Executive Summary / Key Takeaways

• Endeavour Silver is undergoing a significant transformation, poised to become a leading mid-tier silver producer with an annualized production target of 20 million silver equivalent ounces by 2026, driven by the commissioning of Terronera and the acquisition of Kolpa.
• The Terronera project, a cornerstone asset, is nearing commercial production in Q3 2025, with strong ramp-up progress and operational expertise demonstrated in achieving design throughput and optimizing recoveries, despite initial commissioning losses.
• The strategic acquisition of Minera Kolpa in Peru significantly enhances Endeavour's production profile and offers substantial exploration upside, with plans for a 2,500 tonnes per day expansion.
• While facing near-term liquidity management during the Terronera ramp-up and initial integration costs at Kolpa, the company's balance sheet is expected to strengthen as new assets generate positive cash flow.
• Endeavour Silver's valuation metrics, such as its Price-to-Sales ratio of 8.95 and Price-to-Book ratio of 4.09, reflect market anticipation of its growth trajectory, positioning it as a growth-oriented play in a favorable precious metals market.

A New Era for Endeavour Silver: Forging a Mid-Tier Powerhouse

Endeavour Silver Corp. (NYSE: EXK), incorporated in 1981, has long been a fixture in the silver mining landscape, primarily establishing its roots and operational expertise in Mexico through mines like Guanacevi and Bolañitos. These assets have provided a foundational production base for nearly two decades. Today, Endeavour stands at the precipice of a transformative growth phase, strategically expanding its footprint and production capacity to emerge as a leading mid-tier silver producer. This ambitious trajectory is anchored by the imminent commercialization of its flagship Terronera project in Mexico and the recent, impactful acquisition of the Minera Kolpa mine in Peru.

The broader precious metals market provides a compelling backdrop for Endeavour's expansion. Gold prices surged 27% in 2024, reaching a record of $2,786 per ounce in October and surpassing $2,900 earlier in 2025, fueled by global tensions and economic uncertainties. Silver, historically mirroring gold's movements, is experiencing its own demand surge, driven by industrial applications in electrification, renewable energy, and electric vehicles, alongside emerging supply deficits. This dual tailwind of safe-haven demand and industrial consumption creates a favorable environment for silver-focused producers like Endeavour.

In this dynamic market, Endeavour Silver positions itself as a growth-oriented player, differentiating through its operational and exploration expertise. Unlike some competitors that might rely on a single, large-scale technological breakthrough, Endeavour's "technological edge" is rooted in its proven ability to efficiently develop and optimize mining projects and systematically unlock exploration potential. This is evident in the rapid progress at Terronera and the strategic approach to integrating Kolpa. For instance, the company's operational team successfully navigated a trunnion failure at Guanacevi in 2024, restoring operations to 1,200 tonnes per day by December, showcasing its problem-solving capabilities.

Terronera: The Cornerstone of Growth

The Terronera project in Jalisco, Mexico, represents the most significant catalyst for Endeavour's transformation. Acquired around 2013, the project has progressed rapidly, with construction reaching 89% completion by December 31, 2024, and a total estimated cost of $332 million. By the end of Q1 2025, Terronera had already produced its first batch of concentrate, with wet commissioning commencing around May 1, 2025. The company is targeting commercial production in Q3 2025, following an aggressive 90-day ramp-up period.

Operational details from Q2 2025 highlight the progress and the company's focus on optimization. Throughputs in late July 2025 averaged between 1,900 and 2,000 tonnes per day. While initial silver and gold recoveries averaged 71% and 67% respectively, due to processing lower-grade material, management is actively introducing higher-grade ore to enhance these figures. The goal is to achieve silver recoveries within 90% of the historical life-of-mine target of 88-89% and gold recoveries of 76-78%. A key operational differentiator has been the successful commissioning of the filter presses, which went "a lot smoother than what we expected," providing 4,000 tons of capacity and redundancy. This efficient startup of critical plant components underscores Endeavour's operational acumen. The company expects Terronera to become one of the lowest operating cost mines in its portfolio over its projected decade-plus mine life, with gold production largely offsetting silver costs, although initial operating costs in the first year will be higher during the ramp-up phase.

Strategic Expansion: The Kolpa Acquisition

Further solidifying its growth trajectory, Endeavour Silver completed the acquisition of Minera Kolpa in Peru on May 1, 2025. This strategic move is expected to significantly enhance Endeavour's production profile, adding an asset that produced approximately 5.1 million silver equivalent ounces in 2024. The integration of Kolpa has been progressing well, with annualized production from May and June 2025 tracking at 4.8 million silver equivalent ounces.

Kolpa's existing infrastructure and substantial exploration upside present a compelling opportunity. The company plans to expand Kolpa's operation from its current 1,800 tonnes per day capacity to 2,500 tonnes per day, with an incremental capital investment estimated between $12.5 million and $16 million. This expansion, pending operating permits, is expected to be achieved in 2026. Endeavour's exploration strategy at Kolpa involves a more systematic approach, moving beyond traditional vein-following to surface geochemical and geophysical work to identify new, significant structures. A $12 million exploration program is planned over the next 24 months, with an updated NI 43-101 resource estimate anticipated by mid-2026. This systematic approach to exploration, honed over years in Mexico, is a key differentiator that could unlock substantial value at Kolpa.

