Q4 2023 Coeur Mining Inc Earnings Call
Operator: Good morning, everyone, and welcome to the Coeur Mining fourth quarter 2023 financial results conference call. All participants will be in a listen-only mode; should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephone. To withdraw your questions, you may press star and two.
Good morning, everyone and welcome to the core mining fourth quarter 2023 financial results Conference call all.
All participants will be in a listen only mode.
You need assistance, please signal conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May press Star and then one on your Touchtone telephone.
Withdraw your question you May press Star two.
Operator: Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Mitchell Krebs, President and CEO. Please go ahead.
Please also note today's event is being recorded.
At this time I'd like to turn the floor over to Mitchell Krebs, President and CEO.
Sir Please go ahead.
Mitchell J. Krebs: Hi everyone. Thank you for joining our call. Before we begin, 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 some of the team who are here with me. By nearly every metric, Coeur's fourth quarter represented our strongest quarter of 2023. In fact, it was our strongest quarter in over three years. Revenues jumped 35% based on 29% higher gold production and 34% higher silver production. This led to a more than doubling of adjusted EBITDA and fourth quarter operating cash flow, which reached its highest level since late 2020. These results were driven largely by the stepped-up production levels at the expanded Rochester operation and by a strong finish to the year at Wharf. Kensington and Palmareo also delivered consistent results to end the year, which enabled the company to achieve its full year production guidance.
Hi, everyone. Thank you for joining our call.
Before we begin 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 some of the team who are here with me.
By nearly every metric of course fourth quarter represented our strongest quarter of 2023 in fact, it was our strongest quarter in over three years.
Revenues jumped 35% based on 29% higher gold production and 34% higher silver production.
This led to a more than doubling of adjusted EBITDA in the fourth quarter operating cash flow.
Which reached its highest level since late 2020.
These results were driven largely by the stepped up production levels at the expanded Rochester operation and by a strong finish to the year at wharf.
Kensington and Palm Marino also delivered consistent results to end the year, which enabled the company to achieve its full year production guidance.
Mitchell J. Krebs: Rochester's fourth quarter provided a glimpse of what the expanded mine is capable of delivering once operating at full strength. Based on expected throughput rates of over 32 million tons per year, Rochester will be one of the world's largest operations of its kind and will be the largest source of American produced and refined silver. Mick will provide an update on Rochester in a few minutes.
[noise] Rochester's fourth quarter provided a glimpse of what the expanded mine is capable of delivering once operating at full strength.
Based on expected throughput rates of over 32 million tons per year, Rochester will be one of the world's largest operations of its kind and will be the largest source of American produced and refined silver.
Mick will provide an update on Rochester in a few minutes.
Mitchell J. Krebs: A year ago, I spoke on this call about our expectations for a strong bounce-back year at Wharf in 2023, and I'm happy to say that's exactly what the team delivered. Pre-cash flow reached $27 million in the fourth quarter and $82 million for the year from 94,000 ounces of gold production. As you can see on slide 12, cumulative free cash flow since we purchased WRF nine years ago has now topped the $400 million mark, which is over four times our acquisition price. When we acquired Wharf, it had an estimated remaining mine life of about five years. And today, after over 800,000 ounces of production, Wharf's reserves stand at over 760,000 ounces of gold with further exploration upside. I also want to offer a few quick comments on our year-end reserve and resource update we provided earlier this week, which is summarized on slide 10. Our roughly $245 million investment in exploration over the past five years continues to deliver tremendous results. It remains a key differentiator for Coeur at a time when many companies in the sector have underinvested in this critical component of the business.
A year ago I spoke on this call about our expectations for a strong bounce back year at wharf in 2023.
And I'm happy to say, that's exactly what the team delivered.
Free cash flow reached $27 million in the fourth quarter and $82 million for the year from 94000 ounces of gold production.
As you can see on slide 12 cumulative free cash flow since we purchased wharf nine years ago has now topped the $400 million Mark.
Which is over four times our acquisition price.
