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Coeur Reports Second Quarter 2017 Results

CHICAGO--(BUSINESS WIRE)--

Coeur Mining, Inc. (the “Company” or “Coeur”) (CDE) today reported second quarter 2017 financial results, posting revenue of $173.4 million, net loss of $11.0 million, or $0.06 per share, and adjusted net loss1 of $2.5 million, or $0.01 per share. Second quarter cash flow from operating activities was $29.3 million, adjusted EBITDA1 was $33.4 million, and free cash flow1 was $(8.2) million. Second quarter results reflect significantly higher levels of investment in long-term growth through exploration expense and capital expenditures as well as a $9.3 million one-time expense from the early retirement of debt.

  • Quarterly silver and gold production down - As reported on July 6, 2017, second quarter silver and gold production were 4.0 million ounces and 82,819 ounces, respectively, or 8.9 million silver equivalent ounces (AgEqOz)1, representing declines of 3% quarter-over-quarter and 7% year-over-year. Palmarejo’s production increased significantly year-over-year due to higher underground mining rates. Rochester’s production declined year-over-year due to fewer tons placed in the quarter. Kensington’s quarterly production declined year-over-year due to lower grades, which are expected to increase during the second half of 2017. Wharf’s production was lower as expected year-over-year due to lower grades, which is expected to be offset by higher mining rates during the second half of 2017. San Bartolomé’s production was lower due to a lack of water and fewer higher-grade third-party ore purchases during the quarter
  • Higher second quarter costs per ounce driven by lower production - Second quarter companywide all-in sustaining costs (AISC) and adjusted AISC per average spot AgEqOz1 were $15.90 and $15.73, respectively. Costs related to accessing higher-grade material during the second half of 2017 impacted second quarter costs at Rochester (pre-stripping), Kensington (expensed development and paste backfill) and Palmarejo (ground support). Lower grades and pad timing and sequencing led to higher costs per ounce at Wharf. Higher diesel costs and reagent consumption also contributed to temporarily higher costs, which are expected to reverse during the second half of 2017
  • Significant investments in long-term growth; key development projects on-schedule - Quarterly exploration expense increased to $7.8 million, up nearly 50% from first quarter and 250% compared to the second quarter of 2016. Second quarter capital expenditures increased by approximately 60% quarter-over-quarter and year-over-year to $37.5 million. Rochester's Stage IV leach pad expansion has now been commissioned, the Jualin deposit at Kensington is on-track to begin production in late 2017, and mining rates at the Independencia deposit at Palmarejo are now above 1,400 tons per day after temporarily declining in the second quarter
  • Accomplished key balance sheet initiatives - The Company successfully refinanced 7.875% senior notes due 2021 with 5.875% senior notes due 2024. Quarterly interest expense declined 66%. Balance sheet repositioning has led to credit ratings upgrades by both agencies. Cash and cash equivalents were $250.0 million at June 30, 2017, up from $162.2 million at year-end. Additionally, cash flow from operating activities and free cash flow1 were impacted by the acceleration of interest on the repurchased senior notes of $5.1 million, which would have otherwise been paid on August 1, 2017
  • Modifications to full-year guidance - Full-year production guidance was revised on July 6, 2017 by increasing Wharf's expected gold production and decreasing San Bartolomé's expected silver production. As a result, Wharf's full-year cost guidance range has been reduced and San Bartolomé's full-year cost guidance range has been increased. Full-year companywide cost guidance remains unchanged
  • Further portfolio enhancements - The Company agreed to sell the Endeavor silver stream and other non-core royalties for total consideration of $13.0 million. The transaction is expected to close in the third quarter of 2017. Investments totaling approximately $12 million through mid-July were made in six earlier-stage silver and gold companies

“We accomplished or advanced several strategic priorities during the quarter that are critical to achieving our full-year and longer-term objectives," said Mitchell J. Krebs, Coeur's President and Chief Executive Officer. “Our stepped-up exploration programs targeting higher-grade mineralization at Palmarejo and Kensington are yielding positive results, we significantly strengthened our balance sheet, the development of Jualin remains on-track to commence production later in the year, and we have now begun to stack ore on the new Stage IV leach pad at Rochester.

“Through the first half of the year, we generated $84.6 million of cash flow from operating activities and $23.1 million of free cash flow. As we enter the second half of the year, we anticipate higher production from all five of our operations: Palmarejo due to the rising mining rates we are now seeing from Independencia, Kensington due to higher expected gold grades from three separate areas in the mine, Rochester and Wharf due to higher anticipated mining and crushing rates, and San Bartolomé due to an expected increase in third party ore purchases. Based on these production increases, together with lower expected unit costs, we anticipate delivering additional free cash flow during the remainder of the year.

"Upcoming milestones include initial production from Jualin and the release of an updated Preliminary Economic Assessment (PEA) for La Preciosa, both expected later this year, as well as updated technical reports for Kensington and Rochester planned for early 2018. The updated technical report for Rochester is expected to reflect several operating and capital enhancements, and the updated technical report for Kensington will incorporate the results of the Company's ongoing drill program in Alaska, particularly at Jualin.”

