped ore Processing Cost per Tonne $19.58 On-site processing, including treatment and refining charges G&A Costs per Tonne $8.40 On-site G&A 31

32 NI Cautionary Disclosure Notes (1) CIM definitions were followed for Mineral Resource Estimates (2) Mineral Resources are estimated by conventional 3D block modeling based on wire-framing at a 150 g/t Ag Eq cut-off grade and inverse distance cubed grade interpolation. (3) Ag Eq is calculated using the formula: Ag Eq = Ag g/t + (75*Au g/t). (4) For the purpose of Mineral Resource estimation, assays at Terronera were capped up to 15 g/t for Au and up to 2,100 g/t for Ag and 90 g/t Au and 1,000 g/t Ag for La Luz. (5) Metal prices for the Mineral Resource Estimate are: US$17.00/oz Ag and US$1,275/ oz Au. (6) A bulk density of 2.57 tonnes/m 3, derived from 683 analyses was used for Terronera and 2.62 tonnes/m 3 derived from 79 analyses for La Luz were used for the volume to tonnes conversion. (7) Grade model blocks are 4.0m x 1.0m x 4.0m for Terronera and 2.0m x 0.50m x2.0m for La Luz (8) Mineral Resources are classified as Indicated and Inferred based on drill hole location, interpreted geologic continuity and quality of data. (9) A small amount of the Mineral Resource was historically mined in the upper portion of the Terronera Vein and this material has not been included in the Mineral Resource Estimate. (10) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues (11) The Inferred Mineral Resource in this estimate has a lower level of confidence that that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration. (12) The Inferred Mineral Resources reported herein were not included in the economic assessment of the updated 2018 PFS. (13) P&E Mining Consultants Inc. estimated diluted and extractable mineralized resources using a cut-off grade of 160 g/t AgEq for Terronera and 216 g/t for La Luz and employed mechanized cut and fill mining methodology. (14) Mining extraction was estimated at 95% and mining dilution was calculated at an average of 10% for Terronera and 22% for La Luz. PFS Team Endeavour engaged Smith Foster & Associates Inc. to complete an NI PFS for Terronera, including the metallurgical test work and process flowsheet design. P&E Mining Consultants Inc. prepared the Mineral Resource and Mineral Reserve Estimates. Knight Piésold provided input on the mine geotechnical and water inflow data while Wood (formerly AmecFW) designed the tailings and water management facilities and reviewed the environmental permits. Qualified Persons Godfrey Walton, M.Sc., P.Geo., Endeavour s President and COO, is the Qualified Person who reviewed and approved this news release and supervised the engineering work supporting the 2018 PFS. Peter Smith, P.Eng., Eugenio Iasillo, P. E., Eugene Puritch, P.Eng. F.E.C., Benjamin Peacock, P.Eng., and Humberto Preciado, P.E., are the Independent Qualified Persons for the 2018 PFS who have reviewed and approved the technical contents of this news release. QA/ QC A Quality Control sampling program of reference standards, blanks and duplicates is used to monitor the integrity of all assay results. All samples are split at the local field office and shipped to ALS-Chemex Labs, where they are dried, crushed, split and 50 gram pulp samples are prepared for analysis. Gold is determined by fire assay with an atomic absorption (AA) finish and silver by aqua regia digestion and ICP finish, over-limits by fire assay and gravimetric finish. 32