Improved silver prices and a major restructuring program have put
If all goes as planned, Coeur will almost double silver production and reduce cash costs by bringing on-stream the San Bartolome silver project in Bolivia and the Kensington gold project in Alaska by 2006.
Chairman Dennis Wheeler says the projects are part of a larger plan to build a new generation of low-cost mines and branch out from the company’s historic holdings in Idaho’s Silver Valley, where mines are old, deep and relatively expensive to operate.
“Lower costs and long mine lives will be two important hallmarks of Coeur d’Alene Mines as we move forward,” Wheeler says.
Coeur already has two low-cost mines in South America — Cerro Bayo in Chile and Martha in Argentina — and the company intends to spend most of this year’s US$10.7-million exploration budget there.
Coeur also took steps to clean up its balance sheet last year. The company eliminated about US$70 million of debt, or 88% of its total indebtedness, and will redeem the remainder shortly. When cash on hand is combined with a recent US$180-million financing, Coeur’s cash and cash-equivalents total about US$252.7 million.
Indeed, with silver prices at robust levels not seen in years, the company is stronger financially than it has been in a decade, Wheeler says. “We’ve seen a four-fold increase in our market capitalization to US$1.5 billion,” he says, noting that the company has benefited from its policy not to hedge silver production. “This has allowed us to outperform our competitors.”
Despite the restructuring, Coeur posted a net loss of US$67 million for 2003 and a fourth-quarter loss of US$13.5 million, both of which reflect debt-restructuring efforts. But even after excluding these and other non-recurring items, Coeur would have posted a net loss of US$16.1 million for the year, and a loss of US$4.8 million for the last quarter.
On the operations front, the Cerro Bayo mine in Chile was a star performer, with fourth-quarter cash costs of US52 per oz. silver equivalent on production of 1.1 million oz. silver and 14,982 oz. gold.
Production for the full year was 4.9 million oz. silver and 67,155 oz. gold at a cash cost of US60 per oz. — a 56% improvement for silver and a 49% improvement for gold over 2002 levels.
Coeur’s exploration of Cerro Bayo in 2003 raised total year-end proven and probable reserves to 5.4 million oz. silver and 94,000 oz. gold. Mineralized material doubled between 2002 and 2003.
The company plans to spend US$3.5 million exploring Cerro Bayo this year, mostly near the existing mine. Work will target several vein extensions discovered in 2003, which, Coeur says, can be brought into production “quickly and economically.”
At the Martha mine in Argentina, Coeur mined and transported 4,381 tons of ore to Cerro Bayo in the fourth quarter. The average grade ranged between 60 and 70 oz. silver-equivalent per ton.
Coeur plans to spend US$2.3 million at Martha this year in an effort to boost total reserves, which stand at 1.4 million oz. silver contained in 24,000 tons averaging 78 oz. silver per ton.
In Nevada, production at the Rochester mine exceeded 100 million oz. silver last year, plus 1 million oz. gold. The mine started producing in 1986.
Production for the year was 5.6 million oz. silver and 52,363 oz. gold at an average cash cost of US$4.67 per oz. silver.
The Galena mine in Idaho’s Silver Valley produced 3.7 million oz. silver at a cash cost of US$4.66 per oz. in 2003. About US$1.3 million will be spent exploring Galena this year.
San Bartolome, Kensington
Coeur expects to complete an updated feasibility study of the San Bartolome project by the second quarter. The project is in Bolivia’s famous Potosi district, which has historically produced more than 2 billion oz. silver.
Based on previous studies, Coeur estimates San Bartolome could produce up to 6 million oz. silver per year (or about 40% more than current company-wide levels) at cash costs of about US$2.50 per oz.
Ore consists of silver-bearing gravels that can be hauled directly to processing plants.
Capital costs are projected at US$80 million, while the mine life is estimated at 14 years.
Coeur notes, however, that recent feasibility work indicates the potential to expand resources, which, at last report, stood at 123 million contained ounces silver. As a result of this and other positive factors, previous production plans and cost estimates may be revised in the updated study.
Meanwhile, in Alaska, Coeur is carrying out re-engineering and optimization studies for the Kensington gold mine, north of Juneau.
Capital costs are estimated at US$75 million for an underground operation with a 10-year life. About 1 million oz. gold are contained in the mine’s proven and probable reserves.
Annual production of about 100,000 oz. is expected, at cash costs of about US$195 per oz.
Early this year, Coeur received a draft environmental impact statement for Kensington from the U.S. Forest Service. The document brings Coeur a big step closer to completing the permitting phase.
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