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Edited Transcript of CDE earnings conference call or presentation 8-Aug-19 3:00pm GMT

Q2 2019 Coeur Mining Inc Earnings Call

COEUR D'ALENE Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Coeur Mining Inc earnings conference call or presentation Thursday, August 8, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Mitchell J. Krebs

Coeur Mining, Inc. - President, CEO & Director

* Paul DePartout

Coeur Mining, Inc. - Director of IR

* Terrence F. D. Smith

Coeur Mining, Inc. - SVP of Operations

* Thomas S. Whelan

Coeur Mining, Inc. - Senior VP & CFO

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Conference Call Participants

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* Adam Philip Graf

B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD

* Brian MacArthur

Raymond James Ltd., Research Division - MD & Head of Mining Research

* Joseph George Reagor

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

* 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, Inc. Second Quarter 2019 Financial Results Conference Call and Webcast. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Paul DePartout, Director of Investor Relations. Please go ahead.

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Paul DePartout, Coeur Mining, Inc. - Director of IR [2]

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Thank you, and good morning. Welcome to Coeur Mining's second 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. I would like to remind everyone that our press release, slides and some of our comments today 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 recent 10-Q and 2018 10-K.

Now I'll turn it over to Mitch.

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

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Thanks, Paul, and good morning. With me here are Tom Whelan and Terry Smith, along with a handful of other members of the management team.

Results from our 5 North American operations were largely in line with our expectations and represented a strong increase over the prior quarter. As we look to the second half of the year, we are reiterating our full year production and cost guidance as our plans for a stronger third quarter and an even stronger fourth quarter remain intact.

4 of our 5 operations saw improved operating cash flow and free cash flow during the second quarter. And overall, our operations delivered solid double-digit production growth across all 4 metals leading to a 17% increase in adjusted EBITDA.

There are 4 highlights from the quarter that stood out to me. First, it was great to see Kensington generate strong free cash flow on the back of higher grades from the Jualin deposit, which we expect to continue. Second, I'm very proud of our team at Rochester as they have now begun to feed material to the new crusher configuration, and we look forward to reporting its impact on silver recoveries to you in coming quarters. Third, at Silvertip, we recently hosted an analyst tour, many of you attended. The goal was to provide better visibility into the operation and to showcase the potential of the high-grade deposits. While Silvertip is not yet achieving break-even cash flow, we demonstrated significant quarter-over-quarter improvements. We resumed our drilling efforts in June, which have returned exceptional results thus far and make us optimistic about our ability to significantly expand reserves and resources at Silvertip over time.

And finally, I was glad to see our total debt decline by $82 million during the quarter or nearly 20%, which greatly improves our balance sheet flexibility going forward.

Tom will provide some additional color on this in a few minutes. Before handing the call over to Terry, I wanted to note another item you may have noticed in our earnings release relating to an option agreement we signed for the Richmond Hill Project. Richmond Hill is a past-producing gold project owned by Barrick Gold. It's adjacent to our Wharf mine and represents an opportunity to further extend that mine's life and leverage its nearby infrastructure.

Lastly, I want to highlight a set of slides starting on Slide 18 that outline our proactive approach to managing our tailings facilities.

And with that, I'll turn it over to Terry.

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [4]

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Thanks, Mitch, and good morning, everyone. From an operation standpoint, the second quarter represented a step-up from the prior period. As Mitch mentioned, this trend is expected to continue into the second half of 2019 as we remain focused on generating positive free cash flow.

Slide 5 highlights our production results and the key catalysts at each mine for the remainder of the year.

Starting at Palmarejo, we saw gold and silver production increased 22% and 36%, respectively, quarter-over-quarter, largely due to the completion of maintenance and an expansion of our cemented rockfill plant, which took place in the first quarter. This allowed us to access secondary stopes with better recovery characteristics and to increase mill throughput by nearly 20%.

At the end of the quarter, the team achieved an important milestone by reaching the ore phase of the La Nación deposit and began mining in early July.

As a reminder, La Nación is expected to add around 400 tons per day of additional mill feed once ramped up. We also completed commissioning of a new thickener last week, which is expected to improve metallurgical recoveries for both gold and silver by roughly 2%.

Together, these initiatives are expected to deliver production, cost and CapEx in line with Palmarejo's full year guidance ranges.

