Silver Prices Up, But Endeavour’s Profit Still Elusive

Key Points

• Endeavour Silver missed earnings estimates despite a 46% YOY revenue increase.
• Lower output, higher costs, and provisional pricing cut profitability.
• Terronera mine could double output and lower costs by 2026.

Endeavour Silver Corp. NYSE: EXK is a good example of the importance of hitting expectations during earnings season. Although the mining company delivered a solid earnings report, shares were down over 4.78%, erasing almost all of EXK stock's gains the week before earnings.

The company delivered stronger-than-expected revenue of $85.30 million, beating expectations of $81.48 million. That number was also up an impressive 46% year over year (YOY). However, the bottom line was the source of distress for investors.

The company reported negative earnings per share (EPS) of three cents, despite analysts expecting positive EPS of one cent. This was the second consecutive quarter that investors had expected positive earnings, only to be disappointed.

For some investors, this raises a concern about the company’s management. If Endeavour can’t be profitable at a time when the price of silver is rising sharply, when will it be profitable? With the company’s Terronera mine still under construction and higher-grade ore access delayed, consistent profitability may not arrive until late 2025 or beyond.

Why Spot Price Doesn’t Tell the Whole Story

Endeavour cited three key reasons for its negative earnings:

• Sharp drop in silver production—Lower ore grades, mine sequencing issues at Guanaceví, and delays in accessing higher-grade stopes cut output.

• Lower realized silver prices—Despite higher spot prices, provisional pricing and the timing of sales meant the company received less per ounce on average.

• Higher costs and project spending—All-in sustaining costs (AISC) rose due to inflationary pressures, higher labor and energy costs, and continued capital spending on the Terronera project, which hasn’t yet contributed revenue.

This is a reminder that investing in mining stocks can be tricky for investors unfamiliar with mining contracts. In this case, the assumption is that if the price of an underlying metal. Silver is rising, then the company’s silver will automatically become more profitable.

However, many silver miners, including Endeavour, sell part of their output as concentrate under provisional pricing contracts.

At shipment, the buyer pays a provisional price based on the market. Weeks or months later, when the sale is finalized, the price is adjusted to reflect the market. If silver prices drop between shipment and final settlement, the miner takes a negative adjustment, reducing the average realized price.

For example, if Endeavour shipped silver concentrate when the market price was $27 per ounce. Still, the final settlement occurred when silver was $26 per ounce, the company would receive $1 less per ounce on that shipment, even if silver later rallied to $29.

Depending on price volatility, this common industry factor can work for or against miners.

The result is that strong spot prices don’t always translate into strong realized prices, especially in volatile markets. For investors, it’s a reminder that timing and contract terms can significantly impact mining revenue.

Growth on the Horizon

Growth on the Horizon was the title of the investor presentation that accompanies Endeavour’s earnings report. Endeavour provided reasons to believe it could turn around its earnings.

• The Terronera mine is on track for 2025/2026 production—Management reaffirmed that construction is progressing well, with first production expected in late 2025 or early 2026. This mine is projected to more than double the company’s silver-equivalent output and lower its overall cost profile.

• Higher-grade zones are coming online—At Guanaceví and Bolañitos, mine plans call for accessing better ore grades in the coming quarters, which should lift production and margins.

• Leverage to silver price upside—Endeavour remains highly sensitive to silver price movements. If silver strengthens (management suggested they expect tighter supply-demand dynamics), cash flow could rebound quickly.

Still, these catalysts may not meaningfully impact earnings until late 2025 or early 2026. Investors must decide whether to endure another year of uneven results or diversify exposure.

To be fair, analysts remain bullish on EXK stock. The consensus price target of the analysts on MarketBeat is $8.33. That’s a gain of more than 51%.

For investors wanting to exit EXK stock but who still want exposure to mining stocks, the VanEck Gold Miners ETF NYSEARCA: GDX could be an attractive alternative. It’s up about 79% for the year. That’s slightly below the return of Endeavour’s stock.

However, it does smooth out the risk from owning one miner and exposes you to gold and silver miners.