Coeur Reports First Quarter 2013 Results
Coeur Reports First Quarter 2013 Results
Palmarejo rebounds
Timing of metal sales versus production impacts financial results
COEUR D'ALENE, Idaho--(BUSINESS WIRE)-- Coeur d'Alene Mines Corporation (the "Company" or "Coeur") (NYS: CDE) (TSX: CDM) reported metal sales of $171.8 million, operating cash flow1 of $58.7 million, and capital expenditures of $12.8 million during the first quarter 2013.
The Company produced 3.8 million ounces of silver and 56,913 ounces of gold during the first quarter 2013. Silver and gold production at Palmarejo increased 6% and 15%, respectively, compared to the prior quarter while costs declined significantly from $7.55 per silver ounce1 to $2.20 per silver ounce1. Companywide cash operating costs were $8.73 per silver ounce1 and were $1,055 per gold ounce at the Company's Kensington gold mine during the first quarter.
The Company reaffirmed its 2013 full-year production guidance of 18.0-19.5 million ounces of silver and 250,000-265,000 ounces of gold. Coeur's full-year cash operating cost1 guidance is being revised to $9.50 - $10.50 per silver ounce (compared to previous guidance of $8.00 - $9.00 per ounce) to reflect an assumed $1,500 per ounce gold price during the remainder of the year for by-product credits (compared to $1,650 per ounce used in prior guidance). Kensington's cash operating costs per gold ounce1 guidance remains unchanged at $900 - $950 for 2013.
During the first quarter, the Company successfully completed a $300 million senior unsecured notes financing, redeemed $43.3 million of the outstanding $48.7 million of 3.25% convertible debentures and closed the approximately $280 million acquisition of Orko Silver Corp., which adds the La Preciosa silver project in Mexico to the Company's growth profile. The Company announced the relocation of its corporate headquarters to Chicago and that, subject to shareholder approval, the Company will reincorporate to Delaware and change its name to Coeur Mining, Inc. promptly following the Annual Meeting of Shareholders on May 14, 2013. In addition, Coeur repurchased 655,474 shares of its own stock for $12.6 million during the first quarter 2013. The Company has now completed $32.5 million of its $100 million share repurchase program authorized by the Board of Directors in June of 2012.
First Quarter 2013 Highlights
Silver production totaled 3.8 million ounces, a 22% decrease from the first quarter 2012 and level with fourth quarter 2012.
Gold production totaled 56,913 ounces, up 30% from the first quarter 2012 and down 6% from fourth quarter 2012.
Metal sold of 3.1 million silver ounces and 51,926 gold ounces resulted in lower metal sales during the quarter as a result of quarter-end timing.
Average realized prices were $30.30 per silver ounce and $1,630 per gold ounce, down 7% for silver and 4% for gold from the first quarter 2012, and 7% lower for silver and 5% for gold compared with the fourth quarter 2012.
Cash operating costs for silveraveraged $8.73 per silver ounce1 compared with $8.97 per silver ounce1 in the fourth quarter 2012. Kensington's cash operating costs averaged $1,055 per gold ounce1 compared with $1,065 per gold ounce1 in the fourth quarter 2012.
Adjusted earnings1 were $6.8 million, or $0.08 per share, compared with $41.5 million, or $0.46 per share, in the first quarter 2012. Net income for the first quarter 2013 was $12.3 million, or $0.14 per share, compared with net income of $4.0 million, or $0.04 per share, in the first quarter 2012.
Cash, cash equivalents and short-term investments were $332.8 million at March 31, 2013, compared with $153.2 million a year ago. On April 16, 2013, $99.1 million was used as part of the consideration to acquire Orko Silver.
Subsequent to the issuance of 11.6 million common shares to Orko Silver shareholders on April 16, 2013, Coeur has 101.5 million in total shares outstanding at May 8, 2013.
1. | EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for the 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, "Through the first four months of 2013, Coeur has been actively pursuing its strategic objectives of (i) creating a foundation for improved operational consistency throughout the remainder of the year and beyond; (ii) reducing costs and improving the efficiency at our existing mines; (iii) reinvesting in our existing assets to increase production and cash flow; (iv) repurchasing shares, which we feel represent compelling long-term value, especially at current levels; (v) pursuing opportunities to acquire and sell assets in order to create long-term value for our shareholders; and (vi) advancing our capital projects that are critical to the Company's continued growth and sustainability.
"We are pleased that silver and gold production at Palmarejo rebounded at materially lower costs per ounce1 than the last quarter of 2012. Although production levels at our Palmarejo operation had a slow start to the year due to lower than planned grades, both March and April were strong months and we remain confident in our 2013 guidance for this important asset. Rochester also started slow due to extreme winter weather in Nevada and we are pursuing alternatives to catch up production that was not realized during January and February. We remain enthusiastic about the expansion opportunities at Rochester, which we believe can make this long-running operation our largest cash flow generator in the next five years. Our San Bartolomé silver mine in Bolivia continues to exceed plan levels despite mining lower grade material. The Kensington gold mine in Alaska is now demonstrating its ability to operate more consistently as planned. We expect production from Kensington to increase during the second half of the year due to higher grades.
