Q4 2024 Coeur Mining Inc Earnings Call
Good day and welcome to the core mining fourth quarter 2024 financial results Conference call.
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Michal Kratz: I would now like to turn the conference over to Michal Kratz, Chairman President and CEO. Please go ahead.
Michal Kratz: Good morning, everyone and thanks for joining our call today to discuss our fourth quarter and full year results.
Michal Kratz: Before we start we want to quickly point out our cautionary language regarding forward looking statements in today's slide deck and refer you to our SEC filings on our website.
Michal Kratz: I'll start with some quick highlights before turning the call over to Mick if I'm Tom for some more color on our results and our 2025 outlook.
Speaker Change: By any measure 2024, it was one of the most consequential years and quarters nearly 100 year history.
Speaker Change: The company is in the midst of an inflection point following a period of heavy investment to reposition us at a larger scale growing lower cost silver and gold producer with a more conservative balance sheet.
Speaker Change: The second half of last year marked the beginning of this inflection point with $85 million of free cash flow $80 million of debt reduction.
Speaker Change: Nearly $90 million of earnings the successful ramp up of our Rochester expansion.
And the announcement of the Silvercrest acquisition.
Speaker Change: Our full year 2024, adjusted EBITDA more than doubled to $339 million compared to the prior year.
Speaker Change: Looking ahead to 2025, we're entering the year incredibly well positioned to deliver record results and be a true global leader amongst silver companies at just the right time.
Speaker Change: We expect production levels from our five North American operations to reach over 400000 ounces of gold and over 18 million ounces of silver this year, which are 20% and 62% higher than last year's levels.
Speaker Change: We anticipate delivering record levels of EBITDA earnings and free cash flow that can be used to aggressively pay down debt and leave us with a peer leading balance sheet by year end.
The combination of Rochester's first full year post expansion.
Speaker Change: 10, and a half months of the newly acquired last Chiefs. This operation.
Speaker Change: Steady performance from our other operations and higher prices are the key drivers to this expected record year.
Speaker Change: Looking further out our news release on Tuesday, covering yearend 2020 for reserves and resources showcase the company's strengthening pipeline of mineral inventory just a few quick highlights looking at slide 10 over the past five years, we've invested $285 million in exploration.
Speaker Change: That has led to a 26% increase in gold reserves, 30% increase in silver reserves, along with material increases in both gold and silver resources, putting us in a great position to further extend mine lives at our operations.
Speaker Change: Two great. Examples of this from last year's results are the sharp resource increases at Palmetto and wharf.
Speaker Change: Colorado's inferred resources jumped by 75% year over year, while wharf MNI resources doubled.
Speaker Change: And its inferred resources tripled year over year.
Speaker Change: Giving us a high level of confidence in delivering meaningful mine life extensions at these two operations in coming years.
Speaker Change: One other highlight from Tuesdays release is the addition of the high grade Las <unk> asset, which provided a 12% boost to our overall reserve grade, which reflects the quality of this newly acquired asset.
Mick: Mick over to you.
Mick: Thanks Mitch.
Mick: Coors portfolio finished the year on a strong note.
Mick: Highlighted by Great results at wharf on pulmonary who and continued growth at Rochester coming less than a year since startup and initial production.
Mick: Beginning with Rochester.
Mick: The newly expanded operation continues to trend positively with tons placed during the quarter <unk> delivered within our targeted level of seven to 8 million tons on the way to a 34% increase in silver production compared to the third quarter on 63% increase in gold production over the same period.
Mick: This growth contributed to over $12 million of free cash flow during the quarter.
Mick: We are also seeing continued success in the first month of the year as the team placed an additional 2.4 million tonnes on the Leach pad, which was right on plan.
Mick: Mining crushing and recoveries continue to show a strong sequential improvement even as periodic pauses to the circuit have taken place to address plant modifications and typical startup work.
Mick: Placement of high grade backfill material once again contributed to pump placement rates during the quarter.
Mick: The relatively large size fraction of this material led to increased leach cycle times of silver, which presented a slightly lower than planned silver production in the quarter, but contributed to a strong overall finish to the year.
Mick: Unexpected costs applicable to seals were within full year guidance ranges and they claimed by 14% in the fourth quarter as throughput rates continue to climb.
Mick: Okay.
Mick: Looking ahead 2025 production guidance of 7 million to eight 3 million ounces of silver and 60000 to 75000 ounces of gold represent year over year increases of 75% and 72% respectively.
Mick: Higher sustained throughput rates are expected to continue driving down unit costs, which are shown on slide seven on a per tonne per hour.
Mick: Basis.
Mick: Turning to Palmary Hall.
Mick: The team delivered another solid quarter, great year, with gold and silver production, increasing 8% and 3% year over year, respectively, leading to $108 million of free cash flow, which was the highest level in seven years.
Mick: Paul Maria who also continues to position itself for the future with the completion of the Hidalgo pool, leading to enhanced flexibility and access to new all drives in 2020 five and beyond we.
Mick: We expect the mood at a typical year of silver and gold production Palmary, who in 2025.
Mick: Moving to Kensington.
Okay.
Mick: Gold production increased throughout 2024, leading to a strong bounce back year with 13% growth compared to 2023.
Mick: With Kensington Smoky, a investment and underground mine development and exploration now beginning to wane down 2025 production guidance reflects the enhanced flexibility and successful reserve additions, we achieved to set up Kensington for another 5% increase in production compared to 'twenty 'twenty, four and a return to positive free.
Mick: Cash flow this year.
Mick: Finishing up with Wolf as expected fourth quarter production moderated compared to the unusually high third quarter result, but still managed to deliver annual goals growth of 5% leading to a full year free cash flow of $95 million, which sets a new record for the operation.
Mick: <unk> 2025 guidance reflects a similar year of stable production ahead.
Mick: Turning briefly to a couple of key items on Capex guidance Slide 11 highlights a year of more typical sustaining capex spending following the completion of the Rochester expansion.
Mick: With a few additional focused high return capital investments anticipated in 'twenty twenty-five at Kensington, We plan to commence a tailings dam raise to realize the value from its extended mine life.
Mick: At Rochester, we plan to complete some modifications after startup projects across the cushion system to further improve flexibility and drive efficiency.
Mick: And finally, the recent success of Juno and the north fully targets at wharf requires a modest increase in capital this year to support an expected material extension to its mine life.
Eva: With that I'll pass the call over to Eva.
Eva: Thanks, Nick.
Eva: First quarter close back in very successfully air for Coors exploration program.
Eva: Starting with the good news at Kensington, and multi year underground development and drilling program.
It has been very successful with a doubling of reserves since the program began in May 2022.
Eva: Multiple new zones are discovered last year, which will be followed up on in 2025.
Eva: Given there's much more comfort to the mine life have focus will pivot towards maintaining the steady five year life of mine and targeting higher grade zones to maximize the operations cash flow.
Speaker Change: We also had a very busy Arab Moreno, let the analysts to further bolster the inferred pipeline for future conversion to reserves.
Speaker Change: And your discovery was made in Hidalgo, Alright, Josh Libertad footwall vein.
Speaker Change: It was a significant contributor to the overall and sedation there.
Speaker Change: Furthermore, early stage work and the newly acquired Neil claims is outlining multiple new veins.
Speaker Change: An additional 12 kilometers of strike length outlined in the Independencia sure block.
Speaker Change: These are located directly southeast with existing mine infrastructure and we recently commenced drilling.
Speaker Change: Tests, the southeast extensions of the veins and the main line.
Speaker Change: 39% of last year's exploration that jazz has come out with.
Speaker Change: And outside the area of interest impacted by the Franco Nevada Gold stream and this is expected to increase to 60% and 10 to 25 now that's really fully consolidated the land position to the east of existing operations.
Speaker Change: And Rochester, one program, that's not last year, but as the campaign targeting the previously unaddressed portion of east Rochester the wedge.
Speaker Change: And also targeting higher grades in the Black ridge and other salts.
Speaker Change: Higher grades are found in a sense vertical structure and Aesop Chester and a large portion is literally in the words previously thought to be list was shown to have mineralization.
