Coeur d'Alene Mines CEO Discusses Q3 2011 Results - Earnings Call Transcript

| About: Coeur Mining, (CDE)

Coeur d’alene Mines Corporation (NYSE:CDE)

Q3 2011 Earnings Call

November 7, 2011 1:00 p.m. ET


Wendy Yang – VP, IR

Mitchell Krebs – President CEO

Frank Hanagarne – Sr VP CFO

K. Leon Hardy – SVP, Operations

Don Birak – SVP, Exploration


Jorge Beristain – Deutsche Bank

Jeffrey Thorp – Sonoma Capital

Andy(Serpec) – Private Investor

Proctor Winston – Pilot Advisors

John Bridges – JPMorgan


Good afternoon. My name is Genesa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coeur d’Alene Mines third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator instructions).

Ms. Wendy Yang, you may begin your conference.

Wendy Yang

Thank you, very much. Well, welcome, everyone to Coeur d'Alene Mines Corporation third quarter financial results conference call. I am Wendy Yang, I’m the Vice President of Investor Relation. You’ll find Coeur listed on the NYSE and CDE, and then on the TSX, and CDM. This call is also being webcast live on our website at,, where we have posted slides to accompany our remarks.

Telephonic replay of the call will be available from our website for one week following today’s call. And as you know, we will be discussing some forward-looking information today. So we caution our audience that such statements involve risks and uncertainties that could cause actual results to differ materially from projections.

Please review our cautionary statements, shown here, and review the risk factors including some that are specific to our industry, and these are described in more detail in our latest annual and quarterly financial reports filed with the U.S. SEC and Canadian regulators.

On Slide 3, we welcome today to Coeur, our first call with Coeur, Frank Hanagarne, our new CFO and Senior Vice President. We also have Mitchell Krebs, President and CEO; Leon Hardy, Senior Vice President and Chief Operating Operations; and Don Birak, Senior Vice President of Exploration.

Let’s get started, Mitch, please go ahead.

Mitchell Krebs

Thanks, Wendy. Welcome, and thank you for joining us today. We’re pleased to have Frank join our Senior Management team. Frank left Newmont to join us, and brings a depth of mining industry expertise in finance, operations and business development.

Coeur achieved all-time record quarterly sales and operating cash flow in the third quarter; 344 million in sales, and 182 million in operating cash flow. We also beat consensus estimates for adjusted earnings per share at $1.05 compared to $0.69 consensus. And operating cash flow per share at $1.68 compared to consensus of $1.30.

Our increasing quarterly cash flow has strengthened our cash and equivalence balance to over 200 million. Late last month we paid off the remaining $18 million of senior notes, leaving only $128 million of remaining debt, equivalent to less than three months of cash flow.

Turning to Slide 5, once again, our record quarterly results were driven by our constant performance from our Palmarejo silver and gold mine Mexico, and our San Bartolome silver mine in Bolivia. Higher silver and gold prices also augmented our financial results.

During 2011, Palmarejo and San Bartolome have been achieving 60 to 70% gross margins quarterly. At Rochester in Nevada, we are on the cuff of a resurgence in production. Production begins this fourth quarter, from the new leach pad that was construction this year, which adds seven more years of silver and gold production from our longest running mine.

Our number one priority for all of our operations, is to achieve and maintain operating consistency. San Bartolome and Palmarejo are now doing just that. On the gold production side, we’re not yet satisfied with Kensington performance. Leon will speak more about the steps we’re taking there in a couple of minutes, but in short, Kensington is an underground operation with one primary way in, and primary out of the mine through the main portal. So we need to slow down production activities for about six months, while we focus on completing several key projects, which are designed to get Kensington performing consistently and more efficiently.

What this means in the short-term is that Kensington’s 2011 production, will total about 85,000 ounces of gold, and cash cost will be about $990 an ounce.

In 2012, we’ll see production rates increase in the second half, once these projects are completed, resulting in total 2012 production and cost roughly equal to what we expect to see here in 2011. The payoff from this short-term reduction comes in 2013 and beyond, when production and cost at Kensington will become more consistent and sustainable. We expect Kensington’s production to be between 125,000 and 135,000 ounces of gold in 2013.

It’s important to note that there is no new capital needed for these initiatives. What we’re doing is prioritizing the completion of these projects in order to support more sustainable operations over the long-term. In order to do this, we need to slow down production-related activities.

