Categories: Wire Stories

Coeur Reports First Quarter 2020 Results

CHICAGO–(BUSINESS WIRE)–Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) today reported first quarter 2020 financial results, including revenue of $173.2 million, cash flow from operating activities of $(8.0) million and GAAP net loss from continuing operations of $11.9 million, or $0.05 per share. On an adjusted basis¹, the Company reported EBITDA of $46.6 million, cash flow from operating activities prior to changes in working capital of $30.1 million and net loss from continuing operations of $0.8 million, or $0.00 per share.

Key Highlights

Proactive response to managing impacts of global COVID-19 pandemic – As part of Coeur’s corporate crisis management process, a special advisory committee was established in early March to evaluate and address ongoing concerns, risks and challenges associated with COVID-19. Primary objectives of the committee remain (i) protecting the health of Coeur’s workforce and communities, and (ii) ensuring continuity of the Company’s operations to the extent possible
Financial results reflective of key elements of Company strategy – Gold sales represented a record high 74% of quarterly revenue, while Coeur’s three U.S. operations – all of which continue to operate – comprised 56% of quarterly revenue
Strong operational and financial performance at Palmarejo – Palmarejo was the Company’s top performing operation, driven by a 10% increase in gold production quarter-over-quarter. The operation generated $28.9 million in operating cash flow and recorded adjusted costs applicable to sales (“CAS”)¹ of $645 per ounce of gold and $8.37 per ounce of silver. Strong operational performance helped to generate $21.8 million of free cash flow¹ during the first quarter
Improved crusher performance and major permitting milestone achieved at Rochester – Coeur processed 37,677 tons per day (“tpd”) through the upgraded crusher configuration at Rochester during the first quarter, exceeding its target by 11% and was 33% higher than the prior quarter. The Company also received the Record of Decision from the Bureau of Land Management for Plan of Operations Amendment 11 (“POA 11”), marking a significant achievement toward the planned expansion at Rochester
Advancing exploration efforts across portfolio – Coeur began its largest exploration program in Company history, drilling roughly 20% more footage than the prior period and nearly 60% more than the first quarter of 2019. The increased exploration activity was primarily related to the expanded drilling program underway at Palmarejo and the ramp up in drilling at the Sterling and Crown deposits in southern Nevada. Expanded drilling programs at Kensington and Silvertip also commenced during the quarter
Safe transition and advancing work on pre-feasibility study at Silvertip – The Company safely ramped down Silvertip, completing the transition to a temporary suspension of mining and processing activities announced in February. Zinc and lead markets continued to face significant headwinds during the first quarter, further validating Coeur’s decision to temporarily suspend active mining and processing activities. Work on the pre-feasibility study to evaluate a mill expansion is advancing
Additional execution of opportunistic hedging – The Company continued to add to its zero-cost collar (“ZCC”) gold hedging program during the quarter, with a total of 153,000 and 99,000 ounces now hedged through the remainder of 2020 and in 2021, respectively. Coeur also capitalized on multi-year low exchange rates for the Mexican Peso and Canadian Dollar by securing rate protection on a portion of its foreign currency-denominated expenses over the next two years. The increased hedging activity is being implemented to provide downside protection in preparation for the POA 11 expansion at Rochester, which is expected to be funded with a combination of internally generated cash flow and its senior secured revolving credit facility (“RCF”)
Bolstered cash balance to enhance financial flexibility – Coeur had $52.9 million of cash and cash equivalents as of March 31, 2020. As a precautionary measure, the Company further bolstered its cash position by drawing down an additional $100.0 million from its RCF shortly after the end of the quarter in response to potential impacts of COVID-19, bringing the total amount drawn to $150.0 million

“Our top priority as we navigate the COVID-19 situation continues to be the health, safety and well-being of our workforce, their families, and the communities where we operate,” said Mitchell J. Krebs, President and Chief Executive Officer. “We have put stringent controls and procedures in place throughout the Company focused on (i) controlling and limiting access to our sites, (ii) screening employees and visitors at entrance points, (iii) reducing exposure risk through a range of social distancing protocols as well as proactive sanitizing and cleaning procedures, and (iv) mandating all office personnel work from home. We have also implemented travel restrictions and reporting requirements for all of our employees.”