Speaker Change: The impacts of this virus will be evaluated after it more aggressive share program planned for late this year and continuing into 2026.
Speaker Change: Last but not least the three pronged program at silvertip pay it off and buying.
Speaker Change: The underground near mine drilling extended the southern for parents saddle zones along strike.
Speaker Change: The program is large stair step edits intersected massive sulfide mineralization and five of five homes up to one common share and administrations resources first southern silver zone.
Speaker Change: And two of them are still makes it look alikes are outlined in the regional program.
Speaker Change: And to follow up on days during the upcoming summer seasons.
Speaker Change: Looking at slide nine we expect to invest about 85 million in exploration and 2025 like last year. This year's exploration will be weighted towards skirt and expansion drilling with the aim of further bolstering our inferred resources for future conversion.
Speaker Change: We also aim to maintain steady mine lives now that they have successfully extended them across the portfolio over the past few years.
Speaker Change: With that I'll pass the call to Tom.
Speaker Change: Thanks, Keith that the third quarter was the beginning of the major inflection point that we had all been waiting for since the launch of the Rochester expansion in 2020.
Speaker Change: The momentum continued during the fourth quarter with Rochester, joining the free cash flow party with its first positive free cash flow quarter. Since 2019, driven by the steady progress of the ramp up of the crusher and the increase in ounces placed on the Leach pad as Mick described.
Turning to the financial summary on slide eight key 'twenty 'twenty four headlines included revenue exceeding the $1 billion, Mark adjusted EBITDA, increasing by almost $200 million to $339 million.
Speaker Change: Capital expenditures at $183 million were cut in half versus the prior year, which allowed us to increase our exploration expenditures to approximately $60 million and our average quarterly free cash flow was $43 million during the second half of 2024.
Speaker Change: Turning to the balance sheet summary on slide 12, our planned debt reduction continued during the fourth quarter with another $30 million repaid on our revolving credit facility, leaving us with a significantly improved net debt to EBITDA ratio of one six times versus 3.4 times one year ago.
Speaker Change: Coors rapid balance sheet strengthening will accelerate in 2025 off the back of higher gold and silver production stronger commodity prices and of course, the closing of the Silvercrest transaction last Friday, we expect that our revolver balance which stood at $195 million drawn at December 31, 2020.
Speaker Change: Four will be repaid by the second half of 2025, and our long stated goal of net debt to EBITDA of nil is insight.
Speaker Change: We are excited to present, the 2025 guidance on slide 14, which includes last used us for the first time, albeit for only 10 and a half months.
Speaker Change: Key themes for 2025 include production growth driven by Rochester, unless G space and an acceleration of free cash flow and debt repayment using.
Speaker Change: Using a 2700 dollar gold price and a $30 silver price, we expect to average $75 million to $100 million per quarter of free cash flow beginning in Q2, 2025, which will be applied to debt reduction.
Speaker Change: This free cash flow generation includes an elevated exploration investment versus 'twenty 'twenty four as we continued to find excellent opportunities to invest across our portfolio to generate returns above our cost of capital.
Speaker Change: The potential material mine life extension at wharf jumps out as a poster child for our focus as a company on ROIC exciting times indeed.
Speaker Change: One note of caution Q1, 2025 will be a bit messy and not representative of the go forward business. As Q1 will only include 45 days of last <unk> operating results and.
Speaker Change: And we will incur several onetime outflows, which will impact our operating cash flow during the quarter.
Speaker Change: Those outflows include an estimated $80 million of <unk> tax payments in Mexico related to the strong financial results at both Palm right on last <unk> in 2024.
Speaker Change: The payments associated with Coors annual incentive plan and the semiannual interest payment on our long term notes.
Speaker Change: A much larger annual property tax payment at the expanded Rochester mine and Silvercrest transaction costs.
Speaker Change: It is important to highlight that absent. These one time outflows first quarter free cash flow would have been expected to be positive I'll now pass the call back to Mitch.
Mitch: Thanks, Tom before moving to the Q&A I want to quickly highlight slide 13 summarizes our top priorities for 2025.
Speaker Change: With the completion of the Silvercrest acquisition last Friday.
