Q3 Results
posted on
Nov 07, 2013 01:07AM
5 Silver, 1 Gold mine(s) operating - Reserves of: Silver 500m oz, Gold 5m oz
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25% Increase in Gold Production and 11% Decrease in Cash Operating Costs per Ounce1 at Kensington
Rochester Positioned for Strong Fourth Quarter
Chicago, Illinois - November 6, 2013 - Coeur Mining, Inc. (the “Company” or “Coeur”) (NYSE: CDE, TSX: CDM) reported metal sales of $200.8 million, adjusted earnings1 of $(23.4) million, or $(0.23) per share, and cash flow from operating activities of $26.8 million, or $0.27 per share, during the third quarter 2013. This compares to metal sales of $204.5 million, adjusted earnings1 of $(34.6) million, or $(0.35) per share, and cash flow from operating activities of $63.3 million, or $0.63 per share, in the second quarter 2013.
The Company reaffirmed its 2013 full-year production guidance of 18.0-19.1 million ounces of silver and 250,000-258,000 ounces of gold. Coeur expects significantly higher production levels in the fourth quarter, particularly from the Rochester silver and gold mine in Nevada. Coeur is also maintaining its full-year cash operating cost1 guidance of $9.50 - $10.50 per silver ounce and $950 - $1,000 per gold ounce at Kensington, which reflects continued progress in the Company's ongoing cost reduction efforts. The Company incurred $32.7 million in capital expenditures in the third quarter and reaffirmed its 2013 full-year capital expenditure guidance of $100-$110 million.
Third Quarter 2013 Highlights
Mitchell J. Krebs, Coeur's President and Chief Executive Officer, said, "Our third quarter operating performance demonstrates the progress we are making in maintaining operational consistency and executing on our strategic initiatives. We are pleased with the solid performance at Palmarejo, San Bartolomé, and Kensington during the third quarter, and with the early indications of our newly-completed expansion projects at Rochester. We expect a significant increase in fourth quarter production at Rochester as permitting issues delayed the leaching of fresh material, which began October 1. We have made further progress in our four-pronged strategy designed to maximize our net cash flow: (1) identifying and implementing revenue enhancement opportunities at existing operations; (2) reducing operating and non-operating costs; (3) reducing capital spending; and (4) effectively managing working capital."
"In the third quarter, we completed value-creating projects at San Bartolomé and Rochester and implemented revenue-enhancing improvements at Palmarejo and Kensington. Our exploration program delivered very positive results at Palmarejo and Kensington, creating further prospects for high-return growth. We achieved approximately $5 million in additional operating cost reductions during the quarter, bringing our year-to-date savings to $24 million. We remain on track to spend $100-$110 million on capital projects for the full year, which is $25-$30 million below our original guidance. We made further progress in managing our working capital with a $12 million reduction in inventory, and we expect a further decrease in inventory levels during the fourth quarter."
"Going forward, we will continue to make operational and capital spending decisions with the goal of maximizing cash flow and return on invested capital. As an example of this discipline, we have decided to temporarily delay completing the underground mine development of the Guadalupe deposit at Palmarejo since the expected returns on this production do not meet our threshold in the current market environment. We expect to replace the anticipated 2014 production from Guadalupe with lower-cost production ounces from existing areas of the mine, which is a result of our successful 2013 drilling program. This decision is expected to significantly reduce Palmarejo's cash operating costs per ounce1and capital costs, as compared to the expected costs if we were to move forward with Guadalupe at this time, allowing us to redeploy this cash flow to higher-return projects in 2014. This decision demonstrates our commitment to maximizing cash flow and returns rather than simply focusing on production ounces."
"We believe numerous opportunities remain for us to enhance revenues, reduce costs, and fund organic and external growth projects that meet our return criteria. Based on today's silver and gold prices, we continue to believe that we will generate significant after-tax operating cash flow and positive net cash flow for the next few years."