 

Financial and Operating Highlights (Unaudited)

           

(Amounts in millions, except per share amounts, gold ounces produced & sold, and per-ounce metrics)

2Q 2017

 

1Q 2017

 

4Q 2016

 

3Q 2016

 

2Q 2016

Revenue

$ 173.4 $ 206.1 $ 159.2 $ 176.2 $ 182.0
Costs Applicable to Sales $ 125.6 $ 132.7 $ 102.0 $ 105.4 $ 100.5
General and Administrative Expenses $ 7.0 $ 10.1 $ 6.6 $ 7.1 $ 7.4
Net Income (Loss) $ (11.0 ) $ 18.7 $ (8.3 ) $ 69.6 $ 14.5
Net Income (Loss) Per Share $ (0.06 ) $ 0.10 $ (0.03 ) $ 0.42 $ 0.09
Adjusted Net Income (Loss)1 $ (2.5 ) $ 7.0 $ 2.8 $ 38.6 $ 16.9
Adjusted Net Income (Loss)1 Per Share $ (0.01 ) $ 0.04 $ 0.01 $ 0.23 $ 0.11
Weighted Average Shares Outstanding 179.2 178.9 178.6 161.0 157.9
EBITDA1 $ 23.6 $ 73.4 $ 27.4 $ 50.9 $ 62.1
Adjusted EBITDA1 $ 33.4 $ 56.6 $ 44.0 $ 62.7 $ 72.0
Cash Flow from Operating Activities $ 29.3 $ 55.3 $ 25.5 $ 47.8 $ 45.9
Capital Expenditures $ 37.5 $ 24.0 $ 29.9 $ 25.6 $ 23.3
Free Cash Flow1 $ (8.2 ) $ 31.3 $ (4.5 ) $ 14.6 $ 12.2
Cash, Equivalents & Short-Term Investments $ 250.0 $ 210.0 $ 162.2 $ 222.5 $ 257.6
Total Debt2 $ 284.8 $ 219.1 $ 210.9 $ 401.7 $ 511.1

Average Realized Price Per Ounce – Silver

$ 16.98 $ 17.61 $ 16.64 $ 19.61 $ 17.38
Average Realized Price Per Ounce – Gold $ 1,206 $ 1,149 $ 1,170 $ 1,317 $ 1,255
Silver Ounces Produced 4.0 3.9 3.9 3.5 4.0
Gold Ounces Produced 82,819 88,218 102,500 84,871 92,727
Silver Equivalent Ounces Produced1 8.9 9.2 10.0 8.6 9.6
Silver Ounces Sold 4.1 4.5 3.4 3.4 4.0
Gold Ounces Sold 86,194 110,874 87,108 83,389 88,543
Silver Equivalent Ounces Sold1 9.3 11.1 8.6 8.4 9.3
Silver Equivalent Ounces Sold (Average Spot)1 10.4 12.2 9.6 9.1 10.6
Adjusted CAS per AgEqOz1 $ 12.91 $ 11.38 $ 12.05 $ 12.10 $ 10.71
Adjusted CAS per Average Spot AgEqOz1 $ 12.00 $ 10.63 $ 11.34 $ 11.64 $ 9.90
Adjusted CAS per AuEqOz1 $ 860 $ 791 $ 676 $ 712 $ 644
Adjusted AISC per AgEqOz1 $ 17.64 $ 15.02 $ 16.13 $ 16.46 $ 14.82
Adjusted AISC per Average Spot AgEqOz1 $ 15.73   $ 13.66 $ 14.52 $ 15.23 $ 12.95
 

Financial Results

Second quarter revenue was $173.4 million, 16% lower than the first quarter, which benefited from metal inventory carried over from the fourth quarter of 2016. Silver sales contributed 40%, while gold sales contributed 60%. The Company's U.S. operations generated 55% of second quarter revenue. Average realized silver and gold prices were $16.98 and $1,206 per ounce, respectively, representing a decrease of 4% and an increase of 5% quarter-over-quarter. The average realized gold price reflects the sale of 9,683 ounces to Franco-Nevada at a price of $800 per ounce under the gold stream at Palmarejo.

Costs applicable to sales were $125.6 million for the quarter, decreasing 5% versus the first quarter due to lower silver and gold ounces sold, which was partially offset by higher unit costs. General and administrative expenses were $7.0 million, 31% lower than in the first quarter due to lower outside services and employee-related costs. Interest expense, net of capitalized interest, decreased 66% to $3.7 million compared to $10.9 million in the second quarter of 2016 primarily due to lower debt levels and a lower coupon on the new senior notes due 2024.

The successful refinancing of the Company’s senior notes during the quarter resulted in two notable one-time impacts to financial results. Net income and EBITDA1 reflected a $9.3 million one-time expense related to the early redemption of debt, while cash flow from operating activities and free cash flow1 were impacted by the acceleration of $5.1 million of interest, which would have otherwise been paid on August 1, 2017.

Second quarter financial performance was also impacted by higher year-over-year and quarter-over-quarter exploration expense, while free cash flow1 specifically was reduced by higher capital expenditures in the quarter related to key capital projects at Palmarejo, Rochester, and Kensington that are expected to lead to higher production, higher grades, and lower unit costs in the second half of the year.

Operations

Highlights of second quarter 2017 results for each of the Company's operating segments are provided below.