"Since completion of the Orko Silver transaction, we have been actively building a project development team and commissioned a preliminary economic assessment (PEA) of the La Preciosa project by M3 Engineering, the results of which we expect to have by June 30th. We believe La Preciosa will become another long-life, cornerstone asset for the Company and will generate a return on investment in excess of the Company's cost of capital."
Table 1: Financial Highlights (Unaudited)
(All amounts in millions, except per share amounts, average realized prices and gold ounces sold) | 1Q 2013 | 1Q 2012 | Quarter Variance | ||||||||||||||||||
Sales of Metal | $ | 171.8 | $ | 204.6 | (16 | %) | |||||||||||||||
Production Costs | $ | 88.8 | $ | 92.6 | (4 | %) | |||||||||||||||
EBITDA(1) | $ | 61.3 | $ | 96.8 | (37 | %) | |||||||||||||||
Adjusted Earnings(1) | $ | 6.8 | $ | 41.5 | (84 | %) | |||||||||||||||
Adjusted Earnings Per Share(1) | $ | 0.08 | $ | 0.46 | (83 | %) | |||||||||||||||
Net Income | $ | 12.3 | $ | 4.0 | 230 | % | |||||||||||||||
Earnings Per Share | $ | 0.14 | $ | 0.04 | 250 | % | |||||||||||||||
Operating Cash Flow(1) | $ | 58.7 | $ | 93.8 | (37 | %) | |||||||||||||||
Cash Flow From Operating Activities | $ | 12.9 | $ | 17.0 | (24 | %) | |||||||||||||||
Capital Expenditures | $ | 12.8 | $ | 31.6 | (59 | %) | |||||||||||||||
Cash, Cash Equivalents & Short-Term Investments | $ | 332.8 | $ | 153.2 | 117 | % | |||||||||||||||
Total Debt(1)(net of debt discount) | $ | 305.3 | $ | 122.0 | 150 | % | |||||||||||||||
Weighted Average Shares Issued & Outstanding | 89.9 | 89.6 | — | % | |||||||||||||||||
Average Realized Price Per Ounce - Silver | $ | 30.30 | $ | 32.61 | (7 | %) | |||||||||||||||
Average Realized Price Per Ounce - Gold | $ | 1,630 | $ | 1,702 | (4 | %) | |||||||||||||||
Silver Ounces Sold | 3.1 | 4.3 | (28 | %) | |||||||||||||||||
Gold Ounces Sold | 51,926 | 38,884 | 34 | % | |||||||||||||||||
1. | EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for the reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations. | ||
First quarter net metal sales were $171.8 million compared with $204.6 million in the first quarter of 2012 due to lower metal prices and fewer silver ounces sold, which was partially offset by more gold ounces sold.
Silver contributed 53% of the Company's total metal sales in the first quarter 2013 compared with 68% in the first quarter 2012 due to increased gold production at the Company's Kensington and Rochester mines.
Consolidated production costs were $88.8 million in the first quarter 2013, which was down 4% compared to last year's first quarter and 17% lower than the fourth quarter 2012. On a per ton milled basis, production costs were 16% lower compared with the first quarter 2012. Production costs at each of the Company's operations are on plan. Unit costs are expected to decline over the remainder of 2013 with the expected ramp up in production. Cash operating costs per silver ounce1 were higher compared with the first quarter 2012 due to lower production. Compared to the fourth quarter, costs per silver ounce1 declined 3%.
Prior to changes in working capital, Coeur generated $58.7 million in operating cash flow1 in the first quarter 2013 compared with $93.8 million in the first quarter 2012. Including changes in working capital, net cash from operating activities was $12.9 million compared with $17.0 million in the first quarter 2012. Inventories increased $20.5 million during the first quarter due to timing of metal sales, which were realized in April 2013. In addition, accounts payable and accrued liabilities declined $27.0 million during the quarter due mostly to an annual tax payment to Bolivia.
On a U.S. GAAP basis, the Company realized net income of $12.3 million, or $0.14 per share, in the first quarter 2013 compared with net income of $4.0 million, or $0.04 per share, in the first quarter 2012. Net income for the first quarter 2013 included a non-cash fair market value adjustment of positive $17.8 million. The fair market value adjustment in the first quarter 2012 was negative $23.1 million. 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.
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 earnings1 were $6.8 million, or $0.08 per share, in the first quarter 2013, compared with $41.5 million, or $0.46 per share, in the first quarter 2012. Adjusted earnings were lower due to a $32.8 million decline in metal sales and a $6.4 million increase in general and administrative, pre-development, care and maintenance, and other expenses.
