Silver Miner Coeur d'Alene: Still One to Watch

| About: Coeur Mining, (CDE)

Coeur d’Alene Mines (NYSE:CDE) is one of the few mining companies that focuses on primary silver mines (most silver is mined as a by-product of other metals) although they do mine some gold as well. We were attracted to them several months ago because the stock was trading at a discount to what we calculated as the intrinsic value of the reserves they own. It still is – at $16.50 a share we calculate it’s at a 17% discount to the NPV of reserves less production costs and taxes.

Their 2Q10 earnings were good, and management guidance on full year production was up modestly. The company’s much criticized purchase of Palmarejo in Mexico is beginning to pay off, and their Kensington gold mine in Alaska became operational ahead of schedule. They own a mine in Bolivia that was recently the target of local protesters which distrupted deliveries from the mine (though apparently not production). The company reported earlier this week that the Bolivian government had intervened with the protesters and production is not affected.

CDE has been surprisingly firm and is not as correlated with the price of silver as is normally the case, although there’s no news out to suggest why. Nonetheless, we continue to believe it is relatively cheap to its assets.

Disclosure: Long CDE

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