Table 1: Financial Highlights (Unaudited)
(All amounts in millions, except per share amounts, average realized prices and gold ounces sold) |
3Q 2013 |
2Q 2013 |
Quarter Variance |
1Q 2013 |
4Q 2012 |
3Q 2012 |
||||||||||||||
Sales of Metal |
$ |
200.8 |
$ |
204.5 |
(2 |
%) |
$ |
171.8 |
$ |
205.9 |
$ |
230.6 |
||||||||
Production Costs |
$ |
131.7 |
$ |
142.9 |
(8 |
%) |
$ |
88.8 |
$ |
107.4 |
$ |
125.0 |
||||||||
Adjusted Earnings (Loss) (1) |
$ |
(23.4 |
) |
$ |
(34.6 |
) |
32 |
% |
$ |
6.8 |
$ |
26.2 |
$ |
25.8 |
||||||
Adjusted Earnings (Loss) Per Share |
$ |
(0.23 |
) |
$ |
(0.35 |
) |
34 |
% |
$ |
0.08 |
$ |
0.29 |
$ |
0.29 |
||||||
Net Income (Loss) |
$ |
(46.3 |
) |
$ |
(35.0 |
) |
(32 |
%) |
$ |
12.3 |
$ |
37.6 |
$ |
(15.8 |
) |
|||||
Earnings Per Share |
$ |
(0.46 |
) |
$ |
(0.35 |
) |
(31 |
%) |
$ |
0.14 |
$ |
0.42 |
$ |
(0.18 |
) |
|||||
Cash Flow From Operating Activities |
$ |
26.8 |
$ |
63.3 |
(58 |
%) |
$ |
12.9 |
$ |
61.7 |
$ |
79.7 |
||||||||
Capital Expenditures |
$ |
32.7 |
$ |
27.2 |
20 |
% |
$ |
12.8 |
$ |
21.8 |
$ |
30.0 |
||||||||
Cash, Cash Equivalents & Short-Term Investments |
$ |
211.4 |
$ |
249.5 |
(15 |
%) |
$ |
332.8 |
$ |
126.4 |
$ |
143.6 |
||||||||
Total Debt (net of debt discount)(1) |
$ |
305.3 |
$ |
305.3 |
— |
% |
$ |
305.3 |
$ |
48.1 |
$ |
47.4 |
||||||||
Weighted Average Shares |
100.8 |
99.8 |
1.0 |
% |
89.9 |
89.1 |
89.4 |
|||||||||||||
Average Realized Price Per Ounce - Silver |
$ |
21.06 |
$ |
22.86 |
(8 |
%) |
$ |
30.30 |
$ |
32.52 |
$ |
30.09 |
||||||||
Average Realized Price Per Ounce - Gold |
$ |
1,329 |
$ |
1,416 |
(6 |
%) |
$ |
1,630 |
$ |
1,709 |
$ |
1,654 |
||||||||
Silver Ounces Sold |
4.9 |
5.2 |
(7 |
%) |
3.1 |
3.6 |
4.5 |
|||||||||||||
Gold Ounces Sold |
76,466 |
63,389 |
21 |
% |
51,926 |
55,565 |
59,156 |
Coeur's non-U.S. GAAP metric of adjusted earnings1 were $(23.4) million, or $(0.23) per share, in the third quarter 2013, compared with $(34.6) million, or $(0.35) per share, in the second quarter 2013. Third quarter adjusted earnings1 excluded a negative non-cash fair value adjustment of $20.6 million, compared to a positive fair value adjustment of $66.8 million in the second quarter 2013. Fair value adjustments are primarily driven by changes to gold and silver prices, which change the estimated future liabilities for the Palmarejo gold production royalty and the Rochester 3.4% NSR royalty. On a U.S. GAAP basis, the Company realized a net loss of $46.3 million, or $0.46 per share, in the third quarter 2013 compared with net loss of $35.0 million, or $0.35 per share, in the second quarter 2013.
Cash flow from operating activities was $26.8 million in the third quarter 2013 compared to $63.3 million in the second quarter 2013 due primarily to an increase in working capital, partially offset by the change in the fair value adjustment and other non-recurring items. Before changes in working capital, cash flow from operating activities was $37.3 million and $14.4 million in the third and second quarters 2013, respectively.
