Shift to underground mining on track at Palmarejo

The transition to underground operations at Coeur Mining's Palmarejo mine in Mexico is advancing according to plan, CEO Mitchell Krebs said.

US-based Coeur began the shift from open pit mining in 2014 in order to improve margins at the Chihuahua state mine.

Underground throughput has risen by about 45% over the past year, with average silver and gold grades up 12% and 40%, respectively, and silver and gold recoveries up 10 and 18 percentage points, Krebs told Coeur's Q1 earnings call.

Production at Palmarejo's Guadalupe mine is being supplemented by the Independencia deposit, acquired in Coeur's takeover of Paramount Gold and Silver last year.

"As mining at the new Independencia deposit accelerates to augment the mining taking place at the Guadalupe mine, we expect Palmarejo grades to continue to rise, the recovery rates to remain at these higher levels and costs to continue to decline, resulting in strong cash flow," Krebs told the call.

In addition, a renegotiated royalty with Franco-Nevada is expected to reduce annual cash outflows to US$5-10mn from US$40-50mn previously, starting in Q3, the CEO said.

LA PRECIOSA

Coeur is taking a second look at its La Preciosa silver-gold project in Mexico to see whether it can be an attractive development proposition at current silver prices, Krebs said.

The Durango state asset was among a string of Mexican precious metals projects shelved in 2014 due to falling prices, with Coeur concluding silver prices of US$20/oz-plus were needed for it to be economically viable.

Silver's recent rise to around US$17/oz boosts the prospects of some suspended projects coming back on stream.

"We're encouraged by what we're seeing at La Preciosa. As we think about future growth opportunities, it's at the top of our list," Krebs said.

NET LOSS

Coeur recorded a Q1 net loss of US$20.4mn, compared to a net loss of US$33.3mn in the prior-year quarter, and an adjusted net loss – which excludes non-cash items – of US$6.6mn compared to US$19.2mn.

Revenue fell to US$148mn from US$153mn due to lower realized metals prices and lower silver sales, at 3.5Moz from 4.1Moz, partly offset by higher gold sales, at 79,091oz from 68,420oz.

Adjusted all-in sustaining costs were US$13.73 per realized silver equivalent ounce, down from US$16.05/oz.

Coeur also has the San Bartolomé silver mine in Bolivia and operations in the US and Australia.