Coeur d'Alene Could Mend a Broken Heart

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.

Further Foolishness:

167 CAPS All-Stars have rated Coeur d'Alene an outperform, down from more than 250 back in August. Create your own portfolio at Motley Fool CAPS and let your voice be heard. It's free and fun!

Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Alexco Resource, Coeur d'Alene, Hecla Mining, Silver Wheaton, and Yamana Gold. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 16, 2008, at 6:27 PM, TengriTrader wrote:

    Compare Wheeler's statement in this write up:

    "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"

    With this one taken from Q2, Earnings Call Transcript:

    Dennis Wheeler:

    "The Company continues to have a very solid financial position. We ended the second quarter with more than $272 million in cash and short-term investments. A total of nearly $58 million was spent in the second quarter, principally on construction activities at San Bartolome, Kensington, and the new mill at Martha.

    Even before consideration of the positive cash flow that we're generating, this is clearly more than adequate to address our remaining capital needs this year, which we expect to be about $172 million, again mainly devoted to construction at the three projects just mentioned, and sustaining CapEx. The company has sufficient liquidity to complete all its current projects as well as the Palmarejo project.

    And with that, I would like to turn the presentation over to Don Birak, to take you through the recent exploration results"

    Followed by these comments later in the conference call:

    "Well, if you mean by dilution, an increase in the outstanding number of shares of the Company, that’s certainly correct. And of course, we take a look at all of our acquisitions here at Coeur, including Palmarejo, Bolnisi, and balance the consideration that we pay for those assets against the expectation of growth and added value that that will bring for the shareholders of the Company.

    So, we will continue to keep our balance sheet strong and healthy, and we will continue to evaluate the opportunities in the future to determine the best way to finance those. I think it is important to keep in mind, however, my earlier comments, that we do have in place sufficient cash resources today on hand to complete our three major projects that are in our portfolio as we sit here.

    The fact is CDE management has used this 'ploy' that their financial standing etc was very good in difficult times where credit was tightening a few times. It is nothing more than spin to lure further investors. Note, that within 6 months after the Q2, 2007 conference call, CDE was looking for additional funding. This folks was a complete flip flop from what was said in the conference call.

    There is a saying: "Fool me once, shame on you, fool me twice shame on me". CDE has had years to prove themselves to shareholders but instead they have delivered nothing. Sooner or later CDE shareholders will give up and I fear that moment is going to come about very soon.

  • Report this Comment On October 16, 2008, at 8:53 PM, XMFSinchiruna wrote:

    I've been watching this company closely for a very long time. I respect your take on the situation, but I truly disagree. Given the present valuation this would be a most unfortunate time for shareholders to throw in the towel in my opinion. Fool on!

  • Report this Comment On October 17, 2008, at 12:28 AM, DownunerJames wrote:

    You'd have to definitely think that this is NOT the time to even contemplate bailing out of CDE (CXC in Australia)

    It appears nearly ALL Silver Miners have been driven well below their valuations --- CDE more than others. I have a very large position in this Company (unfortunately) & had no idea that the price could go as low as it has. They appear to have the assets so now there's not much choice --it's a matter of patience.

    The Management of CDE has a lot to answer for in my opinion. They are the most useless communicators with their Shareholders I have ever experienced. As examples I offer the following:

    Since being a Shareholder after Bolnisi take over (Palmerjero Project), there has not been a single communication from the Co adddressing the issue of Naked Short Selling AND what the Co was doing about that. Nor has there been a communication telling their loyal hurting Shareholders that management cares.

    Naked Short Selling is Criminal & yet is tolerated by USA regulators (so called!)

    This means that most certainly more shares exist than officially registerd to CDE. It's ridiculous that some entity can sell shares they don't own. They haven't even borrowed them to sell as in

    "normal" short selling. I believe a large proportion of the short position in CDE (15% of Float!) are phantom shares. This is a SHOCKING indictment on the American way of life-- letting Wall Street Crooks away with Financial Murder!

    It's SHOCKING that CDE Management just mutely sits in their Ivory Fortress allowing this state of affairs to continue!

    Coeur are BIG enough & have the clout to object strongly to the so called Regulators about the Naked Short Selling. They should be jumping up & down & useing the Media to turn around this rotten situation. CDE Management have NO excuse for non action. Their responsibility is to their Shareholders. The LOSS to Shareholders so far has been enormous - and most of it because of Criminal behaviour. CDE Management will be held responsible if they continue to accept this situation without protest.

    The US Govt steped in & banned almost ALL Short Selling in "Financial" Stocks.

    I'ts NOT good enough that "other" Stocks are still allowed to be Raped & Pillaged" by the large Wall Street Funds.

    Somethings rotten !

    In Australia the Govt has STOPPED ALL

    Short Selling until further notice. This should also be happening in the USA.

    Please do something --write to the Media

    Phone CDE -don't just let it carry on!

    For Info on Naked Short Selling watch this Video:

    http://video.google.com:80/videoplay?docid=44905417257977460...

  • Report this Comment On October 17, 2008, at 8:48 AM, bizcardnut64 wrote:

    I think you folks give the average investing public too much credit. No one is looking at the companies in which they hold stock. AUY, for instance, is down 75% since March when gold hit it's record high. Since then, gold has dropped (including this morning's action) a bit over 20%. I agree with Barker on this one, I think it is GROSSLY oversold. But apparently I one of very few who think that way. I think CAPS should be renamed CRAPS. It's just a game that people play but they don't back up their picks with the own cash. Over 3,000 outperform ratings on AUY and less than 100 underperforms. I can't understand why if so many people think it will outperform, why no one is buying the stock. The insiders buying are gonna make a bundle when this stock goes up. Too bad not one else will because they are all dumping it like a blind date. My advice, print out a CRAPS page and take it into the bathroom with you because that's all it's worth (no, not as reading material).

  • Report this Comment On October 20, 2008, at 1:15 PM, goirish73 wrote:

    So much for Mr. Wheeler's word that CDE was in no need of cash. Just secured $50 million in senior convertible notes with the possibility of another $25 million to come. They continue to dilute and dilute. Where does it end?

  • Report this Comment On October 20, 2008, at 6:50 PM, XMFSinchiruna wrote:

    I saw that... very unfortunate indeed. :(

    I have to admit... MoneyMongol called it well.

    I spoke to someone at the company again today, who indicated that the company's position on such decisions can indeed change in an environment where silver is dropping from more than $12 to under $10 just since my conversation with Mr. Wheeler. As he points out, those multi-dollar drops in the silver price translate into significant changes for the operational side of things (i.e. cash flow).

  • Report this Comment On October 22, 2008, at 8:43 AM, XMFSinchiruna wrote:

    October... short selling has not stopped. They're supposedly cracking down on illegal naked shorts, but many short positions are legal and remain intact. And unless I've lost track, the ban on short selling on select financial stock has expired as well... just FYI

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