Terronera And Kolpa Mines Will Unlock Silver Potential

Key Takeaways

• New mine developments and operational improvements are set to increase production, revenues, and margins, positioning the company for stronger profitability.
  
• Rising silver demand from renewables and supply deficits support a favorable price environment, boosting the company's growth prospects and valuation.
  
• Operational setbacks, integration issues, and concentrated geographic risk threaten profitability, liquidity, and stability amid escalating costs, regulatory uncertainty, and persistent production challenges.

Catalysts

A silver mining company, engages in the acquisition, exploration, development, extraction, processing, refining, and reclamation of mineral properties in Mexico, Chile, Peru, and the United States.

• With the Terronera mine nearing commercial production and optimization of recoveries on track, Endeavour is poised for a significant, step-change increase in production and operating cash flows, which should drive revenue and margin expansion as the mine transitions from commissioning losses to full contribution.
  
• Integration and potential expansion of the Kolpa mine to 2,500 tpd could further boost production capacity in 2026, increasing the company's operating leverage to higher silver prices and supporting future revenue and earnings growth.
  
• Active exploration across Kolpa and Pitarrilla, combined with resource validation and expansion efforts, increases the company's resource base and future output potential, underpinning long-term earnings and valuation.
  
• The global shift toward renewable energy and electrification is accelerating structural demand for silver in key markets like solar and EVs, supporting a robust price environment that could improve Endeavour's average realized prices and top-line growth.
  
• Recent operational improvements and a clear pathway to production scale mean Endeavour's margins and profitability stand to benefit further from ongoing industry wide silver supply deficits, potentially increasing earnings as supply-demand imbalances persist.

Endeavour Silver Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Endeavour Silver's revenue will grow by 41.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -28.1% today to 22.1% in 3 years time.
• Analysts expect earnings to reach $155.6 million (and earnings per share of $0.54) by about September 2028, up from $-69.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.4x on those 2028 earnings, up from -26.9x today. This future PE is greater than the current PE for the US Metals and Mining industry at 18.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.59%, as per the Simply Wall St company report.

Endeavour Silver Future Earnings Per Share Growth

Risks

• Delays and challenges in ramping up Terronera to full commercial production, including lower-than-expected recoveries and commissioning-related operating losses, could lead to further net losses and strain on future cash flow and earnings if not resolved swiftly.
  
• The company's negative working capital position, driven by high payables and persistent net losses (e.g., net loss of $20 million in Q2 2025), exposes Endeavour to liquidity risk, potentially limiting its ability to fund expansions, repay debt, or weather silver price downturns-impacting overall financial health.
  
• Integration of the recently acquired Kolpa mine has led to higher operating costs and ongoing uncertainties about actual resource validation and future production guidance; failure to standardize costs or realize expected synergies could compress margins and reduce profitability.
  
• Expansion plans at Kolpa to 2,500 tonnes per day and the development of projects like Pitarrilla are subject to permitting, regulatory approvals, and potential capital overruns; any delays or cost escalation could negatively impact revenue timelines and future earnings.
  
• Heavy geographic and asset concentration in Mexico and Peru, in combination with rising ESG scrutiny, regulatory uncertainty, and local inflationary pressures, present persistent operational and political risks which could result in interruptions or increased costs, ultimately affecting revenue stability and net margins.

Valuation

• The analysts have a consensus price target of CA$9.167 for Endeavour Silver based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$10.0, and the most bearish reporting a price target of just CA$7.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $705.2 million, earnings will come to $155.6 million, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 6.6%.
• Given the current share price of CA$8.9, the analyst price target of CA$9.17 is 2.9% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.