Coeur Mining, Inc. (CDE) is widely followed by analysts. There is one aspect of the company's valuation not widely discussed: What was the cost of Orko's Preciosa mine in terms of today's CDE stock price?
On April 16, 2013, Coeur completed its acquisition of Orko and paid $100 million in cash and 11,572,918 shares of CDE common stock. (I am excluding the warrants it issued that are exercisable at $30 per share and expire in 2017).
COST OF ORKO AS OF APRIL 16, 2013:
173,362,310 value of shares at $14.98/share
$273,362,310 total cost
COST OF ORKO AS OF SEPTEMBER 29, 2013:
142,346,890 value of shares at $12.30/share
$242,346,890 adjusted cost
Therefore, the cost of Orko in terms of today's stock price is reduced by $31,015,420 or 11.3% At CDE's $12.30 price per share today, that reduction is 2.5% of its market capitalization. Since April 16, CDE shares have declined 17.9%.
The assets acquired have not declined in value as much as the today's adjusted cost has declined. The spot price of silver since April 16, has declined 7.9%, and the spot price of gold has declined only 2.7%.
In the March quarter the company bought back 655,474 shares of its common stock at an average of $19.22 per share, bringing the total shares repurchased to $32,500,000 out of the $100 million authorized. There were no buybacks in the second quarter, given unsettled market conditions.
Coeur's stock price is now down 36.0% from the average cost paid for buybacks in the March quarter and down 17.9% from the date of its purchase of Orko on April 16, 2013.
As stated in its August conference call, the company is expecting free cash flow to be increasing for the balance of 2013 and beyond. It appears that Coeur Mining has an opportunity to significantly expand its repurchase of stock under the board authorization in 2012.
The book value of Coeur Mining shares was $23.15 per share as of June 30, 2013. Today the stock trades at a market price discount to book of 46.9%.