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Coeur d'Alene Mines Corporation (NYSE:CDE)

Q4 2007 Earnings Call

February 29, 2008 1:00 pm ET

Executives

Dennis Wheeler, Chairman, President, and CEO

Jim Sabala, EVP and CFO

Don Birak, SVP, Exploration,

Richard Weston - SVP, Operations

Tony Ebersole - Director of IR

Analysts

John Bridges - JPMorgan

Michael Dudas - Bear Stearns

Mike Curran - RBC

Pierre Vaillancourt - Orion Securities Inc.

Operator

At this time, I would like to welcome everyone to the fourth quarter and 2007 results 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) I would now like to turn today's call over to Mr. Tony Ebersole, Director of Investor Relations. You may begin your conference.

Tony Ebersole

Thank you, Darlene and good day, everyone. This is Tony Ebersole, Director of Investor Relations for Coeur. Thank you for joining us today in today's call to discuss the company's results for the fourth quarter and 2007.

In accordance with our standard practice, this call is also being broadcast live on the Internet through our website, www.coeur.com, where we have also posted the slides for the company our prepared remarks. A telephonic replay of the call will be available for one week afterward on our website.

Today's presenters include Dennis Wheeler, Chairman, President, and Chief Executive Officer; Jim Sabala, Executive Vice President and Chief Financial Officer, Don Birak, Senior Vice President, Exploration, Richard Weston, Senior Vice President, Operations.

Any forward-looking statements made today by management come under securities legislation in the United States, Canada and Australia and involve a number of risks that could cause actual results to differ from projections.

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

Dennis Wheeler

Thanks Tony and welcome to everyone. It's particularly gratifying to us to be on this call today, highlighting Couer's progress in the fourth quarter and for the year 2007, as the company is coming off one of its most significant and defining years in its eighty-year history. We completed the largest transaction in the history of the silver industry at the end of the December with the acquisition of Bolnisi Gold and Palmarejo Silver and Gold, bringing to the company the exciting Palmarejo Silver and Gold project in Northern Mexico, one of the newest, largest and highest grade silver gold projects in the world, where our team, is well under way.

Combined with our San Bartolome pure silver line in Bolivia, which is already started its pre-commissioning and it is nearing production, Couer is beginning to deliver on its dynamic growth profile in silver production, accelerating in 2008 and heading towards a near tripling of our silver production in 2009 with expected substantial reductions in our companywide cash cost.

We produced 11.5 million ounces of silver and 92,000 ounces of gold in 2007. We are looking this year to increase silver production by as much as 40% over last year with the addition of a partial year of San Bartolome production. Cash cost for the year were under $4 an ounce of silver, providing a healthy margin at current prices.

In 2007, Coeur’s total silver reserves and resources with our fine exploration group increased by 40% from the previous year to 530 million ounces today, and our total gold reserves and resources increased 60% from 2006 levels to 4.6 million ounces. We are nearing competition of the first feasibility study of Palmarejo with construction accelerating this year towards startup in the first half of 2009.

We also completed construction of the new mill at Martha in Argentina in 2007. The decision to construct a standalone mill at Martha was made after we continued to increase the mines reserves and resources through our mine exploration efforts. We expect to continue to add Martha’s mine life with our team there, through additional increases in reserves and resources going forward.

In addition, processing ore at Martha rather than trucking it to Cerro Bayo reduces cost.

At Kensington, our gold project in Alaska, we are moving forward with the plan for an alternate tailings facility and have submitted a modified plan of operations for paste tailings alternatives. With the mining constructions now essentially 100% complete with only the tailings facility remaining, we are optimistic that this alternate permitting process, which is well supported can be realized this year with the potential for operations to begin in the second half of 2009.

At our existing mines, our number one priority has been and will be to get Cerro Bayo back on track in Southern Chile, reducing the mines operating costs and increasing its Silver and Gold production. Richard Weston and his team have made a number of changes and improvements on site, and we believe we now have the right people and the right plan in place address the mine's issues.

This includes a recovery plan for improved mining methods and productivity and we expect steady improvement in the performance each quarter of this year, particularly in the third and fourth quarters. And Richard is going to speak to you more about the plan that we've implemented at Cerro Bayo in a few minutes.

