Coeur Reports Third Quarter 2022 Results
ca.finance.yahoo.com
Wed, November 9, 2022 at 1:10 p.m.·15 min read
Full-Year Production and Cost Guidance Reaffirmed
CHICAGO, November 09, 2022--( BUSINESS WIRE)--Coeur Mining, Inc. ("Coeur" or the "Company") (NYSE: CDE) today reported third quarter 2022 financial results, including revenue of $183 million and cash flow from operating activities of $(19) million. The Company reported GAAP net loss from continuing operations of $57 million, or $0.21 per share, which included a $24 million lower of cost or market ("LCM") adjustment at Rochester primarily due to lower silver prices. On an adjusted basis1, Coeur reported EBITDA of $18 million, cash flow from operating activities before changes in working capital of $(1) million and net loss from continuing operations of $45 million, or $0.16 per share.
Key Highlights
Solid production results and stronger fourth quarter expected to result in full-year production levels within 2022 guidance ranges – Third quarter gold and silver production totaled 83,438 and 2.4 million ounces, respectively. Quarter-over-quarter production growth at Rochester, Wharf and Kensington was offset by lower production at Palmarejo. Production levels are expected to increase at all four operating locations during the fourth quarter and finish the year within Coeur’s full-year guidance range of 315,000 - 353,000 ounces of gold and 9.0 - 11.0 million ounces of silver
Recently installed pre-screens at Rochester providing intended benefit – Pre-screens were successfully installed between the secondary and tertiary crushers at the existing Rochester operation during the third quarter, which is driving enhanced operational flexibility and helping to generate a lower average size of crushed material and improved pad permeability. These learnings and results will be incorporated into the operating plan for the Rochester expansion and used to optimize Rochester’s life of mine plan
Rochester expansion on track; capital estimate updated to incorporate pre-screens – Construction of the Rochester expansion remains on track to be completed mid-2023 with pre-commissioning, commissioning and ramp-up taking place in the second half of next year. At quarter-end, the project was 61% complete, $575 million of the estimated capital had been committed, and $443 million of the estimated capital cost had been incurred. The Company has increased the total capital by 9 - 12% to $650 - $670 million to reflect recently completed final estimates for the addition of pre-screens into the crusher circuit, higher prices and quantities of steel and concrete, and additional contingency
Strategic sale of southern Nevada holdings to AngloGold now complete – The Company entered into a definitive agreement with a subsidiary of AngloGold Ashanti Limited ("AngloGold") (NYSE: AU) during the third quarter to sell its Crown and Sterling holdings ("Crown Sterling") for closing cash consideration of $150 million and deferred cash consideration of $50 million to be paid upon Crown Sterling attaining a total resource of at least 3.5 million gold ounces. Closing of the transaction occurred on November 4, 2022
Balance sheet flexibility with opportunistic hedges support ongoing investments – Coeur ended the quarter with total liquidity of approximately $236 million, including $75 million of cash and $160 million of available capacity under its $390 million revolving credit facility ("RCF")2. On an adjusted basis, giving effect to the Crown Sterling transaction, total liquidity stood at $386 million. In addition, Coeur currently holds gold forward hedges in the amount of 54,500 ounces for the remainder of 2022 at an average price of $1,994 per ounce and 112,500 ounces in 2023 at an average price of $1,982 per ounce. The market value of these hedges was approximately $47 million at quarter-end
"Coeur experienced another steady operational quarter, and we are on-track to deliver a strong fourth quarter from each of our four operations. While financial results were negatively impacted by lower average realized prices, lower grades at Palmarejo, and ongoing inflationary pressures, we are well-positioned to achieve our full-year 2022 production and cost guidance thanks to a tremendous effort and effective cost management by our site operating teams," said Mitchell J. Krebs, President and Chief Executive Officer.
"The third quarter also saw continued progress toward the mid-2023 completion of the expansion project taking place at our Rochester silver and gold mine in Nevada. The installation of pre-screens on Rochester’s existing crushing circuit early in the quarter is generating the intended benefits and providing essential operating data and experience that we will leverage to further enhance this emerging world-class silver and gold mine. Although the estimated capital cost of this expansion has increased, we have taken steps to bolster our liquidity and we remain confident in our ability to successfully deliver this transformational source of growth next year.
