COEUR D'ALENE Nov 3, 2015 (Thomson StreetEvents) -- Edited Transcript of Coeur Mining Inc earnings conference call or presentation Tuesday, November 3, 2015 at 4:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bridget Freas Coeur d'Alene Mines - Director of IR * Mitch Krebs Coeur d'Alene Mines - President and CEO * Frank Hanagarne Coeur d'Alene Mines - SVP and COO * Peter Mitchell Coeur d'Alene Mines - SVP and CFO ================================================================================ Conference Call Participants ================================================================================ * Michael Dudas Sterne, Agee & Leach, Inc. - Analyst * Joseph Reagor ROTH Capital Partners - Analyst * Chris Thompson Raymond James & Associates, Inc. - Analyst * Craig Johnston Scotiabank - Analyst * Chris Terry Deutsche Bank - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day and welcome to the Coeur Mining third-quarter 2015 financial results conference call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Bridget Freas. Please go ahead. -------------------------------------------------------------------------------- Bridget Freas, Coeur d'Alene Mines - Director of IR [2] -------------------------------------------------------------------------------- Thank you welcome, everyone, to our third-quarter 2015 earnings conference call. There are slides available on our website to accompany today's remarks. Please review the cautionary statements and the risk factors in our latest 10-K and 10-Q for risks and uncertainties that could cause actual results to differ from any forward-looking statements made today. Mitch, please go ahead. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [3] -------------------------------------------------------------------------------- Thanks, Bridget, and good morning, everybody. The earnings release we put out yesterday and the slides that go along with the call are both pretty self-explanatory, and they both reflect what we think is a very solid quarter of performance by the Company. So far this year, we have held about 100 individual meetings with existing stockholders, potential investors, and with the analysts that cover the Company, and it seems like there have been about four main takeaways we consistently hear. The first one is that many are surprised to hear about the changes we have made to this Company, and almost everyone supports and applauds the strategy that we are pursuing to revamp the Company. The second takeaway is that many people say they want to see more evidence of our ability to actually execute the strategy. The third thing is a lot of people say they are concerned about the debt on our balance sheet. And then the fourth, some expressed concern about the Company's liquidity and how it would hold up if silver and gold prices remain weak. For anyone who has been following us over the past couple of years and been listening to what we have been saying we do and comparing that to what we are actually doing, the third quarter should help validate a lot of things. These results should also go a long way toward addressing each of those investor takeaways I mentioned. For those wanting to see more evidence of our ability to execute our strategy, there is plenty to point to from the third quarter. Take our costs, for example. If someone can show us a precious metals mining company that is reducing costs quarter over quarter and year over year more than us, please tell us who it is. Our cost per silver equivalent ounce dropped 15% year over year, and that is using a 60 to 1 ratio to calculate equivalent balances. If you use average realized prices to calculate equivalent ounces like most other companies, our costs were $11 an ounce in the third quarter compared to around $14 an ounce a year ago. On an all-in sustaining basis, our costs declined 9% from the second quarter and dropped 17% year over year to just over $15 per silver equivalent ounce based on a 60 to 1 ratio. Using average realized prices to calculate equivalent ounces, our all-in sustaining costs were $13.14 per silver equivalent ounce in the third quarter. If you go back to last year, 2014 full year, our all-in sustaining costs were $19.27 per ounce, using that 60 to 1 ratio, and they were $18.34 using average realized prices to calculate equivalent ounces. Just drop one layer down for a second. Let's look at Palmarejo where we all know we have a lot of things going on there this year. We bumped up our 2015 full-year production guidance, and we dropped our cost guidance range for the full year. We started the year with cost guidance of $16.25 to $17.75 per silver equivalent ounce at Palmarejo. Now we are expecting that full-year cost number to end up between $14 and $40.50 an ounce, which is a reflection of how great the team at Palmarejo is doing and what we consider to be a big transitional year for the operation. Compared to the second quarter, Palmarejo's costs were down 14%, and compared to last year's third quarter, costs were down a whopping 21%. We expect costs to decline further as we continue the transition to higher grade mining in two new underground deposits. The first one is Guadalupe where we achieved an average mining rate of more than 1700 tons per day in the third quarter, and we expect to hit the 2000 tons per day level by year-end. And, remember, we only started mine Guadalupe a little less than a year ago. And the second new underground deposit at Palmarejo is Independencia, which was consolidated through the April acquisition of Paramount Gold and Silver and is located only about 800 meters away from