Coeur Mining, Inc. ("Coeur" or the "Company") (NYSE:CDE) announced
an updated and re-scoped mine plan and preliminary economic
assessment for its Palmarejo silver and gold mine in Mexico (the
"New Mine Plan"). The New Mine Plan reflects the mine's transition
to a lower tonnage, higher-grade, higher-margin underground
operation prioritizing cash flow over production ounces.
Highlights
- Guadalupe underground expected to become Palmarejo's primary
ore source by 2016
- Material increase in overall grades compared to prior
years
- Palmarejo open pit life extended through mid-2015 based on
current metals prices and known reserves
- Ongoing exploration initiative expected to identify new
resources and continue converting a significant portion of existing
resources into reserves
Mitchell J. Krebs, President and Chief Executive Officer,
commented, "This updated outlook for Palmarejo is based on year-end
2013 reserves and resources that we believe are economic based on
prices of $20 per ounce for silver and $1,300 per ounce for gold.
It demonstrates our commitment to prioritizing higher-quality,
higher-margin ounces versus seeking to maximize the quantity of
production ounces. It also demonstrates the significance of
Guadalupe to Palmarejo's future, which is why our recent decision
to place Guadalupe into production next year was so important. In
addition, the modified economics of the recently announced new gold
stream agreement with Franco-Nevada will help boost Palmarejo's
future cash flow profile.
"This plan includes a small percentage of overall reserves and
no resources other than 1.7 million tons of inferred resources that
are included in the updated Guadalupe plan," Mr. Krebs continued.
"This represents a solid base from which we expect to expand and
improve our operations over time. We are confident we will further
add to Palmarejo's mine life through ongoing exploration activities
focused on adding higher-grade, higher-margin underground
material."
Mining Forecast |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
Total |
Guadalupe Underground –
42% of Current Proven and Probable Reserve Tons |
Ore (tons in 000s) |
29 |
470 |
561 |
540 |
566 |
310 |
-- |
-- |
2,475 |
Silver grade (oz/t) |
0.0 |
4.3 |
5.6 |
5.0 |
4.5 |
3.8 |
-- |
-- |
4.7 |
Gold grade (oz/t) |
0.05 |
0.07 |
0.09 |
0.06 |
0.07 |
0.11 |
-- |
-- |
0.08 |
Guadalupe Underground –
42% of Current Inferred Resource Tons |
Material (tons in 000s) |
-- |
-- |
55 |
628 |
661 |
119 |
119 |
79 |
1,659 |
Silver grade (oz/t) |
-- |
-- |
6.8 |
2.9 |
3.0 |
19.8 |
27.9 |
19.5 |
6.9 |
Gold grade (oz/t) |
-- |
-- |
0.18 |
0.14 |
0.12 |
0.17 |
0.55 |
0.56 |
0.19 |
Palmarejo Underground –
57% of Current Proven and Probable Reserve Tons |
Ore (tons in 000s) |
745 |
604 |
-- |
-- |
-- |
-- |
-- |
-- |
1,349 |
Silver grade (g/t) |
5.9 |
4.4 |
-- |
-- |
-- |
-- |
-- |
-- |
5.2 |
Gold grade (g/t) |
0.09 |
0.07 |
-- |
-- |
-- |
-- |
-- |
-- |
0.08 |
Palmarejo Open Pit – 65%
of Current Proven and Probable Reserve Tons |
Ore (tons in 000s) |
1,269 |
344 |
-- |
-- |
-- |
-- |
-- |
-- |
1,613 |
Silver grade (g/t) |
3.5 |
3.0 |
-- |
-- |
-- |
-- |
-- |
-- |
3.4 |
Gold grade (g/t) |
0.03 |
0.02 |
-- |
-- |
-- |
-- |
-- |
-- |
0.03 |
Total Production |
|
|
|
|
|
|
|
|
|
Silver (oz in 000s) |
6,825 |
4,491 |
2,808 |
3,609 |
3,629 |
2,829 |
2,746 |
1,274 |
28,211 |
Gold (oz in 000s) |
86 |
72 |
50 |
100 |
104 |
46 |
57 |
39 |
553 |
The New Mine Plan is a preliminary economic assessment that
represents a re-scoping of the existing mine plan contemplated by
the 2008 feasibility study. Since this initial study was completed
before the mine commenced production in April of 2009, reserves at
Palmarejo have declined, metal prices have experienced high
volatility, a royalty stream agreement was put in place with
Franco-Nevada Corporation in early 2009, and letters of intent to
terminate that agreement and enter into a new gold stream agreement
were recently signed with Franco-Nevada. These factors motivated
Coeur to re-scope the existing mine plan and establish the New Mine
Plan, which assumes a higher cut-off grade.