At Rochester, Slide 7 of today's presentation, summarizes the current status of the new crushing configuration which includes the HPGR unit. The newly upgraded crushing circuit is now fully up and running, and I'm pleased to report that preliminary gradation and leach recovery test work is in line with our expectations for higher and faster silver recoveries.

With the crusher upgrade complete, we plan to place fresh material on a newly completed section of the Stage IV leach pad, which will allow solution to hit liner quickly, helping to accelerate recoveries. In addition, we've been hauling higher grade run-of-mine to Stage IV. We're planning to continue using this strategy and maximize excess fleet capacity through the end of the year.

With the X-Pit fully operational, promising preliminary metallurgy results and our supplementary run-of-mine ore stream, we remain confident in the team's ability to deliver on Rochester's full year production cost and CapEx guidance.

At Kensington, production remained ahead of our internal expectations, with approximately 17% of production coming from Jualin at an average grade of 0.38 ounce per ton. We anticipate this trend to continue in the third and fourth quarters, with plans for Jualin to contribute approximately 20% of Kensington's total production for the year, driving strong expected free cash flow and improved unit cost.

Kensington generated approximately $11.5 million of free cash flow at an average cost of $842 per ounce during the quarter. Kensington's second quarter operating and financial results demonstrate what a high-grade deposit like Jualin can do for the overall economics of the operation. Our strategy at Kensington is to continue drilling other known Jualin-like deposits, including Elmira, Eureka, Comet, Raven and Johnson to extend this higher-grade lower-cost profile.

At Wharf, we experienced unseasonably wet weather during the quarter, which diluted leach pad solutions and impacted crushing capacity. In fact, we've treated and released almost double our annual amount of water in just 6 months. Our investment to upgrade our denitrification plant last year has proven to be extremely beneficial, allowing us to keep up with these unseasonable conditions.

To help us achieve our 2019 plan, a crusher contractor has been mobilized to crush an additional 300,000 tons of ore, which is planned to take place primarily during the third quarter. Production is also expected to benefit from the stacking of higher-grade ore through the remainder of the year.

And last but not least, I'll finish off with Silvertip. As we've highlighted on Slide 8, second quarter 2019 was the best period of operational performance since acquisition. Although our throughput was down slightly quarter-over-quarter, higher grades and improved recovery rates drove significant increases in production. As expected, we worked through the tight mass balance challenges we discussed last quarter. It was also very encouraging to see recovery rates increase during the quarter, including many days of mill recoveries for all metals above 80%. While feed grades and recoveries are heading in the right direction, we still have a way to go on mill availability.

We remain focused on key priorities, which are highlighted on Slide 9, and are confident we will continue stabilizing the operation.

As Mitch mentioned, we are seeing very encouraging results from resource expansion drilling at Silvertip, which are highlighted on Slide 10, and help demonstrate the potential of this high-grade deposit. Our goals at Silvertip remained simple: stabilize top line performance, begin reducing cost and achieve positive operating cash flow by the end of the year.

Before handing the call over to Tom, I'd just like to take a moment and thank everyone across our operations for their continued dedication, safe production and delivering positive results for the business.

Now Tom will cover the financial highlights for the quarter.

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Thomas S. Whelan, Coeur Mining, Inc. - Senior VP & CFO [5]

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Thanks, Terry. Before I dive into our financial results, I'd like to add a bit of color to the balance sheet initiatives that Mitch referred to in his opening. Debt mentioned during last quarter's call, we are focused on reducing our debt to more comfortable levels. We took several steps during the quarter to work towards this goal.

In the second quarter, we executed a $50 million at-the-market equity offering and completed a $25 million prepay with an existing sales counterparty for a portion of gold concentrate at Kensington. These initiatives helped us reduce our revolving credit facility balance from $135 million down to $53 million and led to a 19% reduction in total debt quarter-over-quarter. We remained in compliance with our key covenants at June 30, 2019, including a minor amendment of the revolving credit facility for no additional cost.

Providing some additional color on the prepay, this is recorded as deferred revenue flowing through our working capital for the quarter and is presented in accrued liabilities on our balance sheet. In effect, we brought forward $25 million of cash flow that was originally expected to be received in the second half of the year. However, it is important to note that we maintained our exposure to the potential upside in the price of gold and expect to recognize the full value of the prepay by the end of the year.

As highlighted on Slide 12, we increased our liquidity by $53 million during the quarter to $235 million.

