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Coeur Reports Second Quarter 2022 Results

Rochester Expansion Remains On-Track; Full-Year Production Guidance Reaffirmed; Updated Cost Guidance

CHICAGO--(BUSINESS WIRE)--Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE: CDE) today reported second quarter 2022 financial results, including revenue of $204 million and cash flow from operating activities of $23 million. The Company reported GAAP net loss from continuing operations of $77 million, or $0.28 per share. On an adjusted basis1, Coeur reported EBITDA of $43 million, cash flow from operating activities before changes in working capital of $30 million and net loss from continuing operations of $13 million, or $0.05 per share.

 

Key Highlights

  • Reaffirming full-year gold and silver production guidance – Increased gold and silver production during the quarter remains in-line with the Company’s expectations, leading Coeur to reaffirm consolidated and site level production guidance for 2022
  • Strong quarterly production increases at Kensington, Wharf and Rochester – Kensington’s gold production increased by 23% versus the first quarter, driven by an all-time quarterly record mill throughput. Wharf’s gold production increased by 15% while Rochester’s silver and gold production increased by 5% and 37%, respectively
  • Full-year cost guidance updated – The Company has updated its full-year site level cost guidance to reflect inflationary pressures. Additionally, Coeur has elected to increase its planned exploration investment by approximately $11 million in 2022 due to positive drilling results at the Kensington, Palmarejo and Silvertip assets
  • Rochester expansion project remains on-track – The ongoing expansion at the Rochester silver and gold operation in Nevada remains on-track for completion in mid-2023. The total estimated project capital remains approximately $600 million as of June 30, 2022. Coeur has committed approximately $523 million of the project capital and has incurred roughly $350 million towards the expansion
  • Strategic sale of Victoria Gold shares – Coeur announced the sale of 5 million shares of Victoria Gold Corporation (“Victoria Gold”) stock for net cash proceeds of approximately $40 million, which were received on July 5, 2022
  • Appointment of Jeane Hull to Board of Directors – Consistent with the Company’s commitment to Board refreshment and best-in-class corporate governance, Jeane Hull has been appointed to Coeur’s Board of Directors

“Our second quarter results demonstrate the resilience of Coeur’s multi-asset mine portfolio,” said Mitchell J. Krebs, President and Chief Executive Officer. “Despite weaker gold and silver prices, Company-wide revenue increased 8% versus the prior quarter due to higher production levels from our Kensington, Wharf and Rochester operations. With continued expected production growth during the second half of the year, we remain on track to achieve our 2022 production guidance for gold and silver.

“We have also significantly advanced and de-risked the expansion project taking place at our Rochester operation, which is expected to provide a step-change in Coeur’s production and cash flow profile once completed and commissioned. The project remains on-track to be completed mid-2023 and the total project cost remains approximately $600 million. The Rochester team completed the installation of pre-screens on the existing crushing circuit on July 22, which is providing the team with important operating experience that will be applied to the expansion project.

“Our balance sheet has been further strengthened by recent initiatives and remains sound with total adjusted liquidity1 of nearly $360 million including recent sales of a portion of our equity investments. Following completion of the Rochester expansion, we expect to de-lever the balance sheet from strong anticipated cash flows as we advance and evaluate opportunities to enhance stockholder value, including a potential future expansion and restart of the high-grade Silvertip asset.

“Given ongoing impressive drilling results at Silvertip and Palmarejo and recent positive results from the upper portions of the main Kensington deposit that suggest strong potential for extended mine life, we plan to invest an additional $11 million to accelerate these priority targets during the second half of the year. We remain committed to investing in brownfield exploration and development as a key element of our strategy and an important driver of future returns.”