 

Palmarejo, Mexico

           

(Dollars in millions, except per ounce amounts)

2Q 2017

 

1Q 2017

 

4Q 2016

 

3Q 2016

 

2Q 2016

Underground Operations:
Tons mined 335,856 355,793 293,706 253,681 283,971
Average silver grade (oz/t) 4.98 4.84 5.00 3.96 5.40
Average gold grade (oz/t) 0.08 0.09 0.09 0.08 0.08
Surface Operations:
Tons mined 1,695
Average silver grade (oz/t) 7.77
Average gold grade (oz/t) 0.07
Processing:
Total tons milled 335,428 360,383 287,569 274,644 270,142
Average recovery rate – Ag 87.3% 86.5% 89.1% 85.5% 89.5%
Average recovery rate – Au 91.1% 93.7% 90.4% 77.7% 86.4%
Silver ounces produced (000's) 1,457 1,531 1,269 933 1,307
Gold ounces produced 24,292 30,792 23,906 16,608 18,731
Silver equivalent ounces produced1 (000's) 2,914 3,378 2,703 1,930 2,431
Silver ounces sold (000's) 1,484 1,965 937 778 1,350
Gold ounces sold 25,191 41,045 15,558 11,410 19,214
Silver equivalent ounces sold1 (000's) 2,996 4,427 1,872 1,462 2,502
Silver equivalent ounces sold1 (average spot) (000's) 3,324 4,837 2,042 1,555 2,792
Metal sales $53.2 $77.7 $32.5 $30.7 $48.3
Costs applicable to sales

$33.9

$43.0 $20.9 $16.0 $22.9
Adjusted CAS per AgEqOz1 $11.21 $9.68 $11.01 $10.70 $9.02
Adjusted CAS per average spot AgEqOz1 $10.11 $8.87 $10.11 $10.05 $8.09
Exploration expense $3.1 $1.6 $2.4 $1.3 $0.6
Cash flow from operating activities $18.8 $50.5 $(1.7) $13.7 $11.3
Sustaining capital expenditures (excludes capital lease payments) $6.1 $5.0 $3.9 $6.7 $5.5
Development capital expenditures $5.1   $1.2   $4.2   $3.3   $3.4
Total capital expenditures $11.2 $6.2 $8.1 $10.0 $8.9
Free cash flow (before royalties) $7.6 $44.3 $(9.8) $3.7 $2.4
Gold production royalty payments $—   $—   $—   $7.6   $10.5
Free cash flow1 $7.6 $44.3 $(9.8) $(3.9) $(8.1)
  • Average mining rates at Guadalupe remained flat quarter-over-quarter at 2,600 tons per day, while average mining rates at Independencia decreased to approximately 1,000 tons per day in the second quarter from 1,225 tons per day in the first quarter due to additional ground support measures required during April and May. Mining rates at Independencia are expected to accelerate in the second half with mining rates at Independencia reaching approximately 1,400 tons per day in July
  • Silver equivalent1 production of 2.9 million ounces was 14% lower quarter-over-quarter and 20% higher year-over-year. Metal sales for the quarter were in-line with production yet lower than in the first quarter, which benefited from a reduction in inventory carried over from the fourth quarter of 2016
  • Second quarter adjusted CAS per average spot AgEqOz1 was $10.11, increasing 14% quarter-over-quarter and 25% year-over-year. The increase in costs was primarily due to lower mining rates and additional costs at Independencia associated with areas requiring additional ground support, which led to the mining of lower grade stopes. Higher mining rates and a return to the higher grade stopes are expected to drive higher production and lower unit costs in the second half of 2017
  • Quarterly free cash flow1 totaled $7.6 million, bringing year-to-date free cash flow to $51.9 million. Despite higher anticipated capital expenditures in the third quarter, free cash flow1 is expected to increase due to higher production levels and lower unit costs
  • Exploration expense nearly doubled compared to the first quarter to $3.1 million to accelerate resource expansion and new target definition efforts
  • Gold sales to Franco-Nevada under the gold stream agreement were 9,683 ounces at a price of $800 per ounce. For the full year, the Company expects 40% - 45% of Palmarejo's gold sales to be to Franco-Nevada at $800 per ounce
  • Full-year guidance remains unchanged with production expected to be 6.5 - 7.0 million ounces of silver and 110,000 - 120,000 ounces of gold, or 13.1 -14.2 million AgEqOz1, at CAS per AgEqOz1 of $10.00 - $10.50 on a 60:1 silver equivalent basis
 

Rochester, Nevada

           

(Dollars in millions, except per ounce amounts)

