Rochester expansion on track despite weather

“The story of Rochester’s first quarter was weather. Rain, snow and massive temperature swings throughout the western U.S. fought the team from start to finish,” the company’s senior vice president and chief operating officer, Michael Routledge, said in the May 11 earnings call.

He said capital costs for the Rochester project will likely be at the high end of the estimated $650 million to $670 million because the “poor weather affected nearly every aspect of the project in the quarter hampering the team’s ability to move equipment, material and personnel.”

The adjusted net loss for the first quarter of last year was $13.8 million, or 5 cents per share, and the net income without adjustments was $24.6 million, or 8 cents per share in the 2023 quarter, compared with net earnings of $7.7 million, or 3 cents per share, in the first quarter of 2022.

First-quarter production at Rochester and companywide was stronger than expected, however, according to the Chicago-based company, which reported 69,039 ounces of gold production and 2.5 million ounces of silver production in the first quarter. Gold production was down from 75,409 ounces in the 2022 quarter while silver production was the same in 2022.

“Coeur’s first-quarter results reflect strong overall production and cost management, which positions us well relative to our full guidance ranges,” said Mitchell J. Krebs, president and chief executive officer.

The company’s guidance for gold and silver production this year is expected to be helped by the planned completion of the Rochester expansion, called POA 11, and higher expected grades at Wharf. Gold production is expected to be between 320,000 and 370,000 ounces and silver, between 10 million and 12 million ounces.

Rochester produced 761,000 ounces of silver in the first quarter and 8,155 ounces of gold, compared with 655,000 silver ounces and 6,066 gold ounces produced in the 2022 quarter.

“With the second quarter representing the last quarter of elevated capital to complete the Rochester expansion and a balance sheet well-positioned to support this remaining investment, we look forward to an expected major inflection point during the second half of 2023 as production from Rochester begins to ramp up,” Krebs said.

In the call he said that after completion of the project, Rochester will become one of the world’s largest open pit, heap leach operations.

Coeur began stacking ore on the new leach pad at the expansion site and achieved mechanical completion of the new Merrill-Crowe process plant ahead of schedule at Rochester, which is near Lovelock in Pershing County. Coeur also reported continued progress on the crusher corridor.

Coeur stated that as of March 31, it had committed roughly $634 million to the Rochester project since it began and approximately $560 million of the estimated cost had been incurred for the expansion, which was 82% complete at the end of the first quarter.

Krebs also said in the call that the project has had 2 million hours without a lost-time accident.

Companywide, Coeur’s revenue totaled $187 million in the first quarter, compared with $188 million in the first quarter of 2022, and the released prices in the quarter were $1,794 per ounce of gold and $23.25 per ounce of silver. The average gold price in the 2022 quarter was $1,721 per ounce and the silver price averaged $24.06 per ounce.

Adjusted costs applicable to sales in the first quarter were $1,381 per gold ounce, compared with $1,169 per ounce in the 2022 quarter, and $15.83 per ounce of silver, compared with $14.95 per ounce in last year’s quarter, according to the earnings report.

Additionally, Krebs said as he reported that Coeur is celebrating its 95th year, that “not a lot of companies are fortunate enough to be around to celebrate 95 years.”

Looking at operations outside of Rochester, Coeur reported that Palmarejo in Mexico produced 25,118 ounces of gold and 1.8 million ounces of silver in the first quarter, compared with 28,931 gold ounces and 1.8 million silver ounce in the first quarter of 2022.

Coeur said production at Palmarejo benefited from increased average ore grades, offset by lower average recoveries and lower mill throughput.

The Wharf Mine in South Dakota produced 15,470 ounces of gold in the first quarter, compared with 17,766 ounces of gold in the 2022 quarter, and 21,000 silver ounces, compared with 12,000 silver ounces in the prior year’s quarter.

Wharf is marking its 40th anniversary, Krebs said in the call.

At the Kensington Mine in Alaska, gold production in the first quarter totaled 20,296 ounces, compared with 22,646 ounces in the 2022 quarter, with lower production in the 2023 quarter driven by decreased mill throughput due to challenges in mine sequencing and stope extraction timing, as well as lower average gold grades and recoveries.

Coeur’s exploration program in the first quarter involved up to six drilling rigs across all sites for a total $7 million investment, and the company said he plans to invest $40 million to $50 million this year on exploration, focusing on Kensington and Silvertip, a silver-zinc-lead exploration project in British Columbia.

The company also announced it ended the first quarter with total liquidity of about $382 million, including $67 million in cash, $300 million available through a revolving credit facility and $15 million in marketable securities.

Coeur reported it bolstered its hedging program with roughly 158,000 ounces of gold hedged at $1,968 per ounce and about 3.7 million ounces of silver hedged at $25.04 per ounce, and Thomas Whelan, senior vice president and chief financial officer said in the call that Coeur benefited from the metal prices in the quarter.

The average realized gold price in the quarter was $1,794 per ounce, compared with $1,721 in the 2022 quarter, and the average realized silver price was $23.25 per ounce, compared with $24.06 per ounce last year in the first quarter.