Operator: Thank you for standing by. This is the conference operator. Welcome to the Endeavour Silver Corp. 2020 Fourth Quarter and Year-End Financial Results Conference Call. As a reminder, all participants are in listen-only mode.

And the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I'd now like to turn the conference over to Galina Meleger, Director, Investor Relations for opening remarks. Please, go ahead.

Galina Meleger: Thank you, operator.

Good morning, everyone, and welcome to the Endeavour Silver 2020 fourth quarter and year-end financial results conference call. With me on the line today we have the company's Chief Executive Officer, Bradford Cooke; our Chief Financial Officer, Dan Dickson; and our Chief Operating Officer, Don Gray. Before we get started, I'm required to remind you that certain statements on today's call will contain forward-looking information within the meaning of applicable securities laws. These may include statements regarding Endeavour's anticipated performance in 2021 and future years, including revenue and cost figures, silver and gold production, grades and recoveries and the timing and expenditures required to develop new silver mines and mineralized zones. We do not intend to and do not assume any obligation to update such forward-looking information, other than as required by applicable law.

On behalf of Endeavour Silver, I'd like to thank you again for joining our call. And I will now turn it over to our CEO, Bradford Cooke.

Bradford Cooke: Thank you very much Galina. And welcome everybody to this year-end financials call for Endeavour Silver. Maybe I'll just start with some highlights.

2020 turned into a very challenging year with the COVID pandemic, but ultimately, was one of our most satisfying years as our operational group really came through in the crunch. We drove our costs down and coupled with higher metal prices that drove significantly higher revenues, higher cash flow, higher earnings. We turned positive in terms of earnings for the first time in three years. And notwithstanding the government mandated two months suspension of mining operations throughout Mexico, we were not only able to meet our 2020 original production guidance, we delivered higher production and lower costs at each of the three operating mines. Perhaps last, but not least in terms of high level comments.

We obviously continued to focus on safety as our number one priority and for the second year in a row, Guanacevi, our largest mine, posted more than a million hours worked without a lost time accident. So, kudos to, again, to our operations team. Let me touch on some numbers in today's news release, and then we'll open it up for Q&A. So, as I mentioned in a very good year in 2020, and we've certainly finished the year with a bang, fourth quarter sales were $61 million, up 81% year-on-year. Cash flow was $22 million, up from negative $8 million a year ago.

And net income was almost $20 million or $0.13 a share, up from a net loss of $18 million a year ago. Moving to the full year highlights. We posted $140 million of revenue, up 15%. Cash flow of $29 million before working capital changes, up from negative $9 million; and a net income of $1.2 million, up from a net loss of $48 million in 2019. Our production was solid at 6.5 million ounces of silver and equivalents.

The only equivalent being gold, that was actually down 9% from the prior year due to the closure of a now non-core operation the El Cubo mine. Cash cost at $5.55 per ounce of silver net of the gold credits was down 57%. So, a significant reduction in cash operating costs. And all-in sustaining costs were $17.59 per ounce net of gold credit down 17% year-on-year. We finished the year with a very strong balance sheet, $61 million cash, $70 million working capital, and just a reminder that we started 2020 with $23 million cash.

So, it was a heck of a year for adding cash to the balance sheet. So, those are the financial highlights from today's news release. I think operator, why don't we open this up now for Q&A.

Operator: Certainly. We will now begin the question-and-answer session.

[Operator Instructions] First question comes from Jake Sekelsky with Alliance Global Partners. Please go ahead.

Jake Sekelsky: Hey, Brad and team, congrats on the strong fourth quarter and thanks for taking my questions.

Bradford Cooke: Yeah. Thanks, Jake.

Jake Sekelsky: Just two quick questions on Terronera. Can you just provide us some color around the timing of the feasibility? I guess, are you seeing any delays in the timeline due to the pandemic? I know some of your peers have been seeing extended turnaround times on studies and whatnot. So, I'm just curious how competent you are in a timeline for that?

Bradford Cooke: We're still reasonably confident. We had our quarterly management meetings last week. And the report from our director of project development was that we're almost bang on 50% complete.

The feasibility study would -- is the engineering consultant conducting this study on our behalf, but our director of project development is very active, obviously in the whole process. We are targeting mid summer receipt of the full feasibility study. And that would allow us to go to the board for a development decision thereafter.

Jake Sekelsky: That's good to hear. And then just switching gears to exploration.

In the release, you've touched on some Greenfield exploration that the new concessions at Terronera, I'm just curious, what's the budget for that. And how much of a priority is that relative to exploration across the rest of the portfolio?