During the third quarter 2013, the Company hedged downside metal price exposure on approximately 25% and 35% of its forecasted fourth quarter 2013 silver and gold production, respectively, by purchasing put options with strike prices of $17.00/oz of silver and $1,200/oz of gold, in response to ongoing metal price volatility. In October 2013, Coeur hedged a portion of its expected first quarter 2014 production, purchasing puts covering 1.25 million ounces of silver and 25,000 ounces of gold at strike prices of $17.00/oz of silver and $1,150/oz of gold. This hedging strategy is designed to maintain upside exposure to precious metal prices and mitigate the cash flow impact of a short-term drop in metal prices.
Table 2: Operational Highlights: Production
(silver ounces in thousands) |
3Q 2013 |
2Q 2013 |
Quarter Variance |
1Q 2013 |
4Q 2012 |
3Q 2012 |
|||||||||||||||||||||||||||||||||||||
Silver |
Gold |
Silver |
Gold |
Silver |
Gold |
Silver |
Gold |
Silver |
Gold |
Silver |
Gold |
||||||||||||||||||||||||||||||||
Palmarejo |
1,918 |
29,893 |
2,045 |
28,191 |
(6 |
%) |
6 |
% |
1,646 |
22,965 |
1,554 |
19,998 |
1,833 |
23,702 |
|||||||||||||||||||||||||||||
San Bartolomé |
1,528 |
— |
1,523 |
— |
— |
% |
n.a. |
1,391 |
— |
1,343 |
— |
1,526 |
— |
||||||||||||||||||||||||||||||
Rochester |
595 |
4,824 |
844 |
9,404 |
(29 |
%) |
(49 |
%) |
648 |
8,742 |
828 |
12,055 |
819 |
10,599 |
|||||||||||||||||||||||||||||
Martha |
— |
— |
— |
— |
n.a. |
n.a. |
— |
— |
— |
— |
93 |
76 |
|||||||||||||||||||||||||||||||
Kensington |
— |
29,049 |
— |
23,162 |
n.a. |
25 |
% |
— |
25,206 |
— |
28,717 |
— |
24,391 |
||||||||||||||||||||||||||||||
Endeavor |
162 |
— |
221 |
— |
(27 |
%) |
n.a. |
150 |
— |
106 |
— |
140 |
— |
||||||||||||||||||||||||||||||
Total |
4,203 |
63,766 |
4,633 |
60,757 |
(9 |
%) |
5 |
% |
3,835 |
56,913 |
3,831 |
60,770 |
4,411 |
58,768 |
|||||||||||||||||||||||||||||
Table 3: Operational Highlights: Cash Operating Costs Per Ounce 1
3Q 2013 |
2Q 2013 |
Quarter Variance |
1Q 2013 |
4Q 2012 |
3Q 2012 |
|||||||||||||||||||||||||||
Palmarejo |
$ |
2.79 |
$ |
3.25 |
(14 |
%) |
$ |
2.20 |
$ |
7.55 |
$ |
3.75 |
||||||||||||||||||||
San Bartolomé |
12.80 |
12.89 |
(1 |
%) |
13.27 |
13.97 |
12.13 |
|||||||||||||||||||||||||
Rochester |
35.83 |
14.75 |
143 |
% |
13.54 |
2.17 |
9.58 |
|||||||||||||||||||||||||
Martha |
— |
— |
n.a |
— |
— |
48.12 |
||||||||||||||||||||||||||
Endeavor |
9.72 |
10.62 |
(8 |
%) |
17.30 |
19.92 |
15.97 |
|||||||||||||||||||||||||
Total |
$ |
11.38 |
$ |
8.86 |
28 |
% |
$ |
8.73 |
$ |
8.97 |
$ |
9.05 |
||||||||||||||||||||
Kensington |
$ |
988 |
$ |
1,115 |
(11 |
%) |
$ |
1,055 |
$ |
1,065 |
$ |
1,298 |
||||||||||||||||||||
Palmarejo, Mexico - Lower Cash Operating Costs per Silver Ounce1; Higher Underground Silver Grade
San Bartolomé, Bolivia - Consistent Performance; Higher Throughput Offset Decrease in Grade
Rochester, Nevada - Capacity Expansion Complete; Significant Production Increase Expected in 4Q
Kensington, Alaska - Gold Production Increased 25%; Costs Down 11%; Improved Gold Grade
La Preciosa, Mexico - Feasibility Work Underway
Exploration Update
Costs associated with exploration activities for the quarter were $3.3 million (expensed) for discovery of new silver and gold mineralization and $4.6 million (capitalized) for definition and expansion of new discoveries, for a total of $7.9 million. On a year-to-date basis, total exploration costs were $26.2 million, tracking below original guidance of $40 million for the full year, consistent with the Company's initiative to reduce costs. Coeur expects to spend $37 million on exploration in 2013.
