What happened
Shares of Coeur Mining (CDE 5.93%) fell over 10% today after the company announced second-quarter 2018 earnings. The gold miner actually reported a relatively strong quarter, beating the average Wall Street expectation for earnings per share, and missing the average top-line expectation by only 1.7%, according to estimates compiled by Yahoo! Finance.
However, the company also reported its worst quarterly operating cash flow and free cash totals in over one year. Both were negative and well below the performance in recent periods. As of 3:20 p.m. EDT, the stock had settled to a 8.7% loss.
Image source: Getty Images.
So what
The reported numbers from the cash flow statement are a bit surprising relative to production levels reported during the period. That's because Coeur Mining churned out 8.8 million silver equivalent ounces in the second quarter of 2018, or nearly 16% more compared to the year-ago period, which was announced on July 9 as part of a production update.
It wasn't enough to make Wall Street overlook operating cash flow of negative $1.3 million and free cash flow of negative $42.5 million -- both of them the lowest quarterly totals in any of the last five quarters at least. While the cash flow metrics aren't ideal, analysts may be forgetting that Coeur Mining boosted its full-year 2018 production guidance as part of the July 9 production update.
The company previously expected to produce 36 million to 39.4 million silver equivalent ounces for the year, but now expects 37.3 million to 40.5 million ounces on the same basis. The increased guidance is in part due to better-than-expected preliminary results from its Silvertip mine, which is expected to come online in the third quarter of 2018.
Now what
Coeur Mining stock has been stuck in first gear for several years now. Despite a relatively ambitious growth strategy to diversify away from silver and toward gold (all while boosting earnings and cash flow), progress has been slow. And although 2018 was expected to be accompanied by an uptick in capital expenditures, the market clearly isn't happy with sacrificing cash flow along the way. The long-term trajectory of the business doesn't appear to have been altered in light of the recent quarterly earnings announcement.