"During a period of underinvestment within our industry, we have remained steadfast in our strategy of investing in expansions and near-mine exploration to position the Company to deliver high-return, sector-leading growth in production and free cash flow from operations containing expanded reserve and resource bases and located in mining-friendly jurisdictions."
Financial and Operating Highlights (Unaudited)
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| (Amounts in millions, except per share amounts, gold ounces produced & sold, and per-ounce metrics)
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| 3Q 2022
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| 2Q 2022
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| 1Q 2022
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| 4Q 2021
|
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| 3Q 2021
|
| Gold Sales
| $
| 139.2
|
| $
| 146.6
|
| $
| 129.5
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| $
| 146.7
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| $
| 147.7
|
| Silver Sales
| $
| 43.8
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| $
| 57.5
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| $
| 59.0
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| $
| 61.2
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| $
| 60.2
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| Consolidated Revenue
| $
| 183.0
|
| $
| 204.1
|
| $
| 188.4
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| $
| 207.8
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| $
| 208.0
|
| Costs Applicable to Sales3
| $
| 163.2
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| $
| 150.7
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| $
| 133.3
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| $
| 136.5
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| $
| 134.3
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| General and Administrative Expenses
| $
| 9.7
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| $
| 9.3
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| $
| 10.3
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| $
| 9.6
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| $
| 8.7
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| Net Income (Loss)
| $
| (57.4
| )
| $
| (77.4
| )
| $
| 7.7
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| $
| (10.7
| )
| $
| (54.8
| )
| Net Income (Loss) Per Share
| $
| (0.21
| )
| $
| (0.28
| )
| $
| 0.03
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| $
| (0.04
| )
| $
| (0.21
| )
| Adjusted Net Income (Loss)1
| $
| (44.7
| )
| $
| (13.1
| )
| $
| (13.8
| )
| $
| (11.6
| )
| $
| (2.9
| )
| Adjusted Net Income (Loss)1 Per Share
| $
| (0.16
| )
| $
| (0.05
| )
| $
| (0.05
| )
| $
| (0.05
| )
| $
| (0.01
| )
| Weighted Average Shares Outstanding
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| 278.1
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| 278.0
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| 263.6
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| 254.8
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| 254.7
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| EBITDA1
| $
| (20.5
| )
| $
| (32.8
| )
| $
| 40.4
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| $
| 28.3
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| $
| (14.2
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| Adjusted EBITDA1
| $
| 18.3
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| $
| 43.3
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| $
| 41.5
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| $
| 48.7
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| $
| 48.8
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| Cash Flow from Operating Activities
| $
| (19.1
| )
| $
| 22.6
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| $
| (6.4
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| $
| 35.0
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| $
| 21.8
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| Capital Expenditures
| $
| 96.6
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| $
| 73.2
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| $
| 69.5
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| $
| 100.9
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| $
| 71.3
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| Free Cash Flow1
| $
| (115.7
| )
| $
| (50.6
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| $
| (75.9
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| $
| (65.9
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| $
| (49.4
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| Cash, Equivalents & Short-Term Investments
| $
| 75.4
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| $
| 74.2
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| $
| 73.3
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| $
| 56.7
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| $
| 85.0
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| Total Debt4
| $
| 635.7
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| $
| 547.5
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| $
| 485.5
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| $
| 487.5
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| $
| 442.4
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| Average Realized Price Per Ounce – Gold
| $
| 1,702
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| $
| 1,729
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| $
| 1,721
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| $
| 1,652
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| $
| 1,645
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| Average Realized Price Per Ounce – Silver
| $
| 19.09
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| $
| 22.61
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| $
| 24.06
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| $
| 23.17
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| $
| 24.18
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| Gold Ounces Produced
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| 83,438
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| 83,772
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| 75,409
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| 88,946
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| 87,083
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| Silver Ounces Produced
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| 2.4
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| 2.5
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| 2.5
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| 2.6
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| 2.5
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| Gold Ounces Sold
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| 81,782
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| 84,786
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| 75,211
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| 88,930
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| 89,804
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| Silver Ounces Sold
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| 2.3
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| 2.5
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| 2.5
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| 2.6
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| 2.5
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Financial Results
Third quarter 2022 revenue totaled $183 million compared to $204 million in the prior period and $208 million in the third quarter of 2021. The Company produced 83,438 and 2.4 million ounces of gold and silver, respectively, during the quarter. Metal sales for the quarter totaled 81,782 ounces of gold and 2.3 million ounces of silver. Average realized gold and silver prices for the quarter were $1,702 and $19.09 per ounce, respectively, compared to $1,729 and $22.61 per ounce in the prior period, a respective 2% and 16% decrease quarter-over-quarter, and $1,645 and $24.18 per ounce in the third quarter of 2021, respectively, a 3% increase in gold and 21% decrease in silver.
