Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) today reported second quarter 2023 financial results, including revenue of $177 million and cash flow from operating activities of $39 million. The Company reported GAAP net loss from continuing operations of $32 million, or $0.10 per share. On an adjusted basis1, Coeur reported EBITDA of $22 million, cash flow from operating activities before changes in working capital of $(7) million and net loss from continuing operations of $20 million, or $0.06 per share.
Key Highlights
- Rochester expansion approximately 97% complete as of July 31 – Solution is now circulating through the completed Stage VI leach pad and Merrill-Crowe process plant, with initial ounces expected to be recovered next month. Construction completion of the new three-stage crushing circuit is anticipated this quarter. Ramp-up of the expanded operation is set to occur over the remainder of 2023 and into early 2024, leading to expected significant production growth and materially lower costs. The estimated ultimate cost to complete the expansion is expected to be approximately 6 - 9%, or $40 - $60 million, higher than the prior high-end of guidance. The Company has incurred approximately $660 million of total project costs through the end of July
- Second quarter operating strength at Rochester and Wharf offset lower production at Kensington – Gold and silver production for the quarter totaled 68,406 ounces and 2.4 million ounces, respectively. Stronger production at Rochester and Wharf offset a weaker quarter at Kensington due to excessive water flows and paste backfill issues, which delayed the timing of production from certain stopes
- Full-year silver production guidance maintained; gold production guidance revised to reflect lower outlook at Kensington – 2023 silver production is expected to be 10 - 12 million ounces. 2023 gold production is expected to be 304,000 - 352,500 ounces, approximately 5% lower than prior full-year gold production guidance, after taking Kensington’s lower than anticipated second quarter production into account
- Balance sheet flexibility maintained to support remaining capital investments – Coeur ended the quarter with total liquidity of approximately $346 million including $57 million of cash, $280 million of available capacity under its $390 million revolving credit facility (“RCF”)2, and $9 million of marketable securities
- State of South Dakota approves Boston Expansion at Wharf - Coeur has received a state mine permit from the South Dakota Board of Minerals and Environment allowing for a fifty-acre expansion of mining operations at Wharf which is expected to add significant certainty to Wharf’s current eight-year mine life
“With the bulk of the multi-year expansion at Rochester now behind us, we look forward to beginning to deliver strong production growth and lower costs from Nevada’s largest primary silver mine,” said Mitchell J. Krebs, President and Chief Executive Officer. “The team at Rochester is set to achieve a major milestone next month by recovering the first silver and gold ounces from the new leach pad and processing facility. The crushing facility is also expected to be complete this quarter, followed by a ramp-up of the newly expanded operation during the remainder of the year and into early 2024. Once ramped up, Rochester is expected to be one of the world’s largest operations of its kind with production rates approximately 2.5x higher than recent levels, a significantly lower cost structure, combined with the excellent potential to extend and enhance the mine life from its large, prospective, and under-explored land position.
“Our Palmarejo gold-silver mine in northern Mexico – Coeur’s largest single operation – delivered another solid quarter and continues to showcase its large, prospective land position with additional positive exploration results, which were highlighted in a recent press release. Although Kensington had a weaker than anticipated second quarter, the team has worked hard to address first half operational challenges in order to deliver a stronger second half. Our Wharf operation in South Dakota – which is in its 40th year of operation this year and recently produced its three millionth ounce of gold – continued to deliver solid results during the quarter and received state approval to proceed with an expansion that is expected to add certainty and operational flexibility to its current eight-year mine life.
“We remain committed to our strategy of differentiating Coeur Mining by delivering sector-leading growth and higher returns by reinvesting in the attractive exploration and expansion opportunities that exist throughout our portfolio of North American assets.”
