EX-99.1 2 exhibit99-1.htm EXHIBIT 99.1 Endeavour Silver Corp.: Exhibit 99.1 - Filed by newsfilecorp.com


ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(unaudited – prepared by management)
(expressed in thousands of US dollars)
 

          March 31,     December 31,  
    Notes     20 18     20 17  
ASSETS                  
Current assets                  
   Cash and cash equivalents       $ 36,560   $  38,277  
   Restricted cash         -     1,000  
   Other investments         148     168  
   Accounts receivable   4     35,241     34,012  
   Inventories   5     12,344     13,131  
   Prepaid expenses         1,983     1,911  
Total current assets         86,276     88,499  
Non-current deposits         610     610  
Deferred income tax asset         1,913     655  
Mineral properties, plant and equipment   7     89,628     88,816  
Total assets       $ 178,427   $  178,580  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Current liabilities                  
   Accounts payable and accrued liabilities       $ 18,285   $  19,068  
   Income taxes payable         1,354     3,185  
Total current liabilities         19,639     22,253  
                   
Deferred lease inducement         229     236  
Provision for reclamation and rehabilitation         8,020     7,982  
Deferred income tax liability         1,243     1,592  
Total liabilities         29,131     32,063  
                   
Shareholders' equity                  
Common shares, unlimited shares authorized , no par value, issued
and outstanding 127,488 ,410 shares (Dec 31, 20 17 - 127,488,410 shares) 		  Page 4     450,740     450,740  
Contributed surplus   Page 4     9,201     8,747  
Accumulated comprehensive income (loss)   Page 4     -     127  
Retained earnings (deficit)         (310,645 )   (313,097 )
Total shareholders' equity         149,296     146,517  
Total liabilities and shareholders' equity       $ 178,427   $  178,580  

Commitments and contingencies (Notes 7 and 13)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 2
   


ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
(unaudited – prepared by management)
(expressed in thousands of US dollars, except for shares and per share amounts)
 

          Three months ended  
          March 31,     March 31,  
    Notes     2018     2017  
                   
Revenue       $  40,330   $  36,441  
                   
Cost of sales :                  
   Direct production costs         25,806     24,048  
   Royalties         698     440  
   Share-based payments   8     37     -  
   Depreciation and depletion         9,759     4,113  
   Write down of inventory to net realizable value   5     755     -  
          37,055     28,601  
Mine operating earnings         3,275     7,840  
Expenses :                  
   Exploration   9     2,023     3,336  
   General and administrative   10     2,318     1,955  
          4,341     5,291  
Operating earnings (loss)         (1,066 )   2,549  
Finance costs         49     236  
                   
Other income (expense):                  
   Foreign exchange         2,273     2,147  
   Investment and other         69     77  
          2,342     2,224  
Earnings (loss) before income taxes         1,227     4,537  
Income tax expense (recovery):                  
   Current income tax expense         688     299  
   Deferred income tax expense (recovery)         (1,786 )   (1,797 )
          (1,098 )   (1,498 )
                   
Net earnings (loss) for the period         2,325     6,035  
                   
Other comprehensive income (loss), net of tax                  
   Unrealized gain (loss) on other investments         -     17  
Total other comprehensive income (loss) for the period         -     17  
                   
Comprehensive income (loss) for the period       $  2,325   $  6,052  
                   
Basic earnings (loss) per share based on net earnings       $  0.02   $  0.05  
Diluted earnings (loss) per share based on net earnings   8 (e) $  0.02   $  0.05  
                   
Basic weighted average number of shares outstanding         127,488,410     127,095,764  
Diluted weighted average number of shares outstanding   8 (e)     127,827,863     128,523,833  

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 3
   


ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited – prepared by management)
(expressed in thousands of US dollars, except share amounts)
 

                            Accumulated              
                            Comprehensive     Retained     Total  
          Number of     Share     Contributed     Income ("OCI")     Earnings     Shareholders'  
    Note     shares     Capital     Surplus     (Loss)     (Deficit)     Equity  
                                           
Balance at December 31, 2016         127,080,264   $  449,594   $  6,689   $  44   $  (323,068 ) $  133,259  
Exercise of options   8 (a)   28,000     109     (35 )   -     -     74  
Share based compensation   8 (a)(d)   -     -     396     -     -     396  
Unrealized gain (loss) on other investments         -     -     -     17     -     17  
Earnings (loss) for the year         -     -     -     -     6,035     6,035  
Balance at March 31, 2017         127,108,264     449,703     7,050     61     (317,033 )   139,781  
                                           
Exercise of options   8 (a)   32,000     98     (30 )   -     -     68  
Issued for performance share units   8 (d)   193,825     439     (439 )   -     -     -  
Issued on acquisition of mineral properties, net         154,321     500     -     -     -     500  
Share based compensation   8 (a)(d)   -     -     2,453     -     -     2,453  
Unrealized gain (loss) on other investments         -     -     -     138     -     138  
Realized (gain) loss on other investments         -     -     -     (72 )   -     (72 )
Expiry and forfeiture of options         -     -     (287 )   -     287     -  
Earnings (loss) for the year         -     -     -     -     3,649     3,649  
Balance at December 31, 2017         127,488,410     450,740     8,747     127     (313,097 )   146,517  
                                           
Share based compensation   8 (a)(d)     -     -     416     -     -     416  
Unrealized gain (loss) on other investments tranferred to retained earnings       -     -      -      (127 )   127     -  
Realloction of performance share unit liability   3(a)   -     -     38     -     -     38  
Earnings (loss) for the year         -     -     -     -     2,325     2,325  
Balance at March 31, 2018         127,488,410   $  450,740   $  9,201   $  -   $  (310,645 ) $  149,296  