Guadalupe. There are two parts to Independencia, [Esday] and [O'Esday], which is East and West. The East part is the part of the deposit that Paramount controls, and the West part is the much smaller part of the deposit located on our side of the old property boundary. Putting together the two pieces made a ton of sense for obvious reasons and allows us to unlock value sooner from our part of the deposit. The twin declines we are driving over to the Independencia deposit from Guadalupe are on schedule. We plan to start mining from there early next year, and we will process the ore then back at the existing Palmarejo processing facility. There are three things we love about Independencia Esday. Number one is its grades are about 17% higher than Guadalupe. The second is it is not subject to the existing Franco-Nevada gold stream, so margins are expected to get an extra boost from that. And number three is, we expect to get a lot bigger from further drilling. Now, you probably saw we filed a new updated 43-101 technical report yesterday for Palmarejo, which reflects this scenario of underground mining from Guadalupe and into Independencia, and I remember having these quarterly conference calls a couple of years ago when a big concern people had was whether Palmarejo had more than a couple of years of remaining reserves. Now, since that time, reserves are up almost 20%, despite lower prices in what we have mined since then, and the average grade of silver is 32% higher and the average gold grade is 48% higher. As you can see from the technical report in the press release we put out late yesterday, production is expected to be higher. The mine life is now much longer. Costs are expected to be significantly lower, and cash flow is anticipated to be much, much higher over the next seven years, even when using much lower silver and gold price assumptions. This is all very exciting, but it is still early days at Palmarejo in terms of the drilling we still need to do at both Guadalupe, Independencia, and in that 800-meter gap in between those two deposits. Now turning over to Rochester out in Nevada for a couple of minutes, the investments we have made there over the last couple of years to scale up the mine are driving double-digit production growth and costs that are lower by double digits. We have dropped our full-year guidance there as well down to $12.25 to $12.75 an ounce this year, which means we are on track for about a 10% to 15% reduction in unit costs there compared to last year. And we expect Rochester to produce about 4.7 million to 5 million ounces of silver and anywhere between 55,000 and 65,000 ounces of gold, and that will be about 15% to 30% higher than last year. The permits allowing us to construct a new leach pad out there in 2017 are moving ahead according to schedule, and they are expected to be obtained in early 2016. Another important expansion initiative out at Rochester has been increasing the crushing rates from the existing in-pit crusher unit, and that is now complete, and that will give us a small kick here at the end of 2015 and should make a big difference in 2016 and beyond. And if you just look at the slides that we posted for this call and you look at slide 12 that summarizes Rochester and the costs on a per ton basis going back over the last four quarters or so and you can see the trends there, they are doing a really great job out there at Rochester, and hopefully there will be more to come going forward. Just for a couple of minutes, we will talk about Kensington, up in Alaska. You will note the cost did bump up there a bit in the third quarter, but the trend has been a good one and we reduced the cost guidance there also for the full year. We came into the year with guidance on costs for Kensington of $900 to $975 an ounce, and now we see the full year coming in somewhere in the low $800s, and that would be over $100 an ounce lower than they were last year. The big story at Kensington is the nearby high-grade [Juelen] deposit where development got going in early August. They are now about 700 feet in, and we will start drilling Juelen from underground this winter to hopefully expand it and better define the one vein out of five that contains known resources that carry an average grade that is 3 times the grade of Kensington's current reserves. And then, finally, last but not least, out at Wharf in South Dakota, that operation has really coming on strong in the second half of the year. We reduced our full-year cost guidance there, too, for the full year down to $700 to $750 an ounce. You will note maybe that Wharf was the biggest generator of cash flow of any of our mines in the third quarter. And if you look at those same slides and the slides provided to go along with the call -- I think it is slide 14 that show Wharf's cost per ton -- those are definitely heading down and in the right direction as well. Since we acquired Wharf in February from Gold Corp. for about $100 million, we have announced a 39% increase in reserves, we have extended the mine life, we increased the annual production profile in the mine plan, and we generated nearly $20 million in free cash flow over the last two quarters. So not a bad acquisition at all. Regarding that investor takeaway relating to concerns over the leverage we have on the balance sheet, we did announce yesterday in the earnings release that we are reducing our total debt by about $54 million, which is about 10%. The Company has about $433 million of publicly traded, unsecured notes, 7/8% interest that have been trading at a huge discount to par going back to about July. So we took