Meghan Brown – Director, IR Godfrey Walton - President and COO Dan Dickson - CFO

Benjamin Asuncion - Haywood Securities Chris Thompson - Raymond James

Welcome to the Endeavour Silver Fourth Quarter 2014 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]. At this time I would like to turn the conference over to Meghan Brown, Director of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to the Endeavour Silver Fourth Quarter and Year-End Conference Call. On the line today we have the company's President and Chief Operating Officer, Godfrey Walton as well as CFO, Dan Dickson and our VP Corporate Development, Terry Chandler. Before we get started I am required to remind you that certain statements on this call will contain forward-looking information within the meaning of applicable securities laws. These may include statements regarding Endeavour's anticipated performance in 2014 and future years, including revenue and cost forecasts, silver and gold production, grades and recoveries and the timing and expenditures required to develop new silver mines and mineralized zones. The company does not intend to and does not assume any obligation to update such forward-looking statements or information other than as required by applicable law. With that, I will turn the call over to Endeavour's CFO, Dan Dickson.

Thanks Meg and thanks to everybody joining our call here to talk about our 2014 financial information. We want to apologize Brad Cooke’s out on personal leave just for this week, attending matters back east with his family. We wish him the best and he should be back in the office on Monday. What we try to do with these calls is give our investors the opportunity to ask questions and clarify detail that's in our financial statements or in the MD&A at this time. I'll touch on some highlights from Q4 and the year and then I think we'll open up for questions. In Q4 we produced 2 million ounces of silver and 15,000 ounces of gold. The silver was up compared to 2013 and gold was slightly down for silver equivalent of 3.1 million ounces of silver. Cash costs in Q4 were $8.33 on a consolidated basis. That's up 12% from prior year and all-in sustaining cost was up 8% from prior year to $15.37. On an annualized basis, cash cost came in at $8.31 ahead of our target that we said it in January of 2014 and all-in sustaining costs came in at $16.79 again beating targets for 2014. Total production for 2014 was 7.2 million ounces of silver, ahead of guidance and gold fell a little bit short coming in at just under 63,000 ounces of gold. Some of the other highlights that we have for 2014 was El Cubo we were able to ramp up the 1500 tonnes per day through the plant in December. It was reflected in the production out at El Cubo, clearly in Q2, and Q3 we struggled a bit but we're back on track Cubo. Cost per ton at Cubo in Q4 came in at $90 per tonne. And of course we continue to delineate our new discoveries at all three mines to make sure that we have further production going for long time at each operation. On an annualized basis we had a net loss of $74.5 million. This is reflective of an impairment that we've taken on Cubo reflecting the lower price environment that we were in 2014. On an adjusted earnings basis, we had a loss of $17.2 million compared to last year earnings of $11.1 million, again primarily reflective of lower silver and gold prices, new mining duty taxes in Mexico offset by our lower production cost. So with that I'm going to open up to questions as Meg alluded to we do have our COO, Godfrey Walton here and our Head of Corporate Development, Terry Chandler. So with that operator I'd ask if we can open up for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from Benjamin Asuncion of Haywood Securities. Please go ahead.

Good afternoon guys, thanks for taking my questions here. Just a few things here on operating cost, I guess just trying get a handle on what the impact of favorable FX movements were on your operating costs if you were to look at it on a per tonne basis, would you build the break that apart by asset?

Yeah, it's actually very similar to each asset. About 60% to 65% of our cost are incurred in denominated in pesos and related to pesos. Of that 65% half of that is labor. So 33% 34% and that's the labor across all three operations are very similar ones. 30% of our cost are labor, the other two are 32% and 33% respectively. So the impact from an FX standpoint in Q4 was about $4 to $4.50 per tonne give or take at each operation.

Okay perfect. And would you able to sort of just touch on the guidance that you gave at the beginning of the year, I think your global op cost were on a consolidated basis 90 to 94. Could you give us a breakdown of what that was on a per asset and maybe what the FX rate, like what the implied peso rate was used when you set those?

