Q3 2023 Coeur Mining Inc Earnings Call

Good day and welcome to the core mining third quarter 2023 financial results Conference call.

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I would now like to turn the conference over to Mitch Krebs, President and CEO. Please go ahead.

Good day, everyone and thanks for joining our third quarter 2023 earnings call.

Before getting underway. Please note our cautionary language on forward looking statements in today's slide deck and refer to our SEC filings on our website.

I'll kick off with a quick overview on slide three before turning the call over to Mick Eva and Tom.

While silver is set to take a larger role with the Rochester expansion project now behind US. It was the gold side of the business that drove stronger third quarter results.

Gold production increased 15% in costs per gold ounce declined, 13%, which drove a material increase in our adjusted EBITDA.

These results were primarily due to a bounce back quarter at Kensington as well as a strong gold quarter at Palmer Ao.

In total quarterly revenue increased 10% to $195 million on total production of approximately 78000 ounces of gold and $2 3 million ounces of silver.

Obviously, the key headline is the completion of the expansion at Rochester. The first ounces were produced from the new Leach pad and process plant during the quarter and the focus is now on handing off the new three stage crushing circuit to the operating team to ramp it up as safely and quickly as possible, which Mick.

I'll talk more about in a couple of minutes.

In the meantime, Rochester is delivering a significant step up in production levels. They recovered over 500000 ounces of silver and 8000 ounces of gold in October alone.

Roughly two to three times higher than in prior months, so far this year.

Some of you were able to witness firsthand the size and scale of this operation in September but some recent photos starting on slide 10 of today's presentation also do a good job of showing the newly expanded infrastructure.

With crusher commissioning now underway work has already started to remove the legacy crusher, which allows us to access higher grade ore located beneath it that we planned to mine beginning early next year.

Once at the 32 million ton per year processing rate Rochester is expected to be north America's largest open pit heap leach operation and here in the U S. It's expected to become the country's largest source of domestically produced and refined silver at a time when silver demand for electronic applications.

And renewable power sources is rapidly climbing.

Finally, and most importantly, it is poised to be a truly transformational operation for core with lower cost silver and gold ounces at two five times higher production levels with several near mine opportunities to expand and enhance the life of mine through exploration, which Eva will touch on shortly.

With Rochester is free cash flow is a key driver of <unk>.

Priority in 'twenty 'twenty, four will be to start reducing our leverage levels now that the recent period of elevated investment is starting to fall away.

Tom will provide a balance sheet update in a few minutes.

One other comment on exploration drilling at Kensington accelerated during the quarter with the latest results continuing to demonstrate the near mine potential to add to its mine life.

Evo will provide some additional details shortly.

With that I'll turn the call over to Mick.

Thanks, and good day everyone.

As Mitch mentioned the team delivered solid quarterly results capped off by improvements at Kensington and the good news regarding the end of construction at the Rochester expansion project.

Beginning with Rochester.

The third quarter was characterized by the full scale effort to integrate the newly expanded infrastructure into our Nevada operation located in what is widely recognized as the world's number one mining jurisdiction.

Our progress on those fronts has been truly impressive.

With first production from the new Leach pad and process plant taking place in September.

The grid October silver and gold results that Mitch mentioned Dahlia position us for a very strong fourth quarter and we remain on track to achieve 2023 production guidance.

Commissioning of the new Crusher is underway with full ramp open set to take place during the first half of 2024.

Looking at slide nine the majority of the extensive systems testing has now been completed which is verifying the mining capacity can support the planned ramp up to the full 155000 tonnes per day needed by the end of 2024.

What just a strong reputation in northern Nevada is helping to ensure that we have the best possible workforce I'm pleased to deliver on our goals.

The expansion to increase throughput tuna half times required a modest 20% increase in head count, which highlights the economies of scale, we expect to enjoy going forward.

We are fully staffed and trained for the job ahead.

Aside from the inherent positive attributes of Rochester, the true differentiator for core is the expansion of offices all the growth benefits of a large new mine, but with a degree of familiarity and extensive learnings gained that cannot be matched from the standalone new mine.

Our people are facilities unenforced structure, and the deep well of technical expertise that we are drawing from is a key competitive advantage.

Looking back at the build cost culture of CFT and accountability served as a rock solid foundation for a truly excellent safety result. This construction project over 2.5 millionaire was with just a single lost time incident.

Turning to slide four and looking at pulmonary who.

Tons milled increased with a strong contribution from Guadalupe leading to higher recoveries, especially on the gold side, where production increased by 16% to nearly 27000 ounces.