Turning over to our financial results on Slide 4, second quarter free cash flow was positive $6 million compared to negative $43 million in the prior quarter. This was driven by higher operating cash flow from improved top line performance, disciplined cost management as well as the proceeds from the prepay and lower CapEx. In the second half of the year, we expect to continue investing in key growth projects across our portfolio and remain within our full year CapEx guidance range.

As we stated in the past, we are extremely focused on delivering positive free cash flow for the business. Between our strong anticipated second half performance and strengthening gold and silver prices, we are optimistic about achieving this goal.

We plan to continue focusing on generating dollars, not ounces, managing our costs and continuing to allocate capital according to our framework summarized on Slide 11.

With that, I'll hand it back over to Mitch.

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [6]

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Thanks, Tom. Looking at Slide 13, you can see the key items we need to deliver on during the second half of the year.

To reiterate, our top 3 priorities for the remainder of 2019 are: generating higher silver recoveries from HPGR at Rochester between now and the end of the year; optimizing top line performance at Silvertip and starting to rationalize its cost structure with the goal of achieving positive operating cash flow by the end of the year; and reducing leverage levels and maximizing free cash flow so we can be well positioned to generate meaningful long-term value for our stockholders.

We will continue to pursue a higher standard in everything we do and remain focused on delivering positive results and quality growth from our balanced portfolio of North American precious metals assets.

With that, let's go ahead and open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Michael Dudas with Vertical Research Partners.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [2]

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First question, again, wonderful results at Kensington. You did talk about the mix on Jualin to 20%, early look into going forward, is that kind of mix gets sweetened a little bit even through 2020, and how helpful or quickly some of the drilling that you've been doing on some of those like targets can help the mix going forward in the profile?

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

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Yes. Sure. Michael, I'll ask Terry to take that.

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [4]

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Sure. Mike, good question. We're just really getting going at Jualin. We declared commercial production late last year, as you'll remember. And we're just 2 quarters into the project now.

We're starting to take long haul stopes more consistently. And so I think that there is a good, consistent Jualin profile that we'll establish. And there are numerous other high-grade sources at Kensington, Raven is another one, but we've been mining in for some time. We'll have more news on some of the other veins that we've been exploring, and we're pretty excited about. So the idea is to continue this high-grade supplemental ore stream for as long as we can.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [5]

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Secondly, on Rochester, good news on the early metallurgical indications. Anything else that's been surprising to the upside or something -- maybe any challenges as you look through to second half to meet the targets and looking at the plans on accelerating those investments into 2020, '21?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [6]

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It's Mitchell, I'll start, and then Terry, you can go ahead. The -- as you'll recall, Mike, from our production release, we highlighted the fact that there was a secondary crusher that failed on us, and the team out there did a great job of implementing its contingency plan to get that thing removed and replaced and everything up and going here in the last part of July, early part of August.

So that was a challenge, the team did a great job responding to that. I think now what we've seen is pretty steady 24-hour a day performance out of the entire 3 stages of the crusher and the HPGR material is going out on the liner, and the test work that we've seen is so far, so good. Terry, anything as you look out between now and the end of the year that we should be mindful of?

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [7]

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Yes. Mike, I think as we get through the third quarter here, we're going to have more metallurgical information, more operating history on this crushing configuration. We're just starting to dial in the system now, so there's a lot of opportunity to optimize around that.

So I think by the time the third quarter's through, we'll have much more to say about the performance of the system. Certainly, on a preliminary basis, we're really excited. We've been working on this for some time to get to this point. And look forward to talking more about it in a couple of months.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [8]

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Just 2 more for me. First, on your CapEx expectations full year, relatively you've done so far in the first half. Certainly, is it timing-related on the range? Or is there -- with -- certainly, with the markets and with some cash flows that might be excelling a little bit more than maybe planned to accelerate, and trying to get some things done before we turn to 2020?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [9]

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Yes. You are right, Mike. It's mostly timing, it's mostly underground development-related. And as we see mining grades pick up at Palmarejo and at Silvertip, we'll see underground capitalized development increase at both of those locations.

Kensington has been for the -- through the first half of the year a little ahead of its CapEx. I think that is expected to kind of stabilize in the back half of the year now that they're up and going there in Jualin on a more sustained level.

So we're -- yes, we're -- at halftime of the year here, we're a little less than halfway through our CapEx midpoint guidance range. But based on our plans that we're looking at here, it still shows us ending up within that range for the full year.

