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Coeur reports 4Q adjusted loss, suspending Silvertip operations

Kitco News

Coeur Mining, Inc. (NYSE: CDE) Wednesday reported an adjusted net loss for the third quarter and took a large impairment charge, with the company suspending operations at Silvertip.

Coeur listed an adjusted net loss of $3.3 million, or a penny per share, from continuing operations. This was an improvement from adjusted losses of $5.3 million to $23 million during the first three quarters of 2019 but a turnaround from an adjusted profit of $16.1 million, or 8 cents, in the fourth quarter of 2018.

The company listed a net loss of $270.9 million, or $1.13, for the fourth quarter. The year-ago profit was $0.4 million.

Coeur reported fourth-quarter non-cash write-downs of $277.7 million, reflecting an impairment on the carrying value of Silvertip’s assets, an inventory adjustment for concentrate at Silvertip and an inventory adjustment for ore stacked on a leach pad at Wharf.

“The decision to temporarily suspend operating activities at Silvertip, which represented approximately 6% of the company’s 2019 revenue, was driven by our goal of maximizing the long-term value of the operation,” said Mitchell J. Krebs, president and chief executive officer.

“While we have been successful in executing key projects and improving mill availability, the further deterioration in the zinc and lead markets -- particularly for spot concentrate treatment charges -- represents significant headwinds to our ability to generate positive cash flow. While mining and processing activities are paused, we plan to more than double our investment in drilling to further expand Silvertip’s high-grade deposit and extend its mine life.

“During 2019, we were able to grow Silvertip’s inferred resources by over 70% and its measured and indicated resources by nearly 40%. In addition, we have commenced a pre-feasibility study to evaluate a mill expansion, which we believe will significantly enhance Silvertip’s economics.”

Coeur reported its third straight quarter of increasing positive free cash flow, listing $18.4 million, which was a 63% increase from the third quarter.

Fourth-quarter revenue of $195 million was 36% higher than in the prior year. Average realized gold and silver prices were around 16% higher year-on-year. During the fourth quarter, Coeur sold 95,532 ounces of gold, 3.3 million ounces of silver, 4.1 million pounds of zinc and 4.3 million pounds of lead. All but the silver output were higher than in the year-ago period.

Coeur reported more than $160 million in debt reduction during 2019.

For full-year 2019, Coeur listed gold production of 359,418 ounces and silver output of 11.7 million. For 2020, the company said it anticipates producing 317,000 to 363,000 ounces of gold and 10.3 million to 13.3 million ounces of silver.

Shortly after the end of the fourth quarter, Coeur implemented an additional series of zero-cost collar hedges on a portion of its gold production, officials said. As was the case with the previous hedging program, officials said the structure allows for downside protection against potential decreases in the price of gold, while enabling participation in the potential upside to a specified ceiling price.

The quarterly financial results came a day after Coeur reported updated reserves and resources. End-of-2019 proven and probable reserves included 2.6 million ounces of gold, 182.9 million ounces of silver, 295.4 million pounds of zinc and 196.5 million pounds of lead. Coeur said gold reserves were lower year-over-year but silver reserves increased, largely driven by the replacement of depletion at Palmarejo and conversions at Rochester.

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