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Coeur Mining Upgraded Its 3Q16 Production Guidance

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Production guidance upgrade

In 3Q16, Coeur Mining’s (CDE) silver and gold production levels were slightly lower than market expectations. The company produced 3.5 million ounces of silver and 84,871 ounces of gold.

During its 3Q16 earnings call, Coeur Mining’s CEO, Mitchell Krebs, listed three main factors responsible for its lower-than-expected production:

  • Palmarejo’s production was impacted by scheduled enhancements at both Merrill-Crowe circuits, which the company expected. The company expects to see 1%–2% improvements in future silver and gold recovery rates from this project.
  • At Kensington, Coeur Mining lost 11 days due to a clogged pipeline.
  • Civil unrest in Bolivia between the federal government and the cooperative groups led to a road blockage that prevented third-party high-grade purchases.

Despite these one-off events, Coeur Mining (CDE) upgraded its 2016 operating production guidance from 33.8 million–36.8 million silver equivalent ounces (or SEO) to 34.4 million–37.0 million SEO. As its Palmarejo mine transitions into higher-grade, higher-margin underground operations, production is expected to accelerate going forward.

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Mine-by-mine production

The Palmarejo Complex is Coeur Mining’s silver and gold mine in Mexico. In 3Q16, Palmarejo produced 933,000 ounces of silver and 16,608 ounces of gold. This production was above expectations because Guadalupe achieved 2,300 tons per day (or tpd) compared to the target mining rate of 2,200 tpd.

Coeur Mining (CDE) increased its 2016 production guidance from 3.9 million–4.4 million silver ounces to 4.1 million–4.6 million silver ounces.

Coeur Mining delivered slightly weaker volumes at Rochester, Nevada, due to a longer-than-expected recovery time from the Stage III leach pad. The company said that as crushing rates and tons increase, production is expected to accelerate throughout the year.

At its Kensington, Alaska, operations, mill downtime at the end of 3Q16 due to a blocked tailings line led to an 18% fall in production quarter-over-quarter. The company noted that the development of a fall in the high-grade Jualin deposit is progressing well, with initial production expected in the second half of 2017.

Peer production

Among Coeur’s peers (SIL), Pan American Silver (PAAS), Hecla Mining (HL), Silver Standard Resources (SSRI), and Newmont Mining (NEM) are also trying to increase their production levels at the lowest possible costs.

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