Speaker Change: Just want to take a moment and quickly thank our team and the silvercrest team for their efforts in making this transaction happen.
Speaker Change: And welcome to lost <unk> team to the company as well as welcome Eric Fear and Pierre Boardwalk to our board of directors.
Speaker Change: Thanks to a lot of hard work by a lot of people over many years, coupled with incredibly strong fundamentals for both gold and silver.
Speaker Change: We're seeing several key catalysts converge at once that have the company positioned better than ever heading into 2025.
Speaker Change: From a solid platform of five North American operations.
Speaker Change: Core provides near term growth unmatched silver exposure.
Dramatic cash flow increases a.
Speaker Change: A rapidly strengthening balance sheet peer leading liquidity and a fertile pipeline of exploration targets to support the next phase of growth in the years ahead.
Speaker Change: With that let's go ahead and open it up for questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: Taking your question has been addressed and you would like.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.
Joseph Reagor: Hey, Mitch and team thanks for taking my questions and congrats on all the accomplishments.
Mitch: Hey, Joe Thanks.
Mitch: So I guess first thing on the watch loss cheapest acquisition can.
Joseph Reagor: Can you give us an update on what the cash and bullion equated to at the time of the closing.
Joseph Reagor: Yeah. Thanks for the question, obviously, the balance sheet that Silvercrest had was one of the key deal rationale points using that cash and bullion to reduce debt here in the first quarter and then combined with the free cash flow from lost cheeseburger during the year that that should help us delever quake.
Joseph Reagor: Quite quickly.
Joseph Reagor: Tom do you want to talk a little bit more about where they were at least it sure and in and how we see that playing out from here sure.
Speaker Change: Thanks, Joe So as I noted in our news release of $153 million in cash and 40 in bullion and they didnt sell any of the bullion.
Joseph Reagor: Between year end then.
Joseph Reagor: Allentown stay what we close that transaction they did pay a bunch of bills in a in the first 44 days, including a lot of their transaction costs et cetera, et cetera. So that balances is a close to closer to $100 million as we approached.
Joseph Reagor: The closing dates, but as Mitch said you know the the game plan here is no. It's give me a bit of a messy quarter is weak we deal with our transaction costs, the big tax Bill I mean it.
Joseph Reagor: Nearly $40 million for each of the two subsidiaries given the strong performance.
Joseph Reagor: So.
Joseph Reagor: Anyway, that's that said just want to highlight that Q1 is a bit messy.
Joseph Reagor: Okay No that's helpful.
Joseph Reagor: Two other specific operational things I noticed.
Joseph Reagor: One cans.
Joseph Reagor: Kensington the cost per ounce is going up you know a decent amount from last year and then at Rochester, There was a mention of crush size and.
Joseph Reagor: In Q4 that that was part of the reason for production being a little lower can you just touch on what's called what crush size issue is is it behind you and then on Kensington, what's driving the higher costs.
Joseph Reagor: Yeah, I can I'll start I'll take maybe I'll go with the second question first and then and then we'll hit the Kensington second just on on Rochester, I'll offer up a couple of comments and then make you can.
Joseph Reagor: Give joe some additional detail yeah, we did place a little bit more of that direct to pad material that we call. The D. T. P. In the fourth quarter I think about 3 million tons that went out onto the leach pad.
Joseph Reagor: Came from that material and that's previously mined higher grade slightly larger size material more like a couple of bench size.
Joseph Reagor: And we did that to really offset some some crusher downtime that we took during the quarter.
Joseph Reagor: To take care of a few items.
Joseph Reagor: That had been identified.
Joseph Reagor: Leading up to the fourth quarter, and we pulled some 21st quarter 2025.
Joseph Reagor: Land maintenance into the fourth quarter, and and decided to take care of those items just to set us up better for a good strong clean 2025.
Joseph Reagor: So that did impact slightly the crush size in the in.
In the in the fourth quarter, and and and whereas really the driver to the the slightly lighter silver production and when you think about.
Joseph Reagor: 2025.
Joseph Reagor: We will crush probably right around 30 million tons, and then place on top of that another probably five or 6 million tons of that direct to pad material. The limit on the permit limit on the crushers 32 million tonnes, so that direct a pad material.
