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Can Coeur Mining’s Outperformance Continue in 2018?

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Market sentiment for Coeur Mining

Coeur Mining’s (CDE) YTD (year-to-date) operational performance has been strong. Among major silver miners, it has given the highest return and has been the exception, providing positive returns.

As we learned in the previous article, the iShares Silver Trust ETF (SLV) has returned -3.8% YTD, and the Global X Silver Miners ETF (SIL) has returned -8.2% in the same period.

CDE’s outperformance is the result of its relatively strong operational performance. In its 4Q17 results, which it declared on February 7, 2018, the company reported a 54% YoY (year-over-year) rise in its revenue and silver equivalent production amounting to 35.1 million. For 2018, the company has guided for higher production of 36.6 million–40.0 million ounces of silver equivalent.

Among Coeur Mining’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 at the lowest possible cost.

Analysts’ recommendations

Among the primary silver producers, Coeur Mining has the second-highest percentage of “buy” recommendations at 67%. Another 33% of analysts recommend “holds” on the stock, and there are no “sell” ratings on the stock.

CDE’s upside potential based on its current target price of $10.5 is 33.6%.

Analysts’ estimates

According to Thomson Reuters data, Coeur Mining is expected to have revenue of $742.2 million in 2018, implying a rise of 4.6% YoY. This expected rise in revenue is most likely the result of an expected increase in production as well as higher estimates for precious metals prices. In 2019, CDE’s revenue is expected to take off substantially, rising 18.4% YoY, mainly due to the start of its growth projects.

While Coeur Mining’s revenue is expected to rise in 2018, its EBITDA (earnings before interest, tax, depreciation, and amortization) is expected to fall 0.5% YoY mostly due to an expected rise in its costs in 2018. CDE has guided for higher costs in 2018 due to several transitions, including the following:

  • ramp-up at its Silvertip mine
  • lower grades and higher stripping costs at its Wharf mine
  • transitions to higher sustaining capital at its Palmarejo and Kensington mines

Going forward, Coeur Mining’s costs should fall as the Wharf mine enters the high-grade area and Palmarejo’s production ramps up. Analysts expect a margin of 30.2% for CDE in 2019 and a margin of 33.3% in 2020 compared to 25.2% in 2018.

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