The New Mine Plan also includes 42% of the currently estimated
inferred mineral resources, which the Company expects to be able to
upgrade to reserves through a $24 million drilling program over the
next six years. This drilling will leverage existing and planned
development at Guadalupe, enabling efficient drilling activity.
While the New Mine Plan contemplates mining a higher-grade subset
of the resources during the current price environment, it does not
sterilize any existing reserves or resources, which are expected to
be mined at some point in the future.
Insofar as the New Mine Plan contains a preliminary economic
analysis that is based, in part, on inferred mineral resources, the
New Mine Plan does not have as high a level of certainty as would a
plan that was based solely on proven and probable reserves.Inferred
mineral resources are considered too speculative geologically to
have the economic considerations applied to them that would enable
them to be considered for estimation of mineral reserves, and there
is no certainty that the inferred mineral resources will be
realized.
Select Economic
Estimates1 |
LOM |
Revenue |
|
Silver price ($/oz) |
$20 |
Gold price ($/oz) |
$1,300 |
Gross revenue ($mil) |
$1,285 |
Cash Flow ($mil) |
|
Operating cash flow |
$587 |
Capital expenditures |
$157 |
Net cash flow |
$239 |
NPV (10% discount rate) |
$134 |
1. Pre-tax and after effects of the
Franco-Nevada agreement. |
|
|
|
Operating Cost
Assumptions |
LOM |
3/31/14 LTM |
Average open pit mining costs
per ton mined |
$2.10 |
$1.64 |
Average underground mining
costs per ton mined |
$531 |
$40 |
Average processing costs per
ton processed |
$27 |
$25 |
Average general and
administrative costs per ton processed |
$17 |
$12 |
1. Includes $6/ton of additional haulage
costs to transport ore from Guadalupe. |
|
Capital Cost Assumptions
($mil) |
LOM |
Guadalupe mine development |
$55 |
Capitalized drilling |
$28 |
Tailings related |
$15 |
Equipment |
$21 |
Other
(sustaining/infrastructure-related) |
$38 |
Total |
$157 |
Expected capital expenditures over the life of the mine include
approximately $4 million each year for capitalized drilling, with
$24 million of the total to be spent to upgrade the inferred
mineral resources at Guadalupe. Spending for underground mine
development is expected to ramp up to $10 million per year in 2016
and 2017 when the inferred material is expected to come into
production. Expenditures related to the tailings facility are
expected to be complete in 2016. Approximately 40% of the other
(sustaining/infrastructure-related) capital costs are expected to
be incurred during 2014, as ongoing capital needs are anticipated
to decline as production from Palmarejo ramps down.
Recovery
Assumptions |
Dec 2014 - LOM |
3/31/14 LTM |
Average silver recovery
rate |
83% |
77% |
Average gold recovery
rate |
87% |
82% |
Production Process at
Palmarejo
In early 2014, Coeur commissioned a new Merrill Crowe facility
to improve recovery rates. Improved blending of a range of ore
types has also contributed to improved recovery rates for both
silver and gold. Recovery rates tend to be higher for underground
ore than from surface ore due to the lower oxide content
underground. As Coeur feeds a higher proportion of underground
(sulfide ore) tons to the mill, recovery rates are expected to
improve.
Further process improvements planned for Palmarejo during 2014
are expected to result in higher recovery rates and lower
production costs. Firstly, when oxide ore and sulfide ore are
combined in the flotation circuit, the oxide ore hinders the
recovery of the sulfide ore. Therefore, Coeur intends to process
the oxide ore and sulfide ore separately by creating a bypass for
the oxide ore by the end of 2014 to sidestep the flotation circuit
and flow directly to an agitated leach circuit. Secondly, the
reduced milling rate in the New Mine Plan will result in higher
retention times in the leach tanks, which is expected to result in
higher recovery rates. These changes are expected to result in
higher recoveries for silver and gold as well as lower production
costs due to the reduced cyanide consumed during flotation.