Financial and Operating Highlights (Unaudited)

 

(Amounts in millions, except per share amounts, gold ounces produced & sold, and per-ounce metrics)

 

2Q 2022

 

 

1Q 2022

 

 

4Q 2021

 

 

3Q 2021

 

 

2Q 2021

 

Gold Sales

$

146.6

 

$

129.5

 

$

146.7

 

$

147.7

 

$

146.2

 

Silver Sales

$

57.5

 

$

59.0

 

$

61.2

 

$

60.2

 

$

68.7

 

Consolidated Revenue

$

204.1

 

$

188.4

 

$

207.8

 

$

208.0

 

$

214.9

 

Costs Applicable to Sales2

$

150.7

 

$

133.3

 

$

136.5

 

$

134.3

 

$

132.6

 

General and Administrative Expenses

$

9.3

 

$

10.3

 

$

9.6

 

$

8.7

 

$

10.5

 

Net Income (Loss)

$

(77.4

)

$

7.7

 

$

(10.7

)

$

(54.8

)

$

32.1

 

Net Income (Loss) Per Share

$

(0.28

)

$

0.03

 

$

(0.04

)

$

(0.21

)

$

0.13

 

Adjusted Net Income (Loss)1

$

(13.1

)

$

(13.8

)

$

(11.6

)

$

(2.9

)

$

(0.8

)

Adjusted Net Income (Loss)1 Per Share

$

(0.05

)

$

(0.05

)

$

(0.05

)

$

(0.01

)

$

0.00

 

Weighted Average Shares Outstanding

 

278.0

 

 

263.6

 

 

254.8

 

 

254.7

 

 

252.1

 

EBITDA1

$

(32.8

)

$

40.4

 

$

28.3

 

$

(14.2

)

$

84.6

 

Adjusted EBITDA1

$

43.3

 

$

41.5

 

$

48.7

 

$

48.8

 

$

52.7

 

Cash Flow from Operating Activities

$

22.6

 

$

(6.4

)

$

35.0

 

$

21.8

 

$

58.1

 

Capital Expenditures

$

73.2

 

$

69.5

 

$

100.9

 

$

71.3

 

$

78.2

 

Free Cash Flow1

$

(50.6

)

$

(75.9

)

$

(65.9

)

$

(49.4

)

$

(20.2

)

Cash, Equivalents & Short-Term Investments

$

74.2

 

$

73.3

 

$

56.7

 

$

85.0

 

$

124.1

 

Total Debt4

$

547.5

 

$

485.5

 

$

487.5

 

$

442.4

 

$

414.2

 

Average Realized Price Per Ounce – Gold

$

1,729

 

$

1,721

 

$

1,652

 

$

1,645

 

$

1,651

 

Average Realized Price Per Ounce – Silver

$

22.61

 

$

24.06

 

$

23.17

 

$

24.18

 

$

26.60

 

Gold Ounces Produced

 

83,772

 

 

75,409

 

 

88,946

 

 

87,083

 

 

87,275

 

Silver Ounces Produced

 

2.5

 

 

2.5

 

 

2.6

 

 

2.5

 

 

2.6

 

Gold Ounces Sold

 

84,786

 

 

75,211

 

 

88,930

 

 

89,804

 

 

88,501

 

Silver Ounces Sold

 

2.5

 

 

2.5

 

 

2.6

 

 

2.5

 

 

2.6

 

Financial Results

Second quarter 2022 revenue totaled $204 million compared to $188 million in the prior period and $215 million in the second quarter of 2021. The Company produced 83,772 and 2.5 million ounces of gold and silver, respectively, during the quarter. Metal sales for the quarter totaled 84,786 ounces of gold and 2.5 million ounces of silver. Average realized gold and silver prices for the quarter were $1,729 and $22.61 per ounce, respectively, compared to $1,721 and $24.06 per ounce in the prior period and $1,651 and $26.60 per ounce in the second quarter of 2021.

Gold and silver sales represented 72% and 28% of quarterly revenue, respectively. The Company’s U.S. operations accounted for approximately 58% of second quarter revenue.

Costs applicable to sales2 increased quarter-over-quarter to $151 million, largely due to inflationary pressures on consumable costs. General and administrative expenses decreased slightly quarter-over-quarter to $9 million.

Coeur invested approximately $13 million ($5 million expensed and $8 million capitalized) in exploration during the quarter, compared to roughly $14 million ($5 million expensed and $8 million capitalized) in the prior period, reflecting lower planned investment across the portfolio following the Company’s highest-ever exploration investment in 2021. See the “Operations” and “Exploration” sections for additional detail on the Company’s exploration activities.

The Company recorded income tax expense of approximately $12 million during the second quarter. Cash income and mining taxes paid during the period totaled approximately $8 million.

