Endeavour Silver - Earnings Call - Q3 2025

Transcript

Operator (participant)

Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Third Quarter 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Allison Pettit, Vice President of Investor Relations. Please go ahead.

Allison Pettit (VP of Investor Relations)

Thank you, Operator, and good morning, everyone. Before we get started, I ask that you view our MD&A precautionary 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. Now, over to Dan.

Dan Dickson (CEO and Director)

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 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 ounces. The increase is driven by the impact of higher royalties, higher profit participation, and higher costs 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 four gold sales as part of the project loan facility in March 2024, and gold was trading at $2,325. As of September 30, the company's cash position was $57 million. On October 16, the company announced that Terronera 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 tons 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 tons over the next six months, with average grades estimated to be about 120 grams per ton silver and 2.5 grams per ton gold. These 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 durable 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 costs 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 tons 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 upgrading the inferred resources to indicated 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 (participant)

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. The first question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle (MD of Senior Metals and Mining Analyst)

Hey, Dan and team. Thanks so much for taking my questions.

Dan Dickson (CEO and Director)

Hey, Heiko. Hope all is well.

Heiko Ihle (MD of Senior Metals and Mining Analyst)

Oh, yeah, very much so. Hey, 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. I mean, you just talk about grades and costs, the obvious ones, but also labor relations, equipment uptime, work you've seen with the communities, other unexpected impacts, actual versus anticipated 12 months ago, either better or worse than pre-acquisition.

Dan Dickson (CEO and Director)

Yeah, there's a lot in there. I mean, obviously, the key drivers for a lot of our cost profile comes down to throughput. Our throughput, where it's above 2,000 tons per day, obviously, it's designed to be 2,000 tons 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. 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. We started some of those programs, and then a big chunk is that we're spending on exploration as well.

The exploration has gone as expected, if not better. As I said, in early September, we put out results, and we will continue to put out results as we go through our exploration program to really validate these historical resources. I think it is very important that we get that NI 43-101 estimate up to date and published so we can speak to guidance and cost profile on the forward basis as opposed to always looking at benchmarks going back. Labor relations, community relations, we did a lot of work on that going into the acquisition of Kolpa, and those align to what we saw. They have very good community relations, very good labor relations. I think we are very impressed with the operating team. They are very gung-ho to try to push this 2,500-ton-per-day plant and expansion forward.

We're still trying to go through some of the cash flows and the ultimate benefits and ensuring that there's going to be economies of scale to really push that 2,500. Whether we have that capacity or how we push that for an underground mine is very important. Again, it's been one quarter. Our expectation is that we will be delivering cash flow from Kolpa. If you look at it from a mine-free cash flow, because of the investments we've made in improvements in the plant and exploration, it's higher than or lower than what we want it. Ultimately, I think it will deliver us good cash flow in 2026 and beyond.

Heiko Ihle (MD of Senior Metals and Mining Analyst)

Fair enough. I promise the next one's a lot less loaded. Just a quick clarification, Terronera seems to have had eight days of downtime in Q3. What happened? Also, we're halfway through Q4 at this point. Has there been any downtime this quarter so far? Same question, if so, what happened?

Dan Dickson (CEO and Director)

Yeah. 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 tons per day. In August, we brought that back to around 1,800 to focus on recoveries, or even 1,600 tons per day to focus on recoveries, and did very well till about September 22nd, September 23rd, somewhere around that timeline. We had a shutdown for seven days. Obviously, we expected to announce commercial production on October 1st, just getting through September with that consistency and being shut down. It was an electrical issue, and we had to get some specific resistors, which is a very small investment, but ultimately something we did not have on hand.

They're made to order, so it wasn't that they're available off the shelf either. We had to wait for that, and it took a little bit longer, a couple of days longer than what we expected. Nonetheless, we started up that plant late September again and got going. Since October, we haven't had any down days. In November here, we're about a week into November. We had a half day, a day and a half. We have had intermittent. We're not going to be running fully at 2,000. It's 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. Like I say, over the next six 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.

Heiko Ihle (MD of Senior Metals and Mining Analyst)

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. I'll get back to you. Thank you guys very much, and have a great weekend.

Dan Dickson (CEO and Director)

Thanks for the questions, Heiko.

Operator (participant)

The next question comes from Wayne Lam with TD Securities. Please go ahead.