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 4
   


ENDEAVOUR SILVER CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(unaudited – prepared by management)
(expressed in thousands of US dollars)
 

          Three months ended  
          March 31,     March 31,  
    Notes     2018     2017  
                   
Operating activities                  
Net earnings (loss) for the year     $  2,325   $  6,035  
                   
Items not affecting cash:                  
   Share-based compensation   8     4 16     337  
   Depreciation and depletion   7     9,837     4,182  
   Deferred income tax expense (recovery)         (1,786 )   (1,665 )
   Unrealized foreign exchange loss (gain)         (50 )   (462 )
   Finance costs         38     236  
   Write off of mineral properties         -     233  
   Write down of inventory to net realizable value   5     755     -  
   Unrealized loss (gain) on other investments         20     -  
Net changes in non-cash working capital   11     (3,536 )   771  
Cash from operating activities         8,019     9,667  
                   
Investing activities                  
   Property, plant and equipment expenditures   7     (10,965 )   (9,368 )
Cash used in investing activities         (10,965 )   (9,368 )
                   
Financing activities                  
   Repayment of credit facility         -     (2,500 )
   Restricted cash         1,000     -  
   Interest paid         -     (167 )
   Exercise of options   8 (a)   -     74  
Cash from (used in) financing activities         1,000     (2,593 )
                   
Effect of exchange rate change on cash and cash equivalents       229     462  
                   
Increase (decrease) in cash and cash equivalents         (1,946 )   (2,294 )
Cash and cash equivalents, beginning of year         38,277     72,317  
Cash and cash equivalents, end of year     $  36,560   $  70,485  

Supplemental cash flow information (Note 11)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 5
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

1.

CORPORATE INFORMATION

   

Endeavour Silver Corp. (the “Company” or “Endeavour Silver”) is a corporation governed by the Business Corporations Act (British Columbia). The Company is engaged in silver mining in Mexico and related activities including acquisition, exploration, development, extraction, processing, refining and reclamation. The Company is also engaged in exploration activities in Chile. The address of the registered office is #1130 – 609 Granville Street, Vancouver, B.C., V7Y 1G5.

   
2.

BASIS OF PRESENTATION

   

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and do not include all of the information required for full annual financial statements.

   

The Board of Directors approved the condensed consolidated interim financial statements for issue on May 2, 2018.

   

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

   

These consolidated financial statements are presented in the Company’s functional currency of US dollars and include the accounts of the Company and its wholly owned subsidiaries: Endeavour Management Corp., Endeavour Zilver SARL, Endeavour Gold Corporation S.A. de C.V., EDR Silver de Mexico S.A. de C.V. SOFOM , Minera Santa Cruz Y Garibaldi S.A de C.V., Metalurgica Guanaceví S.A. de C.V., Minera Plata Adelante S.A. de C.V., Refinadora Plata Guanaceví S.A. de C. V., Minas Bolañitos S. A. de C.V., Guanaceví Mining Services S.A. de C.V., Recursos Humanos Guanaceví S.A. de C.V., Recursos Villalpando S.A. de C.V., Servicios Administrativos Varal S.A. de C.V., Minera Plata Carina SPA, MXRT Holding Ltd., Compania Minera del Cubo S.A. de C.V., Minas Lupycal S.A. de C.V., Metales Interamericanos S.A. de C.V., Oro Silver Resources Ltd., Minera Oro Silver de Mexico S.A. de C.V., MXRT Holdings Ltd., Terrornera Mining Company and Terronera Precious Metals S.A. de C.V. All intercompany transactions and balances have been eliminated upon consolidation of these subsidiaries.

   
3.

SIGNIFICANT ACCOUNTING POLICIES

   

The accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in the Company’s annual audited consolidated financial statements as at and for the year ended December 31, 2017 except as described below.

   

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the annual consolidated financial statements as at and for the year ended December 31, 2017 and accordingly, should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended December 31, 2017.


  (a)

Accounting standards adopted during the year

Amendments to IFRS 2, Share-based Payment (“IFRS 2”)
On June 20, 2016, the IASB issued amendments to IFRS 2 clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of a transaction from cash-settled to equity settled.

The amendments apply for annual periods beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied prospectively. Retrospective or early application is permitted if information is available without the use of hindsight. The Company has adopted the amendments to IFRS 2 in its financial statements for the annual period beginning on January 1, 2018 on a prospective basis.

The Company has Performance Share Units (“PSU”) with a net settlement feature, which permits cash settlement for withholding tax obligations. The expense for the PSUs has previously been bifurcated with the cash settlement portion of the expense recognized as a liability until settlement, and the remaining expense allocated to Contributed Surplus. Upon adoption of the amendments to IFRS 2, the PSU liability at January 1, 2018, the liability classified portion of $38 was reallocated to Contributed Surplus.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 6
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

IFRS 9 Financial Instruments (“IFRS 9”)
In November 2009, the IASB issued IFRS 9 as the first step in its project to replace IAS 39, Financial Instruments: Recognition and Measurement. On July 24, 2014 the IASB issued the complete IFRS 9. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on an entity’s business model and the contractual cash flows of the financial asset.

Classification is made at the time the financial asset is initially recognized, namely when the entity becomes a party to the contractual provisions of the instrument.

IFRS 9 amends some of the requirements of IFRS 7, Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in other comprehensive income, and guidance on the measurement of financial liabilities and de-recognition of financial instruments. The mandatory effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018 with early adoption permitted, and must be applied retrospectively with some exemptions permitted.

As a result of the adoption of IFRS 9, we have changed our accounting policy for financial instruments retrospectively.

