Coeur d'Alene is a gold and silver miner based in Idaho. In 2009, the Company produced a record 17.7 million ounces of silver, up 47% from the previous year, with record reserve levels of 269 million silver ounces. Gold production increased 56% to 72,112 ounces. Coeur has 6 mines in production, however, the company seems to be streamlining operations right now and two of those mines could be sold soon.
Palmarejo – Mexico
Palmarejo began operations in April 2009 and is expected to produce approximately 120,000 ounces of gold and 9.0 million ounces of silver per year. Currently it has gold reserves of 1.1 million ounces and silver reserves of 90.5 million ounces. Some highlights:
- Second quarter production increased to 1.1 million ounces compared to 587,716 ounces last year's second quarter, (the mine's initial quarter of operations), while gold production increased to 19,950 ounces compared to 9,730 ounces last year
- First half silver production totaled 2.4 million ounces while gold production was 42,527 ounces
- Cash operating costs averaged $10.78 per ounce of silver during the quarter and $7.83 per ounce of silver during the first half of 2010 versus $19.44 per ounce during last year's second quarter and first six months
- 5.4 million silver ounces and 97,267 gold ounces have been produced in total, representing less than 9% of total contained mineral reserves
In July of 2010, silver production increased 50% while gold production jumped 58%, marking the mine's second highest month of gold production since inception. Cash operating costs during July were ($0.97) per silver ounce, dramatically reduced from the second quarter's average cash operating costs of $10.78 per silver ounce. These improvements are a direct result of recently commenced mining of higher-grade underground ore and improved ore blending procedures.
Full-year 2010 production is expected to reach approximately 6.3 million ounces of silver and 109,000 ounces of gold at an average cash operating cost of approximately $3.00 per silver ounce.
One thing I want to point out regarding Palmarejo, Coeur has actually sold 50% of the gold production from this mine. In late 2008, when the market was crashing, Coeur was running into some liquidity issues. They were trying to finish up construction of Palmarejo, so unfortunately they had to do this. In January 2009, they entered into a gold royalty stream transaction with Franco-Nevada Corporation under which Franco-Nevada purchased 50% of gold to be produced from Palmarejo. The total transaction cost was $80 million. "The gold stream is for the life of the operation but is subject to a minimum production level which began on July 1, 2009 of 50,000 ounces per annum until payments have been made on 400,000 ounces."
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https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/df
San Bartolomé – Bolivia
Coeur's San Bartolomé mine in Bolivia is one of the world's newest and largest pure silver mines. In 2009 – its first full year of production – the mine produced 7.5 million ounces of silver at the beginning of its expected 14 year mine life. The mine has 120 million ounces of silver reserves. For 2010, the expected production is 6.5 million ounces of silver at cash operating costs of $8.00 per ounce.
Now, if you haven't asked yourself already, or if you just don't know, you may be wondering about the risk associated with having a mine in Bolivia. There is a fear of nationalization of mines in certain countries in Latin America. Bolivia is a risky country to mine in. And Coeur does have an insurance policy on the project in the amount of $155 million, in case the government decides to get greedy.
In late 2007, the Bolivian Government did increase the mining tax rates to 37.5% from 25%. This move was expected to bring "tax certainty" to the country's mining industry. Coeur welcomed this news since it seemed to bring a finality to the issue. There is still a risk, but right now things seem pretty stable in Bolivia.
Also of note, the mine was supposed to be producing around 9 million oz of silver right now, this year they are only projecting 6.5 million. Plus, cash cost are currently higher than was projected. I think this has been a disappointment to some shareholders, as the mine seems to be under-performing. However, it looks Coeur is getting things back on track because in Q2 2010, production increased 79% to 1.9 million ounces in the second quarter compared to 1.0 million ounces produced during the first quarter. And cash operating costs dropped 22% to $7.78 per ounce in the second quarter, down from $9.98 in the first quarter due to a 52% increase in tons mined and a 34% increase in average grade mined.
