Q3 2022 Coeur Mining Inc Earnings Call
Good morning, and welcome to the core mining third quarter 2022 financial results Conference call.
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Please note. This event is being recorded I would now like to turn the conference over to Mitchell Krebs President and CEO . Please go ahead.
Good morning, and thanks for joining our third quarter earnings call with me today in Chicago or make Rutledge, Tom Whelan equal Mcgrath and several other members of our team.
Before I begin please note our cautionary language on forward looking statements in our slide deck and refer to our SEC filings, which are available on our website.
Starting off on slide three third quarter production results were in line driven by quarter over quarter production growth at <unk>.
Shuster Kensington and work well.
Well cash flow in the quarter was negatively impacted by lower prices.
Higher consumable cost and lower grades at Palmer rail, along with a $21 million noncash inventory adjustment in Rochester.
We're set up for a strong fourth quarter to finish the year within our full year production and cost guidance ranges and.
And look forward to delivering strong production and cash flow growth on the back of the Rochester expansion that is expected to be completed mid next year, followed by commissioning and ramp up in the second half.
Turning to a few third quarter highlights.
Rochester achieved an important milestone with the successful installation of pre screened into the existing ex pit Crusher circuit.
Since it was commissioned the team has seen meaningful improvements in crush size and has been able to better manage the level of fines, which bodes well for the expansion as we transition from the existing operation to the newly expanded operations next year.
The expansion is advancing on schedule with overall completion now at 61%.
We've updated the total capital estimate to incorporate the cost of adding pre screened into the new crusher to factor in potential price and quantity risk related to steel cement and labor needed to complete the project.
And to add contingency to cover remaining potential project risks.
The updated range represents an increase of about 9% to 12% from the prior estimate.
The photograph on slide 10, 11, and 12 show the impressive progress we're making in Rochester.
Our team has done a tremendous job of overcoming a pandemic disruptions from the breakdown of the global supply chain and incredibly tight labor market and the highest inflation in 40 years to get this project to where it is today.
All while maintaining zero lost time incidents after totaling over $1 2 million hours on the project.
We remain focused on delivering what we believe will be a world class long life operation and one of the largest primary silver mines at a time with global silver demand is beginning to strengthen.
Towards the end of the quarter, we sharpened the focus on our core assets are green to the strategic sale of the Crown and Sterling exploration properties in southern Nevada.
The transaction closed on November 4th and further streamlines, our portfolio, while crystallizing significant value for core in the form of a $150 million in upfront cash.
Before I hand, the call over to Mick for a review of our operations I want to briefly turn your attention to slide 24, which highlights the importance of gold and silver in everyday life.
The world is beginning to realize the importance of metals and the need for responsible mining.
Products, we provide sit at the very beginning of the supply chain for essentially everything we need and use.
Virtually every global trend today.
Carbonization breakthroughs in technology that improve lives and public health.
The growing importance of sovereign natural resources in an increasingly fractious world supports a strong long term fundamental outlook for our industry.
With that I'll turn it over to Mick.
Thanks Mitch.
It's great to witness the growing recognition of mining to the 20, <unk> century economy and to everyday lives.
I know that the people at our site take that very seriously and come to work every day with commitment and purpose.
That hard work and dedication.
And our operating results to date.
Through three quarters of 2022 of our mines continue to demonstrate growing consistency and stability.
Going forward, we have a tremendous opportunity to further entrench best practices and business improvement in our operating culture to sustain and grow our performance we.
We have the right assets and the right people in place to accomplish this.
Turning to our third quarter production summary on slide six and beginning with <unk>.
Production was affected by new agreements, which were partially offset by higher recoveries due to flow patient planned improvements.
Costs were most consumables remain elevated but are beginning to trend in the right direction with recent decreases in diesel and cement costs reflective of cost control efforts and ongoing efficiency improvements.
No our labor costs in the quarter were due to the timing of contract payments.
Did metals production continues to exceed forecast and we remain in good position to achieve production and cost guidance.
Moving to what Jessica.
Boeing has significantly improved second quarter gold and silver production increased again, driven by strong placement rates in the prior period.
Gold ounces produced increased 5% quarter over quarter, while silver ounces produced increased 8%.
<unk> placed in the third quarter were impacted by the installation of the Prescreen pilot system, which was completed on July 22nd.
Third quarter adjusted costs for gold and silver on a co product basis were impacted by continued increased fleet maintenance and consumable costs.
As Mitch mentioned, the Prescreen pilot system continues to progress well.
With encouraging preliminary results shown on slide nine for product size distribution improvements and funds management.
Our focus to date has been on testing the limits of the system and on daily operating Windows.
We're now transitioning to locking in operating discipline and establishing consistency with repeatable results.
Column tests, so remember we give indications of recoveries with initial results expected in the first quarter of 2023.
As mentioned last quarter, we anticipate a period of elevated costs throughout Russia.
<unk> is a transition period of the integration and testing of the Prescreening system takes place and construction activities accelerate.
Despite expectations for a strong finish with just a slow start to the year is expected to result in gold and silver production tracking to the lower end of the 2022 guidance.
As the photos in our presentation clearly illustrate the pace of construction of war chest that has picked up significantly with approximately 450 contract is now working on site.
Virtually all concrete work is now complete with the exception of the primary crusher pocket on the pre screens, which are now underway.
