Coeur Reports Third Quarter 2019 Results

Full-Year Production and Cost Guidance Reaffirmed

CHICAGO–(BUSINESS WIRE)–Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) today reported third quarter 2019 financial results, including revenue of $199.5 million and cash flow from operating activities of $42.0 million. Including non-cash write downs of $15.0 million taken in the quarter, the Company reported GAAP net loss from continuing operations of $14.3 million, or $0.06 per share. On an adjusted basis¹, the Company reported EBITDA of $61.0 million and net loss from continuing operations of $5.3 million, or $0.02 per share.

The Company is reaffirming full-year 2019 production guidance of 334,000 – 372,000 ounces of gold, 12.2 – 14.7 million ounces of silver, 25 – 40 million pounds of zinc and 20 – 35 million pounds of lead. In addition, full-year cost guidance is being reaffirmed.

Key Highlights

• Strong increases in quarterly financial results – Revenue, operating cash flow and adjusted EBITDA¹ increased 23%, 59% and 99%, respectively, quarter-over-quarter. Strong financial performance was driven by a 15% increase in Companywide gold production and higher precious metals prices during the quarter
• Second consecutive quarter of positive free cash flow¹ – The Company generated $11.3 million of free cash flow¹ during the third quarter, approximately double the amount in the prior period. The second consecutive quarter of positive free cash flow¹ was driven by strong performance at Palmarejo and Wharf
• Successful commissioning of new crushing circuit at Rochester – Rochester began processing ore through its new three-stage crushing circuit, including the high-pressure grinding roll (“HPGR”) unit, during the quarter. Fourth quarter results are expected to improve, reflecting a full quarter with the new crusher circuit in place
• Continued strong performance at Kensington – Kensington produced 34,156 ounces of gold and recorded adjusted costs applicable to sales (“CAS”)¹ of $822 per ounce during the quarter. Results reflect the continued benefit of higher-grade ore from Jualin, which is expected to drive production and costs in-line with full-year guidance ranges
• 19% quarter-over-quarter reduction in total debt² – Coeur retired over $70.0 million of indebtedness during the quarter, including the remaining balance outstanding under its $250.0 million senior secured revolving credit facility (the “RCF”). The Company has reduced total debt² by approximately $160.0 million since the beginning of the year
• 72% increase in cash and equivalents – Cash and equivalents as of September 30, 2019 totaled $65.3 million, 72% higher compared to the prior period

“We made significant progress during the third quarter toward achieving our full-year 2019 operational and financial objectives,” said Mitchell J. Krebs, President and Chief Executive Officer. “The combination of strong operational performance and higher prices led to a 23% increase in revenue, a near doubling of adjusted EBITDA¹ and positive free cash flow¹ for the second consecutive quarter. We also improved our financial flexibility by materially reducing our debt level and bolstering our liquidity while continuing to invest in near-mine exploration and high-return organic growth opportunities.”

“At the Silvertip silver-zinc-lead mine in British Columbia, Canada, we continue to make steady progress addressing the operation’s mill availability challenges. We extended the amount of planned downtime during the quarter to prioritize the completion of several key projects, which resulted in lower production levels. However, we mobilized additional third-party resources during the quarter to accelerate our mill stabilization efforts, which are now having the intended impact.”

Mr. Krebs continued, “We anticipate this strong performance to continue in the fourth quarter as we seek to generate a third consecutive quarter of increasing, positive free cash flow¹.”

Financial Results

Third quarter revenue increased 23% to $199.5 million compared to $162.1 million in the second quarter of 2019. The Company sold 100,407 ounces of gold representing an increase of 16% compared to the prior period, while silver sales remained relatively consistent at 3.0 million ounces. Zinc and lead sales totaled 4.1 million and 4.3 million pounds during the third quarter, 23% and 17% lower, respectively, quarter-over-quarter.

Average realized gold and silver prices increased 11% and 16%, respectively, quarter-over-quarter to $1,413 and $17.17 per ounce. The average realized gold price during the quarter reflects the sale of 10,785 ounces of gold at a price of $800 per ounce pursuant to Palmarejo’s gold stream agreement. Average realized zinc price remained relatively consistent quarter-over-quarter at $0.50 per pound, while average realized lead price increased 12% to $0.92 per pound. The average realized zinc and lead prices are presented net of treatment and refining charges and reflect the impact of provisional price adjustments.

Gold and silver sales accounted for 71% and 26% of third quarter revenue, respectively, while zinc and lead together accounted for the remaining 3%. The Company’s U.S. operations accounted for approximately 59% of third quarter revenue, up from approximately 56% in the second quarter primarily due to increased sales from Wharf, which totaled $36.7 million.