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Michael Stephan Dudas, Vertical Research Partners, LLC - Partner [10]

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Excellent. My final question is, Mitch, I'm intrigued by the Richmond Hill announcement. Maybe some background, how long you've been thinking about it and what's the concept there? In addition to what you just kind of just briefly mentioned in your prepared remarks.

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [11]

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Yes. Sure. I'll give you my views. Terry, feel free to chime in on this. I think that you'll recall, Mike, we bought Wharf in February of 2015. This had been on the radar screen of the Wharf team prior to our ownership. This is an all-black minerals producer. That's sits less than 5 miles.

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [12]

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Old school.

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [13]

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Yes, exactly. Haven't heard that name in a long time. But -- so as we look around for opportunities to grow the business in a way that can generate the best returns, obviously, leveraging existing infrastructure is the best way to do that, that there's only a few -- those are a fairly short list of opportunities to do that. Richmond Hill sits there, that close to the infrastructure at Wharf. And so with the historic resource -- Barrick -- for Barrick, I think it's a kind of a nonfactor, so it makes a lot of sense for us to have that and to look for a way to tack that on to Wharf's operation and have that via a further extension. The option we thought was a good way to go about this to give us 2 years to better understand the opportunity and have a better sense of exactly how and when Richmond Hill could potentially fit into Wharf's future.

So we're excited, I think -- I know the folks at Wharf are excited to start taking a look. We'll spend only, I think, it's less than $2 million there this year on some metallurgical work and some drilling. So not a big spend at all but could be a nice enhancement to Wharf. Terry, did I pretty much cover?

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [14]

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Yes. You covered it pretty well. I think what we see there is very similar to Wharf around the technical perspective, the geology is very similar, the metallurgy is very similar. So this, to me, is a natural fit with the Wharf operation, yes.

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Operator [15]

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The next question comes from Joseph Reagor with Roth Capital Partners.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [16]

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Just a couple of minor items. I guess the first one, on Silvertip, there's a -- once you get the permit, there's a $25 million payment due, I believe, what's the timing on that? Do you have to make the payment immediately? Is it within a certain number of days or quarters? And then also, with the resource drilling you've been doing, how soon do you think you'd have to make the resource-related payment?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [17]

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Yes. Sure. It's due -- both of those are due 15 business days after -- in the case of the permit, after we receive it, 15 business days. And then that initial $25 million payment, which is 75% stock, 25% cash. Sorry, I mixed that up. 25% stock, 75% cash.

And then in terms of resource milestone payment of another $25 million, structured the same way that would come then on the back of year-end reserve and resource calculations that we typically complete in kind of the February timeframe and then a similar 15 business day time line on the back of that.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [18]

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Okay. And given the research drilling you've done so far, would you say it's more 2020 or 2021 item for that?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [19]

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That's -- I think we could fall on a bet and still hit that number by early 2020 with the results we are having.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [20]

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Okay. On a different note, you guys purchased the Northern Empire assets over a year ago now, and that area has seen a significant land grab. There's a number of majors that are taking up land down there. Your neighbor, Corvus, has been purchasing additional -- and staking additional land. And obviously, that would imply that the valuation of land in that area has gone up. Is it possible you guys would book to sell that? I know it's a big part of the long-term future, but given the focus on debt reduction and improving the balance sheet, is that an opportunity you think is out there right now?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [21]

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I would never say never to anything. It's really a function of value. If someone is willing to pay us a price for something that's in excess of what we think it's worth, then it's something we obviously need to look at and think real hard about. I think the challenge there is we're still in that early phase of determining just what the value potential is there at Northern Empire, both at Sterling and Crown. I agree with your comment, Joe, that the activity in the area has been quite significant over the last 12 months. And without having done a ton of drilling, I think we have seen probably that value increase just by virtue of all that activity going on around us. We're really excited about the drilling that we're seeing at one of the deposits in the Crown Block. We've been drilling on Daisy for now.

And so with the land position that we have there, it's quite strategic, and I think, ideally, we would like to see our own work progress and see how things evolve in the neighborhood. But always open to anything that we think can unlock some value.