Gold and silver sales represented 76% and 24% of quarterly revenue, respectively, compared to 71% and 29% in the third quarter of 2021. The Company’s U.S. operations accounted for approximately 65% of third quarter revenue, compared to 64% in the third quarter of 2021.
Costs applicable to sales3 increased 8% quarter-over-quarter to $163 million, largely due to a $21 million LCM adjustment at Rochester. Coeur continues to experience inflationary pressures on consumable costs on a year-over-year basis, but these costs remained relatively flat compared to the previous quarter. General and administrative expenses increased slightly quarter-over-quarter to $10 million.
Coeur invested approximately $12 million ($8 million expensed and $4 million capitalized) in exploration during the quarter, compared to roughly $13 million ($5 million expensed and $8 million capitalized) in the prior period and $20 million ($15 million expensed and $5 million capitalized) in the third quarter of 2021, reflecting lower planned investment across the portfolio following the Company’s highest-ever exploration investment in 2021. See the "Operations" and "Exploration" sections for additional detail on the Company’s exploration activities.
The Company recorded income tax expense of approximately $2 million during the third quarter. Cash income and mining taxes paid during the period totaled approximately $7 million.
Quarterly operating cash flow totaled $(19) million compared to $23 million in the prior period, mainly driven by lower metal sales and unfavorable changes in working capital. Changes in working capital during the quarter were $(18) million, compared to $(7) million in the prior period, reflecting the timing of semi-annual interest payments on the Company’s 2029 5.125% Senior Notes.
Capital expenditures increased 32% quarter-over-quarter to $97 million compared to $73 million in the prior period. Expenditures related to the expansion project at Rochester totaled $68 million during the quarter compared to $42 million in the second quarter and $39 million in the third quarter of 2021. Sustaining and development capital expenditures accounted for approximately 25% and 75%, respectively, of Coeur’s total capital investment during the quarter.
Capital Projects Update
Rochester Expansion
Coeur achieved several key milestones at the Rochester expansion during the quarter.
Notably, the Company achieved (i) completion of major concrete work in all areas except the primary crusher pocket and the pre-screens, both of which are in progress, (ii) continuation of structural, mechanical, piping, electrical and instrumentation construction work throughout the project, (iii) commencement of final major high-voltage electrical distribution and substation construction, and (iv) completion of the majority of commitments for the pre-screens.
Progress of the Merrill-Crowe plant continued on schedule during the third quarter, including (i) continuation of mechanical equipment setting, (ii) completion of building and process plant steel pipe rack erection, (iii) continuation of piping and cable tray installation, and (iv) rough setting of electrical switchgear.
Further work on the crusher corridor has also advanced, including (i) civil work on the primary crusher area with a focus on the primary crusher foundation and commencement of conveyor component installation, (ii) setting of the secondary cone crushers and commencement of piping, cable tray and lighting installation in the secondary crusher area, and (iii) setting of the tertiary HPGR crushers and cable tray and lighting installation in the tertiary crusher area.
