Coeur D’Alene Trims Debt, Sells Broken Hill Silver

It’s shaping into a good year for Coeur d’Alene Mines (CDM-T, CDE-N).

On top of having two new silver mines in production and a third gold mine on the way, the renewed strength in the Idahobased silver miner’s share price has allowed it to retire a significant amount of debt.

Through privately negotiated deals, Coeur was able to cut debt payments to its convertible bonds by more than US$150 million, or 37%.

The company reduced its 1.25% convertible senior notes due in 2024 to US$106.7 million from US$180 million, and cut its 3.25% convertible notes due in 2028 to US$150.2 million from US$230 million.

“This is just one element of our plan to strategically position Coeur for a strong future,” Mitchell Krebs, Coeur’s chief financial officer, said in a statement.

He went on to list reducing nonoperating costs, improving working capital and boosting operating cash flow from new mines as other key components to the plan.

One new mine that will figure into the company’s future is the Kensington gold project in Alaska.

On June 22, Coeur announced a key legal victory that paves the way for the development of the mine.

Environmental groups had tried to thwart development of the project, but the U. S. Supreme Court affirmed the permit for the tailings facility that was in question.

Coeur says the tailings dam will be the last piece of infrastructure to be built and that the mine will be in production by the second half of 2010.

Kensington is expected to produce 125,000 oz. of gold per year — enough to bolster Coeur’s annual gold production by 135%. The project has probable reserves of 5.3 million tonnes grading 8.9 grams gold per tonne for 1.4 million oz. gold.

Wholly owned by Coeur, Kensington is 72 km northwest of Juneau.

As for the commodity that the company is most often associated with — silver — 2009 will represent the first full year of production at its San Bartolome mine in Bolivia — a project that it calls “the world’s largest pure silver mine.”

In March, it also began production at the Palmarejo silver mine in Mexico.

Meanwhile, in mid-July Coeur announced it is selling back its 100% interest in the silver produced from the iconic Broken Hill zinc-lead-silver mine in New South Wales, Australia, to mine owner and operator Perilya (PEM-A) for US$55 million in cash.

It’s been a shrewd investment for Coeur: it originally bought the interest from Perilya in September 2005 for US$36.9 million and, since then, has received more than 6.1 million oz. of payable silver from the mine.

Coeur’s annual profits from the silver stream have amounted to: US$3.6 million (partial 2005), US$14.3 million (2006), US$14.2 million (2007), US$13.3 million (2008), and US$3.2 million (first quarter of 2009).

“By selling its interest, Coeur will further strengthen its balance sheet and enhance its liquidity. Proceeds of the sale will contribute to our growth initiatives, including construction of the final tailings facility at the Kensington gold mine in Alaska,” said Coeur president and CEO Dennis Wheeler in a statement.

With the deal set to close on July 31, Coeur expects to realize a gain on asset sales in the third quarter of about US$23.2 million, net of income taxes.

Perilya bought the Broken Hill mine from Pasminco in May 2002. The mine, which opened in 1885, has produced more than 200 million tonnes of ore and, in 1885, spawned the “Big Australian” Broken Hill Proprietary, now known as BHP Billiton.

China’s Shenzhen Zhongjin Lingnan Nonfemet Co. acquired 50.1% of Perilya in February 2009 by investing A$45.4 million in the Aussie miner.

Coeur d’Alene shares recently traded at $13.47 in Toronto and US$11.91 in New York. Coeur has 75.4 million shares outstanding, or 80 million fully diluted.