The change did not result in a change in carrying value of any of our financial instruments on transition date. IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial recognition. The adoption of the expected credit loss impairment model did not have a significant impact on the Company’s financial statements.

The Company’s financial instruments are accounted for as follows under IFRS 9 as compared to the Company’s previous policy in accordance with IAS 39.

    January 1, 2018
    IAS 39 IFRS 9
       
  Assets    
  Cash and cash equivalents Amortized cost Amortized cost
  Restricted cash Amortized cost Amortized cost
  Trade and other receivables (other than derivatives) Amortized cost Amortized cost
  Trade receivables (derivative component) Fair value through profit or loss Fair value through profit or loss
  Marketable securities Fair value through other comprehensive income Fair value through profit or loss
  Liabilities    
  Accounts payable and accrued liabilities Amortized cost Amortized cost

Under IFRS 9, the Company’s equity marketable securities are designated as financial assets at fair value through profit or loss. For equity instruments not held for trading, we may make an irrevocable election at initial recognition to recognize changes in fair value through other comprehensive income rather than profit or loss. We did not make any such election upon adoption of IFRS 9.

IFRS 9 does not require restatement of comparative periods. Accordingly, the Company has reflected the retrospective impact of the adoption of IFRS 9 due to the change in accounting policy for marketable securities as an adjustment to opening components of equity as at January 1, 2018.

The fair value of marketable securities is $168 under both IAS 39 and IFRS 9 as at January 1, 2018, the date of initial application of IFRS 9, and is presented in Other Investments in the consolidated balance sheet. On adoption, the unrealized gain in fair value of $127, previously recognized in accumulated other comprehensive income has been reallocated to retained earnings.

As a result of the adoption of IFRS 9, the Company’s accounting policy for financial instruments has been updated as follows:

Financial Instruments
The Company recognizes financial assets and financial liabilities on the date the Company becomes party to the contractual provisions of the instruments. A financial asset is derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial assets or when cash flows expire. A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 7
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

We classify and measure financial assets (excluding derivatives) on initial recognition as described below:

  •

Cash and equivalents and restricted cash include cash and term deposits with original maturities of less than 90 days are classified as financial assets at fair value through profit and loss and are measured at fair value. Unrealized gains and losses related to changes in fair value are reported in income;

  •

Trade and other receivables are classified as and measured at amortized cost using the effective interest method, less impairment allowance, in any;

  •

Investments in equity instruments are designated as financial assets through profit or loss and are recorded at fair value on settlement date, net of transaction costs. Subsequent to initial recognition, changes in fair value are recognized in income.

Derivative financial instruments, including embedded derivatives in trade receivables measured at amortized cost, are recorded in the consolidated balance sheets at fair value. Subsequent to initial recognition, changes in estimated fair value at each reporting date are recognized through profit or loss.

A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired. For financial liabilities, IFRS 9 retains most of the IAS 39 requirements and since we do not have any financial liabilities designated at fair value through profit or loss, the adoption of IFRS 9 did not impact our accounting policies for financial liabilities.

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
On May 28, 2014, the IASB issued IFRS 15. The new standard is effective for annual periods beginning on or after January 1, 2018 with early adoption permitted. IFRS 15 replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have also been introduced, which may affect the amount and/or timing of revenue recognized.

On April 12, 2016 the IASB issued Clarifications to IFRS 15, Revenue from Contracts with Customers, which is effective at the same time as IFRS 15. The clarifications to IFRS 15 provide additional guidance with respect to the five-step analysis, transition, and the application of the standard to licenses of intellectual property.

The Company adopted IFRS 15 and the clarifications effective January 1, 2018 with no impact on the consolidated financial statements.

Dore sales
IFRS 15 requires that revenue from contracts with customers be recognized upon the transfer of control over goods or services to the customer. The recognition of revenue upon transfer of control to the customer is consistent with our revenue recognition policy as set out in Note 3(l) of the 2017 Annual Financial Statements, as the condition is generally satisfied when title transfers to the customer. As such, upon adoption, this requirement under IFRS 15 resulted in no impact to our financial statements as the timing of revenue recognition on our dore sales is unchanged.

Concentrate sales
We assessed all of our existing concentrate sales agreements and determined that there is no change in the timing of revenue recognition, as control transfers to the smelting companies at the time of delivery, consistent with our current accounting policy as set out in Note 3(l) of the 2017 Annual Financial Statements.

  (b)

Changes in IFRS not yet adopted

IFRS 16, Leases (“IFRS 16”)
On January 13, 2016, the IASB published a new standard, IFRS 16, Leases, eliminating the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Under the new standard, a lease becomes an on-balance sheet liability that attracts interest, together with a new right-of-use asset. In addition, lessees will recognize a front-loaded pattern of expense for most leases, even when cash rentals are constant. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with earlier adoption permitted. The Company has begun a preliminary assessment however, the Company is not able at this time to estimate reasonably the impact that the amendments will have on the financial statements.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 8
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

4.

ACCOUNTS RECEIVABLE


            March 31     December 31  
      Note     2018     2017  
                     
  Trade receivables (1)       $  6,466   $  8,114  
  IVA receivables (2)         22,728     19,989  
  Income taxes recoverable         5,924     5,549  
  Due from related parties   5     1     2  
  Other receivables         122     358  
          $  35,241   $  34,012  

  (1)

The trade receivables consist of receivables from provisional silver and gold sales from the Bolañitos and El Cubo mines. The fair value of receivables arising from concentrate sales contracts that contain provisional pricing mechanisms is determined using the appropriate quoted closing price on the measurement date from the exchange that is the principal active market for the particular metal. As such, these receivables, which meet the definition of an embedded derivative, are classified within Level 2 of the fair value hierarchy (Note 14).