Our two Australian assets at Broken Hill and Endeavor are performing very well, generating a significant return on the investments we made there in 2005. Since we acquired these properties just three years ago, we've already recouped almost 90% of our original investment at Broken Hill and nearly 60% on our investment in Endeavor.

We've just recently announced plans to look at alternatives for our Rochester Mine in Nevada, which is in it's residual leaching phase of mining. We've already received interest from several parties to acquire our wholly owned subsidiary and we plan to apply any proceeds from the sale of the Rochester to our company's long-term growth plan.

We've strengthened our operation's management team significantly. We have had a real emphasis on people this year and these effort is been headed up by Senior Vice President of Operations, Richard Weston, who leads a group of new operating Vice Presidents now at all of our growth projects. We have also added significant numbers of people to our environmental and safety groups, and exploration.

In the critical area of community relations where we feel Coeur is strong in our operations in Argentina, Chile, Bolivia and Alaska, we have further strengthened our team with the addition just announced that [Bibiana Bettencourt], a Columbian and former CARE director, largely responsible for the execution of the international organization's CARE programs in Bolivia.

Bibiana has recently joined us to enhance our company wide program of corporate social responsibility, so essential in today's international mining environment, where we believe Coeur has excelled. This morning, I talked to Ambassador Guzman from Bolivia, who expressed his appreciation to Coeur for our assisting Bolivia secure extension of its free trade agreement which yesterday was enacted following its approval by the United States Senate. We continue to do what we can work, to carry out responsibilities at the communities where we are located.

In short, I think that I can say that we have continued to position Coeur, on the management side where we are accelerating production with sustainable lower cost assets at a time when silver prices are not only at their strongest levels since 1980, but we believe have demonstrated that they are continued to be poised for even stronger margins.

I’ll have a few comments about how we see the silver markets in a few minutes, but first, I am going to ask my colleague Jim Sabala to go through the financial results for the quarter and then Richard Weston can talk about our individual property performances. Jim.

Jim Sabala

Thank you, Dennis. Slide through nine gives a snapshot of the financial performance for both the fourth quarter and full year 2007, as compared to the previous year. We saw slightly lower middle sales due to lower production compared to the previous year in Cerro Bayo, Broken Hill and at Rochester, where the metals production is lower than planned due to cessation of mining activities and a transition to residual leaching. There were also increased production costs at Cerro Bayo and Martha, which offset production cost reduction at nearly all of other operations.

Earnings before interest, taxes, depreciation and amortization in the quarter were $21.9 million compared to $29.3 million of EBITDA in the same period of 2006. EBITDA for the full year 2007 were $65.7 million, compared to $93.7 million in 2006. And net income for the recent fourth quarter was $14.3 million compared to $23.2 million in the fourth quarter of 2006.

For the full year 2007, net income was $43.9 million, compared to $88.5 million in 2006. The 2006 net income was positively impacted by an $11.1 million gain from the sale of Coeur Silver Valley, as well as some production from net operations during the course of the year.

Slide nine illustrates the dramatic decline in operative cost during the fourth quarter, with company-wide cash cost declining to an average of $2.72 per ounce in the period, compared to $3.41 per ounce in the fourth quarter a year ago.

And for the full year, operating costs were $3.97 for silver, compared to $3.33 per ounce in 2006.

As depicted in slide ten, our operating costs have remained consistently low over the past five years. This is the benefit of our diversified production portfolio and overall cost discipline in an area of rising fuel and labor cost that have impacted the mining industry in general. It is also a refection of the gold component of our production, which is deducted as by-product credit.

Slide eleven shows the company's gross margin. Metal sales less production cost by quarter. You can see that we rebounded during the fourth quarter compared, to the third quarter and assuming current metal price expect this upward trend to continue during 2008, and end the year with the margin is similar to what we experienced in the first quarter of 2007.

Slide 12 shows how we compared to our peers in terms of this metric, which eliminates the type and amount of by-products credits between different companies. Despite a disappointing operating performance at Cerro Bayo in particular, and a disappointing third quarter, Coeur remains inline with its peers.

