Coeur Mining’s shares hit on first quarter 2019 production and sales report

Silvertip mine, British Columbia, Canada. Image from Coeur Mining.

Shares in Coeur Mining (NYSE: CDE), the second largest primary silver producer in the US, took a 3.9% hit Thursday, after reporting that first quarter 2019 gold and silver production had decreased at three of its five mines. Friday’s gold and silver spot prices were steady at $1,290.33 and $14.98 per ounce.

Total production for the first quarter of the year was 78,336 ounces of gold, 2.5 million ounces of silver, 3.7 million pounds of zinc and 3.1 million pounds of lead. Metal sales for the quarter were 85,326 ounces of gold, 2.6 million ounces of silver, 4.7 million pounds of zinc and 2.7 million pounds of lead.

At its Palmarejo mine in Mexico, Coeur produced 23,205 ounces of gold in the first quarter of this year, a steep drop from the 31,239 ounces produced in the fourth quarter of last year. Silver production was down to 1.278 million ounces from 1.893 million. Year-over-year, gold and silver production decreased 22% and 37%, respectively. Full-year 2019 production guidance for Palmarejo remains unchanged at 95,000 – 105,000 ounces of gold and 6.5 – 7.2 million ounces of silver.

The miner said lower production during the quarter at Palmarejo was primarily driven by temporarily lower grades and recoveries due to mine sequencing.

Ounces of gold sold from Palmarejo in 1Q2019 was 27,394, up from 23,667 ounces the prior quarter, while silver ounces sold dropped slightly from 1.534 million to 1.405 million.

Approximately 32% of gold sales in the first quarter, or 8,803 ounces, were sold under Palmarejo’s gold stream agreement at a price of $800 per ounce. Full-year gold sales under the stream agreement are expected to remain at similar levels, the company said.

Full-year 2019 production guidance remains unchanged at 95,000 – 105,000 ounces of gold and 6.5 – 7.2 million ounces of silver.

President and CEO Mitchell Krebs maintained that operating results were in-line with expectations and that Coeur’s top two 2019 initiatives remain on-track

At Rochester, Nevada, gold ounces produced fell from 15,926 to 8,256 while silver production dropped from 1.466 million ounces to 960,000.

Silver and gold production during the first quarter decreased 35% and 48%, respectively, to 1.0 million and 8,256 ounces compared to the prior quarter. Year-over-year, silver and gold production decreased 17% and 28%, respectively.

Coeur said lower at Rochester production was driven by reduced ore placement rates due to snowfall in western Nevada. The adverse weather had a comparatively larger impact on gold production as silver production was partially offset by higher residual leach pad performance, the company said.

Ounces of silver sold at Rochester dropped from 1.391 million to 1 million, while gold sales plummeted from 15,339 ounces to 8,511.

At the Jualin mine in Kensington, Alaska, gold ounces produced dropped from 35,335 to 29,973 while gold ounces sold was 31,335, down from 33,202. First quarter gold production of 29,973 ounces represented a 15% decrease quarter-over-quarter and a 15% increase compared to the same period the prior year.

At Wharf, South Dakota, Gold production remained relatively flat quarter-over-quarter at 16,902 ounces in the first quarter and decreased 6% year-over-year.

The company achieved commercial production at Silvertip in British Columbia, where first quarter silver, zinc and lead production increased 68%, 21% and 86%, respectively, to 0.2 million ounces of silver, 3.7 million pounds of zinc and 3.1 million pounds of lead compared to the prior quarter.

Higher production was driven by higher tons milled, which increased 60% quarter-over-quarter, Coeur said. In 2017, Coeur acquired the Silvertip mine by buying Denham Capitals’ JDS Silver in a deal worth about $250 million.

President and CEO Mitchell Krebs maintained that operating results were in-line with expectations and that Coeur’s top two 2019 initiatives – ramping up operating activities at its Silvertip mine in British Columbia, Canada and completing the installation of the high-pressure grinding roll unit at Rochester, Nevada – remain on-track.

“Our full-year financial and operating results are anticipated to be second half weighted,” Krebs said in a media statement. “We expect higher production levels at Palmarejo as production begins at the new La Nación deposit.”

Krebs said Rochester’s second half 2019 production is expected to increase due to the positive impacts of the new HPGR unit, while higher mining and processing rates from the higher-grade Jualin deposit are expected to boost second half production at Kensington. Together, these initiatives are expected to lead to a return to positive free cash flow in 2019.”

Coeur expects to produce 334,000 – 372,000 ounces of gold, 12.2 – 14.7 million ounces of silver, 25 – 40 million pounds of zinc and 20 – 35 million pounds of lead in 2019.

Coeur closed the day down 3.43%, with shares priced at $3.94 on the NYSE.

Trading volume increased from the 3.02 million average to over 4.66 million. The company has an $808 million market capitalization.

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