Production, costs and prices were all headed in the right direction in the second quarter of 2002, but financial costs at
For the three months ended June 30, Coeur d’Alene posted a net loss of US$10.9 million (or US16 per share) on revenue of US$22.1 million, and for the first half of the year the company is US$22.8 million in the red, with revenue of US$39.1 million.
By comparison, in 2001, Coeur lost US$3.6 million in the second quarter and US$11.7 million in the first half. Second-quarter revenue was US$20.1 million and first-half revenue, US$38.1 million.
The loss reflects a significant increase in financing costs, at a time when operating results improved substantially. Cash flow from operations broke just above even in the second quarter, at US$100,000, compared with a US$10-million cash outflow in the second quarter of 2001. But debt retirement and the cleanup of the balance sheet cut into earnings.
Coeur’s silver production was up to 3.3 million oz. in the second quarter, an improvement of 28% over last year’s second-quarter figures. By the halfway point of the year, Coeur had produced 6.1 million oz. silver, a million more than last year. Balanced against that, gold production was down slightly in the quarter and significantly in the first half, compared with last year’s figures. Closure of the Petorca gold mine in Chile took out Coeur’s only principal gold producer, and it now produces gold only as a byproduct from two silver mines: Rochester in Nevada and the new Cerro Bayo mine in southern Chile.
The good news for Coeur was overwhelmingly down on the ground, where two new South American mines went into production and improvements at the established U.S. operations showed up in lower cost figures.
The Cerro Bayo mine in southern Chile started production in mid-April from an underground decline. It produced 260,543 oz. silver and 5,919 oz. gold in the quarter, at a cash cost of US$2.34 per oz. silver. In late June, the small but very high-grade Martha mine in southern Argentina started shipping ore to Cerro Bayo for processing. Martha, acquired from
At Coeur’s Silver Valley division in Idaho, mechanization and a geological re-interpretation program that has allowed old areas to be redeveloped both contributed to a 34% increase in production, compared with last year’s second quarter. Costs came down to US$4.14 per oz., 11% less than a year earlier.
The open-pit, heap-leach mine at Rochester, in northern Nevada, produced 1.6 million oz. silver and 17,000 oz. gold in the quarter, with costs (which had increased to more than US$4 in January and February) down to US$2.81. A satellite pit, Nevada Packard, 2 km south of Rochester, is to be brought into production toward the end of the third quarter.
The company had good success in paring costs, with company-wide operating costs for the quarter pushed down to US$16.3 million, 9% lower than a year earlier. That translated to direct cash costs of US$3.34 per oz., down from US$3.75 a year ago. Realized prices for silver increased to US$4.82 per oz., up from US$4.37, and Coeur got an average US$304 per oz. for gold, up from US$273.
Using proceeds from a US$21.5-million convertible note issue, the company retired US$9.4 million in outstanding debt that would have become payable in the second quarter. The notes bear interest at 13.375% but leave Coeur’s balance sheet much strengthened in the short term.
Beyond debt retirement, the US$16-million net proceeds of the note issue went to general working capital, which stood at US$46.7 million at quarter-end, up from US$28.6 million at the end of 2001. Coeur now has current assets of US$66.6 million, including US$12 million in cash, but debt retirement brought current liabilities down to US$19.9 million from US$41.7 million. Long-term debt and other liabilities decreased slightly, to US$140.8 million.
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