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Executives

Karli Anderson - Director of IR

Dennis Wheeler - Chairman, President and CEO

Mitchell Krebs - SVP and CFO

Richard Weston - SVP of Operations

Don Birak - SVP of Exploration

Analysts

George Bernstein - Deutsche Bank

John Bridges - JPMorgan

Coeur d'Alene Mines Corp. (CDE) Q2 2008 Earnings Call August 8, 2008 1:00 PM ET

Operator

Good afternoon. My name is Tia, and I will be the conference operator today. At this time, I would like to welcome everyone to the second quarter Earnings 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.

I would now like to turn the conference over to Ms. Karli Anderson, Director of Investor Relations. Please go ahead ma'am.

Karli Anderson

Thank you. Thank you today for joining us to discuss the company's results for the second quarter 2008. The call is also being broadcast live on the internet through our website at www.coeur.com, where we've also posted the slides that accompany our prepared remarks. A telephonic replay of the call will be available for one week afterwards on our website.

On the call today are Dennis Wheeler, Chairman, President, and Chief Executive Officer; Mitchell Krebs, Senior Vice President and Chief Financial Officer; Richard Weston, 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, Canada and Australia and involve a number of risks that could cause actual results to differ from our projections. Please see our full cautionary statements on slide 2.

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

Dennis Wheeler

Thank you Karli, and welcome and thank you for joining us on today's call. In the second quarter we continued our growth strategy by making progress on our newest long life mines which as expected to maximize value for you with our share holders. The three key legs of this strategy remain our San Bartolome mine in Bolivia, which began commercial production in the second quarter; Palmarejo in Mexico, where we reported substantial reserve and resource increases; and Kensington, where we continue to move forward towards our goal for production in late 2009. These are all large long life assets which over the next two years we remain confident will continue to ramp company-wide production, cash flows and reserves.

In 2008, with San Bartolome now contributing its initial production, Coeur expects to produce 13 million ounces of silver on a company-wide basis. Next year we are expecting to increase silver production to nearly 24 million ounces as we bring Palmarejo online. In other words, we plan to nearly double our production next year, and these new sustainable long life silver mines will have a major impact on core into the future.

I'll begin by highlighting milestones we achieved during the quarter. San Bartolome, our newest silver mine in Bolivia, did reach commercial production. It is today planned to be the world's largest pure silver mine and we're very encouraged by the high quality of the production of the site. Our first shipment at DorE reflected an impressive 99.9% purity. San Bartolome does continue to maintain an excellent safety record, and continues to benefit from strong local support and cooperation.

We are now forecasting to produce 3.2 million ounces of silver in 2008 from San Barts. Our 2009 guidance however for the mine has not changed and remains at 9 million ounces for that year. No doubt we did experience startup issues at San Bartolome in the first half of the year. We've made some changes to the infrastructure which included replacing some parts of the mill and bearings, which cost us several days of production. Admittedly, we're disappointed with the slow start of our San Bartolome.

However, we've seen nothing, I emphasize we've seen nothing that tells us this mine will not operate at the full capacity for which it was designed. We're implementing a number of measures to get us to design capacity late in the third quarter. We're making personnel improvements, we're intensifying the training and development of the work force, and we expect to very soon complete the modifications to the Ball mill, reaching our production targets at San Bart is paramount to Coeur’s growth strategy. I can assure that you we as an executive team along with our strengthening Bolivia leadership, San Bartolomé staff and workforce are committed to getting it to design capacity, late in the quarter.

On slide seven, we show the location of our new Palmarejo, silver and gold mine in the heart of the Sierra Madre mineral belt of northern Mexico. We are pleased to report Palmarejo’s on schedule, on budget and now set for an earlier March 2009 start-up. The feasibility study you’ll remember, where Palmarejo focused only on the Palmarejo deposits.

We reported the total mineral inventory of nearly 100 million ounces of silver and 1.2 million ounces of gold. And the contribution of Palmarejo alone without the additional oil bodies has already added significantly to Coeur's mineral inventory.

Palmarejo boosted Coeur's total silver mineral reserves by 29%, increased our companywide gold reserves by 51% and we expect the mine went in operation in 2009 to generate approximately $125 million in operating cash flow annually based on current metal prices.