     
  (2)

The Company’s Mexican subsidiaries pay value added tax, Impuesto al Valor Agregado (“IVA”), on the purchase and sale of goods and services. The net amount paid is recoverable but is subject to review and assessment by the tax authorities. The Company regularly files the required IVA returns and all supporting documentation with the tax authorities, however, the Company has been advised that certain IVA amounts receivable from the tax authorities are being withheld pending completion of the authorities’ audit of certain of the Company’s third-party suppliers. Under Mexican law the Company has legal rights to those IVA refunds and the results of the third party audits should have no impact on refunds. A smaller portion of IVA refund requests are from time to time improperly denied based on the alleged lack of compliance of certain formal requirements and information returns by the Company’s third-party suppliers. The Company takes necessary legal action on the delayed refunds as well as any improperly denied refunds.

     
 

These improper delays and denials have occurred within Compania Minera del Cubo (“El Cubo”) and Refinadora Plata Adelante S.A. de C.V. (“Guanaceví,”). At March 31, 2018, El Cubo holds $12,054 and Guanaceví holds $8,720 in IVA receivables which the Company and its advisors deem to be recoverable from tax authorities (December 31, 2017 – $10,392 and $8,812 respectively). The Company is in regular contact with the tax authorities in respect of its IVA filings and believes the full amount of its IVA receivables will ultimately be received; however, the timing of recovery of these amounts and the nature and extent of any adjustments to the Company’s IVA receivables remains uncertain.


5.

INVENTORIES


      March 31     December 31  
      2018     2017  
               
  Warehouse inventory $  8 ,272   $  7,809  
  Stock pile inventory   137     -  
  Work in process inventory   616     49 6  
  Finished goods inventory (1)(2)   3,319     4,826  
    $  12,344   $  13,131  

  (1)

The Company held 160,034 silver ounces and 1,497 gold ounces as of March 31, 2018 (December 31, 2017 – 241,321 and 1,226, respectively). These ounces are carried at the lower of cost and net realizable value. As at March 31, 2018, the quoted market value of the silver ounces was $2,605 (December 31, 2017 - $4,070) and the quoted market value of the gold ounces was $1,982 (December 31, 2017 - $1,590).

     
  (2)

The finished goods inventory balance at March 31, 2018 includes a write down to net realizable value of $755 for finished goods inventory held at the Guanaceví mine. Of this amount $463 is comprised of cash costs and $292 relates to depreciation and depletion.


ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 9
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

6.

RELATED PARTY TRANSACTIONS

   

The Company shares common administrative services and office space with a company related by virtue of a common director and from time to time will incur third party costs on behalf of the related party on a full cost recovery basis. The charges for these costs totaled $2 for the three months ended March 31, 2018 (March 31, 2017 - $10). The Company has a $1 net receivable related to these costs as of March 31, 2018 (December 31, 2017 – $2).

   

The Company was charged $37 for legal services for the three months ended March 31, 2018 by a legal firm in which the Company’s corporate secretary is a partner (March 31, 2017 - $11). The Company has $Nil payable to the legal firm as at March 31, 2018 (December 31, 2017 - $Nil).

   
7.

MINERAL PROPERTIES, PLANT AND EQUIPMENT

   

Mineral properties, plant and equipment comprise:


      Mineral           Machinery &           Transport &        
      properties     Plant     equipment     Building     office equipment     Total  
  Cost                                    
                                       
  Balance at December 31, 2016 $  457,401   $  94,871   $  61,812   $  10,671   $  9,595   $  634,350  
                                       
  Additions   28,682     3,177     5,386     1,191     2,038     40,474  
  Disposals   (233 )   (27 )   (4,354 )   -     (1,100 )   (5,714 )
  Balance at December 31, 2017   485,850     98,021     62,844     11,862     10,533     669,110  
                                       
  Additions   7,673     1,517     797     108     730     10,825  
  Disposals   -     -     -     -     -     -  
  Balance at March 31, 2018 $  493,523   $  99,538   $  63,641   $  11,970   $  11,263   $  679,935  
                                       
  Accumulated amortization and impairment                                    
                                       
  Balance at December 31, 2016 $  419,320   $  85,563   $  46,196   $  9,214   $  7,819   $  568,112  
                                       
  Amortization   12,161     1,672     2,682     188     947     17,650  
  Disposals   -     (26 )   (4,353 )   -     (1,089 )   (5,468 )
  Balance at December 31, 2017   431,481     87,209     44,525     9,402     7,677     580,294  
                                       
  Amortization   8,197     536     917     85     278     10,013  
  Disposals   -     -     -     -     -     -  
  Balance at March 31, 2018 $  439,678   $  87,745   $  45,442   $  9,487   $  7,955   $  590,307  
                                       
  Net book value                                    
  At December 31, 2017 $  54,369   $  10,812   $  18,319   $  2,460   $  2,856   $  88,816  
  At March 31, 2018 $  53,845   $  11,793   $  18,199   $  2,483   $  3,308   $  89,628  

Included in Mineral properties is $11,485 in acquisition costs for exploration and evaluation properties (December 31, 2017 – $11,334).

As of March 31, 2018, the Company has $23 committed to capital equipment purchases.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 10
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

8.

SHARE CAPITAL


  (a)

Purchase Options

Options to purchase common shares have been granted to directors, officers, employees and consultants pursuant to the Company’s current stock option plan, approved by the Company’s shareholders in fiscal 2009 and re-ratified in 2015, at exercise prices determined by reference to the market value on the date of grant. The stock option plan allows for, with approval by the Board, granting of options to its directors, officers, employees and consultants to acquire up to 7.0% of the issued and outstanding shares at any time.