Joseph Reagor: It is profitable and it gives us an opportunity to kind of exceed that that permit limit on the on the crusher.
Joseph Reagor: It does have a slight impact on on recovery given that larger crush size, but it's it's profitable profitable material in gist.
Joseph Reagor: I'd say on the crush size overall, the progress towards the five H gold continued to make a lot of progress Nick can give you. Some additional details on that I know we've run a couple of of specific campaigns focused on hitting that in the in December and again in January and and we've definitely the crusher has proven its ability to deliver that five eighths inch.
Joseph Reagor: A product that we that we're targeting but Mike do you want to fill any blanks on that and then also hit the Kensington question Yeah for sure.
Speaker Change: Thanks, Joe we're absolutely pumped actually we're seeing that momentum build rate across 'twenty 'twenty. Four you know since we started on the <unk>.
Joseph Reagor: March.
Joseph Reagor: It's not that long ago, right feels like a while but it's really not.
Joseph Reagor: We look across the whole of 2024, and we had around 70% of that material through the whole year that was passing about five years synch size fraction. So.
Joseph Reagor: That performance is getting better and better still a bit of work to do we did those tests as Mitch mentioned in December and January and they were very specifically to understand the nature of the ore body and what control limits were to ensure we can send that right blend to the crusher to hit that size fraction and you know, we're not going to be able to do that all of the time.
Joseph Reagor: We are as you higher up in the ore body will get some pretty soft doors, and they're not really applicable to two putting through the tertiary crusher. So we bypass through was a little bit and we see a slightly higher size fraction now and again, but overall those test showed that when we want to and will prevail that crusher with the right blend of hard and soft doors. It.
Joseph Reagor: Can hit that five years, sorry, structured well and so overall really really happy about that.
Joseph Reagor: On Kensington.
Joseph Reagor: Yes, Joe a couple of things on on Kensington.
Joseph Reagor: As we've talked about there's been a lot of that.
Joseph Reagor: Work on on the <unk>.
Joseph Reagor: The multi year program and so as a result of a few more people on site to labor camp costs were higher more expense underground mine development, but the real thing to monitor there is just a sensitivity to the great. If you're if you pull out the chart on page nine of the earnings release, it you're starting to see Rawin Kensington at.
Joseph Reagor: 0.1 for those those costs really pop up in.
Joseph Reagor: We need to add more 0.16 quarters like we had in Q3 Q4 are the better the Costco so.
Joseph Reagor: It's a bit of the increased activity and then that sensitivity grade and a little bit of time and Tom There's a couple of power plant.
Joseph Reagor: The holes that were just scheduled for this year, where we only did one last year. So it's just a little bit attainment of our maintenance and reliability for the sake.
Speaker Change: Alright, that's very helpful guys. Thanks, I'll turn it over.
Joe: Thanks, Joe.
Speaker Change: Again, thank you for your question. Please press Star then one.
Speaker Change: Our next question comes from Mike Parkin with National Bank. Please go ahead.
Mike Parkin: Hi, guys. Thanks for taking my question looking at.
Speaker Change:
Speaker Change: Hi, guys.
Speaker Change: Great slide there kind of given the quarterly expectations of the portfolio.
Speaker Change: Just wondering with Rochester.
Speaker Change: With cold weather and the <unk>.
Speaker Change: Winter months.
Speaker Change: And the size of the pad is there a thermal load.
Speaker Change: Isn't quite sufficient there, that's where you get that bit of a softer Q1.
Speaker Change: On your gold production silver because your leach kinetics, just slow down and kind of picks up as it warms up or is it still more just <unk>.
Speaker Change: Grade tons under Leach that are driving that.
Speaker Change: More back half weighted.
Speaker Change: Obviously as we can.
Speaker Change: As you are still getting up on a slower recovery there are slower leach curve, but just wondering what's driving that.
Speaker Change: Significant back half weighted.
Speaker Change: It looks at Rochester in the second half.
Yeah, Mike Thanks, Mike.
Speaker Change: I think it's a little bit of both actually.
Speaker Change: But making give me a little more detail.
