Coeur Reports Second Quarter 2021 Results

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Reaffirms Production Guidance; Updates Cost and Capital Expenditure Guidance

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.

Key Highlights

  • Quarterly revenue and cash flow growth – Revenue increased 6% quarter-over-quarter and 39% year-over-year due to higher gold and silver ounces sold and a higher average realized silver price. Operating cash flow improved by $62.4 million quarter-over-quarter and $48.1 million year-over-year to $58.1 million
  • Higher quarterly production and stronger expected second half – Gold production increased 2% quarter-over-quarter to 87,275 ounces led by a 27% improvement at Wharf, while silver production of 2.6 million ounces was 8% higher largely due to a 15% increase at Rochester. Year-over-year, gold and silver production increased 12% and 60%, respectively, driven by increases at Palmarejo and Rochester. Production levels are expected to continue climbing in the second half of the year and be within the Company’s full-year guidance of 322,500 – 367,500 ounces of gold and 9.7 – 12.2 million ounces of silver
  • New quarterly drilling record from largest exploration campaign in Company history – A new quarterly record was achieved during the period with the completion of approximately 320,400 feet (97,675 meters) of drilling and 27 currently active drill rigs. Investment in exploration totaled approximately $18.6 million ($12.4 million expensed and $6.2 million capitalized) in the quarter with significant increases in drilling activity at Palmarejo and Rochester as well as the Crown district in southern Nevada
  • Rochester expansion progressing according to schedule – Coeur advanced major construction on the Plan of Operations Amendment 11 (“POA 11”) expansion at Rochester on schedule, with solid ongoing environmental and safety performance. Placement of over-liner material on the new Stage VI leach pad commenced approximately six weeks ahead of schedule, and concrete foundation work for the Merrill-Crowe process plant and crusher corridor is scheduled to begin in the third quarter. Overall project progress was approximately 31% complete at the end of the second quarter
  • Accelerating investment at Silvertip based on positive results – The Company is increasing its investment at Silvertip during the second half of 2021 to complete several surface projects to support a potential restart of active mining and processing activities in 2023
  • Strategic investment in Victoria – Coeur acquired a 17.8% ownership interest in Victoria Gold Corp. (“Victoria”) during the second quarter for consideration of approximately $118.8 million. Victoria owns and operates the new open pit, heap leach Eagle gold mine located in central Yukon Territory, Canada. The investment is consistent with the Company’s strategy and complements its existing portfolio of gold and silver assets located in high-quality jurisdictions

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)

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

2Q 2021

 

1Q 2021

 

4Q 2020

 

3Q 2020

 

2Q 2020

 

Gold Sales

$

146.2

 

 

$

138.3

 

 

$

162.0

 

$

167.1

 

$

127.9

 

 

Silver Sales

$

68.7

 

 

$

63.8

 

 

$

66.4

 

$

62.6

 

$

26.3

 

 

Consolidated Revenue

$

214.9

 

 

$

202.1

 

 

$

228.3

 

$

229.7

 

$

154.2

 

 

Costs Applicable to Sales2

$

132.6

 

 

$

108.1

 

 

$

118.6

 

$

112.8

 

$

90.0

 

 

General and Administrative Expenses

$

10.5

 

 

$

11.6

 

 

$

8.4

 

$

7.8

 

$

8.6

 

 

Net Income (Loss)

$

32.1

 

 

$

2.1

 

 

$

11.9

 

$

26.9

 

$

(1.2

)

 

Net Income (Loss) Per Share

$

0.13

 

 

$

0.01

 

 

$

0.05

 

$

0.11

 

$

(0.01

)

 

Adjusted Net Income (Loss)1

$

(0.8

)

 

$

13.9

 

 

$

19.1

 

$

38.2

 

$

2.6

 

 

Adjusted Net Income (Loss)1 Per Share

$

0.00

 

 

$

0.06

 

 

$

0.08

 

$

0.16

 

$

0.01

 

 

Weighted Average Shares Outstanding

252.1

 

 

244.5

 

 

244.3

 

243.8

 

240.9

 

 

EBITDA1

$

84.6

 

 

$

49.7

 

 

$

76.7

 

$

77.3

 

$

35.3

 

 

Adjusted EBITDA1

$

52.7

 

 

$

65.9

 

 

$

84.0

 

$

90.8

 

$

42.2

 

 

Cash Flow from Operating Activities

$

58.1

 

 

$

(4.4

)

 

$

67.3

 

$

79.5

 

$

9.9

 

 

Capital Expenditures

$

78.2

 

 

$

59.4

 

 

$

37.4

 

$

23.0

 

$

16.7

 

 

Free Cash Flow1

$

(20.2

)

 

$

(63.8

)

 

$

29.8

 

$

56.5

 

$

(6.7

)

 

Cash, Equivalents & Short-Term Investments

$

124.1

 

 

$

154.1

 

 

$

92.8

 

$

77.1

 

