Coeur d'Alene: Mining for Money

Coeur d'Alene Mines (CDE) is one story that I continue to believe in during these perilous times. This company is hitting full stride at the ideal time, as inflation rears its ugly head in the US and UK to an unprecedented degree likely starting sometime in 2010. 70s style inflation is a pipe dream; if you don't buy that, well, I guess all I have to say is "have fun watching your savings melt away before your eyes."

One of the best ways to profit from this inflationary nightmare is to own the gold and silver miners as they have leverage to the actual metal. One of my favorite silver miners is Coeur d'Alene Mines, as it has great leverage to silver (and gold to a lesser degree), a strong financial position, high-double digit growth rates for the next several years, a diversified portfolio in geo-political safe countries from Alaska to Australia, low cash costs, and low capital expenditures.

But best of all, unlike many of the silver miners that will have the same production levels, Coeur d'Alene's enterprise value is about 1.3-1.4 billion (the fluctuations in the last week have been substantial). This is because of the more or less troubled passes and given the fact that investors typically don't go for companies that engage in reverse splits. But this is just opportunity knocking at your door.

Q2 showed Coeur d'Alene increasing cash flow 700% year over year as two of its three flagship mines commenced production with another one set to produce in less than a year.

Disclosure: Author holds a position in CDE

Comments

[Ed L]

Agreed! CDE is running on all cylinders.
Five year high is $71 (adjusted for split) makes the current price of $17 look incredibly cheap. That high was achieved without the benefit of the Bolivian, Mexican or Alaskan mines. If gold holds here and if the economy does not tank, 2010 looks marvelous.
Now if we can keep management from issuing more stock again.....

2009 Sep 07 11:50 AM

[Rich in Bpt.]

CDE's senior management is looking to have a very big payday when they cash out their stock options within the next three years, for they will be of retirement age. Within three years, this stock will be at the minimum at least a double from the current price.

2009 Sep 07 01:17 PM

[SILVERGEEK]

Q1/2010 This should be an easy $25.00 stock.
Q4/2010 when Alasky gold starts to flow along with other 2 major silvers CDE will jump to 70+

** Q4/2011 with hyper inflation, US$ killed by the banksters and (real) unemployment at 20% this is trading at $100.00++

CON: Global tyranny: could be a trap, Banksters could take silver & Gold DOWN!! and hold everyone at ransom - at least for a few years.. but then CDE = $200.00 +++

Wild wide ahead: buy and hang on for 3/4 years. Buy on Dips. Do your own DD. Just my opinion.

2009 Sep 07 03:10 PM

[Chancer]

CDE's management has a really bad track historical record of treating shareholders badly.

They diluted shares so badly that they had to do a 1 for 10 reverse split to reduce the excessive number of shares.

The really big problem with this is that management's that do this are usually doing it for personal gain with all the stock options they give themselves, and using shares to finance the company, including their own fat salaries. Once they have done it, they tend to do it again.

I always vote against reverse splits, because the normal history is for the stock to decline back to the pre-split price after the split. This can be a quick fall or slowly over time. So far, CDE has resisted that trend due to the price of silver.

The question is: which pull will win for CDE? The increase of silver's price or the trend for reverse split stocks to fall in price.

Although CDE may continue the current uptrend, I believe that sooner rather than later, CDE management will start diluting the
shares again.

When you buy a stock, you often take a chance on management, if you have no negative information. But when management has shown itself to behave badly, against shareholder interests, I would stay away from the stock- except maybe for short term trading.

2009 Sep 07 05:18 PM

[MickWS77]

One huge concern you seem to discount is the political climate in Bolivia - in a severe world recession I have a real concern regarding nationalization. Otherwise I agree with your assessment which is why I own CDE .

2009 Sep 07 06:37 PM

[NEOCON47]

You indicate that you are holding a position in CDE.

How much are you in the hole for the stock?

Company operated like a penny stock and they still have the penny stock attitude.