Slide thirteen shows a breakout of our CapEx spending in the fourth quarter and also during the entire 2007. Total CapEx in the fourth quarter was $57 million and $226 million for the full year. Most of the expenditures in the recent quarter and for the year were constructions at San Bartolome. Fourth quarter expenditures at Kensington were principally for legal and engineering studies, for new tailings and phase facilities and for ongoing expenditures at plant.

And with that, I'd now like to turn the call over to Richard for an overview of operations. Richard?

Richard Weston

Yes, thanks Jim. On Slide 15, is a table showing the production at each of our operating properties, which show the 2007 totals 11.5 million ounces of silver and 92,000 ounces of gold. A major focus of our operations in 2007 has been the strengthening of the operations management team as we prepare for our new growth. At Cerro Bayo, we now have in place, a reorganized management team, headed by recently appointed Vice President of Operations, Don Gray, an engineering graduate from MIT, with more than 27 years of mining, operational and development experience, much of it in South America.

We have been implementing a recovery plan, which includes improvement in mining methods and productivity and an organizational restructure with a smaller workforce and a cost improvement program. We expect to see positive results from these recovery plans during the second half of 2008, with improvement in both cost and production. For the year, we are expecting production to be 2.5 million ounces of silver and 40,000 ounces of gold, cash cost of $3.15 per ounce of silver. The new vein systems discovered in 2007 at Cerro Bayo mill will play a prominent role in this improved performance.

At Martha, we have completed the new mill and with the additional reserves, we continue to see the long-term benefits of this new facility. Production levels have more than doubled at Martha since we purchased the property and with the new mill operational in January, we expect to realize lower production costs, well over $5 per ounce level in 2008. Production at Martha this year is expected to be about 3 million ounces of silver, which is about 10% higher than last year.

At Rochester, on Slide 17, the transition to residual leaching was resulted in declining costs and increased cash flow. The mine produced 1.1 million ounces of silver and almost 10,000 ounces of gold in the fourth quarter and 4.6 million ounces of silver and just over 50,000 ounces of gold for the full year.

We have also decided that the sale of Rochester is in the best interest of Coeur shareholders and are confidently conducting a sale process, which we expect to be completed by the end of the second quarter. Proceeds received from the sale of Rochester will be redeployed through a newer and longer life company plans. We have been very pleased with the performance of the Endeavor and Broken Hill assets in Australia.

The fourth quarter cash costs were 33% lower at Endeavor compared to the previous year, the result of silver grades that were around 142% higher. We expect 2008 production at Endeavor to be approximately 850 ounces of silver at cash costs of about $3.70 per ounce. Cash costs for Endeavor will be high going forward due to a price participation component to the terms of the acquisition, and higher smelting and refining costs due to higher silver prices.

At Broken Hill, we expect operations to resume to normal levels this year with projected production of 2 million ounces of silver and steady cash costs of approximately $3.75 per ounce of silver.

Mine construction is nearing completion at San Bartolome and we have started pre-commissioning activities. Processing of ore will begin in March. Production and plant utilization will then steadily increase with full plant capacity to be reached in July. We are looking to produce over 6 million ounces of silver this calendar year and 10 million ounces during the first 12 months of full production.

Operating cash costs, once the plant reaches full scale of operations are expected to be $4.10 per ounce in the August to December timeframe, with additional royalties and production taxes of $2.03 per ounce.

Very noteworthy that the 1,600 man construction workforce made up of mostly Bolivian nationals have surpassed more than 1 million man-hours without a lost time accident, a really great achievement. Coeur people continue to excel at mine safety.

Slide nineteen has some photos of the construction at San Bartolome, showing the first class facilities that we have constructed.

At Palmarejo, our newest major silver and gold project in Mexico, a feasibility study, construction and pre-stripping activities are well underway. The internal feasibility study due for completion during the second quarter, has been focused on the Palmarejo ore body and high quality resources.

Feasibility study will indicate estimated production schedules, operating and capital cost for the project, and these will be reviewed by a third party to ensure accuracy of these capital and operating costs. The inclusion of the other ore bodies at Guadalupe and La Patria may be included in operational planning when ore body reserves are determined.

There are currently 100 operating personnel onsite, headed by the new Vice-president and General Manager, Stuart Mathews. There are also 300 construction personnel on the ground now as well. Capital cost to achieve commercial production at Palmarejo is currently estimated at $225 million. This represents an increase from $204 million and reflects costs associated with earlier subsidence issues that have now been resolved, high owner’s costs and increases in costs associated with road work, surface and tailing storage facilities.