The following table summarizes the status of the Company’s stock option plan and changes during the year:

  Expressed in Canadian dollars   Period Ended     Year Ended  
      March 31, 20 18     December 31, 2017  
      Number     Weighted     Number     Weighted  
      of shares     average     of shares     average  
  Outstanding, beginning of year   5,792,800   $ 4.00     4,458,050   $ 3.93  
     Granted   -     -     1,572,000   $ 4.32  
     Exercised   -     -     (60,000 ) $ 3.03  
     Cancelled   -     -     (177,250 ) $ 5.49  
  Outstanding, end of the period   5,792,800   $ 4.00     5,792,800   $ 4.00  
                           
  Options exercisable at the end of the period   4,509,600   $ 3.91     4,509,600   $ 3.91  

The following table summarizes the information about stock options outstanding at March 31, 2018:

  Expressed in Canadian dollars                          
      Options Outstanding     Options exercisable  
            Weighted                    
      Number     Average     Weighted     Number     Weighted  
      Outstanding     Remaining     average     Exercisable     average  
  Price   as at     Contractual Life     Exercise     as at     Exercise  
  Intervals   March 31, 2018     (Number of Years)     Price     March 31, 2018     Price  
                                 
     $2.00 - $2.99   1,136,500     2.1   $ 2.65     1,136,500   $ 2.65  
     $4.00 - $4.99   4,656,300     2.7   $ 4.32     3,373,100   $ 4.33  
      5,792,800     2.6   $ 4.00     4,509,600   $ 3.91  

During the three months ended March 31, 2018, the Company recognized share-based compensation expense of $416 (March 31, 2017 - $396) based on the fair value of the vested portion of options granted in the current and prior years.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 11
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

  (b)

Deferred Share Units

The Company has a Deferred Share Unit (“DSU”) plan whereby deferred share units may be granted to independent directors of the Company in lieu of compensation in cash or share purchase options. The DSUs vest immediately and are redeemable for cash based on the market value of the units at the time of a director’s retirement.

  Expressed in Canadian dollars   Period Ended     Year Ended  
      March 31, 2018     December 31, 2017  
      Number     Weighted     Number     Weighted  
      of units     average grant     of units     average grant  
  Outstanding, beginning of year   548,392   $ 3.44     510,560   $ 3.39  
     Granted   -     -     37,832   $ 4.11  
     Redeemed   -     -     -     -  
  Outstanding, end of period   548,392   $ 3.44     548,392   $ 3.44  
                           
  Fair value at period end   548,392   $ 3.13     548,392   $ 3.02  

During the period ended March 31, 2018, the Company recognized directors compensation expense related to DSUs, which is included in general and administrative salaries, wages and benefits, of $11 (March 31, 2017 – recovery of $183 based on the fair value of new grants and the change in the fair value of the DSUs granted in the current and prior years. As of March 31, 2018 there are 548,392 deferred share units outstanding (December 31, 2017 – 548,392) with a fair market value of $1,330 (December 31, 2017 - $1,319) recognized in accounts payable and accrued liabilities.

  (c)

Share Appreciation Rights

As part of the Company’s bonus program, the Company grants share appreciation rights (“SARs”) to its employees in Mexico and Chile. The SARS are subject to vesting conditions and, when exercised, constitute a cash bonus based on the value of the appreciation of the Company’s common shares between the SARs grant date and the exercise date.

      Period Ended     Year Ended  
      March 31, 2018     December 31, 2017  
      Number     Weighted     Number     Weighted  
      of units     average     of units     average grant  
  Outstanding, beginning of year   911,993   $ 3.80     579,660   $ 4.20  
     Granted   -     -     489,000   $ 3.30  
     Exercised   (12,832 ) $ 2.21     (46,668 ) $ 2.21  
     Cancelled   (24,666 ) $ 3.89     (109,999 ) $ 4.38  
  Outstanding, end of period   874,495   $ 3.82     911,993   $ 3.80  
                           
  Exercisable at the end of the period   452,679   $ 3.90     212,672   $ 3.69  

During the period ended March 31, 2018, the Company recognized a recovery related to SARs, which is included in operation and exploration salaries, wages and benefits, of $69 (March 31, 2017 – recovery of $11) based on the fair value of new grants and the change in the fair value of the SARs granted in the current and prior years. As of March 31, 2018 there are 874,795 SARs outstanding (December 31, 2017 – 911,993) with a fair market value of $272 (December 31, 2017 - $341) recognized in accounts payable and accrued liabilities.

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 12
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

  (d)

Performance Share Units Plan

The Company has a Performance Share Unit (“PSU”) plan whereby performance share units may be granted to employees of the Company. Once performance conditions have been met, a PSU is redeemable into one common share entitling the holder to receive the common share for no additional consideration. The current maximum number of common shares authorized for issuance from treasury under the PSU plan is 1,000,000.

      Period Ended     Year Ended  
      March 31, 2018     December 31, 2017  
      Number of units     Number of units  
  Outstanding, beginning of year   200,000     325,000  
     Granted   -     200,000  
     Cancelled   -     -  
  Settled for shares   -     (193,825 )
  Settled for cash   -     (131,175 )
  Outstanding, end of period   200,000     200,000  

There were no PSUs granted during the three months ended March 31, 2018 (March 31, 2017 – Nil) under the Company’s PSU plan. A total of 200,000 PSUs were granted on May 4, 2017 under the Company’s PSU plan. The 200,000 PSUs vest on May 3, 2020, subject to achievement of pre-determined performance criteria. The PSUs vest at the end of a three year period if certain performance and vesting criteria, based on the Company’s share price performance relative to a representative group of other mining companies, has been met. During the three months ended March 31, 2018, the Company recognized share based compensation expense of $52 related to the PSUs (March 31, 2017 – recovery of $59).