Bradford Cooke: So our Terronera budget this year for drilling, mostly untested veins on this very large property is $2 million. And we're focusing in two main areas this year, the Southeast extension of the main reserve in the Terronera vein is still open to the Southeast. And we're testing an area about a kilometer further South along the same vein structure. It does splay into two or three different parallel veins at that point.

And we've had some encouraging results so far. The other one is -- on one of the newly acquired properties to the West of our original holdings at Terronera. And it's a big vein. It's called Los Cuates and so big as in up to 30 [technical difficulty] and we've traced it for three kilometers. And we've just started testing various proportions of that vein system.

So, early days yet, but we are hopeful that coming out of this year we'll have not only a new discovery, but some new resources that Terronera.

Jake Sekelsky: Okay. Got it. That's helpful. That's all from my end.

Thanks again, guys.

Operator: The next question comes from Heiko Ihle with H.C. Wainwright. Please go ahead.

Heiko Ihle: Hey, Brad.

Thanks for taking my questions.

Bradford Cooke: Hey, good morning.

Heiko Ihle: Hey. Your firm recently exceeds $1 billion in market cap. Congratulations.

Has this done anything to your investor base? And on that same note, have you seen people interested that are able to purchase shares that previously weren’t allowed to do so and have the whole thing feed on itself a little bit? Have you seen anything like that? Have you gotten phone calls from people you've never really heard of before funds that have -- mandates like a market cap minimum?

Bradford Cooke: Absolutely, Heiko. I don't know if we're seeing it yet, but in the coming 12 days, Endeavour is certainly under reviewed to be added to not one, but two indices, we're certainly qualify or appear to qualify for the GDX inclusion and the GDX index. We're currently on the GDXJ. But we're also in line and could possibly qualify for the S&P TSX 500 index, both indices that actually do their additions in the -- I think the third week of March. So, it's coming up here pretty quick.

And we're hopeful that given our $1 billion market cap U.S., that we do qualify to meet these two new indices, which is not just index buying, but a number of investors, institutional investors who only buy index stocks. So, it could open the door for more institutional involvement.

Heiko Ihle: Very helpful. Thank you. Shifting gears quite a bit.

I was going through your $12.8 million in net deferred income taxes on page 39 of the financial statements. The figure includes $18.4 million of tax loss carry forwards. Are there expiration timelines for these assets? And if so, what's the timeline? And also we're now in March, albeit March 1st, have you managed to recover anything of this some year-to-date?
Unidentified

Company Representative: Yeah. Heiko, good question. Way to get into the depth of those financials note 26 or 36.

In that note, we actually show the expiration dates of our loss carry forwards. We are recognizing an asset related to those temporary differences. I believe $9 million at Guanacevi and $3 million at Bolanitos. The timeline to actually chew through those loss carry forwards is about 16 months for Guanacevi and less for Bolanitos that should be in 2021. So, less than 12 months.

Q1 is continued.

Heiko Ihle: Am I understanding you correctly that some of these are expiring this year?
Unidentified

Company Representative: Sorry. There is …

Heiko Ihle: You're looking at the -- you're looking at the -- on page 40, correct?
Unidentified

Company Representative: I'm not looking at it. But I know -- I familiar with the note. So, ultimately the expert -- typically a loss carry forward lasts for 10 years in Mexico.

And I think some of them start running out in 2025 for us. But we'll use those loss carry forwards in 2021, Heiko, just based off the profitability. So, the -- regards to your question for what -- are we eating some of that up now. It's similar, like our production in Q3 and Q4 show that we're now making profit for tax purposes in Mexico. That's continuing here in Q1.

We put out our guidance for 2021 and we expect to be profitable at these prices. Hence use enough of loss carry forwards.

Heiko Ihle: Got it. Thanks for taking my question. So, I'll get back in the queue and stay safe.

Bradford Cooke: Thanks, Heiko.

Operator: The next question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.

Joseph Reagor: Morning, guys. Thanks for taking the questions.

Bradford Cooke: Yeah. Thanks, Joe.

Joseph Reagor: So, looking at kind of the results from the fourth quarter, Guanacevi, you had slightly higher direct costs there. It seems like part of that was related to the purchasing of ore. Was there any other factors driving higher costs there? And then, what are your thoughts on purchasing ore going forward?
Unidentified

Company Representative: Yeah.