At our other major development project generally Kensington in Alaska, we continued to make measured progress towards a late 2009 start-up. We told you on our last conference call that Coeur Alaska has submitted a modified plan of operations to the U.S. Forest Service for an alternative tailing facility for Kensington.

Separately the United States Supreme Court has granted the State of Alaska and Coeur Alaska’s Petitions to review a Ninth Circuit Court of Appeals decision relating to the original Kensington tailings permit.

Of course, we are not able to predict the potential outcome of the United States Supreme Court review, but the bottom line is this, we now have two parallel paths to get us into production at Kensington late next year. We are looking forward to getting the tailing issue resolved, building on our strong local support in the Juneau area and realizing the long life gold production and economic benefit that Kensington represents to your company and the Southeast Alaska region.

Once in operation, we expect the Kensington mine to produce 140,000 ounces of gold per year. In addition, we are conducting a new exploration program later this year as we pursue to find opportunities, to find new resources at Kensington that could further expand its future production.

Slide 11 demonstrates the combined contribution of these three new projects; San Bartolomé, Palmarejo and Kensington, and what they represent to Coeur's silver and gold production profile over the next three years. At 21% compound annual growth rate over 2000 levels of -- 7 levels of silver, at 32% compound annual growth rate for gold. With further exploration and reserve growth in the Palmarejo district, we expect these growth forecasts to further increase.

As we grow the company, we continue to maintain an excellent record on worker safety. For example, over the last 12 months, we've reported a companywide incident rate of just 0.64 incidents per 100 employees, far below the mining industry average of 3.1 incidents per 100 employees. We do make safety a top priority at Coeur, and we go the extra mile by applying United States Mining Safety and Health standards across all of our operations throughout the world.

Our production growth is expected in turn to lead this significant cash flow growth. In 2009, we are projecting to generate $235 million in operating cash flow and nearly $300 million in 2010 based on current metals prices. Now I'm going to ask Mitch Krebs to join in to review the quarter's financial performance with you in more detail. Mitch?

Mitchell Krebs

Thanks Dennis. Over the next few minutes, I'll discuss some of Coeur's key financial metrics for the second quarter. For our full financial details, please see our press release that was issued this morning as well as our 10-Q that will be filed later this afternoon.

In the second quarter, the company reported a net loss of $5.4 million, which includes 10.7 million of expense-free development costs relating to the Palmarejo project. These costs will now begin to be capitalized going forward due to the completion of the Palmarejo feasibility study during the second quarter. Excluding these costs, second quarter net income was $5.3 million or $0.01 per share.

We have a fully funded capital plan at Coeur and $187 million in cash equivalents and short term investments as of June 30 and I will go into further detail on our capital plan shortly.

The next few slides give you a comparison of a few key financial metrics. On Slide 15 you'll see that our cash cost per ounce of silver have remained more or less consistent over the last six quarters as metals prices have increased substantially.

We continue to aggressively manage our costs at the site level by carefully analyzing our materials, personnel and expenses. On Slide 16 you'll see the sales of metal in the second quarter were $50 million. We were affected by a brief shut down at Cerro Bayo relating to an electrical upgrade as well as mill start up issues, commissioning issues at Martha which affected our quarter-over-quarter performance. With both of those items resolved and San Bartolome now in production we are optimistic about our sales prospects for the third quarter and the fourth quarter of 2008.

On Slide 17 you'll see the last four quarters gross margin which is essentially metal sales less production costs. In the second quarter we maintained a solid gross margin of right at 50% despite being impacted by the Cerro Bayo temporary shutdown and Martha commissioning it's new stand alone milling facility. We consider gross margin a key bench mark and a key area of emphasis and focus as we transition our asset base to large longer life mines that Dennis was talking about earlier and we're maintaining this margin in an environment of cost pressure just for some examples Cerro Bayo and at Martha if you look at the first six months of this versus the first six months of last year. Labor costs on a per ton basis are up 37% and 47% respectively. Diesel costs are up at Cerro Bayo 39% and Martha 60%, first six months of this year versus last year. Power at Cerro Bayo for example is up 36% so in order to maintain I think we've done a good job of maintaining our margin and our cost profile in an environment of pretty intense cost pressure.