Costs applicable to sales increased 7% quarter-over-quarter to $141.0 million, reflecting higher costs associated with increased production at Wharf during the quarter. Third quarter general and administrative expenses were $9.6 million compared to $7.8 million in the prior period, largely due to higher employee-related expenses and legal fees.

Quarterly exploration expense was $5.9 million, or 4% higher quarter-over-quarter, reflecting Coeur’s continued commitment to its success-based exploration program and the commencing of new drilling campaigns during the quarter. Exploration activities in the third quarter were primarily focused on expansion drilling at Palmarejo, Kensington, Silvertip, and the Sterling and Crown exploration properties in southern Nevada. See page 13 for further details.

During the third quarter, the Company recorded an income tax expense of $0.2 million, largely attributable to higher taxable earnings during the quarter. Cash income and mining taxes paid during the quarter totaled $0.7 million, partially offset by $0.3 million of value-added tax refunds.

Operating cash flow of $42.0 million in the third quarter reflects improved profitability across the Company’s portfolio, with the exception of Silvertip. Third quarter operating cash flow also reflects a $14.7 million working capital outflow associated with sales made under Kensington’s $25.0 million prepayment agreement. The Company expects the remaining $10.3 million working capital outflow under this arrangement will occur during the fourth quarter.

Third quarter capital expenditures totaled $30.7 million, compared to $20.7 million in the second quarter. Higher capital expenditures were driven by increased investment at Rochester and Silvertip during the third quarter. Sustaining and development capital expenditures accounted for approximately 52% and 48%, respectively, of the Company’s total capital expenditures in the third quarter.

Third Quarter Debt Reduction Initiatives

During the third quarter, Coeur completed its previously announced $75.0 million at-the-market common stock offering program, raising net proceeds (after sales commissions) of $73.8 million. The Company also entered into privately negotiated agreements to exchange $20.0 million of aggregate principal amount of its senior unsecured notes for common stock during the quarter.

These transactions helped the Company retire $71.3 million of outstanding indebtedness, including the remaining $53.0 million balance under the RCF. As of September 30, 2019, the Company had $315.3 million of liquidity, including $65.3 million of cash and cash equivalents and $250.0 million of availability under the RCF.

Update on Hedging Strategy

During the third quarter, Coeur implemented a series of zero-cost collar hedges on a portion of its gold production in 2019 and 2020. The structure of the hedging program allows for downside protection against potential decreases in the price of gold, while enabling participation in the potential upside up to a specified ceiling. The strategy was designed to support free cash flow¹ generation and help fund key internal growth projects. Additional details are outlined below:

• 21,000 ounces of gold per month for the remainder of 2019 at an average floor of $1,405 per ounce and an average ceiling of $1,798 per ounce; and
• 12,000 ounces of gold per month from January 2020 through August 2020 at an average floor of $1,408 per ounce and an average ceiling of $1,803 per ounce

   

Operations

Third quarter 2019 highlights for each of the Company’s operations are provided below.

• Third quarter gold production increased 13% to 31,779 ounces, while silver production remained consistent at approximately 1.7 million ounces compared to the prior quarter. Year-over-year, gold and silver production increased by approximately 14% and 11%, respectively
• Higher gold production during the quarter was primarily driven by the improvement in average grade, partially offset by lower recoveries. Consistent quarter-over-quarter silver production reflected higher grade offset by slightly lower recoveries and mill throughput. Lower recoveries during the quarter reflect additional in-circuit inventory and adjustments on final settlements of doré sales
• Third quarter adjusted CAS¹ for gold and silver on a co-product basis decreased 11% and 2%, respectively, to $660 and $8.95 per ounce. Strong cost performance during the quarter reflects higher average grades and prudent expense management
• Free cash flow¹ of $28.5 million during the third quarter was largely driven by higher operating cash flow from increased metal sales and lower unit costs. Capital expenditures during the quarter were focused on mine development and infrastructure projects
• Production began at La Nación, located within the Independencia mine complex, in the beginning of the third quarter. La Nación is anticipated to continue ramping up through the end of 2019 as infrastructure projects are completed, adding approximately 400 tons per day of additional mill feed
• Commissioning of a new thickener was completed on-budget and on-schedule in the third quarter. The project is expected to increase metallurgical recoveries for both gold and silver by approximately 2% and has an estimated one-year payback
• Full-year 2019 production guidance remains unchanged at 95,000 – 105,000 ounces of gold and 6.5 – 7.2 million ounces of silver
• Guidance for CAS and capital expenditures also remains unchanged. CAS are expected to be $650 – $750 per gold ounce and $9.00 – $10.00 per silver ounce. Capital expenditures are expected to be approximately $40 – $45 million

