Coeur Mining, Inc. (the “Company” or “Coeur”) (NYSE:
CDE) (TSX: CDM) reported metal sales of $204.5 million, cash
flow from operating activities of $63.3 million, or $0.63 per
share, and capital expenditures of $27.2 million during the second
quarter 2013.
The Company produced 4.6 million ounces of silver and 60,757
ounces of gold during the second quarter 2013, representing
increases of 21% and 7%, respectively, over the first quarter 2013.
Silver and gold production at the Palmarejo mine in Mexico
increased 24% and 23%, respectively, compared to the first quarter.
Companywide cash operating costs were $8.86 per silver ounce1 and
were $1,115 per gold ounce1 at the Company's Kensington gold mine
during the second quarter.
The Company reaffirmed its 2013 full-year production guidance of
18.0-19.5 million ounces of silver and 250,000-265,000 ounces of
gold. Despite lower gold prices used to calculate by-product
credits, Coeur is maintaining its full-year cash operating cost1
guidance of $9.50 - $10.50 per silver ounce, which reflects the
effects of the Company's ongoing cost reduction efforts. Although
the Company anticipates Kensington's second half cash operating
costs per gold ounce1 to be approximately 20% lower than the first
half of the year, full-year 2013 cost guidance for Kensington is
being revised upward slightly to $950 - $1,000 (compared to prior
guidance of $900 - $950). Coeur will provide a three-year
production outlook for each of its operations during the second
half of 2013.
Second Quarter 2013
Highlights
- Metal production increased to 4.6
million silver ounces and 60,757 gold ounces, an increase of 21%
and 7%, respectively, from the first quarter 2013.
- Metal sold increased to 5.2 million
silver ounces and 63,389 gold ounces from 3.1 million silver ounces
and 51,926 gold ounces in the first quarter 2013.
- Net metal sales were $204.5 million, up
19% compared to the first quarter 2013 despite average realized
prices of $22.86 per silver ounce and $1,416 per gold ounce, which
were 25% and 13% lower, respectively, than the first quarter
2013.
- Cash flow from operating activities was
$63.3 million, or $0.63 per share, in the second quarter compared
to $12.9 million, or $0.14 per share, during the first quarter
2013. Net loss for the second quarter 2013 was $35.0 million, or
$0.35 per share, compared with net income of $12.3 million, or
$0.14 per share, in the first quarter 2013. Adjusted earnings1 were
$(34.6) million, or $(0.35) per share, compared with $6.8 million,
or $0.08 per share, in the first quarter 2013.
- Cash, cash equivalents, and short-term
investments were $249.5 million at June 30, 2013, compared with
$332.8 million at March 31, 2013. On April 16, 2013, $99.1 million
was used as part of the consideration to acquire Orko Silver
Corporation. The Company's $100 million revolving credit facility
remains undrawn.
- Effective June 27, 2013, Coeur settled
the outstanding claims dispute at Rochester.
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
Mitchell J. Krebs, Coeur's President and Chief Executive
Officer, said, “Our second quarter operating performance improved
significantly compared to this year's first quarter and last year's
fourth quarter. Palmarejo is now performing quite consistently from
month-to-month. Our operations and technical teams deserve
tremendous credit for the improvements at Palmarejo since late last
year. Continued robust silver production from San Bartolomé and
higher than planned gold production from Palmarejo are expected to
offset lower than expected production levels at Rochester, which
encountered poor crusher performance in the first half of the year.
We remain enthusiastic about the expansion initiatives underway at
Rochester, which we believe can make this long-running operation
our largest cash flow generator in the next five years. The
Kensington gold mine in Alaska is now demonstrating its ability to
operate more consistently as planned. We expect production from
Kensington to increase and unit costs to decrease significantly
during the second half of the year due to higher grades. Finally,
we are beginning a feasibility study on the La Preciosa project in
Mexico, which is expected to be completed in mid-2014, and we will
be focusing our efforts on optimizing the results of the PEA to
improve the project's economics,” Mr. Krebs added.
“Since late last year, Coeur has been actively pursuing a
four-pronged strategy designed to maximize the Company's net cash
flow: (1) identifying and implementing revenue enhancement
opportunities at existing operations; (2) reducing operating and
non-operating costs; (3) reducing capital spending, completing
expansion projects at two of our mines, and targeting significantly
lower capital expenditures in 2014; and (4) effectively managing
working capital. I am pleased with the results of these initiatives
and the targets we have established, which are summarized below and
support our expectation to remain net cash flow positive at current
price levels:
Revenue Enhancements:
- Process recovery enhancements at
Palmarejo expected to boost silver and gold recovery rates by
5%-10% by year-end, which are expected to result in approximately
$30 million of incremental annual metal sales (assuming $20 per
ounce silver and $1,300 per ounce gold prices).
- Re-sequencing of higher-grade stopes at
Kensington containing expected 10% higher grade during the second
half of 2013, which is anticipated to increase production by
approximately 25% and decrease unit operating costs by 20% compared
to the first half of 2013.
- Completion of the $15.1 million process
plant expansion project at San Bartolomé by the end of the year,
which is expected to increase silver production by 10%-15%,
resulting in $11-$17 million of incremental annual metal sales
(assuming a $20 per ounce silver price).
Cost Reductions:
- $19 million of cash operating cost
savings versus plan realized during the first half of 2013.
- $8-$9 million of further cash operating
cost reductions targeted during the remainder of the year. The
projected cost savings are lower than in the first half due to
higher than planned production levels in the second half of
2013.
- Reducing exploration expense by 17%, or
approximately $3 million during the remainder of 2013, and
reallocating an additional $3 million of reductions to the La
Preciosa project.
Capital Spending Reductions:
- Eliminated or deferred $24 million of
capital projects scheduled for 2013 resulting in full-year expected
capital expenditures of $100-$110 million, an 18% decrease compared
to prior guidance of $125-$140 million.
- Targeting 2014 total capital
expenditures of less than $80 million in order to maximize
company-wide net cash flow.
- On-track to complete the San Bartolomé
process plant expansion project 20%, or $3.7 million, below
budget.
Working Capital Improvements:
- Reduced supplies and materials
inventory by $12 million in the first half of 2013.
- Targeting $30 million of additional
working capital reductions during the remainder of 2013 in order to
maximize net cash flow.
“After a difficult period for commodity prices since mid-April,
silver and gold prices appear to be finding a bottom recently,
although we expect continued volatility throughout the remainder of
the year. We are seeing modest increases in industrial demand for
silver and we believe the overarching rationale for investment
demand for silver and gold remains intact. Looking ahead, we
anticipate supplies of both silver and gold will tighten as a
result of project deferrals, difficult capital markets, reduced
exploration expenditures, and greater geopolitical and
community-related challenges. Supply from scrap has already shown
signs of significant decline, all of which should be supportive of
stronger prices over the long-term."
