Coeur Mining Stock Could Lose Its Momentum

It is surprising to see that Coeur Mining has made a comeback over the past few weeks as it hasn’t done anything notable from an operational point of view this year. A weak production profile has taken its toll on Coeur, and that is clearly evident from its latest round of results.

Coeur is Not in a Good Shape

Coeur’s revenue was down 5% year over year in the first quarter of 2019 and it missed consensus estimates. The lower revenue was a result of a sharp decline in the company’s output.

As reported by Seeking Alpha:

Silver output fell 22% Y/Y to 2.5M ounces, while gold output slipped 8% to 78,336 ounces; the biggest drop was at the Palmarejo mine in Mexico, where output slid by 735,000 ounces due to lower grades and recoveries due to mine sequencing.

Thanks to this lower production and weak pricing of both gold and silver, Coeur delivered a wider-than-expected net loss of $23 million last quarter as compared to a minor profit of $0.3 million in the prior-year period.

Still, investors have bid up Coeur stock of late under the belief that the ongoing economic tensions around the globe will boost gold and silver prices. That’s a logical move to make, but investors might be disappointed with the fact that Coeur is not well-equipped to take advantage of any potential improvement in gold and silver prices.

In fact, Coeur stock has shot up more than 45% in the past one month. I believe that anyone who has made profits during this period should book them as the rise has not been propelled on any company-specific news.

Why You Should Sell and Go Away

For starters, whether Coeur will achieve its yearly targets or not is still debatable. After missing estimates last quarter, Coeur believes that it will be able to achieve its targets for the full year. It is expecting a nice turnaround in the second half of the year on the back of “high-pressure grinding roll technology at the Rochester mine, higher recovery rates and production levels at Palmarejo, and improved plant performance and higher grades at Silvertip.”

But before that tailwind arrives, Coeur stock could start losing momentum as the risk appetite of investors seems to be on the rise once again. The U.S.-China trade war could near a conclusion as both parties are slated to meet this month.

Of course, gold prices have shot up 5% in the past month, but if there’s a positive outcome to the U.S.-China meeting, you should be prepared to see a pullback.

This could derail the positive investor and analyst sentiment that Coeur has built in the past month. The company’s financial growth is expected to pick up massive pace in the coming quarters, but don’t be surprised to see it failing to deliver on account of a shaky operational profile and a potential weakness in precious metal prices.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
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.

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