Interview: Bradford Cooke of Endeavour Silver (TSX:EDR)

President & CEO Bradford Cooke inside Endeavour's Guanajuato mine with silver ore in hand.

Mexico has enjoyed an extended period of relative political stability with the exception of a few hotly contested elections. Most recently in 2006 involving Felipe Calderón, Mexico’s current President. Calderón’s narrow victory in the July 2006 election and his ascendancy to the presidency was fraught with strife and controversy. The results were contested by his closest opponent, López Obrador, who started what he called a “pacific civil resistance” and held numerous protests. Calderon’s victory was ultimately confirmed months later on September 5, 2006 by the Federal Electoral Tribunal.

With political stability, Mexico has emerged as a power-house in the world of exploration, development and production of silver. And, Canadian mining companies have migrated like geese in search of the shiny white metal. In a political address, the former Canadian Ambassador to Mexico, Gaetan Lavertu, noted, “Well over half of the foreign mining concessions issued in Mexico are registered to Canadian companies. The bulk of these investments are from British Columbia”.

One company that has done well in Mexico is Endeavour Silver, a junior miner based in Vancouver, Canada. Endeavour has, some would say diligently, focused on the growth of its resource expansion and silver production in Mexico. Since the company’s start-up in 2004, Endeavour has methodically expanded its asset base and stable of properties. The company is now reaping the benefits from years of hard work, Endeavour reported first quarter results on April 11th; revenue was up considerable to $35.4 million, compared with $18.2 million last year as production rose 17% and silver prices increased sharply. Earnings were $14.5-million, or 18 cents per share.

The company has two operating silver mines and four development projects in Mexico. recently discussed the price of silver and Endeavour Silver’s prospects with President & CEO Bradford Cooke.

There is a “silver rush” in Mexico these days but Endeavour Silver has been operating there for some time. Please tell us about the history of the company in Mexico?

By 2002, the price of gold had clearly entered into a new secular bull market but the silver price was still flat on its back.  Given that historically, where gold goes, silver follows, I thought it might be a good time to get into the silver business so I founded Endeavour.  We started off by looking at numerous, high grade, narrow vein prospects marked by small historic Spanish diggings up in the heart of the Sierra Madre mountains.  However, we just were not seeing properties that had company-building potential so in late 2003, we changed course and started looking at operating silver mines in established mining districts with process plants that were fully built and permitted but were up for sale and about to close for lack of ore.  That led us to our first major acquisition in early 2004, the Santa Cruz mine and Guanacevi process plant located in Guanacevi, Durango, the fifth largest historic silver district in Mexico.  In 2007, we made our second major acquisition, the Guanajuato mine and Bolanitos process plant located in Guanajuato, Guanajuato, the second largest historic silver district in Mexico.  Thanks to these two key acquisitions and our successful organic expansion programs, Endeavour has grown its silver resources, production and cash-flow every year.

What differentiates Endeavour Silver from other operators in Mexico?

I think our track record for doing what we say we will do and delivering growth every year is what sets us apart from the rest of the pack of junior silver producers in Mexico.  We also offer investors some of the best leverage to silver and to growth because we timed our financings so that they were accretive rather than dilutive to shareholders.  For that reason, we have only 83 million shares issued, amongst the lowest in the silver sector.

You’ve been a “silver bug” for many years. What is your take on the recent spike in the price of silver and what is your outlook?

The recent run-up in silver since August 2010 is just a taste of what lies in the future for silver bugs.  Clearly the explosive growth of demand for silver as an investment helped fuel the latest rise.  When you look at the ugly financial condition of western economies such as the US or Europe, one has to conclude that we are nowhere close to bottom in terms of the falling value of western currencies.  Therefore, we are nowhere close to the top in terms of the rising $US price for silver.  However, nothing goes straight up forever and when silver went ballistic in March-April, it was obvious that a correction was likely.  We are now in that correction but do not be surprised if silver moves up to new highs before year-end.

Would you ever consider hedging any of your production?

The short answer is no, not in a bull market.  The purpose of a hedge is an “insurance policy” to protect your self from falling prices.  Therefore a hedge may be useful in a bear market but it can be very damaging in a bull market, as Barrick found out the hard way.

You have two mines in production right now and four exploration/development projects. Which of your projects is the most advanced and which has the best exploration potential?

Our Parral project is the most advanced, thanks to our recent drilling programs.  Endeavour almost doubled the resource at Parral last year to about three million tonnes of polymetallic mineralization grading 50 to 60 grams per tonne silver, 0.7 to 0.9 grams per tonne gold and 5 to 6% combined lead-zinc. We estimate the Parral resources have a net smelter return of about $140 USD per tonne at current metal prices, very positive for the economic development of the Parral project.  A preliminary economic assessment is now underway to advance the Parral project to a development decision.  Another exploration project we are very excited about is the San Sebastian Project in Jalisco State.  We acquired it one year ago and recently commenced drilling on the property. San Sebastian is an historic silver-mining district which stopped production during the Mexican revolution in 1910.  Virtually nothing has happened on the property since that time. We love the district, because it has all these veins where you can sample high grades on surface. And I mean a dozen veins on the San Sebastian property. It has the potential to be our next Guanacevi or Guanajuato.  Our exploration team hopes to define an initial resource by year-end.

This interview appeared in 10 Most Interesting Silver Stocks – Part 4 – CLICK HERE – for the article.

Mike Luft

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