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
Table 1: Financial Highlights
(Unaudited)
(All amounts in millions, except per share amounts, average
realized prices and gold ounces sold)
2Q 2013 1Q 2013
QuarterVariance
4Q 2012 3Q 2012 2Q
2012
Sales of Metal $ 204.5
$ 171.8 19 % $
205.9 $ 230.6 $ 254.4
Production
Costs $ 142.9 $ 88.8 61 % $ 107.4 $ 125.0 131.8
Adjusted Earnings (1) $ (34.6 )
$ 6.8 (609 %) $ 26.2 $ 25.8 28.0
Adjusted Earnings Per
Share(1) $ (0.35 ) $ 0.08 (538 %) $
0.29 $ 0.29 $ 0.31
Net Income $ (35.0 )
$ 12.3 (385 %) $ 37.6 $ (15.8 ) 23.0
Earnings Per Share
$ (0.35 ) $ 0.14 (350 %) $ 0.42 $ (0.18 ) $
0.26
Cash Flow From Operating Activities $
63.3 $ 12.9 391 % $ 61.7 $ 79.7 $ 113.2
Capital
Expenditures $ 27.2 $ 12.8 113 % $ 21.8 $ 30.0
32.2
Cash, Cash Equivalents & Short-Term Investments
$ 249.5 $ 332.8 (25 %) $ 126.4 $ 143.6 200.3
Total
Debt (net of debt discount) $ 305.3 $
305.3 — % $ 48.1 $ 47.4 118.8
Weighted Average Shares
99.8 89.9 11 % 89.1 89.4 89.6
Average Realized Price Per
Ounce - Silver $ 22.86 $ 30.30 (25 %) $ 32.52 $
30.09 $ 29.28
Average Realized Price Per Ounce - Gold
$ 1,416 $ 1,630 (13 %) $ 1,709 $ 1,654 $ 1,610
Silver Ounces Sold 5.2 3.1 68 % 3.6 4.5 5.6
Gold
Ounces Sold 63,389 51,926 22 % 55,565 59,156 59,579
Included in second quarter net loss was a $32 million one-time
charge ($22 million non-cash) for the settlement of the Rochester
claims dispute litigation and a $17.2 million non-cash writedown of
the Company's strategic investments. Both of these non-recurring
items were excluded from Coeur's non-U.S. GAAP metric of
adjusted earnings1. Adjusted earnings1 were $(34.6) million,
or $(0.35) per share, in the second quarter 2013, compared with
$28.0 million, or $0.31 per share, in the second quarter 2012 and
$6.8 million or $0.08 per share in the first quarter 2013.
On a U.S. GAAP basis, the Company realized a net loss of
$35.0 million, or $0.35 per share, in the second quarter 2013
compared with net income of $23.0 million, or $0.26 per share, in
the second quarter 2012 and $12.3 million, or $0.14 per share, in
the first quarter 2013. Net income for the second quarter 2013
included a positive non-cash fair value adjustment of $66.8
million. The positive fair value adjustment in the second quarter
2012 was $16.0 million. Fair value adjustments are driven primarily
by lower or higher gold prices, which decrease or increase,
respectively, the estimated future liabilities related to a gold
royalty obligation at Palmarejo.
Table 2: Operational Highlights:
Production
(silver ounces in thousands)
2Q 2013 1Q 2013
QuarterVariance
Q4 2012 Q3
2012 Q2 2012
Silver
Gold Silver Gold Silver Gold
Silver Gold Silver Gold
Silver Gold
Palmarejo 2,045
28,191 1,646 22,965
24 % 23 % 1,554
19,998 1,833 23,702
2,366 31,258
San Bartolomé 1,523
—
1,391
—
9 % n.a. 1,343
—
1,526
—
1,470
—
Rochester 844 9,404 648 8,742 30 % 8 % 828
12,055 819 10,599 713 10,120
Martha
—
—
—
—
n.a. n.a.
—
—
93 76 108 97
Kensington
—
23,162
—
25,206
n.a.
(8 %)
—
28,717
—
24,391
—
21,572
Endeavor 221
—
150
—
47 % n.a. 106
—
140
—
240
—
Total 4,633 60,757 3,835 56,913 21 % 7 % 3,831
60,770 4,411 58,768 4,897 63,047
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
Table 3: Operational Highlights: Cash
Operating Costs Per Ounce 1
2Q 2013 1Q 2013
QuarterVariance
Q4 2012 Q3 2102 Q2
2012
Palmarejo $ 3.25 $
2.20 (48 %) $ 7.55
$ 3.75 $ (0.85 )
San Bartolomé
12.89 13.27 (3 %) 13.97 12.13 11.05
Rochester
14.75 13.54 9 % 2.17 9.58 9.83
Martha
—
—
n.a.
—
48.12 55.07
Endeavor 10.62
17.30 (39 %)
19.92 15.97 17.50
Total $ 8.86 $ 8.73 1 % $ 8.97 $ 9.05 $
6.41
Kensington $ 1,115 $ 1,055 6 % $ 1,065 $
1,298 $ 1,348
Palmarejo, Mexico - Rebounding Production Due to Higher
Grades; Expected Recovery Rate Improvements
- Palmarejo produced 2.0 million ounces
of silver and 28,191 ounces of gold at cash operating costs of
$3.25 per silver ounce1 for the second quarter. In the first
quarter of 2013, Palmarejo produced 1.6 million ounces of silver
and 22,965 ounces of gold at cash operating costs of $2.20 per
silver ounce1.
- Silver and gold ore grades from both
the open pit and from underground operations improved compared to
the first quarter 2013, and these grades are expected to be
maintained throughout the remainder of the year. Recovery rates are
expected to increase 5%-10% by the end of the year.
- Ongoing cost reduction initiatives at
Palmarejo have lowered cash operating costs in the first half of
2013 compared to plan. The initiatives include reductions in
outside services, contract services, reagent and consumable
consumption, as well as more favorable pricing on key consumables,
shorter waste haul distance, and greater cost efficiency within the
maintenance systems.
- The acquisition of the La Curra
property potentially adds value as an on-strike extension of Las
Animas, part of the Guadalupe system, outside the property boundary
subject to the Franco-Nevada gold production royalty. Mine modeling
of Las Animas as an open pit operation continues with further
drilling planned for the remainder of the year.
- Guadalupe underground development has
now reached the ore horizon. A vent raise to connect the upper and
lower parts of the mine is planned for 2014.
- Mining is ongoing in the upper ore
zones in 76 Clavo. Mining in 108 Clavo continues to produce strong
silver grade and higher gold grades in 2013. Open pit expansion
into the Tucson/Chapotillo is progressing and open pit ore grade
material from this new area is being modeled for mining in early
2014.
- Sales and cash flow from operating
activities totaled $86.2 million and $37.2 million, respectively,
in the second quarter 2013.
- Capital expenditures of $9.2 million
were incurred at Palmarejo in the second quarter on underground
mining equipment and for underground mine development at Palmarejo
and Guadalupe.
San Bartolomé, Bolivia - Consistent Performance; Mill
Expansion On-Track
- San Bartolomé produced 1.5 million
ounces of silver at cash operating costs of $12.89 per silver
ounce1. In the first quarter of 2013, San Bartolomé produced 1.4
million ounces of silver at cash operating costs of $13.27 per
silver ounce1.
- The Company is in the process of
increasing processing capacity approximately 10%-15% during 2013.
