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Interview with Brad Cooke of Endeavour Silver (EDR.TO)

Jim Letourneau: “Good
morning everyone and it is Friday January 25th 2008 and we
are speaking with Bradford Cooke from Endeavour Silver, the trading
symbol for Endeavour Silver is EDR and welcome to our little podcast
Brad.”



 



Bradford Cooke: “Thanks Jim.”



 



Jim Letourneau: “Can
you tell us a little bit, this should probably step back a bit and
talk about the silver market first and where do you see, you know,
precious metals in general and silver heading in
the medium to long term future.”



 



Bradford Cooke: “I
would be happy to give our overview of the silver markets going
forward.  First a quick look back.  You know in this first leg of the
commodity cycle that was triggered by the moving gold in 2001 and the
moving silver in 2003, um, even though, ah, the precious metals have
performed wonderfully well these last few years, I think virtually
every other base metal are performing.  And strategic metals like
uranium and tungsten.  And, there’s a good reason for that.
The dominant investment theme in the last few across all of the
commodities has been Asian growth striving physical demand and
therefore, things that were used were demand driven market and
therefore outperformed the precious metals, which primarily gold in
particular, is not used to basically a proxy on inflation.  And
therein lies the transition to our outlook going forward.  I think
last year, in hindsight will be viewed as a transition
year where the precious metals did outperform the base metals.  I
think virtually every one of the base and strategic metals had a
topping out and a major correction last year, whereas with gold and silver
closed the year up.  Like the numbers were something like 36% up for
gold and 14% up for silver.  I think that’s a dominant theme
going forward.  The new investment theme is looming inflation partly
because of the approach that the U.S. has taken to re-liquefying the
U.S. economy and of course that would ripples throughout the
world.  So, U.S. dollar denominated metal prices for precious metals
should have continued to outperform for several years now.  They’re
base metal counterparts.  What does that mean short term?  We
certainly are modest bulls on gold and silver and I think for silver,
we should see a test of $18 this year, perhaps even $19 or
$20.  Ah, as you know silver is more volatile than gold so, if there
would be runoff, there’s always a sling shot.  But I wouldn’t
be surprised if we test it $14, $15 again, perhaps even soon, but we’re
used to this now.  And I think silver represents one of the most
attractive investment sectors out there.”



 



Jim Letourneau: “Well
that’s a very good explanation and I don’t think too
many people talk about precious metals. They typically focus on the
precious
metal story and they don’t compare it to other things and
you know, when you point out well, lead, actually increased by a higher
precentage than the price of gold they tell you to shut up and go away.”




 


Bradford Cooke:
(Laughs)




 


Jim Letourneau: “So
that was a very well-reasoned explanation of what’s happening
and I would agree.  We’re starting some things that were
supporting what you just said.  Now, how did you get involved in the
silver business?  What made you decide to get
involved to silver?”




Bradford Cooke: “Having
been in the mining sector for 30 years and in the Junior Resource
Sector for 20 years, um my associate and I got Godfrey Walton recognized in 2002-2003 that there was a unique and strategic timing
to getting into silver.  You know, we’ve been through cycles in
the 80s and 90s and almost every single precious metal cycle I’ve
been in, gold moves first, silver follows.  That’s why silver's called the poor man’s school.  While gold started moving off
of its $255 base in March of 2001, here we were sitting in our offices
in early 2003, and silver was still flat on its back at $4-4.50 an
ounce.  That kind of certainty where there’s an opportunity to
get into a commodity that’s going to move up doesn’t come
along very often and so we resolved to form a company, now called the
Endeavour Silver Corp., and to go looking for strategic silver assets
in Mexico and as you know we did Endeavour, finally acquired our
first strategic silver acquisition in early 2004 that became our first
operating mine in Guanacevi mines project and last year of course,
we’ve had our second in Guanajuato and Endeavour moved to
the forefront of emerging silver producers.”




 


Jim Letourneau: “Okay.
Now that, I guess, but my big question is, why did you decide on
looking for silver in Mexico?”



 



Bradford Cooke: “Well,
once we get decided that we wanted to be in silver, then there’s
really only two countries that dominate mine production, have done
for centuries in Peru and Mexico.  Going all the way back
to the Spanish days, these two countries were the backbone of the
Spanish empire, so to speak.  And there are many things mines Peru
and Mexico.  Once you start doing your homework, although it became
clear to us that Mexico would be closer being part of NAFTA
having had an economic boom in recent years, thanks to NAFTA.
And having restricted foreign ownership and mining until 1993
represented a huge exploration opportunity for us.  And so given that
we though the exploration potential and political risk, the economic
factors were all, more attractive in Mexico than Peru, we went
to Mexico.”



 



Jim Letourneau: “Okay.
Now, Endeavour, you know, from what I can see, there’s no
shortage of Canadian Venture list of companies that
have gone to Mexico.  Then you guys were probably one of the earliest
and you definitely have pronged at the most, actual silver
production.  Um, can you talk about the growth in your production
from Guanacevi and how your new acquisition might even add more
silver production in the future?”



