Coeur Reports Second Quarter 2013 Results
Coeur Reports Second Quarter 2013 Results
Operating Performance Improves
CHICAGO--(BUSINESS WIRE)-- Coeur Mining, Inc. (the "Company" or "Coeur") (NYS: CDE) (TSX: CDM) reported metal sales of $204.5 million, cash flow from operating activities of $63.3 million, or $0.63 per share, and capital expenditures of $27.2 million during the second quarter 2013.
The Company produced 4.6 million ounces of silver and 60,757 ounces of gold during the second quarter 2013, representing increases of 21% and 7%, respectively, over the first quarter 2013. Silver and gold production at the Palmarejo mine in Mexico increased 24% and 23%, respectively, compared to the first quarter. Companywide cash operating costs were $8.86 per silver ounce1 and were $1,115 per gold ounce1 at the Company's Kensington gold mine during the second 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. Despite lower gold prices used to calculate by-product credits, Coeur is maintaining its full-year cash operating cost1 guidance of $9.50 - $10.50 per silver ounce, which reflects the effects of the Company's ongoing cost reduction efforts. Although the Company anticipates Kensington's second half cash operating costs per gold ounce1 to be approximately 20% lower than the first half of the year, full-year 2013 cost guidance for Kensington is being revised upward slightly to $950 - $1,000 (compared to prior guidance of $900 - $950). Coeur will provide a three-year production outlook for each of its operations during the second half of 2013.
Second Quarter 2013 Highlights
Metal production increased to 4.6 million silver ounces and 60,757 gold ounces, an increase of 21% and 7%, respectively, from the first quarter 2013.
Metal sold increased to 5.2 million silver ounces and 63,389 gold ounces from 3.1 million silver ounces and 51,926 gold ounces in the first quarter 2013.
Net metal sales were $204.5 million, up 19% compared to the first quarter 2013 despite average realized prices of $22.86 per silver ounce and $1,416 per gold ounce, which were 25% and 13% lower, respectively, than the first quarter 2013.
Cash flow from operating activities was $63.3 million, or $0.63 per share, in the second quarter compared to $12.9 million, or $0.14 per share, during the first quarter 2013. Net loss for the second quarter 2013 was $35.0 million, or $0.35 per share, compared with net income of $12.3 million, or $0.14 per share, in the first quarter 2013. Adjusted earnings1 were $(34.6) million, or $(0.35) per share, compared with $6.8 million, or $0.08 per share, in the first quarter 2013.
Cash, cash equivalents, and short-term investments were $249.5 million at June 30, 2013, compared with $332.8 million at March 31, 2013. On April 16, 2013, $99.1 million was used as part of the consideration to acquire Orko Silver Corporation. The Company's $100 million revolving credit facility remains undrawn.
Effective June 27, 2013, Coeur settled the outstanding claims dispute at Rochester.
1. | 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, "Our second quarter operating performance improved significantly compared to this year's first quarter and last year's fourth quarter. Palmarejo is now performing quite consistently from month-to-month. Our operations and technical teams deserve tremendous credit for the improvements at Palmarejo since late last year. Continued robust silver production from San Bartolomé and higher than planned gold production from Palmarejo are expected to offset lower than expected production levels at Rochester, which encountered poor crusher performance in the first half of the year. We remain enthusiastic about the expansion initiatives underway at Rochester, which we believe can make this long-running operation our largest cash flow generator in the next five years. The Kensington gold mine in Alaska is now demonstrating its ability to operate more consistently as planned. We expect production from Kensington to increase and unit costs to decrease significantly during the second half of the year due to higher grades. Finally, we are beginning a feasibility study on the La Preciosa project in Mexico, which is expected to be completed in mid-2014, and we will be focusing our efforts on optimizing the results of the PEA to improve the project's economics," Mr. Krebs added.
"Since late last year, Coeur has been actively pursuing a four-pronged strategy designed to maximize the Company's net cash flow: (1) identifying and implementing revenue enhancement opportunities at existing operations; (2) reducing operating and non-operating costs; (3) reducing capital spending, completing expansion projects at two of our mines, and targeting significantly lower capital expenditures in 2014; and (4) effectively managing working capital. I am pleased with the results of these initiatives and the targets we have established, which are summarized below and support our expectation to remain net cash flow positive at current price levels:
Revenue Enhancements:
Process recovery enhancements at Palmarejo expected to boost silver and gold recovery rates by 5%-10% by year-end, which are expected to result in approximately $30 million of incremental annual metal sales (assuming $20 per ounce silver and $1,300 per ounce gold prices).
