Coeur d'Alene Mines Corporation (CDE) will hold a conference call on August 7th to report its second quarter 2012 financial results. Early indications suggest that the earnings report will be positive, and thus having the potential to trigger a stock price rally for a company hovering near its 52-week low.
Coeur d'Alene is the largest U.S.-based silver producer, and has expanded operations to include gold mining as well. In 2012, the company estimates production of approximately 20 million ounces of silver and 230,000 ounces of gold. The company currently operates silver and gold mines in the United States, Mexico, Bolivia, Argentina, and Australia.
One major reason why Coeur's second quarter earnings could trigger a stock price rally is the company's recent announcement of a $100 million share repurchase program. The stock repurchase amounted to 5.3 million, or 6 percent, of the company's outstanding shares. This repurchase program tells investors two things; first, the company considers its stock price a bargain and, second, they believe it will rise in the near future. If Coeur expected a negative earnings report, the company would most likely wait to authorize the repurchase program, knowing that the stock price would be driven down even further following release of the results.
The company's financial indicators back up the premise that its stock price is undervalued. First, Coeur's net cash flow is growing on a year-to-year basis, with over $100 million in cash on hand at the conclusion of 2011. Second, the company's earnings are projected to increase 44.10 percent in 2013, which is almost double the industry average of 22.60 percent. Lastly, the company's sales and income growth increased 98.10 and 212.40 percent respectively over the past fiscal year.
In addition to repurchasing its own stock, Coeur is also using its free cash flow to invest in silver and gold mining companies with prospective land holdings in Mexico and the United States. In July, Coeur spent $3.01 million to purchase a 13.1 percent stake in Northair Mines Ltd (INM), a mineral exploration and development (E&D) company with active drilling projects in La Cigarra and Sierra Rosario, Mexico. A month prior, Coeur purchased nearly 11 million shares of Pershing Gold Corporation (PGLC) Common Stock, another gold E&D company with prospective land holdings just one mile south of Coeur's Nevada Packard Mine. In the third quarter, Pershing Gold plans to release drilling results for this project, coined the Relief Canyon Mine, which are expected to significantly increase the project's probable reserves.
Coeur is clearly trying to take advantage of Nevada's modern-day gold rush. Its Nevada Packard project has proven and probable reserves totaling 27.6 million ounces of silver and 247,400 ounces of gold. Of note to investors is a reported increase of 72 and 73 percent respectively in measured and indicated silver and gold resources.
The recent moves made by Coeur suggest that the company has substantial investment capital on hand and is willing to use it to increase its value. The stock repurchase program implies that the company believes its stock price is undervalued and second quarter financial results will trigger a stock price rally. Coeur appears to have solid investment potential and its stock should be attractive for investors looking for undervalued companies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: The writer is not a licensed broker or investment adviser and therefore cannot recommend that you buy, sell, or hold any security. While every attempt was made to verify the information in this report, much has been derived from public sources and cannot be guaranteed for accuracy.