After declining for the past few years, shares of Coeur Mining (CDE, Financial) seem to have hit the bottom in November last year when the company touched its 52-week low. Since then its shares doubled, until recently when the company reported its fourth quarter result and again started falling. Interestingly the consolidation didn’t last long, or in other words it did not touch its previous low and bounced back at a sufficiently higher price above the previous low. Although this may sound like technical analysis; but it is a strong indication of an upside momentum. Let’s consider its fundamentals, which would form the base of actual growth in the long run.
Trying to improve
Although Coeur is putting in a lot of effort to reduce costs, it seems that these initiatives are not sufficient to bring the company back on track. The numbers for the fourth quarter were not encouraging, as revenue declined 17.7% to $140.6 million from a year ago period, while losses widened to 37 cents a share compared to 18 cents last year.
In addition, the company recently acquired Paramount Gold and Silver, located near Palmarejo, which is yet another source of high grade ore and Coeur hopes to develop it quickly for very little capital. Coeur anticipates that once this project is online alongside Guadalupe, it will be able to produce high-margin cash flow for the next eight years with an annual production profile of about 6 million-ounces of silver and about 110,000 ounces of gold. Both these efforts look good and should contribute to its long term growth.
Further, Coeur also completed the acquisition of Wharf Gold mine from Goldcorp for $105 million. This new addition is expected to give an immediate boost to its cash flow, while reducing its overall costs and also increase its 2015 EBITDA by more than 30%. Wharf is an open pit mine, expected to produce 85,000 to 90,000 ounces of gold in the current fiscal at an all-in sustaining cost of $800 to $875 per gold ounce, which will increase Coeur’s total gold reserve by 24%. This will further add to its top line in the coming days and enhance its business.
Conclusion
The company currently does not have any trailing or forward P/E because of its year over year losses, but its PEG ratio and P/S ratio of 0.32 and 0.93 are quite good compared to the industry average. The stock has declined considerably in the past year, which gives it sufficient space for an upside rally. Therefore, in the light of these facts, investors can consider adding this stock to their portfolio.