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Joseph George Reagor, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [22]

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Great. And then one final one on Silvertip. You guys goal is to get to cash flow breakeven by the end of the year. One, what is the things that you think might stop you from getting there or might help you get there? And then two, if you don't get the mine to cash flow breakeven by the end of the year, what would that mean moving forward?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [23]

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Yes. I'd say, it all comes back to mill availability. The sooner we get to high 80s or 90% mill availability, the sooner we will achieve that objective. And I'd like to think that we can do that before the end of the year. But we've given ourselves until the end of the year to achieve that. That, by far, outweighs what operating cost reductions can do in terms of achieving that goal. But that said on a go-forward kind of sustained basis, we need to see, and we will see, we think the OpEx there declined pretty dramatically. The costs that we're showing right now are not very indicative of what a sustained sort of ongoing operation there should look like, just given the resources that we're throwing at addressing somebody with mill challenges that we've been wrestling with. And as those get peeled back, and those will take a little bit more time, that will kind of give us a second tailwind behind the -- achieving that mill availability.

And in terms of the second part of your question, look, we have to not be emotional about how we allocate capital, right? We need to maintain a discipline. We need to stick -- stay true to our framework and our priorities, when we'll always assess. If we're not there by the end of the year, we'll need to take a silver look at it, and say, "Are we allocating capital to a good opportunity there versus other opportunities inside the business?" I'd like to think that it's a pretty -- given the nature of that ore body with the grades and drilling results. There's a very attractive business sitting there for us once we get to that steady state, and our main focus is on getting there. And that really, like I said, is driven by the mill availability focus that we have.

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Operator [24]

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The next question comes from Brian MacArthur with Raymond James.

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Brian MacArthur, Raymond James Ltd., Research Division - MD & Head of Mining Research [25]

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A couple of questions. Just, Mitch, can you just go over the options for paying the $25 million? You said it's 25% stock and 75% cash. Is that at your option or the seller's option? And how's that actually work?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [26]

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It's just defined that way, Brian. It's $25 million in total for the first payment, $25 million on the resources. And it's just prescriptive in terms on the agreement of the 75%-25% breakdown.

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Brian MacArthur, Raymond James Ltd., Research Division - MD & Head of Mining Research [27]

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So that's not negotiable? That's just the way it will be?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [28]

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That's right.

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Brian MacArthur, Raymond James Ltd., Research Division - MD & Head of Mining Research [29]

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Okay. Second question, just for this you have to make those payments. And what's your focus on debt reduction? I thought the prepay was time interesting. Do you see yourself doing more of that going forward? And would you do it on silver as well as gold?

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [30]

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Well, I'll start. Tom feel free to add to it. Tom should kind of spearheaded the effort on this in the second quarter, and I agree it was a good way and elegant way of bringing forward some cash flow to help us accelerate our goals around debt reduction. And it's a good tool that happened to the toolbox going forward.

As I think about funding sources for the next expansion at Rochester, this POA 11, that's sitting out there in a couple of years from now, utilizing this type of a tool to help with the internal funding alternatives for a project like that. It's something that's definitely worth keeping on the radar screen. And silver could be used just as much as gold. I guess when we looked at it, gold's had a much better run relative to silver, and that was a bit of a consideration. But yes, it's something that we'd keep in the toolbox for sure.

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Brian MacArthur, Raymond James Ltd., Research Division - MD & Head of Mining Research [31]

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And are those prepays, are they asset-specific? So I assume, if something went wrong and you couldn't deliver from Kensington, you just deliver in from one of the other assets that you buy it in the market. Is that kind of the way it works?

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Thomas S. Whelan, Coeur Mining, Inc. - Senior VP & CFO [32]

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That's exactly. We'd have the alternative to deliver from another asset or find some other ways of fulfilling that or delivering into the ounces that we committed to, that just buy in the market. But again, just to give some perspective, $25 million based on current prices, I mean that's -- that is -- we'll easily be able to achieve that at -- from Kensington in the second half of the year.

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Brian MacArthur, Raymond James Ltd., Research Division - MD & Head of Mining Research [33]

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Right. No, I get that. It's more just of some drastic thing happens or whatever. I was just curious what the other side of the trade was. So that's very, very helpful.

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Operator [34]

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The next question comes from Adam Graf with B. Riley.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [35]

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Just getting back to Silvertip. You guys -- second quarter in a row now that the cost attributable to sales have been about $24 million there. Should we expect that to be the steady run rate per quarter going forward?

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

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No. That will start to decline here as we achieve steady state on the top line and we start to peel away some of these kind of onetime costs that we're incurring right now that help us address some of these mill projects. We'll see that spend level decline. Terry, do you want to give a couple of maybe examples or...