2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016
Ore tons placed 4,493,100 3,513,708 3,878,487 4,901,039 6,402,013
Average silver grade (oz/t) 0.53 0.58 0.57 0.54 0.54
Average gold grade (oz/t) 0.003 0.002 0.002 0.003 0.003
Silver ounces produced (000's) 1,156 1,127 1,277 1,161 1,197
Gold ounces produced 10,745 10,356 14,231 12,120 13,940
Silver equivalent ounces produced1 (000's) 1,801 1,749 2,131 1,888 2,033
Silver ounces sold (000's) 1,135 1,289 1,205 1,163 1,137
Gold ounces sold 10,658 13,592 12,988 11,751 12,909
Silver equivalent ounces sold1 (000's) 1,774 2,104 1,984 1,868 1,912
Silver equivalent ounces sold1 (average spot) (000's) 1,913 2,240 2,128 1,963 2,106
Metal sales $32.8 $39.0 $36.2 $37.9 $35.8
Costs applicable to sales $24.2 $26.4 $23.7 $21.8 $21.7
Adjusted CAS per AgEqOz1 $13.54 $12.57 $11.99 $11.56 $11.30
Adjusted CAS per average spot AgEqOz1 $12.56 $11.81 $11.16 $11.02 $10.24
Exploration expense $0.3 $0.1 $0.4 $0.1 $0.2
Cash flow from operating activities $(1.1) $5.7 $7.6 $9.5 $9.2
Sustaining capital expenditures (excludes capital lease payments) $1.1 $0.2 $1.5 $1.2 $2.6
Development capital expenditures $12.7   $10.4   $4.3   $2.2   $1.3
Total capital expenditures $13.8 $10.6 $5.8 $3.4 $3.9
Free cash flow1 $(14.9) $(4.9) $1.8 $6.1 $5.3
  • Tons placed increased nearly 30% quarter-over-quarter as crushing rates recovered from record rainfall during the first quarter. Silver and gold production increased 3% and 4%, respectively, to 1.2 million ounces and 10,745 ounces compared to the first quarter. Higher production is expected in the second half of 2017 due in part to the impact of increased tons placed in the second quarter
  • Adjusted CAS per average spot AgEqOz1 increased 6% quarter-over-quarter and 23% year-over-year to $12.56. Elevated unit costs during the quarter were related to increased waste stripping activity to expose higher expected gold grades. The costs associated with supporting this increased stripping impacted the second quarter but will be discontinued at the end of July. Processing costs were also higher in the quarter due to increased use of cyanide to offset dilution caused by record rainfall in the first half of the year. Higher production and lower unit costs are anticipated in the second half of the year following the commissioning of the Stage IV leach pad expansion, completion of recent waste stripping, higher expected gold grades, production ounces resulting from the 30% increase in tons placed in the second quarter, and normalization of cyanide usage
  • Negative quarterly free cash flow1 of $14.9 million was driven by higher stripping rates and higher capital expenditures related to the Stage IV leach pad expansion. Higher production and lower capital expenditures are expected to drive positive free cash flow1 at Rochester in the second half of the year
  • The Company repurchased the Rochester net smelter return royalty obligation for $5.0 million in cash, recording a pre-tax gain of $2.3 million
  • Rochester was awarded the top 2017 Mine Operator Safety Award in the Medium Surface Operations category by the Nevada Mining Association during the second quarter. Several of Rochester's employees were also awarded 2017 Individual Safety Awards for their dedication to safety
  • Production guidance for the full year remains unchanged at 4.2 - 4.7 million ounces of silver and 47,000 - 52,000 ounces of gold, or 7.0 - 7.8 million AgEqOz1, at CAS per AgEqOz1 of $11.50 - $12.00 on a 60:1 silver equivalent basis
 

Kensington, Alaska

           
(Dollars in millions, except per ounce amounts) 2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016
Tons milled 163,163 165,895 163,410 140,322 157,117
Average gold grade (oz/t) 0.17 0.17 0.22 0.20 0.22
Average recovery rate 93.2% 94.0% 94.4% 94.8% 94.1%
Gold ounces produced 26,424 26,197 33,688 26,459 32,210
Gold ounces sold 29,031 32,144 28,864 30,998 30,178
Metal sales $35.6 $38.0 $34.2 $40.2 $36.5
Costs applicable to sales $28.0 $28.4 $23.0 $26.7 $22.6
Adjusted CAS per AuOz1 $952 $884 $801 $859 $740
Exploration expense $2.0 $0.8 $1.3 $1.2 $1.0
Cash flow from operating activities $7.0 $4.5 $11.4 $18.0 $7.7
Sustaining capital expenditures (excludes capital lease payments) $3.7 $2.5 $8.9 $5.2 $4.3
Development capital expenditures $4.9   $3.0   $3.7   $3.4   $3.2
Total capital expenditures $8.6 $5.5 $12.6 $8.6 $7.5
Free cash flow1 $(1.6) $(1.0) $(1.2) $9.4 $0.2
  • Gold production of 26,424 ounces was relatively unchanged compared to the first quarter and 18% lower year-over-year primarily due to lower grades. As previously noted, higher grades and production are expected in the second half of the year
  • Gold sales decreased 10% quarter-over-quarter to 29,031 ounces, primarily due to elevated sales in the first quarter resulting from an inventory carryover from the fourth quarter of 2016
  • Adjusted CAS per gold ounce (AuOz)1 were $952, representing an increase of 8% over the first quarter. Higher costs in the quarter were due to the mining of lower grade stopes caused by lower-than-planned paste backfill rates and expensed underground development to gain access to higher-grade stopes in the Kensington Main deposit
  • The mine plan in the second half of the year anticipates mining from higher grade areas, which is expected to lead to increased production and lower unit costs
  • Development of the Jualin deposit remains on track for initial production later this year
  • Exploration expense more than doubled compared to the first quarter to $2.0 million as efforts accelerated to extend and expand the Jualin deposit and to drill structures located in the Kensington Main deposit
  • Guidance for the full year remains unchanged at 120,000 - 125,000 ounces of gold at CAS per AuOz1 of $800 - $850
 

