Coeur outlines more silver at Martha

Reverse-circulation drilling by Coeur d’Alene Mines (CDE-N) has increased the resource at the Martha silver mine in Santa Cruz province, Argentina, by about a quarter.

The new resources are along strike and downdip from known mineralization blocked out in the existing mine workings. The new drilling brings the resource figure to 33,000 tonnes grading 3,800 grams silver per tonne.

About 100 metres east of the Martha workings, Coeur d’Alene has identified another zone of high-grade silver mineralization in the R-4 prospect. The mineralization occupies the same structure as the main Martha orebody.

At R-4, one reverse-circulation hole intersected 1 metre grading 11,008 grams silver per tonne. A second hole intersected 4,165 grams per tonne over 11.5 metres, and a third cut a 20.5-metre interval with an average silver grade of 1,067 grams.

The company expects to convert virtually all the existing resource into reserves (at present, about two-thirds of it is in proven and probable reserves). The main Martha vein structure is thought to be prospective over a 1.6-km strike length, and two other veins have been identified on surface.

More drilling is about to begin.

Thanks in large part to the first full quarter of production from the Cerro Bayo mine in southern Chile, Coeur d’Alene enjoyed record silver production during the recent third quarter.

For the three months ended Sept. 30, the company produced 3.8 million oz. of silver, a 47% increase from the year-ago period. At the same time, consolidated cash costs fell 28% to US$2.92 per oz. Cerro Bayo, which began producing in mid-April, turned out 881,348 of those ounces at US$1.95 apiece.

For the first nine months of the year, silver production rang in at a record 10 million oz., 28% better than a year earlier. Cash costs fell US54 to US$3.33 per oz.

Over the quarter, Coeur d’Alene realized an average of US$4.65 for each ounce of silver produced, up from US$4.26 per oz. in the comparable 2001 quarter. None of the production is hedged.

Financially, Coeur remains stuck in the red despite the record production.

For the quarter, the company reported a net loss of US$12.3 million, or US14 per share, compared with a year-earlier loss of US$26.9 million, or US62 per share. Revenue climbed 55% to US$26.5 million, and operations ate up US$2.3 million in cash, a nice turnaround from the US$9.8 million consumed in the third quarter of last year. During September, cash flow swung to the plus side to the tune of US$2.8 million. The increased revenue and lower unit cash costs were offset by higher interest expenses.

For the first nine months of 2002, Coeur d’Alene’s net loss piled up to US$35.1 million (or US51 per share) on revenue of US$65.7 million, compared with year-earlier earnings of US$15.2 million (US37 per share), which included a US$48.2-million gain on the early retirement of debt. Operations ran through US$7.7 million in cash, down from US$25.7 million.

Cerro Bayo also more than offset the loss of gold production after the closure of the Petorca gold mine in Chile, Coeur’s only principal gold producer. During the quarter, Coeur d’Alene produced 33,966 oz. of byproduct gold at Cerro Bayo and the Rochester mine in Nevada. A year earlier, the company produced 21,734 oz. The quarter’s average realized price climbed US$37 to US$315 per oz. Coeur has 30,000 oz. gold sold forward over the next 15 months at an average of US$324 apiece.

At Cerro Bayo, wider-than-expected veins (primarily the Lucero vein) required expanded stope development, and cut into production. Coeur expects silver production to double and gold production to increase by 50% during the fourth quarter. Cash costs are expected to fall by about 30% to US65 per oz. silver. For all of 2002, the mine is expected to produce 3 million oz. silver and 44,000 oz. gold.

A 12% rise in quarterly production to 1.2 million oz. silver at Coeur d’Alene’s Silver Valley division in Idaho should enable it to produce a record 5.2 million oz. silver this year, and although cash costs came in at a high US$4.54 per oz. during the recent quarter and are projected at US$4.30 per oz. for the remainder of the year, mechanized mining is serving to reduce those costs.

At the end of September, working capital stood at US$38.8 million, with cash and equivalents pegged at US$7.4 million in total.

Total debt fell to US$103.7 million, from US$145.5 million at the end of 2001.

The company’s outstanding shares grew to 100.3 million after holders of US$24 million worth of the company’s Series I and II 13 3/8% notes cashed in for 17.7 million shares.