Coeur Mining, Inc. (“Coeur” or the “Company”) (NYSE:CDE)
(TSX:CDM) today announced the formation of a new wholly-owned
subsidiary, Coeur Capital, Inc. (“Coeur Capital”), which will hold
Coeur’s existing and any future-acquired royalty and streaming
interests along with its portfolio of strategic equity investments.
Increasing Coeur’s interests in royalties and streams through Coeur
Capital is expected to provide the Company’s stockholders with
higher-margin, less volatile free cash flow1, diversified metal
exposure, and future avenues for growth.
In addition, Coeur today announced that it has entered into an
agreement for Coeur Capital to acquire Global Royalty Corp.
(“Global Royalty”), a Vancouver-based privately-held company
holding precious metals royalty interests in operating mines
located in Mexico and Ecuador. Total consideration for the
transaction, which is expected to close in December 2013, will be
approximately $23.8 million, consisting of $0.3 million in cash and
$23.6 million in Coeur common shares, which represents a 2.1%
increase in Coeur’s current outstanding shares of 100.5 million.
Upon closing of the transaction, Mark Kucher, President and CEO of
Global Royalty, has agreed to join Coeur Capital as Managing
Director and will have primary responsibility for its daily
management and growth. Mr. Kucher, who is the largest shareholder
of Global Royalty, has agreed to support the transaction with
Coeur.
“We are pleased to announce our agreement to acquire Global
Royalty,” said Mitchell J. Krebs, Coeur’s President and Chief
Executive Officer. “Combining Global Royalty’s cash flowing
royalties with those already owned by Coeur into a newly-formed
entity is expected to enhance the quality and stability of our cash
flows, offer superior leverage to metals prices, reduce our overall
risk profile, and increase our margins and current net cash flow.
Over time, we believe Coeur Capital can build sufficient critical
mass to make a meaningful impact on our overall margins and cash
flow and eventually be valued by the equity markets at the
multiples currently enjoyed by streaming and royalty companies due
to the attractive nature of this business model. While the
acquisition of Global Royalty and the formation of Coeur Capital
are expected to augment and balance our composite asset portfolio
and complement our business development initiatives, our focus and
priority will remain on our core business, which is exploring,
developing, and operating precious metals assets.”
Global Royalty owns a tiered royalty on McEwen Mining Inc.’s
(“McEwen Mining”) (NYSE: MUX, TSX: MUX) El Gallo/Magistral mine in
Mexico, currently paying a 3.5% net smelter royalty (NSR), and a
1.5% NSR royalty on Dynasty Metals & Mining, Inc.’s (“Dynasty”)
(TSX: DMM) Zaruma gold mine in Ecuador. Both mines are currently in
production and paying royalties. Global Royalty also has an option
to acquire an additional 1.5% NSR on Zaruma (for a total of 3.0%),
plus 1.0% NSR interests on Dynasty’s Jerusalem and Dynasty
Goldfields projects in Ecuador, for an additional $5.0 million.
Coeur Capital intends to exercise this option upon closing the
Global Royalty transaction.
El Gallo Complex2
Under McEwen Mining’s ownership, El Gallo has been in production
since September 2012 and reached commercial production on January
1, 2013. Global Royalty has received proceeds from McEwen totaling
$1,117,227 since September 2012. The mine remains on track to meet
its production guidance of 27,310 gold equivalent ounces in
2013.
The El Gallo plant is currently being expanded from 3,000 to
4,500 tonnes per day. The expansion is ahead of schedule with
completion expected at the end of Q1 2014. The increased capacity,
combined with higher grades as mining moves deeper in the pit, is
expected to increase production from 27,310 gold equivalent ounces
in 2013, to 37,500 gold equivalent ounces in 2014 and 75,000 gold
equivalent ounces by 2015. The royalty on the El Gallo mine is
currently 3.5% until cumulative production of 350,000 ounces of
gold equivalent production has been reached, of which approximately
275,000 ounces remain to be produced at this royalty rate. The
royalty then decreases to 1.0% in perpetuity. To date 28,426 ounces
of gold equivalent has been produced at El Gallo.
