Why Silver is a Compelling Investment

• Silver prices have risen significantly in recent months, driven by demand from East Asian countries like China and India as well as increasing industrial applications such as solar panels
• Mexico remains one of the best jurisdictions in the world for silver mining, despite some perceived political risks, according to executives from Vizsla Silver and Endeavour Silver
• Both companies are rapidly advancing silver projects in Mexico and expect to become major silver producers in the coming years
• Vizsla Silver's Panuco project hosts a large, high-grade silver resource with significant expansion potential in an underexplored district
• Endeavour Silver is doubling production and halving costs with its new Terronera mine, with further growth expected from its project pipeline

Why Investors Should Consider Investing in Silver

Silver has long been considered a store of value and hedge against economic uncertainty, much like its more well-known precious metal counterpart, gold. However, silver also plays an increasingly important role as an industrial metal, with growing demand driven by the global transition to clean energy technologies. This combination of monetary and industrial demand drivers makes silver a compelling investment opportunity.

Recent Silver Price Moves

After trading relatively flat for much of 2023, the silver price has broken out to the upside in 2024, rising nearly $3 to over $30 per ounce as of late May 2024. According to Michael Konnert, CEO of Vizsla Silver, this move has been driven primarily by two factors.

First, there has been a strong physical demand for silver bullion from East Asian countries, particularly China and India. Konnert notes that at a recent silver conference, "They were going through all the supply and projects like Terronera and Vizsla is, for a few years out from that, but there are not very many new places for silver to come up as far as supply goes.

Second, the rapid growth of the solar photovoltaic industry is significantly increasing industrial demand for silver, which is a key component in solar panels. "The growth of solar panels increasing the demand for industrial cannot be understated," says Konnert. "It's quite incredible."

Structural Supply Deficit

This surge in demand comes when the silver market is entering a structural supply deficit. According to Dan Dickson, CEO of Endeavour Silver, this marks the third consecutive year of supply shortfalls. "It's the third year of a significant deficit for silver, and a big driver of that is this excess demand is churning through the above-ground stock-pile," explains Dickson.

"Some estimates a few years back said there's about two billion pounds above ground. We're probably more than halfway through that now."

This drawdown of above-ground inventories will likely accelerate, as very few new silver development projects are in the pipeline globally to offset depleting production from existing mines. This sets the stage for a continued tightening of the physical silver market in the years ahead.

The Appeal of Mexico for Silver Mining

Mexico is the world's largest silver producer, accounting for nearly a quarter of global output. The country has a centuries-long history of precious metals mining, yet modern exploration techniques have left much of its mineral potential untapped.

Vizsla Silver and Endeavour Silver have centered their growth strategies on developing and expanding silver operations in Mexico. The executives cite the country's prolific geology, well-established mining infrastructure and culture, competitive operating costs, and relative permitting speed as key advantages.

While Mexico is sometimes perceived as a higher-risk mining jurisdiction due to political electioneering rhetoric using resource nationalism as a calling card, Konnert and Dickson expressed confidence in the outlook under Mexico's new presidential administration. "The proof is contrary to the sentiment," argues Konnert. "It's pretty easy to pick on mining. We're an easy target, but if you're sitting there and thinking how to improve the lives of the citizens of a country, there's nothing better than mining to do that."

Consolidating a Historic Silver District

Vizsla Silver is rapidly advancing its flagship Panuco silver-gold project in Mexico's Sinaloa state. The company has consolidated a district-scale land package covering the past-producing Panuco-Copala silver camp for the first time."We only had about 30 drill holes historically, and we went in, and we made very large high-grade discoveries quite rapidly, and we continued to drill," recounts Konnert. "We've drilled like 400,000 meters now on the property." This aggressive exploration program has delineated a high-grade resource base of over 200 million silver equivalent ounces, with excellent potential for further growth. Vizsla aims to complete a preliminary economic assessment (PEA) on the project in the third quarter of 2023.

