Well, Coeur issued preliminary production and financial information this afternoon in an announcement that one has to characterize as a WARNING regarding Q4's financial results, although they didn't use that specific word.
Coeur announced that its Q4 revenues will be in the range of $202-207 million, which is far short of the analysts' average estimate of $257 million and also far short of my estimate of $240 million. And I thought my estimate was conservative! Coeur's ability to underdeliver is becoming epic.
The problem in Q4 is directly related to disappointing silver production, which I had estimated at 4.5 million ounces. Coeur's actual number has turned out to be only 3.8 million ounces, which is the lowest quarterly silver production in probably two to three years.
I estimated that Coeur would sell 4.2 million ounces of silver in Q4, vs. actual sales coming in somewhere around 3.3 million ounces. In effect, Coeur wasn't able to get approx 500,000 ounces of its Q4 production sold in the quarter, when I had estimated that amount to be approx 300,000 ounces. This shortfall in silver sales might turn out to be over or understated, depending on how close to 60,000 ounces of gold were sold in the quarter.
The causes of the quarterly shortfall are directly related to disappointing silver production levels at both Palmarejo and San Bart. It turns out the company didn't get its Palmarejo issues straightened out until late in Q4, when we had been led to believe in the last conference call that those issues were resolved mid quarter. And the upside I had hoped for at San Bart didn't materialize. Additionally, Palmarejo produced only 20,000 ounces of gold in the quarter, meaning Coeur had to pay royalties to Franco Nevada on well in excess of 50% of its gold production.
The bright spots in the quarter were Rochester and Kensington. Going forward into 2013, Rochester will make an even larger contribution to Coeur's results. And I guess I have to say I'm happy that Coeur finally had to guts to come out and tell us ahead of time that the quarterly results were going to be problematic, rather than dropping a bomb on us when final earnings are released. Maybe they actually implemented my early 2012 recommendation that they adopt a corporate policy for issuing financial warnings.
I'm expecting to see CDE drop in price tomorrow morning.
In spite of some really #$%$ news yesterday afternoon, the stock is UP today. Go figure. Fundamentals don't matter anymore?
Looks like vcar was right in adding to her position yesterday. Technicals clearly trumped fundamentals, at least for today. And Stahlz' options aren't expiring worthless. :)
As a human being, I do my best to fight my innate tendency toward cynicism, as I'm old and smart enough to know that cynicism by itself never accomplishes anything constructive. Yet I'm having difficulty accepting the credibility of Coeur's 2013 positive guidance. FWIW.
Thanks for your analysis, Rocky. Another new year for CDE. The guidance looks extremely positive. Kensington back on track and Rochester expanding. Not bad. If we also get those long awaited higher silver and gold prices on top of that, 2013 may finally give us that share price above the $70 of 2003. I like optimistic people.
Thanks Rocky, you are the best..
Interesting they issued this on the day before option expiration.
3rd quarter balance sheet (on yahoo) shows 5,053,000 in long term debt.
Maybe they paid this off and can put an additional positive spin on Q4.
2013 should be a good production year with upside if gold goes up and silver decreases it's ratio.
Sentiment: Strong Buy
Well I too have to say good job Krebs for providing an update instead of bombing us at earnings announcement with an unpleasant surprise.
I sold more than half of my long term holdings in CDE. Shares held since 2001.
Will look for a much lower price to buy back in, say ..... Feb 19th.
*long term bagholder
Rock_ I share your disappointment. It is particularly disheartening that Coeur needs to pay for 12,500 ounces of gold out of only 20,000 ounces produced at Palo this past quarter. And, the fact that they didn't advise us that the problems with that mine continued on to the end of the 4th-Q. I suppose that we can cheer the fact that growth in Rochester gold production more than covers that shortcoming....with better numbers due this year. Likewise the production at Kenny of 28,717 Au ounces was a spectacular rebound from last quarter. All in all, this is a report that I can live with but I sure hate this repeated kicking the "high profits report" can down the road again.
Thanks for your great contribution to this otherwise sad Board.
I am long on CDE. Why is everyone here so pessimistic? Their gold production is way up from previous year and Q Also, AH is up and AH bid is higher. Doesn't this bold well for the near future.
For anyone wondering where this announcement can be read... go to Yahoo search and put in: Coeur Announces 2012 Summary Highlights It should be the first on the list of that subject. It is probably on the Coeur web site too.
I always try to read what Rocky has to say about CDE. In my opinion he is by far the best poster here. I copied some stuff about Palmarejo from the November 6, 2012 Q3 conference call transcript below.
Frank Hanagarne - SVP & CFO
Yeah, I will answer those that I can and then Leon feel free to jump in but some of the impact of what we saw in September has spilled or did spill over into October but we look like we're now back on budget in November and December at Palmarejo. So that’s certainly positive and as we look at the mine plant in the 2013, no, we don’t see significant change in terms of the underground and open pit component to the plant. The remediation work that is underway, keep in mind, we are mining still in 76 club in this one area where we saw some ground conditions that didn’t appear safe where we pulled back. We're now focusing on the back filling in those areas so that we can go back in and access those secondary stopes safely later this quarter and into 2013. Leon do you have anything? I think I hit Mike most of those questions, but Leon, anything to add to that?
Leon Hardy - SVP & COO
No, the infected area that we're talking about is about an 8 to 12 stope areas, secondary as we already mined the primary stopes in the area. The primaries are principally all filled but the fault zone that’s given us the problems is really outside of the vein and it's in the hanging wall. So as we push these secondary towards the hanging wall, we are getting a lot of [raveling] out of the hanging wall. So what our plan is to go back in, refill some of the portions of these primaries that didn’t get jam tied and also to look at our grouting method of grouting the fault zone so that we don’t get the raveling. We could be mining these secondary today and I think we acted prudently in pulling out of this area for safety reasons and we want to make sure that when we go back in there which we are looking at probably 30 days or so before we get the grouting completed that we don’t have this excessive raveling in these stopes which would lead to a loss of ore reserves in the long run.
Seems to me that Leon Hardy in effect said that production at the bad ground at Palmarejo may restart around December 6, or later.
just..bill_ Good catch! I didn't read the 3rd-Q CC transcript and missed this discussion of a longer term problem remedy at Palo. My disappointment was self inflicted but as we see how the share price is reacting this morning, the "warning" is being well accepted by the market. Thanks
Well stated Rocky. Shareholders should not be suprised. CDE management almost without exception for the last 10 years (maybe 20) has over estimated and underperformed. As you stated "we had been led to believe in the last conference call that those issues were resolved mid quarter. And, the Franco BAD deal strikes again".
Get ready for all the "just wait until tomorrow" sound bites. These will be recycled phrases heard over the past decade as shareholders have been destroyed.
They do get credit for warning in advance, however at the end of the day the only thing that counts is the 2 buck share value. Some things never change. Well, I shouldn't say never since they tend to get worse sometimes.