Companywide, we expect to produce approximately 19.5 million ounces of silver this year, and about 220,000 ounces of gold. The 19.5 million ounces of silver is in line with prior guidance, and the 220,000 ounces of gold is about 20,000 ounces lower, due to the temporary reduction at Kensington I just mentioned.

Cash operating cost for the company are expected to average $5.75 per ounce of silver for the full year. And as a company, we remain on track to exceed $1 billion of total sales, and over a half a billion dollars of operating cash flow this year.

Now Frank will take us through some of the financial highlights from the quarter.

Frank Hanagarne

Thanks, Mitch, I’ll address Slide Number 6, which is a financial snapshot of our third quarter financial performance.

Starting with the top left chart, you’ll see that we continue to realize strong silver and gold prices. Our average realized price is for 38.35 for silver ounces, and $1,681 per gold ounce. That’s double for silver and 37% higher for gold, compared to the last year’s third quarter.

Moving at the chart on the right, metal sales reached a record 344 million in the third quarter, which is 49% increase over the prior quarter, and 190% higher than the year ago quarter. Sales of silver contributed 68% of the company’s total metal sales, while the remainder was derived from the sale of gold.

Looking at the chart on the lower left, we generated operating cash flow for a record 151 million in the third quarter. This was 30% jump over the prior quarter, and fivefold increase over last year’s third quarter.

Adjusted earnings totaled 93.8 million during the third quarter, up 62% over the prior quarter, and a significant improvement over the last year’s third quarter adjusted loss. We are expecting higher production and lower unit cost in the fourth quarter of this year from all our operations except for Kensington. This should translate to our highest quarter of production, sales, and operating cash flow.

Now turn to Slide 7, and emphasize some key financial highlights. Starting again at the top left hand chart, cash and cash equivalence at a total of 208 million at the end of September, and now stand at approximately 180 million after paying off 18 million of remaining senior notes, subsequent to the end of the third quarter.

As shown on the lower right chart, we have reduced our total debt by 20% from 160 million at the end of 2010 to a balance that’s currently at 128 million. Turning our attention to capital expenditures at the top right, as you heard, no new capital is needed for the Kensington initiatives. We expected CapEx in 2012 will be lower than 2011.

Our silver/gold operations will carry our momentum until Kensington resumes 100% mining operations in mid-2012. Mitch, I’ll turn it back over to you.

Mitchell Krebs

On Slide 8, you can see our shares outstanding has remained level for over six quarters now. With our strengthened cash flow from operations, our management and the board are evaluating means of returning capital to our shareholders in 2012. We are considering the second half of 2012 for implementation, once consistency is achieved at all of our operations including Kensington and Rochester.

In the meantime, we are deploying our free cash flow towards internal and external high-return opportunities.

Where do we see high return growth for shareholders? First, in exploration. We increased our exploration investment in the second half of this year by 68%, and by 37% over last year to $24 million for the full-year of 2011. And we’re looking to increase this level to around $40 million in exploration investment in 2012, as we see great opportunity for additions to resources over the next couple years at our young underexplored mining district, especially at Palmarejo and Kensington.

Secondly, we are investing in growth at our existing properties, including advancing the Waukegan Silver Project in Argentina, to a feasibility study. We are also planning the next generation of expansion at Rochester beyond the current reserves. We will be submitting this next plan of operation for permitting in early 2012.

Thirdly, we have invested almost $20 million year-to-date, in five silver exploration and development companies. These strategic investments provide exposure to several growing silver projects from British Columbia down through Chili, that have the potential to add to the company’s growth pipeline.

Leon, will now take us through our operational performance in the third quarter.

Leon Hardy

On Slide 10, our third quarter production of 4.9 million ounces of silver was up about 13% over the third quarter of 2010. Palmarejo counted for approximately 46% of the company’s silver production in the third quarter.

Gold production was 57,000 ounces of which Kensington accounted for approximately 45%, or approximately 26,000 gold ounces, and about 30,000 ounces were produced at Palmarejo.

Gold production was down slightly from the prior quarter, and about 20% higher than last year’s third quarter. Our consolidated cash operating cost were $7.57 per ounce of silver in the third quarter. Cost were higher than the -go third quarter due to short-term production at Palmarejo, San Bartolome, and Rochester, which are expected to improve in the fourth quarter.

Turning to Slide 11, Palmarejo produced 2.3 million ounces of silver and approximately 30,000 ounces of gold at cash operating cost of negative $1.16 per silver ounce. Palmarejo turned in another quarter of consistent performance, which included improving recovery rates of about 76% for silver and 94% for gold.