Importantly, the Panuco project benefits from extensive existing mining infrastructure, including underground development, roads, power, and a nearby workforce. This should enable a rapid and relatively low-capital restart of production. "We're looking at a range of 15 to 20 million ounces of production from just the Western portion of our project," says Konnert. "If you look at the district, the western portion where our resource sits on less than 10% of the known veins of the district. We make discoveries of veins all the time. The combination of high-grade resources, substantial exploration upside, and development optionality makes Vizsla Silver a unique silver investment opportunity. As the company transitions from explorer to developer to producer in the coming years, there is potential for significant rerating.

Endeavour Silver: A Growing Mid-Tier Producer

Endeavour Silver reported a 5% decrease in consolidated silver production (5,672,703 oz) and a 1% increase in gold production (37,858 oz) for the year ended December 31, 2023, compared to 2022. The company met its 2023 consolidated production guidance of 8.7 million oz AgEq, with silver production at the low end of guidance and gold production in the mid-range. Production at Guanacevi was impacted by mine re-sequencing changes required to focus on improved ventilation, resulting in lower-than-budgeted grades during Q2 and Q3.

In Q4 2023, direct operating costs per tonne increased by 7% to $144.59 compared to Q4 2022, due to a stronger Mexican peso, higher operating costs, and slightly lower processed tonnes. Consolidated cash costs per oz, net of by-product credits, increased 8% to $12.54, driven by lower silver production, decreased by-product gold sales, and higher direct operating costs, partially offset by lower royalties. All-In-Sustaining-Costs (AISC) increased by 11% per oz in Q4 2023 compared to Q4 2022, primarily due to decreased silver production at Guanacevi and higher cash costs, partially offset by slightly lower sustaining capital expenditures.

The $320 million project build is 90% complete, with plant commissioning expected in the fourth quarter of 2024. First production is slated for early 2025, driving a step-change in Endeavour's production scale and unit costs.

"Terronera effectively doubles our production, takes us to 15 million ounces silver equivalent, but most importantly cuts our cost profile in half," highlights Dickson. "The gold production out of Terronera will pay for all the silver."

Beyond Terronera, Endeavour has a pipeline of development projects to fuel further growth, including the Parral and Pitarrilla projects. Parral hosts oxide and sulfide silver mineralization with the potential for a mix of open-pit and underground mining. With higher grades, Pitarrilla could become the larger operation, with a resource base already approaching 600 million ounces of silver. "Our goal is to be a senior silver producer when we reach that point," Dickson affirms. The combination of a solid production base, near-term growth from Terronera, and a stocked development pipeline makes Endeavour an attractive mid-tier silver producer for investors.

The Investment Thesis for Vizsla Silver and Endeavour Silver

• Rising industrial demand and declining mine supply are likely to drive silver prices higher in the medium to long-term
• Mexico remains one of the most attractive jurisdictions for silver mining globally
• Vizsla Silver offers high-grade exploration and development upside with the potential to become a major new silver producer rapidly
• Endeavour Silver provides leverage to silver prices as an established producer with near-term growth and a robust project pipeline
• Investors can gain silver exposure through buying shares of Vizsla Silver (VZLA) and Endeavour Silver (EXK) on the NYSE

The silver market appears poised for a sustained period of strength, driven by growing industrial demand, particularly from the solar energy sector, and constrained global mine supply. Against this constructive backdrop, silver-focused mining companies operating in safe jurisdictions offer investors strong upside leverage.

Vizsla Silver and Endeavour Silver stand out and are well-positioned to benefit from the silver bull market. Vizsla controls a vast, high-grade silver district in Mexico with the potential to grow resources and become a significant new producer rapidly. Endeavour has a solid production base, low-cost development-stage project, and potential pipeline to potentially become a senior silver mining company. With their experienced management teams, strong financial positions, and shares trading on the NYSE, both Vizsla Silver and Endeavour Silver should be on the radar of investors looking for exposure to silver. Real teams, real assets, doing things really well.