Paul Maria who also took a big step forward in the quarter through the completion of the high compression tailings in the open pit backfill project on budget and ahead of schedule.

Its completion secures tailings and waste rock storage capacity for the remainder of pulmonary whose main life.

More importantly, we estimate that it will reduce overall water utilization needed for the tailings process by 16% while back filling the legacy open pit and.

In providing a head start on our future reclamation efforts.

Moving on to Kensington, which delivered a significantly improved quarter as excess water flows have abated and peace placement continues to exceed targets.

The fourth quarter is expected to be similarly improved but the past issues from earlier this year have impacted full year results.

Leading us to refrain Kensington production guidance to between 81080 5000 ounces.

Finishing up with wharf third quarter production was as expected and the operation is well positioned for a good finish to the year.

As a result the.

So end of wharf gold production guidance has been revised upwards by 3000 ounces 2000 ounces with the high end remaining at 95000 ounces.

With that I will pass the call over to Eva for a review of exploration.

Thanks, Nick and Hello, everyone.

As Mitch mentioned, we made some great progress in exploration giant courtyard.

In September we released a press release that indicated the ongoing success of exploration programs at Kensington.

Drilling in 2023 has demonstrated the continuation of all key mineralized structures to the site and down dip.

Lower Kensington, we intersected some of the best grades thickness is ever encountered.

Like length has been increased by 760 feet and we have intersected sub parallel structures and linking structures with the potential to host some higher grade chute.

Drilling an upper Kensington has discovered a new zone C. On turnkey D that has already been defined over 950 foot strike like an 850 feet down dip.

These most recent positive developments from Kensington multiyear exploration program.

This successful addition.

One and a half years of mine life.

Leasing at year end 2022.

First such mine Life addition, Kensington since 2018.

Over at Rochester, and referring to slides 11, and 12 ongoing geology modeling work there is continuing to enhance their understanding of the controls to mineralization at this deposit.

That's a high angle structures have been outline that seemed to confer a little higher gold grades.

These structures fern Park.

Long and up to two mile wide corridor that extends from not just the Rochester pet.

Slides, two and including Nevada packet pitch.

The opportunity for higher grades on these structures will be tested in more detail in 2024 and beyond.

I'll now turn the call over to Tom.

Thanks, Deepa I'll begin with a brief review of our third quarter financial results before providing a balance sheet update.

Turning to the financial highlights on slide 15, third quarter revenue and adjusted EBITDA saw healthy increases compared to the prior quarter driven primarily by increased gold sales at Palmer ailing Kensington, which also led to lower consolidated Cas per ounce.

Operating cash flow swung to a negative $2 million as we continued to build up significant inventory on the new leach pad at Rochester, as well as the timing of the semiannual interest payment on our five and one 8% senior notes.

As noted by niche and emphasized by Mick we're expecting strong fourth quarter production, which we expect to drive a significant increase in operating cash flow across all sites.

Turning to costs on slide 16, we continue to experience inflationary pressures, but we are aggressively managing costs and implementing business improvement initiatives to mitigate this key risk despite the.

The continued inflationary pressures.

Increased throughput at Palm rail in Kensington helped drive down consolidated gold Cas by almost $200 per ounce quarter over quarter.

Turning to the balance sheet, we ended the quarter with total liquidity of $280 million comprised primarily of cash and cash equivalents of $53 million and total available borrowing capacity under the revolving credit facility of $220 million we.

We finished the quarter with a slightly lower net debt to EBITDA ratio versus the end of the second quarter. It is important to note that we expect higher quarter over quarter EBITDA on the back of strong Q4 production across all sites, including a monster fourth quarter at Rochester.

The expected flush of balances at Rochester that we've been discussing on previous conference calls and consistent with our annual guidance is taking place during this quarter as we ramp up the Merrill Crowe flip flow rates and monetize many of the ounces placed throughout 2023 on the new Leach pad.

To give context Rochester's Q4 production, we recovered 537000 ounces of silver and over 8000 ounces of gold during the month of October which is more combined metal than we produced during the entire third quarter.

The company's hedging program remains a key price risk mitigation tool during this period of capital intensity and ramp up at Rochester.

We have almost 70% of our Hedgeable fourth quarter gold production locked in at nine $777 per ounce and nearly 50% of our fourth quarter silver production hedged at $25.47 per ounce as of.

Timber 30th the hedge book fits with an unrealized gain of approximately $12 million on the remaining 2023 hedges.

Combined with the realized gains year to date, we expect just under $20 million of total gains from our 2023 hedging activities.

I wanted to highlight two final key data points related to the Rochester expansion.

We've incurred $704 million and it paid $648 million of the Poa 11 capital costs.