Wayne Lam (Director of Mining Research)

Yeah, thanks, guys. 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? Just curious what kind of stockpile you might have ahead of the mill. Then maybe just in terms of the grades, the mine plan in the earlier years had around double the initially guided grades here. Just wondering what you're seeing in terms of access to those higher-grade zones and reconciliation to date versus plan.

Dan Dickson (CEO and Director)

Yep, 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 tons. We can kind of push that to 80,000 tons. Because of the topography at Terronera and where we have laydown yards, we do not have the ability to carry six months of stockpile in front of us. It is about making sure we have sufficient stopes available underground and be able to go from underground rig to the crusher. Grades thus far, we are in an area where it is lower grade, and that is just a function in our ultimately in our initial mine plans or feasibility study. It is both focused on IRR payback period. Ultimately, when you are 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 stream 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. We designed now that the plum of the resource, the Terronera plum, which is basically the middle chute, we're about 100 meters away from that area. Ultimately, we have plans that that comes in mid-2026. Right now, we're putting through lower grade, what we deem to be lower grade. As I said earlier on the call, about 2.5 grams gold, 120 grams silver is our expectations for that next six months.

We bring La Luz, which is a high-grade deposit that is about a kilometer away, to supplement what is coming out of Terronera. Mid-year next year, we are going to see those grades pick up to what you are going to see in Q3, Q4, Q1, Q2. We should start seeing that in Q2, Q3. Ultimately, grade reconciliation, there are a couple of things that have been happening that we have seen. A, on the vein, our grade reconciliation is relatively in line. We are getting a lot of stockwork. For those on the call that are not familiar, stockwork would be the mineralization between veins. We have a hanging wall, footwall vein on Terronera, and in between, we have what grades to be about 150-200 grams silver equivalents.

Obviously, that has a lot of value, and we've moved from either longitudinal stoping or cut-and-fill stoping doing some transversal stoping. In these areas that we should have been a little bit higher grade, we're bringing in lower grade, but we're getting more tons, more ounces, and ultimately extend mine life. 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 stockworks continue on. As we get into that main chute with the higher grade, bigger width, we don't expect that stockwork. We expect those grades to come through. Otherwise, to answer that question, our grades have aligned relatively well to what our resource model has.

As far as October, October has been a pretty steady month, not any huge events, knock on wood. It's kind of continuing on. 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. There's a big push to get us through into commercial production, and we commend our team on doing that. Now it's really focusing on operating efficiencies and processes and making sure we hit our marks.

Wayne Lam (Director of Mining Research)

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? Now that you're commercial, would you be able to refinance that facility for a larger amount? What could be the timeline beyond that?

Elizabeth Senez (CFO)

Sure. Wayne, I'll take that. This is Elizabeth Senez, the CFO. In terms of your first question on the ATM, no, we've not used the ATM in the past month. You see in our Q3s that we used $15 million during Q3, but since the end of September, we've not used the ATM. 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 six months.

Wayne Lam (Director of Mining Research)

Okay, that's great. 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 hiccups?

Dan Dickson (CEO and Director)

Yeah, 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, min/maxes has to be determined and 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. We feel like we have lots of flexibility. You're right about the negative working capital on our balance sheet for the last two 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. Again, we've seen gold prices come from $4,500 down to $4,000. That's reduced that a little bit. Ultimately, our goal is now to get our balance sheet in a strength position, and we have positive working capital. Hopefully, we see that sooner rather than later.

Wayne Lam (Director of Mining Research)

Okay, great. Thanks for taking my questions, and best of luck over the coming months.

Dan Dickson (CEO and Director)

Thanks, Wayne. Those are good questions.

Operator (participant)

The next question comes from Alex Terentiew with National Bank. Please go ahead.

Alex Terentiew (Director of Equity Research Analyst)

Hey, guys. Thanks for taking my questions here. Just got a couple of questions on spending. 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 is just the spending a little bit below planned here? That's my first question.

Dan Dickson (CEO and Director)

Yeah, no, that's a very good question. I think you're going to see pretty consistent if all of these are going to be 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.

Alex Terentiew (Director of Equity Research Analyst)

Okay. And just sticking with Kolpa, I mean, I know you guys are working towards evaluating that underground expansion. 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 six 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 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. I mean, any clarity on spending plans for the next six months?

