Coeur Mining: A Lot Of Patience Needed With This One (Rating Upgrade) (NYSE:CDE)

Part I – Introduction

Chicago-based Coeur Mining, Inc. (NYSE:CDE) released its first-quarter results on May 10, 2023.

Note: I have followed CDE quarterly since April 2019. This new article is a quarterly update of my article published on March 28, 2023.

1 – 1Q23 results snapshot

Coeur Mining’s quarterly revenue was $187.30 million, representing a decrease of 0.5% year-over-year. Gold and silver sales represented 67.9% and 32.1% of quarterly revenue. Net income was a loss of $24.59 million, or $0.08 per diluted share, compared to an income of $7.68 million, or $0.03 per share, last year.

Gold production was better than expected this quarter at Palmarejo, Rochester, and the Wharf, offsetting lower production at Kensington. Total production was 69,039 Au ounces and 2,535K Ag ounces. Metal sales for the quarter totaled 70,866 Au ounces and 2.589 million ounces of silver.

CEO Mitch Krebs said in the conference call:

Our results were slightly ahead of expectations, driven by a strong start to the year at our Palmarejo, Rochester, and Wharf operations, which offset a weaker quarter from our Kensington mine. As we have said, the first quarter is typically our softest quarter of the year, due to weather and one-time payments. Overall, we remain on-track to deliver on our full year guidance, which reflects a much stronger second half.

2 – Stock Performance

Coeur Mining, Inc. continues to perform poorly in my portfolio’s gold and silver miners. CDE sank significantly on a one-year basis and has underperformed the iShares Silver Trust ETF (SLV), the VanEck Vectors Gold Miners ETF (GDX), and Fortuna Silver Mines (FSM) while doing better than Pan American Silver (PAAS). The stock is down 5% YoY.

3 – Gold And Silver Production In 1Q23

Strong performances at Palmarejo, Rochester, and Wharf mines offset a weaker quarter from the Kensington mine.

Detailed Presentation per mine:

3.1 – Palmarejo mine. Solid quarter

During 1Q23, gold and silver production totaled 25,118 Au oz and 1.752 Moz, respectively, compared to 25,935 Au Oz and 1.489 Ag Moz in the prior period.

3.2 – Kensington Mine. A better production this quarter

Gold production decreased in the first quarter to 20,296 ounces compared to 22,646 ounces in the prior year period.

3.3 Rochester mine. Bad weather impacted the results.

However, Coeur Mining, Inc.’s Rochester expansion is now above 82% completed.

3.4 – Coeur Mining metal production

Gold and silver sales were 67.9% and 32.1% of quarterly revenue. Coeur Mining produced 69,039 Au ounces of gold (but sold 70,866 Au Oz) and 2.535 million Ag ounces (sold 2.589 Ag Moz) during the first quarter.

Average realized gold and silver prices for the quarter were $1,794 and $23.25 per ounce, respectively, compared to $1,721 and $24.06 per ounce in the prior year period.

Part II – Coeur Mining: Financials in 1Q23 – The Raw Numbers

Click to enlarge

Data Source: Company 10-Q.

Analysis: Revenues, Free Cash Flow, Debt, And Production Details

1 – Revenues and trends – Revenues were $187.3 million in 1Q23

2 – Free cash flow was a loss of $109.05 million in 1Q23

Note: Generic free cash flow is cash from operations minus CapEx.

Coeur Mining’s free cash flow for the first quarter of 2023 was a loss of $109.05 million, and the trailing 12-month free cash flow was a loss of $359.86 million.

The company’s CapEx in 1Q23 was $74.05 million, and cash flow from operations was a loss of $35.00 million.

The Rochester Expansion seems to be the main reason for the loss and should be resolved by H2 2023. However, with solid gold and silver prices, CDE will do quite well in H2 2023.

3 – Available capital, net debt, liquidity, and hedges

Total debt was $485.5 million, and net debt was $403.68 million. Cash, cash on hand, and marketable securities were down to $81.82 million.

Total potential liquidity is now $382 million (including $100 million ATM).

For financial ratios and Metal sales hedges, please see below:

4 – 2023 outlook – Unchanged

In 2023, Coeur Mining, Inc.’s gold production is expected to be between 320K-370K oz, while silver production is between 10 And 12 Moz.

Technical Analysis And Commentary

CDE forms a descending channel pattern, with resistance at $3.95 and support at $3.20. RSI is now 35 and close to showing an oversold situation, a buy signal.

Descending channel patterns are short-term bearish in that a stock moves lower within a descending channel, but they often form within longer-term uptrends as continuation patterns. The descending channel pattern is often followed by higher prices, but only after an upside penetration of the upper trend line.

The trading strategy is to sell about 40%-50% of your position LIFO and keep a core long-term position for a higher target of around $6 to $6.50.

I suggest taking profits LIFO between $3.90 and $4 with possible higher resistance at $4.45 and waiting patiently for a retracement between $3.25 and $3.10 with lower support at $2.90 to accumulate again.

Gold and Silver are helping the bottom line.

Thus, be cautious and watch the gold and silver prices like a hawk.

Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.