“At this time, three of our four active mines remain in operation. Our three U.S. assets continue to operate, while our Palmarejo mine in Mexico has taken steps to suspend active mining and processing activities in accordance with the Mexican government’s decree to suspend non-essential business activities. We safely ramped down mining and processing activities at our Silvertip operation in British Columbia in February and are successfully carrying out site-based activities and advancing our drilling program. Finally, we continue to coordinate with federal, state and local officials, our suppliers, health providers, and other mining companies to share best practices, provide assistance and support to local communities, and ensure we are doing everything possible to mitigate the risks and potential impact of this global health crisis.”

Mr. Krebs continued, “Our first quarter consolidated financial results were in-line with our expectations, led again by strong performance from Palmarejo. We made solid progress on several key 2020 priorities, including (i) advancing our efforts to further expand and reposition Rochester as a long-life asset generating strong, consistent cash flow, (ii) increasing our investment in exploration to drive further reserve and resource growth throughout the Company, and (iii) evaluating a potential expansion of Silvertip. Additionally, we have taken proactive steps to maximize our financial flexibility during this period of unprecedented volatility and uncertainty. We look forward to delivering on our key objectives during the remainder of the year in a constructive gold price environment and to navigating the near-term uncertainty related to COVID-19. We remain enthusiastic about the opportunities we are pursuing to deliver high-return growth over the coming years for our stockholders,” concluded Mr. Krebs.

Financial and Operating Highlights (Unaudited)

*(Amounts in millions, except per share amounts, gold ounces produced & sold, and per-ounce/pound metrics)*	1Q 2020			4Q 2019			3Q 2019			2Q 2019			1Q 2019
Gold Sales	$	127.6		$	134.3		$	141.9		$	110.3		$	106.8
Silver Sales	$	44.9		$	54.8		$	51.6		$	45.0		$	40.1
Zinc Sales	$	(0.7	)	$	2.6		$	2.0		$	2.6		$	5.6
Lead Sales	$	1.3		$	3.3		$	4.0		$	4.2		$	2.4
Consolidated Revenue	$	173.2		$	195.0		$	199.5		$	162.1		$	154.9
Costs Applicable to Sales²	$	118.9		$	146.6		$	141.0		$	131.9		$	131.7
General and Administrative Expenses	$	8.9		$	7.6		$	9.6		$	7.8		$	9.5
Net Income (Loss)	$	(11.9	)	$	(270.9	)	$	(14.3	)	$	(36.8	)	$	(24.9	)
Net Income (Loss) Per Share	$	(0.05	)	$	(1.13	)	$	(0.06	)	$	(0.18	)	$	(0.12	)
Adjusted Net Income (Loss)¹	$	(0.8	)	$	(3.3	)	$	(5.3	)	$	(23.0	)	$	(23.0	)
Adjusted Net Income (Loss)¹Per Share	$	0.00		$	(0.01	)	$	(0.02	)	$	(0.11	)	$	(0.11	)
Weighted Average Shares Outstanding	240.3			238.7			225.9			207.8			202.4
EBITDA¹	$	25.5		$	(214.5	)	$	37.6		$	7.7		$	14.8
Adjusted EBITDA¹	$	46.6		$	59.8		$	61.0		$	30.6		$	26.1
Cash Flow from Operating Activities	$	(8.0	)	$	39.3		$	42.0		$	26.4		$	(15.8	)
Capital Expenditures	$	22.2		$	21.0		$	30.7		$	20.7		$	27.4
Free Cash Flow¹	$	(30.2	)	$	18.4		$	11.3		$	5.7		$	(43.3	)
Cash, Equivalents & Short-Term Investments	$	52.9		$	55.6		$	65.3		$	37.9		$	69.0
Total Debt³	$	343.1		$	295.5		$	298.7		$	370.0		$	456.8
Average Realized Price Per Ounce – Gold	$	1,490		$	1,407		$	1,413		$	1,277		$	1,251
Average Realized Price Per Ounce – Silver	$	16.63		$	16.99		$	17.17		$	14.75		$	15.22
Average Realized Price Per Pound – Zinc	$	(0.21	)	$	0.62		$	0.50		$	0.49		$	1.19
Average Realized Price Per Pound – Lead	$	0.54		$	0.78		$	0.92		$	0.82		$	0.86
Gold Ounces Produced	85,077			94,716			99,782			86,584			78,336
Silver Ounces Produced	2.7			3.1			3.0			3.1			2.5
Zinc Pounds Produced	2.5			3.9			4.2			5.3			3.7
Lead Pounds Produced	2.2			4.0			4.5			5.0			3.1
Gold Ounces Sold	85,635			95,532			100,407			86,385			85,326
Silver Ounces Sold	2.7			3.3			3.0			3.0			2.6
Zinc Pounds Sold	3.2			4.1			4.1			5.3			4.7
Lead Pounds Sold	2.5			4.3			4.3			5.2			2.7