Capital expenditures were $12.8 million in the first quarter 2013, a 59% decrease from the first quarter 2012. Capital expenditures were primarily related to Palmarejo's capitalized exploration drilling, underground development and development of the Guadalupe satellite operation located near the Palmarejo mine, leach pad and crusher expansion at Rochester, and exploration drilling and underground development at Kensington.
Cash, cash equivalents and short-term investments were $332.8 million at March 31, 2013. On January 29, 2013, the Company realized net proceeds of $290.8 million from the sale of $300.0 million in aggregate principal amount of 7.875% Senior Notes due in 2021. On April 16, 2013, $99.1 million (CAD $100.0 million) was used in connection with the acquisition of Orko Silver Corp. The Company's $100 million revolving credit facility remains undrawn.
Coeur and XDM Royalty Corp. ("XDM") have terminated the previously-announced letter of intent whereby Coeur announced its intent to sell its interest in the silver production and reserves from the Endeavor mine in Australia and the royalty from the Cerro Bayo gold and silver mine in southern Chile. Mr. Krebs said, "The proposed transaction with XDM provided Coeur with an opportunity to monetize certain non-core assets. Unfortunately, a severe dislocation in metals markets has disrupted the transaction. Both parties remain committed to continuing discussions to possibly reach a revised agreement."
1. | EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for the 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) | 1Q 2013 | 1Q 2012 | Quarter Variance | |||||||||||||||||||
Silver | Gold | Silver | Gold | Silver | Gold | |||||||||||||||||
Palmarejo | 1,646 | 22,965 | 2,483 | 31,081 | (34 | %) | (26 | %) | ||||||||||||||
San Bartolomé | 1,391 | — | 1,591 | — | (13 | %) | n.a. | |||||||||||||||
Rochester | 648 | 8,742 | 441 | 5,292 | 47 | % | 65 | % | ||||||||||||||
Martha(1) | — | — | 123 | 84 | n.a. | n.a. | ||||||||||||||||
Kensington | — | 25,206 | — | 7,444 | n.a. | 239 | % | |||||||||||||||
Endeavor | 150 | — | 248 | — | (40 | %) | n.a. | |||||||||||||||
Total | 3,835 | 56,913 | 4,886 | 43,901 | (22 | %) | 30 | % | ||||||||||||||
1. | The Martha mine in Argentina ceased production at the end of the third quarter 2012. | ||
Table 3: Operational Highlights: Cash Operating Costs Per Ounce1
1Q 2013 | 1Q 2012 | Quarter Variance | |||||||||||||||||||
Palmarejo | $ | 2.20 | $ | (2.27 | ) | 197 | % | ||||||||||||||
San Bartolomé | 13.27 | 10.21 | 30 | % | |||||||||||||||||
Rochester | 13.54 | 23.35 | (42 | %) | |||||||||||||||||
Martha(1) | — | 46.48 | n.a. | ||||||||||||||||||
Endeavor | 17.30 | 16.64 | 4 | % | |||||||||||||||||
Total | $ | 8.73 | $ | 6.29 | 39 | % | |||||||||||||||
Kensington | $ | 1,055 | $ | 2,709 | (61 | %) | |||||||||||||||
1. | The Martha mine in Argentina ceased production at the end of the third quarter 2012. | ||
Palmarejo, Mexico - Rebounding with Expected Improved Quarters to Come
Palmarejo produced 1.65 million ounces of silver and 22,965 ounces of gold at cash operating costs of $2.20 per silver ounce1 for the first quarter. In the fourth quarter of 2012, Palmarejo produced 1.55 million ounces of silver and 19,998 ounces of gold at cash operating costs of $7.55 per silver ounce1.
Palmarejo's underground and open pit mining rates improved and stabilized during the first quarter compared to the last four months of 2012. Silver and gold ore grades from both the open pit and from underground operations are generally expected to continue increasing during the remainder of the year as they have in March and April.
Palmarejo's mine rescue team earned first place and the first aid response team second place in their respective competitions at the Northern Mexico Mine Rescue and First Aid Competition held in mid-March 2013. The Company's subsidiary Coeur Mexicana was also recognized by the Mexican Centre for Philanthropy with the Socially Responsible Business Distinction Award for the exemplary Palmarejo operations for the fifth year in a row.
Sales and operating cash flow1 totaled $57.4 million and $31.5 million, respectively, in the first quarter 2013.
Capital expenditures were $5.3 million during this quarter.
San Bartolomé, Bolivia - Stable Production and Mill Expansion On-Track
San Bartolomé produced 1.4 million ounces of silver at cash operating costs of $13.27 per silver ounce1. In the fourth quarter of 2012, San Bartolomé produced 1.3 million ounces of silver at cash operating costs of $13.97 per silver ounce1.
