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Coeur Reports Strong Operating Cash Flow And Record Gold Production In 2012; Expected Production Growth In 2013 Driven By Rochester Expansion

Capital expenditures were $115.6 million in 2012, a 4% decrease from 2011. Capital expenditures were primarily related to capitalized exploration drilling and development of the Guadalupe satellite operation located six kilometers from the main Palmarejo operation, underground development at Palmarejo, and tailings expansion, underground development and infrastructure improvements at Kensington.

Cash, cash equivalents and short-term investments were $126.4 million at December 31, 2012. In August 2012, the Company entered into a four year senior secured revolving credit facility of up to $100 million, which remains undrawn.

In January 2013, Coeur raised net proceeds of $291.1 million in 7.875% Senior Notes due 2021, resulting in current cash, cash equivalents and short term investments of approximately $400 million. Including the undrawn revolving credit facility, the Company has available liquidity of approximately $500 million.

Shares outstanding at the end of 2012 totaled 90.3 million.

     

1.

   

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 
                       

Table 2: Operational Highlights: Production

 

(silver ounces in thousands)

4Q 2012     4Q 2011    

QuarterVariance

    2012     2011    

YTDVariance

      Silver     Gold     Silver     Gold     Silver     Gold     Silver     Gold     Silver     Gold     Silver     Gold
Palmarejo 1,554     19,998 2,690     34,108 (42 %)     (41 %) 8,236     106,038 9,042     125,071 (9 %)     (15 %)
San Bartolomé 1,343 1,997 (33 %) n.a. 5,930 7,501 (21 %) n.a.
Rochester 828 12,055 373 1,993 122 % 505 % 2,801 38,066 1,392 6,276 101 % 507 %
Martha 130 144 n.a. n.a. 323 257 530 615 (39 %) (58 %)
Kensington 28,717 13,299 n.a. 116 % 82,125 88,420 n.a. (7 %)
Endeavor 106             112             (5 %)     n.a.       734             613             20 %     n.a.
Total 3,831 60,770 5,302 49,544 (28 %) 23 % 18,025 226,486 19,078 220,382 (6 %) 3 %
 

*Additional operating statistics can be found in the tables in the appendix.

 
                       

Table 3: Operational Highlights: Cash Operating Costs Per Ounce 1

 
4Q 2012       4Q 2011    

QuarterVariance

    2012   2011    

YTDVariance

Palmarejo $ 7.55 $ (2.13 ) 454 % $ 1.33   $ (0.97 ) 237 %
San Bartolomé 13.97 9.18 52 % 11.76 9.10 29 %
Rochester 2.17 37.99 (94 %) 9.62 22.97 (58 %)
Martha 33.75 n.a. 49.77 32.79 52 %
Endeavor 19.92       14.74       35 %     17.27     18.87       (8 %)
Total $ 8.97 $ 6.19 45 % $ 7.57 $ 6.31 20 %
Kensington $ 1,065 $ 1,807 (41 %) $ 1,358 $ 1,088 25 %
 

*Additional operating statistics can be found in the tables in the appendix.

 

Palmarejo, Mexico - Lower Grades Offset Higher Tons Mined

  • Palmarejo produced 8.2 million ounces of silver and 106,038 ounces of gold in 2012, down 9% and 15%, respectively, compared with 2011.
  • Cash operating costs 1 per silver ounce of $1.33 in 2012 compared with negative cash operating costs 1 of $0.97 in 2011 were a result of lower production, remediation work in the underground operations, accelerated open pit mining and higher maintenance costs.
  • Normal mining rates resumed in the underground operation late in the fourth quarter in the upper 76 zone and production from zone 108 commenced as planned. A lower overall mining rate in zone 76 was partially offset by planned mining rates in zone 108, which contains lower grade ore.
  • A record 465,498 tons were mined in the open pit in the fourth quarter, a 10% increase from the third quarter 2012 and 45% higher than open pit tons mined in the fourth quarter 2011. Silver grades in the new phase of the pit are expected to increase gradually over 2013.
  • A record 563,123 tons of ore processed partially offset lower mill feed grades in 2012. The Palmarejo mill recorded solid recovery rates of 84.2% in silver and 91.4% in gold for the fourth quarter.
  • Sales and operating cash flow 1 totaled $442.1 million and $233.1 million, respectively, in 2012, including $79.4 million and $33.2 million in the fourth quarter. Capital expenditures were $38.5 million in 2012.
  • The Company is optimizing the mine plan for Guadalupe and will provide operational details during the second half of the year. Guadalupe is expected to commence initial production in the second half of 2013.
     

1.