advantage of the opportunity this presented to take a big bite out of our outstanding debt at a 24% discount. Now, we don't like using shares to eliminate debt, but with about $4.5 million of annual interest savings and with an opportunity to retire $54 million of debt at $0.76 on the dollar, it was too good of an opportunity to pass up, and it makes our stockholders better off. As a result of this, net debt is expected to drop 16% down to $287 million. And when you compare that net debt level to our EBITDA, which has been running between $30 million and $35 million a quarter the last two quarters, we believe our credit leverage ratios are heading in the right direction, especially given that we expect EBITDA to keep growing and the fact that 98% of our remaining debt doesn't mature for another four to five years. The last investor takeaway I mentioned earlier relates to liquidity concerns. Now we all know metals prices in the third quarter were the lowest we have seen in about six years, but yet our Company's cash balance stayed about the same compared to the end of June at around $206 million. So I would say we are doing a really good job of managing our liquidity. And, as I have said now for about the past 18 months, our investments in these different initiatives at our mines designed to drive down our cost structure are the heaviest through the middle of next year, at which point we expect cash to start to build. So there you have it. Good results. There is one other piece of investor feedback from all those meetings we had have this year that I didn't mention, and that is that this Company appears to be nearing a pretty significant inflection point. And I totally agree with that piece of feedback. We definitely are. And as that point draws nearer, we anticipate putting up more quarters like the third quarter and keep doing what we're doing. At some point, equity markets will notice the long-term value that is being created for stockholders of this Company. Until then, we will stay focused on the things we can control, on executing our strategy, on continuing improving the business, on carefully managing our liquidity, and on being opportunistic when we think it is in our stockholders' best interest. We believe that inflection point is right around the corner, and we definitely can't wait to get there. And now we would be happy to take any questions you might have. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Michael Dudas, Sterne, Agee. -------------------------------------------------------------------------------- Michael Dudas, Sterne, Agee & Leach, Inc. - Analyst [2] -------------------------------------------------------------------------------- First, on the Palmarejo release, maybe you or Frank can talk about like what really surprised you in the work that you did relative to what you had thought, and on top of that, some of that -- when we can expect some of those drilling results that you talk about to kind of tighten up the two different zones? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [3] -------------------------------------------------------------------------------- Yes. I will just make one plug, and then, Frank, I will turn it over to you. We are going to have -- host a teach-in up in Toronto next week to sit down and spend some time going through the technical report -- because there are a lot of changes, a lot of moving parts in what has been a very dynamic asset for us. And included in that will be a good overview of the exploration results that we have been having and how that kind of fits into the longer-term profile and priorities at Palmarejo. Frank, do you want to answer Mike's question about big surprises or --? -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [4] -------------------------------------------------------------------------------- Sure. Mike, this is Frank. The things that I thought were very good surprises in our work related to the technical report were how well the resource itself stood up to lower prices. We have got in the range a range of prices that we tested sensitivity on and even get close to spot prices today. It is a very strong resource, producing good grades from both Guadalupe and Independencia looking forward over the next seven and part of an eighth year. Now that is something that really instills a good sense of confidence in the fact that we improved our resource model down there through more focused drilling and better applied engineering and quality controls, and it makes for a pretty good life of mine at this point. The costs also are well within -- they are pretty close to what we expected, but I can tell you in the process of developing this technical report, capital was reduced substantially as we continue to optimize the development meters that we're going to go into both mines and so on. So I feel like it is pretty reasonable capital over the life as well. And by virtue of the fact we will be running an underground mine, underground mining unit costs are higher than they are in the open pit, but the volumes and materials that are moved are much slower. So we will be at significant reduction going forward and (inaudible) dollars being spent as we operate every day. -------------------------------------------------------------------------------- Michael Dudas, Sterne, Agee & Leach, Inc. - Analyst [5] -------------------------------------------------------------------------------- Excellent. I will look forward to the details next week. On Wharf, hope you can find a few more acquisitions like what you did with Wharf. But maybe, Chuck, a little bit about some of the