Turning to Slide 18, EBITDA for the second quarter was $11.7 million after adding back those predevelopment costs from Palmarejo that we prepared to run through our income statement. On Slide 19, you'll see our last four quarters of net income; our second quarter was a loss of 5.4 but adding back the Palmarejo predevelopment cost.

We would have reported net income of $5.3 million. the next set of slides take you through each of our current operations and just show the quarter-over-quarter and six months over six months comparisons of operating cash flow by mine and you will see that with the exception of Martha which was impacted by the transition to becoming a stand alone operation in the first half of the year. Each of our existing sites has improved. Its operating cash flow, contribution on both the quarterly and first six months basis, for example on Slide 20, you'll see Rochester's operating cash flow is currently up 25% year-to-date over the last year, contributed about $14.2 million to operating cash flow in the second quarter alone.

Flipping to Slide 21, you'll see that Cerro Bayo second quarter cash flow was $9.5 million and cash flow at that side is up about 112% year-to-date over 2007 and as I just mentioned, that Martha’s course only existing site to show negative operating cash flow year-to-date. However, its important to point out that operating cash flow at Martha through the first six includes nearly $12 million of increase in working capital, which reflects, primarily the lag and timing between when we produce silver and when we receive payment from our refineries. Without these timing adjustments, Martha would have contributed about 4.5 million in positive operating cash flow year-to-date.

Slides 23, 24 summaries our two Australian interest in Broken Hill and Endeavor, both of which continue to be strong performers, with Broken Hill contributing 5.6 million and Endeavor contributing 3.2 million to operating cash flow in the second quarter. Since 2005, Broken Hill has contributed over $40 million of cash flow to Coeur and Endeavor has contributed over 16.5 million of cash flow to the company.

Turning to CapEx on Slide 25, despite chart rate is down, our spending year-to-date just under 169 million. You'll see it’s fairly evenly distributed among our in the existing sites and then in San Bartolome. We expect the bulk of our remaining CapEx in 2008 to be spent on completion at San Bartolome, as well as continued CapEx at Palmarejo.

Slide 26, then I'll wrap up by discussing our liquidity and capital plan as of June 30. As I mentioned, we have cash equivalents and short-term investments of right $187 million. And a program to grow our cash flows at both our new mines and our existing mines. We are aggressively managing our spending on both the operating and capital cost, as well as aggressive working capital management.

Even in light of an escalating commodity cost environment, our CapEx budget has not changed. For the remainder of this year, the last six months of 2008, we expect to spend between $185 million and $215 million in capital spending. This of course includes the single largest component of our CapEx profiled Palmarejo project, and those capital costs as part of the feasibility study just went through a very thorough third party evaluation and updating.

At the current time, the company is comfortable that its existing cash plus cash flow from operations during the second half of the year will cover our second half capital expenditures.

We are continually reviewing the company's cash and spending forecast and we will continue to manage the company's spending including even a slowdown of spending at our projects if necessary. We expect to grow our cash flow in the second half which will lead to a further bolstering of our cash position.

With that, I'd like to turn the call over to Richard Weston and Don Birak, who will provide an update on our operations and exploration activities.

Richard Weston

Thank you Mitch. Silver productions asset for the second quarter is detailed on slide 28, and this was up 5% over the last quarter. You'll see that the 2.5 million ounces of silver production is well balanced and diverse across their six operating mines. While San Bartolome was a small contributor to our second quarter results, we had our first silver fall there in June, and we are very pleased to have completed the first shipment of DorE in July. And we expect San Bartolome to be a solid contributor to the second half results.

Looking at slide 29. In the second quarter Coeur reported gold production of 13,470 ounces, which was generated by three mines; Cerro Bayo in Chile, Rochester, and Martha. We look forward to the startup of Palmarejo this year, which we expect will contribute significantly to Coeur's gold and silver production in 2009.