Wharf, South Dakota

           
(Dollars in millions, except per ounce amounts) 2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016
Ore tons placed 993,167 1,292,181 1,178,803 1,199,008 915,631
Average silver grade (oz/t) 0.19 0.22 0.29 0.24 0.28
Average gold grade (oz/t) 0.024 0.027 0.027 0.033 0.037
Gold ounces produced 21,358 20,873 30,675 29,684 27,846
Silver ounces produced (000's) 13 20 32 25 35
Gold equivalent ounces produced1 21,568 21,207 31,202 30,106 28,433
Silver ounces sold (000's) 11 33 30 17 33
Gold ounces sold 21,314 24,093 29,698 29,230 26,242
Gold equivalent ounces sold1 21,495 24,636 30,204 29,508 26,786
Metal sales $27.0 $30.3 $35.5 $39.3 $34.0
Costs applicable to sales $15.8 $16.3 $16.9 $19.7 $14.3
Adjusted CAS per AuEqOz1 $737 $670 $556 $559 $534
Exploration expense $— $— $— $— $—
Cash flow from operating activities $8.8 $8.6 $15.4 $21.1 $16.2
Sustaining capital expenditures (excludes capital lease payments) $1.5 $0.9 $1.3 $0.6 $1.5
Development capital expenditures $—   $—   $—   $—   $—
Total capital expenditures $1.5 $0.9 $1.3 $0.6 $1.5
Free cash flow1 $7.3 $7.7 $14.1 $20.5 $14.7
  • Gold production increased 2% quarter-over-quarter to 21,358 ounces. Year-over-year, gold production decreased 23% due to fewer tons mined from the higher-grade Golden Reward deposit, the remainder of which is expected to be mined in the third quarter
  • Gold sales of 21,314 ounces were in-line with production
  • Adjusted CAS per AuEqOz1 increased 10% quarter-over-quarter and 38% year-over-year to $737 due primarily to a lower gold grade. Lower tons placed and higher unit costs were also attributable to timing of pad off-loading. Mining rates are expected to increase during the second half of 2017 as a result of a larger haul truck fleet and improvements made to the crusher and processing facility over the past 18 months
  • During the quarter, Wharf generated $7.3 million of free cash flow1, bringing year-to-date free cash flow1 to $15.0 million. Wharf has generated cumulative free cash flow1 of $101.4 million since its acquisition in February 2015 for $99 million
  • As published on July 6, 2017, full-year gold production guidance increased from 85,000 - 90,000 ounces to 90,000 - 95,000 ounces. Wharf's full-year cost guidance has been revised lower from CAS per AuEqOz1 of $775 - $825 to $700 - $750
 

San Bartolomé, Bolivia

           
(Dollars in millions, except per ounce amounts) 2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016
Tons milled 417,784 384,267 368,131 450,409 440,441
Average silver grade (oz/t) 3.31 3.49 3.96 3.43 3.79
Average recovery rate 92.8% 90.7% 86.3% 88.7% 87.4%
Silver ounces produced (000's) 1,285 1,215 1,259 1,370 1,458
Silver ounces sold (000's) 1,398 1,148 1,218 1,391 1,418
Metal sales $23.8 $20.6 $19.9 $27.5 $25.2
Costs applicable to sales $23.4 $18.2 $17.3 $20.8 $18.6
Adjusted CAS per AgOz1 $15.96 $15.88 $13.97 $14.40 $12.97
Exploration expense $— $— $— $— $—
Cash flow from operating activities $5.2 $11.3 $4.1 $8.6 $11.2
Sustaining capital expenditures (excludes capital lease payments) $0.4 $0.4 $1.8 $3.0 $1.3
Development capital expenditures $—   $—   $—   $—   $—
Total capital expenditures $0.4 $0.4 $1.8 $3.0 $1.3
Free cash flow1 $4.8 $10.9 $2.3 $5.6 $9.9
  • Second quarter production increased 6% to 1.3 million silver ounces, primarily due to process enhancements that improved recovery rates; year-over-year, production declined 12% as a result of lower third-party ore purchases and the continued effects of drought conditions in the Potosí region of Bolivia
  • Timing of sales lifted silver sales to 1.4 million ounces, 22% higher quarter-over-quarter
  • Adjusted CAS per silver ounce (AgOz)1 of $15.96 were flat compared to the first quarter. Increased high-grade third party ore purchases are expected to result in lower unit costs in the second half of the year
  • Free cash flow1 for the second quarter was $4.8 million, bringing total year-to-date free cash flow to $15.7 million
  • On July 6, 2017, full-year production guidance was lowered to 5.0 - 5.4 million ounces of silver from 5.4 - 5.9 million ounces due to challenges associated with persistent drought conditions. As a result, cost guidance has been revised from CAS per AgOz1 of $14.00 - $14.50 to $15.75 - $16.25

Exploration

Second quarter expensed exploration increased $2.5 million to $7.8 million compared to the first quarter, while capitalized exploration increased from $2.3 million in the first quarter to $2.9 million. At quarter-end, the Company had 18 drill rigs active across its portfolio compared to 11 one year earlier.

