GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Coeur Mining: Insiders Are Buying Below Book Value

August 10, 2014 | About:
maarnio

maarnio

2 followers

1. The Company

Coeur Mining (CDE) is engaged in the ownership, operation, exploration, and development of silver and gold mining properties primarily in the United States, Mexico, Bolivia, Argentina, Australia, Ecuador, and Chile.

Shares outstanding (August 5, 2014)

103,466,078

Warrants

1,588,768

Share price

$7.97

Market cap

$824.6 million

Enterprise value

$988.0 million

P/S

1.1

P/B

0.5

Ticker

CDE

1.1 History

  • The company was formed in 1928 to mine silver in the Coeur d’Alene region of Idaho.
  • In April 2013, Coeur acquired Orko Silver Corp.
  • In May 2013 the company changed its name to Coeur Mining from Coeur d’Alene Mines.

1.2 Business Model

Coeur’s goal is to produce and protect value for stakeholders through operating consistently, delivering high-return growth and increasing reserves and resources per share.

nimetön.png

(Source: Investor presentation)

1.3 Assets

Coeur has five operating mines and several royalty and development stage projects.

nimetön.png

(Source: Fact Sheet)

Coeur’s P&P reserves are 523.5 million silver equivalent ounces or 5.08 ounces per share.

nimetön.png

(Source: Earnings release)

2. Management

The CEO Mitchell Krebs joined Coeur in 1995. Mitchell Krebs was named President and CEO in July 2011. Collectively, Coeur’s management team has over 270 years of industry experience.

nimetön.png

(Source: Investor presentation)

2.1 Insider Ownership

Coeur’s directors and executive officers own 0.5% of the company.

Here is a table of Coeur’s insider activity during the last 30 days.

Name

Title

Trade Date

Shares Purchased

Current Ownership

Increase InShares

Mitchell Krebs

CEO

Aug 8

10,000

160,657 shares

+6.6%

Peter Mitchell

CFO

Aug 8

2,000

61,523 shares

+3.4%

Keagan Kerr

VP

Aug 8

750

46,209 shares

+1.6%

Casey Nault

VP

Aug 8

2,000

56,090 shares

+3.7%

There have been 14,750 shares purchased by insiders during the last 30 days.

Here is a table of Coeur’s insider activity by calendar month.

Insider buying / shares

Insider selling / shares

August 2014

14,750

0

July 2014

0

0

June 2014

0

0

May 2014

0

0

April 2014

0

0

March 2014

0

0

February 2014

0

0

January 2014

0

0

December 2013

0

0

November 2013

8,650

0

October 2013

0

0

September 2013

650

0

August 2013

3,000

0

July 2013

0

0

June 2013

0

0

May 2013

0

0

April 2013

0

0

March 2013

0

0

February 2013

1,000

0

January 2013

0

0

There have been 28,050 shares purchased and there have been zero shares sold by insiders since January 2013.

2.2 Compensation

Here is a table of the management’s compensation during the last three years.

nimetön.png

(Source: Proxy Statement)

The management’s total compensation was highest in 2013.

3 Operating Summary

Here is a table of Coeur’s annual silver and gold production since 2004.

Year

Silver production (ounces)

Gold production (ounces)

2004

14,135,148

129,686

2005

13,722,600

134,227

2006

12,813,986

116,254

2007

11,488,129

92,014

2008

9,429,896

24,354

2009

16,868,197

72,112

2010

16,761,735

157,062

2011

19,078,251

220,382

2012

18,025,206

226,486

2013

17,011,193

262,217

Silver production has averaged 14,933,434 ounces and gold production has averaged 143,479 ounces since 2004.

4. Financial Summary

4.1 Current Situation

Coeur reported the second-quarter financial results on August 6 with the following highlights:

Revenue

$164.6 million

Net loss

$43.1 million

Cash

$316.8 million

Debt

$480.1 million

Silver production

4.5 million ounces

Gold production

61,025 ounces

All-in sustaining costs per silver equivalent ounce

$19.89

nimetön.png

(Source: Earnings release)

Silver production increased 10% compared to the first quarter, and gold production increased 4% compared to the first quarter.

4.2 Historical Developments

Here is a table of Coeur’s revenue and earnings since 2004.

Year

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Revenue ($ in millions)

109.0

156.3

216.6

215.3

189.5

300.4

515.5

1,021.2

895.5

746.0

Net income / loss ($ in millions)

-16.9

+10.6

+88.5

+43.9

-0.6

-27.1

-91.3

+93.5

+48.7

-650.6

EPS (diluted)

-0.80

+0.40

+3.00

+1.41

-0.01

-0.38

-1.05

+1.04

+0.54

-6.65

(Note: Coeur had an 1-for-10 reverse stock split on May 26, 2009. The EPS numbers have been adjusted accordingly.)

The revenue has grown +584% since 2004. In 2013, there was a $772.8 million impairment charge on the carrying values of Palmarejo and Kensington.

5. Shares

Here is a table of Coeur’s number of shares since 2004.

Year

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Number of shares (basic) (millions)

21.6

24.3

27.1

28.6

55.1

71.6

87.2

89.4

89.4

97.9

Number of shares (diluted) (millions)

21.6

24.4

29.6

31.1

55.1

71.6

87.2

89.7

89.6

97.9

(Note: Coeur had an 1-for-10 reverse stock split on May 26, 2009. The number of shares have been adjusted accordingly.)

Coeur’s number of shares have grown 353% since 2004, but revenue has grown 584%.

nimetön.png

(Source: GuruFocus)

6. Outlook

Coeur’s capital expenditures are expected to be lower in 2014 than in 2013.

nimetön.png

(Source: Earnings release)

Coeur’s 2014 silver production guidance is 17,000,000 - 18,000,000 ounces and gold production guidance is 225,000 - 240,000 ounces.

nimetön.png

(Source: Earnings release)

7. Valuation

Coeur trades at EV/EBITDA ratio of 7.8, which is below the peer average.

nimetön.png

(Source: Investor presentation)

8. Risks

The main risks are negative earnings, the price of gold, and the price of silver. Coeur extended its downside metal price protection program during the second quarter, using put spreads to protect 25% - 40% of expected future production against a sharp decrease in metal prices.

nimetön.png

(Source: Earnings release)

9. Conclusion

There have been four different insiders buying Coeur this month, and there have not been any insiders selling Coeur since January 2013. The stock is currently trading at a P/B ratio of 0.5. I believe Coeur could be a good pick below $10 based on the insider buying.

chart.ashx.png

Disclosure: The author is long CDE.

About the author:

maarnio
I have 15 years of investing experience. I have traded stocks, commodities and Forex markets.

Rating: 5.0/5 (2 votes)

Voters:

Comments

dmullinax
Dmullinax - 2 weeks ago

Thank you, Markus for providing this information. Seems to be a consistent trend among mining companies right now.

Do you also follow technical analysis, such as stochastics and volume? Looking at a six month chart for CDE, what price would you recommend as an entry?

maarnio
Maarnio - 2 weeks ago

Dmullinax,

The insiders purchased below $8:

http://www.openinsider.com/search?q=cde

So I believe you could buy some below $8 as well.

The stochastics are currently below 20, could get a buy signal from there shortly:

http://stockcharts.com/h-sc/ui?s=CDE&p=D&b=5&g=0&id=p17689578240

dmullinax
Dmullinax - 1 week ago

The stochastics look like a screaming buy this morning at 6.85, and just purchased some calls. Thanks Marcus. Please keep your articles coming.

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK