Coeur d’Alene posts loss

The first quarter of 2003 left Coeur d’Alene Mines (CDE-N) with a loss even though revenue and cash flow were substantially increased.

A one-time charge of US$28.1 million for early conversion of existing debt into stock, and changes to accounting principles, turned a US$297,000 loss into a US$31.5-million loss (US23 per share) for the three months ended March 31. In the first quarter of 2002, Coeur lost US$11.8 million (at that time, also US23 per share).

First-quarter revenues grew substantially year-over year, to US$29 million from US$16.5 million in 2002. Significantly higher production pumped up the top line, as the company produced 3.6 million oz. silver and 33,000 oz. gold in the quarter. The additional silver production, an increase of 25% over last year’s first quarter, and gold production, double the comparable 2002 figure, came from the Cerro Bayo mine in southern Chile and the Martha mine in southern Argentina, which both came into production in the second quarter of 2002.

Coeur also floated an 8.1-million-share placement with an institutional investor at US$1.23 per share, for US$10 million. Those funds go into the cash account, but may in the end be used to repay existing debt. Coeur has a note issue (at 13.375%) coming due in December of this year, and debentures (bearing interest at 6.375%) due the following month.

At the Rochester heap-leach operation in Nevada, Coeur saw costs increase to US$6.46 per oz. silver in the quarter. The operation produced 1.1 million oz. silver and 10,747 oz. gold. A road being built between the Rochester leach pad and the Nevada-Packard property adjoining Rochester was delayed by reclamation requirements, but finished by the end of the quarter. Work is also proceeding on a new crusher, which will allow Coeur to dismantle the present one and mine the reserves underneath.

New reserves at Rochester and at Nevada-Packard are expected to extend Rochester’s mine life to 2007.

At Silver Valley in Idaho, Coeur produced 1.2 million oz. silver at cash costs of US$4.22 per oz. Production was down about 20% from last year’s first quarter, and costs increased as lower grades were being mined. Backfilling of some stopes also added to operating costs.

Development on upper levels of the mine will allow some of the reserves to be mined by longhole methods. Coeur expects this to reduce operating costs.

The company also concluded an agreement with United Steelworkers Local 5114-03, the bargaining unit at Silver Valley, running to March 2006.

Coeur’s Latin American operations provided the company with a big lift, as Cerro Bayo in Chile produced 1.3 million oz. silver and 22,416 oz. gold in the quarter. After taking gold credits into account, Cerro Bayo had a negative cash production cost, US29 per oz. silver. Since going into production last April, the mine has produced 4.4 million oz. silver and 67,625 oz. gold.

The Martha mine, in Santa Cruz province, Argentina, produced 4,816 tons ore at an average 108 oz. silver per tonne. Ore from Martha is trucked to Cerro Bayo for processing.