Which do you want first, the good news or the bad news?
Since I can't hear you, let's get the bad news out of the way. Silver miner Coeur d'Alene Mines (NYSE: CDE ) issued guidance this week preparing investors for another loss this quarter, citing lower silver prices and operational issues in Bolivia and Chile.
The shorts are firmly entrenched with 15% of the float, punishing shares for every ounce of bad news. Following cost pressures in Chile, ramp-up delays at the San Bartolome mine in Bolivia, and continued uncertainty surrounding the fate of the Kensington gold project in Alaska, there has been plenty of rough news to prevent a firm bottom from forming as yet. Toss in a gut-wrenching 50% correction in the price of silver since March, and you have enough bad news to break an investor's heart. Coeur shares have toppled 76% from their 2008 high.
Now for the good news
Seeking to ensure that the company remains on a solid financial footing in light of these difficulties and the broader global credit crunch, I spoke to Coeur CEO Dennis Wheeler last week. Mr. Wheeler asserts that the company has no need to access or seek new lines of credit in the foreseeable future. With capital expenditures fully funded by cash on hand and cash flow, Coeur d'Alene is in a favorable position relative to many competitors with respect to withstanding the global credit crisis.
Two key mines remain on-target
After scaling back 2008 production targets from San Bartolome, the company reaffirmed 2009 production guidance of nine million ounces of silver, targeting full ramp-up in the fourth quarter. Development of the Palmarejo mine in Mexico continues on-budget and on time for start-up in the first quarter of 2009. With $140 million invested this year, the remaining development budget fully funded, and resources continuing to expand through exploration, I believe the present share price fails to value the solid prospects for another world-class silver mine coming online shortly.
Coeur d'Alene is not alone in being ripped apart by this market. Major miner Pan American Silver (Nasdaq: PAAS ) has lost 70% since March, Hecla Mining (NYSE: HL ) is off 75% from its April high, and Silver Wheaton (NYSE: SLW ) has followed suit despite a shiny new deal with Alexco Resource (AMEX: AXU ) . Like their gold-mining kin Goldcorp (NYSE: GG ) and Yamana Gold (NYSE: AUY ) , I view precious metal miners, and Coeur in particular, as fundamentally oversold.