Endeavour Silver Earnings Call Signals Cost Reset Ahead

Endeavour Silver ((TSE:EDR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Endeavour Silver’s latest earnings call balanced record financial performance with candid acknowledgment of near-term cost headwinds. Management highlighted a sharp step-change in production, revenue, and liquidity, largely driven by the Kolpa acquisition and the Terronera ramp-up, while stressing that elevated costs, hedging impacts, and ramp-up issues are transitional and expected to ease through 2026.

Production Surges on Kolpa and Terronera Contributions

Endeavour reported 2025 production of about 11 million ounces silver equivalent, a 48% jump versus 2024 as new assets came online. Fourth-quarter output reached roughly 2 million ounces of silver and 14,000 ounces of gold, just under 4 million silver equivalent ounces and up about 146% year-over-year, with legacy operations still posting about 27% growth.

Record Revenue and Strong Mine-Level Cash Generation

Revenue surged to a record $468 million in 2025, more than doubling with a 115% increase compared with the prior year on higher volumes and metal prices. Mine operating earnings reached $83 million, while mine operating cash flow before taxes rose to $156 million, with cash flow before working capital changes up about 116%.

Balance Sheet Fortified by Convertible Debt and Cash Build

The company raised $350 million in December via a convertible debt offering, significantly strengthening its capital base. Endeavour ended the year with $215 million in cash, giving it the flexibility to advance Pitarrilla and other strategic growth projects without straining its balance sheet.

M&A and Portfolio Moves Refocus the Asset Base

The May 2025 acquisition of Kolpa added meaningful base metal exposure and was a key driver of the year-over-year production jump. On the flip side, the sale of Bolanitos, which closed in January and is expected to yield about $50 million and an accounting gain in the first quarter, trims legacy complexity and sharpens the portfolio on core growth assets.

Terronera Reaches Commercial Production but Faces Ramp-Up Growing Pains

Terronera achieved commercial production on Oct. 1, 2025, and is ramping toward a steady-state throughput of roughly 2,000 tonnes per day through 2026 with higher grades expected in the second half and into 2027. However, early quarters have been burdened by ramp-up challenges including electrical interruptions tied to diesel generators, which hurt recoveries, throughput, and unit costs.

Kolpa Plant Expansion Targets Higher Throughput and Lower Costs

Kolpa’s plant expansion toward 2,500 tonnes per day is advancing, with commissioning expected across the first half of 2026 after recently running near 2,300 tonnes per day. Management believes the higher throughput will drive better cost efficiency and set the stage for a new resource estimate later in 2026, supporting Kolpa’s role as a key growth and margin contributor.

Energy Transition to LNG Poised to Cut Power Costs

At Terronera, Endeavour plans to switch power generation from diesel to an LNG vaporization solution in the second quarter of 2026, a move expected to materially reduce energy expenses. The company cited a drop in power costs from about $0.33 to $0.17 per unit and an estimated benefit of around $8 per ton, improving both reliability and operating margins.

Pitarrilla Moves Toward Feasibility and Future Build Decision

The company is accelerating work at Pitarrilla, planning about $68 million of investment in 2026 to move the project toward development readiness. An NI 43-101 feasibility study is targeted for the third quarter of 2026, with long-lead procurement and early works underway to support a potential construction decision in early 2027, underscoring Pitarrilla as a major organic growth pillar.

Hedging Strategy Focused on Gold While Preserving Silver Upside

Endeavour reiterated that historic gold hedges were tied to a project loan facility rather than a directional bet on prices, and these derivative contracts have contributed to recent reported losses. The remaining notional hedge of about 50,000 ounces of gold is scheduled to unwind through 2026 into the second quarter of 2027, while the company remains largely unhedged on silver to retain full leverage to higher silver prices.

Adjusted Earnings Reflect Underlying Profitability Amid Noise

For the fourth quarter, adjusted net earnings were $4.8 million, or $0.02 per share, once derivative and financing impacts are stripped out as detailed in management’s disclosures. This modest but positive bottom line shows the underlying operations are profitable even as reported net income is clouded by hedging marks and financing-related items.

