Coeur Reports Strong Operating Cash Flow and Record Gold Production in 2012; Expected Production Gro

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Coeur Reports Strong Operating Cash Flow and Record Gold Production in 2012; Expected Production Growth in 2013 Driven by Rochester Expansion

COEUR D'ALENE, Idaho--(BUSINESS WIRE)-- Coeur d'Alene Mines Corporation (NYS: CDE) (TSX: CDM) reported strong operating cash flow1 of $338.7 million from metal sales of $895.5 million for the full year 2012. Production totaled 18.0 million silver ounces and a record 226,486 gold ounces. Coeur expects to generate robust operating cash flow from anticipated 2013 production of 18.0 - 19.5 million ounces of silver and a record 250,000 - 265,000 ounces of gold.


Coeur repurchased nearly $20.0 million, or 0.9 million common shares, during the second half of 2012. Coeur also acquired the remaining interest of the Joaquin silver-gold project in Argentina in December 2012 for $60 million of cash and stock.

2012 Highlights

  • Silver production was 18.0 million ounces, a 6% decrease from 2011.
  • Gold production was a record 226,486 ounces, up 3% from 2011.
  • Average realized prices were $30.92 per silver ounce and $1,665 per gold ounce, down 12% for silver and up 7% for gold from 2011.
  • Net metal sales totaled $895.5 million, down 12% from 2011.
  • Operating cash flow1 totaled $338.7 million, down 25% from 2011. Including changes in working capital, net cash from operating activities was $271.6 million compared with $416.2 million in 2011.
  • Consolidated cash operating costs1 were $7.57 per silver ounce compared with $6.31 per silver ounce in 2011.
  • Kensington's cash operating costs1 per gold ounce were $1,358 compared with $1,088 in 2011 and ended 2012 at $950 per ounce during December.
  • Adjusted earnings1 were $121.5 million or $1.36 per share, compared with $232.5 million, or $2.60 per share, in 2011. Net income for 2012, which included a non-cash fair market value adjustment of negative $23.5 million, was $48.7 million, or $0.54 per share, compared with net income of $93.5 million, or $1.05 per share, in 2011.
  • Cash, cash equivalents and short-term investments were $126.4 million at December 31, 2012, compared with $195.3 million a year ago.

2013 Outlook

  • Coeur expects to produce 18.0 - 19.5 million ounces of silver and 250,000 - 265,000 ounces of gold in 2013.
  • Cash operating costs1 per ounce are estimated at $8.00 - $9.00 per silver ounce, assuming a gold by-product price of $1,650 per ounce. Kensington's cash operating costs1 are estimated at $900 - $950 per gold ounce.
  • Coeur expects to invest $40.0 million in exploration with the goal of increasing estimated mineral reserves and resources at year-end 2013.
   

1.

  

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 

Mitchell J. Krebs, Coeur's President and Chief Executive Officer, said, "Coeur has grown considerably over the past five years and is now one of the world's largest silver producers. Today, we have a new management team, a stronger balance sheet and a disciplined but aggressive approach to moving the Company forward which we believe will lead to operational consistency, substantial growth and long-term value creation for our shareholders.

"We expect 2013 to be a strong year for Coeur, supported by significant expected growth at Rochester, a full year of steady state operations at Kensington, and stable production at Palmarejo and San Bartolomé. We worked through operational challenges at Palmarejo and San Bartolomé in the fourth quarter and expect these operations to achieve sustainable production rates in 2013 and beyond.

"Production at Rochester is expected to increase 35% - 50% this year versus 2012 levels, which we anticipate will drive cash operating costs down and significantly increase the mine's cash flow. This expansion will require an investment of approximately $30 - $35 million in 2013 and we expect it will allow annual production of 4.5 - 5.0 million silver ounces and approximately 45,000 gold ounces to continue for at least seven years. We are enthusiastic about future opportunities to expand production at Rochester even further that could make this asset the second largest producer in our portfolio.

"We are pleased to see positive results at Kensington after taking six months to re-tool the operation to generate consistent performance. We will also invest approximately $20 million of capital at San Bartolomé in 2013 in order to boost annual production by 10% - 15% in 2014 and beyond. This investment is expected to generate a near triple digit rate of return."

Commenting on further 2013 goals, Mr. Krebs said, "For good reason, investors are demanding that mining companies demonstrate capital discipline, focus on true value creation, return capital to shareholders, and control costs in order to provide operating leverage to higher metals prices. Our organization is focusing on these priorities and on reducing the risks to our business in order to provide investors a compelling rationale to own our shares. Our key objectives in 2013 are:

  • Achieve excellence in employee health and safety, environmental stewardship and community relations.
  • Double our efforts to achieve operational consistency and reliability by improving planning, maintenance and execution of our key capital projects.
  • Invest in accretive, high-return internal and external growth opportunities - including our own shares - in order to build net asset value and resources on a per share basis.
  • Maximize free cash flow by containing operating costs, identifying revenue enhancement opportunities, proactively managing working capital.
  • Continue strengthening our organizational structure and management.
  • Maintain an aggressive approach toward investing in exploration, which served the Company well in 2012."
            

