Investment Thesis
Chicago-based Coeur Mining (NYSE: NYSE:CDE) released its first-quarter 2021 results on April 29, 2021.
CEO Mitch Krebs said in the conference call:
"...first quarter results were in line with our expectations and represent a strong start to the year. We're feeling confident in our ability to accomplish our key objectives and achieve full year guidance at each of our sites."
The investment thesis is to invest carefully in this volatile sector, notably since silver has experienced a surge due in part to speculative trading. Coeur Mining is still mostly a gold miner, but its silver production is significant and could be predominant if Silvertip mine resumes production.
My recommendation is to trade short-term volatility and keep a medium- to long-term position. The balance sheet is looking great now, and the stock is experiencing a sell-off that I see as an opportunity to accumulate below $8.25.
CDE had an impressive increase in January 2021 and outperformed the iShares Silver Trust ETF (NYSEARCA: SLV) and the VanEck Vectors Gold Miners ETF (GDX). However, the first quarter put an abrupt end to the ascending trend.
Below is the historical data for two of the company's primary gold mines:
1 - Palmarejo mine.
2 - Kensington mine
On April 29, 2021, Coeur Mining Announced Its First Quarter 2021 Results
First-quarter production in silver/gold equivalent ounce
Production for the first quarter was lower sequentially. CEO Mitch Krebs said in the conference call:
"These results were supported by the overall performance of our portfolio, particularly for gold. With over 85,000 ounces of gold produce and the first quarter expected to be our weakest of the year. We're feeling good about being a quarter of the way towards the midpoint of our full year production guidance, which is ahead of the 22% we indicated earlier this year."
Coeur Mining produced 85,225 Au Oz of gold (sold 83,112 Au Oz) and 2.403 million Ag ounces (sold 2.436 Ag Moz) during the first quarter. Average realized gold and silver prices for the quarter are $1,664 per Au Oz and $26.19 per Ag Oz, respectively. Below is the historical price for both metals.
Not much has been said about the Silvertip mine on care and maintenance since February 2020 after booking a $251 million impairment charge.
Coeur Mining plans to provide some additional updates on progress throughout the year, including one in a few weeks that will focus on Silvertip and Crown.
Note: 2020 proven and probable reserves 14.6M oz Ag and 296.1M lbs Zn and 193.2M lbs Pb
Coeur Mining: Financials And Production In 1Q 2021 - The Raw Numbers
| Coeur Mining | 1Q'20 | 2Q'20 | 3Q'20 | 4Q'20 | 1Q'21 |
| Total Revenues in $ Million | 173.2 | 154.25 | 229.73 | 228.32 | 202.12 |
| Net Income in $ Million | -11.9 | -1.2 | 26.86 | 11.88 | 2.06 |
| EBITDA $ Million | 25.1 | 34.9 | 76.91 | 76.38 | 49.69 |
| EPS diluted in $/share | -0.05 | -0.01 | 0.11 | 0.05 | 0.01 |
| Cash from operating activities in $ Million | -7.99 | 9.95 | 79.46 | 67.29 | -4.36 |
| Capital Expenditure in $ Million | 22.21 | 16.68 | 23.00 | 37.39 | 59.42 |
| Free Cash Flow in $ Million | -30.20 | -6.74 | 56.47 | 29.90 | -63.78 |
| Total Cash $ Million | 52.9 | 70.9 | 77.15 | 92.79 | 154.07 |
| Total Debt (including lease obligation) In $ Million | 343.1 | 348.6 | 301.1 | 275.5 | 412.1 |
| Shares outstanding in Million | 240.3 | 240.9 | 243.83 | 244.18 | 244.5 |
Data Source: Company release
Analysis: Revenues, Free Cash Flow, Debt, And Production Details
1 - Revenues and trends - Revenues were $202.12 million in 1Q'21
Coeur Mining posted $202.113 million in revenues with an EBITDA of $49.693 million and negative cash flow from operating activities of $4.359 million. The adjusted net income was $13.94 million or 0.06 per share.
The company reported a net income of $2.06 million, or $0.01 per share compared to a loss of $0.05 per share the same quarter a year ago.
2 - Negative Free cash flow was $63.8 million in 1Q'21
Note: Generic free cash flow is cash from operations minus CapEx
Coeur Mining's free cash flow for the first quarter of 2021 was minus $63.8 million, and the yearly free cash flow was $15.85 million.
With such a loss in free cash flow during the first quarter, the company could not afford a dividend.
3 - Available capital, net debt, and liquidity
Total debt increased to $412.125 million, and net debt is $258.06 million — net debt to Adj. EBITDA was 0.9X, which is still excellent. However, the recent financing indicated below shows a sharp net debt increase this quarter.
For financial ratios, please see below:
Source: CDE presentation
4 - 2021 Outlook is unchanged
Coeur Mining kept full-year 2021 production guidance of 322.5-367.5K oz. of gold, 9.7-12.15M oz. of silver.
Source: Q1 Presentation
Note: The total proved and probable gold and silver reserves, as of December 31, 2020, increased 22% and 42% from the reserves in 2019. Below are the details:
Source: Presentation
Conclusion and Technical Analysis
Coeur Mining is great gold and silver miner with a solid financial profile and strong growth potential, especially with Rochester in Nevada.
The mine saw major construction activities starting in January 2021 and are expected to be completed in late 2022 or early 2023.
So, it is a big deal for the company. Unfortunately, the market was not looking favorably at the increased CapEx involved and reacted to the immediate loss in free cash flow.
As we can see in the presentation, Coeur Mining plans to increase CapEx by almost three-fold this year, mostly on Rochester's expansion project.
Source: Presentation
Unlike many other gold miners, the stock experienced a strong uptrend in correlation with the silver price, which closed on Friday at $25.93 per ounce after reaching nearly $29 per ounce in February.
Source: Kitco
Technical Analysis (short term)
CDE formed a symmetrical wedge pattern which ended on Friday with a typical breakdown with higher volume.
I estimate the next support at around $7.75, and the old support is now turning into resistance at $9-$9.50. I believe CDE is now in the buying range territory confirmed by the RSI approaching an oversold territory at 35.
The trading strategy now is to accumulate at or below $8.25, expecting lower support at $7.75. The nearest sell partial target (about 35%) should be around $9.15.
Warning: Those numbers cannot be precise, and the TA chart must be updated often to be helpful in your search for the best path strategy.
I am offering here a quick interpretation only. I regularly update the TA chart for my subscribers through my over 80-stock tracker.
Author's note: If you find value in this article and would like to encourage such continued efforts, please click the "Like" button below as a vote of support. Thanks!
Join my "Gold and Oil Corner" today, and discuss ideas and strategies freely in my private chat room. Click here to subscribe now.
You will have access to 57+ stocks at your fingertips with my exclusive Fun Trading's stock tracker. Do not be alone and enjoy an honest exchange with a veteran trader with more than thirty years of experience.
"It's not only moving that creates new starting points. Sometimes all it takes is a subtle shift in perspective," Kristin Armstrong.
Fun Trading has been writing since 2014, and you will have total access to his 1,988 articles and counting.