Second Quarter Exploration Highlights

  • Nine drill rigs were active at Palmarejo targeting resource conversion at Guadalupe and Independencia as well as discovery and resource expansion at several locations. During the quarter, 89,001 feet (27,128 meters) were drilled compared to 50,930 feet (15,523 meters) during the first quarter. Drill results continue to be encouraging. Of the nine drill rigs, three are focusing on expanding the Nación - Dana deposit located between Independencia and Guadalupe. Two additional rigs are targeting new discoveries in the Guadalupe footwall and exploring new structures between Guadalupe and Nación from underground. One drill rig is currently targeting the La Bavisa structure located north-northeast of Independencia while one additional drill is focused on two new targets - Hidalgo and Reforma - located near Independencia North
  • Drilling at Kensington accelerated with an expanded focus on both resource conversion and expansion of the Jualin deposit. 43,341 feet (13,210 meters) of drilling was completed during the second quarter compared to 14,654 feet (4,467 meters) in the first quarter. Two surface rigs continue to target extensions of Jualin Vein #4 to the south and down dip. One underground rig commenced drilling the Raven South structure while drilling to upgrade resources in Zone 12 in the Kensington main deposit continues to show grades well above the average reserve grade
  • Drilling at La Preciosa, which began late 2016, was completed early in the second quarter. The resulting geologic model is currently under evaluation and an updated PEA is expected later this year
  • Additional drilling at Rochester and Wharf remains focused on resource conversion

Full-Year 2017 Outlook

Coeur's 2017 production guidance remains unchanged from the revised guidance published July 6, 2017. Revised 2017 cost guidance is shown in the table below.

 

2017 Production Outlook

 

(silver and silver equivalent ounces in thousands)

  Silver   Gold  

Silver Equivalent1

Palmarejo   6,500 - 7,000   110,000 - 120,000   13,100 - 14,200
Rochester 4,200 - 4,700 47,000 - 52,000

7,020 - 7,820

San Bartolomé 5,000 - 5,400

5,000 - 5,400

Endeavor 105 105
Kensington 120,000 - 125,000 7,200 - 7,500
Wharf     90,000 - 95,000   5,400 - 5,700
Total   15,805 - 17,205   367,000 - 392,000   37,825 - 40,725
 

2017 Cost Outlook

   
Previous Guidance (if changed) Current Guidance
(dollars in millions, except per ounce amounts)   60:1   70:1 Spot   60:1   70:1 Spot
CAS per AgEqOz1 – Palmarejo   $10.00 - $10.50   $9.00 - $9.50
CAS per AgEqOz1 – Rochester

 

$11.50 - $12.00

$10.50 - $11.00

CAS per AgOz1 – San Bartolomé $14.00 - $14.50 $15.75 - $16.25
CAS per AuOz1 – Kensington $800 - $850
CAS per AuEqOz1 – Wharf $775 - $825 $700 - $750
Capital Expenditures $109 - $129
General and Administrative Expenses $28 - $32
Exploration Expense $29 - $31
AISC per AgEqOz1

 

$15.75 - $16.25

$14.25 - $14.75

 

Financial Results and Conference Call

Coeur will report its financial results for second quarter of 2017 on July 26, 2017 after the New York Stock Exchange closes for trading. There will be a conference call on July 27, 2017 at 11:00 a.m. Eastern Time.

      Dial-In Numbers:   (855) 560-2581 (US)
 
(855) 669-9657 (Canada)
 
(412) 542-4166 (International)
 
Conference ID: Coeur Mining

Hosting the call will be Mitchell J. Krebs, President and Chief Executive Officer of Coeur, who will be joined by Peter C. Mitchell, Senior Vice President and Chief Financial Officer, Frank L. Hanagarne, Jr., Senior Vice President and Chief Operating Officer, Hans Rasmussen, Senior Vice President of Exploration, and other members of management. A replay of the call will be available through August 10, 2017.

      Replay numbers:   (877) 344-7529 (US)
 
(855) 669-9658 (Canada)
 
(412) 317-0088 (International)
 
Conference ID: 101 07 016

About Coeur

Coeur Mining, Inc. is a well-diversified, growing precious metals producer with five precious metals mines in the Americas employing approximately 2,000 people. Coeur produces from its wholly-owned operations: the Palmarejo silver-gold complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, the Wharf gold mine in South Dakota, and the San Bartolomé silver mine in Bolivia. In addition, the Company owns the La Preciosa project in Mexico, a silver-gold exploration stage project. Coeur conducts exploration activities in North and South America.

