CHICAGO--(BUSINESS WIRE)--Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) today reported second quarter 2021 financial results, including revenue of $214.9 million, cash flow from operating activities of $58.1 million and GAAP net income from continuing operations of $32.1 million, or $0.13 per share. On an adjusted basis1, the Company reported EBITDA of $52.7 million, cash flow from operating activities before changes in working capital of $31.4 million and net loss from continuing operations of $0.8 million, or $0.00 per share.
“Second quarter revenue and cash flow increased quarter-over-quarter and year-over-year, primarily due to stronger silver production from our Palmarejo and Rochester operations as well as higher average realized silver prices,” said Mitchell J. Krebs, President and Chief Executive Officer. “We anticipate production to continue increasing during the second half of 2021, particularly from our Wharf and Rochester operations, and expect to achieve our full-year production guidance for both gold and silver. We also accelerated investment on the POA 11 expansion project at Rochester during the quarter. Construction is advancing on schedule and is expected to be largely completed late next year, leading to an anticipated step change in production and cash flow despite seeing some early signs of inflationary pressures in certain areas.”
Mr. Krebs continued, “Similarly, we continued to increase our investment in exploration and established a new quarterly drilling record, which is leading to additional positive results from the largest campaign in Company history. A third source of high-return organic growth is the potential expansion and restart of our Silvertip mine in northern British Columbia. We are accelerating investment at Silvertip to take advantage of the current construction season based on positive results from our exploration and technical programs to preserve the option of a potential restart in 2023. Finally, we further bolstered our portfolio by acquiring a 17.8% interest in Victoria, which aligns with our strategy of having a balanced collection of long-life, low-cost precious metals assets in high-quality jurisdictions that can generate strong returns for our stockholders.”
“Collectively, these initiatives reflect our strategy of discovering, developing and operating a balanced, multi-asset portfolio of precious metals assets located in high-quality jurisdictions to maximize free cash flow, returns and net asset value. Together with a flexible balance sheet and industry-leading environmental, social and governance practices, we believe we are well positioned to deliver solid results and generate meaningful value for our stockholders,” concluded Mr. Krebs.
Financial and Operating Highlights (Unaudited)
Second quarter 2021 revenue totaled $214.9 million compared to $202.1 million in the prior period and $154.2 million in the second quarter of 2020. The Company produced 87,275 and 2.6 million ounces of gold and silver, respectively, during the quarter. Metal sales totaled 88,501 ounces of gold and 2.6 million ounces of silver.
Average realized gold and silver prices for the quarter were $1,651 and $26.60 per ounce, respectively, compared to $1,664 and $26.19 per ounce in the prior period. Gold and silver sales accounted for 68% and 32% of quarterly revenue, respectively. The Company’s U.S. operations accounted for approximately 60% of second quarter revenue, consistent with the prior period.
Costs applicable to sales2 increased to $132.6 million, largely due to higher throughput rates, an increase in maintenance costs, higher consumable costs and a non-cash inventory charge at Rochester.
General and administrative expenses for the quarter totaled $10.5 million compared to $11.6 million in the prior period, reflecting lower employee-related expenses. Full-year general and administrative expenses are expected to be slightly higher at $40 - $45 million (previous guidance of $37 - $41 million) largely driven by increased accruals for previously-granted long-term performance share awards.
Coeur invested approximately $18.6 million ($12.4 million expensed and $6.2 million capitalized) in exploration during the quarter, compared to roughly $14.9 million ($9.7 million expensed and $5.2 million capitalized) in the prior period, reflecting an increase in drilling activity across most sites. Notably, the Company completed approximately 320,400 feet (97,675 meters) of expansion and infill drilling during the period, establishing a new Company record. See the “Operations” and “Exploration” sections for additional detail on the Company’s exploration activities.
Operating costs related to COVID-19 mitigation and response efforts totaled $2.3 million during the second quarter, compared to $3.0 million in the prior period. These costs were primarily driven by employee-related expenses at Kensington and Palmarejo, and are included in “Pre-development, reclamation, and other expenses” on the Company’s income statement. Coeur continues to implement and maintain rigorous health and safety protocols across its operations and in surrounding communities aimed at limiting the exposure and transmission of COVID-19 while minimizing business interruptions.
The Company recorded an income tax expense of $15.3 million during the second quarter. Cash income and mining taxes paid during the period totaled approximately $12.4 million.
Quarterly operating cash flow totaled $58.1 million compared to $(4.4) million in the prior period, largely driven by higher metal sales and favorable changes in working capital. Changes in working capital during the quarter were $26.6 million, compared to $(45.9) million in the prior period.
Capital expenditures during the second quarter were $78.2 million compared to $59.4 million in the prior period, primarily driven by increased investment at Rochester and Silvertip. Investment related to the POA 11 expansion project at Rochester totaled $33.2 million during the quarter, compared to $28.1 million in the first quarter. Sustaining and development capital expenditures accounted for approximately 38% and 62%, respectively, of the Company’s total capital investment during the quarter.