Quarterly operating cash flow totaled $23 million compared to $(6) million in the prior period, mainly driven by higher metal sales and favorable changes in working capital. Changes in working capital during the quarter were $(7) million, compared to $(30) million in the prior period.

Capital expenditures increased 5% quarter-over-quarter to $73 million compared to $70 million in the prior period. Expenditures related to the POA 11 expansion project at Rochester totaled $42 million during the quarter compared to $30 million in the first quarter. Sustaining and development capital expenditures accounted for approximately 37% and 63%, respectively, of Coeur’s total capital investment during the quarter.

Capital Projects Update

Rochester Expansion

As of June 30, 2022, the total estimated project capital cost remained approximately $600 million. With the commencement of structural, mechanical, piping, electrical and instrumentation construction work, completion of final major high-voltage electrical contracts and initial commitments for the pre-screen addition to the expanded crusher circuit, the Company has committed approximately $523 million and incurred $350 million of the total estimated project cost through June 30, 2022.

The expansion consists of three major components: (i) a new 300-million-ton leach pad, for which civil work is essentially complete and piping work is near completion; (ii) a Merrill-Crowe process plant, with construction completion scheduled for the first half of 2023; and (iii) a new three-stage crushing circuit, with construction completion scheduled for mid-2023. These scheduled construction completion dates for the project remain unchanged.

Construction of the Merrill-Crowe process plant ramped up during the second quarter, including completion of concrete work, continuation of equipment setting, and the commencement of building and process plant steel pipe rack erection, as well as piping and cable tray installation.

Work on the crusher corridor included (i) continued civil construction in the primary crusher area, (ii) the completion of concrete work, start of steel construction, and setting of conveyor and equipment in the secondary crusher area, (iii) continued advancement of concrete work and start of steel erection in the secondary stockpile reclaim area, (iv) completion of concrete in the tertiary crusher area, and (v) continuation of concrete work in the tertiary reclaim and final product load-out areas. Deliveries of equipment and materials for the project continue to support the overall construction schedule.

The Company also recently advanced detailed engineering on the pre-screens. Equipment procurement and construction contract development is well underway as Coeur continues working to align construction of the pre-screens with the completion of the new crusher. Final cost estimates related to pre-screens are expected in the third quarter.

Silvertip Expansion and Restart

Coeur continues to advance study work to assess the economics of a potential future expansion and restart of its high-grade Silvertip silver-zinc-lead development project in British Columbia, Canada. The Company’s objective remains to complete an evaluation by year-end of higher throughput scenarios to reduce unit costs and to take advantage of Silvertip’s expanding, high-grade resource base.

Ongoing exploration activities continue to generate positive results. Exploration investment in the second quarter totaled approximately $2 million (substantially all capitalized) compared to roughly $2 million (substantially all capitalized) in the prior period.

Up to three core drill rigs were active during the second quarter focused on infill drilling. Two underground rigs drilled at the Southern Silver and Discovery zones, while one surface rig drilled at the Camp Creek zone. During the third quarter, a second surface rig will be added to target infill and expansion drilling at the Camp Creek and Discovery zones while the underground rigs will focus on infill and expansion drilling at the Southern Silver zone along with testing for chimney feeder structures beneath the Discovery zone.

Ongoing carrying costs at Silvertip totaled $5 million in the second quarter, compared to $6 million in the prior period. Capital expenditures related to infill drilling and underground development during the second quarter totaled $6 million compared to $12 million in the prior period. For full-year 2022, capital expenditures are now expected to be approximately $28 - $36 million (previously $18 - $24 million). The revised figures reflect increased underground development and infill drilling.

Liquidity Update

Coeur ended the quarter with total liquidity of approximately $319 million, including $74 million of cash and $245 million of available capacity under its $390 million revolving credit facility (“RCF”)3. Additionally, Coeur had $99 million of marketable securities at the end of the second quarter.

On June 28, 2022, the Company announced the sale of 5 million shares of Victoria Gold for net proceeds of approximately $40 million, which is not included as part of Coeur’s second quarter results due to timing of settlement.