   

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 

San Bartolomé, Bolivia - High Return Capital Investment Expected to Increase Production in 2014

  • Silver production was 5.9 million ounces in 2012, compared with 7.5 million ounces in 2011. Fourth quarter production of 1.3 million ounces of silver decreased from the third quarter due to lower silver grade and downtime resulting from grinding mill maintenance.
  • Cash operating costs 1 per silver ounce were $11.76 in 2012 compared to $9.10 in 2011, primarily due to lower production despite flat operational spending.
  • Sales and operating cash flow 1 totaled $178.0 million and $72.4 million, respectively, in 2012, including $37.0 million and $17.4 million, respectively, in the fourth quarter 2012. Capital expenditures were $25.7 million.
  • The Company plans to increase mill capacity approximately 15% through an estimated capital expenditure of $17.0 - $20.0 million. This expansion is expected to increase the mine's annual production to 6.0 million ounces of silver over the next seven years at reduced cash operating costs per ounce 1.
  • Duilio Rivero has joined the Company as General Manager of San Bartolomé. Mr. Rivero was most recently the General Manager at Nyrstar's Campo Morado Mine in Mexico. Previously, he was General Manager for Nyrstar's El Toqui mine in Chile and for Yamana's Gualcamayo mine in Argentina. He is a mining engineer with over 20 years of experience in diverse roles in open pit and underground mines in South America. Mr. Rivero graduated from the University of San Juan, Argentina.

Rochester, Nevada - High Return Investment Drives Expanded Production in 2013 and Beyond

  • Rochester achieved its highest production quarter of the year in the fourth quarter, reaching full year production of 2.8 million silver ounces and 38,066 gold ounces, significantly higher than 2011. Increased production was the result of the first full year of production from a new heap leach pad, which was commissioned in late 2011.
  • Cash operating costs 1 of $9.62 per silver ounce in 2012 were 58% lower than $22.97 in 2011. Fourth quarter cash operating costs 1 were $2.17 per silver ounce compared to $37.99 per silver ounce in the fourth quarter of 2011.
  • Sales and operating cash flow 1 totaled $132.4 million and $53.5 million, respectively, in 2012, including $43.2 million and $21.5 million, respectively, in the fourth quarter 2012. Capital expenditures were $11.8 million.
  • In 2013, the Company plans a major crusher and heap leach capacity expansion at Rochester to boost production to 4.5 - 4.9 million ounces of silver and 44,000 - 46,000 ounces of gold.
  • Total capital expenditures are expected to be $30.0 - $35.0 million in 2013, including $23.0 - $26.0 million of growth capital and the remainder for sustaining capital. The Company is investing $4.0 million during 2013 to expand the capacity of the primary crusher from 9.0 million tons to the currently permitted annual rate of 14.0 million tons. In addition (subject to final permits) the Company expects to expand the mine's heap leach capacity on existing pads to approximately 67.0 million tons at an estimated capital cost of approximately $15.0 million to accommodate higher production rates of ore coming from historic stockpiles.
  • Further expansion potential is being planned. Engineering and permitting are underway for 40.0 million tons of additional pad capacity with expected initial production in 2016 to further extend the mine life and increase production rates from historic stockpiles. This capital project is estimated to cost $10.0 million scheduled for 2015-2016.

Kensington, Alaska - First Full Year of Steady Operations to Drive Higher Production and Cash Flow

  • Kensington produced 28,717 ounces of gold in the fourth quarter, its highest quarterly production for the year, and 18% higher than third quarter. Full year 2012 gold production was 82,125 ounces.
  • Cash operating costs 1 per gold ounce were $1,358 in 2012, compared to $1,088 per ounce in 2011, due to a short-term production scale back to complete several underground and surface infrastructure projects and to establish increased underground development footage.
  • As production ramped up in April 2012, cash operating costs 1 per gold ounce declined 40% through year-end to $1,065 per ounce in the fourth quarter and to $950 per ounce in December 2012.
  • Sales totaled $111.0 million in 2012 and $43.0 million in the fourth quarter 2012. Kensington generated $14.5 million in operating cash flow 1 in the fourth quarter and $14.5 million for the full year 2012 after roughly breaking even on a cash flow basis after the first nine months of 2012. Capital expenditures were $37.0 million in 2012.
     

1.

   

EBITDA, operating cash flow, adjusted earnings and cash operating costs are non-GAAP measures. Please see tables in the Appendix for reconciliation to U.S. GAAP. Total debt includes short and long-term indebtedness and excludes capital leases and royalty obligations.

 

Organizational Update

Frank L. Hanagarne, Jr. was appointed Senior Vice President and Chief Operating Officer effective February 4, 2013, as reported in the Company's Form 8-K filed on February 7, 2013. The Company is conducting a search for a new Chief Financial Officer while Mr. Hanagarne continues in that role in the interim. Mr. Hanagarne joined Coeur as Senior Vice President and Chief Financial Officer in October 2011 and assumed the duties of principal operating officer in January 2013. Mr. Hanagarne has over 30 years of industry experience in operations, finance and business development. He was previously the Chief Operating Officer of Valcambi, a precious metal refiner in Switzerland in which Newmont has an equity interest. Prior to that, he was Director of Corporate Development for Newmont. In his 17 years at Newmont, Frank also served as Mill Project Superintendent, Advisor in Corporate Health and Safety and Loss Prevention and held various positions of increasing responsibility in operations, business functions and environmental, health and safety. Mr. Hanagarne has a Master's in Business Administration degree from the University of Nevada, Reno, and a Bachelor of Metallurgical Engineering degree from the New Mexico Institute of Mining and Technology.

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