Coeur Mining, Inc. (NYSE:CDE) This fall 2022 Earnings Convention Name February 23, 2023 11:00 AM ET
Firm Individuals
Mitchell Krebs – President and Chief Government Officer
Michael Routledge – Senior Vice President and Chief Working Officer
Thomas Whelan – Senior Vice President and Chief Monetary Officer
Aoife McGrath – Senior Vice President, Exploration
Convention Name Individuals
Michael Dudas – Vertical Analysis Companions
Operator
Good day and welcome to the Coeur Mining Fourth Quarter 2022 Monetary Outcomes Convention Name. All individuals shall be in listen-only mode. [Operator Instructions] After immediately’s presentation, there shall be a possibility to ask questions. Please observe, this occasion is being recorded.
I might now like to show the convention over to Mitchell Krebs, President and CEO. Please go forward.
Mitchell Krebs
Good morning, and thanks for becoming a member of our fourth quarter and 2022 earnings name. Earlier than I start, please observe our cautionary language on forward-looking statements in immediately’s slide deck and seek advice from our SEC filings on our web site. I am going to begin with the principle highlights on slide three earlier than turning the decision over to Mick, Tom and Aoife.
The fourth quarter was Coeur’s strongest quarter of the 12 months, which helped to realize our total full 12 months manufacturing steering for the third consecutive 12 months, positively not a straightforward process final 12 months with such unprecedented volatility. Rochester was the principle driver to our stable end final 12 months. Each silver and gold manufacturing elevated over 30% quarter-over-quarter with sharply decrease prices. Ongoing operational enhancements and better grades contributed to Rochester’s outcomes as we start the transition to the newly expanded infrastructure the place development stays on observe to be accomplished mid-year.
We achieved a number of important targets final 12 months that we consider are necessary worth drivers for the corporate within the brief, medium, and long-term. Within the short-term, we proceed to derisk and advance the Rochester enlargement. The challenge is nearing 80% full this month and stays on observe when it comes to finances and schedule. We additionally additional fortified the stability sheet to help our elevated ranges of funding in our current belongings which are supposed to extend manufacturing, lower prices, prolong mine lives, and drive a return to optimistic free money movement, which Tom will present extra particulars on in a couple of minutes.
Within the medium time period, the group at Kensington acquired an early soar on their multiyear growth and drilling program final 12 months by including roughly a 12 months and a half to its thoughts life. As we laid out throughout our Investor Day in December, we’re optimistic about additional extending Kensington’s mine life and producing stable returns from greater manufacturing and decrease prices from this funding.
Over the long term, I wish to spotlight the nice outcomes from yesterday’s reserve and useful resource replace on slide 11, which displays one other 12 months of efficiently changing mine reserves. 12 months-over-year our gold reserves elevated by roughly 12%, whereas silver reserves elevated roughly 3%. Over the previous 5 years, we now have invested roughly $245 million in exploration throughout a time when many firms have under-invested on this important part of the enterprise. Over that point, our gold equal reserves have expanded by almost 2 million ounces or roughly 34% web of depletion. As well as, our gold equal sources have elevated almost 4 million ounces or roughly 80%. Aoife will present some further feedback on our exploration successes and our year-end reserve and useful resource leads to a couple of minutes.
Only a few fast ideas as we sit up for 2023. Total, the important thing for us this 12 months is clearly execution, not solely at Rochester with the completion of development and ramp up publish enlargement, however throughout your complete portfolio to realize our targets that may transition the corporate again to optimistic free money movement.
We anticipate 2023 shall be comprised of two very totally different halves. Through the first half, capital depth is predicted to stay excessive, whereas we expertise weaker seasonal working outcomes from our two open pit operations. The primary half additionally consists of our regular first quarter outflows referring to 2022 tax curiosity and compensation pushed funds. Through the second half of the 12 months, capital depth is predicted to sharply decline, and manufacturing ranges are anticipated to extend as we start the commissioning and ramp up course of at Rochester. Total, 2023 manufacturing is predicted to extend over final 12 months pushed by Rochester’s stronger second half, and by an anticipated robust bounce again 12 months at Wharf after a decrease grade 12 months in 2022.