Palmarejo is our largest contributor of sales and cash flow as shown in the pie charts. For the first nine months of 2011, Palmarejo accounted for 49% of consolidated sales, and 58% of cash flow from our mines.

For the fourth quarter increased throughput, and sustained silver recovery rates are expected to drive increased productions at Palmarejo.

On our next slide, similar to Palmarejo, San Bartolome continues to perform consistently. The mine produced 2.1 million ounces of silver at cash operating cost of $9.32 per ounce. Metal sales were 103 million with operating cash flow of about 50 million for the third quarter. San Bartolome accounts for 26% of our consolidated metal sales, and 27% of cash flow from our mines.

On to Slide 13, Rochester produced over 350,000 ounces of silver and about 1,400 ounces of gold, at cash operating cost of $36.71 per ounce, from on-going residual leaching activities, while the mine focused on completing construction of a new leach pad, and placing material on the pad.

Cost were temporarily higher during the quarter due to these activities, while ounces were produced solely from residual leach, resulting in the higher cost per ounce.

We have been loading the new leach pad with ore containing 4,000 ounces of gold, and 400,000 ounces of silver through the end of October. We will continue loading that much material each month, and we will expect rapid recovery in the first 30 to 60 days of placement, which will drive higher productions in the fourth quarter.

As we have discussed in the past, there is significant production potential at Rochester, this initial 50 million ton leach pad only covers production from the existing reserves at Rochester. There is a significant amount of resources containing over 100 million ounces of silver and nearly 800,000 ounces of gold, which we are aggressively pushing to convert to resources, while planing for new leach pads on which to place this material.

Please refer to the appendix for a breakout of these resources.

Furthermore, there is the exploration upsite, to expand reserves and resources, which Don will discuss later.

On Slide 14, Kensington produced about 26,000 ounces of gold, $9 -- $973 per cash ounce, in the third quarter, resulting in 44 million in sales and 14.5 million in operating cash flow.

Now, let’s discuss the path forward at Kensington on the next slide.

While Kensington has only been operating for 16 months, during this time we have not achieved our goals in production cost, and cash flow, principally due to lingering startup issues. We have primary access for all construction and ore production traffic at the underground mine. To complete most key projects, we must temporarily scale back production to sequence ore haulage with other work.

These key initiatives include accelerating the underground development to increase the number of working faces and enhance operational flexibility. Increase infill drilling to improve definition of ore zones, convert resources to reserves, and discover and find new resources. Completing the underground paste backfill plant, to allow mining of more [inaudible] upgraded surface facilities, such as the dormitory, office facilities, warehouse, horse shed, to better support operations, and reinforce overall safety throughout the operation.

2012 is expected to be a transition year at Kensington to complete these initiatives, and having operating activities resume at increased levels. The objective of all of this is to lower cost and to achieve higher more constant production loads.

I’ll now turn the presentation over to Don.

Don Birak

Thank you, Leon. I’m really very encouraged to talk to you today about our exploration results, and our reaffirmation of our commitment to exploration with a nearly $3 million increase to this year’s budget. The new total of just over 24 million is over 37% larger than the full-year cost in 2010.

We completed nearly 40,000 meters of drilling across all of our properties, the lion’s share of which were at Palmarejo and Rochester in the third quarter. Drilling at both of these properties has yielded positive results. Here we show some the favorable results received from drilling at LA Patria and Palmarejo. We’re pleased with these initial results, and I will talk more about La Patria later in this presentation.

In addition, we completed the acquisition of an early-stage property, Guerra al Tirano, located within the limits of our Palmarejo concessions. This was the largest foreign-held land parcel interior to our holdings, and it straddles one of the major Northwest-trending, ore-bearing structures that cut the district.

Turning to Slide 18, like at Palmarejo, we significantly stepped up the drilling program around the Rochester mine. Most of this drilling was devoted to two areas, Nevada Packard at the south, and Northwest Rochester at the north. In both of these areas, we received several positive results from drilling.

In particular, the drilling at northwest Rochester cut wide intercepts of silver and gold, significantly higher grade than the current metal reserves. I will highlight northwest Rochester a little later.

Finally, we recommenced drilling with the advent of spring weather conditions at Joaquin and southern Argentina. The purpose of this drilling is to expand and define the current metal resources, which stand at nearly 70 million contained ounces of silver at LA Negra and La Morocha deposits, and to collect new samples from metallurgical test. This drilling will be used to help support feasibility studies currently being kicked off.