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [37]

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Yes. Sure. Adam, there's just a number of different resources that we're throwing at Silvertip to help with this revenue stabilization that we're describing. Contractors, additional employees, lots of onetime items associated with just ramping up mill throughput and trying to turn mill availability into 80s and the low 90s. It just requires lot of resources. You start to pull back those resources after you've achieved that stability. So it's sort of a series of stabilization, optimization, if that makes sense.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [38]

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Do you guys have a feel for the run rate, the quarterly run rate? You guys would be expecting once you got -- once you have all those things in hand?

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

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Yes. It's Mitch, again, Adam. If you look at where we are right now on mining cost per ton, I think it's in the 70s, which is not too far off I think where we would expect to be. And as you can imagine, it's more a function of processing and G&A cost. I think on a per ton basis right now, both of those are up in the $150, $140 a ton range. You look at our other underground mines, you look at any kind of benchmarking, and you look at sort of where we think that could get, it's not a stretch at all to think that that should be kind of -- both of those should be half of those numbers. And that that gives you a sense of the magnitude of the OpEx reductions. It could go from $140 to $175 on a per ton basis, 1,000 tons a day. I think last quarter, I mentioned an objective of hitting on an operating cost basis, about $7 million a month or so on a steady-state basis. So obviously, multiply that, times 3, that gets you into the low 20s. I think that's not a bad way to think about it.

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [40]

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That's a perfect answer, Mitch. Now I don't have to ask you to break down into mining, milling and G&A per ton. Perfect.

And just to switch tracks over to Rochester, Wharf, when I look at your cost per ton numbers, I'm left scratching my head there that perhaps Rochester and perhaps Wharf, I know you had issues there on the quarter, but perhaps they had 5 stripping quarters that would bring sort of the numbers in line on a cost per ton basis. Can you give us an idea of the strip in the second quarter at Rochester and Wharf and what that's going to look like for the rest of the year?

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [41]

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Yes. I want to say that Rochester's strip ratio last quarter was around 0.3 or 0.4. So it's low like we traditionally have seen there.

If you're looking at mining cost on a unit basis, and you go back sort of through Rochester's last couple of years when we're sort of open-pit mining tonnage north of 5 million tons, you will see our unit mining cost below $2. And when it's sort of in the 3 million and 4 million ton range, like it is at the moment, our unit costs are obviously above $2.

And to compound our unit cost problems lately, we've been doing PCRs on our all-edge fleet which show up in our cost. And those are completed up every couple of years, and we've just been hit with a lack of them here in the last couple of quarters.

So that's compounding a low tonnage, fixed variable issue there. So does that help, Adam?

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Adam Philip Graf, B. Riley FBR, Inc., Research Division - Senior Mining Analyst & MD [42]

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Yes. So it sounds like it wasn't a stripping issue because that's sort of the regular strip, more or less, for Wharf -- sorry, for Rochester.

And in Wharf, I know you guys had a lot of water issues. So was it a -- what was the strip at Wharf roughly in this -- in the second quarter?

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Terrence F. D. Smith, Coeur Mining, Inc. - SVP of Operations [43]

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It's a good question. Let me -- I want to say that it was around 2.5:1. I think our reserves there are roughly 4:1. But we've had a lot of positive ore reconciliation. And -- yes, sorry, 3:1 in the last quarter. We've had a lot of positive reconciliation there, which is a good problem means that there are more ores on every bench than we thought.

The mining costs at Wharf are quite -- they fluctuate a lot. We have reasonable leach pads, which is different than Rochester, which are life-of-mine pads. So every time we have an offload event at Wharf, that kind of compounds our cost, and you see that sharp in the mining cost. So that's -- you'll get some variability quarter-over-quarter from those types of activities.

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Operator [44]

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(Operator Instructions)

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [45]

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Okay. We appreciate everyone's time. Sorry?

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Operator [46]

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I was going to conclude the question-and-answer.

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [47]

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Yes. Go ahead.

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Operator [48]

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This concludes our question-and-answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks.

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Mitchell J. Krebs, Coeur Mining, Inc. - President, CEO & Director [49]

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Okay. Well, I was just going to say that we appreciate your time to get on the call this morning, and we look forward to speaking with you again this fall to talk about our third quarter. So thanks again.

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Operator [50]

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