Coeur's exploration program used nine drill rigs during the quarter: four drills at Palmarejo, four at Kensington, and one at Rochester. This work resulted in completion of over 145,700 feet (44,400 meters) of combined core and reverse circulation drilling. Through the first nine months of 2013, nearly 428,000 feet (131,000 meters) of drilling was completed.
Palmarejo, Mexico
Rochester, Nevada
Kensington
La Preciosa, Mexico
San Bartolomé, Bolivia
Table 4: Select Drilling Results at Palmarejo
Hole |
True Width (meters) |
True Width (feet) |
Silver |
Gold |
||||||||||||
Gram/Metric Ton |
Ounce/Short Ton |
Gram/Metric Ton |
Ounce/Short Ton |
|||||||||||||
575 |
9.4 |
31.0 |
542 |
15.8 |
— |
— |
||||||||||
575 |
4.4 |
14.4 |
583 |
17.0 |
— |
— |
||||||||||
578 |
6.3 |
20.7 |
713 |
20.8 |
0.46 |
0.013 |
||||||||||
584 |
3.9 |
12.8 |
958 |
27.9 |
0.98 |
0.029 |
||||||||||
585 |
4.3 |
14.1 |
221 |
6.4 |
1.77 |
0.052 |
||||||||||
See the appendix of the presentation titled "3Q 2013 Financial Results" to be posted at www.coeur.com for all drilling results for the third quarter 2013.
Table 5: Select Drilling Results at Kensington
Hole |
True Width (meters) |
True Width (feet) |
Gold |
|||||||
Gram/Metric Ton |
Ounce/Short Ton |
|||||||||
3 |
1.4 |
4.6 |
40.5 |
1.18 |
||||||
4 |
1.4 |
4.5 |
53.9 |
1.57 |
||||||
23 |
0.49 |
1.6 |
82.0 |
2.39 |
||||||
24 |
4.4 |
14.4 |
41.5 |
1.21 |
||||||
47 |
0.85 |
2.8 |
76.5 |
2.23 |
||||||
49 |
0.64 |
2.1 |
66.9 |
1.95 |
||||||
See the appendix of the presentation titled "3Q 2013 Financial Results" to be posted at www.coeur.com for all drilling results for the third quarter 2013.
2013 Outlook
Coeur's 2013 silver and gold production guidance remains unchanged as shown in Table 6 below, and compares to 2012 silver production of 18.0 million ounces and gold production of 226,486 ounces.
Table 6: 2013 Production Outlook
(silver ounces in thousands) |
Country |
Silver |
Gold |
Palmarejo |
Mexico |
7,700-8,300 |
108,000-110,000 |
San Bartolomé |
Bolivia |
5,900-6,000 |
— |
Rochester |
Nevada, USA |
3,700-4,000 |
34,000-36,000 |
Kensington |
Alaska, USA |
— |
108,000-112,000 |
Endeavor |
Australia |
700-800 |
— |
Total |
18,000-19,100 |
250,000-258,000 |
Conference Call Information
Coeur will hold a conference call and webcast at www.coeur.com to discuss the Company's third quarter 2013 results on November 7, 2013 at 11:00 a.m. Eastern time.
Dial-In Numbers:
(877) 768-0708 (U.S. and Canada)
(660) 422-4718 (International)
Conference ID:
805 93 215
A replay of the call will be available on Coeur's website through November 21, 2013.
Replay Numbers:
(855) 859-2056 (U.S. and Canada)
(404) 537-3406 (International)
Conference ID:
805 93 215