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Is Coeur Mining Comfortable with Its Financial Leverage?

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Repaying debt

Coeur Mining’s (CDE) outstanding debt at the end of 3Q17 was $288.9 million. That reflects a fall of 28% year-over-year. Due to the decline in CDE’s debt, its interest expenses have also fallen 56% to $3.6 million in 3Q17 compared to $8.1 million in 3Q16.

Financial leverage

In 3Q17, Coeur entered into a four-year $200 million revolving credit facility. After the end of the quarter, the company withdrew $100 million from the facility to partially fund its Silvertip mine acquisition. After taking into consideration the closing of the Silvertip acquisition, the company’s pro forma cash balance would be $180 million.

During CDE’s 3Q17 earnings call, Peter Mitchell, the company’s chief financial officer, mentioned that currently, the company’s financial leverage is 2.4x. He added that it’s toward the upper range of its comfort zone. He said CDE’s pro forma liquidity position is in “pretty good shape” and that it plans to utilize its free cash flow generation next year when it starts ramping up Silvertip.

Improving balance sheet

Coeur has taken a number of steps to improve its balance sheet, including divesting its non-core assets. It has divested $65.1 million in non-core assets since 2016.

In 2Q17, the company refinanced its senior notes due in 2021 with senior notes due in 2024. This refinancing lowered the coupon rate by 2% as well as extended the maturity of its debt.

Its peers (GDX) also took advantage of rising share prices to offer equity at the beginning of 2017. First Majestic Silver (AG) offered equity in 2016 with the intention of using the proceeds for development and exploration activities. Kinross Gold (KGC) issued $288 million in equity in February 2016, and Iamgold (IAG) turned to equity markets with a deal of 38.9 million in shares to raise $200 million.

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