Coeur Mining, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Coeur is a gold and silver producer operating mines in the United States, Mexico, and Bolivia, with additional royalty and streaming interests. Unless otherwise noted, financial amounts are in U.S. dollars.
Financial and operating performance
- Revenue: $148.4 million, down 3% from $153.0 million. Metal sales were $146.6 million and royalty revenue was $1.8 million.
- Net loss: $20.4 million, or $0.14 per diluted share, compared with a $33.3 million loss, or $0.32 per share. Adjusted net loss, a non-GAAP measure, was $6.6 million, or $0.04 per share, versus $19.2 million, or $0.19 per share.
- Costs and margins: Costs applicable to sales were $101.6 million; amortization was $28.0 million. CAS per silver-equivalent ounce was $12.36, versus $14.32; all-in sustaining costs (AISC) were $16.28 per ounce, versus $18.11. Operating margin per silver-equivalent ounce was $5.66, versus $3.96.
- Production and sales: Produced 8.1 million silver-equivalent ounces (3.4 million silver ounces and 78,072 gold ounces); sold 8.3 million silver-equivalent ounces. Average realized prices were $15.16 per silver ounce and $1,178 per gold ounce.
- Cash flow: Operating activities provided $6.6 million, versus using $3.4 million. Investing used $18.6 million, including $22.2 million of capital expenditures. Financing used $15.4 million. Cash declined $27.3 million to $173.4 million.
- Balance sheet and liquidity: Current assets were $420.7 million and current liabilities $130.4 million at quarter-end. Total debt was $511.1 million, compared with $490.4 million at December 31, 2015; cash less total debt was approximately $337.7 million. Stockholders’ equity was $405.1 million.
Changes versus the prior-year quarter
- Net loss narrowed by $12.9 million, primarily on higher gold ounces sold, lower unit costs, and reduced G&A, partly offset by lower realized metal prices and lower silver sales.
- Silver production fell from 3.8 million to 3.4 million ounces; gold production rose from 69,734 to 78,072 ounces. Silver-equivalent production was broadly unchanged.
- Average realized silver and gold prices declined from $16.77 to $15.16 per ounce and from $1,204 to $1,178 per ounce, respectively.
- Operating cash flow improved by $10.1 million. Investing cash use was substantially lower than in Q1 2015, which included the Wharf acquisition; capital expenditures increased from $17.6 million to $22.2 million.
Outlook, commentary, risks, and unusual items
- Management stated that liquidity and capital resources were adequate for operations and corporate activities. The filing provides no specific production, cost, revenue, or earnings guidance.
- Capital spending focused mainly on underground development at Kensington’s Jualin deposit and Palmarejo’s Guadalupe and Independencia deposits. Palmarejo production was lower as the mine transitions toward a lower-tonnage, higher-grade underground operation.
- Coeur recorded $4.4 million of write-downs, including a $2.5 million write-down related to the Endeavor silver stream after the operator curtailed production amid low lead and zinc prices, and a $1.9 million write-down ahead of the El Gallo royalty sale. The filing also reports a $5.7 million Cerro Bayo royalty sale, comprising $4.0 million cash and Mandalay shares. Subsequent non-core asset sales brought expected total consideration to $24.8 million, including Cerro Bayo.
- Non-cash fair-value losses were $8.7 million, versus $4.9 million, mainly reflecting changes in metal-price assumptions affecting royalty obligations. Interest expense was $11.1 million.
- Key exposures include gold and silver price volatility, production and grade variability, mine development and permitting risks, foreign exchange, labor relations, third-party-operated stream and royalty properties, and the ability to refinance or raise financing. The filing discusses potential environmental liabilities at former Callahan sites and uncertainty around mining restrictions and community relations in Bolivia.
- Debt includes 7.875% Senior Notes due 2021 and a secured Term Loan due 2020 bearing adjusted Eurodollar interest plus 8.00%. Management said certain debt securities traded at substantial discounts and that it evaluates possible repurchases, subject to liquidity and contractual restrictions.
Important facts for investors to verify
- Whether production, realized prices, and unit costs at Palmarejo, Rochester, and other mines track management’s operating plans.
- Cash generation after capital expenditures, royalty payments, and working-capital changes, and the impact of metal-price movements on liquidity.
- Debt maturities, interest and prepayment terms, refinancing options, and any future debt repurchases or exchanges.
- The effect of Endeavor’s production curtailment and the proceeds and conditions associated with announced royalty and other asset sales.
- Potential developments in Bolivia, labor relations, environmental matters, and tax assessments; the filing identifies $18.9 million of gross unrecognized tax benefits at March 31, 2016.
- Non-GAAP CAS, AISC, and adjusted net loss reconciliations, which supplement but do not replace GAAP results.