When we acquired wharf. He had an estimated remaining mine life of about five years.
Today after over 800000 ounces of production.
Wharf's reserves stand at over 760000 ounces of gold with further exploration upside.
I also want to offer a few quick comments on our year end reserve and resource update we provided earlier this week, which is summarized on slide 10.
Our roughly 245 million dollar investment in exploration over the past five years continues to deliver tremendous results.
It remains a key differentiator for core at a time when many companies in this sector have underinvested in this critical component of the business.
Mitchell J. Krebs: Over the past five years, we've produced roughly 1.7 million ounces of gold and also managed to add 400,000 ounces to our reserves, which now stand at over 3 million ounces of gold. For silver, we've added 73 million ounces of reserves, in addition to producing over 51 million ounces over the past five years, with our current silver reserves now approaching nearly 250 million ounces. In addition to reserve growth, our gold and silver M&I resources have increased by approximately 45 and 59 percent, respectively, over the past five years. IFA will provide additional color in a few minutes, including providing some highlights on our 2024 exploration priorities. Before turning the call over to Mick, I want to thank our entire team for their commitment and dedication last year, which has led the company to be very well positioned, not only for this year, but well into the future. Nick, over to you.
Over the past five years, we've produced roughly 1.7 million ounces of gold and also managed to add 400000 ounces to our reserves, which now stand at over 3 million ounces of gold.
For silver we have added 73 million ounces of reserves. In addition to producing over 51 million ounces over the past five years with our current silver reserves now approaching nearly 250 million ounces.
In addition to reserve growth, our gold and silver MNI resources have increased by approximately 45, and 59% respectively over the past five years.
Eva will provide additional color in a few minutes, including providing some highlights on our 'twenty 'twenty four exploration priorities.
Before turning the call over to Mick I want to thank our entire team for their commitment and dedication last year, which has led the company to be very well positioned not only for this year, but well into the future.
Mick over to you.
Mick: Thanks, Mitch, and good day to everyone. The foundation of Coeur's success lives with our people. And I also extend my gratitude and appreciation to every employee and contractor that contributed to a great finish this year. I want to take a moment to stress the importance of keeping our people safe. Coeur has made strides over the last few years in driving down injury frequency rates, overall severity, and lost pain injury risk to take our place as a clear safety leader within the sector. While I applaud those results.
Thanks, Mitch and good day to everyone.
The foundation of course success lies with our people.
And I also extend my gratitude and appreciation to every employee and contractor that contributed to a great finish for the year.
I wanted to take a moment to stress the importance of keeping our people safe.
Coal has made strides over the last few years and driving down injury frequency rates.
Overall severity and loss time injury rates.
To take our place as a T S.
CFT leader within the sector.
While I applaud those results.
Mick: We must also recognize that redoubling our efforts is absolutely essential to sustaining and improving that track record. We must do more, and we will do more to safeguard the well-being of everyone on our team. There is no higher priority for me and for this company. Turning to a brief recap of our fourth quarter production and cost summary, beginning with Pomeroy Hall, higher gold grades due to a greater contribution from Guadalupe and a concerted effort from the team led to a nice finish to the year. Full-year gold and silver production trended towards the lower end of the guidance range, and cash for gold and silver met guidance despite a continued strong peso and ongoing inflationary pressures that have been slower to moderate compared to our U.S. operation. Despite these challenges, the team at Palmarejo delivered over $15 million of free cash flow in the fourth quarter, its highest mark of the year. Looking ahead, guidance for 2024 anticipates gold and silver production to be consistent with 2023. Moving to Rochester.
We must also recognize that redoubling, our efforts is absolutely essential to sustaining and improving track record.
We must do more and we will do more to safeguard the well being of everyone on our sites.
There is no higher priority for me and for this company.
Turning to a brief recap of our fourth quarter production and cost summary on slide four and beginning with <unk>.
Higher gold grades due to a greater contribution from Guadalupe in a concerted effort from the team led to a nice finish to the year.
Okay.
