In 1999, we became concerned about the availability and cost of energy in Mexico and given that energy represents around 40 percent of our expenses, we started to look at how we could lower costs. We made a strategic decision to integrate our energy supply and start generating our own electricity. In 2016, a total of 81 percent of the energy we consumed was generated in-house. Most of this comes from the petcoke thermal plant in San Luis Potosi, which generates 230MW, and the two wind plants in Oaxaca that generate over 40MW. We also have natural gas turbines in Laguna del Rey, Coahuila and a steam generator in Torreon. There is a new energy law in Mexico that will require companies to procure at least 30 percent of their energy from sustainable sources by 2025. Peñoles has already reached that landmark, because we are convinced of the need for sustainable development.

Before we decide to pursue an opportunity, it must meet rigid criteria anchored to a healthy rate of return. I believe this is true across the industry. While the increased optimism is noticeable, so is the persistent conservatism and tempered risk appetite. Our costs used to be among the highest in the industry but since 2013, we have reduced our costs by approximately 30 percent on an all-in sustaining basis. While we benefited from several external factors such as a more favorable peso exchange rate and lower diesel prices, most of these cost reductions were internally generated through operational efficiencies, higher recovery rates and rationalization of outside services. This makes our cost reductions sustainable over the long-run.

The biggest constraint on our production historically has been that there is a lot of water in the mine. This does not impede mining but we use a lot more grouting and the process is a lot more manual and time consuming. In 2015, we developed a simple engineering solution to more efficiently dewater the mine and are in the final stages of implementing this optimization plan. With us being able to more effectively manage this water, we can develop five times faster, cut our maintenance costs and become a lot more efficient in terms of electricity use. As the water level drops we will dry out two additional mantos: one that contains 1,800g/t silver equivalent and another with 1,600g/t silver equivalent. This would double the availability of working phases on our mine.

Over the last 15 years FLSmidth has been acquiring many companies with specific products that add value to our portfolio. Depending on the product it may be more beneficial to buy another company and integrate that into the FLSmidth Group product flow sheet than to develop an existing product design in-house. We constantly have to evaluate our needs and decide what will bring results to our clients and returns for our investors. In September 2016, we announced a JV with the state-owned Chinese heavy machinery manufacturer Northern Heavy Industries Group (NHI). The new JV will operate under the name NHI-Fuller and will be launched in 1Q17, providing the mining industry with mid-market crushing equipment. China will be the initial focus for the venture, but in time it will incorporate other markets including Mexico

Evrim has survived the last five years by being more selective with the projects it evaluates. A funny thing is that market slumps are also important opportunities to acquire mineral projects at low prices but few junior companies took advantage of this. Investment expenditures in mineral exploration in Mexico have dropped more than 70 percent over the last five years, the worst slump I have ever witnessed in my career. But I remain confident that in the next five to 10 years, the industry will recover. Since early 2016, we have begun to see a growing interest in the exploration segment. It is a favorable time for junior companies to pick up new mineral projects and bring them to an exploration stage where they can be of interest to the major mining companies.

To survive the last five-year bear market in metal prices, Endeavour Silver had to incorporate several strategies to reduce our cash operating and all-in sustaining costs. We reduced our work force and retrained our remaining employees to use newer and more efficient mining equipment and methods. We also reduced our exploration and capital budgets. The falling peso was another important factor that contributed to lower costs. Last year, when metal prices started to increase, we raised some equity capital to invest in growth. In 2017 we plan to raise some debt financing as well as to build one of our new mines. Our healthy cash flows are now helping us become one of the fastest-growing silver mining companies in the world. The company is planning to develop three new mines in the coming three years to increase our production by 50 percent.

There is still vast overcapacity in the Chinese market, and until it is effectively addressed, the risk of volatility remains. The complex scenario we encountered in 2015 and 2016 due to market conditions and trends in worldwide steel demand has undermined our ability to compete in a market where importers are selling at subsidized prices below average production costs. In light of this, our company has implemented emergency measures to reduce costs and increase operational efficiency. These initiatives have included plans to improve management and productivity, labor mobility and savings. Our President Lakshmi Mittal presented the strategy known as Action 2020, which is a compilation of actions for the next five years, resulting from a detailed analysis of our growth and improvement potential.