Endeavour Silver Corp.

EXK Details

Endeavour Silver Corp. (NYSE: EXK) is a precious metals mining company established in Canada that specialises in silver mining and related activities in Mexico, such as acquisition, exploration, development, extraction, processing, refining, and reclamation. In addition, the company is doing exploration in Chile. Parrral, Lourdes, and Guadalupe y Calvo are among the company's initiatives. The Parrral project is located in Hidalgo de Parral, Mexico's historic silver mining zone, and covers roughly 3,432 hectares of exploration land. The Lourdes project is located near San Felipe, Guanajuato, in the El Tigre mining zone. The Lourdes project encompasses 509 hectares of silver-gold veins. The Guadalupe y Calvo project is situated in the ancient silver mining district of Guadalupe y Calvo, Chihuahua, and spans around 57,000 hectares of exploration property.

Latest News:

• Strong Production Results: In Q1FY22, consolidated silver production increased by 25% to 1,314,955 ounces, owing to a 23% increase in silver production at the Guanacevi mine and a 70% increase in silver production at the Bolaitos mine, offset by nil production at El Compas, which the Company put on care and maintenance last August. Gold production fell by 22% to 8,695 ounces, driven by a 27% gain at the Guanacevi mine was offset by a 16% reduction at the Bolaitos mine and no production at El Compas.

FY21 Results:

• Growth in Topline: The company reported a YoY growth of 19.40% in revenues to USD 165.32 million in FY21 (ended December 31, 2021) compared to USD 138.46 million in FY20, driven by 38.61% growth in Payable silver ounces produced and 16.76% growth in Realized silver price per ounce.
• Surge in Net Income: EKX witnessed an sharp untick in net income to USD 13.96 million in FY21 vs. USD 1.16 million in FY20.
• Healthy Balance Sheet: As of December 31, 2021, the company had a cash balance (including short-term investments) of USD 114.50 million with total debt of USD 11.50 million.

Key Risk:

• Metal Price Risk: Prices of gold and copper on the global market, which are highly volatile and uncontrollable, significantly impact GOLD's business. Hence, any unfavorable movement in their prices could negatively impact its financials.

Outlook:

2022 Outlook (Source: Investors Presentation, April 2022) 

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

EXK's stock price has fallen 24.81% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 3.35 to USD 7.75. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 4.85.

Considering the significant correction in the stock price, solid margins, strong Q1FY22 production results, current valuation, encouraging outlook and associated risks. We recommend a "Speculative Buy" rating on the stock at the closing price of USD 3.91, up 4.87% as of April 26, 2022.

Three-Year Technical Price Chart (April 26, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.