Financial and Operating Highlights (Unaudited)
(Amounts in millions, except per share amounts, gold ounces produced & sold, and per-ounce metrics) | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2022 | ||||||||||
Gold Sales | $ | 121.4 | $ | 127.1 | $ | 157.6 | $ | 139.2 | $ | 146.6 | |||||
Silver Sales | $ | 55.9 | $ | 60.2 | $ | 52.5 | $ | 43.8 | $ | 57.5 | |||||
Consolidated Revenue | $ | 177.2 | $ | 187.3 | $ | 210.1 | $ | 183.0 | $ | 204.1 | |||||
Costs Applicable to Sales3 | $ | 139.6 | $ | 153.1 | $ | 159.3 | $ | 163.2 | $ | 150.7 | |||||
General and Administrative Expenses | $ | 9.8 | $ | 12.1 | $ | 10.2 | $ | 9.7 | $ | 9.3 | |||||
Net Income (Loss) | $ | (32.4 | ) | $ | (24.6 | ) | $ | 49.0 | $ | (57.4 | ) | $ | (77.4 | ) | |
Net Income (Loss) Per Share | $ | (0.10 | ) | $ | (0.08 | ) | $ | 0.17 | $ | (0.21 | ) | $ | (0.28 | ) | |
Adjusted Net Income (Loss)1 | $ | (20.2 | ) | $ | (33.1 | ) | $ | (17.5 | ) | $ | (44.7 | ) | $ | (13.1 | ) |
Adjusted Net Income (Loss)1 Per Share | $ | (0.06 | ) | $ | (0.11 | ) | $ | (0.06 | ) | $ | (0.16 | ) | $ | (0.05 | ) |
Weighted Average Shares Outstanding | 333.1 | 301.0 | 284.5 | 278.1 | 278.0 | ||||||||||
EBITDA1 | $ | 4.0 | $ | 16.2 | $ | 84.9 | $ | (20.5 | ) | $ | (32.8 | ) | |||
Adjusted EBITDA1 | $ | 22.2 | $ | 25.1 | $ | 35.9 | $ | 18.3 | $ | 43.3 | |||||
Cash Flow from Operating Activities | $ | 39.4 | $ | (35.0 | ) | $ | 28.5 | $ | (19.1 | ) | $ | 22.6 | |||
Capital Expenditures | $ | 85.6 | $ | 74.0 | $ | 113.1 | $ | 96.6 | $ | 73.2 | |||||
Free Cash Flow1 | $ | (46.2 | ) | $ | (109.0 | ) | $ | (84.5 | ) | $ | (115.7 | ) | $ | (50.6 | ) |
Cash, Equivalents & Short-Term Investments | $ | 56.8 | $ | 67.0 | $ | 61.5 | $ | 75.4 | $ | 74.2 | |||||
Total Debt4 | $ | 469.4 | $ | 494.1 | $ | 515.9 | $ | 635.7 | $ | 547.5 | |||||
Average Realized Price Per Ounce – Gold | $ | 1,809 | $ | 1,794 | $ | 1,787 | $ | 1,702 | $ | 1,729 | |||||
Average Realized Price Per Ounce – Silver | $ | 23.91 | $ | 23.25 | $ | 21.14 | $ | 19.09 | $ | 22.61 | |||||
Gold Ounces Produced | 68,406 | 69,039 | 87,727 | 83,438 | 83,772 | ||||||||||
Silver Ounces Produced | 2.4 | 2.5 | 2.4 | 2.4 | 2.5 | ||||||||||
Gold Ounces Sold | 67,090 | 70,866 | 88,189 | 81,782 | 84,786 | ||||||||||
Silver Ounces Sold | 2.3 | 2.6 | 2.5 | 2.3 | 2.5 | ||||||||||
Adjusted CAS per AuOz1 | $ | 1,464 | $ | 1,381 | $ | 1,270 | $ | 1,318 | $ | 1,207 | |||||
Adjusted CAS per AgOz1 | $ | 16.77 | $ | 15.83 | $ | 15.57 | $ | 14.52 | $ | 15.09 | |||||
Financial Results
Second quarter 2023 revenue totaled $177 million compared to $187 million in the prior period and $204 million in the second quarter of 2022. The Company produced 68,406 and 2.4 million ounces of gold and silver, respectively, during the quarter. Metal sales for the quarter totaled 67,090 ounces of gold and 2.3 million ounces of silver. Average realized gold and silver prices for the quarter were $1,809 and $23.91 per ounce, respectively, compared to $1,794 and $23.25 per ounce in the prior period and $1,729 and $22.61 per ounce in the first quarter of 2022.
Gold and silver sales represented 68% and 32% of quarterly revenue, respectively, compared to 68% and 32% in the prior period. The Company’s U.S. operations accounted for approximately 59% of first quarter revenue compared to 56% in the first quarter of 2023.
Costs applicable to sales3 decreased 9% quarter-over-quarter to $140 million, largely due to lower production in the period. General and administrative expenses decreased 19% quarter-over-quarter to $10 million.
Coeur invested approximately $5 million ($3 million expensed and $2 million capitalized) in exploration during the quarter, compared to roughly $7 million ($5 million expensed and $2 million capitalized) in the prior period. See the “Operations” and “Exploration” sections for additional detail on the Company’s exploration activities.
The Company recorded income tax expense of approximately $9.9 million during the second quarter. Cash income and mining taxes paid during the period totaled approximately $2.7 million. As of December 31, 2022, Companywide U.S. net operating loss carryforwards totaled approximately $535 million.