  (e)

Diluted Earnings per Share


      Three months ended  
      March 31,     March 31,  
      2018     2017  
  Net earnings $  2,32 5   $  6,035  
  Basic weighted average number of shares outstanding   127,488,410     127,095,764  
  Effect of dilutive securities:            
  Stock options   139,453     1,10 3,0 6 9  
    Performance share units   200,000     325,000  
  Diluted weighted average number of share outstanding   127,827,863     128,523,833  
               
  Diluted earnings per share $  0.02   $  0.05  

As of March 31, 2018 there are 4,656,300 anti-dilutive stock options (March 31, 2017 – 47,250 stock options).

9.

EXPLORATION


      Three months ended  
      March 31,     March 31,  
      2018     2017  
               
  Depreciation and depletion $  23   $  28  
  Share-based compensation   36     39  
  Salaries, wages and benefits   706     530  
  Direct exploration expenditures   1,258     2,739  
    $  2,023   $  3,336  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 13
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

10.

GENERAL AND ADMINISTRATIVE


      Three months ended  
      March 31     March 31  
      2018     2017  
               
  Depreciat ion and depletion $  5 5   $  41  
  Share-based compensation   343     298  
  Salaries, wages and benefits   878     736  
  Direct general and administrative expenditures   1,042     880  
    $  2,318   $  1,955  

Included in salaries, wages and benefits is $11 in director’s deferred share unit recovery for the three months ended March 31, 2018 (March 31, 2017 – recovery of $183).

11.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS


      Three months ended  
      March 31,     March 31,  
      2018     2017  
               
  Net changes in non-cash working capital:            
     Accounts receivable $  (1,229 ) $  (1,149 )
     Inventories   348     944  
     Prepaid expenses   (72 )   263  
     Accounts payable and accrued liabilities   (752 )   2,037  
     Income taxes payable   (1,831 )   (1,324 )
    $  (3,536 ) $  771  
  Non-cash financing and investing activities:            
     Fair value of exercised options allocated to share capital   -     35  
               
  Other cash disbursements:            
   Income taxes paid   1,068     1,603  
   Special mining duty paid   1,012     -  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 14
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

12.

SEGMENT DISCLOSURES

   

The Company’s operating segments are based on internal management reports that are reviewed by the Company’s executives (the chief operating decision makers) in assessing performance. The Company has three operating mining segments, Guanaceví, Bolañitos and El Cubo, which are located in Mexico as well as Exploration and Corporate segments. The Exploration segment consists of projects in the exploration and evaluation phases in Mexico and Chile.


  March 31, 2018  
      Corporate     Exploration     Guanaceví     Bolanitos     El Cubo     El Compas     Total  
                                             
  Cash and cash equivalents $  12,860   $  383   $  8,812   $  4,286   $  9,818   $  401   $  36,560  
  Investments   148     -     -     -     -     -     148  
  Accounts receivables   103     1,858     11,165     4,616     15,752     1,747     35,241  
  Inventories   -     -     6,704     2,622     3,018     -     12,344  
  Prepaid expenses   1,238     110     245     76     193     121     1,983  
  Non-current deposits   76     -     316     144     74     -     610  
  Deferred income tax asset   -     -     767     1,146     -     -     1,913  
  Mineral property, plant and equipment   669     11,472     38,597     7,358     16,598     14,934     89,628  
  Total assets $  15,094   $  13,823   $  66,606   $  20,248   $  45,453   $  17,203   $  178,427  
                                             
  Accounts payable and accrued liabilities $  4,785   $  455   $  4,574   $  2,495   $  5,125   $  851   $  18,285  
  Income taxes payable   584     -     631     128     11     -     1,354  
  Deferred lease inducement   229     -     -     -     -     -     229  
  Provision for reclamation and rehabilitation   -     -     2,097     1,781     4,092     50     8,020  
  Deferred income tax liability   -     200     -     816     227     -     1,243  
  Total liabilities $  5,598   $  655   $  7,302   $  5,220   $  9,455   $  901   $  29,131  

    December 31, 2017      
      Corporate     Exploration     Guanaceví     Bolanitos     El Cubo     El Compas     Total  
                                             
  Cash and cash equivalents $  20,884   $  1,034   $  6,212   $  2,360   $  7,594   $  193   $  38,277  
  Restricted cash   1,000     -     -     -     -     -     1,000  
  Investments   168     -     -     -     -     -     168  
  Accounts receivables   341     893     12,115     4,100     15,602     961     34,012  
  Inventories   -     -     8,476     2,178     2,477     -     13,131  
  Prepaid expenses   1,090     128     125     77     176     315     1,911  
  Non-current deposits   76     -     316     144     74     -     610  
  Deferred income tax asset   -     -     -     655     -     -     655  
  Mineral property, plant and equipment   691     11,285     42,264     6,766     15,929     11,881     88,816  
  Total assets $  24,250   $  13,340   $  69,508   $  16,280   $  41,852   $  13,350   $  178,580  
                                             
  Accounts payable and accrued liabilities $  5,965   $  225   $  4,484   $  1,774   $  5,721   $  899   $  19,068  
  Income taxes payable   727     -     1,499     940     19     -     3,185  
  Deferred lease inducement   236     -     -     -     -     -     236  
  Provision for reclamation and rehabilitation   -     -     2,086     1,772     4,074     50     7,982  
  Deferred income tax liability   -     200     528     637     227     -     1,592  
  Total liabilities $  6,928   $  425   $  8,597   $  5,123   $  10,041   $  949   $  32,063  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 15
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