The Merrill Crowe plant is taking shape.
<unk> 10 in the presentation shows the October maintenance replacement of the DRA that Taylor.
Construction of the Merrill Crowe plant is on track for completion by the end of the first half of 2023 right in line with the P 85 project schedule.
With engineering of the pre screens Assembly now complete we have aligned all work streams on the crushing circuit and construction continues on schedule.
Im also pleased to report that the construction project is now past two years as of August 1st without the loss statements Island.
Yes.
Moving to Kensington.
Production increased quarter over quarter with grid contributions from <unk> and Kensington.
The focus of fourth quarter production is on Kensington Eureka in July and we began to see production from our <unk>.
With strong contributions from June 30, we believe Kansas and it's on track to achieve the lower end of the 2022 production guidance.
Yes.
Wrapping up with Wolfe.
6% production increase quarter over quarter was driven primarily by recovery timing of higher grade ore placed in the previous period.
Wolf remains on track to finish the year around the top of its 2022 production guidance range.
With that I'll pass the call over to Tom Thanks, Nick.
Turning to slide four I'll quickly run through our consolidated financial results before spending some time to review the key initiatives, we have taken to bolster our balance sheet over the remaining duration of the Rochester expansion during these uncertain economic and geopolitical times.
Our third quarter financial results were impacted by significantly weaker spot old and silver prices and continued cost inflation.
Revenues decreased by $21 million quarter over quarter, driven primarily by 24% lower silver sales.
This decrease was due to a 16% decrease in average realized silver price and an 8% decrease in silver ounces sold.
Gold revenues decreased by 5% quarter over quarter due to a 4% decrease in gold ounces sold.
<unk> quarter with the spot gold price decreased by 8%. It is important to note our average realized gold price only decreased by 1% due to the positive impact from the downside protection we have in place. The our goal hedging program, we realized an $11 million gain on our gold hedges for the quarter, which equated to a one.
$33 per ounce boost to our average realized gold price this quarter.
The estimated market value of the hedge book was approximately $47 million at September 30.
Operating costs were in line with expectations for the quarter, but remained elevated due to the ongoing inflationary pressures on diesel other consumables and labor we're.
We are seeing pockets of cost moderation throughout the portfolio and our aggressive cost management and business improvement initiatives contributed to a lower increase in <unk> compared to the prior quarter.
As we all see in our daily lives fuel prices remained frustratingly high.
Core consumes between 16 to 18 million gallons of diesel per year.
Our average realized gold price for the quarter was $4 33 per gallon, which was a modest 5% decrease from Q2 2022.
However, this price still represents a 45% increase since Q2 2021 as outlined on slide five.
A couple of additional items to note on the third quarter operating cash flow swung to a negative $19 million driven by the aforementioned 24% decrease in silver revenues and the semiannual interest payment on our senior notes.
Capital expenditures for the quarter were $97 million, reflecting the planned poa 11 expenditures, notably approximately $575 million of the estimated Poa 11 capital has now been committed and $443 million has been incurred towards the expansion.
The fourth quarter of 2022, and the first quarter of 2023 are the peaks of our capital expenditures on the project as we drive towards achieving our <unk> 85 schedule as Nick outlined.
Against the backdrop of geopolitical and global macroeconomic uncertainty, we remain concerned about commodity prices and continued cost inflation over the short term.
Slide 13 highlights the proactive initiatives that we have completed during 2022 to position the company to fund the remainder of the revised Poa 11 expansion and to continue our exciting high return exploration plans against this uncertain backdrop I wanted to highlight a couple of key items that gives us confidence that the balance sheet will be.
Well to provide the required flexibility.
We received inflows of $150 million of cash from the strategic sale of Crown Sterling last week.
We worked with our banks to complete an amendment to our revolving credit facility to provide additional balance sheet flexibility through to the end of 2023, we would like to thank all of our syndicate banks for their continued support and confidence as we round. The final turn on the Poa 11 expansion.
We continue to hold approximately $46 million of equity investment.
We have established a new ATM for gross potential proceeds of up to $50 million.
Yes, Thats, all up and we have approximately $492 million of total potential liquidity.
These key initiatives taken to enhance our total potential liquidity leaves us feeling comfortable that the balance sheet will provide the required flexibility to deliver the industry, leading high return growth that will transform our company I will now pass the call back to Mitch Thanks, Tom.
Before moving to the Q&A I want to quickly highlight slide 14 summarizes our top priorities for the remainder of the year.
On December 15th core will hold a virtual investor day during which we will provide in depth updates of our progress against these goals as well as provide a three year outlook for the company and a more detailed review of our exciting exploration efforts taking place at Kensington at Silvertip.
We continue to believe that the execution of this strategy is the right roadmap for adding significant long term value for stockholders and positions <unk> as a truly differentiated opportunity for investors seeking industry, leading organic growth.
With that let's go ahead and open it up for questions.
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There appear to be no questions at this time I would like to.
Turn the conference back over to Mitchell Krebs for any closing remarks.
Okay.
Well, Hey, we appreciate everybody's time this morning.
I hope Youll join us on our Investor day on December 15th otherwise, we look forward to speaking with you all again in early 2023, and if you have any follow up questions from today. Please.
Please don't hesitate to reach out have a healthy and safe holiday season, everyone. Thanks.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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