Quarterly operating cash flow totaled $39 million compared to $(35) million in the prior period, mainly driven by strong operating performances at Palmarejo, Rochester and Wharf as well as favorable changes in working capital partially offset by the second quarter challenges at Kensington related to stope sequencing.
During the second quarter, Coeur satisfied the remaining $15 million obligation under its prepayment agreement at Kensington and exercised an option to receive an additional $25 million prepayment. The Company also exercised options under new agreements for a $10 million prepayment for deliveries of gold concentrate from Wharf as well as a $10 million prepayment for deliveries of gold and silver doré from Rochester, resulting in a net cash inflow from prepayments of approximately $30 million.
Capital expenditures increased 16% quarter-over-quarter to $86 million as a result of timing of payments on Rochester expansion capital. Expenditures related to the expansion project at Rochester totaled $55 million during the second quarter compared to $47 million in the first quarter. Sustaining and development capital expenditures accounted for approximately 34% and 66%, respectively, of Coeur’s total capital investment during the quarter.
Rochester Expansion Project Update
Coeur continued making solid progress on the construction of the Rochester expansion during the quarter as the project nears completion. At the end of July, the project was approximately 97% complete and the Company had incurred $660 million of the total project costs.
Coeur expects to achieve mechanical completion of the crusher corridor in the third quarter, with ramp-up anticipated throughout the second half of 2023 and into early 2024.
The Company also updated its estimate for the expected ultimate cost to complete the expansion, which reflects additional contractor hours required to offset the loss of approximately thirty days due to extreme weather and lower than planned productivity rates driven by a lack of qualified skilled labor. Together with ongoing inflationary impacts and required construction re-work to address issues from previously completed engineering designs, the Company expects the total cost for the project to be approximately 6 - 9%, or $40 - $60 million, above the high end of Coeur’s previous guidance range of $650 - $670 million.
Balance Sheet and Liquidity Update
Coeur ended the quarter with total liquidity of approximately $346 million, including $57 million of cash, $280 million of available capacity under its $390 million RCF2 subject to certain financial covenants, and $9 million of marketable securities.
To further enhance the Company’s balance sheet flexibility and liquidity during the final stages of the Rochester expansion, Coeur and its RCF banks agreed to amend the terms of the RCF to raise the maximum net leverage ratio from 4.25x to 5.50x for the third quarter of 2023 followed by decreasing the ratio to 4.5x for the fourth quarter of 2023 and the first quarter of 2024 before reverting to a ratio of 3.50x thereafter, among other items.
Hedging Update
During the second quarter, the Company added to its hedge position by executing additional hedges on 1.3 million ounces of its expected 2023 silver production. The Company’s hedging strategy continues to focus on mitigating risk during this period of capital intensity. An overview of the hedges in place is outlined below.
3Q 2023 | 4Q 2023 | Total 2023 | ||
Gold Ounces Hedged | 55,749 | 55,749 | 111,498 | |
Avg. Forward Price ($/oz) | $1,977 | $1,977 | $1,977 | |
Silver Ounces Hedged | 1,245,000 | 1,245,000 | 2,490,000 | |
Avg. Forward Price ($/oz) | $25.34 | $25.47 | 25.41 |
Rochester LCM Adjustment
Coeur reports the carrying value of metal and leach pad inventory at the lower of cost or net realizable value, with cost being determined using a weighted average cost method. Decreases in the market price of gold and silver can affect the value of metal inventory, stockpiles and leach pads, and it may be necessary to record a write-down to the net realizable value, as well as impact carrying value of long-lived assets. At the end of the second quarter, the cost of ore on leach pads at Rochester exceeded its net realizable value which resulted in a lower of cost or market (“LCM”) adjustment of $2 million (approximately $1.6 million in costs applicable to sales2 and $0.5 million of amortization). The non-cash write-down in the three months ended June 30, 2023 includes a $3.9 million recovery of losses recognized in the prior quarter.
Operations
Second quarter 2023 highlights for each of the Company’s operations are provided below.
Palmarejo, Mexico
(Dollars in millions, except per ounce amounts) | 2Q 2023 | 1Q 2023 | 4Q 2022 | 3Q 2022 | 2Q 2022 | ||||||||||
Tons milled | 472,622 | 533,606 | 554,247 | 538,750 | 539,600 | ||||||||||
Average gold grade (oz/t) | 0.056 | 0.052 | 0.051 | 0.049 | 0.054 | ||||||||||
Average silver grade (oz/t) | 4.10 | 4.02 | 3.16 | ||||||||||||