Financial Results

First quarter 2020 revenue totaled $173.2 million compared to $195.0 million in the prior period and $154.9 million in the first quarter of 2019. During the first quarter, the Company produced 85,077 ounces of gold, 2.7 million ounces of silver, 2.5 million pounds of zinc and 2.2 million pounds of lead. Metal sales for the quarter totaled 85,635 ounces of gold, 2.7 million ounces of silver, 3.2 million pounds of zinc and 2.5 million pounds of lead.

Average realized gold and silver prices for the quarter were $1,490 and $16.63 per ounce, respectively, or 6% higher and 2% lower quarter-over-quarter. Average realized zinc and lead prices, net of treatment and refining charges and including the impact of provisional price and quantity adjustments, for the quarter were $(0.21) and $0.54 per pound, respectively, compared to $0.62 and $0.78 per pound in the prior quarter. The significant decrease in base metals prices, combined with the finalization of the annual zinc and lead benchmark treatment charges at $299.75 and $182.50 per tonne, respectively, further validated the Company’s decision to temporarily suspend active mining and processing activities at Silvertip in mid-February.

Gold and silver sales accounted for 74% and 26% of first quarter revenue, respectively, while combined zinc and lead sales were minimal. The Company’s U.S. operations accounted for approximately 56% of first quarter revenue, down modestly from approximately 59% in the prior period.

Costs applicable to sales of $118.9 million were 19% lower quarter-over-quarter, reflecting the suspension of mining and processing activities at Silvertip as well as lower production from Rochester and Wharf. First quarter general and administrative expenses totaled $8.9 million compared to $7.6 million in the prior period, primarily driven by higher employee-related expenses.

First quarter exploration expense was $6.4 million, or 11% lower quarter-over-quarter. The Company focused on infill and expansion drilling at Palmarejo and Sterling as well as expansion drilling at Kensington, Silvertip and the Crown Block. See the “Operations” section and page 16 for additional details on the Company’s exploration activities.

Coeur recorded an income tax benefit of $3.9 million during the first quarter. Cash income and mining taxes paid during the quarter totaled approximately $10.9 million, including the annual payment of the Mexican Mining Royalty Tax of $4.6 million.

Quarterly operating cash flow totaled $(8.0) million, reflecting lower operating cash flow across most of the Company’s operations and unfavorable changes in working capital during the period. Cash flow prior to changes in working capital totaled $30.1 million. Operating cash flow in the first quarter was impacted by Silvertip, including (i) cash outflow of approximately $10.4 million related to an inventory adjustment prior to the suspension of active mining and processing activities in mid-February and (ii) $6.3 million of costs associated with the ramp down, including $3.7 million in one-time costs primarily related to employee severance and contractual obligations. The Company now expects ongoing carrying costs during the suspension to total approximately $4.5 million per quarter, down from its original estimate of approximately $6.0 million per quarter.

Additionally, first quarter operating cash flow includes approximately $7.0 million of cash outflow associated with the Company’s prepayment agreement at Kensington. Coeur expects the remaining $8.0 million cash outflow under the arrangement will occur in the second quarter.

First quarter capital expenditures remained relatively consistent with the prior period, totaling $22.2 million. Sustaining and development capital expenditures accounted for approximately 77% and 23%, respectively, of the Company’s capital expenditures during the quarter.

COVID-19 Update

Coeur established a special advisory committee to evaluate ongoing concerns, risks and challenges with respect to COVID-19 across its operations and corporate headquarters in early March 2020. The primary goals of the committee include (i) protecting the health, safety and well-being of Coeur’s workforce and communities, and (ii) ensuring the continuity of business operations. The committee meets regularly via video conference and has elevated its level of communications by proactively engaging with various stakeholders, including regulators, government officials, community partners and healthcare providers, among others.