Yes, the implied rate that we used when we set that was 14.5. Clearly we're above 15, 15 to 1 15.5 to 1 was what we set it that. The breakdown for cost per tonne was $86 and change at Cubo, $85 at Bolanitos and I want to say $104 at Guanacevi. The impact that of today's FX rate would be on that is minor, I would say it's 2% to 3%. So we're probably ahead from that standpoint but again it's pretty to tell for the year and then even for Q1, 2015.

Okay and then just sort of the last thing on some housekeeping things. Just in regards to some of the taxes that came through in the fourth quarter, can we just retouch on what your tax loss carry forwards are at each of the operations?

Yeah, we did have a higher current tax expense in 2014 than what some people would expect with the earnings level. In 2014 effective January 1st, Mexico reformed their taxes. Prior to 2014 we were able to consolidate tax returns in Mexico and effective, like I say 2014 and going forward, the consolidation regime does not work for Endeavour. So each entity and each mine which is held in different entity effectively filed their own tax returns and Guanacevi we have no tax loss carry forwards. Bolanitos we have no tax loss carry forwards, at Cubo, we have $95 million of tax loss carry forwards.

Okay, perfect and then just one last thing then I guess at Bolanito based on what your internal projections are for like guided cost and production, are you looking at paying taxes or does that imply taxes then for Bolanitos in 2015.

Yeah we do expect to pay taxes in 2015 at Bolanito and Guanacevi. El Cubo obviously we have a lot of protection with those loss carry forwards especially at these prices. So Bolanitos and Guanacevi will have taxes provided we stay at these silver and gold prices. I should add that to just extend on that your second question. We did pay more current taxes also because of that catch up from the deconsolidation. So in the past we were able to defer revenue year-to-year-to year, with the new tax rules we are unable to do that. We had effectively had a catch up of about $7 million of taxes paid to the Mexican government because of that change in that deconsolidation regime.

Okay. Perfect. Thanks a lot Dan and that's it for me right now.

Thanks Ben.

[Operator Instructions]. The next question is from Chris Thompson of Raymond James. Please go ahead.

Good afternoon guys. Thanks for taking my question. I've got a question or two here relating more to operations than anything else. So just looking at El Cubo at the moment, I know you mentioned, I think earlier this year plans to optimize the mine. It's good to see obviously that throughputs about 1,500 tonne a day. I guess the big question here is that sustainable?

Hi, Chris. This is Godfrey. Yes, it is sustainable. We managed to continue that and actually increase production there in 2015. So it is sustainable and we're working on a variety of plans that we will be coming out with sometime later on in Q1.

Right okay. And can you just remind me again Godfrey the high grades site that you're hoping on developing into how is it going, can you give us a sense of accomplishment there?

Well, there is actually two areas that we're really focusing on one is Santa Cecilia, which are narrow veins but very high grade and we looked at increasing our production from there. And then the new area, Villalpando at Asuncion we've got some good development going on in that area and it's helping us be able to meet those initial guidance of the 1,500 tonnes a day.

Okay, right. And what sort of grade, I mean should we be expecting I guess on a forward going basis quarter-by-quarter for this year?

I think we guided 134 and 1.6 - 1.34…

Yeah, the guidance is 125 and 1.68 and the variability between quarter is like minimal Chris and cannot even elaborate on that earlier question when we came out with guidance in end of January, we used $18 and 12.60 gold as our budget and projections and since we're in a $16 silver environment right now and we have that fear so to speak when we're going through the budgeting process in our sensitivity is as we realize that Cubo at $18 was in a difficult situation from a positive cash flow standpoint. We thought we could get there but it didn't give us a lot of room. So now that we're in a $16 silver price environment albeit still 1200 for gold is we've been working on these alternative plans to see if we can create a situation where we can have at least breakeven cash flow if not positive cash flow at Cubo.

That’s good news and looking at the recoveries, any chance of getting a better gold recovery here at El Cubo?

I think we have been sort of shaving that and getting a little bit better but I think those are about where they are going to sit.

And just on to Guanaceví at the moment, Mala Noche, can you give us an update there and do you see that fitting into the mine plan any time soon?

Mala Noche, I guess with the current prices it's not being brought into the mine plan. We're looking for little bit higher prices before we start development. There is about, I guess about eight months of ramp development before we get into the ore. So I don't see it actually being in production this year. We're focusing our production this year on Santa Cruz and Porvenir Cuatro and North Porvenir.

