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Edited Transcript of CDE earnings conference call or presentation 27-Apr-17 3:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Coeur Mining Inc Earnings Call

COEUR D'ALENE May 4, 2017 (Thomson StreetEvents) -- Edited Transcript of Coeur Mining Inc earnings conference call or presentation Thursday, April 27, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Courtney R. B. Lynn

Coeur Mining, Inc. - VP of IR and Treasurer

* Frank L. Hanagarne

Coeur Mining, Inc. - COO and SVP

* Hans John Rasmussen

Coeur Mining, Inc. - SVP of Exploration

* Mitchell J. Krebs

Coeur Mining, Inc. - CEO, President and Director

* Peter C. Mitchell

Coeur Mining, Inc. - CFO and SVP

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Conference Call Participants

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* Brett Levy

* Chris Thompson

Raymond James Ltd., Research Division - Mining Equity Research Analyst

* Joseph George Reagor

Roth Capital Partners, LLC, Research Division - Senior Research Analyst

* Mark Mihaljevic

RBC Capital Markets, LLC, Research Division - Senior Associate

* Michael Stephan Dudas

Vertical Research Partners, LLC - Partner

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Presentation

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Operator [1]

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Good day, and welcome to the Coeur Mining First Quarter 2017 Financial Results Conference Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Courtney Lynn, Vice President of Investor Relations and Treasurer. Please go ahead.

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Courtney R. B. Lynn, Coeur Mining, Inc. - VP of IR and Treasurer [2]

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Thank you, and good morning. Welcome to Coeur Mining's first quarter earnings conference call. Our results were released after yesterday's market close, and a copy of the press release and slides for today's call are available on our website.

Before we get started, I would like to remind everyone that our press release and some of our comments on the call may include forward-looking statements, from which actual results may differ. Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our 10-Q and latest 10-K.

I'll now turn it over to Mitch Krebs, President and Chief Executive Officer.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [3]

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Thanks, Courtney. And good morning, everybody. Thank you for joining our first quarter earnings call. The first quarter results we issued yesterday reflect a solid start to the year. Revenues rose nearly 30% to $206 million, and we reported over $31 million of free cash flow. Adjusted EBITDA was $57 million, which was up 29% from the fourth quarter and up 51% over last year's first quarter. You may recall we had a substantial amount of metal sales that carried over into the first quarter, which gave our first quarter results a boost. And we also completed the sale of the Joaquin project in Argentina during the first quarter.

Operationally, the first quarter should be our lightest quarter of the year, as Palmarejo mining rates continue to climb, and as Rochester and San Bartolomé recover from poor weather conditions during the first quarter. That said, our all-in sustaining costs declined again, down another 6% to $13.66 per ounce. Slide 7 shows our cost performance going back to 2014.

We ended the first quarter with $210 million in cash, nearly $50 million higher than at year-end. A year ago, we had net debt of approximately $340 million, and now that number is close to 0. We are now seeing the benefits of this drastically reduced debt balance with interest expense down over 70% over the past 1.5 years to just $3.6 million in the quarter. Slide 8 does a good job of showing the progress on the balance sheet and this reduced interest expense going back.

With the balance sheet now in good shape and the company generating strong cash flow, we are well positioned to deliver high-quality growth from Palmarejo this year, and from Rochester starting next year, and then from Kensington starting in 2019. With the cumulative cash flow growth from these 3 assets plus Wharf's continued contribution, we expect to deliver strong and sustained cash flow from our existing platform of assets looking ahead. It may not be the flashiest strategy, but we see it as a smart and disciplined one and the best way to generate high rates of return with the lowest risk.

We are also now well positioned to allocate more capital to exploration drilling at our existing operations. These funds are targeting known areas that can help extend and enhance mine lives and develop future sources of high-quality growth. In general, this company historically hasn't been in a position to invest in sustained exploration at its portfolio of assets. Our team sees lots of opportunity to add ounces and realize high rates of return on this capital by drilling targets located around our existing locations. We ended the quarter with 17 drill rigs active across our portfolio compared to just 3 a year ago. Our total exploration spend during the quarter was $7.5 million, over $2 million of that was spent on resource conversion drilling and over $5 million on expensed exploration. About 1/3 of that exploration spend went to Palmarejo, where we continue to see encouraging results. And just this week, we completed a 25,000-meter drill program at La Preciosa to support a revised PEA that we expect to complete in the third quarter, targeting a smaller, higher-grade, lower-capital operation.

