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With Its Stock Up 400%, Coeur Mining Inc. Is Cashing In

By Matthew DiLallo – Sep 14, 2016 at 10:00AM

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The silver miner is taking advantage of its surging stock price to raise cash and repay debt.

Image source: Getty Images.

Coeur Mining's (CDE 2.45%) stock price is scorching hot this year, up more than 400% since the calendar flipped the page to 2016. The company has been taking advantage of that rally by selling stock to repay debt. As a result, it has meaningfully de-levered its balance sheet, putting it in a much stronger position for the future.

Going back for seconds

Earlier this month, Coeur Mining disclosed plans to sell up to $200 million in stock in the future, both to reduce debt and for general corporate purposes. It already sold $75 million worth in an "at-the-market" offering last quarter, which boosted its cash stockpile to $257.6 million. The company then used $103.4 million of that to repay the remaining principal on its term loan, reducing its total debt by 20% to $420.6 million and eliminating $9 million in annual interest expenses.

If Coeur Mining successfully raises $200 million in its next offering, it would boost its total cash pile to over $350 million, and reduce its net debt to a mere $70 million -- a huge drop from the middle of last year, when its net debt was more than $350 million. Further, its net leverage ratio would come down from 3.8 times as of the end of second quarter 2015 to a minuscule 0.4 times, and that's before accounting for any cash flow from the current quarter. Needless to say, that would be a transformational turnaround in just over a year.

Taking advantage of the market's gift

Coeur is one of a growing number of mining companies that are cashing in on their surging share prices this year. Kinross Gold (KGC -2.00%) was one of the first producers to take advantage of the rally, issuing $287.7 million in equity in late February after its stock jumped nearly 70% to start the year. The company used $175 million of that cash to pay down its credit facility, which it had used to buy $610 million in assets from Barrick Gold (GOLD -0.94%). More recently, Kinross Gold paid off a $250 million debt maturity to take even more pressure off its balance sheet. 

Likewise, Barrick Gold has been paying down debt this year, reducing it by $968 million through the second quarter, which puts it on pace to hit its target to cut debt by $2 billion in 2016. Barrick, though, is not cashing in by selling stock. Instead, it's taking advantage of the market rebound to sell off non-core mines to rivals like Kinross that now have greater access to capital.

Meanwhile, First Majestic Silver (AG -0.23%) took advantage of the fact that its stock shot up over 200% this year to complete a C$57.5 million equity offering to boost its cash position to $108.2 million. However, its primary plan for that money is not debt reduction. Instead, it is pouring some of that capital into its development and exploration budget. First Majestic Silver intends to spend an additional $20.9 million on development and exploration in the second half of this year, which represents a 38.7% increase. The company is gearing that capital toward quick-payback projects such as the construction of a roasting plant that will recover an additional 1.4 million ounces of silver from reprocessing above-ground tailings.

Investor takeaway

The remarkable rally in the mining sector is giving producers like Coeur Mining something they have not had in a while: abundant access to capital. The company and its peers are clearly taking advantage of this by selling stock and assets to pay down debt and invest in new projects. This is putting miners back on solid ground for the first time in years, giving them a much more optimistic outlook for the future.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
GOLD
$15.90 (-0.94%) $0.15
Kinross Gold Stock Quote
Kinross Gold
KGC
$3.93 (-2.00%) $0.08
First Majestic Silver Stock Quote
First Majestic Silver
AG
$8.70 (-0.23%) $0.02
Coeur Mining Stock Quote
Coeur Mining
CDE
$3.76 (2.45%) $0.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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