Coeur doubles Mexico exploration budget to $158M

Coeur Mining (TSX, NYSE: CDE) plans to spend twice as much this year drilling in Mexico after reporting high-grade assays from its Palmarejo operation in Chihuahua state. The stock rose.

Hole SMDH-138 at Palmarejo’s San Miguel target cut 11.5 metres grading 6.9 grams gold and 1,250 grams silver per tonne from 274 metres depth, according to a statement late Tuesday. Nearby hole SMDH-118 cut 10.8 metres of 3.4 grams gold and 1,083 grams silver from 335 metres downhole.

Chicago-based Coeur is earmarking $158 million (C$221 million) for exploration in Mexico this year, its largest ever program. The amount includes $27 million and 83 km of drilling at Palmarejo and $24 million and 119 km of drilling at the Las Chispas mine in Sonora State. This will bring Coeur’s exploration spending in the country to about $340 million over five years.

“We view these results as positive given the scale of drilling and high-grade intercepts at both assets,” Scotia Capital mining analyst Eric Winmill said Wednesday in a note. “Palmarejo’s Eastern District is emerging as a longer-term production front, while Independencia Sur offers nearer-term reserve potential.”

Coeur shares rose 5.3% to $16.10 Wednesday morning in New York Stock Exchange trading, valuing the company at about $16.6 billion. The stock has traded between $8.57 and $27.77 in the past year.

Satellite targets

The increased spending will support additional drilling at Palmarejo’s underground deposits as well as expanded testing of satellite targets and regional prospects across the company’s extensive land package, Coeur said.

Exploration work is also accelerating at Las Chispas, which Coeur acquired through its $1.7 billion purchase of SilverCrest Metals last year and now views as another key platform for resource growth.

Other assay highlights include hole LUDH-111 at La Union, which cut 14.5 metres of 6.3 grams gold and 19 grams silver from 415 metres depth, and hole LUDH-093, which cut 7.9 metres of 7 grams gold and 14 grams silver from 194 metres.

Hole VIDH-221 at the Independencia Sur target, meanwhile, intersected 9.1 metres grading 16.5 grams gold and 206 grams silver from 473 metres downhole.

Deposits at San Miguel and La Union remain open in all directions, Coeur said.

Cornerstone operation

Located about 1,150 km northwest of Mexico City, Palmarejo has been one of Coeur’s cornerstone operations since entering production in 2009. It includes a processing facility, three underground mines, exploration targets and a campsite.

Including nearby satellite deposits, Palmarejo has produced millions of ounces of precious metals and remains a key cash-flow generator. Exploration work has consistently extended the operation’s reserve life by identifying new mineralization near existing infrastructure.

Palmarejo produced 6.5 million oz. silver and 101,000 oz. gold last year, accounting for 36% of Coeur’s total silver output and 24% of gold production.

Las Chispas, which can be accessed by highway from the city of Hermosillo, is the site of historical silver and gold production from narrow high-grade veins in numerous underground mines dating back as early as the 1640s. It produced 5.1 million oz. silver and 55,000 oz. gold last year.