Cautionary Statement

This news release contains forward-looking statements within the meaning of securities legislation in the United States and Canada, including statements regarding anticipated production, costs, grades, cash flow, expenditures, growth, interest expense, mining rates, crushing rates, exploration efforts, waste stripping, cyanide volumes, expectations regarding the La Preciosa project and the timing of publication of a PEA, operations at the Palmarejo complex, expectations regarding the Palmarejo gold stream agreement, operations at Rochester and the timing of publication of a new technical report, development efforts at Kensington and the timing of publication of a new technical report for, operations at Wharf, third party ore purchases at San Bartolomé, and expectations regarding the sale of the Endeavor silver stream and other royalty assets. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Coeur's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, the risk that the sale of the Endeavor silver stream and other royalty assets does not close on a timely basis or at all, the risk that anticipated production, cost, and expense levels are not attained, the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), changes in the market prices of gold and silver and a sustained lower price environment, the uncertainties inherent in Coeur's production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions, grade variability, any future labor disputes or work stoppages, the uncertainties inherent in the estimation of gold and silver reserves, changes that could result from Coeur's future acquisition of new mining properties or businesses, the loss of any third-party smelter to which Coeur markets silver and gold, the effects of environmental and other governmental regulations, the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, the political risks and uncertainties associated with operations in Bolivia, Coeur's ability to raise additional financing necessary to conduct its business, make payments or refinance its debt, as well as other uncertainties and risk factors set out in filings made from time to time with the United States Securities and Exchange Commission, and the Canadian securities regulators, including, without limitation, Coeur's most recent reports on Form 10-K or Form 10-Q. Actual results, developments and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. Coeur disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Coeur undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Coeur, its financial or operating results or its securities.

Christopher Pascoe, Coeur's Director, Technical Services and a qualified person under Canadian National Instrument 43-101, approved the scientific and technical information concerning Coeur's mineral projects in this news release. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors, Canadian investors should refer to the Technical Reports for each of Coeur's properties as filed on SEDAR at sedar.com.

Non-U.S. GAAP Measures

We supplement the reporting of our financial information determined under United States generally accepted accounting principles (U.S. GAAP) with certain non-U.S. GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income (loss), costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver ounce (or per gold ounce), all-in sustaining costs, and adjusted all-in sustaining costs. We believe that these adjusted measures provide meaningful information to assist management, investors and analysts in understanding our financial results and assessing our prospects for future performance. We believe these adjusted financial measures are important indicators of our recurring operations because they exclude items that may not be indicative of, or are unrelated to our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. We believe EBITDA, adjusted EBITDA, adjusted net income (loss), costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver ounce (or per gold ounce), all-in sustaining costs, and adjusted all-in sustaining costs are important measures in assessing the Company's overall financial performance. For additional explanation regarding our use of non-U.S. GAAP financial measures, please refer to our Form 10-K for the year ended December 31, 2016 and our quarterly report on Form 10-Q for the quarter ended March 31, 2017.

Notes

1. EBITDA, adjusted EBITDA, adjusted net income (loss), costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver equivalent ounce (or per gold equivalent ounce or per average spot silver equivalent ounce), adjusted costs applicable to sales per silver ounce (or per gold ounce), all-in sustaining costs, and adjusted all-in sustaining costs are non-GAAP measures. Please see tables in the Appendix for the reconciliation to U.S. GAAP. For purposes of silver and gold equivalence, a 60:1 silver to gold ratio is assumed except where noted as average spot prices. Please see table below for average silver and gold spot prices during the period and the silver to gold ratio. Free cash flow is defined as cash flow from operating activities less capital expenditures and gold production royalty payments. Please see table in Appendix for the calculation of consolidated free cash flow.

2. Includes capital leases. Net of debt issuance costs and premium received.

 

Average Spot Prices

 
    2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016
Average Silver Spot Price Per Ounce   $ 17.21   $ 17.42   $ 17.19   $ 19.61   $ 16.78
Average Gold Spot Price Per Ounce $ 1,257 $ 1,219 $ 1,222 $ 1,335 $ 1,260
Average Silver to Gold Spot Equivalence 73:1 70:1 71:1 68:1 75:1
 

For Additional Information
Coeur Mining, Inc.
104 S. Michigan Avenue, Suite 900
Chicago, IL 60603
Attention: Courtney Lynn, Vice President, Investor Relations and Treasurer
Phone: (312) 489-5910
www.coeur.com

 

Coeur Mining, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

 
 

Three months ended June 30,

  Six months ended June 30,

2017

  2016 2017   2016
In thousands, except share data
Revenue $ 173,354 $ 182,007 $ 379,492 $ 330,394
COSTS AND EXPENSES
Costs applicable to sales(1) 125,621 100,465 258,333 202,020
Amortization 32,946 37,505 73,050 65,470
General and administrative 7,042 7,400 17,175 15,676
Exploration 7,813 2,233 13,065 3,963
Write-downs 4,446
Pre-development, reclamation, and other 4,366   4,364   8,947   8,568  
Total costs and expenses 177,788 151,967 370,570 300,143
OTHER INCOME (EXPENSE), NET
Loss on debt extinguishment (9,342 ) (9,342 )
Fair value adjustments, net 336 (3,579 ) (864 ) (12,274 )
Interest expense, net of capitalized interest (3,749 ) (10,875 ) (7,335 ) (21,995 )
Other, net 4,136   (1,857 ) 25,275   (543 )
Total other income (expense), net (8,619 ) (16,311 ) 7,734   (34,812 )
Income (loss) before income and mining taxes (13,053 ) 13,729 16,656 (4,561 )
Income and mining tax (expense) benefit 2,098   768   (8,948 ) (1,338 )
NET INCOME (LOSS) $ (10,955 ) $ 14,497   $ 7,708   $ (5,899 )
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Unrealized gain (loss) on equity securities, net of tax of ($1,164) and ($2,174) for the three and six months June 30, 2016, respectively (18 ) 2,103 (2,200 ) 3,146
Reclassification adjustments for impairment of equity securities 305 20 426 20
Reclassification adjustments for realized (gain) loss on sale of equity securities (203 ) (314 ) 1,268   273  
Other comprehensive income (loss) 84   1,809   (506 ) 3,439  
COMPREHENSIVE INCOME (LOSS) $ (10,871 ) $ 16,306   $ 7,202   $ (2,460 )
 