To continue building on this momentum, we're increasing our 2017 exploration budget by $6 million to expand the Jualin deposit at Kensington. This increase will be offset by lower CapEx at Kensington.

Before I open it up for questions, I'll offer some quick highlights on each of our mines. At Palmarejo, we had a banner first quarter on all fronts. Production was up 25% over the fourth quarter, and metal sales more than doubled. Costs of $8.87 per silver equivalent ounce were well below our full year guidance range and helped to generate $44 million in quarterly free cash flow, the highest in nearly 4 years. We expect production to climb throughout the remaining 3 quarters of the year to levels approximately 50% higher than last year, as mining rates at Guadalupe and Independencia accelerate.

At Rochester, lower placement rates late in the fourth quarter, and then record precipitation in January and the beginning of February negatively impacted first quarter production. Metal sales, however, increased 8% quarter-over-quarter due to a reduction in metal inventory. Production is expected to increase throughout the remainder of the year, following a rebound in crushing rates in March and the expected completion of the Stage IV leach pad expansion project in the third quarter. Rochester's unit costs are expected to trend lower then as production and sales rise.

As anticipated, Kensington's first quarter production declined due to lower-grade stopes that were scheduled to be mined. However, higher grades and production levels are expected in the second half of the year, which will lead to lower costs than we saw in the first quarter.

Development rates at Jualin have increased as underground conditions have improved, and we remain on track for initial production there later this year. We expect Jualin to contribute approximately 5,000 ounces of gold production this year at Kensington.

At Wharf, we generated nearly $8 million in free cash flow during the quarter, bringing cumulative free cash flow, since the acquisition of this operation in 2015, to $94 million. We also plan to begin mining the high-grade Golden Reward deposit later this quarter and complete mining activities there during the third quarter. Wharf's costs during the quarter of $670 per ounce were well below our full year guidance range of $775 to $825 per ounce.

At San Bartolomé, persistent drought conditions had a negative impact on production and unit costs during the quarter. Fortunately, the mine has had more rain since quarter end, which is expected to lead to higher production this quarter. We are also pursuing opportunities to purchase and process more high-grade third-party ore, which accounted for about 24% of ounces produced in the first quarter. Despite lower production and higher unit costs during the first quarter, free cash flow increased nearly fourfold to $11 million due to the timing of sales.

Looking ahead to the rest of 2017, on Slide 10 of our materials, we anticipate overall production levels to increase, operating costs to decline further and cash flow to grow, mostly due to the rising underground mining rates at Palmarejo. We expect our expanded exploration programs to keep laying the groundwork for future reserve growth and mine life extensions.

Our G&A expense in the first quarter was up, which is typically the highest quarter every year, but we expect it to decline in future quarters and end the year within our guidance range. We had higher 2016 cash and noncash compensation expense, some onetime severance costs, and timing related to some outside services all hit us in G&A in the first quarter.

We look forward to completing the PEA on La Preciosa later this year and reporting those results to you as well.

So in summary, we started the year off with a good first quarter. We have a very talented and committed team here that continues to deliver solid results. And our portfolio of mines is generating strong cash flows. And our balance sheet is now a strength rather than a weakness. We're enthusiastic about our direction and the growth that lies ahead.

And that's the extent of our prepared comments. So let's go ahead and open it up for any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Mark Mihaljevic from RBC.