This expansion is expected to have a less than two-year payback and
increase the mine's annual production to over 6.0 million ounces of
silver for the next several years. This expansion project remains
on-schedule for completion by the end of the year and is expected
to be completed 20% below budgeted levels.
- Sales and cash flow from operating
activities totaled $49.2 million and $32.8 million, respectively,
in the second quarter 2013.
- Capital expenditures were $3.2 million
during the second quarter and consisted primarily of the tailings
and process plant expansion project.
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
Rochester, Nevada - Slow First Half of 2013; Anticipate
Expansion Announcement by Year-End
- Rochester produced 843,845 ounces of
silver and 9,404 ounces of gold, up 30% and 8% respectively, over
the first quarter 2013. This was a smaller rebound than expected
due to poor crusher performance during the second quarter.
- Cash operating costs per silver ounce1
were $14.75, which were 9% higher than the first quarter 2013.
- Ongoing cost reductions at Rochester
include reductions in reagent and consumable consumption, contract
services, and power, as well as shorter haul distances.
Year-to-date, Rochester's operating costs remain below planned
levels. Cash operating costs per silver ounce1 have been negatively
impacted by the lower than planned production levels.
- The Company is investing approximately
$4.0 million during 2013 to expand the capacity of the primary
crusher from 9.0 million tons to 14.0 million tons. Monthly crusher
throughput is expected to accelerate in the second half of 2013,
leading to higher anticipated silver and gold production in the
second half of 2013.
- In addition, the Company is expanding
the mine's heap leach capacity to approximately 67.0 million tons
at an estimated capital cost of approximately $15.0 million. This
planned expansion is designed to accommodate sustained higher
production rates driven by the processing of ore contained in
historic stockpiles. These stockpiles were created during the
mine's 26 year operating history when gold and silver prices were
significantly lower than current market prices. Coeur expects
further reserve increases from this and its ongoing exploration
efforts on the stockpiles, and intends to announce future expansion
plans at Rochester later in 2013.
- Effective June 27, 2013, Coeur settled
the outstanding claims dispute at Rochester. In connection with the
settlement, Coeur acquired the disputed mining claims for $10
million in cash plus a 3.4% net smelter returns royalty covering
39.4 million silver equivalent ounces beginning January 1,
2014.
- In July, Rochester was recognized for
outstanding achievement in safety by the Nevada Mining Association,
which will present Rochester with its 2013 1st Place Safety Award
for the Surface Operations, Medium Mine category.
- Sales totaled $34.9 million in the
second quarter compared to $39.5 million in the first quarter. Cash
flow from operating activities of $(3.4) million in the second
quarter 2013 declined from $5.6 million in the first quarter due to
the $10 million cash portion of the disputed claims settlement, an
increase in ore placed on the leach pad (the related costs of which
are added to inventory and subsequently expensed as ounces are
recovered from the leach pad), and also due to lower metal
prices.
- Capital expenditures of $6.6 million
during the quarter were spent on process plant equipment, the Stage
III leach pad expansion, and equipment related to the crusher
expansion.
Kensington, Alaska - Improving Gold Grade Expected in Second
Half of 2013
- Kensington produced 23,162 ounces of
gold, a decrease of 8% from the first quarter 2013. Cash operating
costs per ounce1were $1,115, compared to $1,055 in the first
quarter 2013.
- Average mill head grade of 0.18 oz/t
was 10% lower than the first quarter 2013 due to the processing of
lower-grade stockpile ore. The gold grade is expected to gradually
improve during the second half of 2013 as higher-grade stopes are
mined and processed, which we expect will lower unit operating
costs 20% compared to the first half of the year.
- Additional cost reductions targeted for
the second half of the year include reductions in contract services
and lower underground backfill costs due to lower prices for
backfill material.
- Sales and cash flow from operating
activities totaled $30.9 million and $7.6 million, respectively,
for the second quarter 2013.
- Capital expenditures of $7.4 million in
the second quarter were spent primarily on underground capital
development and reserve category drilling.
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
La Preciosa, Mexico - PEA Completed and Feasibility Work to
Begin
- The results of the PEA provide a solid
foundation from which the Company will seek to enhance the
project's economics given current silver and gold prices. The PEA
indicated an estimated mine life of 17 years, initial capital
expenditures of $348 million, and an average annual production rate
of 9.1 million ounces over the first 14 years.
- Coeur will now commence a full
feasibility study, along with infill and development drilling. Upon
completion of this work in mid-2014, the Company and its Board will
evaluate the economics of the optimized project, assess the silver
and gold market, and determine whether to proceed with
construction.
- A strong development team continues to
be established at the corporate office and in Durango, Mexico.
- Expenditures in the second half of 2013
are expected to be approximately $15 million, with $3 million for
exploration and $12 million for sustainability projects within the
community, engineering, access road, and land acquisitions.
Exploration Update
During the second quarter, the Company invested $6.8 million in
expensed exploration for discovery of new mineralization and $3.0
million in capitalized exploration for definition of new
mineralization.
Coeur's exploration program utilized up to 11 drill rigs: five
drills at Palmarejo, three at Kensington (including one drill
devoted to definition drilling), two in Argentina (Joaquin and
Lejano projects), and one at Rochester.
Palmarejo, Mexico
- Exploration for discovery of new
mineralization was conducted around the Palmarejo surface and
underground mine area on new targets generated in 2012 and early
2013. Significant results were obtained from this work, notably
hole T4DH-002 from drilling of open pit targets and hole TTDH-003
from drilling of underground targets, which intersected 8.1 meters
(true width) grading 352 grams per metric ton (g/t) of silver and
3.4 g/t of gold, and 2.5 meters true grading 720 g/t silver and 5.7
g/t gold, respectively. In addition, drilling underground in the
108 and Interclavos zones, part of the long La Blanca structure,
returned favorable results and is expected to contribute to the
expansion of Palmarejo's underground-minable reserves.
- New drilling was completed at El Salto,
bordering the Las Animas surface minable reserves, with positive
initial results. A phase 2 drilling program is underway and the
Company has commenced evaluation of the new La Curra property
situated nearby to the southeast. Favorable results from this
exploration would have a positive impact on the surface-minable Las
Animas portion of the more than 2.6 kilometer-long (1.6 miles)
Guadalupe vein system. Notable results include hole TDGH-563 with
3.8 meters true width mineralization grading 478 g/t of silver and
1.29 g/t of gold.
- The first drilling from underground
positions started on Guadalupe Norte. Assays are pending and
drilling will continue as this part of the Guadalupe mine is
developed.
Kensington, Alaska
- Exploration work to discover new
mineralization continued in the second quarter. As part of this
work, surface drilling began on the Jualin area (a historic mine
south of main Kensington). This drilling targeted the number 4
vein, a zone of auriferous quartz and sulfide veining situated
about 1,500 feet (460 meters) due south of the mill facility.
Targets selected to discover and define new mineralization are
focusing on those, like Jualin and Raven, with the potential to be
higher-grade than the current reserves.