Joe, you're right. We did purchase more ore. Obviously with higher prices, we're seeing more of the local miners bring a third-party ore to the -- to our processing plant, which were required to process, I believe, up to 10% of local ore just under the terms of when that plant was built. The other thing that's coming through our cost structure in Q4 -- and it's going to persist 2021 -- is royalties and special mining duty. So, as we're profitable in Mexico, we're paying more special mining duties that goes into our KPI metrics.

And the royalties coming from El Curso, which is a property we acquired in 2019. We didn't have any upfront capital, but it does have a big royalty on it. A significant of our production is actually coming from El Curso, about 50% for 2021. So, that's going to persist through our cost structure going forward.

Joseph Reagor: Okay.

And then, on the tax front, I saw some commentary, I can't remember from which government person. But basically that the Mexican government expects less investment in Mexico in the coming years, because their tax structure has become more cumbersome and more expensive and that they believe people are going to look to invest in South America instead. Do you think that there's any opportunities to see them kind of roll back some of the taxes they added kind of just after the last peak in the gold cycle? Or is that wishful thinking?
Unidentified

Company Representative: I think at this time it's wishful thinking based off the current government regime that's there. You're hearing a lot of rhetoric out of Mexico with regards to how much Mexican mining companies and Canadian mining companies are paying in taxes. The special mining duty was introduced in 2013, plus environmental duty, which is a 0.5% on gross revenue for precious metal companies.

I would guess that none of that's going to get rolled back during this regime. And quite frankly, it'd be great if taxes got lower in all jurisdictions, but I would think that going forward there -- I'd always be conservative and hope that it stays where we're at now. And we'll be comfortable with that.

Bradford Cooke: And maybe I can give some more color to that. [Indiscernible] come out last week in a press conference in State, no new mining taxes.

I guess, we're supposed to take that as good news. And in the overall scheme things, the total tax burden in Mexico is around 52%, 53%. So, right up there, with Canada and some other countries, not exactly the cheapest jurisdiction in the world. They would love to have more investment, but the Mexico has cost in the middle of this COVID pandemic with a crash in employment to crash in tax incomes to the government. And no financial relief in Mexico for poor people, like there is in Canada or the States.

So, I think it's steady as she goes in terms of taxes in Mexico.

Joseph Reagor: Okay. Just continue on that and maybe one other thing just real quick. Is that part of the reason the company is started to look at South American opportunities. And then, on that note, any update on what to expect from Parral this year?

Bradford Cooke: So, yes.

We diversified in recent years our exploration projects. We have three active and world-class prospects in Northern Chile. We really liked Chile a country. And we're looking at other South American jurisdictions as well as North America. So not just exclusively Mexico.

And then Parral after a one-year hiatus in terms of exploration drilling, we resumed in January, drilling our Parral project with a $2 million budget to try and grow the resource space there. We've basically got two more years to grow the resource space before Parral goes to economic studies and Terronera is up and running. We'd love to have our project development team move straight from Terronera to Parral in 2024.

Joseph Reagor: Okay. Thanks.

Let's turn it over.

Operator: The next question comes from Craig Hutchison with TD Securities. Please go ahead.

Craig Hutchison: Hi. Good morning, guys.

Thanks for your question.

Bradford Cooke: Hi, Craig.

Craig Hutchison: Just a question on reserves and resources, you still have fairly substantial indicated resources at Bolanitos. What are the opportunities to have some of those resources sort of converted into reserves? And do you see there the mine life at Bolanitos extending well into -- to next year this point?

Bradford Cooke: Yeah. Bolanitos is a bit different than Guanacevi because the main area where mining is underneath the village of La Luz, which really prevents us from being able to drill from surface.

So, almost all of our drilling in recent years of the La Luz vein system has been from underground. And, of course, that then -- it's a cost reward exercise to see how far ahead we want to drill. Can we convert indicated resources to reserves? Certainly to some degree. But we're typically run a one year reserve envelope and an additional couple of years of resources. And I don't think that's going to change just because of the constraints of drilling ahead of the reserve envelope, the oil pricing could have some beneficial impact on conversion of resources to reserves as well.

Craig Hutchison: And can you remind me what's the budget for Bolanitos in terms of explorations resume?
Unidentified

Company Representative: 2,250,000 for Brownfield's exploration this year.

Craig Hutchison: Okay. Great. Thanks, guys.

Bradford Cooke: Thanks for your questions.

Operator: The next question comes from Lucas Pipes with B. Riley. Please go ahead.

Lucas Pipes: Hey, good morning, everyone. And well down on the quarter, congratulations there.