The Company satisfied the remaining $7.1 million obligation under its prepayment agreement at Kensington and exercised an option to receive an additional $15.0 million prepayment, resulting in a net cash inflow of approximately $7.9 million in the second quarter. Coeur expects the $15.0 million cash outflow under the arrangement to occur over the next two quarters.
Strategic Investment in Victoria
During the second quarter, Coeur entered into an agreement to acquire roughly 11.1 million outstanding common shares of Victoria (approximately 17.8% of issued and outstanding shares on an undiluted basis at time of transaction) from Orion Co-VI Ltd. (“Orion”) at a price of C$13.20 per share, reflecting a 5% discount to the trailing 30-day volume weighted price for the period ended May 7, 2021.
In connection with the transaction, Orion received roughly 12.8 million shares of Coeur common stock (approximately 4.9% of issued and outstanding shares on an undiluted basis at time of transaction), based on the trailing 30-day volume weighted price of $9.17 per share, for the period ended May 7, 2021. The transaction was completed on May 14, 2021 for consideration of approximately $118.8 million. The value of Victoria’s shares held by Coeur totaled approximately $164.7 million as of June 30, 2021.
Maintaining balance sheet flexibility remains a key element of Coeur’s strategy. The Company ended the second quarter with total liquidity of approximately $389.1 million, including $124.1 million of cash and no borrowings under its $300.0 million revolving credit facility (“RCF”)4. Additionally, the aggregate borrowing capacity under its RCF may be increased by up to $100.0 million.
As of June 30, 2021, the Company also had $174.4 million of strategic investments in equity securities and the full $100.0 million available under its at-the-market common stock offering program it established in April 2020.
During the second quarter, the Company added to its hedge position by executing additional zero-cost collar hedges on 6,000 ounces of its expected 2022 gold production. Coeur previously completed its gold hedging program for 2021 and continues to proactively monitor market conditions to potentially layer in additional hedges on up to 50% of expected gold production in 2022. The Company’s silver price exposure remains unhedged. An overview of the hedges currently implemented is outlined below:
The Company continued to execute major construction activities on the POA 11 expansion project at Rochester during the second quarter, with overall progress approximately 31% complete at the end of the period. Key elements of the project timeline remain on schedule and are highlighted below:
Coeur began placing over-liner material on the Stage VI leach pad approximately six weeks ahead of schedule following the successful swap-out of the secondary crushing unit. The Company also mobilized a cement batch plant, began construction of a new high-voltage power line and started executing electrical substation upgrades during the period. Concrete foundation work for the Merrill-Crowe process plant and crusher corridor is expected to commence during the third quarter. Additionally, structural steel erection for the crusher corridor is expected to begin in early 2022.
As of June 30, 2021, the Company has committed approximately $334 million of capital since the inception of the expansion project in the third quarter of 2020, including 76 executed contracts valued at approximately $309 million. There are six packages yet to be awarded, including two structural, mechanical, piping, electrical and instrumentation construction contracts for the Merrill-Crowe process plant and crushing circuit, respectively. The Company has begun to see signs of inflationary pressures on recent bids received for the remaining uncommitted contracts related to building materials, fuel and overall tightness in the construction market.
Additionally, Coeur has elected to allocate approximately $20 million of additional capital investment to further enhance the project’s economics and de-risk the execution of the project. The majority of this incremental capital is expected to be incurred in 2022.
The Company is also reviewing additional optimization opportunities based on key learnings from HPGR-placed material onto the current Stage IV leach pad since late 2019. The results from this work are expected to be available during the second half of 2021.
Coeur secured a capital lease package for nearly $60 million during the quarter, higher than its original target of $50 million. The package is earmarked for planned equipment purchases for the project in 2021 and 2022, and has an interest rate of 5.20%.
Second quarter 2021 highlights for each of the Company’s operations are provided below.
Wharf, South Dakota
Silvertip, British Columbia
During the second quarter, the Company drilled a record of roughly 320,400 feet (97,675 meters) at a total investment of approximately $18.6 million ($12.4 million expensed and $6.2 million capitalized), compared to roughly 256,500 feet (78,175 meters) at a total investment of approximately $14.9 million ($9.7 million expensed and $5.2 million capitalized) in the prior period. The increase in exploration activity was largely driven by a ramp up of drilling at Palmarejo, Rochester and Crown as well as the continuation of expansion and infill programs across the rest of the Company’s portfolio.
Up to four drill rigs were active at Crown during the second quarter. Three reverse circulation rigs drilled expansion holes at Daisy, SNA and C-Horst, while one diamond core rig was active at Daisy, Secret Pass, SNA and C-Horst to better characterize metallurgic and geologic domains. The Company drilled approximately 64,800 feet (19,750 meters) during the quarter, compared to approximately 40,300 feet (12,275 meters) in the prior period.
Coeur plans to continue the same pace of exploration at Crown for the remainder of the year, with three reverse circulation rigs scheduled to conduct expansion drilling within its 300-acre disturbance permit on the property. The Company also expects to receive an amended disturbance permit during the third quarter to begin expanding C-Horst to the south. A core rig is planned to be used intermittently at Crown, shared with Rochester, to infill specific resource shapes to gather additional metallurgical and engineering information.