During the quarter, Coeur successfully aligned the construction of the pre-screens with the completion of the new crusher to maintain a mid-2023 mechanical completion target. Ramp-up and commissioning is anticipated to take place during the second half of next year.
Coeur also completed a review of the total capital costs necessary to complete the expansion, resulting in a 9 - 12% increase in the capital estimate. The estimate reflects the finalization of cost estimates for pre-screens, higher prices and quantities of steel and concrete, and additional contingency
As of September 30, 2022, the Company had committed approximately $575 million of capital since the inception of the project and approximately $443 million of the estimated project cost had been incurred.
Silvertip Project
Coeur continues to advance study work to assess the economics of a potential future expansion of its high-grade Silvertip silver-zinc-lead development project in British Columbia, Canada. The Company’s objective remains to complete an evaluation by year-end of higher throughput scenarios to enhance the project’s economics and to take advantage of Silvertip’s expanding, high-grade resource base. Subject to continued positive results, the Company anticipates advancing Silvertip once the Rochester expansion and ramp-up is complete and Coeur generates sustained, positive free cash flow that can be used to reduce leverage back to targeted levels.
Exploration investment in the third quarter totaled approximately $3 million ($2 million expensed and $1 million capitalized) compared to roughly $2 million (substantially all capitalized) in the prior period.
Up to four core drill rigs were active with two underground rigs focused on infill and expansion holes at the Southern Silver and Discovery zones. All five exploration holes drilled from underground during the quarter successfully intersected chimney/feeder structures beneath the Discovery zone manto, providing further exploration targets for 2023 and beyond. Two surface rigs were also active during the quarter, one focused on expansion drilling at the Saddle zone located south of the Southern Silver zone where significant mineralized intervals were intersected. The other surface rig carried out scout drilling on three regional targets — Tour Ridge, Trident Creek and Tiger Terrace — located 1 kilometer, 2.5 kilometers and 5 kilometers to the south of known mineralization, respectively. Results are pending, but multiple geological indicators of proximity to mineralization were intersected.
Ongoing carrying costs, which includes de-watering, power, camp and travel costs to support continued underground development and exploration activities, totaled $5 million in the third quarter, compared to $5 million in the prior period. Capital expenditures related to infill drilling and underground development during the third quarter totaled $4 million compared to $6 million in the prior period. Full-year 2022 capital expenditures are expected to be approximately $28 - $36 million.
Balance Sheet and Liquidity Update
Coeur ended the quarter with total liquidity of approximately $236 million, including $75 million of cash and $160 million of available capacity under its $390 million RCF2 subject to certain financial covenants. Additionally, Coeur had $46 million of marketable securities at the end of the third quarter.
On September 18, 2022, the Company entered into a definitive agreement with a subsidiary of AngloGold to sell its Crown Sterling holdings for closing cash consideration of $150 million. The transaction closed on November 4, 2022 and is not included as part of Coeur’s third quarter results due to timing of closing.
As adjusted to reflect the receipt of proceeds from this transaction, the Company’s total liquidity stood at $386 million.
To further enhance the Company’s balance sheet flexibility and liquidity during this period of peak capital expenditures to complete the Rochester expansion project, Coeur and its RCF banks agreed to amend the terms of the RCF to raise the maximum net leverage ratio from 3.5x to 4.25x for the remainder of 2022 and to 4.5x for 2023, among other items. As part of this amendment, the method of calculating adjusted EBITDA was modified to allow up to $50 million for integration costs or costs associated with establishing new facilities and certain costs associated with LCM adjustments at Rochester to be excluded, which is in alignment with the Company’s external reporting.
