Coeur stuck in red despite record production

Thanks in large to the first full quarter of production from the Cerro Bayo mine in southern Chile, Coeur d’Alene Mines (CDE-N) enjoyed record silver production during the recent third quarter.

During the three months ended Sept. 30, the company produced 3.8 million oz. of silver, a 47% increase from the year-ago period. At the same time, consolidated cash costs fell 28% to US$2.92 per oz. Cerro Bayo, which began producing in mid-April, turned out 881,348 of those ounces at US$1.95 apiece.

For the first nine months of the year silver production rang in at a record 10 million oz., 28% better than the previous year. Cash costs fell US54 to US$3.33 per oz.

Over the quarter, Coeur realized an averaged US$4.65 for each ounce of silver produced, up from the year-ago US$4.26 per oz. None of the production is hedged.

The record production allowed Coeur to more than halve its third-quarter net loss to US$12.3 million. That translates into US14 per share, and is a significant improvement on the US62-per-share loss a year ago.

For the quarter, Coeur reported a net loss of $12.3 million, or $0.14 per share. That compares to a year-ago loss of US$26.9 million or US62 per share. Revenue climbed 55% to US$26.5 million. Operations ate up US$2.3 million in cash, a nice turnaround from the US$9.8 million consumed the previous year. During September, cash flow swung to the plus side to the tune of US$2.8 million. The increased revenue and lower unit cash costs were offset by higher interest expenses.

For the first nine months of 2002, Coeur’s net loss piled up to US$35.1 million (or 51 per share) on revenue of US$65.7 million, compared with year-ago net earnings of US$15.2 million (37 per share), which included a US$48.2-million gain on the early retirement of debt. Operations ran through US$7.7 million in cash, down from US$25.7 million.

Cerro Bayo also more than offset the loss of gold production after the closure of the Petorca gold mine in Chile, Coeur’s only principal gold producer. During the quarter, Coeur produced 33,966 oz. of byproduct gold at Cerro Bayo and the Rochester mine in Nevada. A year earlier the company produced 21,734 oz. The quarter’s average realized price climbed US$37 to US$315 per oz. Coeur has 30,000 ounces of gold sold forward over the next 15 months at an average of US$324 apiece.

At Cerro Bayo, wider-than-expected veins (primarily the Lucero vein) required expanded stope development, and cut into production. Coeur expects silver production to double and gold production to increase by 50%during the fourth quarter. Cash costs are expected to fall by about 30% to US65 per oz. silver. For all of 2002, the mine is expected to produce 3 million oz. of silver and 44,000 oz. of gold.

With quarterly production of 1.2 million ounces (up 12% from the previous year) of silver Coeur’s Silver Valley division in Idaho remains on pace to produce a record 5.2 million ounces of gold in 2002. Cash costs came in at US$4.54 per oz., and are projected at US$4.30 per oz. for the remainder of the year. Mechanized mining continues to reduce costs and boost production.

At the end of Sept., the company’s working capital stood at US$38.8 million. Cash and equivalents totalled US$7.4 million. Total debt fell to US$103.7 million from US$145.5 million at the end of 2001. The company’s outstanding share count grew to 100.3 million after holders of US$24 million worth of the company’s Series I and II 13 3/8% notes cashed in for 17.7 million shares.