Financial Performance and Liquidity: Managing Growth

Endeavour's financial performance in the first half of 2025 reflects the significant investment phase it is undergoing. In Q2 2025, the company reported revenue of $85 million, a 46% increase year-over-year, benefiting from higher precious metal prices and increased production, including Kolpa's contribution. Mine operating cash flow before working capital changes rose by 21%. However, the company reported a net loss of $20 million for Q2 2025, primarily due to a $6 million operating loss at Terronera during commissioning, increased General & Administrative (G&A) expenses from the Kolpa acquisition, and a $10 million non-cash loss on derivatives. Similarly, Q1 2025 saw a net loss of $32.9 million, largely due to an unrealized non-cash impact of gold hedging contracts related to the Terronera debt facility, which is a mark-to-market accounting adjustment rather than a cash outflow. Excluding these non-cash adjustments, Q1 2025 showed a small adjusted loss of $200,000.

Liquidity management has been a critical focus during this period of intense capital expenditure. As of June 30, 2025, Endeavour's cash position was $52 million, with negative working capital by design as Terronera neared commercial production. The company explicitly stated that this was a "high stress, high anxiety" phase, requiring close monitoring. However, excluding non-cash derivatives, there was a $14 million working capital surplus. Management expects working capital to improve significantly in the second half of 2025 as Terronera generates positive cash flow and debt is paid down. The company has also secured additional financing, including a US$45 million bought deal financing and a US$35 million copper stream on Kolpa, to fund the acquisition and ongoing development. Endeavour's hedging philosophy generally avoids precious metals hedging to provide shareholders with direct price exposure, though some contracts were in place for debt facilities.

Competitive Landscape and Strategic Positioning

Endeavour Silver operates in a competitive environment alongside larger, more diversified precious metals producers such as Pan American Silver Corp. (PAAS), Hecla Mining Company (HL), First Majestic Silver Corp. (AG), and Agnico Eagle Mines Limited . While these larger players often benefit from economies of scale and broader geographical diversification, Endeavour differentiates itself through its focused approach on high-potential silver-dominant assets and its proven operational expertise in Mexico and now Peru.

Compared to its peers, Endeavour's current financial metrics reflect its growth-oriented, capital-intensive phase. Its TTM Gross Profit Margin of 14.45% and Operating Profit Margin of 1.04% are indicative of the significant investments and commissioning costs. The TTM Net Profit Margin of -28.16% and P/E ratio of -31.05 highlight the current unprofitability driven by non-cash derivative losses and initial operating losses from Terronera. In contrast, some larger competitors like Agnico Eagle Mines Limited (AEM) show a positive P/E ratio of 15.63, reflecting established profitability. Endeavour's Price-to-Sales ratio of 8.95 and Price-to-Book ratio of 4.09 suggest that the market is valuing its future growth potential and asset base, rather than current earnings. Its Debt/Equity ratio of 0.26 indicates a manageable debt load relative to its equity, even with recent borrowings for Terronera and Kolpa.

Endeavour's strategic response to this competitive landscape is to build a scalable, silver-dominant asset base. The addition of Kolpa, with its planned expansion to 2,500 tpd, and Terronera's 2,000 tpd design throughput, will significantly increase its production profile. The company's ability to efficiently bring new mines online and optimize existing operations, as demonstrated by the smooth filter press commissioning at Terronera and the rapid integration of Kolpa, provides a competitive advantage in project execution. Furthermore, its strong community relations and social license to operate in Mexico, as evidenced by its long-standing presence and local initiatives, are crucial in an industry often facing community challenges.

Pitarrilla: The Next Frontier

Beyond Terronera and Kolpa, Endeavour is actively advancing the Pitarrilla project in Durango, Mexico, recognized as one of the largest undeveloped silver deposits globally with nearly 600 million ounces of silver, plus zinc and lead. The company has allocated a $26 million budget for 2025, focusing on drilling to upgrade inferred resources to indicated and conducting technical studies for an economic assessment, which is now expected beyond early Q1 2026 due to resource allocation to Terronera. The biggest permitting hurdle for Pitarrilla remains the tailings dam. This project represents the next significant growth opportunity, poised to further solidify Endeavour's long-term production pipeline.

Conclusion

Endeavour Silver Corp. is at a pivotal juncture, transitioning into a more substantial silver producer. The successful commissioning and ramp-up of Terronera, coupled with the strategic acquisition and integration of Kolpa, are set to drive a significant increase in production, targeting 20 million silver equivalent ounces by 2026. This growth narrative is underpinned by the company's operational expertise, systematic exploration approach, and strategic capital allocation in a robust precious metals market.

While the company is managing near-term financial pressures related to its aggressive growth initiatives, the expected positive cash flows from Terronera in the second half of 2025 are critical for strengthening its balance sheet and reducing debt. The market's current valuation of Endeavour reflects the anticipation of this future growth. For discerning investors, Endeavour Silver presents a compelling opportunity to participate in the growth story of a transforming mid-tier silver producer, leveraging its operational prowess and strategic asset base to capitalize on favorable market dynamics and technological advancements in mining. The successful execution of its Terronera ramp-up and Kolpa integration, alongside the continued advancement of Pitarrilla, will be key determinants of its long-term value creation.