Coeur Mining, Inc. — Q2 2021 Form 10-Q
Business context and period: Unaudited results for the quarter and six months ended June 30, 2021. Coeur is a gold and silver producer operating mines in the United States, Mexico and Canada; Silvertip remained suspended.
Financial and operating results
- Q2 revenue: $214.9 million, up 39% from $154.2 million in Q2 2020. Gold sales were $146.2 million and silver sales $68.7 million.
- Q2 earnings: GAAP net income of $32.1 million, or $0.13 per diluted share, compared with a $1.2 million loss, or $0.01 per share, a year earlier. Adjusted net loss, a non-GAAP measure, was $0.8 million; adjusted EBITDA was $52.7 million.
- Six-month results: Revenue of $417.0 million, up 27%; GAAP net income of $34.2 million versus a $13.1 million loss in 2020. Adjusted net income was $13.1 million and adjusted EBITDA was $118.6 million.
- Cash flow: Q2 operating cash flow was $58.1 million versus $9.9 million; first-half operating cash flow was $53.7 million versus $2.0 million. Capital expenditures were $78.2 million in Q2 and $137.6 million in the first half, leaving reported free cash flow (operating cash flow less capex, non-GAAP) of negative $20.2 million and negative $83.9 million, respectively.
- Margins and costs: Costs applicable to sales were $132.6 million in Q2 and $240.7 million in the first half; these exclude amortization. The filing does not present a consolidated gross or operating margin as a headline measure. Rochester’s per-ounce costs rose, including an $8.6 million non-cash leach-pad inventory charge.
- Liquidity and debt: Cash, cash equivalents and restricted cash totaled $125.5 million at quarter-end; $265.0 million was available under the revolving credit facility, with no borrowings and $35.0 million of letters of credit outstanding. Total debt, including finance leases, was $414.2 million. The balance sheet reported $28.9 million current and $385.4 million non-current debt.
- Production: Q2 gold production was 87,275 ounces and silver production 2.6 million ounces, up 12% and 60% year over year. First-half production was 172,500 ounces of gold and 5.0 million ounces of silver.
Material changes and notable items
- Revenue growth reflected higher realized prices—gold up 1% and silver up 64% in Q2—and greater sales volumes; comparisons also benefited from Palmarejo’s COVID-related suspension in 2020.
- GAAP earnings included a $37.2 million Q2 fair-value gain, primarily from Coeur’s Victoria Gold investment. The $118.8 million stake was acquired through issuance of 12.8 million Coeur shares and was valued at $164.7 million at June 30. This gain is non-cash and contributed substantially to reported income.
- Coeur issued $375 million of 5.125% senior notes due 2029, receiving approximately $367.5 million net, and tendered and redeemed its 2024 notes. The refinancing resulted in a $9.2 million first-half extinguishment loss. Rochester expansion and other capital spending drove the increase in investment outflows.
- Management updated Rochester Stage IV leach-pad recovery assumptions, recording $8.6 million in costs applicable to sales and $2.2 million in amortization as non-cash charges.
Outlook, commentary and risks
- Management maintained full-year production guidance of 322,500–367,500 ounces of gold and 9.7–12.2 million ounces of silver, expecting production to climb in the second half.
- Rochester’s POA 11 expansion was approximately 31% complete and described as on schedule; over-liner placement began ahead of schedule. Management noted inflationary pressure on construction materials and fuel and tight construction-market conditions.
- Coeur planned increased Silvertip investment in the second half to support a potential 2023 restart. An updated mine plan and economic analysis was expected by year-end, with a technical report expected in early 2022; timing and economics remain uncertain.
- Key risks include volatile precious-metal prices, COVID-19 disruption and costs, operating and project execution risks, inflation, water availability and water-rights disputes, changing tax regimes, and uncertainty in exploration and reserve estimates. A new Nevada excise tax on gross proceeds from gold and silver mining was enacted in June 2021.
- Coeur reported a $26.6 million Mexican VAT receivable under ongoing recovery efforts and litigation. The company warns some or all may not be recovered and that recovery could be lengthy. Separate Mexican water-rights litigation could affect Palmarejo’s water access.
- Gold collars covered 211,350 ounces through December 2022; management said it was targeting hedges of up to 50% of expected gold production in 2021–2022. COVID-19’s full business impact could not be estimated.
Most important facts for investors to verify
- Whether production and cost trends support full-year guidance, particularly at Kensington and Rochester.
- Rochester POA 11 schedule, total cost outlook and exposure to construction inflation.
- Whether operating cash generation can fund elevated capital spending without further financing or dilution.
- The sustainability of earnings excluding Victoria-related fair-value gains and other adjustments.
- Progress and recoverability of the Mexican VAT claim, and potential operational implications of water-rights litigation.
- Silvertip restart assumptions, revised capital estimates and the timing of updated technical disclosures.