positive cost divergences that you are seeing there and the sustainabilities of such. -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [6] -------------------------------------------------------------------------------- I can take that one as well. They just continue to perform as they have, although you do see a slight reduction in this most recent quarter. They are benefiting at Wharf from lower fuel prices and lower maintenance costs, so there is a big theme there. We were able to get through this most recent quarter and save quite a bit of money on maintenance. In fact, if I were just to make a comment about our costs in general across all of our mines, the general themes that we see are significant labor reductions, Mexico at Palmarejo. We are benefiting from some reduction in costs on fuel. We are seeing tremendous power cost savings in Mexico at this time as well. Our haulage costs are down substantially at both Palmarejo and Rochester due to some pretty strategic rerouting of haul roads and a reduction in the amount of waste that has to be moved at Palmarejo. We have been real focused on maintenance this year, and we are starting to see the benefits of that at each one of our mines. -------------------------------------------------------------------------------- Michael Dudas, Sterne, Agee & Leach, Inc. - Analyst [7] -------------------------------------------------------------------------------- That hard work is really showing -- paying off. My final quick question for you, Mitch, is I know you met with a bunch of investors and analysts and such, but you also have done some travel relative to the silver industry. I had a couple of thoughts on what your expectation on what you are seeing out there on some trends, positive or negative, relative to silver offtake? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [8] -------------------------------------------------------------------------------- Yes. I think the big takeaway on the supply side for silver is after about a dozen years of continual increases, every year in overall mine supply, that trend is now reversing itself. And over the next five or 10 years, we are expecting to see silver supply -- global silver supply come down pretty extensively. And, obviously, that is a combination of existing mines, depleting the reserves, and no new projects to speak of being built. Less exploration going into the ground, so fewer new discoveries. So that is a big trend that I think on the supply side that is positive and not all that surprising, just given what has happened to silver prices over the last few years. On the demand side, you guys have probably all read about the tightness in coins. That has been a big attention and headline grabber. Just seems like there is a nearly insatiable appetite for silver eagles, and even whether it is in Canada, Austria, Perth, all these mints are in allocation now for metal and for coin sales. I would say one of the -- the bigger trends on the industrial demand side, which makes up about 60% of total demand for silver now, is solar panels have become a real interesting component of the overall demand picture. When you go back a decade and there is less than 1 million ounces of silver that went into solar panels each year, I think this year that is scheduled to be about 65 million or 70 million ounces of silver going into those panels themselves, and if you believe what China, India, and even with the clean powerplant here proposed by the Obama administration and our transition here in the US to more renewable sources of power, you add up all those new gigawatts of PB installations and each new gigawatt consumes about 2.8 million ounces of silver. You start doing the math, and you can really quickly get to a point where solar becomes kind of like what 35-millimeter film used to be for silver where it was kind of a solid, a third of total demand each year, year in and year out. So that has been an interesting one that I have learned a lot more about here over the last few months. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Joseph Reagor, ROTH Capital Partners. -------------------------------------------------------------------------------- Joseph Reagor, ROTH Capital Partners - Analyst [10] -------------------------------------------------------------------------------- Congrats on a great quarter. A couple of questions kind of on the cost front. You guys discussed a lot about how costs have come down, but maybe for all of our benefits, can you provide a little bit more color as to what you guys have done to reduce costs? I know that you guys have been against essentially high grading your mines because obviously that ruins the long-term view on them. But maybe some of the other things you guys have done to get the costs down as well as you have. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [11] -------------------------------------------------------------------------------- I will start and anybody else here can chime in. I think of costs generally in four or five different buckets, one being they are one of the things outside our control that have been kind of give me's for us that obviously we will take, but we really haven't done anything to earn them. And, in that category, things like Frank mentioned, diesel, Mexican peso has been a good tailwind, although most companies seem to have more international operations than we do, most of our operations here in the US. So we don't have as much of a FX benefit as maybe some. The second benefit -- sorry. The second bucket of costs that I think about are sort of just like the dollar -- hard dollars savings, and those have been in areas like labor. Frank mentioned our headcount at Palmarejo as we've transitioned and keep transitioning away from the open pit has come down a lot. The maintenance costs Frank mentioned, the power at Palmarejo, which is a huge component of our costs. Freight up at Kensington, those types of things that are just pure dollar savings, and while those are great and we have definitely been aggressively pursuing those, those have limits. You can't cut those quarter in and quarter out forever, and that is where I get more excited about the other two or three buckets of costs, the first being coming from grade, the next one coming from scale and then the third one coming from processing related enhancements. And that is really for us the next wave of -- that is going to deliver cost reductions for us. For us, grade, for example, we haven't even gotten in to Independencia yet, and that is where some of that real grade kick is going to come at Palmarejo and really drive those costs down even further. In terms of scale, we are -- we just invested, like I mentioned, in expanding that crusher capacity out at Rochester, that higher scale and the volume efficiencies that come along with things like that. That is going to be another -- give us another wave of opportunity on the cost front. And then, Frank and his team on the processing side, when you look at those Palmarejo recoveries in the third quarter, that stems from a lot of hard work, a lot of effort, and there are some more tweaks to be done in 2016, 2017 that can give us some more benefit there. We're looking at some opportunities at San Bartolome to improve recoveries through the addition of some oxygen into the processing plant there to hopefully boost recoveries. And I mean those are the sweet kinds of kickers to cost in terms of low capital or no capital, and every 2%, 3%, 4%, 5% on recoveries makes a huge, huge difference in terms of unit costs and cash flows. Frank, I probably just stole 100% of your thunder there. -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [12] -------------------------------------------------------------------------------- Yes. I don't know what more to say. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [13] -------------------------------------------------------------------------------- Does that help, Joe? Does that give you the kind of color you are hoping to get? -------------------------------------------------------------------------------- Joseph Reagor, ROTH Capital Partners - Analyst [14] -------------------------------------------------------------------------------- Yes. That is very helpful. Kind of like following on one of your points there, the Palmarejo recovery improvements, looking at the report filed overnight, it seems to suggest recovery rates of roughly like 86%, 87% for silver and gold going forward, which are kind of somewhat in line with what you guys got in Q3. My thought would be, though, that the report was worked on before the improvements in Q3. So could those estimates that are in the filed report be a bit light and be more driven by great improvement than they were by processing improvement? -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [15] -------------------------------------------------------------------------------- Joe, what you will find, you need to go in and look in Section 22 in our economic analysis, and you will see that for the years 2017 and beyond, we bumped those recovery rates up. Between now and 2017 -- well, for 2016, we kept the recoveries pretty close to where we are at right now because we've actually -- we are going to be putting some capital into our process plant in the area of the Merrill-Crowe area that is going to raise the recovery up, but it doesn't actually become effective until rather late next year. So we will start to see the benefits of that in 2017 and beyond. So you will see our gold and silver recoveries ratcheting up in 2017 and beyond, roughly 2% to 3% above where we are at right now. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [16] -------------------------------------------------------------------------------- Another thing I was thinking of, listening to Frank, is that is a 6000 ton a day processing facility down there, and as we transition to lower grade, higher tons, the retention time in that process down there is only going to help as well as relating to recoveries. And the cleaner ore coming out of Guadalupe is definitely a help when thinking about the recovery rates going forward. -------------------------------------------------------------------------------- Joseph Reagor, ROTH Capital Partners - Analyst [17] -------------------------------------------------------------------------------- Okay. And then, one final one. Could you just give us an update on what you guys are thinking as far as M&A? On the last call, you said you thought you were pretty much done with it for the time being. Have you seen any interesting opportunities come across that might make you change that course of action and look to make some other investments, or do you think all of your investing right now is going to be into your own properties? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [18] -------------------------------------------------------------------------------- Yes. Good question. Where we come at that from is what we have inside our Company right now should derive a tripling of our EBITDA over not very long, and I don't want us to distract ourselves away from delivering that. That is the best way to drive value for the Company and its stockholders. But, that said, if an opportunity came along that could kind of accelerate that ramp-up in cash flow and reduce our costs and improve -- or enhance our overall portfolio in some way, we need to take a look at those. I would say, the level of inbounds that we are getting on M&A has picked up probably more on the earlier stage stuff. The companies that don't have production or cash flow and have a cash balance that is getting closer and closer to zero, and those kinds of companies are interested in doing something. For us, that doesn't necessarily achieve those objectives and enhance our strategy at all. So it has to be a pretty special opportunity like Wharf, and those -- there's not a lot of those out there. I think this flow of non-core assets out of the majors is probably about run its course. I don't think there is going to be a ton of that continuing into 2016. So we will keep going. The bar is set high as far as what we consider and keep our priority on everything that we have going on because our plate is pretty full. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Chris Thompson, Raymond James. -------------------------------------------------------------------------------- Chris Thompson, Raymond James & Associates, Inc. - Analyst [20] -------------------------------------------------------------------------------- Congratulations on a good quarter. It was really nice to see. I have a number of quick questions, just on the operations. We will start off with Palmarejo. Can you give us a little bit of color as to the status of the open pit there? Are you going to squeeze another quarter out of this, or do you definitely see this shutting down by the end of this year? -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [21] -------------------------------------------------------------------------------- This is Frank. Yes, we are still planning on seeing the open pit come to a close at the end of December this year. At this point, we are mining in the Tucson [Chapa TL] area. It is what I would describe as a slot cut now part of the pit, very narrow. It has become so narrow that we have had to go away from using 777 haul trucks and our direct shovels to -- the mining equipment that was used over Guadalupe earlier this year, these 740 articulating capital -- Caterpillar trucks and single loader operation in there. So it is definitely -- we are getting down to the bottom. Starting I guess go back about six months ago, we nearly had three benches to mine through. We are on the second one now, and the third one is signed at the end of the year. -------------------------------------------------------------------------------- Chris Thompson, Raymond James & Associates, Inc. - Analyst [22] -------------------------------------------------------------------------------- Excellent. Great. Thanks for that, Frank. Just moving on, then, to Rochester. Looking at the grades at Rochester -- the silver grades here plus 20 gram per ton, better than what you have delivered year to date. Again, do you see that sort of extending through to next year? What should we be modeling as far as the silver grades? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [23] -------------------------------------------------------------------------------- The grades have been pretty good this year. They will be roughly equivalent next year, maybe declining towards the later end of next year, all tied to the mine plan and the different benches that we will be on, but it is going to hold fairly close to where we are at. -------------------------------------------------------------------------------- Chris Thompson, Raymond James & Associates, Inc. - Analyst [24] -------------------------------------------------------------------------------- Alright. Nice to see. Good. And then on to Kensington very quickly, the unit costs at Kensington, our records show they are slightly higher this quarter than they were previously in previous quarters of the year. Is this something we should be modeling, mainly using the Q3 as a good sort of representation of what we should be looking at as far as unit costs for the remainder of next the year and into next? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [25] -------------------------------------------------------------------------------- Chris, we -- costs went up slightly in the third quarter due to a number of different -- several major component rebuilds that were required on the underground mining fleet at Kensington. So those are done. Those are behind us. We will start the new cycle where we move forward without that happening. So it will come up again in some future quarter, but we are good through the end of the year and a good ways into next year before we have to do more of that. -------------------------------------------------------------------------------- Chris Thompson, Raymond James & Associates, Inc. - Analyst [26] -------------------------------------------------------------------------------- Alright. Great. And then, finally, at Wharf, Frank, going (inaudible) obviously, we are seeing sort of that layering in with effect to -- as far as good grades in that. Just remind us again, what is the mine plan for that Golden Reward? When do you see that wrapping up, and can we expect this sort of contribution on a quarter by quarter basis into next year? -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [27] -------------------------------------------------------------------------------- No. We resumed mining in Golden Reward in August right after we had completed a re-line on Pad #5 at Wharf and started to