Re-sequencing of higher-grade stopes at Kensington containing expected 10% higher grade during the second half of 2013, which is anticipated to increase production by approximately 25% and decrease unit operating costs by 20% compared to the first half of 2013.
Completion of the $15.1 million process plant expansion project at San Bartolomé by the end of the year, which is expected to increase silver production by 10%-15%, resulting in $11-$17 million of incremental annual metal sales (assuming a $20 per ounce silver price).
Cost Reductions:
$19 million of cash operating cost savings versus plan realized during the first half of 2013.
$8-$9 million of further cash operating cost reductions targeted during the remainder of the year. The projected cost savings are lower than in the first half due to higher than planned production levels in the second half of 2013.
Reducing exploration expense by 17%, or approximately $3 million during the remainder of 2013, and reallocating an additional $3 million of reductions to the La Preciosa project.
Capital Spending Reductions:
Eliminated or deferred $24 million of capital projects scheduled for 2013 resulting in full-year expected capital expenditures of $100-$110 million, an 18% decrease compared to prior guidance of $125-$140 million.
Targeting 2014 total capital expenditures of less than $80 million in order to maximize company-wide net cash flow.
On-track to complete the San Bartolomé process plant expansion project 20%, or $3.7 million, below budget.
Working Capital Improvements:
Reduced supplies and materials inventory by $12 million in the first half of 2013.
Targeting $30 million of additional working capital reductions during the remainder of 2013 in order to maximize net cash flow.
"After a difficult period for commodity prices since mid-April, silver and gold prices appear to be finding a bottom recently, although we expect continued volatility throughout the remainder of the year. We are seeing modest increases in industrial demand for silver and we believe the overarching rationale for investment demand for silver and gold remains intact. Looking ahead, we anticipate supplies of both silver and gold will tighten as a result of project deferrals, difficult capital markets, reduced exploration expenditures, and greater geopolitical and community-related challenges. Supply from scrap has already shown signs of significant decline, all of which should be supportive of stronger prices over the long-term."
1. | 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 1: Financial Highlights (Unaudited)
(All amounts in millions, except per share amounts, average realized prices and gold ounces sold) | 2Q 2013 | 1Q 2013 | Quarter | 4Q 2012 | 3Q 2012 | 2Q 2012 | ||||||||||||||||||||||||||
Sales of Metal | $ | 204.5 | $ | 171.8 | 19 | % | $ | 205.9 | $ | 230.6 | $ | 254.4 | ||||||||||||||||||||
Production Costs | $ | 142.9 | $ | 88.8 | 61 | % | $ | 107.4 | $ | 125.0 | 131.8 | |||||||||||||||||||||
Adjusted Earnings(1) | $ | (34.6 | ) | $ | 6.8 | (609 | %) | $ | 26.2 | $ | 25.8 | 28.0 | ||||||||||||||||||||
Adjusted Earnings Per Share(1) | $ | (0.35 | ) | $ | 0.08 | (538 | %) | $ | 0.29 | $ | 0.29 | $ | 0.31 | |||||||||||||||||||
Net Income | $ | (35.0 | ) | $ | 12.3 | (385 | %) | $ | 37.6 | $ | (15.8 | ) | 23.0 | |||||||||||||||||||
Earnings Per Share | $ | (0.35 | ) | $ | 0.14 | (350 | %) | $ | 0.42 | $ | (0.18 | ) | $ | 0.26 | ||||||||||||||||||
Cash Flow From Operating Activities | $ | 63.3 | $ | 12.9 | 391 | % | $ | 61.7 | $ | 79.7 | $ | 113.2 | ||||||||||||||||||||
Capital Expenditures | $ | 27.2 | $ | 12.8 | 113 | % | $ | 21.8 | $ | 30.0 | 32.2 | |||||||||||||||||||||
