Coeur d’Alene Mines Corporation — 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also reports fourth-quarter results. The company was a multi-country silver and gold producer operating mines in Mexico, Bolivia, Alaska, Nevada and Argentina, and held an interest in silver production from Australia’s Endeavor mine.
Financial and operating highlights
| Metric | 2011 | 2010 |
|---|---|---|
| Metal sales | $1,021.2 million | $515.5 million |
| Gross profit | $376.7 million | $116.2 million |
| Operating income | $306.8 million | $74.9 million |
| Net income (loss) | $93.5 million | $(91.3) million |
| Diluted earnings (loss) per share | $1.04 | $(1.05) |
| Cash provided by operating activities | $416.2 million | $165.6 million |
| Capital expenditures | $120.0 million | $156.0 million |
| Cash and short-term investments at year-end | $195.3 million | $66.1 million |
| Working capital at year-end | $212.9 million | $(4.5) million |
- Gross margin was approximately 36.9% and operating margin approximately 30.0%. These are calculated from reported sales and profit figures.
- Production was 19.1 million ounces of silver and 220,382 ounces of gold, up 14% and 40%, respectively. Realized prices averaged $35.15 per ounce of silver and $1,558 per ounce of gold.
- Fourth-quarter sales were $246.9 million, net income was $11.4 million, operating cash flow was $87.4 million and capital expenditures were $40.2 million.
- Reported consolidated long-term and current debt, capital leases and royalty obligations together were approximately $380 million. This includes the Palmarejo gold royalty obligation; the Kensington term facility balance was $75.8 million and convertible notes had $48.7 million principal outstanding.
Changes versus the prior comparable period
- Metal sales nearly doubled, driven by higher realized silver and gold prices, increased ounces sold, stronger Palmarejo output and a full year of Kensington production.
- Gross profit rose to $376.7 million from $116.2 million, while net income improved from a $91.3 million loss to $93.5 million profit. Results also reflected lower fair-value losses than in 2010, partly offset by a $114.3 million income tax provision versus a $9.5 million tax benefit.
- Operating cash flow increased substantially; capital expenditures declined 23%. Cash and short-term investments rose, and working capital moved from a deficit to a surplus.
- Higher production costs and depreciation reflected expanded production and a full operating year at Kensington. Mine-level costs increased notably at Rochester, Martha, San Bartolomé and Endeavor; Martha’s silver production fell 66.4%.
- The company repurchased the remaining Senior Term Notes and 1.25% convertible notes during 2011; $48.7 million principal of 3.25% convertible notes remained outstanding.
Outlook, commentary and risks
- Management said liquidity and projected operating cash flows should cover obligations for at least the next 12 months, while noting capital investment could be deferred or additional financing sought. No consolidated production or earnings guidance is provided in the filing text.
- Planned 2012 exploration and reserve-development spending was approximately $39.9 million. Estimated environmental compliance spending was $7.5 million; Rochester capital spending was budgeted at $9.5 million. Palmarejo’s 2012 silver recovery was expected to average about 78%.
- Kensington began a six-month period of processing at roughly half capacity, about 700 tons per day, to accelerate underground development, drilling and paste-backfill work. Management warned that the production reduction could cause a debt-service covenant shortfall at March 31, 2012 and said it was seeking a waiver from Credit Suisse.
- Mining above 4,400 meters at San Bartolomé remained suspended in some areas pending Cerro Rico stability studies. The duration and effects of the restriction, and changes under Bolivia’s proposed mining-law revision, were uncertain.
- At Rochester, a missed claim-maintenance payment led to forfeiture and re-staking of unpatented claims, with a competing claimant dispute and separate administrative appeal over permitting. Current reserves were stated to be unaffected by an adverse claim outcome, but future expansion could be constrained.
- Metal prices, foreign exchange, operating and geological conditions, permitting, labor, environmental obligations and reliance on third-party smelters remain material risks. The filing reports $32.3 million accrued for reclamation at producing properties and $1.0 million for former-operation environmental matters.
- The Palmarejo royalty requires payments tied to gold prices and production, limits exposure to rising gold prices, and creates significant cash commitments. The company also had gold hedges associated with the Kensington facility.
Important facts for investors to verify
- Whether Credit Suisse granted the requested covenant waiver and Kensington returned to planned production levels.
- Progress and legal outcomes in the Rochester claims dispute and permitting appeal, including implications for expansion plans.
- Duration and production impact of San Bartolomé’s high-elevation mining restriction and any enacted Bolivian mining-law changes.
- Cash requirements and accounting sensitivity of the Franco-Nevada royalty, debt maturities, reclamation liabilities and tax assets.
- Whether mine-level production, recoveries and costs—especially at Rochester and Martha—support management’s cash-flow and liquidity expectations.