Dan Dickson (CEO and Director)

Part of that for the next six months is difficult to say because we're coming through that budget season. That's part of that evaluation aspect of it. Ultimately, we really need to know what that capital is. 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. A little bit of the background on that Kolpa and the expansion 2,500, they'd have applied for the expansion prior to our acquisition, and they'd actually made some commitments on that expansion. For example, a 2,500-ton ball mill was already committed to and on-site when we kind of acquired it. Our concern just comes down to ensuring that there's sufficient economies of scale, not through the plant, not through the indirect costs or the camps and support on-site.

It's really down into the mine. Are we going to be able to, 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 tons out and be more efficient and actually see that benefit of economies of scale? That's a process, like I say, we're kind of in the next two months. Hopefully, we can make a final decision on that and then move forward. That's part of all the trade-off studies of understanding what that total capital spend is. Like I say, should have that done by December and hopefully out in everybody's hands or minds by January or in January. Sorry, I can't give you any more than that right now.

Alex Terentiew (Director of Equity Research Analyst)

No, no, I understand. I know it's the 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 know just that the deal closed in Q2. Is that kind of a number we should be expecting going forward on a quarter basis, or do you think that can come down a little?

Elizabeth Senez (CFO)

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

Dan Dickson (CEO and Director)

I think it's a very good question on that, Alex, because that flows into Kolpa. We had the internal discussions of, well, we have G&A out of Vancouver, and we've given out these DSUs historically that get marked to market. In itself, when you look at the all-in sustaining costs for Kolpa, that includes those DSUs being allocated. How we do our allocation is a way to calculate and how we distribute the cost out of Vancouver to that. That G&A is not cost at Kolpa. Kolpa's G&A costs in their indirect costs on a per-ton basis. Obviously, there's no right or wrong answer to how you allocate those answers. That's how we've done it. That's how it'll consistently be. It's a non-cash item, but we do include that as it is an expense that historically goes through. Again, not reflective of Kolpa's performance, just an allocation on that all-in sustaining cost.

Alex Terentiew (Director of Equity Research Analyst)

Okay, that makes sense. Perfect. Okay, that's it for me. Thanks.

Dan Dickson (CEO and Director)

Thanks for those questions, Alex. Good questions. Thank you.

Operator (participant)

The next question comes from Soundarya Iyer with B. Riley Securities. Please go ahead.

Soundarya Iyer (Senior Equity Research Associate)

Hi, Dan and team. Thanks for taking my question. I just wanted to follow up on the sustaining CapEx question asked earlier. At Guanacevi, you spend about $13 million off the $19 million planned, and there is a considerable amount of development being done. How critical is completing this development to maintaining production levels at Guanacevi? What's the current pace of advancement over there?

Dan Dickson (CEO and Director)

Yeah, no, fair. That's a very good question. As you point out, we spent $13 million year to date over the nine months, which is just about $3 million, just over $3 million per quarter. That's what we were here in Q3. Again, we do not have a big catch-up in Q4. A lot of the Guanacevi sustaining capital is mine development. We always want to stay ahead from mine development. That's ultimately underground mining. We have sufficient development to continue on. Obviously, we try to always try to get a bit ahead. I think we're always a little bit ambitious on our total capital. $19 million, whether 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. We focus on ore extraction, less on mine development because of the kind of a two-week period around Christmas. At Bolañitos, similarly, we did have some mine equipment that we purchased early Q3, but most of the work that we do at Bolañitos is mine development. If you look at guidance, we're slightly behind on what we expect to spend, but we're hitting our meters. We do not see an expected change in our operating profile because of mine development at either of those operations.

Soundarya Iyer (Senior Equity Research Associate)

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

Dan Dickson (CEO and Director)

Yeah, 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 cost. At Guanacevi, it's about 15% of our throughput now. The Guanacevi plant was built in 1980 or 1981 by the Mexican government. Under that original, when it was passed on to who we bought it from, there's a requirement that at least 10% of throughput can go through to local miners. In our district of Guanacevi, there's a lot of small local miners. Obviously, with higher prices, there's actually a lot more ore that's coming to our plant asking to be tolled.

The way we pay out, ultimately, we buy that third-party ore for a percentage around 70%, and we have margins between 20%-25% depending on the group, depending on recoveries, and ultimately where prices end up. It does displace our own ore, obviously, but at the same time, it extends life at Guanacevi. As the price has gone up, that cost per ton when we're buying that ore ton, it's higher because of what it contains of silver and gold. With the price increases, we've gotten similar grades, sometimes lower grades, but the actual cost for that ore ton is higher. How we incorporate that in is purchase ore. It's higher costs than our mine tons, but again, displaces ours, and we are making a profit somewhere around 20%-25%. We'll continue to do that. 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.