Going to slide number 19, for the remainder of the presentation, I’m going to focus on exploration at the holdings of Palmarejo and Rochester. Slide 20, earlier this year, we commenced the first Coeur drilling at La Patria. This is located in the south centeral part of our Palmarejo land holdings. La Patria is a zone of silver and gold veins on one of the major northwest trending structure cordial throughout the district.

Current Palmarejo mine and the Guadalupe deposit are also located on similar northwest oriented structures. We believe La Patria has potential to be a completely new mining area for us at Coeur, both underground and surface. Mineralization at this La Patria structure is demonstrated over nearly two kilimeters of strike, and the structure itself extends to the north, and to the south beyond the limits of our drilling.

Here we show on slide number 20, a surface image with the known zones of mineralization super imposed over it. Location of the recently acquired Guerra al Tirano property, is just off the slide to the left.

Next slide, this image we show a cross section with the pierced points of our current drilling on the La Patria, color coded by grade times thickness. Holes drilled this year are noted by stars. The first drilling performed by Coeur at La Patria since acquisition of Palmarejo.

We’ve completed over 3,300 meters of Coeur drilling to the end of September, and we’ve recommenced drilling there again in the fourth quarter. Drilling has – as I said, recommencing, we’re going to continue that program in to 2012.

Joining today is to defining at least three coherent zones with gold and silver mineralization in the La Patria vein system, with at least two additional ones suggested. Many of our drill holes cut multiple mineralized intercepts. Much more drilling is needed here to further define this system, and is wide open to depth and on strike.

Assays from our drilling are shown in the appendix of this presentation. Now to shift to Rochester. Drilling this past quarter was more than doubled from prior quarter and focused on two targets, northwest Rochester, north of the current Rochester surface mine, and the Nevada Packard.

Again, essay completion of this past quarters drilling are shown in the appendix. Next slide shows the outline of additional mineral resources, peripheral to the current or reserved limits. The mineral resources, just around the Rochester deposit alone, are very large containing over 79 million silver ounces, in total measured an indicated plus another 10 million of inferred mineral resource ounces.

It is important to note that the resources are open on the north and west, shown here. We’ve been drilling on the northern side of the deposit this past quarter, of the northwest Rochester target. At this time, our drilling suggest strong potential to extend mineralization to Rochester and Packard, and we will be drilling there in the fourth quarter and into 2010. Mitch?

Mitchell Krebs

We have invested about $20 million to date in five silver exploration and development companies this year. These investments represent one component to our efforts to add new silver growth projects to the company’s pipeline.

We have a 6% interest in Silver Bull resources which operations the Sierra Mojada project in Mexico, where Silver Bull announced the 61 million ounce silver resource last month. We also own a 7% interest in Huldra silver, which is developing the high grade Treasure Mountain Property in British Columbia.

Turning back to Mexico, we have 8% interest in Soltoro, which is advancing the El Rayonier silver project, which currently has a 58 million ounce, measured in indicative resource. In addition, we own just under 10% of Apogee silver, which is advancing the Pulacayo-Paca silver property in Bolivia, and also has an early stage silver exploration project in northern Chile. The company recently announced an increase in the resources at Pulacayo-Paca to 56 million ounces.

And finally, we have a 6% interest in Caracara silver, which is exploring perspective silver projects on its 24,000 [inaudible] land package in southern Peru.

We feel like we’re doing the right things here at Coeur, to best position the company to deliver consistent performance over the long-term. We’re on track for our best financial results in our 83 year history, with $1 billion in metal sales and over 500 million in operating cash flow in 2011.

We’re a top ten global primary silver producer and we expect to produce 19.5 million ounces of silver, at cash operating cost of $5.75 per ounce in 2011. We’re taking action at Kensington with a short-term reduction in production to achieve long-term consistency. We’re evaluating capital return to our shareholders in 2012, and evaluating how that best fits in to our overall strategy for creating long-term value for investors. And in the meantime, over the near-term, we are investing our increasing cash flow and high return, value creating opportunities.

We appreciate your time today and your continued interest in our company. Operator, we’re now ready for your questions.

Question-and-Answer Session

(Operator Instructions). And you first question comes from the line of Jorge Beristain of Deutsche Bank.

Jorge Beristain – Deutsche Bank

Good afternoon, gentlemen, and ladies, and congratulations on your results. My question was just related to the Kensington downtime. How much of this pushback in your production rate is related to the unfortunate incident you had there resulting in the death of a miner a few months ago? And could you quantify how much of those costs are related to perhaps the safety element?

