TORONTO (miningweekly.com) – Midtier precious metals producer Endeavour Silver has started a significant expansion of its El Cubo mine, in Guanajuato state, Mexico, that will see the mine and plant ramp up output from the current 1 500 t/d to about 2 200 t/d.

The triple-listed Canadian company planned to add about 650 t/d of mine production from the V-Asunción mine area, which had thicker mineralised zones amenable to long-hole mining, and the Santa Cecilia mine area, which had narrower, but higher-grade veins, and would be processed at Endeavour's Bolañitos plant, 18 km away in the same district, which had available capacity and comparable circuits to El Cubo.

Output at Bolañitos would be reduced by a small amount to process more El Cubo ore.

The main reason for the mine expansion was to drive operating costs lower and generate free cash flow at El Cubo by taking advantage of the available plant capacity at Bolañitos. As a result, El Cubo would become the company's largest mine by metal output.

Endeavour had received the cooperation of the miners' union at El Cubo last week in finalising a labour contract that facilitated the mine expansion and helped establish the short- and long-term viability of the mine.

Meanwhile, Endeavour also announced on Tuesday that it had revised its silver output estimate for 2015 upwards by 11% to a range of 6.3-million ounces and 7-million ounces. Gold output was expected to rise 27% to the 60 000 oz to 66 000 oz range and silver equivalent output was now forecast at between 10.4-million ounces and 11.6-million ounces, using a 70:1 silver:gold ratio.

Further, the company expected all-in sustaining costs (AISC) net of gold by-product credits to be between $16/oz and $17.50/oz of silver this year. Despite the El Cubo mine expansion requiring an increase in mine development capital, management reported that it was able to reduce some minor capital projects to optimise AISC.

When noncash items such as stock-based compensation were excluded, the AISC net of gold by-product credits should pull back to $15.50/oz to $17/oz of silver.

Endeavour planned to invest $36.5-million on capital projects this year, an increase of $3.8-million from the original estimate, to support the mine expansion at El Cubo. The total included $30-million on mine development, infrastructure and exploration, $4.3-million on plant infrastructure, equipment and tailings, and $2.2-million on miscellaneous items.

The development capital would be used to access reserves and convert resources into reserves. Endeavour did not estimate reserves based on drill holes, only on underground workings.

The company had budgeted to spend $18.7-million at El Cubo, up from the original estimate of $15-million. Capital spending at the other operations remained unchanged at $4.9-million at Bolañitos, $12.5-million at Guanaceví and $400 000 for corporate items, all of which would be covered by Endeavour's expected full-year 2015 cash flow.

"We fulfilled our initial two-year capital expansion and operating turnaround plans at El Cubo in December, but with precious metal prices still falling, it was clear we needed to do more to make El Cubo a viable mine. The current mine expansion will bring operating costs down further and should allow El Cubo to start generating free cash flow,” Endeavour Silver CEO Bradford Cooke advised.