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Why Coeur Mining’s Analysts Expect Its Margins to Drop in 2017

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Sep. 1 2017, Updated 7:36 a.m. ET

Coeur’s revenue estimates

Analysts’ revenue projections reflect a mining company’s volumes sold as well as its realized prices. The Wall Street analysts covering Coeur Mining (CDE) are projecting sales of $781 million for 2017, which implies a 17.3% rise in revenues YoY (year-over-year).

Coeur’s actual revenues rose 3.0% YoY in 2016. Most of the rise in its 2017 revenues is attributable to a rise in production as guided by the company.

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Coeur’s 3Q17 revenues are expected to rise 18% quarter-over-quarter and 16% YoY to $204.3 million. Coeur expects production at all of its five operations to increase in the second half of 2017, and assuming constant silver and gold prices, revenues should rise based on a rise in production throughout 2017.

Coeur’s revenue estimates for 2018 and 2019 are $810.0 million and $837.0 million, respectively, implying a rise of 3.7% and 3.4% YoY, respectively.

EBITDA margins

Coeur’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 2016 was $215.2 million, implying an EBITDA margin of 35.6%. Analysts are expecting EBITDA of $205 million for Coeur in 2017. This implies an EBITDA margin of 26%.

Although Coeur’s revenues are expected to rise significantly in 2017, its EBITDA is expected to fall 4.8% in 2017, according to the analysts’ estimates.

Its margins should still rise to 31.6% and 36.5% in 2018 and 2019, respectively, according to the consensus estimates. As anticipated by Coeur, costs going forward should normalize, leading to higher margins.

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

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