At present, life of mine production is expected to average approximately 10 million ounces of silver per year and 115,000 ounces of gold per year. Needless to say, we are very excited about Palmarejo, its impact on Coeur and the project's potential.

Slide 22 shows recent photos of construction activities at the site. Previously mentioned was the completion of the new standalone mill of Martha. Slide 23 shows photos of the new 240 ton per day facility. The new mill is expected to lower operating cost, since it will no longer be necessary to transport ore to Cerro Bayo for processing. This is also expected to have a beneficial impact on the ore reserve cut-off grade and overall ore reserves.

At Kensington, as we previously reported, we have completed the mill construction, as well as related service facilities and a 2.5 mile tunnel connecting the Kensington and the Jualin property. In the first quarter of this year, a modified plan of operation was submitted to the US Forest service for an alternative site for disposal of the mine's tailings using paste technology. Our expectation is that this submission to the forest service will pave the way for final permit applications, review and approvals, so that construction of the tailings disposal facility can begin.

We are also seeking an appeal to the Ninth Circuit decision that affected our original tailings permit. On the management team, we have named Tom Anderson as the new Vice President and General Manager of Kensington. Tom, whose had a total of 29 years of live scale underground mining operations experience.

I'll turn the call over to Don Birak who'll review our recent exploration activities.

Don Birak

Thanks Richard. In 2007 we continued to devote a major part of our global exploration to discovery and definition of resources and reserves that are large, prospective, operating properties and advancing our Greenfield’s activities to find new mining opportunities.

On slide 25, you could see the results of this Brownfield’s focus. Year-end 2007 reserves are essentially the same as year end 2006, even after producing nearly 11.5 million silver ounces last year.

Next slide shows the tabulated data in graph form. Our silver mineral reserves remain over 216 million total contained ounces. During the year we realized significant reserve gains at San Bartolome, Cerro Bayo, and Martha, and the Palmarejo feasibility study is expected to add significantly to both silver and gold reserves.

In 2008, we are committing a record of over $27 million to both Brownfield’s and Greenfield’s exploration, as part of our operations and help grow the company.

Next, let’s take a look at some new exploration developments. During the past year we invested nearly $15 million in exploration with about 41% devoted to Greenfield’s, 59% to Brownfield’s around our existing mines where we control significant, highly perspective property.

At Cerro Bayo we achieved an 80% gain in silver reserve ounces relative to year-end 2006. You may recall of our announcement of the discovery of five new veins in the second half of 2007, which occur about one kilometer east of the mill facility. Drilling at just two of the new veins Dagny and Fabiola added over 10.8 million ounces to Cerro Bayo’s total silver mineral resource. We are currently drawing on the five new veins and other targets in the district, which we expect to add to our resources and reserves this year.

At Martha, silver mineral reserves increased by 36% and we also discovered two new high grade veins called Isabel and Betty Sur. High grade silver in the these two new discoveries which occurred just north of the new Martha mill, is hosted in the same volcanic rocks that hosts the Martha Mine.

Another part of South America; our Greenfield’s exploration in Patagonia is focused on five properties; Aguila, Sol de Mayo, Cisne, Sacha and Joaquin. Additional drilling is planned for 2008 on all five properties, and on our wholly-owned Lejano properties, which joins Cisne on the east. A map of these properties in included later in the presentation.

At our new Palmarejo property in the Sierra Madre of Northern Mexico, we are progressing on the first fully engineered mineral reserves for this world class district, which we based on a combined open pit and underground mine tunnel.

As Richard mentioned, the analysis considers just the Palmarejo deposit and their significant expansion potential by conversion of other resources in the district with new drilling.

Guadalupe deposit, which occurs on a major structure parallel to and south of the Palmarejo deposit, is a good example of this growth potential. A new estimate of mineral resources in Guadalupe will be completed this year incorporating results from a large number of drill holes completed in the second half of 2007 and just this year.

