Coeur d’Alene Mines Corporation (CDE)
Q1 2010 Earnings Call Transcript
May 10, 2010 1:00 pm ET
Tony Ebersole – Director, Corporate Communications
Dennis Wheeler – Chairman, President and CEO
Leon Hardy – SVP, Operations
Mitch Krebs – SVP and CFO
Don Birak – SVP, Exploration
John Bridges – J.P Morgan
Jorge Beristain – Deutsche Bank
Matthew O'Keefe – Cormark
John Tumazos – Very Independent Research
Chris Lichtenheldt – UBS
Previous Statements by CDE
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My name is Jennifer, and I will like be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2010 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)
Thank you and Mr. Ebersole, you may begin your conference.
Thank you Jennifer and thank you all for joining us today to discuss the company's first quarter results. This call is also being broadcast live on the Internet through our website at www.coeur.com, where we have also posted the slides that accompany our prepared remarks. Telephonic replay of the call will be available for one week afterward on our website. On the call today here in Coeur d'Alene are Dennis Wheeler, Chairman, President and Chief Executive Officer, Mitch Krebs, Senior Vice President and Chief Financial Officer, Leon Hardy, Senior Vice President of Operations, Don Birak, Senior Vice President of Exploration and Humberto Rada, President of Coeur South America.
Any forward-looking statements made today by management come under securities legislation of the United States, Canada and Australia and involve a number of risks that could cause actual results to differ from our projections. Please see our full cautionary statement on slide two.
With that, I would like to turn the call over to Dennis.
Welcome, everybody and thank you for joining us on today's call. The first quarter continued to demonstrate Coeur's successful strategy of transitioning to its three new long-live precious metals mines.
With increasing production, growing metal sales and explosive cash flow growth compared to last year's first quarter With a full first quarter of operations from Palmarejo in Mexico, which began production will you recall last April, we saw a nearly seven-fold increase in company-wide gold production from a year ago to nearly 26,000 ounces. Metal sales increased 94% to 87.5 million with gold now contributing nearly one-third of the company's total sales. And our operating cash flow grew 308% to $27.7 million.
At the same time, we saw a 40% decline in capital expenditures from a year ago as both Palmarejo and San Bartolome in Bolivia are now in full production and we near completion of our third new large mine, Kensington within the next two months. At Palmarejo, we have seen an increase in throughput and recovery rates as the workforce continues to optimize operations there.
At San Bartolome, we've reach into the higher grade area above the 4400 meters level which resulted in improved production and costs during the quarter and is expected to have a positive impact on production and costs through the remainder of the year. In addition, we've entered into a definitive share in asset purchase agreement to sell the standby Cerro Bayo silver silver-gold mine in Southern Chile as part of our strategy to focus on our three new long-lived assets.
Now I will turn the call over to Leon Hardy for detailed report on the operations during the quarter. Leon?
Thanks, Dennis. Palmarejo began operations in April of last year with silver reserves at that time beginning of this year totaling 90.5 million ounces and gold reserves at 1.1 million ounces. During this initial full year of operations, we are expecting silver production of 7.9 million ounces of silver and 109,000 ounces of gold production at average cash operating costs of under 250 per ounce of silver.
During the first quarter, silver production of 1.3 million ounces of was 10% higher and gold production of 22,577,000 ounces was up 9% from previous quarter while cash operating costs declined 12% to $5.41 per ounce of silver. Palmarejo contributed 51% of the company's total metal sales during the quarter, a reflection of growing impact this new mine is having on Coeur's overall operating and financial profile.
On slide six, you can see that both silver and gold production rebounded nicely at Palmarejo in the first quarter compared to the prior quarter, which is a trend we expect to see during the remaining three quarters of 2010.
Slide seven, tons milled increased 24% from the prior quarter and silver recoveries averaged 72.7% in the first quarter, up from 67.2% in the fourth quarter. Low 80 silver recoveries were realized near the end of March which bodes well for production levels during the remainder of the year. These silver recovery improvements are directly related to improve bore feet into the mill and stabilization of the flotation surface. As part of our plan, we have now changed carbonate in the leach circuit, which we believe we will get silver recoveries into the mid-80s range on a consistent bases.
We will have a new metal refinery operational in June which will optimize refinery operations. As a result of the increase in tons to the mill and continued strong gold production at Palmarejo, cash operating costs continue to decline. We are looking at full-year cash operating costs in 2010 of $2.50 per ounce of silver.