Business context and reporting period
Coeur Mining, Inc. is a gold and silver producer operating mines in the United States, Mexico and Canada. This unaudited Form 10-Q covers the three months ended March 31, 2021; comparisons are with the first quarter of 2020.
Financial and operating results
- Revenue: $202.1 million, up 17% from $173.2 million. Higher realized gold and silver prices—up 12% and 57%, respectively—more than offset lower gold and silver sales volumes.
- Profit: GAAP net income was $2.1 million, or $0.01 per diluted share, versus a net loss of $11.9 million, or $0.05 per share. Adjusted net income, a non-GAAP measure, was $13.9 million versus an adjusted loss of $0.9 million.
- Cash flow: Operating cash flow was negative $4.4 million, compared with negative $8.0 million. Operating cash flow before working-capital changes, a non-GAAP measure, was $41.6 million versus $30.1 million. Capital expenditures were $59.4 million, up from $22.2 million; free cash flow was negative $63.8 million.
- Costs and margins: Costs applicable to sales fell 9% to $108.1 million. The filing does not provide a consolidated margin measure. Adjusted EBITDA, a non-GAAP measure, increased 42% to $65.9 million.
- Liquidity and debt: Cash, cash equivalents and restricted cash totaled $155.4 million at quarter-end. The company had $265 million available under its revolving credit facility, with no borrowings and $35 million of letters of credit outstanding. Total debt, including finance leases, was $412.1 million.
- Production: Gold production was 85,225 ounces, broadly flat year over year; silver production was 2.4 million ounces, down from 2.7 million. Wharf and Rochester increased production, while Palmarejo and Kensington reported lower production.
Material changes versus the prior period
- Revenue rose $29.0 million, primarily reflecting higher realized metal prices; lower gold and silver ounces sold partly offset the price benefit.
- The company moved from a GAAP loss to modest net income. Results included a $9.2 million loss on extinguishing the 2024 Senior Notes and a $12.8 million income and mining tax expense, compared with a $3.9 million tax benefit in Q1 2020.
- Capital expenditures increased substantially as construction advanced at the Rochester expansion. The project was approximately 20% complete at quarter-end, with major elements expected to be largely completed by late 2022.
- Cash increased $61.3 million during the quarter, principally reflecting debt issuance proceeds. Working-capital outflows, including accounts payable and accrued liabilities, contributed to negative operating cash flow.
Outlook, commentary and risks
- Management said gold production exceeded expectations for the quarter and was tracking toward full-year guidance; site-level gold unit costs were below or within their full-year ranges. Numeric full-year guidance ranges are not provided in the supplied filing text.
- Coeur issued $375 million of 5.125% senior notes due 2029, using proceeds in part to tender and redeem its 5.875% notes due 2024. It also extended its $300 million revolving facility maturity to March 2025. The new notes include covenants restricting certain debt, distributions, liens and asset transactions.
- Management cited planned capital intensity, including the Rochester expansion, and maintained a $100 million at-the-market equity program; no shares had been sold under it as of the filing.
- COVID-19 mitigation costs were $3.0 million for the quarter. The company warned that pandemic effects could materially affect operations, workforce availability, suppliers and customers.
- The company is pursuing recovery of $25.6 million in Mexican VAT receivables through litigation and other processes. Recovery timing and outcome are uncertain; some or all of the balance may not be recovered.
- Silvertip remained suspended. Ongoing carrying costs were $6.9 million for the quarter; the company continued engineering work on a revised flowsheet and exploration.
- Other risks include volatile metal prices and foreign exchange rates, mine development and operating uncertainties, regulatory and political risks, reclamation obligations, and the potential for higher costs following Mexican legislation limiting outsourcing.
Important facts for investors to verify
- Progress, remaining cost and schedule for the Rochester expansion, and its effect on liquidity and future cash flow.
- Whether the Mexican VAT receivable is recoverable and whether related litigation or collection developments change its carrying value.
- Operating plans and carrying costs at Silvertip, and whether its suspension or revised development plan changes.
- Cash conversion and working-capital needs alongside elevated capital spending; reconcile non-GAAP cash-flow and earnings measures with GAAP results.
- Debt terms, refinancing benefits and constraints, and the company’s gold and currency hedge exposures.
- Potential effects of COVID-19, Mexican regulatory changes and the quarter’s unusually high effective tax rate on subsequent results.