To rapidly wrap up, we stay assured in the important thing pillars of what we predict is a singular technique in our sector, an solely North American and U.S.-centric footprint, a contrarian multiyear dedication to exploration that continues to generate significant outcomes, investments and expansions which are designed to ship sector main progress and have transformative impacts on the enterprise and a metals combine that gives significant and rising publicity to silver. An unrelenting focus by our group on executing this technique is bringing us nearer and nearer to that time of transformation that everybody has been working so exhausting for.
With that, I am going to flip it over to Mick.
Michael Routledge
Thanks Mitch. I am going to begin by echoing Mitch’s feedback on the nice job our groups have achieved this final 12 months to ship steering amid difficult circumstances. With the best individuals in the best chairs executing the best technique, we really feel assured in our potential to persistently ship important long-term worth. Our journey to zero hurt progressed nicely in 2022 with the groups delivering the most effective environmental well being and security efficiency within the historical past of the corporate. What a implausible achievement to be happy with, however that journey just isn’t over as we proceed to manage exposures as we drive to get to zero as rapidly and sustainably as doable.
Turning to a short recap of our fourth quarter manufacturing abstract on slide six and starting with Palmarejo. Larger gold grades and an uptick in mill throughput led to a pleasant end to the 12 months. Full 12 months gold and silver manufacturing got here in on the excessive finish of steering vary and CAS for gold and silver completed nearer to the excessive finish of steering as Palmarejo fought inflationary headwinds all 12 months lengthy. Regardless of these challenges, the group delivered almost $46 million of free money movement in 2022.
Trying forward, steering for 2023 anticipates the same 12 months when it comes to gold manufacturing, whereas silver manufacturing beneficial properties is considerably greater. Regardless of continued easing in sure of Palmarejo’s enter prices, our 2023 value beneficial properties displays warning as total prices stay unstable.
Transferring to Rochester. The 30%-plus will increase we noticed in gold and silver manufacturing within the fourth quarter have been pushed by considerably greater grades because of the major sequencing positioned on pad 4 in September and October that started the breakthrough within the latter half of the quarter. This surge in grades made the distinction in serving to Rochester exceed its gold manufacturing steering for the 12 months and are available in on the excessive finish of its silver manufacturing steering.
Fourth quarter adjusted CAS for silver and gold on a core product foundation have been down versus the earlier quarter attributable to excessive attributable metallic gross sales. We’ve elected to defer pervading 2023 value steering at Rochester till mid-year, given the transitional nature of the 12 months forward. There shall be loads of shifting components as we begin inserting crushed ore on Stage VI leach pad on February 1, we activate the Merrill-Crowe plant throughout Q2 2023, and we start inserting rock by means of the brand new crushing circuit later in the summertime.
The variety of prins seen within the POA 11 4 door slates [ph] show clearly that development is at peak ranges on the crushing hall. The work is continuing. The challenge stays on finances, non-schedule, metal erection and tools set up is continuing above the corn crushers within the secondary crusher space, in addition to above the HBGR crushers within the tertiary crusher space.
Slide 12 within the presentation highlights the progress on our key milestones for 2023 at POA 11. The Merrill-Crowe course of plant stays on observe for completion on the finish of the primary half of 2023, according to the P85 challenge schedule. Mechanical tools setting, course of plant constructing cladding, management programs programming and manufacturing unit testing are all now full. Electrical cable and piping set up are nicely unaware. I am additionally happy to report that the development challenge has now handed 1.5 million hours as of January thirty first and not using a misplaced time incident.
Turning to Kensington. As soon as once more, an awesome job by the group to achieve a brand new all-time report in mill throughput. New management there continues to make a robust mark and bodes nicely for the way forward for this key asset. Difficult recoveries by means of most of 2022 led Kensington to simply lacking the low finish of the manufacturing steering. 2023 steering replicate related ranges of manufacturing and value. With the beforehand mentioned infusion of capital at Kensington, this 12 months shall be a busy interval of growth to set the Important up for a robust future.