Cash, Cash Equivalents & Short-Term Investments | $ | 249.5 | $ | 332.8 | (25 | %) | $ | 126.4 | $ | 143.6 | 200.3 | |||||||||||||||||||||
Total Debt(net of debt discount) | $ | 305.3 | $ | 305.3 | — | % | $ | 48.1 | $ | 47.4 | 118.8 | |||||||||||||||||||||
Weighted Average Shares | 99.8 | 89.9 | 11 | % | 89.1 | 89.4 | 89.6 | |||||||||||||||||||||||||
Average Realized Price Per Ounce - Silver | $ | 22.86 | $ | 30.30 | (25 | %) | $ | 32.52 | $ | 30.09 | $ | 29.28 | ||||||||||||||||||||
Average Realized Price Per Ounce - Gold | $ | 1,416 | $ | 1,630 | (13 | %) | $ | 1,709 | $ | 1,654 | $ | 1,610 | ||||||||||||||||||||
Silver Ounces Sold | 5.2 | 3.1 | 68 | % | 3.6 | 4.5 | 5.6 | |||||||||||||||||||||||||
Gold Ounces Sold | 63,389 | 51,926 | 22 | % | 55,565 | 59,156 | 59,579 | |||||||||||||||||||||||||
Included in second quarter net loss was a $32 million one-time charge ($22 million non-cash) for the settlement of the Rochester claims dispute litigation and a $17.2 million non-cash writedown of the Company's strategic investments. Both of these non-recurring items were excluded from Coeur's non-U.S. GAAP metric of adjusted earnings1. Adjusted earnings1 were $(34.6) million, or $(0.35) per share, in the second quarter 2013, compared with $28.0 million, or $0.31 per share, in the second quarter 2012 and $6.8 million or $0.08 per share in the first quarter 2013.
On a U.S. GAAP basis, the Company realized a net loss of $35.0 million, or $0.35 per share, in the second quarter 2013 compared with net income of $23.0 million, or $0.26 per share, in the second quarter 2012 and $12.3 million, or $0.14 per share, in the first quarter 2013. Net income for the second quarter 2013 included a positive non-cash fair value adjustment of $66.8 million. The positive fair value adjustment in the second quarter 2012 was $16.0 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.
Table 2: Operational Highlights: Production
(silver ounces in thousands) | 2Q 2013 | 1Q 2013 | Quarter | Q4 2012 | Q3 2012 | Q2 2012 | |||||||||||||||||||||||||||||||||||||||||||||||
Silver | Gold | Silver | Gold | Silver | Gold | Silver | Gold | Silver | Gold | Silver | Gold | ||||||||||||||||||||||||||||||||||||||||||
Palmarejo | 2,045 | 28,191 | 1,646 | 22,965 | 24 | % | 23 | % | 1,554 | 19,998 | 1,833 | 23,702 | 2,366 | 31,258 | |||||||||||||||||||||||||||||||||||||||
San Bartolomé | 1,523 | — | 1,391 | — | 9 | % | n.a. | 1,343 | — | 1,526 | — | 1,470 | — | ||||||||||||||||||||||||||||||||||||||||
Rochester | 844 | 9,404 | 648 | 8,742 | 30 | % | 8 | % | 828 | 12,055 | 819 | 10,599 | 713 | 10,120 | |||||||||||||||||||||||||||||||||||||||
Martha | — | — | — | — | n.a. | n.a. | — | — | 93 | 76 | 108 | 97 | |||||||||||||||||||||||||||||||||||||||||
Kensington | — | 23,162 | — | 25,206 | n.a. | (8 | %) | — | 28,717 | — | 24,391 | — | 21,572 | ||||||||||||||||||||||||||||||||||||||||
Endeavor | 221 | — | 150 | — | 47 | % | n.a. | 106 | — | 140 | — | 240 | — | ||||||||||||||||||||||||||||||||||||||||
Total | 4,633 | 60,757 | 3,835 | 56,913 | 21 | % | 7 | % | 3,831 | 60,770 | 4,411 | 58,768 | 4,897 | 63,047 | |||||||||||||||||||||||||||||||||||||||
1. | 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 3: Operational Highlights: Cash Operating Costs Per Ounce1
2Q 2013 | 1Q 2013 | Quarter | Q4 2012 | Q3 2102 | Q2 2012 | ||||||||||||||||||||||||||||
Palmarejo | $ | 3.25 | $ | 2.20 | (48 | %) | $ | 7.55 | $ | 3.75 | $ | (0.85 | ) | ||||||||||||||||||||
San Bartolomé | 12.89 | 13.27 | (3 | %) | 13.97 | 12.13 | 11.05 | ||||||||||||||||||||||||||
Rochester | 14.75 | 13.54 | 9 | % | 2.17 | ||||||||||||||||||||||||||||