2013 Palmarejo
Mineral Reserves and Resources by Area |
|
Short Tons |
Grade (oz/t) |
Ounces (000s) |
|
(000s) |
Silver |
Gold |
Silver |
Gold |
Underground Proven Reserves: |
|
|
|
|
|
Guadalupe |
1,397 |
3.93 |
0.056 |
5,491 |
78 |
Palmarejo |
1,957 |
3.99 |
0.072 |
7,800 |
141 |
Open-Pit Proven Reserves: |
|
|
|
|
|
Guadalupe |
238 |
5.23 |
0.013 |
1,243 |
3 |
Palmarejo |
1,509 |
2.80 |
0.022 |
4,227 |
34 |
Underground Probable Reserves: |
|
|
|
|
|
Guadalupe |
4,567 |
3.91 |
0.056 |
17,877 |
258 |
Palmarejo |
398 |
3.94 |
0.081 |
1,568 |
32 |
Open-Pit Probable Reserves: |
|
|
|
|
|
Guadalupe |
183 |
5.18 |
0.016 |
945 |
3 |
Palmarejo |
988 |
2.53 |
0.021 |
2,501 |
20 |
Total Proven and Probable
Reserves |
11,235 |
|
|
41,653 |
569 |
Underground Measured Resources |
|
|
|
|
|
Guadalupe |
225 |
10.78 |
0.073 |
2,426 |
16 |
Palmarejo |
3,546 |
6.67 |
0.110 |
23,656 |
391 |
Open-Pit Measured Resources |
|
|
|
|
|
Guadalupe |
479 |
3.76 |
0.039 |
1,799 |
19 |
Palmarejo |
257 |
1.38 |
0.011 |
356 |
3 |
Underground Indicated Resources |
|
|
|
|
|
Guadalupe |
2,232 |
5.31 |
0.062 |
11,860 |
138 |
Palmarejo |
615 |
4.57 |
0.067 |
2,811 |
41 |
Open-Pit Indicated Resources |
|
|
|
|
|
Guadalupe |
1,169 |
3.50 |
0.033 |
4,088 |
39 |
Palmarejo |
250 |
1.45 |
0.011 |
364 |
3 |
La Patria |
17,529 |
0.56 |
0.028 |
9,828 |
491 |
Total Measured and Indicated
Resources |
26,302 |
|
|
57,188 |
1,140 |
Underground Inferred Resources |
|
|
|
|
|
Guadalupe |
3,951 |
4.78 |
0.110 |
18,894 |
433 |
Palmarejo |
32 |
3.66 |
0.056 |
117 |
2 |
Open-Pit Inferred Resources |
|
|
|
|
|
Guadalupe |
217 |
3.28 |
0.039 |
709 |
8 |
Palmarejo |
3 |
2.07 |
0.018 |
7 |
-- |
La Patria |
7,408 |
0.33 |
0.024 |
2,461 |
178 |
Total Inferred
Resources |
11,611 |
|
|
22,188 |
621 |
Notes to the above mineral reserves and resources:
1. Effective December 31,
2013.
2. Metal prices used for mineral
reserves were $25.00 per ounce of silver and $1,450 per ounce of
gold. Metal prices used for mineral resources were $29.00 per ounce
of silver and $1,600 per ounce of gold.
3. Mineral resources are in
addition to mineral reserves and do not have demonstrated economic
viability. Inferred mineral resources are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be considered for
estimation of mineral reserves, and there is no certainty that the
inferred mineral resources will be realized.
4. Rounding of tons and ounces,
as required by reporting guidelines, may result in apparent
differences between tons, grade, and contained metal content.
5. For details on the estimation of
mineral resources and reserves, including the key assumptions,
parameters and methods used to estimate the mineral resources and
reserves, please refer to the NI 43-101-compliant Technical Report
for Coeur's Palmarejo Project dated January 1, 2013 and filed
February 28, 2013 at www.sedar.com.
Conversion
Table |
1 short ton |
= |
0.907185 metric tons |
1 troy ounce |
= |
31.10348 grams |
A slide deck to accompany this release is posted at
www.coeur.com.
About Coeur
Coeur Mining is the largest U.S.-based primary silver producer
and a significant gold producer with four precious metals mines in
the Americas employing nearly 2,000 people. Coeur produces from its
wholly owned operations: the Palmarejo silver-gold mine in Mexico,
the San Bartolomé silver mine in Bolivia, the Rochester silver-gold
mine in Nevada and the Kensington gold mine in Alaska. The Company
also has a non-operating interest in the Endeavor mine in Australia
in addition to net smelter royalties on the Cerro Bayo mine in
Chile, the El Gallo complex in Mexico, and the Zaruma mine in
Ecuador. In addition, the Company has two silver-gold feasibility
stage projects - the La Preciosa project in Mexico and the Joaquin
project in Argentina. The Company also conducts ongoing exploration
activities in Alaska, Argentina, Bolivia, Mexico, and Nevada. The
Company owns strategic investment positions in several silver and
gold development companies with projects in North and South
America.