- Exploration to define and expand known
mineralized zones and help expand reserves focused on the southern
margins of lower Zone 10 and Zone 50 in main Kensington as well as
the northern extent of lower Zone 10. Initial results from
widely-spaced drilling have shown new gold mineralization extends
more than 200 feet from the south limits of the current mineral
reserves.
- In addition, underground drilling was
conducted on the Ann target and the upper extension of Zone 10 at
main Kensington.
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
Rochester, Nevada
- Drilling was performed to expand and
define grades and tons of existing stockpiled material in the
second quarter. The drilling returned favorable results from the
Limerick, South, and North areas. Results from 23 new drill holes
were received this quarter. Results from hole LMD13-061 with 120
feet grading 0.67 ounces per short ton (oz/t) of silver and 40 feet
of 1.52 oz/t of silver from Limerick and SRD13-109 in the South
stockpile which returned 70 feet grading 0.38 oz/t silver and 150
feet grading 0.56 oz/t of silver.
Coeur is reducing its exploration spending by 17%, or
approximately $3 million during the remainder of 2013, and
reallocating an additional $3 million of reductions to the La
Preciosa project.
2013 Outlook
Coeur's estimated 2013 consolidated silver and gold production
guidance remains unchanged as shown in Table 4 below, and compares
to 2012 silver production of 18.0 million ounces and gold
production of 226,486 ounces.
Coeur has maintained its full-year 2013 projected cash operating
costs of $9.50 - $10.50 per silver ounce1, which reflects ongoing
cost reduction efforts that are expected to offset lower gold
prices used to calculate by-product credits. Although the Company
anticipates Kensington's second half cash operating costs per gold
ounce1 to be 20% lower than the first half of the year, full-year
2013 guidance for Kensington is being revised upward slightly to
$950 - $1,000 (compared to prior guidance of $900 - $950). The
midpoint of this range is 32% below 2012 cash operating costs per
gold ounce1 of $1,358 at Kensington.
Table 4: 2013 Production
Outlook
(silver ounces in thousands)
Country Silver
Gold Palmarejo
Mexico 7,700-8,300
104,000-109,000
San Bartolomé Bolivia
5,600-5,900 —
Rochester Nevada, USA 4,100-4,500
38,000-42,000
Endeavor Australia 600-800 —
Kensington
Alaska, USA
— 108,000-114,000
Total
18,000-19,500
250,000-265,000
Conference Call
Information
Coeur will hold a conference call and webcast at www.coeur.com to discuss the Company's second
quarter 2013 results at 1 p.m. Eastern time on August 8, 2013.
Dial-In Numbers: (855) 546-8317 (U.S. and
Canada) (660) 422-4718 (International) Conference ID: 217 88
354 A replay of the call will be available on Coeur's
website through August 22, 2013. Replay number: (855)
859-2056 (US and Canada) International replay: (404)
537-3406 (International) Conference ID: 217 88 354
1.
Adjusted earnings and cash operating costs
are non-GAAP measures. Please see tables in the Appendix for the
reconciliation to U.S. GAAP. Total debt includes short and
long-term indebtedness and excludes capital leases and royalty
obligations.
About Coeur
Coeur Mining, Inc. is the largest U.S.-based primary silver
producer and a growing gold producer. The Company has four precious
metals mines in the Americas generating strong production, sales,
and cash flow. 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. Coeur has a non-operating interest
in the Endeavor silver-gold mine in Australia. The Company has two
feasibility stage projects, the Joaquin silver project in Argentina
and the La Preciosa silver-gold project in Mexico. In addition,
Coeur conducts ongoing exploration activities in Mexico, Argentina,
Nevada, Alaska and Bolivia. The Company owns strategic investment
positions in eight 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 anticipated operating results,
production levels, operating costs, exploration results, and
expected results of initiatives to reduce costs and capital
expenditures, enhance revenue, maximize net cash flow, and manage
working capital, continued volatility in gold and silver prices,
industrial demand, and supply levels. 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
risk that permits necessary for the planned Rochester expansion may
not be obtained, 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, 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.
The PEA referenced in this news release is preliminary in nature
and it includes inferred mineral resources that are considered too
speculative geologically to have the economic considerations
applied to them that would enable them to be characterized as
mineral reserves and there is no certainty that the results
reflected in the PEA will be realized. Mineral resources that are
not mineral reserves do not have demonstrated economic viability.
Mineral resource estimates do not account for minability,
selectivity, mining loss and dilution. There is no certainty that
the inferred mineral resources will be converted to the measured
and indicated categories or that the measured and indicated mineral
resources will be converted to the proven and probable mineral
reserve categories.
Donald J. Birak, Coeur's Senior Vice President of Exploration
and a qualified person under Canadian National Instrument 43-101,
reviewed and approved the scientific and technical disclosures
concerning Coeur's mineral projects contained herein. 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 Reports for each
of Coeur's properties as filed on SEDAR at www.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 http://www.sec.gov.
Non-U.S. GAAP Measures
We supplement the reporting of our financial information
determined under United States generally accepted accounting
principles (U.S. GAAP) with certain non-U.S. GAAP financial
measures, including adjusted earnings and cash operating costs. We
believe that these adjusted measures provide meaningful information
to assist management, investors and analysts in understanding our
financial results and assessing our prospects for future
performance. We believe these adjusted financial measures are
important indicators of our recurring operations because they
exclude items that may not be indicative of, or are unrelated to
our core operating results, and provide a better baseline for
analyzing trends in our underlying businesses. We believe adjusted
earnings and cash operating costs are important measures in
assessing the Company's overall financial performance.
