Coeur Mining, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 17, 2021. Coeur is a gold and silver producer with operations in the United States, Mexico and Canada. Silvertip’s mining and processing activities were suspended in February 2020.
Financial and operating results
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $785.5 million | $711.5 million |
| GAAP net income (loss), continuing operations | $25.6 million | $(346.9) million |
| Diluted EPS, continuing operations | $0.11 | $(1.59) |
| Adjusted net income (loss), non-GAAP | $59.0 million | $(54.6) million |
| Adjusted EBITDA, non-GAAP | $263.4 million | $173.9 million |
| Cash from operating activities | $148.7 million | $91.9 million |
| Capital expenditures | $99.3 million | $99.8 million |
| Free cash flow, non-GAAP | $49.4 million | $(7.9) million |
| Cash and cash equivalents, year-end | $92.8 million | $55.6 million |
| Total debt, including finance leases | $275.5 million | $295.5 million |
Revenue rose 10%, primarily as realized gold and silver prices increased 22% and 29%, respectively; lower gold and silver sales volumes partly offset the price benefit. Average realized prices were $1,641 per gold ounce and $20.79 per silver ounce. Production was 355,678 ounces of gold and 9.70 million ounces of silver, down from 359,418 and 11.75 million, respectively.
Costs applicable to sales were $440.3 million, down from $551.2 million; amortization was $131.4 million, down from $178.9 million. These measures and adjusted earnings/EBITDA are not GAAP measures. The 2019 loss included a $250.8 million non-cash Silvertip impairment; 2020 included $15.6 million of COVID-related costs and $16.4 million of Silvertip ongoing carrying costs.
Fourth quarter: Revenue was $228.3 million, continuing-operations net income was $11.9 million, and cash from operating activities was $67.3 million. Quarterly gold production was 96,377 ounces; silver production was approximately 2.8 million ounces.
Liquidity, debt and capital allocation
- Year-end cash, cash equivalents and restricted cash totaled $94.2 million. The $300 million revolving credit facility had no borrowings and $35 million of letters of credit outstanding, leaving $265 million available.
- The company repaid $150 million drawn under the revolver during 2020. The $230 million principal amount of 5.875% senior notes is due in 2024; debt carrying value is net of issuance costs. Debt agreements contain financial covenants and other restrictions.
- Cash used for investing was $65.7 million, including $99.3 million of capital expenditures; proceeds from investment sales helped reduce net investing outflow. Cash used for financing was $46.5 million.
- Reclamation and mine-closure liabilities were $139.3 million on the balance sheet; estimated undiscounted contractual reclamation cash flows were $332.0 million. Surety bonds supporting reclamation and closure totaled $311.9 million.
Changes, outlook and material risks
Management attributed improved 2020 results and cash generation to higher precious-metals prices, operating performance, and the absence of the prior-year Silvertip impairment. Lower sales volumes, COVID-related interruptions and costs, and Silvertip suspension costs tempered improvement. Rochester’s production was affected by leach-pad dilution and process-plant issues; its per-ounce costs increased.
For 2021, Coeur forecast gold production of 322,500–367,500 ounces and silver production of 9.7–12.15 million ounces. Guidance assumes $1,850 gold, $24 silver, CAD 1.27 and MXN 19.50, and excludes the effects of metal and foreign-exchange hedges. Planned capital expenditures were $80–$100 million sustaining and $180–$225 million development; expensed exploration $46–$51 million, capitalized exploration $17–$21 million, and G&A $37–$41 million.
- Rochester: POA 11 expansion construction began in 2020. Estimated project capital costs for 2021–2023 are $396.8 million. An updated 18-year reserve-based mine plan reported an expected after-tax NAV of $634 million and IRR of 31%; these are estimates, not guaranteed outcomes.
- Silvertip: Suspension followed operating and processing challenges, weaker zinc/lead economics and higher treatment costs. The company continued exploration and engineering work on a potential mill expansion/restart; execution, permitting, cost and restart economics remain uncertain.
- COVID-19: Government restrictions temporarily interrupted Palmarejo operations; COVID cases and precautions affected Kensington production, schedules and costs. Further effects on operations, workers, suppliers and counterparties remained difficult to estimate.
- Hedging: Gold collars covered 284,700 ounces at year-end, with average call prices of approximately $1,875/oz for 2021 and $2,030/oz for 2022. Their fair value was a $24.9 million liability; hedges can limit upside and may create cash-collateral or counterparty risks.
- Other exposures: Metal-price volatility, mining and permitting risks, water availability, environmental/reclamation obligations, foreign-exchange and political/tax risks, and debt covenant/refinancing risks could affect results. A $26.4 million Mexican VAT receivable remained subject to ongoing litigation and recovery uncertainty.
Coeur reported that its financial statements received an unqualified audit opinion and that internal control over financial reporting was effective. The auditor identified Rochester ore-on-leach-pad valuation as a critical audit matter; the balance was $138 million at year-end.
Investor facts to verify
- Reconcile the 2021 production, cost and capital guidance with actual results, especially Rochester recovery and expansion spending.
- Track funding, schedule, permitting and expected returns for Rochester POA 11, and the engineering, permitting and restart case for Silvertip.
- Assess liquidity and covenant headroom against the 2024 notes, finance-lease obligations, reclamation commitments and planned development capital.
- Monitor the Mexican VAT litigation and collectability of the $26.4 million receivable, as well as changes in reclamation estimates and surety requirements.
- Review the effect of gold collars and currency hedges on realized prices, earnings, cash collateral and future cash flows; compare non-GAAP measures with GAAP results.