Ramp-Up Costs and Elevated CapEx Weigh on Terronera Margins

Terronera’s early quarters have been characterized by higher operating costs per ton and elevated sustaining capital requirements as the mine transitions from construction to stable production. Sustaining capital in the fourth quarter was about $16.3 million, and management acknowledged that unit costs and per-ounce metrics at Terronera are currently inflated but should improve as throughput stabilizes and capex normalizes.

AISC Spiked on Royalties, G&A and New Mine Contributions

All-in sustaining costs were elevated in the quarter driven by higher royalties and duties, increased third-party ore purchases, and higher corporate general and administrative expenses alongside the addition of Terronera. Executives emphasized that many of these pressures are temporary or one-time and that AISC should trend lower as ramp-up issues subside and the business settles into a more normalized cost structure.

Derivative and Financing Hits Depress Reported Earnings

Realized and mark-to-market losses from derivative contracts, mainly gold hedges linked to project financing, reduced reported earnings despite robust revenue. Higher financing costs associated with the early repayment of a debt facility added to the drag, helping explain why adjusted net earnings grew far less than top-line and mine-level cash flows.

Security Concerns and Supply Chain Vulnerabilities Highlight Operational Risk

Terronera experienced a temporary shutdown following regional security events and a Jalisco Code Red, with operations paused and then resumed in late February. Management noted that the site has limited on-site storage of food and water and remains exposed to supply chain disruptions, prompting a potential need for stronger transport security and more resilient logistics planning.

Inflation and Labour Costs Push Operating Expenses Higher

Direct operating costs per ton climbed about 8% year-over-year as inflation, wage pressure, and currency effects took hold. Negotiated wage hikes for Mexican union workers around 6%, slightly above the 5% budget assumption, and appreciation of the Mexican peso against the U.S. dollar added further cost pressure that management is actively monitoring.

Profit Sharing and Royalties Drive Price-Linked Cost Sensitivity

The company explained that higher metal prices directly increase per-ton costs due to royalties, duties, and profit-sharing mechanisms, with Terronera’s direct cost per ton rising about $0.90 for every $1 per ounce increase in silver. Kolpa’s sensitivity is around $0.50 per ton, while Guanaceví’s is a much steeper $3.80 per ton, reflecting its heavier exposure to royalties and purchased ore.

Guanaceví Reliance on Tolling and High Royalty Burden

Guanaceví’s cost structure is shaped by significant toll milling arrangements and a sizable royalty obligation that magnify its sensitivity to metal prices. About 20% of throughput in the fourth quarter came from tolling, and the mine pays a 16% royalty to Minera Frisco, which raises effective costs even as it adds valuable feed and margin at higher silver prices.

Transitional CapEx and Construction Items Inflate Near-Term Costs

One-time capital items from Terronera’s construction and transition to commercial production, such as LNG infrastructure installation, waste dump permitting, and backfill plant purchases, flowed through the fourth quarter and will continue into the first half of 2026. Management expects these transitional investments to taper off after mid-year, helping lower sustaining capital and improve cost metrics.

Guidance Signals Cost Normalization and Growth Through 2026

For 2026, Endeavour expects Terronera to operate around 2,000 tonnes per day, move into higher-grade zones in the second half, and complete the diesel-to-LNG conversion, targeting a sharp drop in power costs and per-ton operating expenses. Management guides for AISC at Terronera to fall from roughly $48 per ounce in the fourth quarter toward the low $20s to $30 per ounce range by year-end, while Kolpa’s expansion to about 2,400–2,500 tonnes per day and a $68 million push at Pitarrilla support a multi-asset growth trajectory backed by $215 million in year-end liquidity and still-unwinding gold and peso hedges.

Endeavour Silver’s earnings call painted the picture of a company in the middle of a transformative expansion phase, with record production and revenue offset by temporary cost and risk challenges typical of large ramp-ups. Investors were left with a clear message that 2025’s financial foundation and ongoing 2026 initiatives are designed to convert today’s growing pains into lower-cost, higher-margin production and a stronger growth platform over the next several years.