Coeur Mining, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Coeur is a North American precious-metals producer operating Palmarejo, Rochester, Kensington and Wharf; Silvertip remained suspended. Figures below are in U.S. dollars unless stated otherwise.
Financial and operating performance
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $832.8 million | $785.5 million | Up 6%; stronger realized metal prices and silver sales |
| Net income (loss) | $(31.3) million | $25.6 million | Turned to a loss; $(0.13) diluted EPS versus $0.11 |
| Adjusted net income (loss), non-GAAP | $(1.4) million | $59.0 million | $(0.01) diluted EPS versus $0.24 |
| Adjusted EBITDA, non-GAAP | $210.8 million | $263.4 million | Down about 20% |
| Cash from operating activities | $110.5 million | $148.7 million | Down $38.2 million |
| Capital expenditures | $309.8 million | $99.3 million | Primarily Rochester expansion and Silvertip work |
| Free cash flow, non-GAAP | $(199.3) million | $49.4 million | Operating cash flow less capital expenditures |
| Total debt, including finance leases | $487.5 million | $275.5 million | Higher following debt refinancing and project financing |
| Cash and cash equivalents | $56.7 million | $92.8 million | Cash, cash equivalents and restricted cash totaled $58.3 million |
Gold and silver sales were $578.9 million and $253.9 million, respectively. Average realized prices rose 1% for gold to $1,652/oz and 21% for silver to $25.06/oz. Gold production was 348,529 oz (down 2%); silver production was 10.1 million oz (up 4%). Costs applicable to sales increased 16% to $511.5 million, driven by inflation, higher silver sales and a Rochester inventory adjustment. The filing does not present a single consolidated operating-margin figure as a key performance measure.
Liquidity, debt and financing
- At year-end, the $300 million revolving credit facility had $65 million drawn and $35 million in letters of credit, leaving $200 million available. Its maturity was extended to March 2025.
- Coeur issued $375 million of 5.125% senior notes due 2029 and used proceeds in part to tender and redeem its 5.875% notes due 2024. The refinancing resulted in a $9.2 million extinguishment loss.
- Management said it believed available funding sources were sufficient for business requirements over the next 12 months and long term. Planned funding includes operating cash flow, revolver borrowings and finance leases; asset sales, equity issuance and investment monetization were identified as additional possible sources.
- Equity securities totaled $132.2 million, including a 17.8% interest in Victoria Gold. Coeur received those Victoria shares in exchange for issuing approximately 12.8 million Coeur shares.
Material changes and unusual items
- Net loss reflected higher operating costs and exploration expense, a $26.0 million write-down of a Mexican VAT receivable, a $9.2 million debt-extinguishment loss and higher income and mining taxes. The effective tax rate was unusually high at 961.4%, largely because of valuation allowances and the low level of pretax income.
- Rochester recorded an $8.4 million non-cash inventory write-down, including $7.3 million in costs applicable to sales and $1.1 million in amortization. Management also reported lower-than-expected silver recovery from HPGR-crushed ore.
- The Rochester POA 11 expansion faced inflation, construction-market tightness and schedule uncertainty. The filing gives an updated total construction estimate of approximately $597 million, including $70–$80 million for pre-screens and added contingency; about $236 million had been incurred by year-end. Completion was expected in mid-2023, followed by commissioning. An earlier highlights passage refers to approximately $520 million for the project before the pre-screen and contingency estimate; investors should reconcile these presentations.
- Silvertip had no 2021 production and incurred $24.9 million in ongoing carrying costs. Coeur was studying a larger expansion and potential restart; 2022 capital spending was expected to be $15–$25 million, mainly for evaluation, development and drilling.
- Coeur agreed to sell La Preciosa, classified as held for sale at year-end, with closing expected in Q1 2022 subject to customary conditions and approvals.
- Mining and processing costs faced inflationary pressure. Other significant exposures include metal-price volatility, COVID-19 disruption, permitting and project execution, water availability, foreign-country and community risks, mine safety and environmental obligations, and potential financing needs.
Outlook and management commentary
For 2022, Coeur guided to consolidated production of 315,000–353,000 oz of gold and 9–11 million oz of silver. Guidance assumes gold at $1,800/oz, silver at $24/oz, CAD at 1.25 and MXN at 20.00, and excludes metal and foreign-exchange hedges.
| 2022 guidance | Range |
|---|---|
| Sustaining capital expenditures | $115–$140 million |
| Development capital expenditures | $205–$250 million |
| Expensed exploration | $18–$23 million |
| Capitalized exploration | $18–$23 million |
| General and administrative expenses | $42–$46 million |
Coeur reported that full-year production was within 2021 consolidated guidance and that its primary gold operations met their cost guidance ranges despite inflation. It highlighted a record exploration program of $71 million, up 41% year over year. For Rochester after expansion, management estimated average annual production of roughly 8 million oz of silver and 76,250 oz of gold, with average free cash flow of $90 million annually from 2024–2034; these are forward-looking estimates, not assured outcomes.
Gold hedges covered 132,000 oz of expected 2022 production, with average put and call prices of $1,630/oz and $2,038/oz. The company stated it was targeting hedges on up to 70% of expected gold production through 2022. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; the Rochester leach-pad inventory estimate was identified as a critical audit matter.
Most important facts for investors to verify
- Reconcile the Rochester POA 11 capital estimate, including the approximately $520 million amount in the highlights and the updated approximately $597 million estimate elsewhere, and assess remaining funding and schedule risks.
- Track Rochester leach-pad recovery assumptions, silver recoveries and inventory valuation after the 2021 write-down.
- Assess liquidity against substantial planned 2022–2023 capital spending, debt service and the company’s negative 2021 free cash flow.
- Monitor progress and potential recovery of the $26 million Mexican VAT claim despite its write-down and unfavorable court decisions, and follow any related water-rights litigation.
- Verify delivery of production and cost guidance and the assumptions behind any Silvertip restart, Rochester expansion benefits and La Preciosa sale proceeds.