Full year gold and silver production trended towards the lower end of the guidance range and Costa Goldman sober met guidance. Despite a continued strong peso and ongoing inflationary pressures that have been slower to moderate compared to our U S operations.
Despite these challenges the team at pulmonary or delivered over $15 million of free cash flow in the fourth quarter its highest mark of the year.
Looking ahead guidance for 'twenty, 'twenty, four anticipates gold and silver production to be consistent with 2023.
Moving to Rochester.
Mick: The team finished the year off strong, producing 1.3 million ounces of silver and 20,000 ounces of gold in the fourth quarter, representing quarter over quarter increases of 120% and 345%, respectively, a sign of greater things to come with the new pad 6 and upscaled new Merrill Crowe facility. This new kit made all the difference in helping Rochester meet gold production guidance for the year. Silver production fell just below the low end of the guidance range due to a temporary inventory backlog at the new Merrill Core plant right in the area.
The team finished the year off strong producing $1 3 million ounces of silver and 20000 ounces of gold in the fourth quarter.
Representing quarter over quarter increases of 120% and 345% respectively.
Sign of greater things to come with a new pod six upscaled Numero cool facility.
This new Kid made all the difference in helping Rochester meet gold production guidance for the year.
Production fell just below the low end of the guidance range due to a temporary inventory backlog at the Numero cool plant right at year end.
Okay.
Mick: Both quarter-adjusted costs for silver and gold fell dramatically compared to the previous quarter due to higher silver and gold sales, which is also a sign of greater things to come as we see the benefits of higher throughput on our unit costs going forward. The ramp-up of the three-stage crushing circuit is proceeding, with all feed now passing through the primary and secondary crushing stages and out to the new leach pad. Commissioning work is now focused on the pre-streams and tertiary crushers, with expected completion during the current quarter. As a result of lower placement rates while we complete crusher commissioning, we expect significantly lower gold and silver production levels in the first quarter. We remain on track to reach commercial throughput levels by the end of the second quarter. Dismantling of the Legacy Crusher is progressing, with mining activities in the area now underway. As we look at the second half of the year post-ramp-up, we expect Rochester's unit costs to markedly decline to win in a range of $14 to $16 per ounce of silver and $1,200 to $1,400 per ounce of gold, nearly 50% lower than recent levels.
Both quarter adjusted costs for silver and gold fell dramatically compared to the previous quarter due to higher silver and gold sales.
Which is also a sign of great things to come as we see the benefits of higher throughput on our unit costs going forward.
The ramp up of the three stage crushing circuit is proceeding with all feed now passing through the primary and secondary crushing stages and out to the new Leach pad.
Commissioning work is now focused on the pre screens and tertiary crushers with expected completion during the current quarter.
As a result of lower placement rates, while we completed crusher commissioning, we expect significantly lower gold and silver production levels in the first quarter.
We remain on track to reach commercial throughput levels by the end of the second quarter.
Dismantling of the legacy Crusher is progressing with mining activities in the area now under way.
As we look at the second half of the year post Trump, we expect Rochester's unit costs to markedly decline to win in a range of $14 to $16 per ounce of silver.
On $200 to $4800 per ounce of gold.
Nearly 50% lower than recent levels.
Mick: Looking at it another way, we anticipate around $2 per tonne of mining costs, $3.00 per ton of processing costs, and $1.00 per tonne of G&A costs during the second half of 2024 while we settle the operation into a rhythm and optimize for both cost and performance. Turning to Kensington, they continue to regain footing with a good fourth quarter following an equally strong third quarter. You'll recall Kensington had a difficult first half beset by dewatering and pierced backfill challenges.
Looking at it another way, we anticipate around $2 per ton of mining costs.
$3 per tonne processing costs and $1 two and in G&A costs. During the second half of 2024, while we set will be operation into a rhythm and optimized for both cost and performance.
Turning to Kensington.
We have continued to regain footing with a good fourth quarter following an equally strong third quarter youll.
Youll recall Kensington had a difficult first half beset by dewatering and paste backfill challenges.
