Q2 2024 Earnings Summary
- Coeur Mining is successfully ramping up operations at the Rochester mine, achieving consistent daily production rates of 90,000 to 100,000 tons per day, and expects to deliver 7 million to 8 million tons per quarter for the rest of the year, giving confidence in meeting their target of processing 32 million tons in 2025.
- The company anticipates significant free cash flow starting in the second half of the year, which will be used to repay debt aggressively, aiming for a total debt to EBITDA ratio of 1x and net debt to EBITDA of 0, potentially achieving these targets by 2026 or even by the end of 2025 if commodity prices improve.
- The acquisition of new land near Palmarejo presents significant near-term production opportunities, with drilling expected to start early next year and potential production by 2026, leveraging existing infrastructure to expedite development.
- Increased cost guidance at Rochester due to operational delays: The company raised its 2024 cost guidance at Rochester because of lighter-than-planned tons placed on Stage 6 during the first half of the year, caused by extra downtime to address items identified during ramp-up. This could indicate operational challenges that may affect profitability.
- Delayed contribution from new Palmarejo concessions: Production from the newly acquired land near Palmarejo is not expected until 2026, which means that the benefits from this acquisition will not materialize in the near term, potentially impacting growth expectations.
- Uncertainty in achieving debt reduction targets: While the company aims to reduce its total debt to EBITDA ratio to 1x and net debt to EBITDA to 0, management acknowledges that achieving these targets may not occur until 2026 and is dependent on commodity prices, introducing uncertainty in the company's ability to de-leverage in the desired timeframe.
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Debt Repayment Plans
Q: What's your debt repayment and cash balance plan?
A: The company aims for a total debt to EBITDA ratio of 1x and a net debt to EBITDA of 0. With senior notes totaling just under $300 million , they plan to direct free cash flow from the second half toward repaying the revolver. They aim to maintain a minimum cash balance of $50 million. Achieving these debt reduction goals by the end of 2025 is possible but may extend into 2026, depending on commodity prices. -
Rochester Cost Guidance Adjustment
Q: What's driving the cost guidance adjustment at Rochester?
A: The adjustment is primarily due to the timing of ounces placed on Stage 6. The company took additional downtime in the second quarter to address items identified during ramp-up to ensure a smooth second half. This affected the timing of tons being placed, impacting the cost guidance. There are no changes in other inputs or expectations for costs excluding this item. -
Rochester Crushing Circuit Performance
Q: How is the Rochester crushing circuit performing?
A: The company is pleased with the performance, having reached nameplate capacity. They consistently process 90,000 to 100,000 tons per day, delivering nearly 2 million tons to the pad last month. They expect to land between 7 million and 8 million tons per quarter moving forward. Optimization efforts are ongoing to dial in the size fraction and improve recoveries. -
Production from New Palmarejo Land
Q: When will you start producing from new Palmarejo land?
A: Drilling is expected to start in the first part of next year , focusing on the southeastern extension of existing areas. Initial production from this area is anticipated around 2026. The proximity to current infrastructure should facilitate development.
Research analysts covering Coeur Mining.