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Mark Mihaljevic, RBC Capital Markets, LLC, Research Division - Senior Associate [2]

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A couple of questions for me. So first off, I guess with the Q1 results, you're -- you expect to have pretty good gains relative to that for the rest of the year, but your AISC was already about $0.70 below the low end of guidance. So I was just wondering how much of that is just a bit of timing related to sustaining capital that you expect to trend upwards, versus how much has just been you guys delivering a bit ahead of plan on the cost side of things?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [3]

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Yes, I think where we are relative to our guidance after 1 quarter is not a bad place to end the year, if we can manage to do that. I do think sustaining CapEx will increase in the second and third quarters of the year as the summer season hits and we're able to do more work, especially at places like Kensington. So you'll probably see a little bit of a higher sustaining capital component to our AISC. But I think on the costs applicable to sales per ounce, that component of all-in cost should continue to decline. As I think through each mine, Wharf is likely to see continued lower costs, like we saw in the first quarter, Kensington's are likely to come down, Rochester's are likely to come down as we go through the year, and then Palmarejo, as they keep accelerating mining rates, those should come down. So I think we'll see lower CAS per ounce costs, but maybe a slightly higher contribution to all-in costs from sustaining capital that will pick up.

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Mark Mihaljevic, RBC Capital Markets, LLC, Research Division - Senior Associate [4]

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Okay, then switching on Palmarejo mining costs, I guess. Where do you think -- where do you see them settling out once you're at the full bore? You've gotten them down to about $37 on the underground mining side. So do you still see some gains as Independencia ramps up to full production?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [5]

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Frank, I'll take a first crack, and then you can fill in any blanks. I think on an underground mining cost per ton basis, running below $40 is pretty dang good. And I wouldn't expect to see that number decline much or any further, really. What we'll see is probably a pickup. We'll definitely be seeing a pickup in the total tons mined and processed. Where we'll likely see a little bit of pickup or further reduction in the per ton cost would be on the processing and then on the G&A side. On a per ounce basis, those costs should go down a bit more. I think our objective has been to get our all-in costs there at Palmarejo into the single digits. So that's kind of where we're shooting to get the cost structure there at Palmarejo, which will largely be driven by the higher throughput and spreading those higher tons over that large fixed cost component of our costs there. Frank, anything to add?

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [6]

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Yes, a little bit, I guess. Mark, obviously, we're very pleased with the results we saw in first quarter. I think, ahead, looking forward, I expect that costs should stabilize in a range of $40 to $45 per metric ton, which is still a very good cost. We're mining using -- deploying 2 methods, long-haul stoping and longitudinal mining. Longitudinal mining is a little bit more expensive than the long haul, just due to the massive tonnage that you drop per given operating period of time. But on a weighted basis, $40, $45 is where I see it stabilizing.

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Mark Mihaljevic, RBC Capital Markets, LLC, Research Division - Senior Associate [7]

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Okay. I guess sticking with Palmarejo now, obviously the 2017 outlook has or would imply that you'll be mining above reserve grades, especially on the gold side of things. So I was just wondering if you had some longer-term outlook there, for how long it would take -- or how long you'd be able to stay above reserve levels.

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [8]

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I view it as a short-term benefit that we're very happy to take here in the first quarter. You know, some variations in our modeling between model grades for gold, and what we're actually seeing, a bit of a positive reconciliation. But over time, the goal is that these balance out to not be positive or negative. I think that's the kind of performance we'll see. We're not banking on those -- that kind of result every quarter for the rest of the year.

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Mark Mihaljevic, RBC Capital Markets, LLC, Research Division - Senior Associate [9]

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Okay, and then shifting gears to the exploration side of things. First, the La Preciosa program. How does that -- how have the results compared relative to your expectations on that 25,000-meter drill program?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [10]

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Hans, you want to take that?

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Hans John Rasmussen, Coeur Mining, Inc. - SVP of Exploration [11]

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This is Hans Rasmussen, Senior VP of Exploration. The results are in line with what we expected. Modeling looks to be in line with what we had for a prior resource model there. The revised PEA is going to tell us how and where we're going to mine. So that's what we're basically pushing towards right now. So there's no surprises, which is good and -- but fairly interesting looking, new way of looking at the project with the smaller, higher-grade underground as well as some small open pits.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [12]

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Frank, anything you want to add to that?

