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Executives

Tony Ebersole – Director, Corporate Communications

Dennis Wheeler – Chairman, President and CEO

Mitchell Krebs – SVP and CFO

Leon Hardy – SVP, Operations

Donald Birak – SVP, Exploration

Jeffrey Thorp

Andrew Kaip

Patrick [ph]

John Bridges

Adam Brooks

Coeur d’Alene Mines Corporation (CDE) Q1 2011 Earnings Call May 9, 2011 1:30 PM ET

Operator

Good afternoon. My name is Ginger, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coeur d’Alene Mines First Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Mr. Tony Ebersole, Director of Corporate Communications, you may begin your conference.

Tony Ebersole

Thank you for joining us today to discuss the company’s first quarter 2011 results. This call is also being broadcast live on the Internet through our website at www.coeur.com, where we have posted slides to accompany our prepared remarks. Telephonic replay of the call will be available for one week following today’s call. On the call today are Dennis Wheeler, Chairman, President and Chief Executive Officer; Mitchell Krebs, Senior Vice President and Chief Financial Officer; Leon Hardy, Senior Vice President of Operations; and Don Birak, Senior Vice President of Exploration.

Any forward-looking statements made today by management come under securities legislation of the United States and Canada, and involve a number of risks that could cause actual results to differ materially from projections. Please see our full cautionary statement on slide two.

With that, I’d like to turn the call over to Dennis.

Dennis Wheeler

Thank you, Tony. Welcome to you all and thank you for joining us today. We’re very pleased to showcase to you today another quarter of solid performance driven by the combination of production from our three long-life silver and gold mines and from the new realm of precious metal prices that despite recent volatility remains strong based on sound supply and demand fundamentals.

With one month of second quarter results now behind us, we are seeing even stronger production and cash flows, which is the trend we expect to continue throughout 2011. The important takeaway for you today is that we will produce 20 million ounces of silver and 250,000 ounces of gold in 2011.

Despite the recent volatility, current prices remain well above our first quarter average realized prices of $31.27 per silver and $1,374 per ounce of gold, which underpin our confidence in the remainder of the year. Achievements during this most recent quarter: net sales of $199.6 million; $90.1 million of operating cash flow; adjusted earnings of $37.5 million representing $0.42 per share; 4.1 million ounces of silver along the 53,130 ounces of gold. Average cash operating cost were $8.36 per ounce of silver.

With silver and gold prices expected at Coeur to remain at newly established levels, we are on track to the company’s best year ever by a wide margin with record cash flows and the total stated production of approximately 30 million silver equivalent ounces. We’re moving along the schedule with our expanded production plan and mine life at our long time flagship Rochester silver and gold mine in Nevada. It’s on schedule to start adding new ounces of production in the fourth quarter for at least eight more years with plenty of exploration potential remaining.

Silver prices have raised about 20% this year and our $37.28 per ounce this morning up $1.46. During the first quarter of last year, silver averaged $16.84 per ounce, compared to $31.27 per ounce in this year’s first quarter. It’s exciting that silver is benefiting from the dual role this essential metal plays in the world today, as both an investment and industrial metal. Although recent momentum in the silver market has been slowed by the 84% that 84% increase in margin requirements in three separate hikes in just the last two weeks, the fundamentals for silver remained solid.

Clearly, investment demand has been the single biggest reason for silver’s upward move. Silver ETFs added 120 million ounces to their holdings during 2010, which now stand at approximately 547 million ounces worldwide. This is remarkable considering the total global production of silver in 2010 with 735 million ounces. While investment demand has exploded, it’s important to note that industrial demand grew 21% in 2010 versus 29%, as a result of emerging market demand for products containing silver, and importantly, due to a growing and diverse set of new uses per silver.

This includes a robust increase in the manufacture of electronic context in uses like rMOBILES , not simply our response to an increase in the volume of rMOBILES made, but also because the number of end users for silver in cars is continuing to expand. The use of silver in photovoltaic cells for alternative energy is dramatically increasing. And global industrial demand is now projected to grow another 36% to 665 million ounces by just 2015.