The current status of each of the Company’s operations is highlighted below:

Operation	Location	Status	Commentary
Palmarejo	Chihuahua, Mexico	Temporarily suspended	Precious metals mining not considered essential as part of decree issued by the Federal Government of Mexico on March 31, 2020
Rochester	Nevada, United States	Operating	Mining considered essential as part of State of Nevada regulations issued on March 20, 2020
Kensington	Alaska, United States	Operating	Mining considered essential as part of State of Alaska declaration on March 27, 2020
Wharf	South Dakota, United States	Operating	State of South Dakota issued a public order mandating the closure of all public-facing businesses, which does not include Wharf, on March 23, 2020
Silvertip	British Columbia, Canada	Temporarily suspended	Previously announced temporary suspension of mining and processing activities (unrelated to COVID-19). No actions required at this time to comply with restrictions issued by the Government of British Columbia

Each of the Company’s operations has developed site-specific screening, education and modifications to work procedures to limit and identify COVID-19 exposure and transmission. Operational readiness is routinely being assessed as the situation continues to evolve and each site has scenario plans in place, should the need arise. Coeur is following guidance from the U.S. Centers for Disease Control and Prevention, Mexican and Canadian public health officials, World Health Organization as well as federal, state and local authorities to safeguard the health, safety and well-being of its employees, contractors and communities, and minimize business interruption.

Key initiatives that the Company has undertaken include:

Travel and site access restricted to business-critical needs; discretionary travel strongly discouraged and must be reported
Health and travel questionnaires as well as temperature checks required prior to entering sites
Increased cleaning and disinfecting of common areas
Social distancing, including limiting meetings to ten people (or less)
Extended rotational schedules at certain operations to reduce travel to and from site
All site-level employees who can and all corporate headquarter employees working remotely
Providing ongoing support to local communities, including donations of critical supplies
Partnering with local communities in communication and response efforts

Coeur has also evaluated its supply chain and metal sales risks at each operation and remains in close contact with critical vendors, customers and transportation providers, establishing back-up arrangements to mitigate the impact of any disruptions related to COVID-19. The Company has not experienced any material disruptions and has incurred minimal additional operating costs to date.

Liquidity Update

A key element of the Company’s strategy is prudent balance sheet management. At March 31, 2020, Coeur had $252.9 million of total liquidity, including $52.9 million of cash and cash equivalents and $200.0 million of availability under its RCF that is scheduled to mature in October 2022. The Company has completed various scenario planning analyses to consider potential impacts of COVID-19 on its business, including volatility in commodity prices, temporary disruptions and/or curtailments of operating activities (voluntary or involuntary).

To provide additional flexibility to respond to potential downside scenarios, Coeur drew an additional $100.0 million from its RCF shortly after the end of the first quarter as a precautionary measure. As of April 22, 2020, the Company had approximately $150.0 million drawn under its RCF. Additionally, as Coeur seeks to proactively maximize its financial flexibility during these unprecedented levels of volatility and uncertainty, the Company intends to take the prudent step of re-establishing an at-the-market equity facility.

Hedging Update

Building on the gold hedging program that commenced in 2019, Coeur continued to execute additional series of ZCC hedges on a portion of its gold production. The ZCC structure allows for downside protection against potential decreases in the price of gold, while enabling participation in the potential upside to a specified ceiling price. An overview of the hedges currently implemented is outlined below:

2Q 2020: 48,000 ounces of gold at an average floor of $1,426 per ounce and an average ceiling of $1,829 per ounce;
3Q 2020: 49,500 ounces of gold at an average floor of $1,441 per ounce and an average ceiling of $1,826 per ounce; and
4Q 2020: 55,500 ounces of gold at an average floor of $1,471 per ounce and an average ceiling of $1,823 per ounce
1H 2021: 28,500 ounces of gold per quarter at an average floor of $1,600 per ounce and an average ceiling of $1,837 per ounce
2H 2021: 21,000 ounces of gold per quarter at an average floor of $1,600 per ounce and an average ceiling of $1,815 per ounce

During the quarter, the Coeur also implemented a series of foreign currency hedges to further enhance its downside protection. The Company has secured rate protection on approximately 50% of its Mexican peso- and Canadian dollar-denominated expenses for 2020 at average rates of roughly 24.09 and 1.44, respectively, and approximately 50% of its Mexican peso-denominated expenses for 2021 at an average rate of roughly 24.99.

Rochester Expansion

With the receipt of the Record of Decision in March 2020, the Company received the key regulatory approval to begin advancing its work on POA 11 at Rochester. The expansion project contemplates the construction of a new leach pad, a new crushing facility equipped with a second high-pressure grinding roll unit and a new Merrill-Crowe process plant as well as additional infrastructure to support the extension of Rochester’s mine life.