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [13]

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No. Well, I guess, like Hans just said, Mark, the drilling has been targeted in the Martha vein which lies in the bottom of that resource. It's done a lot to confirm and provide a lot of additional data to help refine the next version of mine plan that we develop or are developing now. The model-over-model comparisons that we've undertaken over the last year, 1.5 years are coming back very close to each other, a very good sign. And we're -- our last -- there's a small amount of drilling that's going to be done to complete the program in total. And we're looking for some crossing structures that are in the upper horizons that may provide a few ounces to support some of the stripping that will be necessary in that open pit scenario up at the top. So that's kind of where we're at.

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Mark Mihaljevic, RBC Capital Markets, LLC, Research Division - Senior Associate [14]

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And I guess, last one for me, and again, probably for Hans again. Anything interesting on that -- on the greenfield efforts you've been doing, has anything kind of piqued your interest that you've seen so far?

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Hans John Rasmussen, Coeur Mining, Inc. - SVP of Exploration [15]

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Well, the program's definitely accelerated. And we're spreading our risk between Canada, the Great Basin and Mexico, which is actually a more focused effort than you've seen in the past with Coeur [earlier] all the way to Argentina at one point. So within the focused exploration program, we do see some exciting new projects that we've both signed up and put private placements into. And these will be our pipeline for the future. As far as drill results and things that are showing some upside, I can't comment on that right now. But you'll see as we generate some news flow later on, if anything comes out of that program, we'll definitely make it newsworthy. I guess the main thing is we're -- we've expanded our footprint. And we've diversified our approach to exploration to where we're not only investing in high-quality project generators in the business as well as high-quality assets that we see as we're looking in these 3 jurisdictions.

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Operator [16]

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Our next question will come from Chris Thompson of Raymond James.

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Chris Thompson, Raymond James Ltd., Research Division - Mining Equity Research Analyst [17]

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I got a couple of questions here. We'll just start off with these inventories again. And I'm just referring to, I think it's Page 6 of your presentation here. So if you look at the balance between ounces produced and ounces sold, it looks like for the Q4 you had effectively a growth of, it looks like, 1.4 million ounces in inventory. And we saw that reverse, but more than reverse, in the Q1. Can you just sort of comment on that? And what sort of -- what's the normal? What can we anticipate as far as run rate by way of inventories here?

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Peter C. Mitchell, Coeur Mining, Inc. - CFO and SVP [18]

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Chris, it's Peter. I think as we alluded to at the end of Q4, we did have a build of finished goods, silver and gold inventories for a number of reasons across the sites. Certainly at the end of Q1, that excess inventory, finished goods inventory, was sold off as well as kind of managing our sales through the quarter, and especially at quarter end, pretty aggressively. So I would say finished goods inventories at the end of Q1 are a good representation for you to use as you're comparing production against sales ounces on a go-forward basis across the platform.

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Chris Thompson, Raymond James Ltd., Research Division - Mining Equity Research Analyst [19]

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So I guess what you're implying there is, as long as we don't have any sort of a hold-up by way of doré shipments, we can basically model sales on production, right?

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Peter C. Mitchell, Coeur Mining, Inc. - CFO and SVP [20]

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Yes, that's exactly it. And certainly very much at issue is, you'll probably recall, at the end of Q4 was weather issues, et cetera. So we can't account for those, but as a sort of overriding assumption in terms of how we're managing the business, it is to maximize sales.

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Chris Thompson, Raymond James Ltd., Research Division - Mining Equity Research Analyst [21]

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Just moving on very quickly to Palmarejo here. Can you give us a sense or just remind us, full ramp-up. What are we looking for when all underground deposits are fully ramped up by way of ton per day figures? And give us a sense of time line, again, just remind us of that.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [22]

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Yes, I'll...

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [23]

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Sure, Chris, this is Frank. You going to handle it?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [24]

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No, go ahead.

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [25]

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Independencia, we're targeting 1,400 to 1,500 tons per day by the end of the year. First quarter results are pretty much on pace with our internal plans at Independencia, so pleased with that. Guadalupe, we're currently operating comfortably around an average of 2,500 tons per day. We'll push for incremental gains on that, but that is pretty close to the target that we had expected to achieve throughout this year.

