Giant Mine Finds Second Wind

Q: Given the recovery of precious metals prices in 2016 and early 2017, to what extent is optimism returning to the mining community?

A: The industry is certainly becoming more optimistic. Many companies had been focusing on survival, hoping for an upturn in prices for several years, so when that upturn finally came in 2016, there was a collective sigh of relief. While Coeur has enjoyed these tailwinds as well, our team is consciously maintaining its focus on cost and operational discipline. This translates into continued discipline around growth. Before we decide to pursue an opportunity, it must meet rigid criteria anchored to a healthy rate of return. I believe this is true across the industry.

While the increased optimism is noticeable, so is the persistent conservatism and tempered risk appetite.

Q: What were the financial highlights for the company in the last year and how were you able to generate such a strong growth rate?

A: Our stock performance over the last 12 months reflects the confluence of a number of things. Firstly, our team has made tremendous progress in repositioning our asset portfolio over the last four years. Our costs used to be among the highest in the industry but since 2013, we have reduced our costs by approximately 30 percent on an all-in sustaining basis. While we benefited from several external factors such as a more favorable peso exchange rate and lower diesel prices, most of these cost reductions were internally generated through operational efficiencies, higher recovery rates and rationalization of outside services. This makes the magnitude of our cost reductions even more remarkable and, importantly, sustainable over the long-run.

Secondly, our balance sheet was dominated by debt 12 months ago. While we needed this capital to invest in and reposition our asset portfolio over the last four years, it became a sticking point for investors. In the last 15 months we have repaid roughly US$350 million in debt and our cash flow has more than doubled.

Q: What is the latest update from the Palmarejo mine?

A: In 2014 most looked at Palmarejo and thought it was coming to the end of its production cycle. But we renegotiated an expensive royalty into a more favorable gold stream expected to significantly increase free cash flow and developed the Guadalupe underground deposit. We also acquired Paramount Gold and Silver, the owner of the San Miguel project adjacent to Palmarejo, allowing us to develop the Independencia deposit, which began production in 2016 and is expected to ramp up significantly in the next few years.

Palmarejo is now 100 percent underground. Production is expected to increase over 50 percent in 2017 and based on reserves, it now has a seven-year expected mine life. Importantly, grade and recovery rates have also improved and overall costs continue to trend lower. Once again, we view Palmarejo as a long-term cash-flow generator for the company.

Q: What else can investors and shareholders expect to see from Coeur Mining in 2017 and 2018?

A: We will be focusing on completing a couple of new growth projects. The first is the Kensington gold mine in Alaska, where we are developing the Juneau deposit, which is expected to begin production in late 2017. The second is at the Rochester mine in Nevada, where we are constructing a leach pad expansion, which is expected to be commissioned by the end of 2017.

To complement our transition to underground operations at Palmarejo and expansions at Rochester and Kensington, our drilling and exploration budget has been increased for 2017 to target a strong pipeline of projects in key jurisdictions. Also, in 3Q17, we completed the acquisition of the Silvertip Mine in British Colombia, and we expect this asset to enter production in 1Q18.