NET INCOME (LOSS) PER SHARE
Basic $ (0.06 ) $ 0.09   $ 0.04   $ (0.04 )
Diluted $ (0.06 ) $ 0.09   $ 0.04   $ (0.04 )
 
 
Coeur Mining, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
  Three months ended June 30,   Six months ended June 30,
2017   2016   2017   2016
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ (10,955 ) $ 14,497 7,708 (5,899 )
Adjustments:
Amortization 32,946 37,505 73,050 65,470
Accretion 2,593 2,848 5,107 6,017
Deferred taxes (4,844 ) (15,170 ) (3,469 ) (17,275 )
Loss on debt extinguishment 9,342 9,342
Fair value adjustments, net (336 ) 3,579 864 12,274
Stock-based compensation 2,235 2,307 5,542 5,222
Gain on sale of the Joaquin project (21,138 )
Write-downs 4,446
Other (3,624 ) 1,930 (5,822 ) 494
Changes in operating assets and liabilities:
Receivables (1,916 ) (12,402 ) 11,190 (8,921 )
Prepaid expenses and other current assets 3,612 (898 ) (687 ) 381
Inventory and ore on leach pads (997 ) (7,686 ) 13,295 (15,508 )
Accounts payable and accrued liabilities 1,223   19,429   (10,432 )   5,855  
CASH PROVIDED BY OPERATING ACTIVITIES 29,279   45,939   84,550     52,556  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,482 ) (23,288 ) (61,461 ) (45,460 )
Proceeds from the sale of assets 436 7,293 15,455 11,302
Purchase of investments (8,948 ) (92 ) (9,964 ) (99 )
Sale of investments 898 648 10,918 1,645
Other (61 ) (1,446 ) (1,607 )   (2,919 )
CASH USED IN INVESTING ACTIVITIES (45,157 ) (16,885 ) (46,659 )   (35,531 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 73,071 73,071
Issuance of notes and bank borrowings 244,958 244,958
Payments on debt, capital leases, and associated costs (188,931 ) (6,712 ) (192,157 ) (12,683 )
Gold production royalty payments (10,461 ) (19,592 )
Other (473 ) (448 ) (3,720 )   (728 )
CASH PROVIDED BY FINANCING ACTIVITIES 55,554   55,450   49,081     40,068  
Effect of exchange rate changes on cash and cash equivalents 329   (302 ) 884     (216 )

INCREASE IN CASH AND CASH EQUIVALENTS

40,005 84,202 87,856 56,877
Cash and cash equivalents at beginning of period 210,033   173,389   162,182     200,714  
Cash and cash equivalents at end of period $ 250,038   $ 257,591   $ 250,038     $ 257,591  
 
 
Coeur Mining, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
 
  June 30, 2017  
(Unaudited) December 31, 2016
ASSETS In thousands, except share data
CURRENT ASSETS
Cash and cash equivalents $ 250,038 $ 162,182
Receivables 69,656 60,431
Inventory 67,895 106,026
Ore on leach pads 75,699 64,167
Prepaid expenses and other 18,563   17,981  
481,851 410,787
NON-CURRENT ASSETS
Property, plant and equipment, net 227,738 216,796
Mining properties, net 550,247 558,455
Ore on leach pads 69,954 67,231
Restricted assets 19,294 17,597
Equity securities 11,872 4,488
Receivables 15,140 30,951
Other 18,552   12,604  
TOTAL ASSETS $ 1,394,648   $ 1,318,909  

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable $ 58,800 $ 53,335
Accrued liabilities and other 41,250 42,743
Debt 13,014 12,039
Royalty obligations 4,995
Reclamation 3,599   3,522  
116,663 116,634
NON-CURRENT LIABILITIES
Debt 271,766 198,857
Royalty obligations 4,292
Reclamation 99,541 95,804
Deferred tax liabilities 75,388 74,798
Other long-term liabilities 53,779   60,037  
500,474 433,788
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 181,441,769 at June 30, 2017 and 180,933,287 at December 31, 2016 1,814 1,809
Additional paid-in capital 3,316,407 3,314,590
Accumulated other comprehensive income (loss) (2,994 ) (2,488 )
Accumulated deficit (2,537,716 ) (2,545,424 )
777,511   768,487  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,394,648   $ 1,318,909  
 
...
 

Adjusted EBITDA Reconciliation

 

(Dollars in thousands except per share amounts)

  LTM             LTM  

 

2Q 2017 2Q 2017 1Q 2017 2016 4Q 2016 3Q 2016 2Q 2016 2Q 2016
Net income (loss) $ 68,959 $ (10,955 ) $ 18,663 $ 55,352 $ (8,306 ) $ 69,557 $ (323,118 ) $ 14,497
Interest expense, net of capitalized interest 22,260 3,749 3,586 36,920 6,857 8,068 46,199 10,875
Income tax provision (benefit) (46,629 ) (2,098 )