Coeur Mining, Inc. — Q3 2021 Form 10-Q
Business context and reporting period. Coeur is a gold and silver producer operating mines in the United States, Mexico and Canada. This unaudited quarterly report covers the three and nine months ended September 30, 2021; interim results may not indicate full-year performance.
Financial and operating results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $208.0 million | $229.7 million | $624.9 million | $557.1 million |
| Net income (loss) | $(54.8) million | $26.9 million | $(20.6) million | $13.7 million |
| Diluted EPS | $(0.21) | $0.11 | $(0.08) | $0.06 |
| Operating cash flow | $21.8 million | $79.5 million | $75.5 million | $81.4 million |
| Capital expenditures | $71.3 million | $23.0 million | $208.9 million | $61.9 million |
| Adjusted EBITDA | $48.8 million | $90.8 million | $167.4 million | $179.4 million |
- Q3 gold and silver production was 87,083 ounces and 2.46 million ounces, respectively. Nine-month production was 259,583 gold ounces and 7.45 million silver ounces.
- Q3 average realized prices were $1,645 per gold ounce and $24.18 per silver ounce. Gold prices were down 6% year over year in the quarter; nine-month realized gold and silver prices rose 1% and 33%, respectively.
- Costs applicable to sales were $134.3 million in Q3, up 19% year over year, while revenue fell 9%. Higher operating costs, maintenance and consumables, and a Rochester inventory adjustment contributed to the increase.
- Nine-month free cash flow, as defined by the company as operating cash flow less capital expenditures, was negative $133.4 million, versus positive $19.5 million a year earlier.
- At September 30, cash and cash equivalents were $85.0 million; total liquidity was approximately $330 million, including $245 million available under the revolving credit facility. Current assets were $307.4 million and current liabilities $242.5 million.
- Total debt was $442.4 million, including finance leases, compared with $298.7 million at September 30, 2020. The balance included $368.0 million of 2029 Senior Notes and $20.0 million drawn on the revolving facility, in addition to lease obligations.
Material changes and unusual items
- Q3 revenue decreased $21.8 million year over year, reflecting lower realized gold prices and lower gold and silver ounces sold. Nine-month revenue increased $67.8 million, primarily on stronger silver prices and higher metal sales versus the 2020 COVID-related Palmarejo shutdown period.
- The Q3 net loss included a $26.0 million write-down of a Mexican VAT receivable following continued unsuccessful recovery efforts and unfavorable court decisions. The company says it continues to pursue recovery, including possible arbitration.
- Q3 results also reflected a $26.4 million net loss on fair-value adjustments, largely from declines in the value of equity investments, partly offset by a gain on an embedded derivative. Victoria Gold and Integra equity holdings were valued at $131.2 million and $8.5 million, respectively, at quarter-end.
- Rochester recorded a $5.3 million inventory valuation adjustment in Q3. A June change to the Stage IV leach-pad recovery assumption resulted in additional non-cash charges of $8.6 million to costs applicable to sales and $2.2 million to amortization during the nine-month period.
- In March, Coeur issued $375 million principal amount of 5.125% Senior Notes due 2029 and tendered and redeemed its 2024 Senior Notes, recording a $9.2 million extinguishment loss. The revolving facility maturity was extended to March 2025.
Outlook, management commentary and risks
- Management expected stronger Q4 production to put full-year output within 2021 guidance ranges of 322,500–367,500 gold ounces and 9.7–12.2 million silver ounces.
- Rochester’s POA 11 expansion was approximately 42% complete. Coeur estimated a likely 10%–15% increase in total project capital due to inflationary pressure on remaining unawarded work. A potential pre-screen scope change could extend commissioning and ramp-up by three to six months; the company was assessing impacts of unusually heavy late-October rain.
- Coeur is reassessing the scale and timing of a potential Silvertip expansion and restart in light of exploration results, higher-than-expected preliminary costs, inflation and supply and labor constraints. Management expects a potential project to follow Rochester’s expansion.
- On October 27, 2021, after quarter-end, Coeur agreed to sell the La Preciosa project to Avino. Consideration includes cash, a note, equity, deferred and contingent payments, and royalties, with total potential consideration stated as up to $93.4 million. The transaction remained subject to customary closing conditions and was expected to close in Q1 2022.
- Risks include metal-price and foreign-exchange volatility, inflation and project execution, operating and geological uncertainty, COVID-19 effects, water access and Mexican legal proceedings, reclamation obligations, and the ability to obtain financing. Gold collars covered 171,675 ounces through December 2022; the company said it was targeting hedges for up to 50% of expected 2021–2022 gold production.
Most important facts for investors to verify
- Whether production finishes within the stated 2021 guidance ranges and how Q4 operating results develop.
- Rochester POA 11’s updated total capital estimate, schedule, potential scope changes and weather-related impacts.
- Progress and potential outcomes of the Mexican VAT recovery efforts and Palmarejo water-rights matters.
- Cash generation and liquidity as capital spending continues, alongside the higher debt balance and interest obligations.
- La Preciosa sale closing, final consideration and any contingent or royalty value; the agreement was announced after the reporting date.
- The filing’s MD&A highlights report Q3 diluted loss per share of $0.22, while the financial statements report $0.21. Verify the intended figure; the financial-statement amount is shown above.