Ending briefly with Wharf, the group overcame some important snowfalls within the quarter to complete inside expectations close to the excessive finish of its 2022 steering vary. 2023 steering displays a return to extra typical gold manufacturing charges with related CAS ranges, setting the stage for stronger anticipated money movement within the 12 months forward.
With that, I am going to go the decision over to Tom.
Thomas Whelan
Thanks Mick. Turning to slip 4. I am going to start with the evaluation of our consolidated monetary outcomes earlier than referring to our 2023 steering and the stability sheet.
As anticipated, Coeur’s improved fourth quarter monetary outcomes have been pushed by our highest purpose manufacturing of the 12 months and the $62 million achieve on sale from Sterling Crown. Larger costs, together with beneficial properties from our gold hedges led to a 96% improve in our EBITDA quarter-over-quarter.
Talking of hedging, our 2022 program supplied $24 million of web beneficial properties, $13 million of which was realized within the fourth quarter. Subsequent to year-end, we took benefit of some short-term momentum in gold and silver costs so as to add further draw back value safety for 2023.
Inflation stays a headwind on our sector’s monetary efficiency. Whereas we now have seen some moderation in diesel costs, slide 5 demonstrates the continued strain on our key value buckets. Accordingly, our 2023 outlook continues to imagine a difficult 12 months for working prices.
I’m happy to report that Coeur capital value publicity at POA 11 continued to lower with roughly $605 million of the estimated capital now dedicated and $495 million incurred. As Mitch and Mick each talked about, the challenge stays on observe and on finances with roughly 75% of the remaining CapEx anticipated to be incurred through the first half of the 12 months.
Turning to 2023 steering. Our steering stays per our December, 2022 Investor Day as we strategy the free money movement inflection level publish completion of POA 11. Mitch and Mick have already hit on the important thing messages round manufacturing, working prices, POA 11 capital and the story of two halves this 12 months.
I wish to spotlight a few further crucial objects inside the steering, which we anticipate will ship NAV progress and cut back total threat for the corporate. We’ve allotted worth accretive capital for added underground mine growth and exploration at Kensington and Palmarejo, which is predicted to increase mine lives and cut back threat at each mines.
To accommodate these prolonged mine lives, each websites are investing in new tailings capability throughout 2023. Acquiring that essential POA 1 allow modification at Kensington final 12 months has allowed us to progress on the aggressive multiyear program on the mine, which incorporates this permitted tailings capability. At Palmarejo, the brand new tailings capability shall be contained in the outdated open pit, which is a major environmental derisking milestone.
Turning to the stability sheet, slide 16 supplies snapshot of our monetary place, that includes complete potential liquidity of over $500 million. We do, nevertheless, stay involved within the short-term concerning the total macro setting for gold and silver costs and continued working value inflation. This concern, coupled with our story of two halves of 2023, has led us to take a number of actions to maintain our stability sheet versatile throughout these last few months of capital depth at Rochester.
The important thing parts of our financing technique embrace we not too long ago monetized our remaining place in Victoria Gold for $40 million, a revolving credit score facility, which has $280 million of capability. Our hedging program designed to offer draw back commodity value threat safety throughout this era of capital depth. We head into 2023 with roughly 180,000 ounces of gold hedged at $1,961 per ounce and three.2 million ounces of silver hedge at $24.55 per ounce, and we put a brand new ATM in place for gross potential proceeds of as much as $100 million.
These key initiatives taken to boost our complete potential liquidity depart us feeling snug that the stability sheet will present the required flexibility to ship the industry-leading excessive return progress that may remodel our firm.
I am going to now flip it over to Aoife.
Aoife McGrath
Thanks Tom. As Mitch mentioned earlier, profitable exploration in 2022 led to a rise in our world reserves with progress at every website.
a couple of key highlights. At Kensington, the multiyear exploration plan described in our December Investor Day is already bearing fruit, with reserves rising by a powerful 56%. Nearly all of this progress got here from higher Kensington zones 30, 30A, and 30B. These zones stay open and we’ll proceed to broaden and data drill these areas by means of 2023.