Some of those newest results are shown in the appendix. Los Bancos is another new high priority target north of Guadalupe that sits on the south east extension of the Palmarejo Trent. We are quite excited about this new target in which we recently received results from the discovery hole, which cut over 36 drill meters grading 1.5 grams of gold and 250 grams of silver, and the true width of this intercept is estimated to be about 19 meters.

On slide 29 we show a chart of the breakdown of the mineral resources for the Palmarejo district and you can see the large inventory that this brings to Coeur. Of our 2008 exploration budget, over $8.3 million is dedicated to Palmarejo, where we will focus on the full spectrum from new targets to reserve development. We expect that as a result of this program we'll continue to grow our reserves and resources.

On Slight 30, we show a general map of the district and targets with the Guadalupe and Los Panchos targets in an expanded view.

We use a variety of tools to help visualize exploration drill results and image on Slide 31 is a product of some of that work. Here, you can see a three-dimensional model of the contour drilled assessed grades at Guadeloupe, where we have 3.7 million ounces of indicated silver mineral resources, and a 35 million ounces of inferred. This deposit is still open at depth and to the north.

Turning to Cerro Bayo, on Slide 32, you can see many veins systems and district and our exploration target areas. Today, we've found more than a hundred veins and they produced more than 26 million ounces of silver and nearly half a million ounces of gold.

The new discovery area, Coigues Este, as shown here on Slide 33. At Coigues, we drilled over 16,000 meters in 2007, most of that on Dagny and Fabiola. On surface, these new veins appear only as thin, veinlets or faults, and unfavorable rock, essentially barren at the surface.

Moving now to Martha on Slide 34, we highlight some of the veins in the district in recent exploration areas. Over 15 million silver ounces have been produced from this district from the high grade Martha quarter that you could see on the map. And you could see our new discovery area, Betty Sur, Martha Este and Isabel on the same map, all within a short distance of the new mill. Focus for 2008 in Cerro Bayo and Martha is on development of the new target areas and aggressive drilling of the new discoveries.

We've also been exploring some of our other tenements of Patagonia with upwards of 7,800 meters of drilling of five prospects that I mentioned earlier and our total land possession is now over 560 square miles in size. Exploration is planned for this year on all the properties. Recently, we completed new drilling program at our Lejano silver and base level property and we added new properties in the eastern part of the province called Satellite.

Now, I'll turn the call back to Dennis for comments on silver market and summary.

Dennis Wheeler

Thanks Don for your exploration report today. As you know we are in the midst of the strongest metals market we have seen for a number of years. Silver prices are at their highest level since 1980, recently exceeding $19 per ounce and gold prices seem to be edging up to $1000 an ounce. This time a year ago, silver prices were $13. So we have seen an appreciation of almost 50% in the last year.

The under-growing macro drivers continue to do very positive for the metal in Coeur’s opinion, underpinned by strong investor demand, continued growth in industrial demand, a weak US dollar and inflation concerns, with strong economic growth particularly in China and Asia, continue to bode well for our product.

Overall, there indeed is new supply coming online from new operations like San Bartolome, according to publish plans. But we do not expect this increase in supply to exceed the ongoing growth in total demand, especially after net ounce supply reductions from the two of our closing mines going forward.

At Coeur, we think these dynamic markets bode well for us, with its new growth projects coming on-stream this year and next. With a little luck the timing of the San Bartolome seems to be coinciding perfectly with these record high prices. This year, as San Bartolome comes fully on-stream, we are expecting nearly a 40% increase in silver production to nearly 16 million ounces in 2008, and in addition we plan to generate nearly 67,000 ounces of gold. Through the first full year following commissioning of the plant at San Bartolome, this long-life mine is expected to produce more than 6 million ounces of silver in 2008.

I should also mention that we are very proud of the relationships that people of Coeur have developed with the people of Potosí and greater Bolivia and the numerous government and community groups there.

I briefly mentioned our relationship with the national government and our relationship with Ambassador Guzmán in the United States in assisting the country of Bolivia in seeking the extension of the Bolivian free trade agreements with the United States.

In addition, a major mass party governor of Potosi recently publicly announced his support for the San Bartolome mine. Stating that San Bartolome was precisely the type of project that the government of Bolivia wanted to see within the country and that San Bartolome was aligned with the goals and philosophy of the national and regional government.