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Chris Thompson, Raymond James Ltd., Research Division - Mining Equity Research Analyst [26]

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Great. Thanks. And then Frank, while I have you on the line there, I mean the gold recoveries at Palmarejo are pretty great in the Q1. Are they sustainable at these levels?

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [27]

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Yes. I still think you'll see a variation of 1% or 2% up or down below that, like from 89% to 91%, I believe is where we ended in the first quarter. We're very happy with how that mill or changes that we made there are performing on gold. We've seen silver recovery drop down about 2% over the course of the last 12 months. It's to do with manganese that's in one of the ore sources in the Independencia mine, but we're working on that. I'm confident we'll get that solved. So we should see good silver as well going forward in ranges that we've seen, like, over the last 5 quarters.

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Chris Thompson, Raymond James Ltd., Research Division - Mining Equity Research Analyst [28]

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And finally just looking at strip waste -- waste to ore strips at Wharf and Rochester. Could you give us a sense of what those strips are now? And do see any variances in that for the remainder of the year?

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [29]

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Yes, in the first quarter at Wharf, it was just a bit below 4 to 1 strip ratio. Over the life, I think we're at averaging 4.3 to 1. And at Rochester, it will range between 0.3 and 0.5 to 1 over the life of the mine.

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Operator [30]

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Our next question will come from Joseph Reagor of Roth Capital Partners.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [31]

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A bunch of stuff I would've touched on has already been hit on by some of the other guys. But just thinking more big picture, you generated $45 million, $50 million in cash this quarter. Assuming gold and silver prices stay pretty steady, you could continue to do something similar to that going forward. Are you guys considering eventually putting some of this money into debt repayment? I know you don't have as much of a burden as you used to. Also, what are you guys looking at on the M&A front? Are there opportunities to pick up an asset, maybe potentially in the U.S. and use some more of those NOLs up? Any color you can give there.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [32]

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Yes, sure. I'll take that. It's Mitch. Peter, if I miss anything, step in. In terms of the balance sheet, we're pretty comfortable with what we have there, with, I think, $178 million left of those 7 7/8% notes. A pay-down is probably not something that's high on our list. If we could refinance that at some point, kick out the maturity and pick up some coupon reduction, that's something worth keeping an eye on. I guess, I've turned more when we think about capital allocation and relative rates of return, continuing to reinvest this free cash flow into this platform of assets that we have that still have a lot to give us, in terms of returns and cash flow and growth and mine extensions, life extensions. So funding more drilling, funding more things like development underground at Jualin, underground development at the several different opportunities to further extend and expand Palmarejo, those are all, again, not flashy, but very solid-return, low-risk capital allocation decisions. And let's see how this PEA at La Preciosa turns out. If there is a project that looks like it has some legs there that we could be building in the near medium term, how great would that be for the equity of the business to be able to fund that out of cash on hand and free cash flow that we're generating. So hard to apologize for keeping a large cash balance. It keeps our flexibility to do a lot of different things. We'd rather be patient and smart and deliberate about that, so that's what we're doing. In terms of M&A, yes, anything -- we obviously, like any company always says to that question, we're looking at things all the time. Our criteria are probably not that dissimilar from most other companies. First and foremost for us is the basic fundamental question, can it make -- or would it make our business better? And by that, we define better as being higher grade, long life, good jurisdiction and capable of generating a good rate of return on that capital we'd be allocating to that opportunity. And you start throwing stuff through those filters and not a lot shakes out at the bottom, but we continue to review a lot of things and look for ways to further improve the business. I mean we want to have a collection of assets here that are really built for the cycle, and by that I mean low-cost, high-margin that can be cash flow generators, regardless of where silver and gold prices are. So we're going to keep trying to upgrade the quality of the assets that we have in this business. We're going to keep trying to bolster that pipeline of future growth with higher quality assets and just keep improving the overall asset quality of the business. And to the extent things come along that can help us do that, we'll definitely give them a good hard look.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [33]

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Okay. And then you mentioned some weather issues at Rochester and San Bartolomé. Do you think either one will see a rollover of the impact of that into Q2? Maybe particularly at Rochester with leach cycles, and I'm guessing the weather might have impacted the rate at which you stack the pad.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [34]