Soundarya Iyer (Senior Equity Research Associate)

Yeah, thank you. I'll get back. Thank you.

Dan Dickson (CEO and Director)

Okay.

Operator (participant)

Once again, if you have a question, please press star, then one. The next question comes from Cosmos Chiu with CIBC. Please go ahead.

Cosmos Chiu (Analyst)

Thanks, Dan and team. Thanks for a lot of good details on this call today. Overall, I guess my question is, Dan, when should we start expecting the company to generate positive free cash flow? You got close 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?

Dan Dickson (CEO and Director)

Yeah, that's very fair. I mean, obviously, we averaged $38 on silver. This quarter, we're up in the $48 range. I would fully expect free cash flow in Q4. It's all predicated now that Terronera is going 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 separately. Guanacevi, Bolañitos, and Kolpa, I've had this conversation in the mature assets. I think where they are in their life cycles, we've got to make sure that the grades that we're pulling out are 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. What our job is, the management team, is to deliver rate of return, right? Rate of return on investment.

Guanacevi and Bolañitos 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 have gone through over the last two years, and it has 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 is going to be our job to work to get those cost profiles down to what we expected in the feasibility study. It is not going to be $88 that we have there. We have seen inflation 25%-30%. If we can be around $120-$130, I think that is going to be good. Of course, we want it 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. We've had the construction permit. Now we're waiting for our vaporization plant permit to be able to shake 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 in an emergency response plan. Hopefully, we get that before the year's out, but that's out of our control. That diesel cost versus LNG cost, you're talking about $0.33 kWh 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 way we want. Part of that is our MIA regional permit that we received. We have our COUS, 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. We expect those costs at Terronera to really improve partly from some of these permits, partly from our operational efficiencies. Q4, Q1, free cash flow. Again, Kolpa is going to be in a great position. Again, we'll get that stuff out, and you'll see that in January. I hope that helps answer the question, Cos.

Cosmos Chiu (Analyst)

Yeah, yeah. That does. I do have a follow-up. 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 policies like that? Instead of me asking you about, "Are you using yo`ur ATM?" I can potentially ask you about share buybacks.

Dan Dickson (CEO and Director)

Yeah. No, it's very fair. I think we're still in that transition, right? We're excited about what Terronera is going to deliver to us from a cash flow standpoint. I can understand when you look at those numbers, it comes down to dividends. What we haven't really talked about today is the opportunity with Pitarrilla. Pitarrilla, 600 million ounces in the ground, half 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 from 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 ton per day operation. The grades run around 300 grams.

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 around about saying that cash flow that we're going to generate, it's 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 it 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 off the Pitarrilla feasibility study are going to be compelling and allow us to invest at that operation or that development project.

Cosmos Chiu (Analyst)

Investing in Pitarrilla will likely come first before capital return?

Dan Dickson (CEO and Director)

Yes.

Cosmos Chiu (Analyst)

Okay. 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. 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 a lower price now. Any thoughts in terms of buying those back?

Dan Dickson (CEO and Director)

Yeah. We talk about it all the time. Ultimately, as Libby 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. Taking that project loan and trying to get it refinanced and put 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. 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. 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.

Cosmos Chiu (Analyst)

Okay. Sounds good. Maybe one last question.

Dan Dickson (CEO and Director)

Yeah, for sure.

Cosmos Chiu (Analyst)

Number one, I did not know that Guanacevi was older than [Bolañitos [mill], but hopefully, it has aged okay. On that, as you mentioned, Q3, throughput, higher grade, lower. How should we look at throughput and grade into Q4? Then Bolañitos, as you mentioned, both throughput and grade were lower in Q3. How should we look at Q4?

Dan Dickson (CEO and Director)

Yeah. Throughput would be similar. I mean, we know they're pretty steady state between 1,100 and 1,200 tons 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, Bolañitos, we're kind of trending towards the bottom end of that guidance. That's because of the grades that we're seeing really out of Bolañitos and a little bit lower grades out of Guanacevi. Mostly the lower gold grades out of Bolañitos. I expect that to continue here in Q4.

Cosmos Chiu (Analyst)

Great. Thanks, Dan, for answering all my questions. That's all I have. Have a good weekend.