The Company is in the process of increasing processing capacity approximately 10%-15% by investing $17.0 - $20.0 million during 2013. This expansion is expected to have a less than two-year payback and increase the mine's annual production to over 6.0 million ounces of silver for the next several years at reduced cash operating costs per ounce1. This expansion project remains on-schedule to be completed late this year.
In celebration of the city of Potosi's bicentennial, San Bartolomé donated silver bars which were made into commemorative medallions for the government.
Sales and operating cash flow1 totaled $33.1 million and $11.9 million, respectively, in the first quarter 2013.
Capital expenditures were $0.5 million during this quarter.
Rochester, Nevada - Slow First Quarter; Accelerated Production Expected during Remainder of 2013
Rochester produced 648,000 ounces of silver and 8,742 ounces of gold, up 47% and 65% respectively, over the first quarter 2012. Cash operating costs per silver ounce1 were $13.54, which were materially lower than first quarter 2012, but higher than fourth quarter 2012.
In the fourth quarter 2012, Rochester produced 828,000 ounces of silver and 12,054 ounces of gold at cash operating costs of $2.17 per silver ounce1. First quarter production was lower due to poor weather and lower than planned crushing rates.
The Company is investing approximately $4.0 million during 2013 to expand the capacity of the primary crusher from 9.0 million tons to 14.0 million tons. Crusher throughput is expected to ramp up to achieve 1.2-1.4 million tons crushed monthly in the second half of 2013, leading to higher second half silver and gold production.
In addition, the Company is expanding the mine's heap leach capacity to approximately 67.0 million tons at an estimated capital cost of approximately $15.0 million. This planned expansion will accommodate sustained higher production rates driven by the processing of ore contained in historic stockpiles. These stockpiles were created during the mine's 26-year operating history when gold and silver prices were significantly lower than current market prices.
On May 1, 2013, Rochester presented Nevada Governor Brian Sandoval with a 1,000-ounce silver bar to be made into 1,000 commemorative coins to mark the state's sesquicentennial.
Sales and operating cash flow1 totaled $39.5 million and $17.4 million, respectively, in the first quarter 2013.
Capital expenditures were $3.3 million during this quarter.
Kensington, Alaska - Improving Gold Grade Expected in Second Half of 2013
Kensington produced 25,206 ounces of gold at cash operating costs of $1,055 per ounce1, significantly improved over the first quarter 2012, which was affected by the temporary scale back in production from November 2011 until April 2012 to allow for the completion of several critical underground and surface infrastructure projects.
Production during the fourth quarter 2012 totaled 28,717 gold ounces at cash operating costs of $1,065 per ounce.1
Kensington's mill throughput at 129,057 tons was consistent with the fourth quarter 2012. Average mill head grade of 0.20 oz/t was 13% lower than the fourth quarter 2012, but 11% higher than first quarter 2012.
The gold grade is expected to gradually improve during the remaining quarters of 2013 as higher-grade stopes are mined and processed.
Rebuilds of generators during the first quarter limited backfilling rates, which negatively impacted overall efficiency and costs.
Sales and operating cash flow1 totaled $39.3 million and $15.2 million, respectively, for the first quarter 2013.
Capital expenditures were $3.3 million during this quarter.
La Preciosa, Mexico - Project Update
The acquisition of Orko Silver closed on April 16 for total consideration of the approximately $280 million ($99.1 million in cash, 11.6 million Coeur shares and 1.6 million Coeur warrants.)
Joe Phillips was recently named the Company's Chief Development Officer, bringing international mine development experience, including the successful construction of two mines in Mexico. He is responsible for the development of La Preciosa and other capital projects.
Coeur has engaged M3 Engineering to prepare a PEA by the end of the second quarter 2013. M3 has built over 16 mines and processing plants in Mexico and is a leading engineering and construction company to the mining industry in Mexico.
Following the PEA, Coeur intends to commence with basic engineering and full feasibility work in the second half of 2013, along with infill and development drilling.
Optimization of the operating plan at the feasibility stage is expected to enhance project economics.
A strong development team is being established at the corporate office and in Durango, Mexico.
1. | EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for the reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations. | ||||||||||
Organizational Update
Sandro Ferrarone joins Coeur as Vice President of Operations Support. Mr. Ferrarone comes to Coeur from Newmont where he served as Regional Corporate Development Director for South America. He has 19 years of operational planning and corporate development experience in the gold and copper industries. Mr. Ferrarone's 13 years of service at Newmont included positions of increasing responsibility within key areas of Newmont's operations and business functions.
Bruce Kennedy is Coeur's General Manager for La Preciosa. He was previously the Country Manager of Argentina and General Manager of the Pirquitas Mine for