Bradford Cooke: Thanks, Lucas.

Lucas Pipes: So most of my questions already asked, but then I'll add some follow-up questions. So, first on the purchased ore, can you remind us how we should think about margins on that business? Thank you. Unidentified

Company Representative: Yeah. From a margin standpoint, we look to -- we pay about 60% of the value of that ore.

And ultimately when it's all said and done, we share about 35% to 40% with the processing costs and royalties, they get put in place. Ultimately, it's about 10 -- last year, we were closer to 11% total production came from the toll ore, which is the highest we have historically ever been. If you go back through the last 10 years, we've approximately 6% of our throughput through toll ore. So, at current prices, I would imagine we're going to be closer to 10% again this year, and generally follow the same formula from a purchase standpoint of shooting for that 40% profit margin from it.

Lucas Pipes: Very helpful.

Very helpful. I appreciate that detail. And then, second follow-up question just on Chile. Brad, you mentioned how -- you like being there, what's kind of the priority in terms of allocating capital towards that region? And a very high level, kind of what are some of the catalysts we might be looking forward to when it comes to your Chile opportunities? Thank you.

Bradford Cooke: Thanks, Lucas.

We've been in Chile for, I think, eight years. We've generally run $0.5 million to $1.5 million annual budgets. So, we've actually done a pretty significant investment to acquire, explore and prepare for drilling our three projects. We're currently drilling one of them. The Paloma project in the far North of Chile is arguably 5 million ounce gold equivalent high sulfation epithermal target.

So open-pit, potentially bleached. But early days yet. We just started drilling last year and we hope to have some results here in the next month or two. We're probably going to partner our copper rich project. Cerro Marquez is a copper gold porphyry.

Again, we've spent several years and several million dollars grooming it. It's drill ready. And we've had a lot of expressions of interest from copper majors. So, we've signed some confidentiality agreements and our preference is to bring on a partner at Cerro Marquez, which leaves our third project Aida and Aida is our extension of the Bolivian silver belt down into the Northern most Chile. And again, it's drill ready.

It's a massive alteration zone with very strong indications of open pit silver. We don't have the drill permit yet. We expect it late this year and it would lead to a central program at Aida either this year or next year. So, we really liked drilling, truly. We focused on world-class prospects when we acquired these things during the bear market.

We're not done yet. We'll keep continue to try and grow that pipeline. And the whole goal of our Chilean exposure is to get into a discovery that has world-class potential and ultimately to add it to the development pipeline.

Lucas Pipes: This is very helpful color. I appreciate all the detail and continued best of luck.

Thank you.

Bradford Cooke: Thanks.

Operator: [Operator Instructions] The next question comes from Henry Westender [ph], a private investor. Please go ahead.

Unidentified Analyst: Well, gentleman, you seemed to have had a very, very good fourth quarter and that strikes me that the future in 2021 and beyond could be very substantial.

And without pushing the envelope too far, could you comment on 2021?

Bradford Cooke: In terms of our public guidance, we've guided our production to be silver to slightly higher than last year. So, I think, a 6.1 to 7.1 million ounces of silver equivalent production forecasted this year. Obviously, performance in Q4 with the lower costs and higher metal prices is a pretty good guide for how we're going to do financially this year. We don't provide financial guidance, but Q4 is certainly a good indicator.

Unidentified Analyst: You provided a little one-- you said you're going to use up the tax loss carry forward in Mexico this year.

What'd you say you're going to use it up very, very safely? Just about, is it up or is it dicey?
Unidentified

Company Representative: Using those loss carry forwards, it's just a function of production and what we've used historically from a cost standpoint. So, we have multiple entities in Mexico and at Guanacevi from 2016 to 2019 where we had challenges financially and we accumulated those loss carry forwards and hopefully over the -- likely say the next 16 months, we eat through those loss carry forwards.

Unidentified Analyst: Excellent. Excellent. For what it's worth -- I've been one of the us since 2003 up in that, and I think we're going up again.

Thank you, gentlemen.

Bradford Cooke: Thanks for your questions.

Operator: The next question comes from [indiscernible] with Arcadia Economics. Please go ahead.

Unidentified Analyst: Hi, guys.

Thank you for having me. Congratulations on a great quarter four. My question has to do around -- has to do with the developments that arose during quarter four, and mostly quarter one, specifically with the silver squeeze and the manipulation of the price of silver on the Colmex [ph]. My question is, does Endeavour have any strategic plan to deal with this? The combat, the manipulation, an idea I've heard is withholding 5% of production. I just have -- I just want to hear your answers around that and the future concerning that.