Zaruma Project3
The Zaruma project is in pre-commercial production, with
processing of ore to doré at the Zaruma processing plant located in
Zaruma, Ecuador. For the nine months ended September 30, 2013,
Dynasty received proceeds of $23.3 million from the sale of
approximately 15,245 ounces of processed gold and 45,409 ounces of
processed silver derived from intermittent operations at its
processing plant in Zaruma during the continued development of the
Zaruma mines. Global Royalty Corp. has received proceeds from
Dynasty totaling $565,082 since January 2012.
Subsequent to September 30, 2013, and up to the date of this
news release, Dynasty exported approximately 4,500 ounces of gold
and 9,000 ounces of silver with an aggregate approximate value of
$6.1 million.
Existing Coeur Royalty and Streaming Interests
Endeavor is an underground lead/zinc/silver mine and associated
mill facility operated by a subsidiary of Toho Zinc in Australia
and has been in production since 1983. Coeur owns 100% of the
silver production and reserves (up to 20 million payable ounces).
Endeavor generated $10.4 million of after-tax cash flow1,4 and
produced 665,816 payable ounces of silver in 2012 and is expected
to produce 600,000-800,000 payable ounces of silver in 20135.
Cerro Bayo is a silver-gold mine operated by Mandalay Resources
Corp. in Chile. The mine has a 2% NSR for the life of mine; Coeur
received its first royalty payment from this royalty in the third
quarter 2013. 2014 production6 is expected to be 3.0-3.2 million
ounces of silver and 23,000-27,000 ounces of gold. 2014 cash costs
per silver ounce1,6 are expected to be $6-$8.
A slide deck and Q&A information sheet to accompany this
release are posted at www.coeur.com.
Coeur is being represented by Goodmans LLP in the Global Royalty
acquisition.
1.
Non-GAAP measure.
2.
Source: Publicly available information
published by McEwen Mining Inc. including the technical report
dated August 30, 2013 on file at www.sedar.com.
3.
Source: Publicly available information
published by Dynasty Metals & Mining Inc. including the
technical report dated August 21, 2006 on file at
www.sedar.com.
4.
Source: Coeur December 31, 2012 Form 10-K.
Calculated as net income plus depreciation, depletion and
amortization.
5.
Guidance as published on November 6, 2013
by Coeur.
6.
Guidance as published on November 5, 2013
by Mandalay Resources Corp.
About Coeur
Coeur Mining, Inc. is the largest U.S.-based primary silver
producer and a significant 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. The Company also has
a non-operating interest in the Endeavor mine in Australia in
addition to a 2.0% net smelter royalty on the Cerro Bayo
silver-gold mine in Chile. 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 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 shall not constitute an offer to sell or a
solicitation of an offer to purchase the Coeur shares and shall not
constitute an offer, solicitation or sale in any jurisdiction,
province or state in which such an offer, solicitation or sale
would be unlawful.
This news release contains forward-looking statements within the
meaning of securities legislation in the United States and Canada,
including statements regarding the anticipated closing of the
Global Royalty transaction, strategic priorities and initiatives
and expectations regarding leverage to metals prices, risk
exposures, valuations, margins, cash flow, growth and anticipated
production. 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, the absence of control over mining
operations in which Coeur or Coeur Capital holds 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 jurisdictions in
which the mining operations are located and changes in project
parameters as plans continue to be refined; 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.
Inferred mineral resources are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be characterized as mineral
reserves. 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. For additional information, please refer to the
Canadian National Instrument 43-101-compliant Technical Reports for
the applicable properties available on www.sedar.com or other
publicly available disclosure of the applicable mine operators.
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 cash costs, after-tax cash flow,
and free cash flow. 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 cash costs, after-tax cash flow, and free cash flow are
important measures in assessing the Company's overall financial
performance.
Coeur Mining, Inc.Bridget Freas, 312-489-5819Director, Investor
RelationsDonna Mirandola, 312-489-5842Director, Corporate
Communicationswww.coeur.com
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