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I would say that the second quarter at Rochester will be better than the first quarter, but the third quarter will be better than the second quarter. So it's -- there will be a little bit of that hangover effect from -- for the exact reason that you mentioned there, Joe, just the leach curves. I think it -- Bolivia will also see same kind of thing. Second quarter will be better than the first quarter, but all things being equal, third quarter and fourth quarters will be better than the second quarter. It takes a little bit of time to get things back up to that run rate. But I think in both cases, we're comfortable with full year guidance. San Bartolomé is probably more likely to be at the low end of that range. But yes, I think we'll see second quarter at both of those mines better, but even better in the second half.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [35]

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Okay. And obviously with better production, we should expect costs to come back down at those 2 mines?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [36]

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That's right. Yes, we expect that in both cases.

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Operator [37]

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Our next question will come from Michael Dudas of Vertical Research.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [38]

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First question. Mitch, maybe elaborate a little more detail on your thoughts on the added exploration [less] capital being spent up at Jualin/Kensington?

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [39]

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Yes, I'll start there. And Frank and Hans, fill in the blanks. But what we've done there, Mike, is make a couple of decisions earlier in the year. One is we drove an exploration drift higher up in the development of Jualin that will accelerate some additional drilling, allow us to set up drilling stations there sooner than what we had thought. And between that and then putting some drills on surface to test kind of the extension potential of Jualin, we thought made a lot of sense, so that we can end the year as we start mining at Jualin with a larger reserve capable of supporting sustained 350 to 500 ton a day rates out of Jualin going forward. We have developed ourselves to a -- the middle part of Jualin, the number of feet that we had been planning to develop was to go all the way down to the very bottom of Jualin, and then start mining our way back up. But what we've been able to do by reconfiguring that -- and for the biggest reason of doing that was to start drilling down there as well. And so by driving that drift higher up, it allowed us to kind of cut back on the number of feet of development, which is giving us some of that capital savings that we're then taking and reapplying toward these drilling efforts to, hopefully, expand the size of Jualin. Hans, Frank, anything to add to that?

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Hans John Rasmussen, Coeur Mining, Inc. - SVP of Exploration [40]

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This is Hans. Yes, what this is, is really a follow-up to what we had going in 2015 with some good offset hits on Vein 4 of Jualin. And Mitch went to the site earlier this year and decided with the operations team and exploration team up there to accelerate and make this year the year for Kensington and Jualin. So in 2015, we had about 1,000 feet of strike new drill hole to find with Vein 4. So we're going to test that extension and hopefully come up with a resource by the end of the year, with 2 rigs active from surface all year. The caveat I'd like to throw in there too is that not only we're going to test Vein 4, but there's a vein that's below Vein 4 called Vein 5. It's 500 feet below Vein 4. And based on 5 holes that were drilled in 2014 and then got the results back in early 2015, the thickness and grade look exactly the same as Vein 4. So this is something that we'll also test with a few of these holes and get a feeling for what the growth upside might be for Jualin moving forward. So it's a big year for Jualin, and it was a big decision to allocate that much money to drilling up there, but it will come back and give us a lot of benefits, I think, at the end of the year.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [41]

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I think that sounds very well thought out. My follow-up, Mitch, is thinking about Preciosa for third quarter, at least announcement on (inaudible) comes up with, can you remind us what internally you all are thinking about relative to rates of return, silver prices, gold prices, by-products, thinking about how the parameters would be for an early go or no-go decision? And is capital cost and size of capital cost something that also is taken into consideration, despite the fact that you've done a great job getting the balance sheet in place to so something here.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [42]