Mick: But after establishing good controls for both of these issues, we finished at the high end of the previously revised gold production game. 2024 Games reflect higher expected gold production, setting the stage for a bounce-back year characterised by greater mine flexibility and continued development aimed at positioning the operation for a strong future. 2024 is expected to be the last full year for elevated levels of development and drilling as we look to meaningfully extend Kensington's mining. Finishing briefly with Wharfe, as Mitch highlighted, the team in South Dakota delivered again in 2023, achieving the previously upwardly revised gain. 2024 should be another typical Wharf Lake year with similar production and cost gains anticipated. With that, I'll pass the call over to you.
But after establishing good controls for both of these issues. We finished at the high end of the previously revised gold production guidance.
2024 guidance reflects higher expected gold production setting the stage for a bounce back year characterized by greater mine flexibility and continued development aimed at positioning the operation for a strong future.
2044 is expected to be the last full year for elevated levels of development and drilling as we look to meaningfully extend Kensington mine life.
Finishing briefly with Wolf as Mitch highlighted the team in South Dakota delivered again in 2023, achieving the previously upwardly revised guidance.
<unk> 2024, it should be another typical wolf Lake.
With similar production and cost guidance anticipated.
With that I'll pass the call over to Eva.
IFA: Thanks, Mick, and good morning, everyone. 2023 marks another successful year for exploration, with the main priorities being replacement of depletion at Kensington, building the resource pipeline at other sites, and enhancing our ore body knowledge. The teams were enormously successful at this; measured and indicated resources climbed by double digits at Palmarejo, Rochester, and Wharfe, while inferred resources climbed by double digits at Rochester, Kensington, Wharfe, and Silvertip. We plan to continue with more of this expansion focus in 2024. And in addition, we expect meaningful growth in reserves at Kensington. For the second year running, we replaced depletion and recorded growth in reserves at Kensington. Reserve grades also increased 5%, driven mainly by excellent results from lower Kensington.
Thanks, Nick and good morning, everyone.
'twenty 'twenty train marked another successful year for exploration with the main priorities being replacement if the patient at Kensington building the resource pipeline, that's at their sites and enhancing our ore body knowledge.
The teams are enormously successful at this measured and indicated resources climbed by double digits. This time Marino Rochester and wharf.
While inferred resources climbed by double digits at Rochester at Kensington.
And silver kit.
We plan to continue with more of this expansion focus in 'twenty 'twenty four and then in addition, we expect meaningful growth in reserves at Kensington.
For the second year running we replace depletion and recorded growth in reserves at Kensington.
Reserve grades also increased 5% driven mainly by accident results from nowhere Kensington.
IFA: This is the first time we've ever achieved back-to-back reserve growth, a clear indication that the multi-year drilling and development program is achieving its objectives. In a year of limited exploration expenditures at Rochester, we still banked growth across all classes, achieving a 7% increase in reserves. Coeur Mining Inc. This was achieved mainly through pit redesigns, which increased the mine life to 16 years.
This is the first time, we've ever achieved back to back with or is that a clear indication that the multiyear drilling and development program is achieving its objectives.
In a year is limited exploration expenditures at Rochester, we still banked growth across all classes, achieving a 7% increase in reserves, 16% increase in measured and indicated and a 77% increase in fared well on a gold equivalent basis.
This is achieved mainly to pitch redesigned which increase the mine life to 16 years.
Okay.
IFA: Another standout for the year was strong inferred resource growth at Silvertip, with silver, lead, and zinc increasing 12%, 20%, and 27%, respectively. A recent press release shows the opportunity for extremely high grades in the deposit, and this, along with our continually growing understanding of the system, makes us very confident of rapidly increasing the resource base over the next few years. Across the company, exploration investment for 2024 is expected to include $40 to $50 million on scout and expansion drilling and $7 to $13 million on infill drilling. This excludes $15-20 million of underground mine development and exploration support costs at Silvertip.
And understand that for the error was strong inferred resource to actually Richard with silver lead and zinc, increasing 12, 20 and 27% respectively.
