Coeur Mining, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Coeur operates gold and silver mines at Palmarejo, Rochester, Kensington and Wharf, with the Silvertip exploration project. Results are unaudited; management cautions they may not indicate full-year results.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $213.1 million | $187.3 million |
| GAAP net loss | $29.1 million; $0.08 per diluted share | $24.6 million; $0.08 per diluted share |
| Adjusted net loss (non-GAAP) | $19.0 million; $0.05 per diluted share | $33.1 million; $0.11 per diluted share |
| Adjusted EBITDA (non-GAAP) | $44.3 million | $25.1 million |
| Operating cash flow | $(15.9) million | $(35.0) million |
| Capital expenditures | $42.1 million | $74.0 million |
| Free cash flow (non-GAAP) | $(58.0) million | $(109.1) million |
| Total debt, including finance leases | $585.6 million | $494.1 million |
Revenue rose 14% year over year, reflecting 15% more gold ounces sold and higher realized gold and silver prices. Gold and silver production was 80,744 ounces and 2.6 million ounces, respectively. Costs applicable to sales were $146.0 million, down 5% from Q1 2023; the filing does not state a comparable consolidated operating-margin figure.
At March 31, cash and cash equivalents were $67.5 million ($69.2 million including restricted cash). The company had $145.4 million available on its $400 million revolving credit facility, with $225 million drawn at a 9.2% weighted-average rate and $29.6 million in letters of credit. The 2029 Senior Notes had a carrying value of $289.5 million. The revolver was amended to mature in February 2027.
Material changes and unusual items
- Compared with Q1 2023, revenue and adjusted EBITDA increased, and operating cash use narrowed. GAAP net loss widened, with higher interest, exploration and other costs among the factors; the prior-year quarter included a $10.6 million fair-value gain on equity investments.
- Sequentially, revenue fell 19% from Q4 2023, mainly due to lower ounces sold and prices. Rochester production and sales declined during the transition to its new crushing circuit and ramp-up.
- Coeur revised upward its estimated recoverable metal on Rochester’s legacy leach pads by 6,000 gold ounces and 900,000 silver ounces. This prospective estimate change contributed to lower costs and amortization; total estimated recoverable leach-pad metal at quarter-end was 30,953 gold ounces and 4.9 million silver ounces. The company also recorded a $4.0 million non-cash Rochester stockpile write-down.
- Rochester’s new crushing circuit and truck load-out facility completed commissioning on March 7 and achieved commercial production by March 31. $528 million of construction in progress was placed into service. The company said ramp-up to sustained nameplate capacity of 88,000 tons per day remained on schedule for the end of Q2.
- The company raised $23.7 million net from 7.7 million Canadian flow-through shares for qualifying exploration expenditures, and drew $50 million net on the revolver. It also exchanged $5.9 million principal of 2029 notes for 1.8 million shares. Shares outstanding rose to 398.6 million at quarter-end from 386.3 million at year-end.
Outlook, risks and contingencies
- Management said Q1 production was in line with 2024 guidance and expects production to increase over the rest of 2024, primarily as Rochester ramps up. The supplied filing text does not provide a clear numerical full-year production or capital expenditure guidance figure.
- Management expects available funding to meet business requirements for the next 12 months and longer term, using operating cash flow, hedging, equity financing and revolver borrowings as needed. It cautioned that additional financing may not be available on acceptable terms.
- Gold and silver forwards covering 49,950 gold ounces and 1.8 million silver ounces settle monthly through June 2024, at average fixed prices of $2,100 and $26.00 per ounce, respectively. They protect cash flow during the Rochester ramp-up but limit upside on hedged production. Their quarter-end fair values were an $8.0 million liability for gold and a $1.8 million asset for silver.
- Income and mining tax expense was $16.0 million despite a pretax loss, producing a negative 122.4% effective tax rate. Management said the rate can fluctuate significantly due to mining taxes, geographic income mix, depletion, foreign exchange and uncertain tax positions.
- Coeur continues efforts to recover $31.6 million of Mexican VAT principal through NAFTA arbitration after adverse court decisions; the receivable’s carrying value was previously written down. Separate water-rights litigation in Mexico could affect Palmarejo’s water supply if unsuccessful.
- A March settlement of Kensington royalty litigation lowered the effective royalty rate and eliminated cost recoupment provisions. The company recorded a $6.8 million settlement expense and agreed to issue up to 2.455 million shares, with a cash shortfall provision; 737,210 shares were issued in April to satisfy the first $3.0 million installment.
- Other key exposures include leach-pad recovery-estimate uncertainty, commodity prices, operating costs and grades, mine development and ramp-up risks, permitting and regulatory matters, reclamation obligations, and access to financing. Reclamation obligations were $217.0 million; surety bonds supporting closure costs totaled $333.3 million.
Important facts for investors to verify
- Rochester’s progress toward sustained 88,000-ton-per-day capacity by the end of Q2 and the resulting production, costs and cash flow.
- Liquidity, revolver borrowing costs and availability, covenant compliance, and any further debt or equity financing or dilution.
- Actual leach-pad recoveries against revised estimates and any subsequent inventory write-downs.
- Resolution and recoverability of the Mexican VAT claim, and developments in the water-rights matter.
- Hedge settlements, metal prices, and the impact of the unusually high and variable tax expense.