Average gold prices also continue to set new highs, with today’s price of $1508 per ounce up $11.40.

During the first quarter of last year, gold was $1104, compared to $1374 per ounce in this year’s first quarter, a significant 25% increase. Like silver, gold continues its upward march. Based on factors such as the weakening dollar, Middle East political instability, inflation concerns, sovereign debt in the euro zone and a continued bias towards what appears to be lose monetary policy. I’ll talk more on the outlook for this year for Coeur in a few minutes. But now I’d like to ask Mitch to join me to comment on our first quarter financial results.

Mitchell Krebs

Thanks, Dennis. We had the best first quarter in company history in terms of production, sales, and cash flow all of which continue to climb in the current quarter. With the strong April behind us, we’re pleased to see our cash balance now exceed $100 million, a material junk from $64 million at the end of March.

On slide nine, you can see our first quarter metal sales of $199.6 million, it was about double last year’s first quarter, about half of this increase is due to higher production rates, especially of gold now extending in its operating, while the other half is attributable to higher metal prices. Based on our full-year production guidance and year-to-date average prices of $36 an ounce for silver and $1424 an ounce for gold, 2011 metal sales for Coeur are on track to exceed $1 billion.

On slide 10, you can see the first quarter-adjusted earnings was $37.5 million, or $0.42 per share which nearly equal adjusted earnings for the entire year last year. This first quarter result is the substantial increase compared to the same period a year ago when adjusted earnings totaled just $1.7 million. On a U.S. GAAP basis, first quarter net income was $12.5 million, compared to a net loss of $12.9 million in last year’s first quarter and a net loss of $5.1 million in the prior quarter.

We also continued our upward trend in operating cash flow, reporting $90.1 million in the recent quarter, again, based on our full-year production guidance and year-to-date average prices, well over $500 million of operating cash flow is expected to be generated in 2011. Our confidence in this full-year performance is based on three main drivers. Palmarejo is now full stride with the record start to the second quarter, we’re seeing increased gold production from Kensington and Rochester is expected to contribute new silver and gold ounces beginning in the fourth quarter.

Our capital expenditures continued to decline as planned now that the major investments in our new mines are completed. We saw 40% decline in CapEx from the fourth quarter and just $15.9 million in the first quarter. We still anticipate full-year CapEx of around $120 million. We took advantage of our strong operating cash flow and low CapEx to aggressively repay outstanding obligations especially short-term obligations, reduce stables and eliminate the remaining Mitsubishi gold leases in the first quarter.

The company’s working capital as of March 31 reached a solid $71.4 million compared to its deficit of $4.5 million at year-end. Also, as shown on the graph, on slide 14, our number of shares issued has remained consistent now that the company is self-sustaining from internally generated free cash flow.

Leon will now take us through the company’s operating results.

Leon Hardy

Thanks, Mitch. In the first quarter, the company completed the necessary modifications to stabilize performance at our anchor mines. This was reflected in the start of the second quarter with very strong operational results in April. The company produced 4.1 million ounces silver in the first quarter, 1.7 million ounces from Palmarejo and the same from San Bartolomé.

On the gold production side, shown on slide 17, we produced 53,130,000 ounces in the quarter, down slightly from the fourth quarter, but more than double what the company produced in the last year’s first quarter. We saw higher gold production in April and remain comfortable with our full-year production targets at both Kensington and Palmarejo. Palmarejo produced 1.7 million ounces of silver and 23,676 ounces of gold in the quarter and an average cash cost of $4.33 per silver ounce.

Metal sales at the mine were $88.1 million with operating cash flow of $48.8 million. Our full-year forecast is (inaudible) by the record results in April where the mine produced over 800,000 ounces of silver and 11,650,000 ounces of gold. We are confident at Palmarejo, we will reach our target of 9 million ounces of silver and 120,000 ounces of gold.

San Bartolomé produced 1.7 million ounces of silver at an average cash cost of $9.13 per ounce during the quarter. Metal sales were $46.1 million and operating cash flow was $18.4 million at the mine. We are confident San Bartolomé will achieve the target of 7 million ounces of silver.