The Company is nearing completion of its internal studies to support the expansion with the assistance of SNC-Lavalin who has been selected to provide engineering, procurement and overall project management services. Coeur intends to complete its internal review of the business case supporting the expansion during the second quarter of 2020.

The Company intends to file an updated technical report in accordance with Canadian National Instrument 43-101 in late 2020 further outlining the expansion, including an updated mine plan and proposed capital estimate as well as additional operational and financial information regarding the expected impacts of high-pressure grinding roll technology.

Operations

First quarter 2020 highlights for each of the Company’s operations are provided below.

Palmarejo, Mexico

*(Dollars in millions, except per ounce amounts)*	1Q 2020	4Q 2019	3Q 2019	2Q 2019	1Q 2019
Tons milled	479,562	486,779	442,464	447,727	378,987
Average gold grade (oz/t)	0.07	0.07	0.09	0.07	0.07
Average silver grade (oz/t)	4.69	5.11	4.88	4.74	4.64
Average recovery rate – Au	91.6%	84.9%	81.7%	87.7%	83.4%
Average recovery rate – Ag	81.5%	81.7%	79.6%	81.8%	72.8%
Gold ounces produced	31,578	28,702	31,779	28,246	23,205
Silver ounces produced (000’s)	1,835	2,029	1,720	1,735	1,278
Gold ounces sold	31,287	27,952	32,731	28,027	27,394
Silver ounces sold (000’s)	1,895	1,980	1,747	1,709	1,405
Average realized price per gold ounce	$1,331	$1,238	$1,269	$1,210	$1,154
Average realized price per silver ounce	$17.25	$17.28	$17.05	$14.86	$15.39
Metal sales	$74.3	$68.9	$71.3	$59.3	$53.2
Costs applicable to sales²	$36.0	$34.8	$37.4	$36.5	$33.2
Adjusted CASper AuOz¹	$645	$622	$660	$741	$713
Adjusted CASper AgOz¹	$8.37	$8.79	$8.95	$9.17	$9.66
Exploration expense	$1.5	$2.0	$1.6	$1.1	$1.0
Cash flow from operating activities	$28.9	$41.4	$36.3	$15.6	$5.9
Sustaining capital expenditures (excludes capital lease payments)	$7.1	$6.2	$4.7	$5.0	$6.0
Development capital expenditures	$—	$2.4	$3.1	$2.6	$2.7
Total capital expenditures	$7.1	$8.6	$7.8	$7.6	$8.7
Free cash flow¹	$21.8	$32.8	$28.5	$8.0	$(2.8)

As previously disclosed, Coeur began taking steps toward temporarily suspending active mining and processing activities at Palmarejo in accordance with a government-mandated decree
The Company is taking all appropriate actions to be able to safely and expeditiously ramp production back up once the suspension has been lifted

Operational

First quarter gold production increased 10% to 31,578 ounces, while silver production decreased 10% to 1.8 million ounces compared to the prior quarter. Year-over-year gold and silver production increased 36% and 44%, respectively
Higher gold production during the quarter was driven by improved recovery rates from ongoing grinding, blending and flotation optimization initiatives. Lower quarter-over-quarter silver production was largely due to a decrease in average grade, in-line with mine plan sequencing
Throughput from La Nación, located within the Independencia mine complex, averaged approximately 518 tpd during the quarter, lower than the Company’s target of 700 tpd target due to blending adjustments

Financial

First quarter adjusted CAS¹ for gold on a co-product basis increased 4% compared to the prior period to $645 per ounce, while adjusted CAS¹ for silver on a co-product basis decreased 5% to $8.37 per ounce
Quarterly capital expenditures decreased 17% to $7.1 million and continued to focus on mine development and infrastructure projects
Free cash flow¹ in the first quarter totaled $21.8 million, compared to $32.8 million in the prior period. Lower quarter-over-quarter free cash flow¹ reflects the payment of cash income and mining taxes paid during the first quarter totaling $8.9 million, partially offset by higher metal sales and lower capital expenditures

Exploration

Exploration investment for first quarter totaled approximately $2.7 million ($1.5 million expensed and $1.2 million capitalized), compared to roughly $3.0 million ($2.0 million expensed and $1.0 million capitalized) in the prior quarter
Up to eight surface and underground core rigs were active during the quarter, focusing on infill drilling within the two underground mine complexes, Independencia and Guadalupe, and on resource expansion both north and south of both mine complexes.

Contacts

For Additional Information
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

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Alex