At San Bartolome we continue to work through startup issues as Dennis discussed. We are currently repairing our gold-bearings and in the interim, are using a segment, one would use throughput. We expect to have this issue resolved this month. We are currently using an interim phase disposal area within the (inaudible) tailing facility, and expect this facility to be completed during the fourth quarter of 2009. In this initial year of production, we expect to produce 3.2 million ounces of silver, and remain on target for the projected 9 million ounces of production next year.

Turning to Palmarejo. We also made considerable construction progress at Palmarejo during the second quarter, and we remain on schedule for our March 2009 startup.

On Slide 31 through 34, we've provided some (inaudible) of the startup activities. The tailings dam, an environmental controlled dam, pre -construction works, well advanced. We have approximately 600 contract employees on site for construction activities. Fixed evaluation for the processing facilities, that the plants are bank inflated and contracts for mechanical piping and electrical work are in place.

On a community relations front, contractors have been forced to maintain a number of local community roads. I'm also pleased to report that some of our critical path items are actually ahead of schedule at this point. In particular, the underground development from our third portal and we remain very confident in our March 2009 start update.

On slide 35 we've provided a 3D image of Palmarejo. Over 1,200 meters of underground development and open pit free stripping activities are advancing as planned. Both mining shovels are currently pre stripping with the daily production rates of up to 50,000 metric tonnes being achieved. Work on the plant size growth and the main camp are well advanced and on schedule for the March 2009 startup.

Now Don Birak will discuss the exploration progress at Palmarejo.

Don Birak

Thanks Richard. An important milestone in the second quarter involved a completion of Palmarejo feasibility study. The study focused only on the Palmarejo deposit. We reported a total mineral inventory of nearly 100 million ounces of silver and 1.2 million ounces of gold in the proven, probably, measured and indicated categories. Contribution of Palmarejo alone has already significantly added to Coeur's mineral inventory. I'll find out again to this reserve growth outlined in the feasibility study covered just one of the three current silver and gold deposits to find -- with majority of the districts’ main targets having relatively little prior exploration, they just scratch the surface on the reserve potential at Palmarejo with much more exploration to follow this year and in the future. In particular, we're engaged in an intensive drilling program at the Guadalupe deposit. From the chart on Slide 38, you will see we've already recorded substantial gains from our early drilling.

Further increases are expected throughout the remainder of the year. We anticipate these will result in new reserves. At Palmarejo, we budgeted an US$8 million this year to expand and define the resources and reserves. This important program represents nearly 30% of Coeur's total 2008 exploration investment and we're pleased with the results so far.

In the first half of the year, we are focused as you might expect on completion of the projects’ first feasibility study, definition of the first proven and probable mineral reserves for this important property. Second half of 2008 will focus on reserve definition few technical drilling of Palmarejo and drilling to further expand and define Guadalupe, the second of three major mineralized structures in the district. We completed new mineral resource estimates of Guadalupe and we continue to drill there with three core drills currently.

We achieved a greater than 80% conversion rate of Palmarejo’s resources to reserves in the feasibility study and we're excited about the potential for Guadalupe to contribute in a similar fashion to future reserves.

Now let's take a closer look at Guadalupe on Slide 40. This deposit is located about five kilometers to the southeast of Palmarejo. Since we first visited Palmarejo, we've been impressed with the exploration potential of the whole district. In particular, setting and potential of Guadalupe with the main conjoined structure parallel to Palmarejo [defines] deeply to the northeast.

Images on Slide 50 compare the outlines of the mineralized zones sometimes referred to as clavos in Palmarjo and Guadalupe at the same vertical and horizontal scale. The 1250 and 750 meter elevations are shown comparison. Well Palmarejo is been well defined the exploration and definition drilling from the 1250 meter elevation to below 750 meters. It remains open at depth and on strike. As well, Guadalupe tops out at about to 1250 meters elevation, but so far has only been tested to about 950 meter step. From these images you can see the Guadalupe 2, remains open at dept and on strike.

As a result of new drilling, utilize at modeling, we recently completed the estimate of the now resources for Guadalupe. This major deposit now contains over 28 million silver and 383,000 ounces of gold in indicated resources and over 60 million silver and 271,000 gold ounces of inferred metal resources.