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Yes. I can give you some broad-brush strokes there and some concepts. Obviously, a lot of those details will still need to be worked through as we progress on the PEA, and hopefully then on in -- straight into a feasibility study. But the rate of return for us looking forward on a project like that would have to be at least 15% in terms of kind of internal hurdle rate. What we would like to see there is -- the capital in that feasibility study that was completed in 2014 was something like $330 million. And that just -- that won't fly, so we're looking at a number that would be dramatically lower than that. Timing-wise, when you think about where we are with San Bartolomé being probably 3 years of remaining mine life, maybe, even best case. And that -- so that's our -- so San Bartolomé is kind of our highest-cost mine, it's our shortest mine life, and it's probably the least attractive jurisdiction where we have an operation. And as I think about La Preciosa being potentially on a track to be a nice replacement/enhancement in our portfolio, assuming San Bartolomé goes away about the same time you could see La Preciosa coming on with maybe a similar production rate, but lower costs, longer life, obviously, better jurisdiction and with a lot of potential, I think, to expand that mine life through further drilling. To me that would be just a terrific swap that would end up with the company having longer mine lives and even lower costs. So that's at least kind of conceptually how I think about it. Hans or Frank, anything you guys would like to add from a planning or an exploration perspective?

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Frank L. Hanagarne, Coeur Mining, Inc. - COO and SVP [43]

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No, I agree. The timing is favorable to what's happening at San Bartolomé. We're doing the work now to see what we can come up with to deliver the project at a lower capital cost.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [44]

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Sounds like a reasonable thought. I think everyone would agree except the Bolivian government on that spot idea, but well said, Mitch.

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Operator [45]

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(Operator Instructions) Our next question will come from Brett Levy of Loop Capital.

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Brett Levy, [46]

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You've gotten yourselves to the point that, as you said, your balance sheet is an asset at this point. You've got cash above 200, debt above 200 and LTM EBITDA above 200. You've said historically that kind of 1x leverage is your target, which raises the possibility that you could kind of double your amount of debt and do a number of things that might include a large onetime dividend, a large share repurchase. It sounds like you've got some CapEx in mind. Can I ask sort of one more time, if you're looking at something that might be, well, either a dividend or a share buyback? Is that on the table, since I think you like the assets you have? And it doesn't look like it's going to cost that much on the CapEx line to ramp up the various projects you outlined. And then if you are looking at an asset, would it be sort of within that 1x leverage range pro forma? And would it ideally be a producing asset on day 1? So it's kind of like, tell me about each of the 3 options, dividends, share buyback, type of property you're looking for, as people show you various things in the M&A market.

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Peter C. Mitchell, Coeur Mining, Inc. - CFO and SVP [47]

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I'll tackle the -- your balance sheet questions, Brett. It's Peter. Our intention is to stay around 1x total leverage. We don't have any plans at this point to undertake share buybacks, dividend recaps, et cetera, et cetera. It's kind of stay the course as Mitch referenced earlier on the call. We certainly would consider refi-ing those bonds at an opportune moment to extend maturity and obtain a lower coupon, so that's something we'll continue to consider going forward. But we're going to stay the course in terms of managing things, et cetera. And in terms of your M&A question, Mitch, I don't know if you've got any comment on that.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [48]

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Is it fair to say, it depends? We would -- and I think actually on the fourth quarter conference call, we talked a little bit about sort of our comfort level of using the balance sheet to fund an acquisition of a producing asset, depending on what that asset looked like. Yes, I could see us going down that path and maintaining the kind of parameters Peter just laid out, in terms of a total debt to EBITDA number. I wouldn't say anything has to be producing day 1. But when we think about nonproducing assets, we start internally and think first about La Preciosa since we already have a project that's not in production and could be a CapEx requirement. Let's see where we end up on that PEA before we go out and load up on other development projects that have a CapEx requirement. That said, there are some development-stage assets out there sitting inside companies that are fully funded. They have the cash on the balance sheet sufficient to put the mine into production, and we'd look at that a little bit differently, I think. But for us, it's more about, over the long term, can an asset be the kind of quality mine that -- the quality contributor to the portfolio that we're looking to add?

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Operator [49]

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Having no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Mitch Krebs for any closing remarks.

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Mitchell J. Krebs, Coeur Mining, Inc. - CEO, President and Director [50]

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Okay. Well, we appreciate everyone's time this morning. Thank you for all the questions. I want to thank everybody here at the company for their continued commitment and hard work. And we look forward to speaking with you all again in July to talk about our second quarter results. So thanks, again, and have a good day.

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Operator [51]

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The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.