As many of you are aware, there were erroneous reports out of Bolivia regarding the nationalization of the country’s mines. Unfortunately this failed to clarify that these comments did not pertain to San Bartolomé. We want to emphasize that the government of Bolivia at the highest levels, including Mining Minister Pimentel have affirmed our legal ownership rights at San Bartolomé. Also and importantly both our unions and mining cooperatives continue to buoy strong support for the company and San Bartolomé. So mining operations at San Bartolomé continue to operate as usual.

At Kensington, the mine produced 23,676 ounces of gold in the quarter with metal sales of $48 million and operating cash flow of $13.7 million. Production was down from the previous quarter due to lower head grade as mining transitioned into new areas. Higher grade zones are now contributing Coeur to the mill leading to higher production rates.

At Rochester, we expect to start holing and stacking ore on the new leach pad in early July and anticipate ounces to begin coming out of this new pad in the fourth quarter. This is supported by current reserves of 28 million silver ounces and 247,000 gold ounces. Rochester contains an additional 109 million ounces of silver resources and 777,000 ounces of gold resources, which we expect to further increase production levels and mine life at Rochester.

I’ll now turn the call over to Don for our exploration updates.

Donald Birak

Thanks, Leon. Good morning, everyone. Our exploration strategy this year is focused on adding to resources and reserves at Palmarejo and Kensington and supporting the expansion of mining activities at Rochester. Our 2011 budget for all exploration expense and capitalize is over $20.7 million that includes over 82,000 meters of new drilling. Thus far the 2011 program is off to a good start with over 14,500 meters of new drilling completed, which will accelerate considerably in the second quarter and into the third.

In addition to the focus I mentioned, we will again drill at Rochester and Joaquin and are now collecting samples from new trenches and pits at San Bartolomé to expand and upgrade mineral resources and reserves. This past quarter at Palmarejo, we completed over 9,900 meters of drilling, most of that around the main mine area. We have some encouraging new drill results from Tucson and Chapotillo. One of the best results from Hole 149 shown on the map return average silver grades of 1174 grams per ton silver and 7.2 grams per ton of gold over nearly 4 meters. The map in the upper left of the slide shows five horizons to be drilled this year of surface and underground.

Shifting now to Guadalupe in the southeast section of the Palmarejo District, the slide shows a long section with our year-end 2010 mineral reserves outlined in dark ring and it’s lined by areas of additional mineral resources in lighter green. Color-coded drill hole pierce points has an intersective to Guadalupe zone are shown. It’s important to note that while we are at the sign Guadalupe to over 68 million contained ounces of total silver and over 900,000 total gold ounces deposit is still open for expansion.

Many of the opportunities to add resources and reserves are readily reachable with surface drilling shown on this slide. The deeper extensions and some tighter space in-built targets will be drilled to underground positions. We are driving our road from Palmarejo to Guadalupe now, expect Coeur a north portal at about the 1200-meter level in July.

Now let’s move to Kensington Southeast Alaska where we have our second largest program underway. Late last year, we commenced drilling on the Raven Vein, a gold-bearing share vein similar to other such veins in the current Kensington Mine. Raven occurs about 2000 – do west to the Kensington Mine and it’s easily access to the main tunnel from the north side. The significance of the Raven discovery is its high-grade nature and demonstrates the potential for additional similar structures in the market.

Here in long section looking where we show some initial modeling of the drilling we completed in 2010 and in the first quarter of this year. We have now completed the first mineral resource (inaudible) property located in Santa Cruz, Argentina, about 70 kilometers north of our Martha Mine. We’re now focused on adding to the resources and beginning work on a feasibility stay. This initial resource of approximately 68 million silver ounces and 80,000 gold ounces prepared by an independent engineering firm is metal prices up $1320 per ounce of gold and silver respectively.

Mineral resources are summarized in the appendix of this presentation. These ounces were discovered and defined for less than $7 million in expiration cost or around $0.10 per silver ounce to 2010.

I’ll turn the call back to now to Dennis for closing comments.

