Coeur Mining Slides Weak Q4 Results – Will 2019 Be Better?

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Coeur Mining (NYSE: ) recently released its fourth-quarter and full year 2018 results, and investors didn’t like what they saw. The company’s revenue dropped substantially from the prior-year period and its earnings also decreased thanks to the bankruptcy of refiner Republic Metals.

The market wasn’t impressed with the company’s performance even though it beat analysts’ bottom line expectations. Let’s see what went wrong for Coeur Mining last quarter and how the company might perform this year.

Couer’s Gold and Silver Production Take a Hit

Coeur witnessed a 22% annual decline in gold production during the fourth quarter to 92,546 ounces, while silver output also witnessed a 5% decline to 3.5 million ounces. On a full-year basis, Coeur’s gold production was down 6% to 359,520 ounces, while silver production rose by an identical number to 12.8 million ounces.

The company’s production was affected by the bankruptcy filing of Republic Metals. Coeur couldn’t recognize 6,500 ounces of gold and 0.4 million ounces of silver production during the fourth quarter on account of the Chapter 11 filing of the refiner. As a result, the company’s revenue tumbled 33% year over year to $143.8 million during the quarter, missing the consensus estimate by a wide margin of $9 million.

Additionally, Coeur’s average realized price of silver was down to $14.59 per ounce during the quarter as compared to $16.57 per ounce in the prior-year period. The average realized price of gold was nearly flat on a year-over-year basis at $1,214 per ounce during the quarter. Meanwhile, the company’s cost applicable to sales was relatively flat at $116.6 million during the fourth quarter when compared to the year-ago quarter.

The company’s adjusted earnings of $0.08 per share were flat on a year-over-year basis, which was much better than analysts’ expectations of a loss.

This combination of lower prices and a relatively higher cost profile meant that Coeur’s net income fell to just $0.4 million during the fourth quarter as compared to $14.1 million, or $0.08 per share during the prior-year period. The company’s adjusted earnings of $0.08 per share were flat on a year-over-year basis, which was much better than analysts’ expectations of a loss.

The company’s cost profile was affected by a decline in its gold and silver grades during the quarter. More specifically, Coeur recorded an average silver grade of 5.96 ounces per ton during the quarter as compared to 6.92 ounces per ton during the prior-year period. The average gold grade declined slightly to 0.08 ounces per ton from 0.10 ounces per ton in the year-ago period.

So, it is clear that the company’s operational profile took a beating in the fourth quarter and also for the entire year of 2018.

Disappointing 2019 Guidance Leaves Investors Wanting

The guidance is disappointing as it doesn’t seem good enough to boost the company’s top line by a big margin in 2019.

Coeur’s guidance doesn’t indicate much improvement in the company’s production this year. It expects to produce between 334,000-372,000 ounces of gold this year, the mid-point of which is lower than the 2018 production. Meanwhile, silver production is expected to be between 12.2-14.7 million ounces, indicating a mid-single digit improvement over last year.

The guidance is disappointing as it doesn’t seem good enough to boost the company’s top line by a big margin in 2019. As it turns out, analysts were originally expecting Coeur to deliver a 19% revenue increase this fiscal year, but that looks far-fetched given the production guidance.

Coeur Mining shares have gained some momentum in recent months thanks to the improvement in gold and silver prices. But that momentum could be derailed on account of the company’s weak production profile, which would prevent it from taking advantage of any further increases 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. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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