2009 Sep 07 07:32 PM

[Hyperinflation]

I agree with the Bolivia comment, in that it is the wild card, but the Palamarejo Mine ramp up this year provides a high producing long lived mine. The deal breaker for me was when they won the kennsington battle, otherwise I would have avoided the stock. My favorite is still and will continue to be Silver Wheaton, which has treated me like a king.


On Sep 07 07:32 PM NEOCON47 wrote:

> You indicate that you are holding a position in CDE.
>
> How much are you in the hole for the stock?
>
> Company operated like a penny stock and they still have the penny
> stock attitude.

2009 Sep 07 10:53 PM

[lookingsouth]

Dividends? Buy stock expecting an ownership interest with the expectation you'll to receive a share of the profits each quarter..otherwise your just gambling. And please don't peddle Bolivia and Mexico as "geo-political safe countries". In case you haven't noticed, Bolivia is headed the way of Venezuela..check on Hugo Chavez and his treatment of foreign oil companies if you want see real the risk to investments mineral extraction in South America . Mexico?..It's just this side of a failed state and that's being generous.

2009 Sep 08 12:33 AM

[mineral guy]

I agree with your assessment CDE prospects look briight. Have had the stk for a long time. The Alaska project was a big gamble and it almost bankrupt the company. I hope their tailings problem has been resolved but I can't count on it. I hope they have a plan B. Of course all fo us who have held the stk for a while have been seriously diluted but it may have in my opinion saved the company helped of course by $15 silver . At $8 I don't know where we would be. CDE has been a rainmaker for the investment banks and expect they will issue more stk very soon as it climbs highre. The reverse split in my opinion to market the stk to large investors such as pension funds, etfs, mutual funds etc. CDE needed a stk price over $10 to expand the market for the stk and one over $20 is even better. Getting a higher price stk higher is one way to expand the mkt for the stk. Another is to issue more shares even as the price lags at this higher price. This gives the large investors more liquidity with a large cap and more name recognition . As I have no inside information, the next step I suspect is to take on more acquisitions . I am sure the investment bankers already have several prospects lined up several . Management therefore can be seen astute etc along with bigger payrolls and perks. The risk of course, will management overpay and can they always be bailed out by higher silver prices. Higher silver prices will raise the costs of all takeovers as several bidders always emerge particularly during periods of high prices We saw this happen in the oil and gas industry and we now are seeing writedowns and even bankruptcies there. Commodity prices always fluctuate and everything looks good at the top. Lets hope CDE's management is not buying at the top hoping prices can only got higher

2009 Sep 08 10:23 AM

[easy jay]

CDE and HL both seem ready for their day in the sun. Both have been through recent rough times, CDE really gambled and had to do the 1-10 split but they have survived and look ready to have big returns. The Kensington Supreme Court decision made them a must buy when it came out and the stock was in the 12. area. Still looks like a good buy. HL a big gamble as well but they seem to have drawn four aces. Another must have for the precious metal investor. I have owned HL on and off for 35 years and I still remember 1979 when they were the most up stock on the NYSE. HL's Lucky Friday mine is the motherlode of all time. I just read their report and it said that it is getting richer at depth. I mean really richer......

2009 Sep 11 05:20 PM

[User 81431]

CDE has had a big run lately -- dunno whether to stay in or jump out with profits. How long can silver price run?

2009 Nov 26 10:17 AM

[theseeker]

Hyperinflation,

I love your articles but what do u make of CDE 3rd Quarter earnings? Report says losses are on derivatives.

Is it a one-time loss, or are we going to see this in the future?

2009 Dec 28 08:36 PM

[Hyperinflation]

The Derivatives loss will be a one time write down in this case, but should they engage in any commodity or currency hedging, it could certainly happen again. As far as earnings go, they will report their quarterly results both with and without the derivatives gain. It is considered a one time item so analysts covering the stock will likely ignore it.

Jan 05 08:57 PM