$

70.9

 

 

Total Debt3

$

414.2

 

 

$

412.1

 

 

$

275.5

 

$

301.1

 

$

348.6

 

 

Average Realized Price Per Ounce – Gold

$

1,651

 

 

$

1,664

 

 

$

1,663

 

$

1,754

 

$

1,641

 

 

Average Realized Price Per Ounce – Silver

$

26.60

 

 

$

26.19

 

 

$

24.21

 

$

24.15

 

$

16.25

 

 

Gold Ounces Produced

87,275

 

 

85,225

 

 

96,377

 

95,995

 

78,229

 

 

Silver Ounces Produced

2.6

 

 

2.4

 

 

2.8

 

2.6

 

1.6

 

 

Gold Ounces Sold

88,501

 

 

83,112

 

 

97,400

 

95,283

 

77,933

 

 

Silver Ounces Sold

2.6

 

 

2.4

 

 

2.7

 

2.6

 

1.6

 

 

Financial Results

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.

Liquidity Update

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.

Hedging Update

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:

 

2021

2022

Gold Ounces Hedged

79,350

132,000

Avg. Ceiling ($/oz)

$1,882

$2,038

Avg. Floor ($/oz)

$1,600

$1,630

Rochester Expansion

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:

 

Expected Start Date

Target Completion Date

Leach Pad (Incl. Ancillary Facilities)

2H 2020 ✓

Mid-2022

Merrill-Crowe Process Plant

1H 2021 ✓

YE 2022

Crushing Circuit

1H 2021 ✓

YE 2022

Supporting Infrastructure

2H 2020 ✓

Mid-2022

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%.

Operations

Second quarter 2021 highlights for each of the Company’s operations are provided below.

Palmarejo, Mexico

(Dollars in millions, except per ounce amounts)

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020

Tons milled

517,373

484,390

509,848

492,474

269,641

Average gold grade (oz/t)

0.058

0.062

0.076

0.065

0.066

Average silver grade (oz/t)

3.94

4.07

4.30

4.37

4.46

Average recovery rate – Au

92.4%

95.7%

88.9%

91.3%

86.0%

Average recovery rate – Ag

81.9%

81.3%

81.3%

82.8%

72.2%

Gold ounces produced

27,595

28,605

34,511

29,296

15,223

Silver ounces produced (000’s)

1,667

1,603

1,783

1,784

867

Gold ounces sold

30,516

25,687

35,359

27,252

16,924

Silver ounces sold (000’s)

1,640

1,638

1,767

1,765

875

Average realized price per gold ounce

$1,351

$1,462

$1,395

$1,446

$1,399

Average realized price per silver ounce

$26.71

$26.12

$24.45

$23.98

$16.35

Metal sales

$85.0

$80.3

$92.5

$81.8

$38.0

Costs applicable to sales2

$41.9

$34.0

$36.1

$34.3

$18.8

Adjusted CAS per AuOz1

$662

$621

$542

$602

$686

Adjusted CAS per AgOz1

$13.34

$10.98

$9.61

$10.06

$8.13

Exploration expense

$1.8

$1.7

$2.6

$2.0

$0.9

Cash flow from operating activities

$33.4

$13.2

$43.2

$49.7

$(3.5)

Sustaining capital expenditures (excludes capital lease payments)

$9.8

$10.0

$9.0

$4.9

$4.5

Development capital expenditures

$—

$—

$(0.1)

$0.1

$—

Total capital expenditures

$9.8

$10.0

$8.9

$5.0

$4.5

Free cash flow1

$23.6

$3.2

$34.3

$44.7

$(8.0)

Operational

  • Second quarter gold and silver production totaled 27,595 and 1.7 million ounces, respectively, compared to 28,605 and 1.6 million ounces in the prior period. Gold and silver production in the second quarter of 2020 totaled 15,223 and 0.9 million ounces, respectively, reflecting a temporary suspension to comply with a COVID-19-related government decree
  • Production during the quarter benefited from a 7% increase in mill throughput driven by a re-sequencing of the mine plan due to geotechnically-challenging conditions encountered during the first half of the year, partially offset by lower average gold and silver grades

Financial

  • Second quarter adjusted CAS1 for gold and silver on a co-product basis increased 7% and 21% to $662 and $13.34 per ounce, respectively, compared to the prior quarter, largely driven by slightly lower average grades, higher mining rates, underground rehabilitation activities, and comparatively higher gold sales under Palmarejo’s gold stream agreement, which impacted the allocation of costs on a co-product basis
  • Capital expenditures remained relatively consistent quarter-over-quarter at $9.8 million, reflecting continued investment in business improvement projects, underground development and infill drilling
  • Free cash flow1 in the second quarter totaled $23.6 million compared to $3.2 million in the prior period, largely driven by the payment of cash income and mining taxes in the first quarter

Exploration

  • Exploration investment for the second quarter totaled approximately $3.6 million ($1.8 million expensed and $1.8 million capitalized), compared to roughly $3.0 million ($1.7 million expensed and $1.3 million capitalized) in the prior period
  • Up to eight surface and underground core rigs were active during the quarter. A total of approximately 71,200 feet (21,675 meters) were drilled during the period, including 22,900 feet (6,975 meters) of expansion and 48,300 feet (14,700 meters) of infill drilling
  • Infill drilling focused on specific zones within the Independencia and Guadalupe deposits. Surface rigs targeted areas of the Hidalgo and La Patria zones (located within the Independencia and Guadalupe deposits, respectively) as well as the northern portion of the Independencia zone, while underground rigs focused on the southern portion of the Independencia zone
  • Expansion drilling during the quarter focused on the Hidalgo and El Ojito (located in the northeastern portion of the Independencia deposit) zones
  • Expansion and greenfield target generation is anticipated to continue moving north, northwest and east from the Independencia and Guadalupe deposits while infill drilling is expected to continue on the La Patria, North Independencia, Hidalgo and La Bavisa zones
  • In parallel, a new initiative to evaluate, target and drill the Guazapares district (located east of the Palmarejo district and outside of the gold stream area of influence) was launched with the expectation of drilling to begin in the second half of the year
  • Coeur plans for nine drill rigs to be active at Palmarejo in the third quarter and expects to maintain that pace for the remainder of the year

Other

  • Approximately 46% (14,097 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 40% – 45% of Palmarejo’s gold sales for 2021 will be sold under the stream agreement

Guidance

  • Full-year 2021 production is expected to be 100,000 – 110,000 ounces of gold and 6.5 – 7.8 million ounces of silver
  • CAS1 are expected to be $635 – $735 per gold ounce (previously $710 – $810 per ounce) and $11.75 – $12.75 per silver ounce (previously $11.00 – $12.00 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 approximately $40 – $45 million

Rochester, Nevada

(Dollars in millions, except per ounce amounts)

2Q 2021

1Q 2021

4Q 2020

3Q 2020

2Q 2020

Ore tons placed

3,195,777

3,240,917

4,000,889

4,523,767

3,743,331

Average silver grade (oz/t)

0.38

0.45

0.53

0.49

0.51

Average gold grade (oz/t)

0.003

0.003

0.002

0.002

0.002

Silver ounces produced (000’s)

888

774

1,020

740

728

Gold ounces produced

7,232

6,904

9,590

6,462

5,159

Silver ounces sold (000’s)

912

771

912

786

724

Gold ounces sold

7,818

6,934

8,672

6,834

5,278

Average realized price per silver ounce

$26.38

$26.34

$24.35

$24.49

$16.11

Average realized price per gold ounce

$1,794

$1,794

$1,825

$1,882

$1,702

Metal sales

$38.1

$32.8

$38.2

$32.1

$20.6

Costs applicable to sales2

$38.0

$24.0

$31.7

$19.1

$18.3

Adjusted CAS per AgOz1

$26.09

$19.07

$20.18

$14.98

$13.75

Adjusted CAS per AuOz1

$1,787

$1,300

$1,537

$1,148

$1,481

Exploration expense

$0.9

$0.5

$0.8

$0.5

$1.8

Cash flow from operating activities

$4.0

$(8.7)

$4.7

$2.1

$(5.6)

Sustaining capital expenditures (excludes capital lease payments)

$7.3

$2.0

$2.9

$2.5

$1.5

Development capital expenditures

$35.0

$28.2

$13.9

$7.3

$4.3

Total capital expenditures

$42.3

$30.2

$16.8

$9.8

$5.8

Free cash flow1

$(38.3)

$(38.9)

$(12.1)

$(7.7)

$(11.4)

Operational

  • Silver and gold production increased 15% and 5% quarter-over-quarter to 0.9 million and 7,232 ounces, respectively. Year-over-year silver and gold production increased 22% and 40%, respectively
  • Higher silver production was primarily driven by the breakthrough of material placed on inter-lift liners in the prior period, while gold production continued to benefit from the stacking of additional run-of-mine material during the first half of the year
  • Coeur successfully completed the swap-out of the secondary crushing unit, helping the Company begin placing over-liner material on the Stage VI leach pad approximately six weeks ahead of schedule. Importantly, initial results from the new crusher have shown improvements in throughput, particle size distribution and leachability
  • The Company also completed the fourth phase of its inter-lift liner strategy late in the quarter, helping to facilitate the placement of HPGR-crushed ore on shallower portions of the Stage IV leach pad

Financial

  • Second quarter costs applicable to sales2 figures shown in the table above and highlighted below include a non-cash inventory charge of approximately $8.

Contacts

Coeur Mining, Inc.

104 S. Michigan Avenue, Suite 900

Chicago, IL 60603

Attention: Paul DePartout, Director, Investor Relations

Phone: (312) 489-5800

www.coeur.com

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