Table 5:
Operating Statistics from Continuing Operations -
(Unaudited):
Three months endedJune
30,
Six months endedJune 30,
2013 2012
2013 2012
Silver
Operations:
Palmarejo Tons milled 570,322 489,924 1,143,492 1,018,467
Ore grade/Ag oz 4.69 5.74 4.17 5.94 Ore grade/Au oz 0.06 0.07 0.05
0.07 Recovery/Ag oz 76.5 % 84.2 % 77.5 % 80.2 % Recovery/Au oz 81.2
% 92.0 % 84.9 % 92.6 % Silver production ounces 2,044,967 2,365,484
3,691,365 4,848,298 Gold production ounces 28,191 31,258 51,157
62,338 Cash operating cost/oz $ 3.25 $ (0.85 ) $ 2.78 $ (1.58 )
Cash cost/oz $ 3.25 $ (0.85 ) $ 2.78 $ (1.58 ) Total production
cost/oz $ 20.63 $ 17.28 $ 20.41 $ 15.10
San Bartolomé Tons
milled 424,310 391,005 799,295 769,109 Ore grade/Ag oz 3.98 4.26
4.03 4.43 Recovery/Ag oz 90.3 % 88.3 % 90.5 % 89.8 % Silver
production ounces 1,523,262 1,470,342 2,914,361 3,061,634 Cash
operating cost/oz $ 12.89 $ 11.05 $ 13.07 $ 10.62 Cash cost/oz $
13.80 $ 12.04 $ 14.05 $ 11.76 Total production cost/oz $ 17.21 $
14.89 $ 17.65 $ 14.44
Martha Tons milled — 39,199 — 73,268
Ore grade/Ag oz — 3.52 — 3.94 Ore grade/Au oz — — — — Recovery/Ag
oz — % 78.2 % — % 79.8 % Recovery/Au oz — % 72.4 % — % 68.6 %
Silver production ounces — 107,895 — 230,688 Gold production ounces
— 97 — 181 Cash operating cost/oz $ — $ 55.07 $ — $ 50.50 Cash
cost/oz $ — $ 56.21 $ — $ 51.39 Total production cost/oz $ — $
62.30 $ — $ 56.74
Rochester Tons milled 2,457,423 2,268,896
4,897,180 4,278,414 Ore grade/Ag oz 0.58 0.63 0.5488 — Ore grade/Au
oz 0.003 0.005 0.003 0.005 Recovery/Ag oz 59.7 % 49.8 % 55.5 % 45.7
% Recovery/Au oz 141.4 % 84.0 % 123.5 % 74.9 % Silver production
ounces 843,845 712,706 1,491,434 1,154,043 Gold production ounces
9,404 10,120 18,146 15,412 Cash operating cost/oz $ 14.75 $ 9.83 $
14.23 $ 15.00 Cash cost/oz $ 15.39 $ 11.45 $ 15.76 $ 16.54 Total
production cost/oz $ 18.15 $ 14.66 $ 18.78 $ 20.02
Endeavor
Tons milled 198,517 201,057 393,035 396,903 Ore
grade/Ag oz 2.73 3.31 2.17 3.33 Recovery/Ag oz 40.9 % 36.1
%
43.4
%
36.9
%
Silver production ounces 221,268 240,168 371,012 488,126 Cash
operating cost/oz $ 10.62 $ 17.50 $ 13.31 17.07 Cash cost/oz $
10.62 $ 17.50 $ 13.31 17.07 Total production cost/oz $ 16.13 $
24.13 $ 18.82 23.70
Gold
Operation:
Kensington Tons milled 127,987 97,794 257,044 141,730 Ore grade/Au
oz 0.18 0.23 0.19 0.22 Recovery/Au oz 98.2 % 94.2
%
97.1
%
94.0
%
Gold production ounces 23,162 21,572 48,368 29,016 Cash operating
cost/oz $ 1,115 $ 1,348 $ 1,083 $ 1,697 Cash cost/oz $ 1,115 $
1,348 $ 1,083 $ 1,697 Total production cost/oz $ 1,687 $ 1,799 $
1,634 $ 2,260
CONSOLIDATED PRODUCTION TOTALS Total silver
ounces 4,633,342 4,896,595 8,468,172 9,782,789 Total gold ounces
60,757 63,047 117,671 106,947
Silver
Operations:
Cash operating cost per oz - silver $ 8.86 $ 6.41 $ 8.80 $ 6.35
Cash cost per oz - silver $ 9.28 $ 6.97 $ 9.41 $ 6.91 Total
production cost oz - silver $ 18.84 $ 17.51 $ 19.11 $ 16.88
Gold
Operation:
Cash operating cost per oz - gold $ 1,115 $ 1,348 $ 1,083 $ 1,697
Cash cost per oz - gold $ 1,115 $ 1,348 $ 1,083 $ 1,697 Total
production cost per oz - gold $ 1,687 $ 1,799 $ 1,634 $ 2,260
CONSOLIDATED SALES TOTALS Silver ounces sold 5,228,270
5,601,953 8,304,805 9,892,001 Gold ounces sold 63,389 59,579
115,315 98,464 Realized price per silver ounce $ 22.86 $ 29.28 $
25.61 $ 30.72 Realized price per gold ounce $ 1,416 $ 1,610 $ 1,512
$ 1,646
Table
6:
COEUR MINING, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,2013
December 31,2012
ASSETS (In thousands, except share data) CURRENT
ASSETS Cash and cash equivalents $ 249,531 $ 125,440 Investments —
999 Receivables 64,607 62,438 Ore on leach pad 28,880 22,991 Metal
and other inventory 148,286 170,670 Deferred tax assets 2,620 2,458
Restricted assets 660 396 Prepaid expenses and other 17,945
20,790 512,529 406,182 NON-CURRENT ASSETS Property, plant
and equipment, net 660,333 683,860 Mining properties, net 2,357,689
1,991,951 Ore on leach pad 26,861 21,356 Restricted assets 24,468
24,970 Marketable securities 16,008 27,065 Receivables 38,539
48,767 Debt issuance costs, net 11,890 3,713 Deferred tax assets
969 955 Other 17,430 12,582 TOTAL ASSETS $ 3,666,716
$ 3,221,401
LIABILITIES AND STOCKHOLDERS’
EQUITY CURRENT LIABILITIES Accounts payable $ 57,446 $ 57,482
Accrued liabilities and other 9,369 10,002 Accrued income taxes
8,662 27,108 Accrued payroll and related benefits 15,576 21,306
Accrued interest payable 10,237 478 Debt and capital leases 5,485
55,983 Royalty obligations 44,605 65,104 Reclamation and mine
closure 473 668 Deferred tax liabilities 121 121
151,974 238,252 NON-CURRENT LIABILITIES Debt and capital leases
306,578 3,460 Royalty obligations 86,304 141,879 Reclamation and
mine closure 35,708 34,670 Deferred tax liabilities 711,550 577,488
Other long-term liabilities 23,110 27,372 1,163,250
784,869 COMMITMENTS AND CONTINGENCIES (Notes 11, 12, 13, 16, 17 and
20) STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 per share;
authorized 150,000,000 shares, issuedand outstanding 101,567,355 at
June 30, 2013 and 90,342,338 at December 31, 2012
1,016 903 Additional paid-in capital 2,770,953 2,601,254
Accumulated deficit (418,926 ) (396,156 ) Accumulated other
comprehensive loss (1,551 ) (7,721 ) 2,351,492 2,198,280
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,666,716
$ 3,221,401
Table
7:
COEUR MINING, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
