Coeur Mining, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Coeur is a gold and silver producer with operating mines in the U.S. and Mexico and the Silvertip exploration project in Canada. Amounts below are U.S. dollars unless stated otherwise.
Financial and operating results
| Metric | Q3 2023 | 9M 2023 |
|---|---|---|
| Revenue | $194.6 million | $559.1 million |
| GAAP net loss | $21.1 million; $0.06 per diluted share | $78.1 million; $0.24 per diluted share |
| Adjusted EBITDA (non-GAAP) | $30.6 million | $78.0 million |
| Operating cash flow | $(2.4) million | $2.0 million |
| Capital expenditures | $112.3 million | $271.9 million |
| Gold produced | 78,617 oz | 216,062 oz |
| Silver produced | 2.28 million oz | 7.20 million oz |
Q3 revenue rose 10% from Q2, supported by 16% more gold ounces sold; management reported adjusted EBITDA up 38% quarter over quarter. Compared with Q3 2022, revenue increased about 6% and GAAP net loss narrowed from $57.4 million. For the first nine months, revenue declined 3% year over year, while net loss narrowed from $127.2 million. Adjusted EBITDA was $78.0 million versus $103.2 million in 9M 2022.
Average realized prices for 9M 2023 were $1,796 per gold ounce and $23.97 per silver ounce, up 5% and 9% year over year. Gold ounces sold fell 11% and silver ounces sold fell 2%. Costs applicable to sales (CAS) were $440.6 million for the nine months, down 1%; amortization declined to $65.2 million from $83.5 million. Q3 included an $8.9 million noncash inventory write-down at Rochester; 9M write-downs totaled $25.3 million.
Cash and cash equivalents were $53.2 million at September 30; cash, cash equivalents and restricted cash totaled $54.9 million. The company reported $140.0 million drawn on its $390 million revolving credit facility, $29.6 million of letters of credit and $220.4 million available. Management cited approximately $280 million of total liquidity. Total debt, including finance leases, was $512.2 million. Nine-month free cash flow, a non-GAAP measure defined as operating cash flow less capital expenditures, was negative $269.9 million.
Material changes and financing
- Property, plant and equipment and mining properties, net, increased to $1.64 billion from $1.39 billion at year-end 2022, principally amid Rochester expansion spending. Total assets were $2.07 billion.
- Coeur issued substantial equity during 2023: net proceeds of $98.4 million from a March ATM offering, $49.3 million from a September ATM offering, and $28.7 million from flow-through share placements. Shares outstanding rose from 295.7 million at December 31, 2022 to 382.7 million at September 30, 2023.
- The company exchanged $67.8 million principal amount of 2029 Senior Notes for 21.6 million shares, recording a $3.7 million gain. The RCF balance increased to $140 million from $80 million at year-end 2022. Interest expense, net of capitalized interest, rose to $21.7 million for 9M from $15.7 million a year earlier.
- The August RCF amendment provided temporary covenant flexibility during the Rochester ramp-up, increased interest rates on certain borrowings through June 2024, and restricted certain acquisitions through March 2024.
Outlook, commentary and risks
- 2023 production guidance: Gold guidance was revised to 304,000–342,500 oz from 304,000–352,500 oz, reflecting lower Kensington expectations and higher low-end Wharf guidance. Silver guidance remained 10–12 million oz. Kensington gold CAS guidance increased to $1,850–$1,950/oz. Guidance assumes $1,900/oz gold and $23/oz silver and excludes hedge impacts.
- Rochester: The new three-stage crushing circuit was complete and first production from the new leach pad and process plant began in mid-September. Ramp-up was expected through year-end 2023 and the first half of 2024. At full capacity, throughput is expected to average 32 million tons annually, about 2.5 times historical levels. Estimated project capital remained $710–$730 million. Management reported October production above year-to-date monthly averages; this is an early operating update, not a guarantee of sustained performance.
- Capital and funding: 2023 guidance included $148–$168 million of sustaining capital and $230–$264 million of development capital. Management said it expected funding for business requirements over the next 12 months from operating cash flow, hedging, equity issuance and/or RCF borrowings, depending partly on commodity prices. It cautioned that additional financing might not be available on acceptable terms.
- Hedging: At quarter-end, forwards covered 55,749 gold oz at an average fixed price of $1,977/oz and 1.245 million silver oz at $25.47/oz, settling through December 2023. The company targeted hedging up to 70% of expected gold and 50% of expected silver production for 2023, protecting cash flow but limiting benefit if market prices exceed contracted prices.
- Operating and financial risks: Rochester ramp-up, cost inflation, mine sequencing and grade/recovery variability could affect production and costs. Kensington experienced earlier-year paste-backfill challenges. Mexico litigation involves $29.4 million of VAT principal claimed from the government; the receivable was written down in 2021, and recovery through NAFTA arbitration remains lengthy and uncertain. Separate water-rights litigation could affect Palmarejo’s water access. Reclamation obligations were $208.0 million; surety bonds supporting closure obligations totaled $332.3 million.
- Unusual items and taxes: The company recorded a $12.3 million loss on the May sale of La Preciosa deferred consideration. The 9M effective tax rate was negative 51.9%, affected by geographic earnings mix, mining taxes, asset sales, uncertain tax positions and non-recognition of tax assets; tax expense can vary significantly between periods.
Investor verification priorities
- Track Rochester ramp-up, recoveries, production and remaining project spending against the $710–$730 million estimate.
- Compare actual 2023 production and CAS with revised guidance, particularly at Kensington and Wharf.
- Monitor operating cash generation versus capital spending, liquidity, RCF availability, covenant headroom and borrowing costs.
- Assess dilution from equity offerings and debt-for-equity exchanges, and how proceeds are used.
- Review the effects of hedges on realized prices and cash flow, along with metal-price-driven inventory write-down risk.
- Follow developments in Mexican VAT and water-rights matters, reclamation requirements and related financial support obligations.