As at September 30th 2023, leaving approximately $60 million to $80 million to be paid during the final quarter of the year Importantly, we remain within the guided capital cost range of between 710 and $730 million.

I'll pass the call back to Mitch.

Thanks, Tom.

Slide 18 summarizes our top priorities for the remainder of the year.

Safely and efficiently ramping up Rochester during the fourth quarter remains job one.

With another stronger quarter at Kensington, and consistent performance from Palm Marino and wharf, we are well positioned to deliver a strong fourth quarter and achieve our full year guidance.

Over the past three to five years, we have been deliberately reinvesting in the business for the long term.

As we now begin to deliver the benefits from this more than $1 billion of investments in exploration and expansions.

We look forward to seeing our investors benefit from our sector, leading growth, especially on the silver side.

Longer mine lives <expletive>.

Declining costs transition to positive free cash flow and a more conservative balance sheet.

With that let's go ahead and open it up for questions.

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble our roster.

The first question today.

Comes from Mike Parkin with National Bank. Please go ahead.

Hey, guys. Thanks for taking my questions nice to see Rochester banking, there was some pretty good numbers there in October.

Yeah, Hey, Thanks, Mike.

Just a couple of accounting questions. So the Capex that you report on your cash flow statement is that reconciling more with what's incurred or paid on Rochester.

And Mike, it's yes definitely incurred.

So that'll be that it's yeah, and so incurred and then the cash out the door as cash out the door and their assets and payables. So that's why you see that elevated accounts payable number.

Right, Okay. So the accounts payable or be what's coming down in the fourth quarter.

You got it.

Perfect Okay.

And then.

In terms of.

Leach kinetics, I know, it's kind of early days to speak to it but.

Do you have any concern with the thermal load on the pad being sufficient for the winter months like.

Should we expect a little bit of a slowdown in recoveries, mainly in Q1, and then a pick up as the pad warmed up in the second quarter at Rochester.

Make your way Megan yes, so of course, there's some some weather and winter dynamics there, but in reality, what we're seeing right now is the recoveries from all of the material that we crushed in the existing ex pit. So we haven't yet ramped up the new limited crusher, which is expected.

To deliver a different size fraction forests, and actually improve the recovery so for now.

We should experience the similar recoveries that we've been getting over this last year for this material that we got on pod for Huron.

Here on page six.

As we flush out that inventory that will be in place and over the last year and then we start ramping up the crusher will see that change a little bit and the current recovery, though alum and right on the curve based on the testing that we did all that learning from the last two years is really valuable.

And we've been calibrated not recovery curve in preparation for this new crusher getting ramped up and in the first half of 2024.

Sure and I guess as you're ramping up.

Tons that even if theres a bit of us slowing in <unk>.

Winter months recovery, you're still putting away more ounces on.

Months after months, so production is still probably going to rise up after months.

So yeah, we will see we will see the flush from the inventory from earlier in the year of course, and so that that is likely to dip just a little bit initially and then youll see that general ramp up as we get the the crusher online and we've already got about $9 3 million tonnes placed on pad six and so we'll be getting the ounces from that.

While we get the well, we'll get that crusher ramped open start again, placing placing a new material on the back end of this year.

Okay and is that $90 3 million tonnes, but as of end of October 99, three.

Yes, that's nine three to date yet.

Okay.

Okay. Thank you very much guys. That's it for me.

Thanks, Mike.

As a reminder, if you have a question. Please press star then one to be joined into the question queue.

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The next question comes from Tom Lewis there with.

H C. L Company. Please go ahead.

When do you see your stock going up.

Yeah, Good morning, Ed.

Yeah I'll take that.

I said in my comments.

And in the release.

We look forward here to see a few a few catalysts converge here as we go into 'twenty 'twenty four with the transition into positive free cash flow.

Reducing the leverage levels on the balance sheet.

<unk> seen some pretty significant growth on the silver side of the business from a U S. A.

The operation So we will see more silver contribution in our revenue and more U S contribution to our revenue, which combined with lower debt and transition to free cash flow. We think that those are the catalysts that should benefit our investors in terms of the share price.

Hello.

This concludes our question answer session.

I would like to turn the conference back over to Mitch Krebs, President and CEO Frank bottleneck.

Okay, well, thanks, everybody for taking the time to talk with us today hard.

Hard to believe but.

To be saying this but we wish everybody a safe and healthy holiday season, and we look forward to speaking again in early 2024, following the release of our fourth quarter and year end results.

Have a good day.

The conference has now concluded. Thank you for attending today's presentation you may now.

Now disconnect.

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