Three months endedJune
30,
Six months endedJune 30,
2013 2012 2013
2012 (In thousands, except share data)
Sales of metal $ 204,525 $ 254,406 $ 376,322 $ 458,970 Production
costs applicable to sales (142,924 ) (131,823 ) (231,708 ) (224,377
) Depreciation, depletion and amortization (57,653 ) (61,024 )
(108,089 ) (113,616 ) Gross profit 3,948 61,559 36,525 120,977
COSTS AND EXPENSES General and administrative 15,026 8,594 25,253
16,190 Exploration 6,774 6,305 13,615 12,872 Litigation settlement
32,046 — 32,046 — Loss on impairment and other 86 4,813 205 4,813
Pre-development, care, maintenance and other 973 273
5,458 1,341 Total cost and expenses 54,905
19,985 76,577 35,216 OPERATING INCOME (LOSS)
(50,957 ) 41,574 (40,052 ) 85,761 OTHER INCOME AND EXPENSE Fair
value adjustments, net 66,754 16,039 84,550 (7,074 ) Other than
temporary impairment of marketable securities (17,192 ) — (17,227 )
— Interest income and other, net 419 (3,221 ) 4,275 1,786 Interest
expense, net of capitalized interest (10,930 ) (7,557 ) (20,662 )
(14,227 ) Total other income and expense, net 39,051 5,261
50,936 (19,515 ) Income (loss) before income taxes
(11,906 ) 46,835 10,884 66,246 Income tax provision (23,134 )
(23,862 ) (33,654 ) (39,298 ) NET INCOME (LOSS) $ (35,040 ) $
22,973 $ (22,770 ) $ 26,948 INCOME (LOSS) PER SHARE
Basic $ (0.35 ) $ 0.26 $ (0.24 ) $ 0.30 Diluted $
(0.35 ) $ 0.26 $ (0.24 ) $ 0.30 Weighted average
number of shares Basic 99,833 89,631 94,918 89,611 Diluted 99,833
89,733 94,918 89,777
Table
8:
COEUR MINING, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
Three months ended
June 30, Six months endedJune 30, 2013
2012 2013
2012 (In thousands) (In thousands) CASH FLOWS
FROM OPERATING ACTIVITIES: Net income (loss) $ (35,040 ) $ 22,973 $
(22,770 ) $ 26,948 Add (deduct) non-cash items Depreciation,
depletion and amortization 57,653 61,024 108,089 113,616 Accretion
of discount on debt and other assets, net 484 808 1,531 1,605
Accretion of royalty obligation 4,139 5,492 7,809 10,072 Deferred
income taxes 12,123 9,690 19,548 17,368 Fair value adjustments, net
(65,754 ) (17,759 ) (81,795 ) 4,018 Loss on foreign currency
transactions 148 70 (317 ) 369 Litigation settlement 22,046 —
22,046 — Share-based compensation 1,617 1,033 2,713 3,170 Loss on
sale of assets (264 ) 264 (1,132 ) 264 Other than temporary
impairment of marketable securities 17,192 — 17,227 — Loss on
impairment 86 4,813 205 4,813 Other non-cash charges — (40 ) — (40
) Changes in operating assets and liabilities: Receivables and
other current assets 4,401 10,319 8,647 7,365 Prepaid expenses and
other 2,930 (2,857 ) 411 1,916 Inventories 31,483 3,097 10,990
(21,625 ) Accounts payable and accrued liabilities 10,094
14,276 (16,930 ) (39,655 ) CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 63,338 113,203 76,272
130,204 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of
short term investments and marketable securities (683 ) (6,831 )
(5,332 ) (7,866 ) Proceeds from sales and maturities of short term
investments 1,522 683 6,344 20,701 Capital expenditures (27,201 )
(32,238 ) (40,028 ) (63,885 ) Acquisition of Orko Silver
Corporation (101,648 ) — (113,214 ) — Other 254 995
1,209 1,180 CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (127,756 ) (37,391 ) (151,021 ) (49,870 ) CASH FLOWS
FROM FINANCING ACTIVITIES: Proceeds from issuance of notes and bank
borrowings — — 300,000 — Payments on long-term debt, capital
leases, and associated costs (1,857 ) (8,794 ) (57,197 ) (14,244 )
Payments on gold production royalty (15,480 ) (19,287 ) (30,929 )
(40,660 ) Share repurchases — — (12,557 ) — Other (25 ) (217 ) (477
) (1,045 ) CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (17,362
) (28,298 ) 198,840 (55,949 ) INCREASE IN CASH AND CASH
EQUIVALENTS (81,780 ) 47,514 124,091 24,385 Cash and cash
equivalents at beginning of period 331,311 151,883
125,440 175,012 Cash and cash equivalents at end of
period $ 249,531 $ 199,397 $ 249,531 $ 199,397
Table
9:
Adjusted Earnings Reconciliation -
(Unaudited)
(in thousands)
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Net income (loss) $ (35,040 ) $ 12,270
$ 37,550 $ (15,821 ) $ 22,973 Share based compensation 1,617 1,096
1,476 3,364 1,033 Deferred income tax provision 12,123 7,425 3,738
(4,942 ) 9,690 Accretion of royalty obligation 4,139 3,670 3,946
4,276 5,492 Fair value adjustments, net (66,754 ) (17,796 ) (21,235
) 37,648 (16,039 ) Litigation settlement 32,046 — — — — Other than
temporary impairment of marketable securities 17,192 — — — — Loss
on impairment 86 119 (281 ) 1,293 4,813 Loss on debt
extinguishments — —
1,036 —
—
Adjusted Earnings
$ (34,591 ) $
6,784 $ 26,230
$ 25,818 $
27,962
Table
10:
Results of Operations by Mine -
Palmarejo - (Unaudited)
in millions of US$
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Sales of metal $ 86.2 $ 57.4 $ 79.4 $
102.6 $ 136.4 Production costs $ 55.2 $ 26.7 $ 40.4 $ 48.7 $ 62.5
Operating income $ (7.7 ) $ (0.2 ) $ 4.5 $ 17.7 $ 29.5 Cash flow
from operating activities $ 37.2 $ 10.1 $ 22.9 $ 58.2 $ 90.5
Capital expenditures $ 9.2 $ 5.3 $ 8.8 $ 11.3 $ 11.2 Gross profit $
(4.6 ) $ 1.8 $ 6.8 $ 20.0 $ 31.1 Gross margin (5.3 )% 3.1 % 8.7 %
19.5 % 22.8 %
2Q 2013 1Q 2013
4Q 2012 3Q 2012
2Q 2012 Underground Operations: Tons mined 183,267
151,232 139,925 143,747 162,820 Average silver grade (oz/t) 4.59
4.22 4.70 6.13 8.91 Average gold grade (oz/t) 0.11 0.09 0.08 0.09