Our recent press release shows the opportunity extremely high grades and the deposit and this along with a continually growing understanding of the system makes us very confident of rapidly increasing the resource base over the next few years.
Across the company exploration investment for 'twenty 'twenty four is expected to include $40 million to $50 million unscathed and expansion drilling.
And seven to Turkey millions of dollars on infill drilling.
This excludes $15 million to $20 million.
And mine development and exploration support costs at silvertip.
IFA: The key priorities for the year are continuation of Life of Mine additions at Kensington and Wharf, testing Higher-Grade Structures at Rochester, further building the inferred pipeline at Camarillo to enable rapid reserve conversion over the coming years, and continuing to grow resources at Silvertep. With that, I'll pass the call over to Tom.
The key priorities for the air and continuation of life of mine additions at Kensington and wharf.
Testing higher grade structures in Rochester.
Further building the inferred pipeline at time of rail to enable rapid reserve conversion over the coming years.
And continuing to grow resources at silvertip.
With that I'll pass the call over to Tom.
Tom: Thanks, Issa. I will begin with a brief review of our fourth quarter financial results before touching on an important update regarding the balance sheet. Turning to the financial summary on slide 13, the fourth quarter of 2023 gave us all a sneak peek at what the company could look like once the Rochester ramp-up is complete, with quarterly sales of approximately 100,000 ounces of gold and 3 million ounces of silver. This level of production and sales led to quarterly revenues of $262 million and adjusted EBITDA of $64 million, which were 35% and 110% higher compared to the third quarter. On an annualized basis, this type of run rate would lead to annual revenues and EBITDA exceeding $1 billion and $250 million, respectively. With our expansion capital behind us, we look forward to the arrival of strong, free cash flow generation in the second half of the year, which will be allocated to pay down debt. Lower metal sales are anticipated in the first quarter, consistent with the Rochester ramp-up and Wharf's seasonally driven slower first quarter.
Thanks Peter.
I will begin with a brief review of our fourth quarter financial results before touching on an important update regarding the balance sheet.
Turning to the financial summary on slide 13, the fourth quarter of 2023 gave us all a sneak peek at what the company can look like once the Rochester ramp up is complete with quarterly sales of approximately 100000 ounces of gold and 3 million ounces of silver.
This level of production and sales led to quarterly revenues of $262 million and adjusted EBITDA of $64 million, which were 35% and 110% higher compared to the third quarter.
On an annualized basis. This type of run rate would lead to annual revenues and EBITDA exceeding $1 billion and $250 million respectively.
With our expansion capital behind US, we look forward to the arrival of strong free cash flow generation in the second half of the year, which will be allocated to pay down debt.
Lower metal sales are anticipated in the first quarter consistent with the Rochester ramp up and wharfs seasonally driven slower first quarter.
Tom: In addition, our first quarter operating cash flow is impacted annually by three key items. Mexican EBITDA tax payments Annual Incentive Payouts and the Semi-Annual Interest Payments on our 5-1-8 notes. Turning to costs on slide 15, there's good news at our U.S. operations, where we are seeing inflationary pressures moderating. However, as Mick mentioned at Palmarejo, continuing inflationary pressure coupled with a strong Mexican peso are likely to present headwinds in the months ahead. Our unit costs for 2024 at Palmarejo have been guided to $1,075 to $1,250 per ounce of gold, which will likely lead to lower free cash flow in 2024 at Palmarejo, especially on the approximately 30 to 40,000 ounces of gold where we only paid $800 an ounce due to the onerous Franco-Nevada gold stream.
In addition, our first quarter operating cash flow is impacted annually by three key items.
Skin EBITDA tax payments.
Annual incentive payments and the semiannual interest payments on our five and one eight snopes.
Turning to costs on slide 15, there's good news at our U S operations, where we are seeing inflationary pressures moderating.
However, as Mick mentioned at Palmer Ao, continuing inflationary pressure, coupled with a strong Mexican peso are likely to present headwinds in the months ahead.
