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Terronera

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Overview

Potentially Endeavour’s fifth and largest mine, Terronera is located in San Sebastian, another historic silver mining district in Mexico. The exploration project was acquired in 2010, the first discovery was made in 2012, and Endeavour is currently awaiting final permits and a production decision to initiate construction. An initial 750 tpd mechanized, underground, ramp access mine and plant is envisaged. Since the resources are still growing, the concept is to expand the mine and plant to 1,500 tpd in year 3. An updated pre-feasibility study was completed in 2018 (see Endeavour News Release dated August 30, 2018) modeling a 1,500 tpd operation, as follows:

Location 40 km northeast of Puerto Vallarta, Jalisco State, Mexico
Access Paved state highway and maintained all-weather gravel road
Property 6,100 hectares
Infrastructure Near San Sebastain del Oeste, a town of 5,000 people, close to the power grid, readily available water and labour in local towns
Production Average annual production of 2.9 million oz silver and 28,000 oz gold, for 5.1 million silver equivalents (using 75:1 silver:gold ratio) and 9.5 year mine life
Capital Expenditures Initial capex est. US$75.8 million, Phase 2 capex US$39.1 million
Lost Costs Total cash costs est. $0.15 per Ag oz, net of byproduct credits, All-in sustaining costs est. $1.36 per Ag oz net of byproduct credits
Mine Initial 750 tpd underground, ramp access, cut-and-fill mining methods, doubling to 1,500 tpd in year 3
Plant Initial 750 tpd capacity flotation plant to produce high-grade bulk sulfide concentrates, doubling to 1,500 tpd
District Large, multi-vein silver-rich historic district 10 kilometers (km) long by 5 km wide, discovered in 1542, >50 small historic mines on >20 separate veins
Mineral Reserves & Resources Shallow, low sulfidation epithermal vein deposit, Reserves: Probable 34 million oz Ag and 342,000 oz Au, for 60 million oz Ag Eq; Resources Indicated 33.4 million oz Ag and 354,000 oz Au, for 60 million oz Ag Eq Resources Inferred 8.7 million oz Ag and 82,000 oz Au, for 14.8 million oz Ag Eq (Au:Ag 75:1)
Widths 1-15 meters (m), average 5 m
Grades High grades average 240-309 g/t Ag, 1.5-2.5 g/t Au, 385-430 g/t Ag Eq in main zone
Recoveries Est. recoveries 80.4% gold and 84.6% silver by gravity and flotation
PFs Robust economics including a $117.8 million after tax NPV(5%), 5.4 payback period, and 23.5% after tax IRR using base case prices of US$17 per oz silver and US$1275 per oz gold
Potential Multiple untested veins with small historic mines and good exploration potential

Highlights from the Updated Mineral Reserve and Resource Estimate and Update 2018 PFS

The updated Terronera Mineral Resource and Reserve Estimates that form the basis for the updated 2018 PFS reflect significantly higher tonnes, grades and contained silver, gold and silver equivalent ounces (oz) in each category (Tables 1 and 2 below) due to positive exploration drill results in 2017 and the inclusion of the high grade La Luz vein in the new estimates.

The 2018 Updated PFS report and the updated Mineral Resource and Reserve Estimates were prepared in compliance with National Instrument 43-101 and will be filed on SEDAR and EDGAR within 45 days of the Endeavour Silver News Release dated August 30th, 2018.

  • Silver equivalent (1) Probable Mineral Reserves increased 32% to 59.5 million oz with increases in tonnes (16%), silver grades (8%) and gold grades (17%)
  • Silver equivalent Indicated Mineral Resources increased 23% to 60 million oz with increases in tonnes (10%) silver grades (3%) and gold grades (16%)
  • Silver equivalent Inferred Mineral Resources increased 55% to 14.8 million oz with increases in tonnes (49%) and gold grades (61%)
  • The higher Mineral Reserve and Resource Estimates support a longer Mine life of 9.5 years with average annual production of 5.1 million silver equivalent oz in phase 2 (year 3 and onwards)
  • Reduced costs due to higher grades and optimized engineering:
    • Cash cost (2) of $0.15 per Ag oz, net of gold by-product credits
    • All in sustaining cost (2) of$1.36 per Ag oz, net of gold by-product credits;
  • Robust economics including an after-tax 5% NPV of $117.8 million (51% increase from 2017 PFS), Internal Rate of Return of 23.5% and Payback period of 5.4 years
  1. Silver equivalent ounces calculated at a 75:1 gold: silver ratio
  2. Cash costs and all in sustaining costs are examples of non-GAAP measures. Definitions of “Non-IFRS Measures” can be found in the Company’s MD&A

Table 1 – Mineral Resource Comparison

Classification Tonnes (‘000’s) Ag g/t Au g/t Ag Eq g/t (3) Contained Ag oz (‘000’s) Contained Au oz (‘000’s) Contained Ag Eq oz (‘000’s) (3)
2018 Indicated Estimate
Terronera 4,237 240 2.20 405 32,658 299 55,083
La Luz 126 192 13.60 1,212 779 55 4,904
Total 4,363 239 2.53 428 33,437 354 59,987
Compared to 2017 Indicated Estimate
Terronera 3,959 232 2.18 385 29,530 277 48,920
% Change 10% 3% 16% 11% 13% 28% 23%
2018 Inferred Estimate
Terronera 1,015 258 1.82 395 8,400 59 12,825
La Luz 58 145 12.15 1,060 269 23 1,994
Total 1,073 252 2.38 431 8,669 82 14,819
Compared to 2017 Inferred Estimate
Terronera 720 309 1.48 413 7,153 34 9,533
% Change 49% -18% 61% 4% 21% 141% 55%

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/m3, derived from 683 analyses was used for Terronera and 2.62 tonnes/m3 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.

Table 2 – Mineral Reserve Comparison

Classification Tonnes (‘000’s) Ag g/t Au g/t Ag Eq g/t (3) Contained Ag oz (‘000’s) Contained Au oz (‘000’s) Contained Ag Eq oz (‘000’s) (3)
2018 Probable Estimate
Terronera 4,559 226 2.00 376 33,082 290 54,832
La Luz 142 158 11.40 1,013 721 52 4,621
Total 4,701 224 2.28 395 33,803 342 59,453
Compared to 2017 Probable Estimate
Terronera 4,061 207 1.95 344 27,027 255 44,877
% Change 16% 8% 17% 15% 25% 34% 32%

Notes:

  1. 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.
  2. Mining extraction was estimated at 95% and mining dilution was calculated at an average of 10% for Terronera and 22% for La Luz.
  3. Ag Eq is calculated using the formula: Ag Eq = Ag g/t + (75*Au g/t).

PFS Team

Endeavour engaged Smith aFoster & Associates Inc. to complete an NI 43-101 2018 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.