load that pad. We are mining Golden Reward very close -- come close up to the Thanksgiving holiday where we have to back out of there then because it is going to start to snow, and the ski season is going to begin and so on. So we will be back in there to mine the residual probably in the late second quarter next year, and we will get it finished up by midyear next year. -------------------------------------------------------------------------------- Chris Thompson, Raymond James & Associates, Inc. - Analyst [28] -------------------------------------------------------------------------------- That's what I thought. Great, guys. Congratulations again. Thanks, Frank. -------------------------------------------------------------------------------- Operator [29] -------------------------------------------------------------------------------- Craig Johnston, Scotiabank. -------------------------------------------------------------------------------- Craig Johnston, Scotiabank - Analyst [30] -------------------------------------------------------------------------------- I will keep it quick. There has been a lot of questions so far, but just on Palmarejo, revision of guidance for 2015, even with that revision, it seems like you are being relatively conservative. Just wondering if you could speak to expectations for Q4 and then maybe even into next year. -------------------------------------------------------------------------------- Frank Hanagarne, Coeur d'Alene Mines - SVP and COO [31] -------------------------------------------------------------------------------- Yes. This is Frank. I will take that one. We are expecting -- first of all, we have had a good year because of some bonus grade that has come out of the open pit in some of these ventures that we are mining to complete the open pit. We have also had some very good grade come out of the underground workings at Palmarejo. Now, that is scheduled to come to a close with Palmarejo underground at some point next year. But, the open pit will be done in December. We are expecting to see some good ounces come out of that open pit in November and then very strongly in December, but then the open pit will be down at that point. We have also had the -- our production performance is fueled to a large degree by this most recent ramp-up at Guadalupe. Our tons are going up, and we have been producing some very good silver and decent gold rates over there. So it all adds up. We continue into next year to ramp up Guadalupe, so those benefits will continue, and bring up the open pit to a close by the end of this year and then continue to mine underground at Palmarejo through at least midyear next year. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [32] -------------------------------------------------------------------------------- It is Mitch. Just one thought to add to that. You think about the fourth quarter probably being pretty similar to the third quarter, but then the real break comes as we, like Frank said, we end the open pit, and then there will be a step down in that tonnage. Like Frank said, we will have some underground from the old Palmarejo. The bulk of the ore coming out of the Guadalupe -- the bulk of the ore going to the mill in 2016 will be Guadalupe and around that 2000 tons a day. And then, the big X-factor becomes Independencia then as we get going there from a standing start early next year and ramp that up throughout the year. So it will be a very different looking year next year compared to this year, which is kind of all part of this transition that we've talked about and seem to be doing a really good job of executing. And Frank and his team there have done a great job. I would say we are ahead of plan there as far as the mining rate and -- out of Guadalupe and everything that is going on as it relates to getting over to Independencia is going really well, too. So they are juggling a lot of balls down there, and the team is doing a really good job keeping them all in the air. -------------------------------------------------------------------------------- Craig Johnston, Scotiabank - Analyst [33] -------------------------------------------------------------------------------- That is helpful. Thanks, guys. And just on the technical report, I know we all understand that technical reports are a moment in time, and they are always changing and mine plans are changing. Can you just give us a sense of how much of the technical report you think is not written in stone but more of an absolute? Maybe is it 2016, or do you even see potential changes to your mine plan in 2016 depending on your drilling results and what you see as you go deeper? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [34] -------------------------------------------------------------------------------- I think the big changes that we will see in -- you know, you figure that technical report plan is a good base where there is real opportunity as I see it and as we, I think, all see it is probably first and foremost in Guadalupe and drilling deeper there and then further to the south and east and having some of that really nice grade -- much higher grade inferred and even some stuff that is not inferred yet getting that drilled out and into the mine plan at those kind of grades is really, to me, the biggest change or extra to that base plan that is reflected in the TR. I would say, then, a close second to that would be a somewhat similar theme over in Independencia where that is open depth in both to the North and West, as well as a bit to the South and East. There is a bit of a gap in there between what used to