Silver miner Coeur's profit falls but beats Wall Street

Tue Aug 7, 2012 4:35pm EDT

(Reuters) - Coeur d'Alene Mines Corp's (CDE.N) second-quarter profit beat Wall Street estimates as the company increased gold production at its Alaska mine and lowered costs.

The company also said it expects to reach its production targets for the year and that it anticipates growing through expansion at existing mines and "bite-size" acquisitions.

Coeur's shares finished up 5.5 percent at $18.39 on the New York Stock Exchange.

Chief Executive Officer Mitchell Krebs said on a conference call with analysts that Coeur's exploration program had identified new deposits at the Palmarejo mine in Mexico.

Asked about possible acquisitions, he said large ones were "not on top of our list, but we see more opportunities for bite-size ones that fit strategically with our business."

In June, Coeur announced a $100 million share repurchase program, which Krebs said at the time would help the company's growth.

Sterne Agee analyst Michael Dudas observed that there had been a decline in the valuation of smaller mining companies recently "so someone with capital and patience can take advantage."

Second-quarter net earnings fell to $23.0 million, or 26 cents per share, from $38.6 million, or 43 cents per share, a year earlier, Idaho-based Coeur said.

Excluding items, mostly a non-cash fair value adjustment on the value of Coeur's Mexico mine based on changing gold prices, profit was 31 cents per share. On that basis, it beat analysts' average estimate of 20 cents, according to Thomson Reuters I/B/E/S.

Coeur, which operates mines in Bolivia, Mexico and the United States, said revenue rose to $254.4 million compared with $231.1 million a year ago. Silver production increased to 4.9 million ounces compared with 4.8 million a year ago, and gold output rose to 63,047 ounces from 60,656 ounces.

In the second quarter, the price of silver fell almost 15 percent to $27.44 per ounce, according to Thomson Reuters data. Coeur said its average realized price for silver was $29.28 in the period, down 25 percent from $39.11 a year earlier.

The company sold 59,579 ounces of gold compared with 49,930 ounces a year earlier while the average price rose to $1,610 per ounce from $1,504.

Krebs attributed Coeur's second-quarter results to a near tripling of gold production at its Kensington gold mine in Alaska, while operating costs were nearly halved as the mine returned to full production after being closed for technical reasons earlier this year.

"We also saw higher silver and gold production levels and substantially lower costs at our Rochester mine in Nevada as a result of an expansion that took place in 2011," Krebs said.

The company said it expected to achieve the high end of its 2012 production targets of 18.5 million to 20.0 million ounces of silver and 210,000 to 230,000 ounces of gold.

Krebs told analysts that actions by the Bolivian government toward other mining companies had nothing to do with any federal initiative to nationalize natural resources, but had been taken to address specific issues at certain mines.

"We have been successfully operating in Bolivia for over four years now ... we believe we will continue to successfully and responsibly operate in Bolivia," Krebs said.

The La Paz government is working to reform Bolivia's mining law to bolster the state's role in the industry and give it more of the profits.

Since taking office in 2006, President Evo Morales has nationalized the natural gas industry and the telecommunications and electricity sectors.

Coeur also said on Tuesday that it would acquire 1.85 million shares of Canada's Huldra Silver Inc (HDA.V) for C$1.08 each. After the acquisition, Coeur will own and control 3,756,852 shares, representing about 8.8 percent of Huldra stock.

(Reporting by Steve James in New York; Editing by Lisa Von Ahn)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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