Dennis Wheeler

Thank you, Don. We’re looking ahead to record-breaking year for Coeur in terms of silver and gold production, sales, earnings and cash flow now that our three anchor mines are all in production for their first time. We also have the contribution of new silver and gold production from Rochester starting in the fourth quarter. Our full-year 2011 production forecast remains a record 20 million ounces of silver and 250,000 ounces of gold. We also expect to report progress on adding to reserves at Palmarejo and Kensington, growing the resource base on our large land package of Palmarejo and supporting the mining activities at Rochester and also advancing the Joaquin project.

So we thank you all for joining us on the call today and now we’ll be happy to answer your questions.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question is from the line of Jeffrey Thorp.

Jeffrey Thorp

Hi, Dennis, hi Mitch, congratulations on another solid quarter.

Dennis Wheeler

Thanks, Jeff.

Mitchell Krebs

Hey, Jeff.

Jeffrey Thorp Couple of questions. Just want to make sure that I heard correctly that you guys have $100 million of cash now, so it looks like you’ve generated $34 million in April. And so I guess my question is, given that you’re generating so much free cash flow, what do you plan to do with it?

Dennis Wheeler

Well, Mitch mentioned that we’re currently forecasting free cash flow of approximately $0.5 billion this year. And that money will be devoted to growing the business of Coeur, everywhere from acquiring further greenfield exploration properties for the company. We’re actively looking at development stage properties and operating mines. And, of course, it’s only appropriate that we take a good look at our shareholders in terms of dividend policy for the company.

Jeffrey Thorp Great. And then second question is, I’m just wondering what sort of cost pressures you’re seeing on the consumable side or input side of your business?

Dennis Wheeler

Well, costs are rising. There is no question about that, but they’re not raising anywhere comparable to these new paradigms in pricing that we do expect to continue. We will continue to focus, I can assure you, on how to bring to further cost efficiencies to the company in terms of reducing our cash cost as we go through the balance of the year.

Jeffrey Thorp Thank you so much.

Operator

And our next question is from the line of Andrew Kaip.

Andrew Kaip

Hi, Dennis, hey, Mitch. Look, I’ve got just one question regarding Kensington and that is – that costs were higher than what we were expecting, I think, the Street was expecting at Kensington. And can you give us some detail on how costs are going to – how costs are going to be for the remainder of the year? Are we going to see those costs come down or should we be modeling higher costs at the operation to the remainder of this year?

Dennis Wheeler

They were higher and I’m going to ask Mitch to break down our expectations on costs.

Mitchell Krebs

Yeah. Hi, Andrew. We saw in the first quarter especially from the beginning of the first quarter to the end of the first quarter, starting to pair off some of the field startup related costs there at Kensington things like equipment rentals, outside services, freights, things that still holdovers from the initial ramp-up pace there at Kensington. So from January to the end of the quarter, we’re seeing a trend that is pointing favorably. Those costs will continue to come down throughout the remainder of the year. The target is by the end of the year to be around $600 an ounce, obviously, as the denominator increases as we see great recover from first quarter levels that will obviously push that cost per ounce down to those ranges as we look forward throughout the rest of the year.

Andrew Kaip

Okay. And then on the production side, you indicate that production was lower due to lower grades and that April production is showing the capacity to move into higher-grade portions of the deposits. I’m just wondering whether you’re at the point where your production schedule is stabilizing and we should expect more – we should expect grades to remain at those higher levels, or should we forecast slightly lower production or slightly lower production in the third quarter as you then sequence into another backfilling program, where there is more emphasis on backfilling?

Dennis Wheeler

Andrew, I’ll ask Leon to handle that question.

Leon Hardy

Andrew, we’re going through a cycle, cycling pattern at Kensington. We came out of last year without sufficient backfill capacity, we brought that up in the first quarter, we had cost to backfill up and I don’t feel that the rest of the year will have a shortfall and backfill. So our higher-grade zones as well as the other zones in the mine will be all be blended in on an equal basis for the rest of the year.

Andrew Kaip

Okay. So we should be expecting much more stable production from Kensington moving forward?