Slide 41 shows two, three dimensional views; the new model of Guadalupe on the bottom and that prior models in the upper lift corner. You can see where the outline of the mineralization has been expanded on strike and at depth, particularly the central and northern parts of deposit and where our internal gaps have been filled.

Put this back over to Richard to give you an update on operation for Cerro Bayo.

Richard Weston

Thank you, Don. At Cerro Bayo we were impacted by lower than expected tons and grades in time in the current (inaudible). We have worked aggressively to cut cost at that site and we have reduced slightly cost by 37% since October 2007. We now expect Cerro Bayo to produce 1.2 million ounces of silver and 22,000 ounces of gold during the balance of 2008 -- during 2009.

The Fabiola and Dagny veins discovered in June of last year is currently under development and our expected to contribute to production later this year and throughout 2009. And I let Don to fill you on that.

Don Birak

Okay. Thanks. Drilling to expand and define the current resources reserves and the Coeur’s estate at Cerro Bayo continued to gain at a high pace this quarter. As Richard mentioned, you recall it’s just a year that we discovered mineralization in Coeur’s estate and the Dagny and Fabiola veins. Since then we've drilled over 41,700 meters of Coeur and call our two portals to access the deposits.

In the map, here you can see all the new veins and the main Coeur’s estate area, about 1 kilometer east to the Cerro Bayo mill. Dagny and Fabiola are just two of many veins we have discovered in this area. Past quarter, our exploration efforts were directed to expansion and delineation of the resources or all the veins and tightly space drilling on Dagny to find new reserves.

We’re going to continue drill for us many of the year on these new important discovery. Let’s shift to our next slide, 44. In this longitudinal section, you can see the location of the 2007 discovery drill hole, which intersected ore grades, sliver and gold about 75 meters below the surface and you could see the outline of deposit to find to the end of June. Deposit is now over 700 meters long, approximately 150 meters in vertical extent and still open.

Now I turn this back to get the Richard to discuss operational progress in our Rochester Mine.

Richard Weston

Yeah. Thanks, Don. We currently engaged in the technical study to determine the potential for the conversion of 27.9 million contained ounces of silver and 183,000 contained ounces of gold resources in various areas of the mine to provide for additional production at Rochester.

Rochester is currently in residually leach mines and has been performing ahead of budget throughout the year. We expect our optimization review to be complete during fourth quarter 2008. And we now expect Rochester to produce 3.1 million ounces of silver in 2008, a substantial increase over our earlier guidance which was just 1.8 million ounces for the year.

Don Birak

Okay. We'll just start again. We continue to explore at Rochester to test new structures that we think are potential to host high grade mineralization. Perhaps speeder structures for the large bulk (inaudible) Rochester deposit and to facilitate conversion of the mines large, additional measure and indicative to proven and probable status.

On slide 46, additional measures and indicated resources to prove an improbable status. On Slide 46, you can see a three-dimensional image of the current Rochester mine [18 0:06] in gray, and some of the remaining measured and indicated mineral resource blocks beneath and peripheral to the mine limits.

As Richard mentioned, the current mineral resources totaled over 183,000 gold ounces, and over 27 million ounces of silver, modeled with metal prices of $600 gold and $11 silver. This year we will conduct a program to confirm our model of the remaining resources, especially higher grade sessions and prepare a new model with metal prices to be used and to be used by our engineers in their technical and economical evaluation. In addition, we'll continue to test structures in a district that have potential to host high grade silver and gold.

Last year, our program targeted two such structures exposed in the bottom of the Rochester pit, the pump, and the counterfoil, you might remember those, and that program of seven Coeur holds validated this exploration concept. And I'll turn this back over to Richard to discuss our other operating lines.

Richard Weston

Yeah, thanks Don. At Martha, we have shown substantial improvement in throughput during the last quarter. We completed commissioning of the mill, and we expect growth to meet or exceed expectations in the second half of the year. Our guidance for Martha stands at 3.2 million ounces of silver for 2008.