Hedging Update

The Company did not execute any additional hedges during the second quarter. The Company’s silver price exposure remains unhedged. An overview of the hedges in place are outlined below:

 

2022

2023

Gold Ounces Hedged

108,500

112,500

Avg. Forward Price ($/oz)

$1,965

$1,982

Mark-to-Market Adjustments

The Company values its strategic investments in equity securities as of the end of each reporting period. The estimated fair values of Coeur’s equity investments in Victoria Gold, Avino Silver & Gold Mines Ltd. and Integra Resources Corp. were $88 million, $8 million and $4 million, respectively, at June 30, 2022 (and does not reflect the sale of Victoria Gold stock that settled subsequent to quarter-end) compared to $141 million, $13 million and $5 million at March 31, 2022, respectively, resulting in a non-cash unrealized loss of approximately $63 million during the second quarter of 2022. This figure is included in “Fair value adjustments, net” on the Company’s income statement.

Rochester LCM Adjustment

Coeur reports the carrying value of metal and leach pad inventory at the lower of cost or net realizable value, with cost being determined using a weighted average cost method. At the end of the second quarter, the cost of ore on leach pads at Rochester exceeded its net realizable value which resulted in a lower of cost or market (“LCM”) adjustment of $10 million (approximately $9 million in costs applicable to sales3 and $1 million of amortization).

Operations

Second quarter 2022 highlights for each of the Company’s operations are provided below.

Palmarejo, Mexico

 
 

(Dollars in millions, except per ounce amounts)

 

2Q 2022

 

 

1Q 2022

 

 

4Q 2021

 

 

3Q 2021

 

 

2Q 2021

 

Tons milled

 

539,600

 

 

565,211

 

 

587,615

 

 

517,363

 

 

517,373

 

Average gold grade (oz/t)

 

0.054

 

 

0.056

 

 

0.055

 

 

0.050

 

 

0.058

 

Average silver grade (oz/t)

 

3.95

 

 

3.87

 

 

3.86

 

 

3.86

 

 

3.94

 

Average recovery rate – Au

 

92.4

%

 

90.6

%

 

89.7

%

 

93.7

%

 

92.4

%

Average recovery rate – Ag

 

84.2

%

 

83.0

%

 

81.3

%

 

85.5

%

 

81.9

%

Gold ounces produced

 

27,109

 

 

28,931

 

 

28,748

 

 

24,254

 

 

27,595

 

Silver ounces produced (000’s)

 

1,795

 

 

1,813

 

 

1,843

 

 

1,708

 

 

1,667

 

Gold ounces sold

 

29,285

 

 

28,242

 

 

27,706

 

 

24,897

 

 

30,516

 

Silver ounces sold (000’s)

 

1,855

 

 

1,796

 

 

1,813

 

 

1,715

 

 

1,640

 

Average realized price per gold ounce

$

1,507

 

$

1,419

 

$

1,374

 

$

1,335

 

$

1,351

 

Average realized price per silver ounce

$

22.56

 

$

23.94

 

$

23.26

 

$

24.15

 

$

26.71

 

Metal sales

$

86.0

 

$

83.1

 

$

80.4

 

$

74.6

 

$

85.0

 

Costs applicable to sales2

$

49.1

 

$

43.2

 

$

38.8

 

$

39.0

 

$

41.9

 

Adjusted CASper AuOz1

$

855

 

$

730

 

$

653

 

$

704

 

$

662

 

Adjusted CASper AgOz1

$

12.97

 

$

12.43

 

$

11.25

 

$

12.50

 

$

13.34

 

Exploration expense

$

1.7

 

$

1.6

 

$

2.3

 

$

2.8

 

$

1.8

 

Cash flow from operating activities

$

22.3

 

$

34.3

 

$

32.9

 

$

23.2

 

$

33.4

 

Sustaining capital expenditures (excludes capital lease payments)

$

10.1

 

$

13.6

 

$

8.3

 

$

8.4

 

$

9.8

 

Development capital expenditures

$

 

$

 

$

(0.1

)

$

0.1

 

$

 

Total capital expenditures

$

10.1

 

$

13.6

 

$

8.2

 

$

8.5

 

$

9.8

 

Free cash flow1

$

12.2

 

$

20.7

 

$

24.7

 

$

14.7

 

$

23.6

 