This has truly been a corporative effort and one that will benefit, Potosí, Bolivia and the core shareholder for years to come.

In addition to the contributions from San Bartolome, we are very proud of the new mill at Martha, which will be inaugurated this month. It's further going to enhance the reserve growth at Martha and we expect to continue to capitalize on our focused and successful exploration project in that region.

We're making good progress with regard to the construction and feasibility study at Palmarejo. We're expecting to see operations commence in the first half of 2009 and at Kensington, we're seeing measured progress and expect to have a response soon from the United States Forest Service to the revised plan of operations we recently submitted.

As Don Birak, the Head of Exploration mentioned, our reserve replacement program success has led to our increasing our exploration budget this year to a record $27.5 million. Justifiably, with the largest percentage going to Palmarejo where we're very excited and optimistic about the reserve and resource growth we're seeing at our newest project.

And with our expectations that silver, the world's leading metal, will continue to exhibit itself well in the marketplace, we really are looking forward to a challenging but exciting year at Coeur in 2008.

And I'd like to close by thanking you all for joining us today and we'll now be happy to take your questions.

Question-and-Answer Session

Operator

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

John Bridges - JPMorgan

Good afternoon Dennis, everybody.

Dennis Wheeler

Hi John.

John Bridges - JPMorgan

Hi, you gave us some guidance on Palmarejo, but in Kensington, once you get some sort of go ahead hopefully on the new project, what sort of timeline are we looking for to get the new placed equipment?

Dennis Wheeler

I would say approximately 6 months, John.

John Bridges - JPMorgan

So, there is no big lead time on that sort of equipment?

Dennis Wheeler

We are not expecting a -- you remember that most of the plant is built.

John Bridges - JPMorgan

Right.

Dennis Wheeler

We wouldn’t see a delay in terms of the equipment. I think our group is well ready to execute once we receive the approvals.

John Bridges - JPMorgan

Okay great. And Rochester, there was some interesting exploration results that you published yesterday for that. I just wonder are you hoping to keep a back in on that in case something interesting develops?

Dennis Wheeler

I don’t think, right now we’ve got an alternate plan except to go ahead and pursue the sale process that we have underway now John. We are looking at, in order to focus on the long range growth plan for the company, which has been our strategy. Rochester has been a great mine and certainly these recent exploration results are encouraging. But we have had a strong response so far to the indicated sale of Rochester, data rooms have been set up and we’ll soon be having visitors.

John Bridges - JPMorgan

Okay, okay. And Palmarejo, you mentioned moving the mill from the lower level, I remember when I saw, it was split between the two levels. What’s going on there?

Dennis Wheeler

Richard Weston

Yes, Hi John.

John Bridges - JPMorgan

Hi Richard

Richard Weston

We have identified some issues with settlement at the lower plant site. So we made a decision late last year to relocate that to the upper plant site. That process is well underway.

John Bridges - JPMorgan

Is it very cramped on the upper site?

Richard Weston

Beg your pardon?

John Bridges - JPMorgan

Is it very cramped now on the upper site?

Richard Weston

It's tight, but it will all work.

John Bridges - JPMorgan

I look forward to seeing it. Well done, guys. Thank you.

Dennis Wheeler

Thanks, John.

Operator

Your next question comes from Michael Dudas.

Michael Dudas - Bear Stearns

Good morning, gentlemen.

Dennis Wheeler

Good morning, Michael.

Michael Dudas - Bear Stearns

I wouldn’t have guessed years ago that the Bolivian mine will be producing silver before the Alaska mine produces gold. That’s an anecdotal comment I guess?

Dennis Wheeler

So that makes two of us.

Michael Dudas - Bear Stearns

I figured as such. Expand a little bit on Martha. Remind us about the mill throughput capacity? What kind of potential do you see there with the exploration and the opportunities for throughput and production at that operation?

Dennis Wheeler

We'll break this down into two parts. Richard's going to talk to about the mill itself and then I'm going to ask Don to talk a little about the exploration potential going forward. Got it?

Michael Dudas - Bear Stearns

Terrific, thank you.

Richard Weston

Yeah, the mille got a capacity of about 240 tons per day.