Fantastic, then just finally just moving over to Bolañitos, Godfrey can you give us a sense just of the mine plan this year, what veins are you shutting down, give us a sense as far as the split as far as mining production per vein percentage wise.

Per vein, well I would say the first four to five months, most of the mineral will be coming from the La Joya, Daniela, Karina area with maybe 25% coming out of La Luz. After mid-year the Daniela, Karina, La Joya will be actually shutting down and 100% of that all will be coming from La Luz.

Okay, thank you.

So we expect to have the ramp that we’ve been driving from the plant side to La Luz actually hit the La Luz vein in another month, month and a half and that will give us the access that we need to be able to keep the tonnage moving forward.

Great, Godfrey, - thank you very much, thanks guys.

Okay.

Thanks Chris.

Next is a follow up question from Benjamin Asuncion of Haywood Securities. Please go ahead.

Hey, guys just wanted one thing here, I guess on development front, can you just walk us through what permit you have for San Sebastian, the current plan in terms of timing for the study on which we should look for, I guess the decision point and what’s your thoughts of its advancement, I guess in the context of where we are in around the $16 silver?

Okay Ben thanks for the question. This is Godfrey we have MOU [ph] which permitted a 500 tonne a day operation to actually go into production. We need what’s called the [indiscernible] which is a change of use of soil. We’re in the process of applying for those. And we estimate it will be about six months permitting timeframe to receive those permits. We have done the mine plan for the PFS, we’ve done a lot of metallurgical testing, we’re doing another round but we know we’ve got good recoveries up in the 85% to 90%, averaging around 88. So we’re just finishing off a few of those details. We will be drilling some more holes to tighten up the resource and move more within to an indicative category. And we’re expecting to have the PFS ready by midyear, so that we can go to the Board with a revised plan and that’s something that’s economic at these prices, in time to get all the approvals we need, get the financing in place when the permits are issued.

Okay so the initial scale and I guess we’re talking about some different alternatives and I guess the footprint design for larger scale but the additional permits that you have would be that 500 tonnes a day?

Sorry, the MOU is for 500 tonnes a day. The initial plans has always been to go in at a 1,000 but the footprint we will take 2,000, so expand it and the reason we went to MOU at 500 was to expedite that process because actually expanding it from 500 to 1000 is far simpler than going directly to the 1,000 or even to the 2,000 tonne a day operation.

Okay and can you provide any sort of general ballparks in terms of order of magnitude for what the CapEx would look like for this?

Well we’ve been looking at around $70 million as the number and that seems pretty firm and that’s what we’re talking to people about as a potential financing.

We have Ben, we’ve engaged external engineering firms to help with that process. I mean we still have a little backend work to do to completely firm it up but I think we’re down the path but we know what we’re doing and where we have to source some of that stuff from. We do have experienced, from expanding the plant at Bolañitos and rebuilding the El Cubo plant. So we know what plants cost and we know how to do it. We have the right construction companies and engineering companies that have delivered with that rate around the same range that we’re looking at. I think through the fourth quarter when we started looking at it we had some ideas and good estimates in our heads and I think going through this process we firmed up those estimates and are a lot more comfortable with it. But we still have a little bit more work to do that before we publish any numbers related to that stuff and let’s just start finish off the back and make sure we cross our T’s and dot our I’s.

Okay and just in terms of the financing side I guess any sort of excess capacity with your current lenders to absorb what you would need for CapEx?

At this point we have just started looking at how to finance what we need. Obviously at today’s prices we have less cash flow available to take from our current operations to build San Sebastián. So we’re looking at all buckets of alternatives to see what we need and that includes talking with our current lender, Scotia [ph] what they have but we’re too early in the process to kind of comment on where we are down that road.

Okay, perfect, well thanks a lot, Dan and Godfrey.

Thanks Ben.

There are no more questions at this time. I’ll hand the call back over to Dan Dickson for any closing comments.

Thank you, operator. I want to thank everybody for coming. We hope to put out some news regarding exploration in the coming months and then we’ll have our Q1 that we will be rolling into sooner than expected for the accounting group like myself. So have a good day and talk to you soon.

This concludes today’s conference call. You may disconnect your line. Thank you for participating and have a pleasant day.