On Slide 48, we are looking at production Coeur's two operating interests in Australia, Broken Hill and Endeavour at Cobar. Both were impacted by the unfavorable pricing situation for lead and zinc during the quarter. Coeur has now recouped 100% of its initial investment at the Broken Hill Mine, and 37% of its total investment in Endeavour. We now expect 2008 silver production from Broken Hill; of approximately 1.4 million ounces, and 2008 production from Endeavour of approximately 900,000 ounces of silver.

Now I'll turn this back to Dennis.

Dennis Wheeler

Thanks Richard. We believe Coeur continues to benefit from nervous that we believe long term and robust precious metals environment which by most measures we expect to continue. We believe that investors will continue to seek out metals as a safe heaven in this current global convergence of financial instability, hardened economic concerns and political pensions.

Most precious metal analysts have forecasted continued strength of our metals going forward. I'm sure many of you have seen the recent writers poll of 36 analysts and traders that show consensus 2008 price estimates of $17.50 per ounce of silver and $930 per ounce of gold. We do remain bullish on both of our metals and we're thoroughly convinced that the execution properly of our strategy of bringing new long life sustainable mines into production. It's the best path to maximize our share holder returns.

We are exited as we look forward to the remainder of this year and into 2009. With our goals and our resolve stiffened and consistent this includes reaching design capacity at San Bartolome, advancing Palmarejo construction and production to a March 2009 startup on schedule and on budget. We expect Martha to deliver increased silver production at lower costs and we believe that Rochester will continue to outperform.

We're also looking forward to a resolution related to the Kensington tailings facility and we plan through our robust exploration program to continue to expand our reserve and resource base. We will continue to further strengthen the Coeur team by adding top notch management and technical personnel throughout the year and lastly we'll continue to manage cost effectively as an industry leader in efficient cost of production. I can assure you we have a dedication and fervor today to do whatever needs to be done to get all of these projects done right. Indeed we expect these to continue to be exciting times in precious metals market and we're looking forward to keeping you posted and well informed on our progress as we go out throughout the balance of the year. Thank you very much for joining us today and we're ready to take your questions.

Question-and-Answer Session

Operator

(Operator instructions). The first question is from George Bernstein with Deutsche Bank.

George Bernstein - Deutsche Bank

Hi, good morning gentlemen. Just picking up on the theme of keeping the market well informed, did I miss a press release about the potential miss on Cerro Bayo of 2 million ounces?

Mitchell Krebs

Hi this is Mitch. No, the updated Cerro Bayo guidance is new as of this morning's release.

George Bernstein - Deutsche Bank

Okay. I just wanted to make sure I didn’t miss something there and if you could just, I just want to kind of come through on a mine-by-mine basis, what the updated latest guidance is? You are mentioning now Rochester could produce 3 million ounces for the full year but is this change in guidance that Rochester related simply to the fact that you ended up not selling it and another words the run that Rochester is throwing off. I think you had kind of been toned on previous guidance about 1.5 million ounces assuming it was sold mid year. So is the change that you're actually increasing, the guidance at Rochester or just simply now reflects the full year impact of keeping Rochester on balance sheet.

Mitchell Krebs

It's a good question, it's Mitch again. No, the original budget for the year included Rochester for the full year. This is strictly related to the fact that silver is being recovered from the heaps at a faster rate than anticipated earlier in the year. So this is truly just an increase in production for the year from Rochester from, I think 1.8 up to the 3.1.

George Bernstein - Deutsche Bank

Okay. So that's a net 1.3 increase. And then, at Cerro Bayo, what is your updated '08 and '09 forecast?

Mitchell Krebs

'08 is now 1.2 and we have not put out any '09 guidance, mind-by-mind.

George Bernstein - Deutsche Bank

And the prior guidance for Cerro Bayo was 2?

Mitchell Krebs

Yeah, I think 2.1.

George Bernstein - Deutsche Bank

It's a change to 0.8, okay. Martha?

Mitchell Krebs

3.2.

George Bernstein - Deutsche Bank

And it increased to 0.4. Broken Hill?

Mitchell Krebs

1.4.

George Bernstein - Deutsche Bank

And Endeavor?

Mitchell Krebs

0.9.

George Bernstein - Deutsche Bank

Okay. So then, the change of guidance of about a negative of a million tones. Sorry, a million ounces?