 



Bradford Cooke: “Ah,
yes.  We’ve enjoyed one of the most aggressive production
growth profiles in the sector from scratch in 2003 to I think 350,000
ounces on the back of 3 months production in 2004.  That then
quadrupled in two years to 1.35 million ounces in 2006 up
another 58% last year to 2.1 million ounces.  We’ll come with
our forecast here shortly for 2008, but don’t be surprised if
it’s in the same range of growth as last year, 50% +/- and
then, just to get to the capacity of our two operating mines, and two
operating plants, we still have a 250% gain in production.  So from
2 million ounces last year to a 5-million ounce installed capacity,
it will probably take us another two years to get to capacity but
that kind of production is really hard to find in the business.”



 



Jim Letourneau:
“Definitely.  Now, what are some of the bottlenecks or
challenges that you face as a growing silver producer and that’s
a pretty fast growth rate?”



 



Bradford Cooke: “Well,
I think as all mining companies discovered in the last three years availability of skilled, experienced management and laborers
becoming an ever growing issue.  There’s just not enough trained
miners and engineers and geologists and there’s too many
companies that need them. So that’s something that we’ve
dealt with, particularly within the last year by putting two
executive search companies on  basically, retainer.  So that we get to see everybody
they produce in mining, exploration, accounting, we get a look
at all the people that they came up with so that we can slowly, but
surely, build and add better quality to our existing team.
The other main area, I think investors are familiar with this rising costs,
capital costs and operating costs have been a major issue for many
companies and we’re not an exempt from that.  We saw our cash
cost spike up last year, but fortunately, the trend towards year end
was coming back down again, so we feel that there were some specific
issues in our operating cost that we can manage and control.  And we’re
still forecasting lower costs this year than last year.  And ultimately in the lower quartile, which is the lowest 25% from the
sector at capacity.”



 



Jim Letourneau: “We’ve been speaking with Brad Cooke from Endeavour Silver, the
symbol is EDR on the Toronto Stock Exchange.  Brad now for investors
who are kind of taking a long term view, and they look at
the,  price chart of Endeavour Silver and they see that
it has pulled back a little bit and I see the price of silver moving
up.  What would you tell the long term investors why should they
invest in Endeavour Silver?”



 



Bradford Cooke: “Well,
first, you want to have in your portfolio something silver and
there’s three or four ways you can expose your portfolio to
silver.  You can buy coins or bouillon, that’s, I think the
more arduous way to do it.  You can buy…”



 



Jim Letourneau: “That’s
heavy.”



 



Bradford Cooke: “You
can buy the ETF if you want, liquid access
to the silver market.  The ETF based they just trades like
silver that had turned liquid.  And if you want to go beyond that
though and say okay, I know I’ve got silver, I want silver that
outperforms, well then you have to look to growth and in the major
silver producers, growth would typically be measured either in 10% or
20% increases of resources and production per year or more typically
through acquisitions of other companies or other mines that increased
their major production and resources.  The juniors of course,
Endeavour’s one of the junior producers, are lucky enough
that starting from a small base, they can grow much more quickly,
organically, that is by identifying and building that capacity and
new discoveries and then mining new discoveries to fill the plants.
So that’s really the Endeavour business model.  We got
started in Mexico thinking as explorationists, that we should find
an attractive prospect and see if we got lucky and it turns out our
number 1 man in Mexico is a mining engineer with 34 years experience
in Mexico and he said why don’t you look at these mines that
have infrastructure and they are cheap in 2003-2004, these things were for
sale and they were cheap.  And of course, you still have to have
resources and resource potential, but we were, I think fortunate in
being one of the first to to tour mature  Silver Mine districts
in Mexico looking for fully built out and permitted mines and plants
that were for sale.  And of course, ah, they go to Guanacevi and then
the Bolanitos Mines were acquired and we’re probably running
out of opportunities now that best ones are most likely gone, but…”



 



Jim Letourneau: “The
cats are out of the bag as they say?”



 



Bradford Cooke: “Yeah,
the cat's are out of the bag, there are several other companies who have
borrowed from our business model quite successfully.  And which just
shows you the potential that existed in Mexico at that time.”



 



Jim Letourneau: “But
you had first pick, I would assume?”



 



Bradford Cooke: “Yes.
I think there’s only one of two companies are going after
fully built and permitted assets back in 2003-2004.  It’s
changed now.”



 



Jim Letourneau: “Well,
it’s been real success story so far and you know we’re
still in the early stages of the silver bull market.  Brad, is
there anything you’d like to add?”



 



Bradford Cooke: “Well
yes.  I’ve talked about um, our company being able to grow by
buying strategic assets and then unfolding their full potential.
That’s organic growth.  I would be remiss if I didn’t
point out that we always are looking at new acquisitions.  Ah, we
probably introduce some flexibility now and I think 2008 would be the
year the Endeavour acquires mine number 3 or possibly mine number 4.
That’s on the top of my list of things to do this year in
addition to maximizing the performance of our two mines.”



 



Jim Letourneau: “Well,
I know you’re a busy man, but thank you very much for your time
today.  Once again, we were speaking with Brad Cooke from Endeavour
Silver.  Thank you very much, Brad.”



 



Bradford Cooke: “Thank
you.”



 



Jim Letourneau: “That
concludes this episode of the Big Picture Speculator Podcast.  Thank
you very much to Brad Cooke of Endeavour Silver, symbol EDR on
Toronto Stock Exchange.  If you want to listen to more podcasts,
check out www.bigpicturespeculatorblog.com.



 














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