Hedging Update
The Company did not execute any additional hedges during the third quarter. Coeur continues to have meaningful gold price protection in place for the remainder of 2022 and in 2023 as outlined below. The Company’s silver price exposure remains unhedged.
| 4Q 2022
| 2023
| Gold Ounces Hedged
| 54,500
| 112,500
| Avg. Forward Price ($/oz)
| $1,994
| $1,982
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Mark-to-Market Adjustments
The Company values its strategic investments in equity securities as of the end of each reporting period. The estimated fair values of Coeur’s equity investments in Victoria Gold Corp., Avino Silver & Gold Mines Ltd. and Integra Resources Corp. were $36 million, $7 million and $2 million, respectively, at September 30, 2022 compared to $88 million, $8 million and $4 million, respectively, at June 30, 2022, which reflects the sale of five million shares of Victoria Gold Corp. and a change in the value of the remaining equity investments.
Rochester LCM Adjustment
Coeur reports the carrying value of metal and leach pad inventory at the lower of cost or net realizable value, with cost being determined using a weighted average cost method. Decreases in the market price of gold and silver can affect the value of metal inventory, stockpiles and leach pads, and it may be necessary to record a write-down to the net realizable value, as well as impact carrying value of long-lived assets. At the end of the third quarter, the cost of ore on leach pads at Rochester exceeded its net realizable value which resulted in a LCM adjustment of $24 million (approximately $21 million in costs applicable to sales3 and $3 million of amortization).
Operations
Third quarter 2022 highlights for each of the Company’s operations are provided below.
Palmarejo, Mexico
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| (Dollars in millions, except per ounce amounts)
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| 3Q 2022
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| 2Q 2022
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| 1Q 2022
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|
| 4Q 2021
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|
| 3Q 2021
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| Tons milled
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| 538,750
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| 539,600
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| 565,211
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| 587,615
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| 517,363
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| Average gold grade (oz/t)
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| 0.049
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| 0.054
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| 0.056
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|
| 0.055
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|
| 0.050
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| Average silver grade (oz/t)
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| 3.53
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| 3.95
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| 3.87
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|
| 3.86
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|
| 3.86
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| Average recovery rate – Au
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| 93.3
| %
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| 92.4
| %
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| 90.6
| %
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| 89.7
| %
|
| 93.7
| %
| Average recovery rate – Ag
|
| 84.9
| %
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| 84.2
| %
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| 83.0
| %
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| 81.3
| %
|
| 85.5
| %
| Gold ounces produced
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| 24,807
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|
| 27,109
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| 28,931
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|
| 28,748
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|
| 24,254
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| Silver ounces produced (000’s)
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| 1,612
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|
| 1,795
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|
| 1,813
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|
| 1,843
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|
| 1,708
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| Gold ounces sold
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| 24,378
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|
| 29,285
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|
| 28,242
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|
| 27,706
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|
| 24,897
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| Silver ounces sold (000’s)
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| 1,554
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| 1,855
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|
| 1,796
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|
| 1,813
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|
| 1,715
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| Average realized price per gold ounce
| $
| 1,447
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| $
| 1,507
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| $
| 1,419
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| $
| 1,374
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| $
| 1,335
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| Average realized price per silver ounce
| $
| 19.01
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| $
| 22.56
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| $
| 23.94
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| $
| 23.26
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| $
| 24.15
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| Metal sales
| $
| 64.8
|
| $
| 86.0
|
| $
| 83.1
|
| $
| 80.4
|
| $
| 74.6
|
| Costs applicable to sales3
| $
| 43.2
|
| $
| 49.1
|
| $
| 43.2
|
| $
| 38.8
|
| $
| 39.0
|
| Adjusted CAS per AuOz1
| $
| 948
|
| $
| 855
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| $
| 730
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| $
| 653
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| $
| 704
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| Adjusted CAS per AgOz1
| $
| 12.67
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| $
| 12.97
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| $
| 12.43
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| $
| 11.25
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| $
| 12.50
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| Exploration expense
| $
| 1.8
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| $
| 1.7
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| $
| 1.6
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| $
| 2.3
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| $
| 2.8
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| Cash flow from operating activities
| $
| 12.9
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| $
| 22.3
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| $
| 34.3
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| $
| 32.9
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| $
| 23.2
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| Sustaining capital expenditures (excludes capital lease payments)
| $
| 10.8
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| $
| 10.1
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| $
| 13.6
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| $
| 8.3
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| $
| 8.4
|
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