Coeur Mining Inc. (CDE, Financial), the biggest producer of silver in the U.S., reported financial results for the fourth quarter and full-year 2016 on Feb. 8.
Coeur reported adjusted EPS of one cent, a 96% decrease from the previous quarter and a 103.2% increase on a year-over-year basis. It missed expectations on adjusted EPS by 10 cents, generating a negative surprise of 90.90%.
The decrease in adjusted EPS, compared to the previous quarter, was due to an 8.8% decline in the price of gold per troy ounce and a 12.44% decrease in the price of silver per ounce on the markets from the third quarter of 2016 to the fourth quarter of 2016.
For the year, Coeur reported an adjusted EPS of 29 cents, a 136.3% increase from 2016 when it reported a loss of 80 cents.
Concerning revenue, Coeur generated $159.2 million for the quarter, a 10% decline from the previous quarter. For the year, the miner generated revenue of $665.8 million, a 3% increase on a year-over-year basis.
With 3.4 million ounces of silver sold at an average realized price of $16.64 per ounce and 87,108 ounces of gold sold at an average realized price of $1,170 per ounce, sales of the precious metals accounted for approximately 33% and 67% of the total revenue for the quarter.
For the entire year, gold and silver's contribution to total revenue was approximately the same as it was for the quarter.
Besides a lower market price, the company says the average realized price per ounce of gold sold was also impacted by an $800 payment to Franco-Nevada Corp. (FNV).
Coeur Mining sustained costs applicable to the sale of gold and silver of $102 million for the quarter and $409.5 million for the year, respective decreases of 18.6% and14.6% on a year-over-year basis. Â The company says “lower unit costs, increased operating efficiencies, lower input costs and more favorable currency exchange rates” led the decrease in costs applicable to sales.
During the quarter, Coeur produced 3.9 million ounces of silver, a 2.5% decline on a year-over-year basis, and 102,500 ounces of gold, a 12% increase on a year-over-year basis.
For the year, the company produced approximately 14.8 million ounces of silver, a decrease of 1.1 million ounces from 2015, and 358,170 ounces of gold, an increase of 30,262 ounces compared to the prior year.
The increase in 2016 gold production was primarily driven by operations at the Wharf mine in South Dakota, where production increased almost 40% on a year-over-year basis as a “result of two additional months of production, as well as improved grades and plant recovery rates.” In addition, a higher gold grade processed at the mine lowered the operating costs.
Wharf contributed approximately 30% of the company’s total gold production for 2016, followed by Kensington in Alaska with 35%, Palmarajo in Mexico with 21% and Rochester with 14%.
The decrease in silver production was impacted by the 14% year-over-year decline at Palmarejo due to the transition “from Palmarejo operations to higher-grade underground operations at Guadalupe and Independencia.”
For 2017, the company expects to produce between 16.4 million and 18 million ounces of silver and between 362 thousand to 387 thousand ounces of gold. These figures will lead to a production of between 38.1 million and 41.2 million silver-equivalent ounces.
Coeur Mining closed fiscal year 2016 with approximately $162.2 million in cash on hand and securities that can be readily converted into cash. The total debt amounted to $210.9 million, of which $12 million must be repaid within a year. It has approximately $198.9 million in long-term debt.
Therefore, the net debt (total debt minus cash and cash equivalents) is $48.7 million as of Dec. 31, 2016, for a net debt to EBITDA ratio of 0.2 times, a significant improvement due to the repayment of corporate loans.
This is very important since it suggests the company can take on additional debt to fund its projects and mine expansions should the operating cash flow not be sufficient to sustain the organic growth.
Coeur Mining closed at $12.02 per share yesterday, up 34 cents or 2.91% from the previous trading day, with a volume of 3,578,102 shares traded on the New York Stock Exchange.
As of today, analysts recommend buying the stock. The average target price per share is $12.83, which represents a 6.7% upside from the current share price.
The stock is trading at 3.93 times the book value and at 12.60 times the Ebitda.
Disclosure: I have no positions in Coeur Mining Inc.
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