Operational

  • Second quarter gold and silver production totaled 27,109 and 1.8 million ounces, respectively, compared to 28,931 and 1.8 million ounces in the prior period and 27,595 and 1.7 million ounces in the second quarter of 2021
  • Production during the quarter benefited from higher average gold and silver recoveries, offset by a 5% decrease in mill throughput and lower average gold grade. Higher recoveries in the quarter reflect ongoing blending optimization as well as enhancements in the flotation and solution management processes

Financial

  • Second quarter adjusted CAS1 for gold and silver on a co-product basis increased 17% and 4% to $855 and $12.97 per ounce, respectively, reflecting the combination of metal sales and average realized prices which impacts the allocation of costs on a co-product basis, as well as higher consumable costs
  • Capital expenditures decreased 26% quarter-over-quarter to $10 million, reflecting timing of projects, partially offset by continued investment in underground development and infill drilling
  • Free cash flow1 in the second quarter totaled $12 million compared to $21 million in the prior period, largely driven by higher costs related to inflationary pressures on consumables

Exploration

  • Exploration investment for the second quarter increased 20% to approximately $4 million ($2 million expensed and $2 million capitalized), compared to roughly $3 million ($2 million expensed and $1 million capitalized) in the prior period
  • Up to six surface and underground core drill rigs were active during the quarter. Infill drilling focused on specific zones within the Guadalupe deposits while surface rigs targeted the Hidalgo zone (located at the northwest end of the Independencia deposit) which encountered multiple mineralized veins in both the footwall and hanging wall portions, suggesting a potential extension of the ore body, and the Nacion zone (located within the Guadalupe deposit)
  • Expansion drilling during the quarter continued to focus on the northwest extension of the Hidalgo and La Carmela (located within the Guazapares district and to the east and outside the gold stream area of interest) zones
  • Coeur expects four drill rigs to be active at Palmarejo in the third quarter of 2022, focused on infill drilling at the Hidalgo and Nacion zones as well as expansion drilling in the northwest Hidalgo and La Carmela zones

Other

  • Approximately 36% (10,528 ounces) of Palmarejo’s gold sales in the second quarter were sold under its gold stream agreement at a price of $800 per ounce. The Company anticipates approximately 38% - 42% of Palmarejo’s gold sales for 2022 will be sold under the stream agreement

Guidance

  • Full-year 2022 production is expected to be 100,000 - 110,000 ounces of gold and 6.0 - 7.0 million ounces of silver
  • CAS1 in 2022 are expected to be $825 - $925 per gold ounce (previously $750 - $850 per ounce) and $12.75 - $13.75 per silver ounce (previously $13.50 - $14.50 per ounce). The revised figures largely reflect an anticipated change in the allocation of costs on a co-product basis
  • Capital expenditures are expected to be $48 - $53 million (previously $50 - 55 million). The revised figure is based on timing of projects in 2022

Rochester, Nevada

 
 

(Dollars in millions, except per ounce amounts)

 

2Q 2022

 

 

1Q 2022

 

 

4Q 2021

 

 

3Q 2021

 

 

2Q 2021

 

Ore tons placed

 

4,236,459

 

 

4,377,873

 

 

3,823,764

 

 

3,427,078

 

 

3,195,777

 

Average silver grade (oz/t)

 

0.35

 

 

0.34

 

 

0.40

 

 

0.43

 

 

0.38

 

Average gold grade (oz/t)

 

0.003

 

 

0.003

 

 

0.003

 

 

0.002

 

 

0.003

 

Silver ounces produced (000’s)

 

689

 

 

655

 

 

757

 

 

739

 

 

888

 

Gold ounces produced

 

8,319

 

 

6,066

 

 

6,864

 

 

6,051

 

 

7,232

 

Silver ounces sold (000’s)

 

683

 

 

638

 

 

801

 

 

758

 

 

912

 

Gold ounces sold

 

8,071

 

 

5,928

 

 

7,386

 

 

5,559

 

 

7,818

 

Average realized price per silver ounce

$

22.42

 

$

24.00

 

$

22.98

 

$

24.27

 

$

26.38

 

Average realized price per gold ounce

$

1,883

 

$

1,864

 

$

1,797

 

$

1,785

 