Speaker Change: Yeah, absolutely. So the main driver behind that really is all about momentum player that I talked about so we get those residual ounces over a long period, particularly with silver right because the leach curves for Gould on which fosters you know, but silver it takes a little bit longer.
And because of the size fractions that we saw through last year, the momentum and the leach curves through that for the contribution through 2025, just build up through the year. So you see that momentum build through Q1 Q2 and into the back end of the year as we continue to feed those law.
Speaker Change: A better size fractions to the heap Leach pad there is a bit of weather and obviously loading rates during those adverse weather conditions also impact that typically and more open pit mines at wharf and.
Speaker Change: Rochester.
Speaker Change: Bit trickier in Q1, but overall, that's that's the key reason.
Speaker Change: Okay.
Speaker Change: And on that you guys are almost there on size.
Speaker Change: Remember to look for that actually last night, where are you in terms of your fragmentation or like your ear grind size stacking size at Rochester, you at your your aim targeted or is there still a little bit of work to be done there.
Speaker Change: Yeah, I think it's fair to say that you know make mentioned some numbers.
Speaker Change: Earlier around 70% last year was hitting five H. So we still got a little bit of work to do to get that up to 280%.
Speaker Change: Yes.
Speaker Change: Yeah, we're seeing numbers that are north of about when we're when we're feeding it with the right ore, which would come which we can't do we did those tests in December and January can be assured that we can do that and we've now just go to optimize a little bit more and more blasting practices in the in the pit and then a little bit more controls and tuning on the on the <unk>.
Speaker Change: Crusher as to be expected right, where we're really only getting towards one year in now and that ramp up curve and its really controlling in world.
Speaker Change: So yeah, a little bit more work to do but not too far to go and one thing that you will see and you have to think about is of course, a direct to pop material is of a size at ISI disruption, we don't put out through the crusher at all because it's already pretty well broken material and we wouldn't have any value by putting D. T. P through the crusher so that goes.
Speaker Change: Stripped pod and not to the slightly higher size fraction. So you have to think about how to own picked out from a recovery curve perspective, but the fantastic thing about DTP is of course that doesn't go against what a permit for the crusher. So without limit of 32 million tons is crushed material, where DTP can actually be put on the <unk>.
Speaker Change: Todd and generate value I would say that 32 million tonne limit. So very positive a couple of things Mike I'd, just tack on there too to what makes it.
Speaker Change: Recovery rates are tracking expectations are predicted rates for the size of the material that we're putting putting out there. So we feel we feel good about that that we've got a good handle on that and I think as we look at 2025 and the set up there at Rochester of getting into into that seven five to 8 million ounce.
Speaker Change: Silver.
Speaker Change: Production level, 80, 70000 ounces or so of silver gold.
Speaker Change: And then those cost per ton Theres, a good slide I thought maybe when you said a good slide Mike you were gonna say slide seven of that Rochester, the cost per tonne. We spent a lot of year, telling people last year that we'd be getting into that kind of sub $2 a ton.
Speaker Change: Our mining cost and $3 a tonne processing in dollar a ton or so on G&A and <unk>.
Speaker Change: And sometimes people looked at us with a little bit of skepticism. So it's nice to see that where we're targeting those those levels and obviously driving that at these prices, especially the kind of cash flow.
Speaker Change: Out of out of Rochester, This year, that's going to be.
Speaker Change: A key driver for us along with obviously the addition of of lost cheapest.
Speaker Change: No for sure I really appreciate the additional color you got there on 24, just showing the great improvement quarter over quarter on all your inputs. So.
Speaker Change: Congrats on good while in Rochester, that's it for me guys.
Mike Parkin: Okay. Thanks, Mike.
Mike Parkin: This concludes our question and answer session.
Mike Parkin: I'd like to turn the conference back over to Mitchell, Krebs, Chairman, President and CEO for any closing remarks.
Mike Parkin: Okay well. Thank you thanks, everyone for taking the time I know, it's a busy reporting day appreciate it we look forward to speaking again.
Mike Parkin: After we released our first quarter results here in the spring have a good day and thanks again for your time.
Mike Parkin: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.