0.14 Surface Operations: Tons mined 363,758 388,651 465,498 424,380
321,758 Average silver grade (oz/t) 4.95 3.45 2.62 2.79 4.14
Average gold grade (oz/t) 0.04 0.03 0.02 0.03 0.04 Processing:
Total tons milled 570,322 573,170 563,123 532,775 489,924 Average
recovery rate – Ag 76.5 % 78.8 % 84.2 % 90.0 % 84.2 % Average
recovery rate – Au 81.2 % 90.1 % 91.4 % 102.5 % 92.0 % Silver
production - oz (000's) 2,045 1,646 1,555 1,833 2,365 Gold
production - oz 28,191 22,965 19,998 23,702 31,258 Cash operating
costs/Ag Oz $ 3.25 $ 2.20 $ 7.55 $ 3.75 $ (0.85 )
Table
11:
Results of Operations by Mine - San
Bartolomé - (Unaudited)
in millions of US$
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Sales of metal $ 49.2 $ 33.1 $ 37.0 $
46.2 $ 53.4 Production costs $ 32.8 $ 15.7 $ 15.1 $ 19.9 $ 22.8
Operating income $ 11.5 $ 8.9 $ 17.5 $ 22.0 $ 26.6 Cash flow from
operating activities $ 32.8 $ (5.4 ) $ 9.5 $ 19.8 $ 31.0 Capital
expenditures $ 3.2 $ 0.5 $ 3.3 $ 4.4 $ 7.8 Gross profit $ 11.5 $
12.7 $ 17.6 $ 22.1 $ 26.5 Gross margin 23.3 % 38.4 % 47.7 % 47.8 %
49.6 %
2Q 2013 1Q 2013
4Q 2012 3Q 2012
1Q 2012 Tons milled 424,310 374,985 363,813 344,349 391,005
Average silver grade (oz/t) 4.0 4.1 4.2 4.9 4.3 Average recovery
rate 90.3 % 90.6 % 88 % 90.3 % 88.3 % Silver production (000's)
1,523 1,391 1,343 1,526 1,470 Cash operating costs/Ag Oz $ 12.89 $
13.27 $ 13.97 $ 12.13 $ 11.05
Table
12:
Results of Operations by Mine -
Kensington - (Unaudited)
in millions of US$
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Sales of metal $ 30.9 $ 39.3 $ 43.0 $
36.5 $ 21.1 Production costs $ 30.2 $ 23.6 $ 27.0 $ 26.9 $ 16.1
Operating income $ (13.3 ) $ 1.6 $ 0.9 $ (3.5 ) $ (5.0 ) Cash flow
from operating activities $ 7.6 $ 11.7 $ 16.5 $ 5.0 $ (12.5 )
Capital expenditures $ 7.4 $ 3.3 $ 7.8 $ 9.0 $ 9.3 Gross profit/ $
(12.6 ) $ 2.3 $ 2.2 $ (1.9 ) $ (4.7 ) Gross margin (40.7 )% 5.9 %
5.1 % (5.2 )% (22.3 )%
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Tons mined 135,123 116,747 140,626
113,770 84,632 Tons milled 127,987 129,057 129,622 123,428 97,794
Average gold grade (oz/t) 0.18 0.20 0.23 0.21 0.23 Average recovery
rate 98.2 % 96.2 % 96.9 % 95.9 % 94.2 % Gold production 23,162
25,206 28,718 24,391 21,572 Cash operating costs/Ag Oz $ 1,115 $
1,055 $ 1,065 $ 1,298 $ 1,348
Table
13:
Results of Operations by Mine -
Rochester - (Unaudited)
in millions of US$
2Q 2013 1Q
2013 4Q 2012 3Q 2012
2Q 2012 Sales of metal $ 34.9 $ 39.5 $ 43.2 $
36.2 $ 34.2 Production costs $ 23.1 $ 21.5 $ 22.9 $ 21.0 $ 20.8
Operating income $ (25.2 ) $ 15.2 $ 19.2 $ 10.9 $ 9.5 Cash flow
from operating activities $ (3.4 ) $ 5.6 $ 18.2 $ 7.3 $ 10.1
Capital expenditures $ 6.6 $ 3.3 $ 1.5 $ 4.8 $ 2.9 Gross profit $
9.5 $ 15.8 $ 18.0 $ 13.2 $ 11.3 Gross margin 27.3 % 40.0 % 41.7 %
36.5 % 33.0 %
2Q 2013 1Q 2013
4Q 2012 3Q 2012
2Q 2012 Tons mined 2,667,639 2,924,472 3,031,428
3,170,129 2,585,914 Average silver grade (oz/t) 0.58 0.52 0.51 0.52
0.63 Average gold grade (oz/t) 0.003 0.003 0.005 0.004 0.005 Silver
production (000's) 844 648 828 819 713 Gold production 9,404 8,742
12,055 10,599 10,120 Cash operating costs/Ag Oz $ 14.75 $ 13.54 $
2.17 $ 9.58 $ 9.83
Table
14:
Results of Operations by Mine -
Endeavor - (Unaudited)
in millions of US$
2Q
2013 1Q 2013
4Q 2012 3Q 2012
2Q 2012 Sales of metal $ 3.5 $ 3.0 $ 2.8 $ 4.1 $ 5.2
Production costs $ 1.7 $ 1.3 $ 1.6 $ 2.0 $ 2.6 Operating income $
0.6 $ 0.8 $ 0.8 $ 1.3 $ 1.1 Cash flow from operating activities $
1.2 $ 1.6 $ 1.6 $ 1.5 $ 3.6 Capital expenditures $ — $ — $ — $ — $
— Gross profit $ 0.6 $ 0.8 $ 0.8 $ 1.3 $ 1.1 Gross margin 17.1 %
26.7 % 28.6 % 31.7 % 21.2 %
2Q 2013
1Q 2013 4Q 2012
3Q 2012 2Q 2012
Silver Production (000's) 221 150 105 140 240 Cash operating
costs/Ag Oz $ 10.62 $ 17.30 $ 19.92 $ 15.97 $ 17.50
Table
15:
Reconciliation of Non-U.S. GAAP Cash
Costs to U.S. GAAP Production Costs
Three months ended June 30,
2013
(In
thousands except ounces and per ounce costs)
Palmarejo San Bartolomé Kensington
Rochester Martha Endeavor Total Total
cash operating cost (Non-U.S. GAAP) $ 6,639 $ 19,636 $ 25,819 $
12,450 $ (16 ) $ 2,350 $ 66,878 Royalties — 1,383 — — — — 1,383
Production taxes — — — 538 — —
538 Total cash costs (Non-U.S. GAAP) $ 6,639 $
21,019 $ 25,819 $ 12,988 $ (16 ) $ 2,350
$ 68,799 Add/Subtract: Third party smelting costs — —
(2,449 ) — 16 (831 ) (3,264 ) By-product credit 39,828 — — 13,391 —
— 53,219 Other adjustments 7 256 — — — — 263 Change in inventory
8,735 11,541 6,784 (3,325 ) — 164 23,899 Depreciation, depletion
and amortization 35,543 4,941 13,261 2,325
— 1,220 57,290 Production costs
applicable to sales, including depreciation, depletion and
amortization (U.S. GAAP) $ 90,752 $ 37,757 $ 43,415
$ 25,379 $ — $ 2,903 $ 200,206
Production of silver (ounces) 2,044,967 1,523,262 — 843,845 —
221,268 4,633,342 Cash operating cost per silver ounce $ 3.25 $
12.89 $ — $ 14.75 $ — $ 10.62 $ 8.86 Cash costs per silver ounce $
3.25 $ 13.80 $ — $ 15.39 $ — $ 10.62 $ 9.28 Production of gold
(ounces) — — 23,162 — — — 23,162 Cash operating cost per gold ounce
$ — $ — $ 1,115 $ — $ — $ — $ 1,115 Cash cost per gold ounce $ — $
— $ 1,115 $ — $ — $ — $ 1,115
Table
16:
Reconciliation of Non-U.S. GAAP Cash
Costs to U.S. GAAP Production Costs
Three months ended June 30,
2012
(In thousands except ounces and per ounce costs)
Palmarejo San Bartolomé Kensington
Rochester Martha Endeavor Total Total
