Exposure To Country Risk: The Coeur Mining Edition

May.23.13 | About: Coeur Mining, (CDE)

Coeur Mining (NYSE:CDE) (formerly known as Coeur D'Alene Mines Corporation) is a large primary silver producer with growing gold production. The company controls assets in the United States, Mexico, Bolivia, Argentina and Australia. The Palmarejo mine in Mexico, San Bartolomé mine in Bolivia and Rochester mine in Nevada all produce silver and gold in doré form. Coeur's Kensington gold mine in Alaska produces gold concentrate and the Endeavor mine in Australia produces a concentrate that contains silver. In 2012 Coeur put the Kensington gold mine in Alaska back into production adding a significant gold diversification to the portfolio. In September 2012 active production ceased at the Martha mine in Argentina.

Coeur Mining has a market capitalization of $1.4B and the forward P/E is given as 8.81 on Yahoo Finance. Last year's production amounted to 29.35M ounces of silver equivalent using a silver-to-gold ratio of 50. In 2012 the company maintained a profit margin of 6.6%. The table below provides a summary of production, reserves and resources for Coeur Mining.

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Leading on from an article on country risk exposure of silver mining companies which was based on 2011 data we are now updating our study using current 2012 year-end data. The present article will evaluate country risk exposure for Coeur Mining. In previous work we have collated country risk ratings for numerous countries from eight different sources and averaged these ratings into compounded country risk scores. Our compounded country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The most recent results from this work can be found in this article. Most definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article.

The asset profile shown in the first table above can be consolidated listing summations for each country of exposure resulting in the table below. The data is already calculated in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarized scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).

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The country risk rating based on production computes to 37.39 indicating moderate exposure. This rating increases slightly to 39.40 when considering reserves, but drops off again when using resources as a basis (37.06 for measured and indicted; 34.69 for inferred). The four ratings are within a tight range indicating no significant changes in country risk exposure going into the future.

The asset portfolio contains a mix of operations in high-risk jurisdictions (Argentina and Bolivia) and relatively safe jurisdictions (Australia, USA and Mexico) obviously striking a certain balance. In comparison to last year Coeur Mining has reduced country risk exposure as can be seen in the diagram below. At the start of 2013 Coeur Mining acquired the La Preciosa project in Mexico which has the potential to develop into another large operation in a relatively safe jurisdiction, underpinning this trend towards less exposure to country risk.

Note: last year's statistics did not differentiate between different resource classes.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.