Mitchell Krebs

Those five operations, the numbers I just ran through to get to you right to about 10 million ounces.

George Bernstein - Deutsche Bank

Okay. And then, on San Barts, if we could just understand a little bit more clearly the operational pushback there and how confident you are now that you will hit the 2 million ounce run rate in the third and fourth quarter?

Mitchell Krebs

Yeah, I'll let Richard handle that one all [indiscernible]. Thanks.

Richard Weston

Yeah, hello [indiscernible]. Forecast for the balance of 2008 at San Bart is 3.2 million ounces for the year.

George Bernstein - Deutsche Bank

Okay. So then you are implicatively sort of reducing your 2 million ounce run-rate to about 1.6% per quarter?

Mitchell Krebs

Not -- it's Mitch again. The 3.2 would not be split up equally between the third and fourth quarters. We'll plan to see a continued ramp up between now and at the end of the year month by month, so that, that 3.2 would be more weighted towards the fourth quarter versus the third.

George Bernstein - Deutsche Bank

Okay. And then, are you still standing by the '09 guidance on San Bart?

Mitchell Krebs

Yes. We are.

George Bernstein - Deutsche Bank

Okay. And just also on the acceleration of the Palmarejo project, I also wanted to understand -- I'm sorry I thought I heard Dennis mention that you were moving that project forward to March of '09 startup?

Mitchell Krebs

That's correct.

George Bernstein - Deutsche Bank

And are you sticking by the full year prior year guidance there or will this lead to an increase in the full year '09 guidance now because of the extra quarter pick up of production?

Mitchell Krebs

No, we are sticking with the guidance that we put out there for Palmarejo for 2009 of 5.1 million ounces of silver.

George Bernstein - Deutsche Bank

Okay. So despite now three quarters of operation you are maintaining the full year guidance. Okay. Thank you.

Operator

(Operator Instructions). The next question is from John Bridges with JP Morgan.

John Bridges - JPMorgan

Hi Dennis, hey everybody. Sorry to be repetitious, but on San Bart, what were the tonnes and grades and recoveries you got during the quarter? Are we trying to put them into our model?

Karli Anderson

Okay. Hey John, we'll follow up with you on that one. This is Karli.

John Bridges - JPMorgan

Hi Karli. Okay, quarter two CapEx?

Mitchell Krebs

Quarter two, just the second quarter?

John Bridges - JPMorgan

Yeah.

Mitchell Krebs

Yes, for the first six months it was 168, which included the $25 million payment to Endeavour in the first quarter. So the second quarter CapEx number was company-wide; was about $105 million.

John Bridges - JPMorgan

Okay. You made reference of the potential to slow down spending on some of these things to manage your cash flows. What are your cash flows looking like now for the second half?

Mitchell Krebs

We are looking at operating cash flow in the range of $60 million to $75 million.

John Bridges - JPMorgan

Okay. And capital spending?

Mitchell Krebs

We are looking at somewhere between 185 and 215.

Dennis Wheeler

John, I'd like to add further that we don't have any present intention at Coeur to slow down CapEx spending, places like Palmarejo. What we're signaling to you and the other people on the call today is that we'll be very disciplined in the way we manage our cash in this environment, and we'll do what we need to do to ensure the financial integrity of the company.

John Bridges - JPMorgan

Yeah. While you've been through some tough times before in the 1990s, I seem to remember, when the silver price was just $5.

Dennis Wheeler

Yes.

John Bridges - JPMorgan

And do you have a Q2 CapEx number for San Bart?

Mitchell Krebs

Yeah, it was right around $30 million John.

John Bridges - JPMorgan

Okay, okay guys, good luck.

Dennis Wheeler

Thanks John.

Mitchell Krebs

Thanks.

Operator

There are no further questions at this time. I would like to turn the conference back over to Dennis for any closing remarks.

Dennis Wheeler

We'd like to thank all of you for joining us here today. And we can assure you we'll keep you closely informed on developments within the company as we go through the balance of this year. Thanks again.

Operator

Ladies and gentlemen thank for you participating in today's conference call. You may now disconnect.

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