cash operating cost (Non-U.S. GAAP) $ (2,009 ) $ 16,249 $ 29,083 $
7,008 $ 5,942 $ 4,204 $ 60,477 Royalties — 1,457 — 510 124 — 2,091
Production taxes — — — 641 — —
641 Total cash costs (Non-U.S. GAAP) $ (2,009 ) $
17,706 $ 29,083 $ 8,159 $ 6,066 $ 4,204
$ 63,209 Add/Subtract: Third party smelting costs — —
(2,820 ) — (1,444 ) (1,449 ) (5,713 ) By-product credit 50,363 — —
16,295 157 — 66,815 Other adjustments 124 117 7 229 26 — 503 Change
in inventory 14,060 4,950 (10,165 ) (3,931 ) 2,297 (202 ) 7,009
Depreciation, depletion and amortization 42,741 4,070
9,719 2,060 631 1,592 60,813
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP) $ 105,279 $ 26,843
$ 25,824 $ 22,812 $ 7,733 $ 4,145
$ 192,636 Production of silver (ounces) 2,365,484
1,470,342 — 712,706 107,895 240,168 4,896,595 Cash operating cost
per silver ounce $ (0.85 ) $ 11.05 $ — $ 9.83 $ 55.07 $ 17.50 $
6.41 Cash costs per silver ounce $ (0.85 ) $ 12.04 $ — $ 11.45 $
56.21 $ 17.50 $ 6.97 Production of gold (ounces) — — 21,572 — — —
21,572 Cash operating cost per gold ounce $ — $ — $ 1,348 $ — $ — $
— $ 1,348 Cash cost per gold ounce $ — $ — $ 1,348 $ — $ — $ — $
1,348
Table
17:
Reconciliation of Non-U.S. GAAP Cash
Costs to U.S. GAAP Production Costs
Six months ended June 30, 2013
(In thousands except ounces and per ounce costs)
Palmarejo San Bartolomé Kensington
Rochester Martha Endeavor Total Total
cash operating cost (Non-U.S. GAAP) $ 10,257 $ 38,101 $ 52,401 $
21,219 $ 17 $ 4,938 $ 126,933 Royalties — 2,835 — 1,025 — — 3,860
Production taxes — — — 1,264 — —
1,264 Total cash costs (Non-U.S. GAAP) $ 10,257
$ 40,936 $ 52,401 $ 23,508 $ 17
$ 4,938 $ 132,057 Add/Subtract: Third party smelting
costs — — (5,715 ) — (17 ) (1,751 ) (7,483 ) By-product credit
77,092 — — 27,679 — — 104,771 Other adjustments 611 810 — — — —
1,421 Change in inventory (6,031 ) 6,746 7,032 (6,630 ) — (183 )
934 Depreciation, depletion and amortization 64,478 9,697
26,647 4,505 — 2,044 107,371
Production costs applicable to sales, including
depreciation, depletion and amortization (U.S. GAAP) $ 146,407
$ 58,189 $ 80,365 $ 49,062 $ — $
5,048 $ 339,071 Production of silver (ounces)
3,691,365 2,914,361 — 1,491,434 — 371,012 8,468,172 Cash operating
cost per silver ounce $ 2.78 $ 13.07 $ — $ 14.23 $ — $ 13.31 $ 8.80
Cash costs per silver ounce $ 2.78 $ 14.05 $ — $ 15.76 $ — $ 13.31
$ 9.41 Production of gold (ounces) — — 48,368 — — — 48,368 Cash
operating cost per gold ounce $ — $ — $ 1,083 $ — $ — $ — $ 1,083
Cash cost per gold ounce $ — $ — $ 1,083 $ — $ — $ — $ 1,083
Table
18:
Reconciliation of Non-U.S. GAAP Cash
Costs to U.S. GAAP Production Costs
Six months ended June 30, 2012
(In thousands except ounces and per ounce costs)
Palmarejo San Bartolomé Kensington
Rochester Martha Endeavor Total Total
cash operating cost (Non-U.S. GAAP) $ (7,652 ) $ 32,502 $ 49,251 $
17,311 $ 11,649 $ 8,331 $ 111,392 Royalties — 3,493 — 1,119 206 —
4,818 Production taxes — — — 653 —
— 653 Total cash costs (Non-U.S. GAAP) $
(7,652 ) $ 35,995 $ 49,251 $ 19,083 $ 11,855
$ 8,331 $ 116,863 Add/Subtract: Third party
smelting costs — — (3,903 ) — (3,418 ) (2,238 ) (9,559 ) By-product
credit 102,889 — — 25,252 298 — 128,439 Other adjustments 368 (77 )
14 316 83 — 704 Change in inventory 12,793 463 (12,166 ) (14,335 )
1,977 (803 ) (12,071 ) Depreciation, depletion and amortization
80,501 8,289 16,324 3,702 1,151
3,236 113,203 Production costs applicable to sales,
including depreciation, depletion and amortization (U.S. GAAP) $
188,899 $ 44,670 $ 49,520 $ 34,018 $
11,946 $ 8,526 $ 337,579 Production of silver
(ounces) 4,848,298 3,061,634 — 1,154,043 230,688 488,126 9,782,789
Cash operating cost per silver ounce $ (1.58 ) $ 10.62 $ — $ 15.00
$ 50.50 $ 17.07 $ 6.35 Cash costs per silver ounce $ (1.58 ) $
11.76 $ — $ 16.54 $ 51.39 $ 17.07 $ 6.91 Production of gold
(ounces) — — 29,016 — — — 29,016 Cash operating cost per gold ounce
$ — $ — $ 1,697 $ — $ — $ — $ 1,697 Cash cost per gold ounce $ — $
— $ 1,697 $ — $ — $ — $ 1,697
Table
19:
Co-Product Cash Cost Per Ounce for
Three and Six months ended June 30, 2013 - (Unaudited)
Three months endedJune 30,
2013
Six months endedJune 30,
2013
Palmarejo Rochester
Palmarejo Rochester Total cash
operating costs $ 46,467 $25,841 $ 87,348 $ 48,898 Total cash costs
$ 46,467 $26,379 $ 87,348 $ 51,187 Revenue Silver 54 % 55 %
56 % 55 % Gold 46 % 45 % 44 % 45 % Ounces produced Silver
2,044,967 843,845 3,691,365 1,491,434 Gold 28,191 9,404 51,157
18,146 Total cash operating costs per ounce Silver $ 12.24
$16.99 $ 13.22 $ 18.06 Gold $ 761 $1,223 $ 753 $ 1,210 Total
cash costs per ounce Silver $ 12.24 $17.34 $ 13.22 $ 18.91 Gold $
761 $1,249 $ 753 $ 1,267
Table
20:
Co-Product Cash Cost Per Ounce for
Three and Six months ended June 30, 2012 - (Unaudited)
Three months endedJune 30,
2012
Six months endedJune 30,
2012
Palmarejo Rochester Palmarejo
Rochester Total cash operating costs $ 48,354
$ 23,303 $ 95,237 $ 42,564 Total cash costs $ 48,354 $ 24,454 $
95,237 $ 44,336 Revenue Silver 58 % 55 % 59 % 61 % Gold 42 %
45 % 41 % 39 % Ounces produced Silver 2,365,484 712,706
4,848,298 1,154,043 Gold 31,258 10,120 62,338 15,412 Total
cash operating costs per ounce Silver $11.89 $17.99 $11.61 $22.40
Gold $647 $1,036 $625 $1,084 Total cash costs per ounce
Silver $11.89 $18.87 $11.61 $23.34 Gold $647 $1,087 $625 $1,129
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