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Coeur foresees a positive silver supply/demand picture

In spite of personnel cuts at Kensington, the temporary closure of Cerro Bayo and a $4.3 million net loss so far this year, Idaho’s Coeur d’Alene Mines believes 2009 may be its best year ever.

Author: Dorothy Kosich
Posted: Monday , 03 Nov 2008

RENO, NV -

Despite a net loss of $4.3 million during the first nine months of this year, Dennis Wheeler, president and CEO of Coeur d'Alene Mines, declared, "We think 2009 could be shaping up to be the best year yet for Coeur...

Meanwhile, although the global credit crisis is wreaking havoc with the mining industry, Wheeler suggested, "Overall, we continue to see a positive supply/demand fundamental picture, particularly on the supply side."

During a recent conference call to discuss financial results, Wheeler noted that 75% of silver production is a by-product of base metal mines. Recent dramatic drops in copper, lead and zinc prices will keep some new projects from coming on stream. In addition, some new projects will suffer from a lack of access to capital to fund new development during a time when "there are actually very few new projects in fact in the stable," he said.

Wheeler also suggested that as inflationary pressures are likely to increase based on recent government actions including the Fed's recent rate cut. "This could become very positive for precious metals prices," he added.

Nevertheless, like other mining companies in this current crisis, Wheeler said Coeur has "clearly been impacted by the global sell-off of commodities as well as equities in this widespread environment."

"We're optimistic, however, that as the markets settle and economies stabilize, the underlying fundamentals of your company [Coeur], the strong asset base, and the growth plan at Coeur will clearly be recognized in a more orderly marketplace."

Coeur is approaching the new year with strong optimism as the mine life at Nevada's Rochester silver mine will be extended to 2014 "at a very low cost. Meanwhile, although financing is currently very difficult to obtain, Coeur finds itself adequately funded ($120 million in cash) to complete the development of the major Palmarejo silver and gold project in Mexico.

With start-up expected to begin in the first quarter of next year, Palmarejo is expected to become Coeur's largest silver producer and cash flow generator with 5.1 million ounces of silver production and 67,000 ounces of gold production in its first partial year of production.

Coeur Senior Vice President, Exploration, Don Birak told analysts that the company expects to report the first probable and proven reserves from the Guadalupe deposit at Palmarejo when Coeur issues its year-end results. Currently, Palmarejo has 62.4 million ounces of proven and probable reserves of silver and 750,000 ounces of gold, and 35 million measured and indicated ounces of silver and 490,000 M&I ounces of gold.

Birak told the analysts that Coeur have not yet defined limits of Palmarejo or Guadalupe and many other targets in the district.

Meanwhile, the new San Bartolome silver mine in Bolivia is reaching design capacity levels and remains on target for nearly 3.2 million ounces of silver production this year and 9 million ounces next year.

Combined with the company's other operations, Coeur expects to produce 20 million ounces of silver in 2009, a 55% increase from this year's total silver production.

However, Coeur was forced to temporarily suspend production at its Cerro Bayo gold and silver mine in Chile. In order to conserve existing reserves and focus on exploration and development of new discoveries and existing veins. Wheeler explained that lower-grade ores had initially been encountered at Cerro Bayo, which weren't originally predicted by the model.

Wheeler said a sustainable three-year mine plan for Cerro Bayo will be finished in the next 12 months.

Among the other cost cuts initiated by Coeur is a 60% reduction in expenses at the Kensington gold project in Alaska as the company waits for a decision by the U.S. Supreme Court in the first half of next year on the previously permitted tailings facility. The Kensington workforce has been reduced by half and several consulting and third-party services were eliminated.

Coeur's Santiago office staff has been reduced 60% and its La Paz office staff was reduced by 25%.

FINANCIALS

For the third-quarter 2008, Coeur reported a net loss of $3.6 million or negative 1-cent per share, compared to a net income of $3.6 million (1-cent/sh) for the same quarter of 2007.

For the first nine months of this year, Coeur reported a net loss of $4.3 million or negative 1-cent share, compared to a net income of $29.9 million (11-cents/sh) for the same period of 2007.