Don Birak

Mike, this is Don Birak. On the exploration front, I think you look at the track record of what we have doing at Martha since we acquired it, it's been a steady success rate with additions to reserves and resources. And I'm very excited about these new things that we see here that we announced north of the mill, I think it bodes quote well for that. We are going to continue to devote a lot of our efforts towards increasing both reserves and resources.

Michael Dudas - Bear Stearns

Thank you. My second question for Jim; could you give us bit of a guidance on capital flows and capital spending in 2008 given delays in Kensington potential ramp ups in Mexico and given where your cash flow and cash balances are at the end of the 2007?

Jim Sabala

Sure, Mike, with regard to Palmarejo, we've said that, CapEx spending to the point of commercial production is about $225 million. That point is expected in the first quarter of next year and so, CapEx will start out lower, but will ramp up to that level during the course of '08.

At Kensington we don't have a large CapEx guidance now simply because we have to resolve the permit issue, that's on in current maintenance holding plan of about $2 million a month and at San Bartolome, I think it's about $90 million we have to ramp up total development there, which will be spread out over the course of '08

And we finished the year with about a $150 million in cash and investments. We'll have the proceeds coming in, assuming completion of sales of the Rochester property. There is a potential gap there but we'll take a look at our CapEx spending and other alternatives to the extent that gap exist after we formalize our plan.

Michael Dudas - Bear Stearns

Any sense of what you have -- any initial range of what you have to spend for the tailings up in Alaska?

Jim Sabala

It's in line with the previous estimate and I believe, it was about $40 million was the number I've got in my mind Mike. I think it's likely that could be some money spent on this year, but I think it's more likely that that will come next year.

Michael Dudas - Bear Stearns

All right, terrific, thank you gentlemen.

Operator

Your next question comes from the line of Mike Curran

Mike Curran - RBC

Yeah, Mike here. Just to hit a couple of them on the CapEx, but I just want to make sure, I'm clear on the capital for Palmarejo, the number of 225, a chunk of that’s been spent already or is that from now to production startup to another 225 to spend?

Jim Sabala

Not the whole bunch through the end of December, remember that we never got the keys to the car until December 21st. So the 225 is our estimate of capital…

Mike Curran - RBC

Okay. So that’s over the next 18 months basically.

Jim Sabala

Yes, correct.

Mike Curran - RBC

Got you. Thank you.

Operator

Your next question comes from the line of John Tumazos.

John Tumazos - Prudential

Congratulations on all the progress. Is the phase to be used to Kensington are cemented tailings to stabilize them? And where would the site be first? Second, are you -- would you consider borrowing some money to buy your stock in, given that it has risen so little as silver has risen. Third, with the various projects would 30 million ounces of silver and 330,000 of gold be a reasonable estimate for 2010 output?

Richard Weston

I can answer your first question and in relation to the phase, we are looking at non-cemented phase for the tailings and that would be the Comet base site and Jim will answer the balance.

Jim Sabala

I will turn it over to Dennis. He will take care of the others.

Dennis Wheeler

John, with regard to your comments on share buyback I don’t think we have any present plans to buyback the shares of the company and that, since we were able to make public the documents and complete the Palmarejo, Bolnisi acquisitions, we are quite pleased with the trends, the stock chart over the last three months and here today and I think direction for Coeur shares as we continue to exhibit and execute our growth plan that we've announced, will continue to result in increased shareholder value. With regard to your questions of projections or forward looking statements. I think we've announced all we intend to here today. So keep looking at us in the future.

John Tumazos - Prudential

Thank you.

Operator

Your last question comes from the line of Pierre Vaillancourt

Pierre Vaillancourt - Orion Securities Inc.

I just want to get a little bit of clarification on production at San Bartolome, so you'll get a partial year this year. So how is that looking this year and then next year and beyond in its steady state?

Dennis Wheeler

Yeah, we expect to produce about 6 million ounces of silver this year. That’s because of the ramp-up period, starting with March and then we expect to have our first twelve months of production; 10 million ounces as planned and you'll continue to see the mine produce at a pretty level state after that.

Pierre Vaillancourt - Orion Securities Inc.

So, you'll be able to maintain 10 million ounces annually for as far as you can see basically?

Dennis Wheeler

Well, we've got a 14 year mine life I think there and we've got some additional resources, so, we'll continue to work on that steady state production level of 10 million ounces.

