Coeur Mining Investors Shouldn’t Hope for a Turnaround Yet

Coeur Mining [stock_market_widget type="inline" template="generic" color="default" assets="CDE" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has slid over 20% so far this year as investors have lost confidence in the company after its fourth-quarter results and the 2019 guidance turned out to be below expectations. The company’s recently released operational results for the first quarter of 2019 haven’t done anything good for the stock price either.

Let’s take a closer look at how Coeur Mining performed last quarter and if there’s a potential for a turnaround going forward.

Q1 Performance in Details

Coeur Mining says that its first-quarter operating results were in line with what the company was originally expecting. It produced 78,336 ounces of gold during the quarter and 2.5 million ounces of silver. Its zinc production for the quarter stood at 3.7 million pounds, while lead production came in at 3.1 million pounds.

At the same time, Coeur Mining management clarified that the company is on track to achieve its major initiatives for the year that should eventually help it achieve top-line growth in the long run. According to CEO Mitchell Krebs:

Our top two 2019 initiatives – successfully ramping up operating activities at Silvertip and completing the installation of the high-pressure grinding roll (“HPGR”) unit at Rochester – remain on-track. Our Kensington mine continues to see the benefit of higher grades from the Jualin deposit, while Wharf exceeded its plan during the first quarter and is positioned to deliver higher production during the remainder of the year.

These initiatives are expected to drive Coeur Mining’s results in the second half of the year. The company anticipates higher production levels at Palmarejo on account of the new production at La Nacion. Similarly, the HPGR unit will boost production at Rochester in the second half of 2019.

Also, a bump in the mining and processing rate at Jualin will lead to higher production at Kensington.

In all, Coeur Mining believes that these initiatives will allow the company to deliver positive free cash flow in 2019. That would be a welcome relief for investors as Coeur’s free cash flow was a negative $120.7 million last year.

So, does this mean that Coeur Mining can eventually get back on track by the end of the year? Let’s take a look.

What Next for Coeur Mining

Investors shouldn’t be betting on a turnaround at Coeur Mining yet as its production profile won’t be strong enough this year to help it offset any price-related weakness.

Coeur Mining plans to produce 334,000 ounces to 372,000 ounces of gold this year, as well as 12.2 million ounces to 14.7 million ounces of silver. The mid-point of Coeur Mining’s gold production is lower than 2018 levels, while the silver production translates into a slight increase of mid-single digits.

Now, the price of gold has seen some resurgence in 2019 and averaged $1,300 an ounce during the first quarter of the year. But silver is having a bad time despite a good start to the year. Also, the price of gold has pulled back a bit in recent weeks because of a strong dollar.

Given these developments, investors shouldn’t be betting on a turnaround at Coeur Mining yet as its production profile won’t be strong enough this year to help it offset any price-related weakness.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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