Along with Kensington, we noticed useful resource and reserve additions at Elmira, and this sediment together with the Johnson deposit present alternatives for progress in 2023 and past. Detailed geological modeling is rising our understanding of all deposits in Kensington, and we’re hopeful that it will assist us vector to each greater grades and new zones.
At our excessive grade Silvertip exploration challenge, we additionally noticed notable progress with silver, lead and zinc measured in indicated sources rising by 73%, 69% and 81%, respectively year-over-year.
2022 was an thrilling 12 months for exploration with the next notable achievements. Firstly, expanded drilling elevated mineralization on the Southern Silver Zone to roughly 500 meters vertical extent and 1,800 meters alongside strike as proven on slide 10. Mineralization was additionally intersected in a number of stratigraphic items, thereby rising the quantity of the stratigraphic column that’s amenable to mineralization. This opened up considerably extra alternative for stack manto and a number of chimneys. Secondly, the invention of recent chimney constructions beneath the invention manto zone. And thirdly, scout drilling within the saddle zone generated new chimney targets for observe up in 2023.
We consider Silvertip is nice potential to be a protracted life mine, and proper now we now have visibility on the best way to construct a enough reserve base to allow a call to proceed as soon as the economics are sufficiently compelling. We see that continued progress at Silvertip is alternative to broaden Coeur’s future world manufacturing, cut back prices, and increase free money movement.
I am going to now go the decision again to Mitch.
Mitchell Krebs
Thanks Aoife. Earlier than shifting to the Q&A, I wish to spotlight slide 17 that summarizes our clear priorities for 2023. As I discussed on the outset, execution stays entrance and heart on this pivotal 12 months. By efficiently delivering on these targets, we plan to achieve the top of 2023 on the cusp of a brand new progress base for the corporate.
With that, let’s go forward and open it up for questions.
Query-and-Reply Session
Operator
We’ll now start the question-and-answer session. [Operator Instructions]
Our first query comes from Michael Dudas from Vertical Analysis Companions. Please go forward.
Michael Dudas
Good morning everybody.
Mitchell Krebs
Hello, Mike.
Michael Dudas
I do know 2023 could not devour sufficient, Mitch. Concerning Rochester, what — what is the hurdle or what is the pinch level you guys are seeing over the following few months that’s — {the marketplace} confidence that your targets on development completion and the ramp will happen inside what you guys are speaking about immediately?
Mitchell Krebs
Yeah. Good query. That is the — it is a busy 12 months with loads of shifting components on the market. All of this coming collectively right here now with the primary half centered on the Stage IV leach pad, which is now full. We’re stacking or on that. Merrill-Crowe comes subsequent within the second quarter, crusher midsummer, after which we begin placing rock by means of it and ramping it up all through the second half of the 12 months.
Mick, do you wish to give a bit little bit of element on a number of the different shifting components which are occurring there all year long?
Michael Routledge
Yeah. Yeah. Precisely. So, we accomplished stacking on pad 4 and moved throughout to pad six, on schedule. That was an awesome achievement that milestone on February 1. After which, now we’ll proceed to leach pad 4, so we’ll see some metallic from that all through the primary half of the 12 months. However we’re stopping now and build up stock on pad six proper by means of to that center of the 12 months after we anticipate to fee the warmth leach within the Merrill-Crowe. After which, we’ll begin seeing that metallic come out of stock within the second half of the 12 months as per the plan.
From a challenge perspective, we’re nonetheless on the P85 challenge schedule. And though we went by means of the conventional difficult Nevada winter round — persevering with to remain on observe, we’re nonetheless on that observe. And from a manpower and loading perspective for the challenge TIC and Keywood [ph] have achieved a implausible job at reloading and masking any attrition on that challenge and what we’re totally man as much as get the remainder of the challenge achieved all year long.
