Business context and reporting period
Coeur Mining, Inc. is a gold and silver producer with operating mines in the U.S., Mexico and Canada. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022; balance-sheet comparisons are with December 31, 2021. Results are not necessarily indicative of full-year performance.
Key financial and operating metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $183.0 million | $208.0 million | $575.5 million | $624.9 million |
| GAAP net loss | $57.4 million | $54.8 million | $127.2 million | $20.6 million |
| Diluted loss per share | $0.21 | $0.21 | $0.47 | $0.08 |
| Adjusted EBITDA (non-GAAP) | $18.3 million | Not shown in the comparison table | $103.2 million | $167.4 million |
| Operating cash flow | $(19.1) million | $21.8 million | $(2.9) million | $75.5 million |
| Capital expenditures | $96.6 million | $71.3 million | $239.3 million | $208.9 million |
| Gold / silver produced | 83,438 oz / 2.37 million oz | Not stated here | 242,619 oz / 7.35 million oz | 259,583 oz / 7.45 million oz |
| Average realized gold / silver price | $1,702/oz / $19.09/oz | Not stated here | $1,718/oz / $21.99/oz | $1,653/oz / $25.67/oz |
For the nine-month comparison, revenue declined 8%; gold and silver ounces sold fell 8% and 3%, respectively. Average realized silver prices declined 14%, partly offset by a 4% increase in realized gold prices. Costs applicable to sales rose 19% to $447.1 million, reflecting inflation, higher labor and maintenance costs, and Rochester inventory adjustments. The filing does not provide a clear consolidated gross-margin figure.
At September 30, cash and cash equivalents were $75.4 million (cash, cash equivalents and restricted cash totaled $76.8 million). Total debt, including finance leases and net of debt issuance costs, was $635.7 million, versus $487.5 million at year-end 2021. The company had $200 million drawn and $160.2 million available under its $390 million revolving credit facility; total liquidity was approximately $236 million. Stockholders’ equity was $821.6 million.
Nine-month free cash flow, a non-GAAP measure defined as operating cash flow less capital expenditures, was negative $242.2 million. The company raised $98.3 million net through an at-the-market equity offering and received proceeds from asset and investment sales, helping fund investment spending.
Material changes and unusual items
- Rochester inventory and leach-pad materials were written down by $24.2 million in Q3 and $43.2 million in the first nine months, primarily because carrying costs exceeded estimated net realizable value. The write-downs contributed to substantially higher Rochester unit costs.
- Nine-month net fair-value losses were $65.3 million, including $44.5 million of unrealized equity-security losses and a $17.7 million realized loss on the sale of Victoria Gold shares. The fair-value loss was a major factor in reported net loss.
- The Rochester expansion estimate increased 9–12% to $650–$670 million, reflecting pre-screen work, higher steel and concrete costs, and additional contingency. At quarter-end it was 61% complete; approximately $443 million had been incurred and $575 million committed. Mechanical completion remained targeted for mid-2023, with commissioning and ramp-up expected in the second half of 2023.
- The sale of Sterling/Crown exploration properties to AngloGold Ashanti closed November 4, 2022, after quarter-end, for $150 million cash, subject to customary adjustments, plus potential $50 million contingent consideration if specified resource thresholds are met.
- Coeur completed the La Preciosa project sale in March 2022, receiving cash, a promissory note, Avino shares and warrants, royalties, and contingent consideration. The transaction generated a reported $1.5 million gain.
Guidance, outlook and risks
Management reaffirmed 2022 guidance, expecting full-year production within ranges of 315,000–353,000 ounces of gold and 9.0–11.0 million ounces of silver. Guidance also includes sustaining capital of $110–$135 million, development capital of $220–$260 million, expensed exploration of $25–$30 million, capitalized exploration of $22–$27 million, and G&A of $42–$46 million. Assumptions include $1,800/oz gold, $22/oz silver, CAD 1.25 and MXN 20; guidance excludes hedge impacts. Management expected higher Q4 production at all four operating mines.
Management said available funding was sufficient for business requirements over the next 12 months and longer term, with operating cash, RCF borrowings and finance leases expected to support near-term needs. It also cautioned that further financing could be needed if resources prove insufficient and may not be available on acceptable terms. Elevated Rochester investment, inflation in fuel and construction materials, operating-cost pressures, metal-price volatility and lower-than-expected grades or recoveries could affect results and liquidity.
Gold forward contracts covered 167,000 ounces through December 2023 at a weighted-average fixed price of $1,986/oz; their quarter-end fair value was a $47.1 million asset. Management described hedging as protection for cash flow during elevated capital spending. On November 9, 2022, the RCF was amended to provide temporary covenant flexibility through the December 2023 test date, while increasing rates on certain borrowings, requiring repayment if cash exceeds $60 million during the amendment period, and restricting certain payments and liens.
Coeur continued to pursue recovery of $26 million in Mexican VAT receivables; it filed a NAFTA arbitration request in September 2022, but recovery timing and outcome remain uncertain. Separate Mexican water-rights litigation could affect Palmarejo’s future water access if unsuccessful. Silvertip remained suspended; management was evaluating expansion scenarios and said advancement would depend on positive study results, completion and ramp-up of Rochester, and sustained positive free cash flow sufficient to reduce leverage.
Important facts for investors to verify
- Whether Q4 production delivered the reaffirmed annual guidance and how operating costs compared with guidance amid inflation.
- Rochester expansion cost, schedule, commissioning and ramp-up progress, including any further cost or contingency increases.
- Cash generation, working-capital needs, capital spending and compliance with the amended RCF covenants and cash-sweep provisions.
- Realized proceeds and any contingent payment from the Sterling/Crown sale, and progress on La Preciosa receivables and other sale consideration.
- Rochester inventory valuation assumptions and the effect of metal prices, grades and recoveries on future write-downs and reported results.
- Developments in the Mexican VAT arbitration and water-rights litigation, and their possible effect on recovery prospects and Palmarejo operations.