Mitchell Krebs

Yes, sure. Hi, Jorge, it’s Mitch Krebs. This initiative doesn’t have anything to do with that unfortunate incident. This is a course of action that we’re taking based on the performance of the mine and is independent of that incident. So you know, we look at it as a completely separate course of action that will best position Kensington for the long term.

Jorge Beristain – Deutsche Bank

Okay, great. And my other question was, was this related on squaring the company’s current debt balances? I noticed that you do tend to exclude the leases and the short-term royalty payments there. But it does beg the question – I do recall about three year ago when you were raising cash, you had sold some of your operating equipment and did a lease back. Is that part of some of these lease payments that you’re still making or have you closed those out? And secondly, in the current environment, does it make sense for Coeur to perhaps deploy some of the cash to buy its own equipment instead of leasing it?

Mitchell Krebs

Yeah, you’re right, good memory. There is a portion of our capital leases that involve the sale of lease back from 2008, I think, or maybe 2009 and we have looked at that question as we’re evaluating ways to deploy free cash flow to the greatest good. And the capital leases that we have on our balance sheet have an average interest cost to them of right about, I think it’s 5 ½% or so. So you know, in terms of ranking of prioritization of free cash flow, we’re starting with the strong double digit opportunities. And right now, those capital leases are down the list a ways. But we’re, you know, we continue to evaluate every opportunity we can to deploy cash in the most efficient and value-creating way.

Jorge Beristain – Deutsche Bank

Thank you, and sorry. Third question. Of the production decrease of operating rate you’re looking at Kensington, will that have any impact on some of the sales contracts that you’ve already made to refiners for that metal, or are you just below the – are you still within your threshold to meet those contracted commitments?

Mitchell Krebs

Yeah, as you know, we send half of the concentrate to China National Gold and the other half over to Arubus in Germany and we’re okay under both of those arrangements.

Jorge Beristain – Deutsche Bank

Great. Thank you.


Your next question comes from the line of Jeff Thorp of Sonoma Capital Management.

Jeffrey Thorp – Sonoma Capital

Hi, Mitch. Congratulations on another good quarter.

Mitchell Krebs

Hey, Jeff. Thanks,

Jeffrey Thorp – Sonoma Capital

Quick question for you just on the cash balance. You had 207 million and you paid off the senior notes. I would have thought that the cash balance would have been a little bit higher, maybe increased by the cash flow you generated over the next month. Could you just reconcile that for me?

Mitchell Krebs

Let’s see. You know, we ended the June quarter with, I think it was, what, $106 million of cash. So we have a, you know, a huge third quarter. A lot of that came from, as you recall in the second quarter, we’ve produced more than we sold and so a lot of that cash flow from those ounces came into the third quarter. There was, at the end of September then other – in addition to the senior note retirement, principal and interest payments on the Credit Suisse term…

Jeffrey Thorp – Sonoma Capital

Term facility. Okay. That’s what I thought it was.

Mitchell Krebs

Yeah. And then the royalty payment to Franklin Nevada based on a portion of the gold production at Palmerjo.

Jeffrey Thorp – Sonoma Capital

Okay, great. Thanks so much.

Mitchell Krebs

Yep, thanks, Jeff.


Your next question comes from the line of Andy (Serpec), Private Investor.

Andy(Serpec) – Private Investor

Thank you. Several questions. First, I want to clarify a comment. Mitch, on your opening statement, you made reference to operating cash flow of 182 million, but on Slide 6, I see it’s referenced as 151 million. Could you just clarify that for me?

Mitchell Krebs

Yeah, sure. It’s the different in – when you look at the cash flow statement between the – 182 million is after changes in working capital and the 151 is before changes in working capital. So on a GAAP basis, the number’s 182 and on a pre-working capital changes basis, it’s the 151.

Andy(Serpec) – Private Investor

Thank you. Secondly here, I’d like to ask you a question about the silver market in general. I was listening to a webcast interview with Ross Hansen of the Northwest Territorial Mint. He made a statement that on the industrial side of things, separate from the investment side, that silver was in surplus right now. And he referenced a pretty large number, and I was very taken aback by that because I hadn’t heard anything like that anywhere else Are you seeing anything in terms of silver being in a significant surplus as you exit this year?