Mitchell Krebs
Simply so as to add onto that, Mike. The dialog round right here has began to transition fairly noticeably much less about development actions and schedule and extra about operational readiness, plans across the ramp-up schedule and every part that wants to enter guaranteeing that this factor ramps up easily all through the again half of the 12 months to ship on that second half manufacturing progress and set us up for what must be a — that inflection level in money movement as we head into 2024. So, it is — there’s been a noticeable shift when it comes to what the — the place the priorities are and the place the brand new focus areas are on the market now. So, that is thrilling to see.
Michael Dudas
That is very encouraging, Mitch. My follow-up is, you simply mentioned on Silvertip some fairly optimistic outcomes. Any modifications in ideas from Investor Day to the way you’re occupied with the challenge immediately? Timing or construction, recognizing job one is getting Rochester achieved?
Mitchell Krebs
Yeah. You mentioned it proper there. Job one is in 2023 is POA 11 execution. The priorities at Silvertip this 12 months actually are twofold, minimizing that the holding prices as we prioritize POA 11 and persevering with to broaden the useful resource up there, which we now have loads of confidence in. We have seen it develop considerably since we acquired it and even year-over-year. Aoife talked about the proportion progress within the totally different metals simply year-over-year. We’ve loads of the arrogance that that may proceed. It’s going to be a little bit of a smaller program this 12 months in comparison with final 12 months. Concentrating on a bit bit extra on the enlargement facet to step out a bit extra with the thought being that as we try this, and we now have loads of confidence that we will, that is simply going to assist us put collectively a compelling enterprise case in a couple of extra years that may justify the capital that may go into increasing and beginning that up, as a one other operation. However — so the precedence for now’s, is continue to grow the useful resource, which Aoife I believe has some confidence in and a pair stuff you wish to possibly say about that Aoife.
Aoife McGrath
Yeah. I imply, we had an awesome 12 months in 2022 up there at Silvertip. We actually are — our understanding of the deposit actually developed. Southern Silver Zone itself is turning into fairly an necessary a part of this story in the meanwhile. So, we have prolonged mineralization there over vertical extent of 500 meters. And the — alongside strike extent so far, it is nonetheless open is 1,800 meters. In order that in itself is opening up that Southern Silver Zone is a really — one thing that may add considerably to the tons there. It is a vertical ore physique, it is a chimney, so it is doubtlessly a better mining state of affairs for us as nicely.
Along with that, we did some scout holes beneath the invention zone, which so far has been a manto horizon zone and extra sub — a sub horizontal zone. And we discovered some new chimneys beneath that, which we’ll observe up on this 12 months. And likewise right down to the South, all the way in which right down to Tour Ridge, we’re scheduling — all our scheduling over the previous couple of years intersection mineralization, and that is one other few kilometers of extent that we will broaden into.
Mitchell Krebs
So, Mike, simply to drag the lens again then, and POA 11 this 12 months get again to optimistic free money movement, decrease prices, cut back debt, preserve increasing that useful resource at Silvertip within the meantime, get to some extent the place we now have a sexy enterprise case at Silvertip, at which level then we will have some choices to consider whether or not we go it alone, whether or not we herald a companion, whether or not that is a strategic companion or a monetary companion, working JV, non-operating JV. However we’d like that compelling enterprise case to get to that time and drilling is the way in which to get there. And so that is the sort of the development, and priorities as we sit right here immediately.
Michael Dudas
Sounds very prudent, Mitch. Admire your ideas everybody. Thanks.
Mitchell Krebs
Okay. Thanks Mike.
Operator
[Operator Instructions]
There are not any extra questions within the queue. This concludes our question-and-answer session. I wish to flip the convention again over to Mitchell Krebs for any closing remarks.
Finish of Q&A
Mitchell Krebs
Okay. Effectively, hey, we respect all people’s time immediately throughout this busy reporting interval, and we look ahead to speaking with you all after the primary quarter within the springtime. Thanks once more. Have day.
Operator
Convention has now concluded. Thanks for attending immediately’s presentation. You could now disconnect.