Coeur’s exploration programs continue to generate meaningful new discoveries and identify future growth opportunities. Accordingly, the Company expects to invest $70 - $80 million in exploration in 2021 (previously $63 - $72 million), including $52 - $57 million (previously $46 - $51 million) and $18 - $23 million (previously $17 - $21 million) of expensed and capitalized drilling, respectively. The increase in expected expensed exploration reflects additional planned expansion drilling at Silvertip and Crown, while higher capitalized exploration is largely related to additional planned infill drilling at Kensington.
2021 Production Guidance
2021 Costs Applicable to Sales Guidance
2021 Capital, Exploration and G&A Guidance
Financial Results and Conference Call
Coeur will host a conference call to discuss its second quarter 2021 financial results on July 29, 2021 at 11:00 a.m. Eastern Time.
Hosting the call will be Mitchell J. Krebs, President and Chief Executive Officer of Coeur, who will be joined by Thomas S. Whelan, Senior Vice President and Chief Financial Officer, Michael “Mick” Routledge, Senior Vice President and Chief Operating Officer, and other members of management. A replay of the call will be available through August 5, 2021.
Coeur Mining, Inc. is a U.S.-based, well-diversified, growing precious metals producer with five wholly-owned operations: the Palmarejo gold-silver complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, the Wharf gold mine in South Dakota, and the Silvertip silver-zinc-lead mine in British Columbia. In addition, the Company has interests in several precious metals exploration projects throughout North America.
This news release contains forward-looking statements within the meaning of securities legislation in the United States and Canada, including statements regarding strategy, cash flow, capital allocation and investment, returns, results, value, liquidity, exploration and development efforts and plans, resource growth, expectations regarding the potential restart at Silvertip, expectations regarding the Rochester POA 11 expansion project, technical report timing, hedging strategies, the impact of inflation, anticipated production, costs and expenses, COVID-19 mitigation efforts, and operations at Palmarejo, Rochester, Wharf, Kensington and Silvertip. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Coeur’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, the risk that anticipated production, cost and expense levels are not attained, the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically-related conditions), changes in the market prices of gold, silver, zinc and lead and a sustained lower price or higher treatment and refining charge environment, the uncertainties inherent in Coeur’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays (including the impact of government shutdowns), ground conditions and, grade variability, any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), the uncertainties inherent in the estimation of mineral reserves, changes that could result from Coeur’s future acquisition of new mining properties or businesses, the loss of access or insolvency of any third-party refiner or smelter to which Coeur markets its production, the potential effects of the COVID-19 pandemic, including impacts to the availability of our workforce, continued access to financing sources, government orders that may require temporary suspension of operations at one or more of our sites and effects on our suppliers or the refiners and smelters to whom the Company markets its production and on the communities where we operate, the effects of environmental and other governmental regulations and government shut-downs, the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, Coeur’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt, as well as other uncertainties and risk factors set out in filings made from time to time with the United States Securities and Exchange Commission, and the Canadian securities regulators, including, without limitation, Coeur’s most recent reports on Form 10-K and Form 10-Q. Actual results, developments and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. Coeur disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, Coeur undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Coeur, its financial or operating results or its securities. This does not constitute an offer of any securities for sale.
Christopher Pascoe, Coeur’s Director, Technical Services and a qualified person under Canadian National Instrument 43-101, approved the scientific and technical information concerning Coeur’s mineral projects in this news release. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors, Canadian investors should refer to the Technical Reports for each of Coeur’s properties, including the recently-filed Technical Report for Rochester, as filed on SEDAR at www.sedar.com.
Non-U.S. GAAP Measures
We supplement the reporting of our financial information determined under United States generally accepted accounting principles (U.S. GAAP) with certain non-U.S. GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow, adjusted net income (loss), operating cash flow before changes in working capital and adjusted costs applicable to sales per ounce (gold and silver) or pound (zinc or lead). We believe that these adjusted measures provide meaningful information to assist management, investors and analysts in understanding our financial results and assessing our prospects for future performance. We believe these adjusted financial measures are important indicators of our recurring operations because they exclude items that may not be indicative of, or are unrelated to our core operating results, and provide a better baseline for analyzing trends in our underlying businesses. We believe EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow, adjusted net income (loss) and adjusted costs applicable to sales per ounce (gold and silver) and pound (zinc and lead) are important measures in assessing the Company’s overall financial performance. For additional explanation regarding our use of non-U.S. GAAP financial measures, please refer to our Form 10-K for the year ended December 31, 2020 and our Form 10-Q for the quarter ended March 31, 2021.
1. EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow, adjusted net income (loss), operating cash flow before changes in working capital and adjusted costs applicable to sales per ounce (gold and silver) or pound (lead and zinc) are non-GAAP measures. Please see tables in the Appendix for the reconciliation to U.S. GAAP. Free cash flow is defined as cash flow from operating activities less capital expenditures. Please see table in Appendix for the calculation of consolidated free cash flow.
2. Excludes amortization.
3. Includes capital leases. Net of debt issuance costs and premium received.
4. As of June 30, 2021, Coeur had $35.0 million in outstanding letters of credit under its RCF.
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