Mitchell Krebs

We’re not. We continue to see tightness in the end markets. You know, obviously a lot of demand is on the investment side, which seems to be syphoning off a lot of supply that normally is targeted for the industrial uses. We’ve seen inquiries here into the company directly from industrial end users seeking to buy silver directly from the company, which I think is an interesting piece of evidence that there still continues to be a lot of tightness out there.

Andy(Serpec) – Private Investor

And finally, I’d just like to ask a question about returning value to shareholders, you’ve referenced here the possibility of evaluating dividends as well as a share buyback. How about debt reduction in terms of balance sheet improvement? To what extent is further debt reduction in the year ahead a significant goal of the company?

Mitchell Krebs

Good question. As I said, we looked to deploy cash in the highest return opportunities that we can find. There’s no better place for us to be doing that than in increased exploration or on our existing operations. The Rochester expansion, which is just now going to start throwing off production and cash flow in the fourth quarter, that’s a triple digit rate of return. When you look at what we have left for debt on the balance sheet of – I think it’s 128 million, about 80 million of that is in a term facility with Credit Suisse where the interest rate is just a tad over 5% and then there’s about $48 million of an old out-of-the-money 3 ¼% convert that – at 3 ¼%, that’s pretty cheap money, so in terms of allocating cash to repayment of either of those, you know, we see other, more value-creating opportunities to deploy or free cash here in the next 12 to 24 months.

Andy(Serpec) – Private Investor

Thank you very much.

Mitchell Krebs

Thank you.


(Operator Instructions). Your next question comes from the line of John Bridges of JPMorgan.

Mitchell Krebs

Hi, John.

Wendy Yang

Operator, did we lose John?


Your line is open.

Wendy Yang

Can we move to the next question, please?


Your next question comes from the line of Proctor Winston of Pilot Advisors.

Proctor Winston – Pilot Advisors

Yeah, great quarter.

Mitchell Krebs

Hi. Thanks.

Proctor Winston – Pilot Advisors

Mitch, I was just curious, if things were to be as you see them now, as you described, would – how long would Kensington be able to produce that level of gold at these cash costs after 2013.

Mitchell Krebs

Yeah. We have a current reserve there of about 1.3 or 1.4 million ounces, there’s about a 12-year total mine life there based on those reserves. So it’s a nice long life asset with a lot of exploration upside there over the last several years and we really haven’t deployed a lot of exploration money to Kensington. So I know Don Birak has got some aggressive plans to start the exploration activity at the – at Kensington and hopefully that will, you know, further expand that mine life beyond that 12 years or so.

Proctor Winston – Pilot Advisors

Can you just repeat what you said the cash cost was going to be when things get moving?

Mitchell Krebs

We haven’t said where cash costs are going to be once we are back up and running at full steam later 2012 or second half of 2012 and into 2013, but the target is only one of the main objects of this entire initiative is to get those cash costs down to a competitive level from where they are. And we’ll – as we have more details on that, we’ll be sure to pass those along.

Proctor Winston – Pilot Advisors

Thanks, Mitch.

Mitchell Krebs



We have a question from the line of John Bridge of JPMorgan.

John Bridges – JPMorgan

Hi. Mitch. Good afternoon.

Mitchell Krebs

Hey, John. The suspense was killing us before when it was silent when they said your name.

John Bridges – JPMorgan

I know, I know. One of these days I’ll learn to figure out how to drive the mute button.

I just wanted to – there’s a lot of talk about the new rules down in Argentina. I just wondered how you saw them affecting you?

Mitchell Krebs

Yeah, we take the view there, John, that given what we have going on around Martha and Wauken, you know, we’re an investor into Argentina. The 0.6% additional costs one way and I guess 1.2% both ways for companies, you know, looking to move money in and out will be just additional frictional cost of doing business in Argentina. But from our standpoint, really not a meaningful event.

John Bridges – JPMorgan

Okay, great. On Rochester, you had the big cost number there because the accounting is a little bit dysfunctional for resource industry. I just wondered where you saw – where you expect the cost structure to steady out once you get to normal production next year?

Mitchell Krebs

Yeah, costs in the fourth quarter and then going forward should be around that $10 an ounce range, and that’s after the gold byproduct.

John Bridges – JPMorgan

Okay, cool. Excellent. Congratulations on the results, Mitch.

Mitchell Krebs

Okay, thanks, John.


And there are no further questions. I would like to hand the call back over to Mr. Mitch for closing comments.

Mitchell Krebs

Again, we appreciate everyone’s time and interest in the company. We look forward to getting back to you after year end with hopefully a strong finish to the 2011. Thanks.

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