      Corporate     Exploration     Guanaceví     Bolanitos     El Cubo     El Compas     Total  
      Three months ended March 31, 2018  
  Silver revenue $  -   $  -   $  10,343   $  3,930   $  9,205   $  -   $  23,478  
  Gold revenue   -     -     2,166     7,448     7,238     -     16,852  
  Total revenue $  -   $  -   $  12,509   $  11,378   $  16,443   $  -   $  40,330  
                                             
   Salaries, wages and benefits:                                          
         mining $  -   $  -   $  1,239   $  1,189   $  2,015   $  -   $  4,443  
         processing   -     -     393     242     461     -     1,096  
         administrative   -     -     537     572     685     -     1,794  
         stock based compensation   -     -     13     12     12     -     37  
         change in inventory   -     -     698     (82 )   (128 )   -     488  
  Total salaries, wages and benefits   -     -     2,880     1,933     3,045     -     7,858  
                                             
   Direct costs:                                          
         mining   -     -     4,714     2,619     3,341     -     10,674  
         processing   -     -     1,483     1,576     1,807     -     4,866  
         administrative   -     -     471     429     676     -     1,576  
         change in inventory   -     -     1,067     (145 )   (53 )   -     869  
  Total direct production costs   -     -     7,735     4,479     5,771     -     17,985  
                                             
   Depreciation and depletion:                                          
         depreciation and depletion   -     -     6,509     324     2,897     -     9,730  
         change in inventory   -     -     290     (15 )   (246 )   -     29  
  Total depreciation and depletion   -     -     6,799     309     2,651     -     9,759  
                                             
   Royalties   -     -     303     320     75     -     698  
   Write down of inventory to NRV   -     -     755     -     -     -     755  
                                             
  Total cost of sales $  -   $  -   $  18,472   $  7,041   $  11,542   $  -   $  37,055  
                                             
  Earnings (loss) before taxes $  195   $  (2,023 ) $  (5,963 ) $  4,337   $  4,901   $  (220 ) $  1,227  
                                             
   Current income tax expense (recovery)   -     -     137     348     203     -     688  
   Deferred income tax expense (recovery)   -     -     (1,295 )   (491 )   -     -     (1,786 )
  Total income tax expense (recovery)   -     -     (1,158 )   (143 )   203     -     (1,098 )
                                             
  Net earnings (loss) $  195   $  (2,023 ) $  (4,805 ) $  4,480   $  4,698   $  (220 ) $  2,325  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 16
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

      Corporate     Exploration     Guanaceví     Bolanitos     El Cubo     El Compas     Total  
      Three months ended March 31, 2017  
  Silver revenue $  -   $  -   $  12,639   $  2,585   $  6 ,76 1   $  -   $  21,985  
  Gold revenue   -     -     1,924     7,041     5,491     -     14,456  
  Total revenue $  -   $  -   $  14,563   $  9,626   $  12,252   $  -   $  36,441  
                                             
   Salaries, wages and benefits:                                          
         mining $  -   $  -   $  1,329   $  1,045   $  1,756   $  -   $  4,130  
         processing   -     -     441     200     362     -     1,003  
         administrative   -     -     687     538     659     -     1,884  
         stock based compensation   -     -     -     -     -     -     -  
         change in inventory   -     -     621     (198 )   22     -     445  
  Total salaries, wages and benefits   -     -     3,078     1,585     2,799     -     7,462  
                                             
   Direct costs:                                          
         mining   -     -     3,167     2,455     3,138     -     8,760  
         processing   -     -     1,765     1,327     1,923     -     5,015  
         administrative   -     -     600     379     610     -     1,589  
         change in inventory   -     -     1,507     (448 )   163     -     1,222  
  Total direct production costs   -     -     7,039     3,713     5,834     -     16,586  
                                             
   Depreciation and depletion:                                          
         depreciation and depletion   -     -     3,503     460     338     -     4,301  
         change in inventory   -     -     (130 )   (46 )   (12 )   -     (188 )
  Total depreciation and depletion   -     -     3,373     414     326     -     4,113  
                                             
   Royalties   -     -     343     43     54     -     440  
                                             
  Total cost of sales $  -   $  -   $  13,833   $  5,755   $  9,013   $  -   $  28,601  
                                             
  Earnings (loss) before taxes $  33   $  (3,002 ) $  730   $  3,871   $  3,239   $  (334 ) $  4,537  
                                             
   Current income tax expense (recovery)   -     -     101     275     (77 )   -     29 9  
   Deferred income tax expense (recovery)   -     -     (734 )   (1,166 )   103     -     (1,797 )
  Total income tax expense (recovery)   -     -     (633 )   (891 )   26     -     (1,498 )
                                             
  Net earnings (loss) $  33   $  (3,002 ) $  1,363   $  4,762   $  3,213   $  (334 ) $  6,035  

The Exploration segment included $86 of costs incurred in Chile for the three months ended March 31, 2018 (March 31, 2017 - $81).

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 17
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

13.

INCOME TAXES

   

Tax Assessments

Minera Santa Cruz y Garibaldi SA de CV (“MSCG”), a subsidiary of the Company, received a MXN 238 million assessment on October 12, 2010 by Mexican fiscal authorities for failure to provide the appropriate support for certain expense deductions taken in MSCG’s 2006 tax return, failure to provide appropriate support for loans made to MSCG from affiliated companies, and deemed an unrecorded distribution of dividends to shareholders, among other individually immaterial items. MSCG immediately initiated a Nullity action and filed an administrative attachment to dispute the assessment.

