Weekend Top Story: Coeur loses money despite record precious metals production, revenues
Coeur d'Alene Mines CEO Dennis Wheeler forecasts an average silver price of $16.63/oz and an average gold price of $1010/oz next year.
Posted: Friday , 06 Nov 2009
RENO, NV -
While Coeur d'Alene Mines has experienced what CEO Dennis Wheeler called "a year of exhilarating growth" with record gold and silver production, the Idaho-based silver miner still reported a net loss during the third quarter of $17.3 million or negative 52-cents per share.
Meanwhile, the upcoming Bolivian elections have not made life easy for Coeur's new San Bartolome mine, after the government temporarily suspended mining activities above the elevation of 4,400 meters.
In a conference call to analysts Thursday to discuss financial results, however, Wheeler noted, "Looking forward to 2010, most economists and analysts seem very much in accord with a strong gold and silver market and the direction of metals' prices. ...The average estimated for 2010 silver and gold prices are $16.63 and $1010 respectively."
For the third quarter of this year, Coeur reported record silver production of 5.2 million ounces, an 86% increase over last year, which was driven by two new mines, San Bartolome in Bolivia and Palmarejo in Mexico. Gold production soared 222% to 29,000 ounces during the quarter due to the ramp-up of Palmarejo, which produced 24,289 ounces during the quarter.
For the first nine months of this year, Coeur mined 12.6 million ounces of silver and 46,541 ounces of gold, compared to 6.9 million ounces of silver and 39.087 ounces of gold during the same period last year.
Wheeler told analysts Coeur will mine 18 million ounces of silver this year, twice the 2008 production levels. The company also expects to produce 70,000 ounces of gold for this year, a 52% increase over last year.
However, losses on derivatives based on the Palmarejo gold royalty obligations, the Franco-Nevada warrant, put and call options, the gold lease facility and forex contracts cost the company $35.7 million in income during the third quarter.
Losses on derivative instruments for the first nine months of this year were $49.6 million, while interest expense was $12 million related to the gold lease facility, royalty obligations and other short-term borrowings.
In spite of an all-time high in revenue of $89.8 million during the quarter, a 146% increase over the third-quarter 2008, Coeur reported a net loss of $17.3 million or negative 23-cents per share, compared to a net loss of $4.6 million or negative 7-cents/sh for the third quarter of 2008.
For the first nine months of this year, Coeur reported a net income of $384,000 and one-cent per share, compared to a loss of $4.7 million or negative 9-cents/sh for the same period a year ago.
The mine plan at the Bolivian mine has been temporarily adjusted while mining above 4,400 meters as stability studies of the Cerro Rico Mountain are undertaken by state mining company COMIBOL. The potential impact of the revised mine plan in the fourth quarter may be up to 500,000 ounces of silver.
Wheeler told analysts, "Although the news media sends mixed messages, I want you to know that the President of Bolivia has affirmed his support for private investment and San Bartolome continues to enjoy the full support of the mining cooperatives, the business community at large and our outstanding employees."
"We do expect to, following the national Bolivian elections in December, that the situation temporarily confining mining operations to the 4,400 foot elevation and below will be resolved," he said.
Wheeler said that "we are clearly of the view that our activities are not in any way destabilizing Cerro Ricco Mountain because we are completely a surface mining operation utilizing no explosives there."
"The government is clearly interested in studying the impact of somewhat unregulated and unorganized activities that occur with numerous underground mining groups within the mountain," he added.
Wheeler told the analysts Coeur has high-grade ore reserves above the 4,400 level. "Clearly we have the rights to mine these and we will," he stressed.
"At the same time I will tell you that because we're in an election season for the presidency down there, we are accommodating the request of the government there although the president has clearly confirmed support for our investment there," Wheeler added.