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DAILY NEWS Nov 6, 2012 12:00 AM - 0 comments

Coeur D'Alene shares hammered by weak Q3

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Coeur D’Alene Mines (CDM-T, CDE-N) took a severe beating after posting a third-quarter net loss of US$15.8 million, or US18¢ a share, which included a non-cash fair market value adjustment of US$37.6 million, compared to a profit of US$31.1 million, or US35¢ per share a year ago.

Adjusted earnings per share came in at US29¢, down 72% in the year earlier period, and below the consensus of US39¢.

In Toronto, the Idaho-based miner tumbled more than 22%, or $6.88 per share, in late afternoon trading to $23.23.

BMO analyst Andrew Kaip attributes the miss in earnings mostly to lower-than anticipated production across the company’s mines and higher costs at the Palmarejo silver-gold mine in Mexico. 

“CDE’s operating costs remain elevated and uncertainty over the impact of ground control issues at Palmarejo are expected to overhang shares in the near-term,” he writes in a note, reducing his annual earnings per share estimate to $1.43 from $1.63.

Coeur’s silver production of 4.4 million oz. was roughly 10% below BMO Research’s expectations of 4.9 million oz., says Kaip. He adds the gold production of 58,786 oz., was in line with estimates.

During the three months, Palmarejo produced 1.8 million oz. silver and 23,702 oz. gold, nearly 25% less than the previous quarter owing to poor underground conditions in a high-grade portion of the underground mine, which called for extra ground support and led to slower advances, the company explains. Palmarejo also reported slipping grades and growing costs as mining transitioned to the open pit.

In Bolivia, the San Bartolomé silver mine experienced power outages that resulted in mill downtime in August and fewer ounces. While the company says the mine’s silver output of 1.5 million oz. is similar to the previous quarter, it notes the lower mill production rates at San Bartolomé and rising costs at Palmarejo contributed to its higher consolidated cash operating costs of US$9.05 per oz. silver, up 20% from a year ago.

Before changes in working capital, Coeur recorded US$77.3 million in operating cash flow, nearly half of the amount it reported a year ago.

Net metal sales in the quarter fell 33% to US$230.6 million compared to the same period last year due to declining output at Palmarejo, less attractive realized silver and gold prices, and fewer ounces of silver and gold sold. Silver and gold sales equalled 4.5 million oz. and 59,156 oz., down 27% and 12%, respectively. The average realized per ounce price of silver and gold were US$30.09 and US$1,654, down 21% and 2% for the year.

Thanks to a challenging quarter, the primary silver miner has narrowed its full-year production guidance to 18.5-19 million oz. silver and 215,000-225,000 oz. gold from 18.5-20 million oz. silver and 210,000-230,000 oz. gold previously.

It has also revised its 2012 cash operating costs per silver to roughly US$7.50 per oz., up from US$6.50-US$7.50 per oz. It estimates cash operating costs at the Kensington gold mine in Alaska of US$1,350 per oz., up from US$1,150-US$1,250 per oz.  

Coeur says operating costs at Kensington, its sole gold mine, should decline to US$950 per oz. in 2013.

The company anticipates silver and gold production next year to be consistent with 2011 and 2012 ouput.

Coeur ended the period with US$143.6 million in cash, equivalents and short-term investments, after buying back US$10 million worth of shares and paying US$72 million in debt. It has 89.8 million shares outstanding.

Coeur will be holding a conference call at 2 p.m. EST today.

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