be the Paramount piece of Independencia and our part of Independencia that we are really looking forward to drilling out and hopefully flow that in. And then, the stuff that Hans will talk more about up in Toronto next week, in terms of some additional structure and in between those two deposits, in between Guadalupe and Independencia, that probably a little bit later down the road in 2018 and beyond, but both, I think, are going to be, become then another very prevalent piece of the mix as we think about what that mine looks like in a seven-year kind of four on for the next 10 or 20 years, hopefully. -------------------------------------------------------------------------------- Craig Johnston, Scotiabank - Analyst [35] -------------------------------------------------------------------------------- Okay. No, that makes sense. Thanks, guys. And then, just on corporate G&A with the guidance being lowered to $33 million to $35 million, thoughts on guidance going into 2016 and beyond? Are these the levels you want them to be at, or could you see them going even lower? -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [36] -------------------------------------------------------------------------------- Well, we keep squeezing. The topic of very frequent conversation around here and kind of like one of my comments I made earlier about there is some kind of cost where there is a limit. And also I feel like there is -- you have to be careful what you ask for in G&A because you can cut too far and really do harm to the business in terms of the ability to manage and mitigate risk and do the solid planning and execution like we are seeing at this Company. Is there more to go on G&A here? Yes, but if you go back two years and start at $55 million and now be guiding to, what is it, $33 million, I think we are doing a really good job there. We have not shied away from being very forward leaning on G&A, and we are taking that same attitude into the budgeting process here as we start getting real serious about what 2016 looks like for G&A. -------------------------------------------------------------------------------- Craig Johnston, Scotiabank - Analyst [37] -------------------------------------------------------------------------------- That is it for me. Good quarter, guys. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Chris Terry, Deutsche Bank. -------------------------------------------------------------------------------- Chris Terry, Deutsche Bank - Analyst [39] -------------------------------------------------------------------------------- Well done on a good quarter operation. I just had two more high-level questions. Just in terms of the debt for equity that you have just accomplished, if there was more of those type of situations that become available, would you be interested in doing more of that, or does it really depend on where commodity prices track from here? And then the second question I had was just around heading into 2016 and 2017, I think in a previous presentation you had some quite broad guidance on silver and equivalent ounces for 2016 and 2017 that relates to the technical report in the last day. How has that changed at all, or would that still be the relevant guidance? Thanks. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [40] -------------------------------------------------------------------------------- Peter, do you want to start with the (multiple speakers)? -------------------------------------------------------------------------------- Peter Mitchell, Coeur d'Alene Mines - SVP and CFO [41] -------------------------------------------------------------------------------- Yes. Certainly, in terms of our equity for debt exchange [389], we are able to do it as a result of securing a waiver from our Term Loan B lenders and that the amount of that waiver was $100 million. So we would be able to do it in the future, but it is going to be very opportunity driven, certainly predicated on pricing as you highlight predominant metal prices where we are in that regard, and we would evaluate it on a case-by-case basis specifically. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [42] -------------------------------------------------------------------------------- And as far as the outlook that we gave in terms of production earlier this year and how that has changed at all with the technical report, we are not updating or revising any outlooks right now. We will likely do that in the early part of next year and kind of refresh that outlook as it relates to both production and the cost and the cash flow, kind of that three-year outlook that we have put out. I would say, obviously, we are ahead of plan on a lot of these things, especially on the costs. You look at where we are relative to some of those ranges in that three-year outlook, and we are already there, to a certain extent, on 2016. So we will carry that through into an update that we will likely do in the first couple of months of 2016. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- This concludes our question and answer session. I would now like to turn the conference back over to Mitch Krebs for any closing remarks. -------------------------------------------------------------------------------- Mitch Krebs, Coeur d'Alene Mines - President and CEO [44] -------------------------------------------------------------------------------- Well, thanks for your time and questions. Good quarter. We will keep doing more, hopefully, and look forward to talking to you early in 2016. Thanks, again, for your time. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.
|