Bradford Cooke: Well, thank you for your question. I guess I've got two different answers, because there's really two different issues here. With regard to our sales strategy and whether we withhold or accelerate silver sales, that's typically a short-term decision based on our short-term view on the direction of the silver price. And we have in the past, for instance, when we felt that the silver price was rising, held back our sales for instance, most recently last September. We built up a finished goods inventory because of the crash on the silver price late September.

In the presumption that silver would bounce back in Q4, which it did with a bang. And we were able to sell that accumulated inventory and make extra profit on it. So, we do this from time to time. It's a sales strategy. With regard to the infamous silver short squeeze, I have a lot to say on it and I actually got posted an Ask the CEO comment on our website a few weeks ago.

So, you're welcome to go and read that. But my view on this is perhaps a bit different than most. I don't think it was a silver squeeze. I think it was a classic pump and dump by some knowledgeable investors who did purchase $35 call options on silver before posting on Reddit. Those options on the Tuesday before the Reddit post thing were $0.35 -- $0.30 to $0.35.

And on the following Monday after promoting it for three days, those options were worth $1.65. So, I think some smart investors made a lot of money on that. Very short-term pump and dump. I don't think it was a squeeze at all. Secondly, it's very difficult to squeeze silver.

Because banks are generally agnostic to the silver price. What I mean by that is that they're generally neither long nor short, or more accurately. They are long physical sitting in volts. And they're short paper. And banks using fractional banking do lend out their assets.

If you're on down to the local branch, your cash is being lent out several times. And that is probably the case in sliver, but it's not manipulation. It's simply a function of what banks do. And to be honest, if investors were to try and squeeze silver and buy physical by the ETF, by the call options, what's the bank going to do, they're sitting on physical. So, they're the ones who are actually going to make money at higher prices and they can rollout of -- like they're typically hedging their silver, right? And it doesn't cost them anything to rollout of the short position and set it higher and rollout of it and set it higher.

And they could do that all the way up to a thousand dollars silver. So, I don't think, there is a mother of all squeezes to be had in silver. I think it's a function. By the way, this is my last comment on this. Silver amongst all the metals traded in the options and futures market is different.

Why is it different? Because of all the common metals, it's the only one that is a by-product of other mines, to by-product compromise, but I think mines -- gold mines. And those big diversified global producers of copper lead and zinc and gold typically sell forward their silver, lock in the revenue stream for their by-product. So, they're unhedged on their primary products. What that means is that silver amongst all the metals has a massively higher derivative book compared to the other metals and compared to physical. And that's because diversified miners sell forward their silver.

Who buys it, the buying center into those forward contracts. So, now they have not only physical, they have a commitment to buy more physical. And because they're agnostic, they balance that long commitment with a derivative sharp and that's the structure of the silver market. So, I think it's very, very challenging to try and squeeze something like silver, because the main beneficiaries of higher silver prices would be the bankers and the miners.

Unidentified Analyst: Okay.

So kind of going off that -- this is my last question. Thank you for your answer. What is your projection for silver in 2021?

Bradford Cooke: Crystal ball, well, I'm not shy when it comes to forecasting internally, but I rarely do it externally. We obviously think that there's a silver bull market well underway, precious metal market, well underway. It's probably got years to run.

I say that for two reasons. In the case of precious metals, primarily gold, there's a whole backdrop of record low interest rates, massive government intervention, no change in the fed view for at least two more years, maybe three. So the fundamentals underlying a higher gold price on therefore a higher silver price, a very strong. But silver, again, is not just a precious metals. It's an industrial metal.

And the industrial side of silver is really taking off. Silver is a green metal. You can't have an electronics industry without silver. You can't have solar photovoltaic power without silver. You can't have electric vehicles without silver.

You can't have 5G technology, telephonics without silver. And I think that there is an emerging appreciation finally amongst generalist, investors that silver is a go-to-metal in a green economy.

Unidentified Analyst: Okay. Thank you very much for your answer.

Bradford Cooke: Thanks for your questions.

Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Bradford Cooke, the CEO, for any closing remarks.

Bradford Cooke: Thank you, operator. And thanks all for listening in today. Obviously, this was a great year.

2020 was a great year for us, very satisfying after some challenging years. Q4 was a great way to finish the year, and I think it's a good guide to how we expect to do in 2021. Thanks again, stay tuned.

Operator: This concludes today's conference call. You may disconnect your lines.

Thank you for participating, and have a pleasant day.