Dennis Wheeler

That’s correct.

Andrew Kaip

All right. Thank you.

Operator

(Operator Instructions). Okay, our next question is from Patrick (inaudible).

Patrick

Hello, can you hear me?

Dennis Wheeler

We can. Fine, Patrick.

Patrick

Hi, I just wanted to get your opinion, updated opinion on hedging how potential production this year, next year and just down the road, obviously, silver has been very volatile this year, I just wanted to get your thoughts in terms of locking in some of this cash or make it more predictable if you will leased on a partial basis?

Dennis Wheeler

We will not hedge silver at Coeur that’s been our policy for some time, we don’t anticipate change in it. I’m fully convinced that our shareholders want to have the volatility behind the silver prices that translates to our shares and that’s the policy we intend to keep.

Patrick

That’s certainly definitive. Okay. Thank you.

Operator

And our next question is from the line of John Bridges.

John Bridges

Good morning Dennis, everybody. I just wondered, if you could give us a bit more color on the Joaquinproject and how you can see that developing and how margins interact with Martha?

Dennis Wheeler

I am going ask Don Birak to jump in here John.

John Bridges

Thank you.

Donald Birak

Good morning, good afternoon, John.

John Bridges

, how are you doing?

Donald Birak

Fine. Thank you. Joaquin is on a track now precisely completed the first no resource on its property, we are finishing up with some drilling on both La Negra and moving to La Marocha and we are starting is an internal studies to produce eventually I think facility on this. We’ll go through the engineering and metallurgical work again add new metallurgical and engineering parameters and analysis to the study and get to the point where we can see this is going to produce for core a new line. Obviously, would be synergies with Martha in terms of management and running the project beyond that, we’ll look at all opportunities to lever of what we have in Martha.

John Bridges

How would you characterize the mine also cost per ton do you think you could achieve from this thing?

Donald Birak

I think it’s a little bit premature to put that out. We just completed the resource estimate and, of course, that had some assumptions about cost for the Whittle pit scoping study or scoping analysis and that will be – we’ll crystallize that in the tech report that we’re going to be filing here within about 45 days.

John Bridges

Okay. That will be an interesting read. Are there enough – any other veins on the side?

Dennis Wheeler

Yes, there are John. We’re drilling on extensions of LaMorocha to the northwest of that zone and we also see potential to expand La Negra to the east, and of course, the depth extensions of both particularly LaMorocha look quite good. But I still remain very excited about this property, it’s a large property and we really want to explore the southeast portion of this large property.

John Bridges

Okay. Excellent. Thanks a lot, Don.

Donald Birak

Thank you, John.

Operator

And your next question is from line of Adam Brooks.

Adam Brooks

Yes, real quickly, can you maybe give us the progress in the quarter as far as times of Palmarejo was done a little bit sequentially, maybe you could tell us how things performed from January to February to March maybe even into April?

Mitchell Krebs

Yeah, Mitch here. I will ask Leon to take that. Leon?

Leon Hardy

Okay. Thanks. Actually went into the first quarter with a strict blending plan where we actually restrict the tons going through the mill. As we came out of the quarter, our tons have been growing, steadily we’re on-target for April and we expect the rest of the year to be the same.

Adam Brooks

All right. Thank you.

Operator

And our next question is from Andrew Kaip.

Andrew Kaip

Hi. Next just one further question, can you remind us what metal price assumptions you are using for your estimate of 500 million of operating cash flow?

Mitchell Krebs

Yes, sure, Andrew, with $36 now per silver and 14.24 for gold.

Andrew Kaip

All right. Thank you.

Mitchell Krebs

Yeah.

Operator

And at this time there are no further questions in the queue.

Dennis Wheeler

Thank you, operator. We’d like to thank all of you for joining us as we report close first quarter results today. And we look forward to keeping you timely wise the major developments within the company and look forward to have new joiners for the next quarterly conference call. Thanks again.

Operator

Thank you, ladies and gentlemen. This does conclude today’s conference call. Thank you for participating. At this time, you may now disconnect.

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