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What’s behind Coeur’s Robust EBITDA Margins Going Forward?

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Jan. 10 2017, Updated 9:06 a.m. ET

Beating earnings expectations

Coeur Mining (CDE) has delivered earnings beats for five of the last eight times that it recorded EPS (earnings per share). Analysts are expecting EPS of $0.10 for 4Q16.

The company reported positive EPS in 2Q16 after a gap of many quarters. Strong prices for precious metals led to positive EPS.

Coeur Mining is trying to lower its costs. Its AISC (all-in sustaining costs) per realized silver equivalent ounce (or SEO) for 2015 was $14.62. That was an impressive improvement of 22.0% year-over-year. For 2016, Coeur has an AISC guidance of $16–$17.25 per SEO.

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EBITDA margins

Coeur’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 3Q16 was $62.7 million, implying an EBITDA margin of 35.6%. Analysts expect Coeur’s 4Q16 EBITDA to be $55.8 million, implying an EBITDA margin of 30.0%.

Coeur’s EBITDA margin was just 15.6% in 2015. Higher margins in 2016 came mainly on the back of higher precious metal prices. Expectations of lower margins in 4Q16 also come on the back of lower precious metal prices in the fourth quarter.

Coeur’s expected EBITDA margin for 2016 is 34.5%. The margin should rise to 41.4% and 45.8% for 2017 and 2018, respectively. In 2016, the company is expecting higher costs at some of its mines, including the San Bartolomé mine. However, in 2017, costs should normalize, leading to higher EBITDA margins going forward.

Coeur’s peers

Coeur Mining’s silver peers (RING) such as Hecla Mining (HL), Silver Standard Resources (SSRI), Pan American Silver (PAAS), and senior peers Newmont Mining (NEM) and Barrick Gold (ABX) are trying hard to reduce their costs in order to manage the volatility in precious metal prices.

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