Coeur Mining, Inc. — FY2015 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2015; filed February 10, 2016. This is an annual report, not a standalone fourth-quarter filing. Coeur is a precious-metals producer operating mines in the U.S., Mexico and Bolivia, with a silver stream and royalty portfolio.
Financial and operating performance
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | $646.1 million | $635.7 million |
| Net loss | $367.2 million; $2.83 per diluted share | $1,186.9 million; $11.59 per diluted share |
| Adjusted net loss (non-GAAP) | $96.6 million; $0.75 per share | $145.5 million; $1.42 per share |
| Cash provided by operating activities | $113.5 million | $53.5 million |
| Capital expenditures | $95.2 million | $64.2 million |
| Cash and cash equivalents at year-end | $200.7 million | $270.9 million |
| Total assets | $1,332.5 million | $1,436.6 million |
| Debt, including current portion | $490.4 million | $468.5 million |
| Stockholders’ equity | $421.5 million | $554.3 million |
Metal sales were $639.2 million and royalty revenue was $6.9 million. Production totaled 15.9 million ounces of silver and 327,908 ounces of gold; silver-equivalent production was 35.6 million ounces. Costs applicable to sales were $13.23 per silver-equivalent ounce and all-in sustaining costs were $16.50 per ounce, both non-GAAP measures. Average realized prices fell to $15.46 per silver ounce and $1,143 per gold ounce, from $18.87 and $1,252, respectively, in 2014.
Year-end current assets were $446.7 million against current liabilities of $140.1 million. Management said liquid assets and expected operating cash flows were sufficient for planned operating capital expenditures and liabilities over the following 12 months. The company paid $45.7 million of net interest expense.
Changes versus prior year and notable items
- Revenue increased about 2%, as higher gold ounces sold offset lower realized metal prices and lower silver ounces sold. Gold rose to 60% of metal sales from 48% in 2014.
- Net loss narrowed substantially, mainly because impairment charges declined to $313.3 million from $1,472.7 million. The 2015 charge was non-cash and primarily affected Palmarejo ($224.5 million), San Bartolomé ($66.7 million) and Coeur Capital assets ($22.1 million). Q4 net loss was $303.0 million, reflecting the year-end impairment review.
- Operating cash flow improved by $60.0 million, while capital spending increased. Cash fell by $70.1 million during 2015.
- Coeur acquired the Wharf mine for $99.4 million cash and completed the Paramount acquisition for approximately $201.4 million, primarily in stock and cash. Wharf contributed $84.1 million in post-acquisition revenue. The Paramount transaction issued about 32.7 million shares; a separate exchange of $54.2 million principal of senior notes for 14.4 million shares also increased the share count.
- Silver production declined from 17.2 million ounces; gold production rose from 249,384 ounces, helped by Wharf and improved Kensington output. Palmarejo production fell as the operation transitioned toward lower-tonnage, higher-grade underground mining. San Bartolomé production was disrupted by a three-week shutdown during political protests.
Debt, outlook and risks
Debt included $378.7 million principal of 7.875% senior notes due 2021 and a $100 million secured term loan due 2020. The term loan carries an adjusted Eurodollar rate plus 8.00%, has 1% annual amortization, and is secured by substantially all assets of the company and domestic subsidiaries. The senior notes’ reported fair value was $227.5 million versus a $373.4 million carrying value at year-end. Debt agreements contain restrictive covenants. The company reported no outstanding gold or silver option contracts at year-end.
For 2016, management forecast silver-equivalent production of 33.8–36.8 million ounces, including 14.6–16.0 million ounces of silver and 320,000–347,000 ounces of gold. Guidance included AISC of $16.00–$17.25 per silver-equivalent ounce, capital expenditures of $90–$100 million, G&A of $28–$32 million and exploration expense of $11–$13 million. Mine-level cost guidance was also provided for Palmarejo, Rochester, San Bartolomé, Kensington and Wharf.
Key exposures include volatile precious-metal prices, which affect revenue, cash generation and impairment values; reserve, grade and recovery uncertainty; operating hazards and input costs; foreign political, currency, labor and community risks; and environmental regulation, permitting and reclamation costs. Rochester’s planned leach-pad expansion (POA 10) remained subject to permitting; without timely approval, existing capacity was expected to be insufficient after mid-to-late 2017. In Bolivia, mining above 4,400 meters remained restricted in some areas amid community and political concerns, with possible effects on reserves and asset values. The company reported $85.3 million of recorded reclamation liabilities and approximately $219.0 million of undiscounted contractual reclamation and closure obligations. It also disclosed potential environmental liabilities relating to former Callahan sites; the filing does not provide a clear estimate of ultimate exposure.
The financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective. Wharf’s controls were excluded from the 2015 assessment.
Important facts for investors to verify
- Whether 2016 production, unit-cost, AISC and capital-spending guidance was achieved, especially during Palmarejo’s mine transition.
- Whether cash generation can fund planned capital spending, interest and debt maturities if metal prices remain weak; review the term-loan covenants, collateral and refinancing options.
- The assumptions behind the $313.3 million impairment and the potential for additional write-downs, including sensitivity to metal prices and mine plans.
- Progress and timing of Rochester POA 10 permitting, and the consequences of any delay for leach-pad capacity and mine life.
- Developments in Bolivia affecting access to San Bartolomé reserves, labor relations and the implementation of the mining law.
- Reconciliation of reported share-count growth, acquisition consideration and the diluted impact of equity issued for acquisitions and debt exchange.
- Recoverability and timing of foreign tax and VAT receivables, along with the adequacy of environmental, reclamation and legacy-site contingencies.