Our unit costs for 2024 at Palmer rail had been guided to 1075 to $250 per ounce of gold, which will likely lead to lower free cash flow in 2024.
Tom rail, especially on the approximately 30 to 40000 ounces of gold, where we only paid $800 an ounce due to the onerous Franco Nevada gold stream.
Tom: Fourth quarter capital expenditures declined by 17% compared to the previous quarter, due primarily to the timing of final contractor payments at POA 11. As is often typical with the completion of a major project, we're in the midst of some negotiations with a couple of our key contractors on the quantum of their final bills. At the end of 2023, we will have paid approximately $700 million of the expansion capital at POA 11, leaving approximately $20 to $30 million to be paid in 2024. Turning to the balance sheet, we were very pleased to announce yesterday that we have completed an extension of our revolving credit facility through February 2027, which is a strong external sign of confidence from our lenders in our future. We would like to thank all of our longstanding syndicate banks, BAML, RBC, BMO, ING, and Goldman Sachs for their continued support and confidence. We're happy to announce the addition of National Bank and Desjardins to the syndicate of now seven banks.
Fourth quarter capital expenditures declined by 17% compared to the previous quarter due primarily to timing of final contractor payments at Poa 11.
As is often typical with the completion of the major project. We're in the midst of some negotiations with a couple of our key contractors on the quantum of their final bills.
At the end of 2023 we have paid approximately $700 million of the expansion capital at Poa 11, leaving approximately $20 million to $30 million to be paid in 2024.
Turning to the balance sheet, we were very pleased to announce yesterday that we have completed an extension of our revolving credit facility through February 2027.
Which is a strong external sign of confidence from our lenders and our future we would like to thank all of our long standing syndicate banks demo RBC BMO I N G and Goldman Sachs for their continued support and confidence we are happy to announce the addition of National Bank and days are down to the syndicate of now seven.
Thanks.
We ended the quarter with total liquidity of nearly $250 million.
In light of the strong fourth quarter, our net debt to adjusted EBITDA ratio dropped to 3.4 times versus four times at the end of the third quarter, while we do expect to draw on our revolver. During the first half of the year, we plan to begin reducing debt during the second half of the year as the company begins to generate meaningful free cash flow.
<unk> driven by the successful ramp up at Rochester.
Further enhancing our financial position, we have extended our hedging program to provide price certainty during the commissioning and ramp up of Rochester in the first half of 'twenty 'twenty four with nearly 95000 ounces of gold hedged and an average forward price of $2076 per ounce and roughly $3 1 million.
Ounces of silver hedged and an average forward price of $25 16 per ounce I'll now pass the call back to Mitch.
Thanks, Tom as we look to our key deliverables for 2024 on slide 17.
We see several major catalysts converging this year.
Significant U S based production growth, particularly silver production.
And a transition to positive free cash flow followed by a period of sustained debt reduction.
While these near term catalysts play out we will remain focused on further improving our industry, leading safety performance deliver.
Delivering consistent results from all of our operations and investing in high return high impact exploration.
Combined these drivers offer a highly differentiated value proposition that features production and cash flow growth from our stable platform of for North American operations.
Growing silver exposure.
A declining cost profile, a strengthening balance sheet and significant exploration upside.
The last three years have represented a period of heavy investment by the company and we've repeatedly talked about are coming inflection point.
That point has now arrived and we look forward to delivering the expected results and payoff from these investments and from the incredibly hard work by the team.
With that let's go ahead and open it up for questions.
Ladies and gentlemen at this time well begin the question and answer session.
To ask a question you May press Star and then one on your Touchtone telephone.
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And once again that is star and then one to join the question queue.
And ladies and gentlemen at this time and showing no questions I would like to turn the floor back over to Mitchell Krebs for any closing remarks.
Okay.
I know, it's a busy reporting day I appreciate you all taking the time to join our call.
We look forward to speaking again with everyone in early May when we release, our first quarter results.
Until then have a good a good day in and best of luck.
Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.