Pierre Vaillancourt - Orion Securities Inc.

Okay. And any plans for Tin recovery in addition??

Dennis Wheeler

No, we don’t have any present plans for the Tin recovery.

Pierre Vaillancourt - Orion Securities Inc.

Okay.

Dennis Wheeler

At this time.

Pierre Vaillancourt - Orion Securities Inc.

All right. Now, what about costs there? How is that looking?

Jim Sabala

You know I think we set that forth in the press release Pierre and that would be the guidance that we'd going forward.

Pierre Vaillancourt - Orion Securities Inc.

Okay, okay, so, same thing on Palmarejo, just give me an idea for next year and then 2010, in terms of production?

Jim Sabala

Yes Pierre, the only guidance I can give you there, we're giving you the construction built-out for production guidance. I refer back to the documents that we did it accordance with the acquisition and we were looking at the production reports, their at steady state it was about 10 million ounces of silver and I think, its about 110,000 to 115,000 ounces of gold and the overall cash cost, after byproduct credits was about a negative $0.40, if I recall but I'd refer you back to the currency statement that was filed and executed on just last month.

Pierre Vaillancourt - Orion Securities Inc.

Okay so, now with respect to Kensington, just give me a sense of the process and the whole appeal with respect to the Ninth Circuit Court and how does this whole thing proceed?

Dennis Wheeler

Pierre, there are actually two separate paths, the application that the company has made with regard to the Forest Service for a modified plan of operations, that’s the lead agency there.

Pierre Vaillancourt - Orion Securities Inc.

Yeah.

Dennis Wheeler

And we're hopeful that, let say that in the next 30 days, before service will have acted on the initial idea of the modified plan of operations. Get back to John Tumazos, he asked one question we didn't answer, we're actually siding this dry stack or new stack or, tailings facility down in the area called common beach, which is where one of our earlier plans for tailings locations was. We know that area well and the dynamics of it. So we are still projecting a process that can be concluded in the fall of this year with a production start in 2009.

Now from a litigation standpoint, we have of course appealed to the Supreme Court of the United States. Recently several entities such as the Alaska Miner’s Association and the National Mining Association, the Pacific Legal Foundation, the State of Alaska, the Mountain States Foundation, have all filed briefs, supporting the position of Coeur and the Corp of Engineers in the litigation. So it had very strong support for our positions. There is no certainty in terms of when the US Supreme Court will act on that petition, but we are maintaining both the legal front with that appeal and pursuing the modified plan.

Pierre Vaillancourt - Orion Securities Inc.

Is there still public opposition to the dry tailings or still…?

Dennis Wheeler

Is there what?

Pierre Vaillancourt - Orion Securities Inc.

Is there still public opposition or…?

Dennis Wheeler

There never has really been public opposition to our modified plan, and we have received the public announced support of the environmental plaintiffs to working with Coeur on this modified plan. They are strongly supported by the community of Juneau, the native groups in Alaska, the business community and the City of Juneau with regard to the modified plans. So I would describe our support to that approach as very strong.

Pierre Vaillancourt - Orion Securities Inc.

Okay. Lastly, may be if you can just give me a sense, given the variability in production from Endeavor and Broken Hill, what we can expect there on a steady state basis?

Jim Sabala

I think the guidance we've got going forward is a pretty good indication for that Pierre. As you know there were some issues we've had in the past. I think we've seen improvement from both of those assets over the course of '07 and I would project our '08 guidance forward.

Pierre Vaillancourt - Orion Securities Inc.

All right, thanks.

Operator

And there are no questions at this time.

Dennis Wheeler

Again we'd like to thank our shareholders and interested parties and analysts for joining on today's call, for your continued interested in Coeur. We remain very excited about the direction of the company this year. We'll certainly keep you very timely and candidly apprised about our new pipeline of sustainable projects coning on-stream. We believe it confirms our commitment to remain the leading primary silver producer in the world and we remain focused and totally dedicated to the continued execution of this long-term growth strategy, to maximize the value for our shareholders. So, thanks to all of you and have a great day.

Operator

This concluded today's conference call. You may now disconnect.

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Source: Coeur d'Alene Mines Corporation Q4 2007 Earnings Call Transcript
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