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https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/df
Kensington – Alaska
Kensington is an underground gold mine that recently just came online at the end of Q2 2010. However, the mine was expected to start production a year or two ago, but got delayed because of an issue with the tailings facility. There was an injunction imposed on the mine as environmental groups questioned the tailings permit. Long story short, the tailings permit was lawful, and the injunction was lifted. So, after all that, Kensington is now finally in production.
Based on an initial 12.5 year mine life from current proven and probable mineral reserves of 1.5 million ounces, the Company expects gold production to average approximately 125,000 ounces annually at a cash cost of $490 per oz. For 2010, they expect 50,000 oz as the mine will still be ramping up.
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https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/df
Rochester - Nevada
Rochester is a silver and gold surface mine located in west central Nevada which has produced more than 120 million ounces of silver and 1 million ounces of gold since production began in 1986. A few years ago, Coeur was looking to sell this mine, but they actually decided to keep it. In 2009, Rochester produced 2.2 million ounces of silver and 12,663 ounces of gold. They aren't mining at Rochester right now, this production is coming from ore that has been on the leach pads. It takes years for the ore to leach out.
Recently, new life has been given to Rochester. Coeur decided to restart the mine next year, it is expected to add an average of 2.5 million ounces of incremental annual silver production and 30,000 ounces of further gold production through 2017.
Martha – Argentina and Endeavor - Australia
These are the two mines that Coeur seems to be looking to get rid of. They are pretty insignificant in terms of contribution to Coeur's annual production. Only about 2 million oz of silver from both mines. Martha is near the end of its life, but Coeur is still exploring the property. A recent report claims that Coeur is going to halt operations and put the mine on care and maintenance as it searches for a buyer.
Financials
Q2 2010 highlights:
- Companywide metal sales jumped nearly $33 million, or 49%, to a record $101.0 million, compared to last year's second quarter, aided by strong production and robust metals prices
- Operating cash flow increased 116% compared to last year's second quarter to a quarterly Company record of $32.5 million
- The Company produced 4.2 million ounces of silver and 23,124 ounces of gold compared to 3.9 million ounces of silver and 13,795 ounces of gold during last year's second quarter
- Cash operating costs declined to $8.06 per ounce of silver versus $8.57 per ounce during last year's second quarter
For 2010, Coeur should produce about 17 million oz of silver and 170,000 oz of gold(roughly 50,000 of which goes to Franco Nevada). According to the company:
"Based on year-to-date average realized prices, the Company expects 2010 operating cash flow to reach approximately $186 million3, which is sufficient to fund the Company's 2010 capital expenditure program that will complete the construction of its three new major precious metals mines. Capital expenditures are expected to total approximately $165 million for 20104."
Coeur's cash balance as of June 30, 2010 was approximately $41 million. Debt totaled $157 million.
There are currently 89.3 million shares outstanding.
Conclusion
It's clear that Coeur's main focus is on its three largest mines; Kensington, Palmarejo and San Bartolomé. These are long life mines that should provide Coeur with steady cash flow for years to come. Kensington is ramping up and will be producing 120,000 oz of gold per year. Palmarejo is almost at 100% production capacity. And San Bartolome is running a little under production guidance, but it looks like operations at the mine are improving.
Although they haven't sold Martha or Endeavor, look for these two to be offloaded sometime soon. However, they have decided to keep Rochester, and while it might not be as big as the other three, it will still produce a nice amount of silver and gold for Coeur.
The balance sheet is much stronger now, especially with the operating cash flow Coeur is currently generating. The shares are ridiculously cheap, with a market cap of $1.75 billion. Once Kensington ramps up to 100%, the company will be at about 200,000 of gold per year. Add in the roughly 18-20 million of silver they will be producing next year as well, and revenue will be about $700 million at current gold and silver prices. One thing that will probably always weigh on the shares though is the fact that San Bartolome will always have a "risk" to it. So investors should make note. However, things look fairly steady right now in Bolivia, and Coeur is significantly undervalued even without San Bartolome.
go to
https://sites.google.com/site/goldandsilver2012/company-reviews-by-goldstocksdaily-com/df
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