Coeur D'Alene Mines Management Discusses Q3 2010 Results – Earnings Call Transcript

Coeur d'Alene Mines Corporation (

CDE

)

Q3 2010 Earnings Call Transcript

November 4, 2010 1:00 pm ET

Executives

Debby Schubert – Director, IR

Mitchell Krebs – SVP and CFO

Leon Hardy – SVP, Operations

Don Birak – SVP, Exploration

Analysts

John Tumazos – John Tumazos Very Independent Research

Mike Curran – RBC Capital Markets

Presentation

Operator

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» Coeur d'Alene Mine Q3 2009 Earnings Call Transcript

Good afternoon my name is Erona and I'll be your conference operator today. At this time I would like to welcome everyone to the Coeur d'Alene Mines Third Quarter Earnings Conference Call. (Operator Instructions). Thank you.

I will now turn the call over to Ms. Debby Schubert. Ma'am, you may begin your conference.

Debby Schubert

Thank for joining us today to discuss the company's third quarter and nine months result. This call is being broadcast live through our website at www.coeur.com where we posted slides to accompany our prepared remarks. Telephonic replay will be available for one week following today's call. On the call today are Mitchell Krebs, Senior Vice President and Chief Financial Officer, Leon Hardy, Senior Vice President of Operations and Don Birak, Senior Vice President of Exploration.

Any forward-looking statements made today by management come under the securities legislation of United States, Canada and Australia and involve a number of risks that could cause actual results to differ materially from projections. Please see our full cautionary statement on slide two. With that, I'd like turn the call over to Mitch.

Mitchell Krebs

Thanks, Deborah. Welcome everyone and thank you for joining us. With the company's third quarter results released today, we are very pleased to report very strong quarterly and nine-month financial and operational results driven by our three new long-lived precious metals mines, as well as the very strong metals markets.

As you've probably seen, silver reached a new 30-year high today trading north of $25 an ounce and gold at near $1,400 and ounce. The third quarter mark the first full quarter, with all three of the company's new mines in production, leading to accelerated metal sales and cash flow, while operating costs and capital expenditures declined significantly.

Over the past three years, Coeur has been executing its strategic plan to transition the company to three new long-life silver and gold mines. The results from the third quarter demonstrate the momentum being created by these new operations. The most recent quarter delivered a doubling in quarterly gold production from the prior quarter at a 4% increase in silver production from the prior quarter. A 40% decline in cash operating costs of $4.87 per silver ounce, record metal sales of $118 million, up 17% from the previous quarter and nearly $30 million higher than last year's third quarter. A 58% increase in our operating cash flow to $34.7 million, compared to last quarter.

Operating income jumped to $10.5 million, from $1.9 million last quarter. Our cash position is strong, with nearly $52 million in cash equivalent and short-term investments at the end of the October and rising up from the $33 million at the end of September due to a rising cash flow.

Kensington, which began commercial production at the beginning of the third quarter, produced 15,155 ounces of gold during its initial quarter of operations.

Palmarejo silver production increased 41% from the second quarter and gold production increased 49%. With the higher production at Palmarejo, cash operating costs dropped to just $0.15 per silver ounce versus $10.78 per ounce during the second quarter.

At San Bartolome silver production of 1.8 million ounces was consistent with the prior quarter. While cash operating costs drop to 9% to $7.05 per silver ounce. In addition, we're enthusiastic about the progress made to expand production and Rochester silver and gold mine in Nevada. Just last week, this expansion in plant received a positive decision record – Nevada bureau land management represented the major milestone. This clears the lag for additional mining to commence with additional production for a new leach pad beginning in the fourth quarter of 2011.

This new production will lift average annual production at Rochester to approximately 2.4 million ounces of silver and 35,000 ounces of gold and make Rochester a fourth important component to the company's portfolio of operations. Rochester remains one of the great silver mines of the world, already having produced 127 million ounces of silver and 1.5 million ounces of gold over its 25 years of operations.

With exploration efforts underway, we're hoping to extend its mine life even further. We expect our growing cash balance to be sufficient to fund the related capital investment at Rochester next year. So third-quarter was a very good quarter for us both operationally and with strong financial metrics.

We expect this year to expand gold production by 535% over last year's levels to approximately 170,000 ounces. Thanks to the additional production from Kensington and Palmarejo and we expect to exceed 17 million ounces October production at an average full year cash cost of approximately $5.50 per ounce of silver.

I will now turn the call over to Leon to go over the progress at our individual operations in the quarter.

Leon Hardy

Thanks, Mitch. In the third quarter, the company produced 4.3 million ounces of silver, compared to 4.2 million ounces in the second quarter and 3.4 million ounces in the first quarter of the year.

On slide six, you can see the substantial increase in quarterly gold production to 47,000 ounces versus 23,000 ounces in the second quarter. The 105% increase in gold production was primarily a result of 15,000 gold ounces produced in Kensington mine during its initial quarter of operation and also a 50% increase in gold production at Palmarejo to a little over 29,000 ounces.

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