Table 1: Financial Highlights (Unaudited)

 
(All amounts in millions, except per share amounts, average realized prices and gold ounces sold)

4Q
2012

  

4Q
2011

  

Quarter
Variance

  

YTD
2012

  

YTD
2011

  

YTD
Variance

Sales of Metal$205.9$246.9(17%)$895.5$1,021.2(12%)
Production Costs$107.4$109.1(2%)$456.8$420.09%
EBITDA(1)$86.2$119.7(28%)$372.4$531.3(30%)
Adjusted Earnings(1)$26.2$43.2(39%)$121.5$232.5(48%)
Adjusted Earnings Per Share(1)$0.29$0.48(40%)$1.36$2.60(48%)
Net Income$37.6$11.4230%$48.7$93.5(48%)
Earnings Per Share$0.42$0.13223%$0.54$1.05(49%)
Operating Cash Flow(1)$79.2$97.5(19%)$338.7$454.4(25%)
Cash From Operating Activities$61.7$87.4(29%)$271.6$416.2(35%)
Capital Expenditures$21.8$40.2(46%)$115.6$120.0(4%)
Cash, Cash Equivalents & Short-Term Investments$126.4$195.3(35%)$126.4$195.3(35%)
Total Debt(1)(net of debt discount)$48.1$121.5(60%)$48.1$121.5(60%)
Weighted Average Shares Issued & Outstanding89.189.589.489.4
Average Realized Price Per Ounce - Silver$32.52$30.875%$30.92$35.15(12%)
Average Realized Price Per Ounce - Gold$1,709$1,6742%$1,665$1,5587%
Silver Ounces Sold3.65.1(29%)18.019.1(6%)
Gold Ounces Sold55,56555,308213,185238,551(11%)
 
   

1.

  

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 

Net metal sales for 2012 decreased from 2011 to $895.5 million due to lower second half production at Palmarejo and San Bartolomé, closure of the Martha underground mine in Argentina and a lower average realized silver price. This decrease in metal sales was partially offset by increased production at Rochester and a higher average realized gold price compared with 2011. Silver contributed 61% of the Company's total metal sales in 2012 compared with 65% in 2011.

Consolidated production costs were $456.8 million in 2012, a 9% increase from 2011. During the fourth quarter of 2012, total production costs of $107.4 million were flat compared with the fourth quarter 2011.

Higher cash operating costs1 per silver ounce were due to lower production compared with 2011, including low production from Martha, which ceased active mining operations in September 2012. Unit costs were also impacted by remediation work in the underground operations and increased stripping of waste tons in the open pit operations at Palmarejo and overall increased maintenance costs.

Prior to changes in working capital, Coeur generated $338.7 million in operating cash flow1 in 2012 compared with $454.4 million in 2011. Including changes in working capital, net cash from operating activities was $271.6 million compared with $416.2 million in 2011. Fourth quarter operating cash flow1 of $79.2 million improved from $77.3 million in the third quarter 2012 but decreased from $97.5 million in the fourth quarter 2011.

Coeur reports a non-U.S. GAAP metric of adjusted earnings1 as a measure of operating income, which excludes non-cash fair value adjustments, other non-cash adjustments, deferred taxes and discontinued operations. Adjusted earnings were $121.5 million ($1.36 per share) in 2012, compared with $232.5 million ($2.60 per share) in 2011. Fourth quarter adjusted earnings were $26.2 million ($0.29 per share) compared with $25.8 million ($0.29 per share) in the third quarter 2012 and $43.2 million ($0.48 per share) in the fourth quarter 2011.

On a U.S. GAAP basis, the Company realized net income of $48.7 million ($0.54 per share) in 2012 compared with net income of $93.5 million ($1.05 per share) in 2011. Reduced metal sales and fair value adjustments of negative $23.5 million reduced net income for 2012, while 2011 net income was reduced by fair value adjustments of negative $52.1 million. Fourth quarter net income, after fair value adjustments of $21.2 million, was $37.6 million ($0.42 per share) compared with net loss of $15.8 million, or $0.18 per share, after fair value adjustments of negative $37.6 million, in the third quarter 2012 and a net income of $11.4 million, or $0.13 per share, after fair value adjustments of $19.0 million, in the fourth quarter 2011.

Fair value adjustments are driven primarily by lower or higher gold prices, which decrease or increase, respectively, the estimated future liabilities related to a gold royalty obligation at Palmarejo.

Capital expenditures were $115.6 million in 2012, a 4% decrease from 2011. Capital expenditures were primarily related to capitalized exploration drilling and development of the Guadalupe satellite operation located six kilometers from the main Palmarejo operation, underground development at Palmarejo, and tailings expansion, underground development and infrastructure improvements at Kensington.

Cash, cash equivalents and short-term investments were $126.4 million at December 31, 2012. In August 2012, the Company entered into a four year senior secured revolving credit facility of up to $100 million, which remains undrawn.

In January 2013, Coeur raised net proceeds of $291.1 million in 7.875% Senior Notes due 2021, resulting in current cash, cash equivalents and short term investments of approximately $400 million. Including the undrawn revolving credit facility, the Company has available liquidity of approximately $500 million.

Shares outstanding at the end of 2012 totaled 90.3 million.

   

1.

  

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 
            

Table 2: Operational Highlights: Production

 

(silver ounces in thousands)

4Q 2012  4Q 2011  

Quarter
Variance

  2012  2011  

YTD
Variance

   Silver  Gold  Silver  Gold  Silver  Gold  Silver  Gold  Silver  Gold  Silver  Gold
Palmarejo1,554  19,9982,690  34,108(42%)  (41%)8,236  106,0389,042  125,071(9%)  (15%)
San Bartolomé1,3431,997(33%)n.a.5,9307,501(21%)n.a.
Rochester82812,0553731,993122%505%2,80138,0661,3926,276101%507%
Martha130144n.a.n.a.323257530615(39%)(58%)
Kensington28,71713,299n.a.116%82,12588,420n.a.(7%)
Endeavor106      112      (5%)  n.a.   734      613      20%  n.a.
Total3,83160,7705,30249,544(28%)23%18,025226,48619,078220,382(6%)3%
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