   

In June 2015, the Superior Court ruled in favour of MSCG on a number of the matters under appeal; however, the Superior Court ruled against MSCG for failure to provide appropriate support for certain deductions taken in MSCG’s 2006 tax return. In June 2016, the Company received a MXN 122.9 million ($6,200) tax assessment based on the June 2015 ruling. The 2016 tax assessment comprised of MXN 41.8 million in taxes owed ($2,100), MXN 17.7 million ($900) in inflationary charges, MXN 40.4 million ($2,000) in interest and MXN 23.0 million ($1,200) in penalties. The 2016 tax assessment was issued for failure to provide the appropriate support for certain expense deductions taken in MSCG’s 2006 tax return, failure to provide appropriate support for loans made to MSCG from affiliated companies. The MXN 123 million assessment includes interest and penalties. If MSCG agrees to pay the tax assessment, or a lesser settled amount, it is eligible to apply for forgiveness of 100% of the penalties and 50% of the interest.

   

The Company filed an appeal against the June 2016 tax assessment on the basis certain items rejected by the courts were included in the new tax assessment, while a number of deficiencies exist within the assessment. Since issuance of the assessment interest charges of MXN 5.6 million ($300) and inflationary charges of MXN 8.5 million ($400) has accumulated.

   

Included in the Company’s consolidated financial statements, are net assets of $595, including $42 in cash, held by MSCG. Following the Tax Court’s rulings, MSCG is in discussions with the tax authorities with regards to the shortfall of assets within MSCG to settle its estimated tax liability. An alternative settlement option would be to transfer the shares and assets of MSCG to the tax authorities. As of March 31, 2018, the Company has recognized an allowance for transferring the shares and assets of MSCG amounting to $595. The Company is currently assessing MSCG’s settlement options based on on-going court proceedings and discussion with the tax authorities.


14.

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

   
  Financial assets and liabilities

As at March 31, 2018, the carrying and fair values of the Company’s financial instruments by category are as follows:


      Fair value                    
      through profit     Amortized       Carrying     Fair  
      or loss     cost     value     value  
    $   $   $   $  
                           
  Financial assets:                        
  Cash and cash equivalents   36,560     -     36,560     36,560  
  Investments   148     -     148     148  
  Trade and other receivables   -     6,589     6,589     6,589  
  Total financial assets   36,708     6,589     43,297     43,297  
                           
  Financial liabilities:                        
  Accounts payable and accrued liabilities         18,285     18,285     18,285  
  Total financial liabilities   -     18,285     18,285     18,285  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 18
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

Fair value measurements

Fair value hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (for example, interest rate and yield curves observable at commonly quoted intervals, forward pricing curves used to value currency and commodity contracts and volatility measurements used to value option contracts), or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

Level 1:
Marketable securities are determined based on a market approach reflecting the closing price of each particular security at the reporting date. The closing price is a quoted market price obtained from the exchange that is the principal active market for the particular security. As a result, these financial assets have been included in Level 1 of the fair value hierarchy.

Deferred share units are determined based on a market approach reflecting the Company’s closing share price.

Level 2:
The Company determines the fair value of the embedded derivatives related to its trade receivables based on the quoted closing price obtained from the silver and gold metal exchanges.

The Company determines the fair value of the SARs liability using an option-pricing model.

Level 3:
The Company has no assets or liabilities included in Level 3 of the fair value hierarchy

There were no transfers between levels 1, 2 and 3 during the three months ended March 31, 2018.

Assets and liabilities as at March 31, 2018 measured at fair value on a recurring basis include:

      Total     Level 1     Level 2     Level 3  
      $     $      $     $  
                           
  Financial assets:                        
  Investments   148     148     -     -  
  Trade receivables   6 ,46 6     -     6 ,46 6     -  
  Total financial assets   6 ,6 14     148     6 ,46 6     -  
                           
  Financial liabilities:                        
  Deferred share units   1,330     1,330     -     -  
  Share appreciation rights   272     -     272     -  
  Total financial liabilities   1,6 0 2     1,330     272     -  

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 19
   


ENDEAVOUR SILVER CORP.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Three months ended March 31, 2018 and 2017
(unaudited – prepared by management)
(expressed in thousands of US dollars, unless otherwise stated)

  HEAD OFFICE Suite #1130, 609 Granville Street
    Vancouver, BC, Canada V7Y 1G5
    Telephone: (604) 685-9775
      1-877-685-9775
    Facsimile:(604) 685-9744
    Website: www.edrsilver.com
       
       
  DIRECTORS Geoff Handley
    Ricardo Campoy
    Bradford Cooke
    Rex McLennan
    Kenneth Pickering
    Mario Szotlender
    Godfrey Walton
       
       
  OFFICERS Bradford Cooke - Chief Executive Officer
    Godfrey Walton - President and Chief Operating Officer
    Dan Dickson - Chief Financial Officer
    Luis Castro - Vice-President, Exploration
    Dale Mah - Vice-President, Corporate Development
    Christine West – Vice-President, Controller
    Bernard Poznanski - Corporate Secretary
       
       
  REGISTRAR AND Computershare Trust Company of Canada
  TRANSFER AGENT 3rd Floor - 510 Burrard Street
    Vancouver, BC, V6C 3B9
       
       
  AUDITORS KPMG LLP  
    777 Dunsmuir Street
    Vancouver, BC, V7Y 1K3
       
       
  SOLICITORS Koffman Kalef LLP
    19th Floor – 885 West Georgia Street
    Vancouver, BC, V6C 3H4
       
       
  SHARES LISTED Toronto Stock Exchange
    Trading Symbol - EDR
       
    New York Stock Exchange
    Trading Symbol – EXK

ENDEAVOUR SILVER CORP.      |      CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PAGE 20