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Coeur D'Alene Mines Corporation Q2 2010 Earnings Call Transcript

Coeur dâ¿¿Alene Mines Corporation Q2 2010 Earnings Call Transcript

Coeur d’Alene Mines Corporation (CDE)

Q2 2010 Earnings Call Transcript

August 10, 2010 1:00 pm ET


Debbie Schubert – IR

Dennis Wheeler – Chairman, President and CEO

Leon Hardy – SVP, Operations

Mitchell Krebs – SVP and CFO

Don Birak – SVP, Exploration


James Puckle [ph] – Puckle Capital Management [ph]

John Tumazos – Very Independent Research

Daniel Greenspan – Macquarie Research Equities

Chris Lichtenheldt – UBS

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Good afternoon, my name is Nutrias and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter earnings 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. I would now like to turn the conference over to our host Debbie Schubert. Ms. Schubert, you may begin your conference.



Thank you for joining us today to discuss the Company’s second quarter and six month results. This call is also being broadcast live on the Internet through our web site at, where we have posted slides to accompany our prepared remarks. Telephonic replay of the call will be available for one week following today’s call.

On the call today are Dennis Wheeler, Chairman, President and Chief Executive Officer; Mitchell 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 and Manquiri.

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 projections. Please see our full cautionary statement on slide two.

With that, I would like to turn the call over to Dennis.

Dennis Wheeler

Thank you, Deborah. Welcome and thank you all for joining us today. With the company’s second quarter results we are beginning to see early stages of the impact of our significant investments in three new, long-life precious metals mine. Combined with continued strength in gold and silver markets during the past quarter, Coeur generated record metal sales of $101 million, 49% above last year’s second quarter, and more than any other quarter in the company’s history.

In total, Coeur produced 4.2 million ounces of silver and more than 23,000 ounces of gold during the quarter representing 7% and 68% increases respectively. The large new mines brought on line in the past two years, San Bartolomé and Bolivia and Palmarejo in Mexico were the main contributors to our quarter operating cash flow of $32.5 million, another company record.

Also in the second quarter, I am pleased to say that the third leg of our strategy came to fruition with the start up and successful commissioning of the Kensington gold mine in Alaska. We began processing North Kensington June 24, and as Leon Hardy will tell you in a few minutes, start-up and operations have been very smooth. In fact, the first two barges of containers of gold concentrate have already left the mine site.

We expect Kensington to produce approximately 50,000 ounces of sifted gold this year, which will help boost company wide gold production to 170,000 ounces, a 135% increase over last year’s level, and in line with prior guidance. In addition to the positive launch of mining operations, Kensington marks another company milestone. We have entered into an historical partnership with China National Gold Corporation, China’s largest gold producer for the sale of half of Kensington’s gold concentrate. This agreement not only establishes an important new relationship between Coeur and China but also represents the first of its kind between a state-owned China Corporation and a United States precious metals mining company.

The operation sites Rochester, Martha, and Endeavor are all performing ahead of budget, and we continue to see consistent silver production and declining cost at San Bartolomé. At Palmarejo, many important milestones were achieved as part of the company’s ongoing optimization program, which are expected to increase production and lower costs in the balance of 2010. On the exploration side of the business, the company’s strategy is largely focused on drilling activities on large land positions near our existing mines. This strategy continues to generate very cost-effective, near-term additions to the company’s substantial, existing reserve and resource base, and my colleague Don Birak will have more to say about these efforts in a bit.

This slide makes several key points about Coeur and your asset portfolio. First our mines are 100% precious metal, silver and gold with no base metal exposure. Silver production generates approximately 70% of our overall metal sales while gold contributes to the remaining 30%, which will continue to become a more significant part of our metals portfolio going forward now that Kensington has been in production.

Coeur has the leading precious metal reserve and resource base on repeating our portfolio of new mines. At the beginning of this year, silver reserves alone totaled 269 million ounces, and gold reserves totaled 2.9 million ounces at the end of last year. We are maintaining our full-year production guidance today of 17.3 million silver ounces and 170,000 ounces of gold.

Now, I will turn the call over to Leon Hardy for more details on our operations. Leon?

Leon Hardy

Thanks, Dennis. As mentioned, we are very pleased to report that production began ahead of schedule at Kensington. We have completed pre-commissioning of the plant and ramp-up is proceeding smoothly as scheduled. The mine is on track to produce approximately 50,000 ounces of gold this year. Production from the full 150 ton per day plant is expected to average 125,000 ounces annually in its initial 12.5 year mine line based on current reserves of 1.5 million ounces of gold.

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