Coeur invests in US assets

VANCOUVER — Chicago-based Coeur Mining (NYSE: CDE) has 75% of its company-wide reserves in the U.S., and the company continues to invest on its home turf.

Coeur boosted exploration spending by 66% last year to US$42 million, and plans to fund US$45 million in 2018. Coeur says 85% of that investment will be around existing operations, where the success rates are “high and the payback is quick.”

Furthermore, the company is wrapping up a leach-pad expansion at its Rochester silver-gold mine in Pershing County, Nev., after three years of permitting and 10 months of construction.

“Rochester is a great example of how our strategy of investing in our existing assets is leading to strong returns and cash flow,” Coeur president and CEO Mitchell Krebs said on a Feb. 4 conference call. Production at the operation jumped 45% in the fourth quarter, while unit costs were down 9%.

Coeur Mining’s Rochester mine operation in 2011. Photo by The Northern Miner.

“The project was one of the last pieces of our multi-year strategy at Rochester to achieve a higher level of scale and efficiency,” he continued.

Coeur is set to unveil what Krebs calls “one of the final pieces” of its Rochester plan with a preliminary economic assessment modelling a crusher enhancement and expansion project that could boost silver recovery rates, drop operating costs and extend the operation’s life.

Rochester hosts 248 million proven and probable tonnes at 12.2 grams silver for 118 million contained ounces.

Meanwhile, the company has worked to add reserves at the aging Wharf gold mine in South Dakota, which it picked up from Goldcorp (TSX: G; NYSE: GG) for US$105 million in early 2015.

At Coeur Mining’s Wharf gold-silver mine in South Dakota, which the company bought in 2015. Credit: Coeur Mining.

Coeur reported in early February that Wharf has proven and probable reserves of 31 million tonnes grading 0.7 gram gold per tonne for 869,000 contained oz., or 55% higher than the last reported figure before the acquisition, despite the intervening mining of 100,000 contained oz. gold.

“When talking about a focus on acquisitions to enhance our portfolio, it’s hard to find a better example anywhere than our acquisition of Wharf,” Krebs said. “This is the second significant increase to reserves and resources that we’ve delivered since the acquisition in 2015. As a result, Wharf’s mine life now stands at roughly ten years.”

Finally, Coeur has invested in exploration at its Kensington underground gold mine and mill in Alaska to target higher-grade ore, including: target expansion of the Raven vein, lower Kensington Main Block L and lower Jualin Vein #4.

The company said its fourth-quarter results were the strongest in four years due to mining from Raven, which drove average grades 29% higher quarter-over-quarter.

Kensington’s proven and probable reserves total 2.4 million tonnes at 5.5 grams gold for 520,000 contained ounces.

Rocks travel on a conveyor at Coeur Mining’s mill at its Kensington gold mine in Alaska. Credit: Coeur Mining.

“Speaking to our strategic focus on investing in existing assets, I want to cover Kensington,” Krebs said. “Jualin is another example of a high-grade ore source that we anticipate having a meaningful impact on [project] economics. It has taken us longer than planned to start accelerating mining activities due to the amount of water we’ve encountered. That said, we’re mining development ore out of Jualin now and expect to reach commercial production levels later in the year.”

Coeur expects to produce between 12.2 and 13.8 million oz. silver, and from 355,000 to 375,000 oz. gold this year at all-in sustaining costs (AISCs) ranging from US$15 to US$15.50 per equivalent oz. silver. The company reported record annual silver equivalent production of 35.1 million equivalent oz. silver in 2017 at AISCs of US$13.82 per ounce. It said the results were driven by a 45% production boost at Rochester and a 27% increase at Kensington.

BMO Capital Markets analyst Ryan Thompson has a $9.50 price target on Coeur and an “outperform” rating.

“We see potential for upside at Kensington as [the company] expects to publish an updated technical report … later in the [first quarter], reflecting exploration results from Jualin,” Thompson wrote. “Coeur’s aggressive 2017 drill campaign appears to be paying dividends with the reported increase in tonnage — a trend we expect to continue as aggressive drilling continues into 2018.”

Coeur shares have traded in a 52-week range of US$10.24 to US$7.63 per share, and closed at US$7.84 at press time.

Last year the company had net income of US$10.9 million, or US6¢ per share. It reported US$192 million in cash and equivalents at the end of 2017.