Coeur Mining (CDE) repaid $109.3 million of its debt in 3Q16. After this, the company’s interest expenses fell 26% quarter-over-quarter and 35% year-over-year. Over the past 12 months, Coeur Mining’s debt has fallen more than 25%, or ~$400 million.
During its 3Q16 earnings call, Coeur Mining’s CEO, Mitchell Krebs, noted, “Our objective is to achieve and maintain a balance sheet that is among the strongest in the industry and is flexible and capable of supporting the business’ future growth initiatives.”
Declining financial leverage
As you can see in the above graph, Coeur Mining’s net debt-to-EBITDA ratio was 3.6x at the end of 3Q15. It fell to 0.9x at the end of 3Q16, a 75% improvement. Going forward, margins could expand further if the outlook for precious metal prices remains bright and the focus remains on improving grades, enhancing recoveries, and containing costs.
This would help improve its financial leverage going forward. Coeur Mining’s liquidity position remains comfortable, with $223 million in cash at the end of 3Q16.
Coeur Mining (CDE) announced a $200 million at-the-market stock offering in September 2016. On October 25, 2016, it had sold 7.6 million shares with net proceeds of ~$90 million. The company intends to use these proceeds to reduce its debt further.
Krebs noted during the 3Q16 earnings call that assuming the company is successful in this initiative, its debt at the end of 2016 should be below $200 million. The company should also have a net cash position at the end of the year, which would also decrease its interest expenses significantly.
At the start of 2016, the company’s interest expenses totaled $42 million. Assuming the completion of the equity transaction, its interest expenses would be closer to $15 million.
First Majestic Silver (AG) also offered equity in 2016 with the intention of using the proceeds for development and exploration activities. Iamgold (IAG) turned to equity markets with a bought deal for 38.9 million shares to raise $200 million.