|Coeur d'Alene's CEO 'Not Pleased' With 3Q Results But Says 'Issues Are Short Term'
6 November 2012, 3:11 p.m.
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(Kitco News) - Coeur d’Alene Mines Corp. (TSX: CDM, NYSE: CDE) reported a tough quarter Tuesday as quarterly silver production was largely affected by its Palmarejo mine and company profit was lower at a time of higher silver prices and higher operating costs.
“Although we’re not pleased at all with our third-quarter performance, the issues are short term in nature and are being addressed,” said Mitchell J. Krebs, president and chief executive officer of Coeur d’Alene. “As we move into the last quarter of the year, we’re focused on improving the operating performance at Palmarejo and driving production higher at Rochester and Kensington.”
The Palmarejo mine in Mexico saw a large drop off in production during the third quarter as silver output totaled 1.8 million ounces, down 23% from the second quarter, and gold output totaled 23,702 ounces, down 24% compared to the second quarter.
“Palmarejo’s production was down due to unexpected underground challenges that were encountered in September in a high-grade area of the mine and to a transition phase in the open that negatively impacted grades,” said Krebs. “It’s important to stress what impacted third-quarter production in the 76 clavo in Palmarejo’s underground operation is a timing issue and is temporary in nature.
“No reserves are lost or at risk and the area with poor ground conditions were encountered comprised less than 10% of this specific area of the underground mine,” Krebbs added.
Krebbs said that Coeur d’Alene is still mining in some areas of the 76 clavo and will go back and mine the secondary parts of the area that impacted the third quarter once the company completes some additional backfilling in previously mines primary stopes.
For the time being, Krebs said a focus will be placed on the 108 clavo in the underground mine.
The San Bartolomé mine in Bolivia produced 1.5 million ounces of silver on the quarter, which was consistent with second-quarter production. The mine did stutter in August due to power disruptions.
“At San Bartolomé, the operation lost five days in late August due to power disruptions which reduced the number of (metric) tons processed and increased costs on a per-ounce basis,” Krebs said. “Our other two operations performed well on the quarter.”
Coeur d’Alene’s Rochester mine, located in Nevada, increased silver production by 15% to 819,349 ounces and gold production by 5% to 10,599 ounces, the company said.
The Kensington mine in Alaska also saw production growth as gold output rose to 24,391 ounces, a 13% increase over the second quarter. The company expects cash costs per ounce of gold produced to drop from $1,350 in 2012 to $950 per ounce in 2013 due to higher production rates.
The U.S.’s largest primary silver producer saw a 10% drop in silver production on the quarter, putting output at 4.4 million ounces compared to the second quarter of 2012. Gold production was down 7% to 58,768 ounces, compared to the levels of the previous quarter. Cash costs per silver ounce rose to $9.05, up from $6.41 in the second quarter.
Full-year production is expected to be 18.5 to 19 million silver ounces, readjusted from 18.5 to 20 million silver ounces, while full-year gold production stands at 215,000 to 225,000 ounces, the company said. Silver cash costs are expected to be in the area of $7.50 per ounce.
Coeur d’Alene expects 2013 silver and gold production to follow 2012’s production trend.
Net metal sales totaled $230.6 million, a 9% drop compared to the second quarter of 2012. The company said this was due to lower production rates at the Palmarejo mine, lower average realized silver and gold prices and fewer ounces of silver and gold sold.
Operating cash flow totaled $77.3 million, down 13% from $88.4 million in the second quarter, the company said. Net cash from operating activities, including changes in working capital,totaled $79.7 million compared to $113.2 million in the second quarter.
Adjusted earnings down to $25.8 million, or 29 cents per share, compared to $28 million, or 31 cents per share, in the second quarter. Net loss for the quarter, which included non-cash fair market value adjustment of $37.6 million, was $15.8 million, or 18 cents per share, compared with net income of $23 million, or 26 cents per share, in the second quarter, the company said.
“During the quarter we acted the $100 million share repurchase program that our board authorized in June by repurchasing $10 million of our common shares,” Krebs said. “We reduced outstanding debt by nearly $100 million over the past 12 months which has left just $48 million of remaining debt on the balance sheet compared to total shareholders’ equity of $2.1 billion.
“In addition to reducing debt, we continue to invest in the company’s future through aggressive exploration, pursuing capital projects that help ensure the sustainability of our operations and by making strategic investments in promising non-producing companies,” Krebs said.
Coeur d’Alene invested $7 million in expensed exploration and $1.6 million in capitalized exploration, completing 44,813 meters of drilling and trenching in its global exploration program.
Krebs also remains positive on the outlook for silver and gold prices.
“Looking ahead, the outlook for silver and gold process remains positive, which should translate into strong cash flow for the company,” Krebs said. “We’ll maintain our commitment to running the business in a strategic and disciplined way as we seek to create value and deliver consistent results for our shareholders.”
By Alex Létourneau of Kitco News firstname.lastname@example.org