Cautionary Statements
This news release contains forward-looking statements within the
meaning of securities legislation in the United States and Canada,
including statements regarding the mining profile at Palmarejo and
Guadalupe, expected mining rates, grades, tonnage and margins,
estimated revenues, cash flow, capital expenditures, costs, process
improvements, recovery rates, exploration results, expansion and
improvement of operations, and the ability to upgrade resources to
reserves and extend mine life. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
which may cause Coeur's actual results, performance or achievements
to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Such factors include, among others, the risks and
hazards inherent in the mining business (including risks inherent
in developing large-scale mining projects, environmental hazards,
industrial accidents, weather or geologically related conditions),
changes in the market prices of gold and silver and a sustained
lower price environment, the uncertainties inherent in Coeur's
production, exploratory and developmental activities, including
risks relating to permitting and regulatory delays, ground
conditions, grade variability, any future labor disputes or work
stoppages, the uncertainties inherent in the estimation of gold and
silver ore reserves, changes that could result from Coeur's future
acquisition of new mining properties or businesses, reliance on
third parties to operate certain mines where Coeur owns silver
production and reserves and the absence of control over mining
operations in which Coeur or its subsidiaries hold royalty or
streaming interests and risks related to these mining operations
including results of mining and exploration activities,
environmental, economic and political risks of the jurisdiction in
which the mining operations are located, the loss of any
third-party smelter to which Coeur markets silver and gold, the
effects of environmental and other governmental regulations, the
risks inherent in the ownership or operation of or investment in
mining properties or businesses in foreign countries, Coeur's
ability to raise additional financing necessary to conduct its
business, make payments or refinance its debt, as well as other
uncertainties and risk factors set out in filings made from time to
time with the United States Securities and Exchange Commission, and
the Canadian securities regulators, including, without limitation,
Coeur's most recent reports on Form 10-K and Form 10-Q. Actual
results, developments and timetables could vary significantly from
the estimates presented. Readers are cautioned not to put undue
reliance on forward-looking statements. Coeur disclaims any intent
or obligation to update publicly such forward-looking statements,
whether as a result of new information, future events or otherwise.
Additionally, Coeur undertakes no obligation to comment on
analyses, expectations or statements made by third parties in
respect of Coeur, its financial or operating results or its
securities.
W. David Tyler, Coeur's Vice President, Technical Services and a
qualified person under Canadian National Instrument 43-101,
supervised the preparation of the scientific and technical
information concerning Coeur's mineral projects in this news
release. Mineral resources are in addition to mineral reserves and
do not have demonstrated economic viability. Inferred mineral
resources are considered too speculative geologically to have the
economic considerations applied to them that would enable them to
be considered for estimation of mineral reserves, and there is no
certainty that the inferred mineral resources will be realized. For
a description of the key assumptions, parameters and methods used
to estimate mineral reserves and resources, as well as data
verification procedures and a general discussion of the extent to
which the estimates may be affected by any known environmental,
permitting, legal, title, taxation, socio-political, marketing or
other relevant factors, please see the Technical Report for Coeur's
Palmarejo Project dated January 1, 2013 and filed February 28, 2013
as filed on SEDAR at sedar.com.
Cautionary Note to U.S. Investors - The United States Securities
and Exchange Commission permits U.S. mining companies, in their
filings with the SEC, to disclose only those mineral deposits that
a company can economically and legally extract or produce. We may
use certain terms in public disclosures, such as "measured,"
"indicated," "inferred" and "resources," that are recognized by
Canadian regulations, but that SEC guidelines generally prohibit
U.S. registered companies from including in their filings with the
SEC. U.S. investors are urged to consider closely the disclosure in
our Form 10-K which may be secured from us, or from the SEC's
website at sec.gov.
All tons are reported in U.S. standard short ton units. Grades
reported are troy ounces per short ton.
CONTACT: Bridget Freas, Director, Investor Relations
(312) 489-5819
Donna Mirandola, Director, Corporate Communications
(312) 489-5842
www.coeur.com
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