• Tons placed in the third quarter decreased 10% quarter-over-quarter and 38% year-over-year to approximately 2.5 million tons. Fewer tons placed reflects the commissioning of the new three-stage crushing circuit during the quarter
• Silver production remained consistent quarter-over-quarter at approximately 1.0 million ounces, while gold production decreased 8% to 7,901 ounces. Year-over-year, silver and gold production decreased 24% and 46%, respectively
• Silver production was impacted by slightly lower average grade, while gold production decreased largely due to fewer tons placed. Side slope leaching on the Stage III and Stage IV leach pads as well as the stacking of run-of-mine material early in the quarter were used to supplement production
• Third quarter adjusted CAS¹ for silver and gold on a co-product basis increased 8% and 7%, respectively, quarter-over-quarter to $14.24 and $1,230 per ounce. Higher costs during the quarter were primarily related to lower production and the stacking of run-of-mine material during the commissioning of the new crushing circuit. Third quarter adjusted CAS¹ excludes $4.8 million, primarily related to a one-time charge associated with the operation’s power costs
• Free cash flow¹ of $(1.9) million was driven by higher capital expenditures, which more than offset improved operating cash flow during the quarter. Capital expenditures were focused on the new crushing circuit, further development of the Stage IV leach pad and initial work on Plan of Operations Amendment 11
• Initial recovery results from bottle roll and column tests on HPGR-crushed ore during the quarter were encouraging and in-line with original expectations. The Company plans to continue monitoring and benchmarking results against third-party test work to further validate recovery rates associated with the HPGR unit
• Production in the fourth quarter is anticipated to benefit from the stacking of additional tons, reflecting a full quarter integrating the new crushing circuit. The Company began stacking HPGR-crushed material close to the liner of the Stage IV leach pad in September
• The Company is maintaining full-year 2019 production guidance of 4.2 – 5.0 million ounces of silver and 40,000 – 50,000 ounces of gold. CAS in 2019 are also unchanged and expected to be $12.50 – $13.50 per silver ounce and $1,000 – $1,100 per gold ounce
• The Company’s guidance for capital expenditures is also unchanged and expected to be approximately $17 – $20 million

• Commercial production at Jualin was declared on December 1, 2018. The figures shown in the table above exclude pre-commercial production
• Third and second quarter operating cash flow and free cash flow¹ in the table reflect the impact of a $25.0 million prepayment received in the second quarter, which resulted in $14.7 million of working capital outflows in the third quarter. Excluding the effect of the prepayment, third and second quarter operating cash flow was $19.2 million and $16.4 million, respectively, while free cash flow¹ was $14.3 million and $11.5 million, respectively
• Continued strong gold production during the third quarter totaled 34,156 ounces, consistent with the prior period. Year-over-year gold production increased 34%
• Adjusted CAS¹ decreased modestly quarter-over-quarter, totaling $822 per ounce and remained below the low end of the full-year guidance range of $950 – $1,050 per ounce
• Jualin accounted for approximately 15% of Kensington’s third quarter production, compared to approximately 17% in the prior quarter. Jualin is now anticipated to account for approximately 15% of Kensington’s total production in 2019, largely due to an expected increase in production from the Kensington Main deposit
• Capital expenditures of $4.9 million during the quarter were largely focused on ongoing underground development
• Full-year 2019 production guidance is unchanged at 117,000 – 130,000 ounces of gold
• Full-year CAS and capital expenditures guidance are also being maintained. CAS are expected to be $950 – $1,050 per ounce; capital expenditures are expected to be $20 – $25 million

• Gold production in the third quarter increased 65% quarter-over-quarter and 33% year-over-year to 25,946 ounces
• Higher production during the quarter was largely driven by the placement of additional tons and improved grade. Tons placed increased 63% quarter-over-quarter to 1.5 million, while average gold grade increased 17% to 0.027 ounces per ton
• Operational results reflect better crusher performance and improved weather conditions. Strong crusher performance and the placement of higher-grade ore are expected to drive solid production results in the fourth quarter
• Adjusted CAS¹ on a by-product basis decreased 11% quarter-over-quarter to $887 per ounce, primarily as a result of increased production during the third quarter
• Free cash flow¹ of $16.8 million was driven by higher production, an improvement in the average realized price of gold and lower unit costs during the quarter
• The Company is maintaining full-year 2019 production guidance of 82,000 – 87,000 ounces of gold
• Coeur is also maintaining its full-year 2019 guidance for CAS and capital expenditures. CAS are expected to be $850 – $950 per ounce and capital expenditures are expected to be approximately $3 – $5 million

Contacts

Coeur Mining, Inc.

104 S. Michigan Avenue, Suite 900

Chicago, IL 60603

Attention: Paul DePartout, Director, Investor Relations

Phone: (312) 489-5800

www.coeur.com

Read full story here