Dan Dickson (CEO and Director)

No, I appreciate all those questions, Cos. Thank you.

Cosmos Chiu (Analyst)

Thank you.

Operator (participant)

The next question comes from Trevor Ward, private investor. Please go ahead.

Hey, Dan. Thanks for taking my call.

Dan Dickson (CEO and Director)

Happy to take your call, Dan.

Thanks, buddy. It's been quite some time since I last spoke, almost two years ago. Obviously, a lot has changed in two 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, to fall so hard, so fast in one month, and I think it's almost 30% or thereabouts. Just a couple of questions in terms of going forward. Obviously, another big loss in this third quarter. If I'm correct, I think I heard you say initially that this third quarter, you didn't include Terronera?

Correct.

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

No. Let me clarify that then, Trevor. Yeah. 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 sales. Obviously, we incur it. 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. As we have gone through construction into commissioning and commissioning down to commercial production, going forward, our cash costs, our all-in sustaining costs, our production profile will include Terronera's numbers. Prior to that, it is unfair to kind of throw those in because they are so volatile. We have got days where we are operating, not operating. We are testing different things. It is not reflective of what we see going forward at Terronera.

It is just not in our operating metrics when we report that or speak to that. We are speaking to numbers that are not reflective of what we see going forward. I hear you from a standpoint on losses, a significant loss coming through on Q3. I am appreciative of that. A big function of that, Trevor, is the loss that we are recognizing on a mark-to-market basis under accounting rules under IFRS. Ultimately, it was $39 million this quarter. That is a reflection of gold price going from $2,300 or $2,325 when we entered into these hedges. At the end of the quarter, I think gold sat around $4,400. That delta of $2,000 plus times 68,000 ounces of gold, we recognize that immediately as it is happening. It creates some gauze as the last question.

It creates a lot of noise in that income statement and a lot of volatility. Unfortunately, those are the IFRS rules. We do not change that. It is what it is. We have to report to that. It creates so much noise that sometimes it is nice pulling that out. That is why you will have various companies use adjusted earnings or adjusted EPS, et cetera., etc., to take away some of that noise or one-time items or mark-to-markets that are not actually cash. Again, we would love to have that go the other way. If that meant the other way, that means my revenue number goes down. The value of the company goes down. If you have held Endeavour for two years, we talked, I would argue that our share price is a lot higher. I know there are movements over the last 30 days. Silver hit $55. Now we are sitting at $48.

That's going to be reflected on our share price. Those movements are sometimes hard, but I think the volatility that Endeavour has attracted a lot of different shareholders into us. Over time, I hope our share price appreciates and you stick with us.

Yeah, sure. So these derivatives going forward, I kind of get it. I understand it to some extent. We had went from $2,300, $2,500. Obviously, you 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?

That's ultimately it. When we entered in the project loan 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.

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 these derivatives? How does that look going forward?

Yeah. So right now, we originally entered into 68,000. I think we're sitting on about 57,000 in that. It rolls off over time. We have no interest in entering any other gold hedges. That means Pitarrilla comes, and depending on the market and 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 don't want to take that away from our shareholders. There are times, maybe little things into 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. I didn't quite understand that. 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? I don't quite understand that.

Yeah. I mean, maybe higher than that. [crosstalk]

What do you think?

Yeah. So we have 57,000 ounces sold at $2,300-$2,500. Over the next 18-20 months, we'll roll out of that. Ultimately, our cash flow coming in is going to be $2,300-$2,500. We recognize that loss on a mark-to-market basis that flows through as the price happens. If gold goes to $5,000 at the end of this quarter, you're going to see more loss go through. 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. 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 possible? There is no way you can buy yourself out of it or refinance somewhere else in order to?

That was Cosmo's question previously. Can you buy yourself out of it? 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. It's the right thing, wrong thing. We haven't made a decision on that at this point in time.

Okay. Because I did not understand his question, but now I get to see it. 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 is going to hurt even more.

Correct. We just need to produce and deliver into those hedges. We're good. Thanks for the questions today, Trevor. Much appreciated. Thanks for being a shareholder.

Thanks. All right. Thanks. Bye.

Operator (participant)

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.

Dan Dickson (CEO and Director)

Thank you, operator. I appreciate everybody listening in on our Q3 financial call. Again, very transformational quarter for Endeavour 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. Again, with where prices are, I expect, again, a big and ultimately exciting future for our company. Thanks a lot.

Operator (participant)

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