$

1,794

 

Metal sales

$

30.5

 

$

26.4

 

$

31.6

 

$

28.3

 

$

38.1

 

Costs applicable to sales2

$

38.0

 

$

32.3

 

$

37.5

 

$

31.7

 

$

38.0

 

Adjusted CASper AgOz1

$

20.85

 

$

22.06

 

$

21.76

 

$

22.68

 

$

26.09

 

Adjusted CASper AuOz1

$

1,763

 

$

1,720

 

$

1,707

 

$

1,665

 

$

1,787

 

Exploration expense

$

1.5

 

$

1.9

 

$

2.2

 

$

2.4

 

$

0.9

 

Cash flow from operating activities

$

(9.1

)

$

(19.7

)

$

(12.3

)

$

(9.5

)

$

4.0

 

Sustaining capital expenditures (excludes capital lease payments)

$

4.5

 

$

2.3

 

$

5.8

 

$

2.4

 

$

7.3

 

Development capital expenditures

$

42.5

 

$

30.8

 

$

48.1

 

$

37.7

 

$

35.0

 

Total capital expenditures

$

47.0

 

$

33.1

 

$

53.9

 

$

40.1

 

$

42.3

 

Free cash flow1

$

(56.1

)

$

(52.8

)

$

(66.2

)

$

(49.6

)

$

(38.3

)

Operational

  • Silver and gold production increased 5% and 37% in the second quarter, respectively, to 0.7 million and 8,319 ounces compared to 0.7 million and 6,066 ounces in the prior period and 0.9 million and 7,232 ounces in the second quarter of 2021. Higher production in the period is largely due to increased placement rates during the first quarter
  • Tons placed decreased 3% quarter-over-quarter to 4.2 million, due primarily to crusher circuit downtime related to the installation of pre-screens. Placement rates were supplemented by stacking roughly 1.5 million tons of run-of-mine material during the quarter
  • The Company began installation of pre-screens on the existing crusher corridor on June 23 and commenced commissioning on July 22. Ramp-up of the pilot system as well as optimization of the product size placed under leach is scheduled to take place during the month of August. The experience and knowledge gained from utilizing pre-screens is expected to facilitate the integration of pre-screen technology into the new crusher system flowsheet for POA 11

Financial

  • Second quarter adjusted CAS1 figures in the table above and highlighted below exclude the impact of an LCM adjustment totaling approximately $9 million related to the net realizable value of metal and leach pad inventory
  • Second quarter adjusted CAS1 for silver and gold on a co-product basis totaled $20.85 and $1,763 per ounce, respectively, compared to $22.06 and $1,720 per ounce in the prior period, largely driven by increased fleet maintenance and consumable costs
  • Capital expenditures increased 42% quarter-over-quarter to $47 million, reflecting increased spending related to the POA 11 expansion project
  • Free cash flow1 in the second quarter totaled $(56) million compared to $(53) million in the prior period

Exploration

  • Quarterly exploration investment decreased 22% quarter-over-quarter to approximately $2 million ($2 million expensed and $1 million capitalized)
  • With the approval of the updated Plan of Operations for West Rochester (composed of Lincoln Hill, Independence Hill and Gold Ridge) received in the prior period, the Company began a resource validation program at Lincoln Hill, which, based on its current resource, contains approximately four times the gold grade compared to Rochester Mine reserves. Two reverse circulation drill rigs and one core drill rig were active during the period. Infill drilling focused within Lincoln Hill while expansion drilling targeted the Rochester and Nevada Packard pits
  • Coeur plans to have up to two reverse circulation drill rigs active at Rochester during the third quarter of 2022 to finalize the infill program at Lincoln Hill. Additionally, the Company plans to continue the surface mapping and sampling of West Rochester and the Rochester pit, as well as to expand the soil sampling grid covering both areas

Guidance

  • Full-year 2022 production is expected to be 3.0 - 4.0 million ounces of silver and 35,000 - 43,000 ounces of gold
  • CAS1

Contacts

Coeur Mining, Inc.

104 S. Michigan Avenue, Suite 900

Chicago, IL 60603

Attention: Jeff Wilhoit, Director, Investor Relations

Phone: (312) 489-5800

www.coeur.com

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