Cde Kensington
Kensington mine. Source: Coeur Mining.

It's hard to believe that just a few years ago, silver had reached a 30-year high, and the prospects for Coeur Mining (NYSE:CDE) and other silver miners seemed limitless as the bull market in precious metals extended well beyond the decade mark. Yet the commodity markets are fickle, and with silver prices plunging from their 2011 peaks, Coeur Mining has had to overcome not only challenging conditions in the industry but also some company-specific threats to its long-term success.

Coeur Mining is far from the only silver investment to face tough times in 2014, as silver-mining peer Hecla Mining (NYSE:HL) and bullion ETF iShares Silver Trust (NYSEMKT:SLV) have also suffered losses this year. But Coeur's drop has been especially large, revealing some of the more specific challenges that it faces. Let's take a closer look at Coeur Mining with the hope of deciding whether its worst days are finally behind it.

Stats on Coeur Mining

2014 YTD Return

(48.5%)

Expected 2014 Revenue Growth

(12.4%)

Expected 2014 EPS vs. Previous Year

($1.03) vs. ($0.78)

Expected 2015 Revenue Growth

(1%)

Source: Yahoo! Finance.

What's pulling Coeur Mining down?
The biggest problem that Coeur has had to deal with is the pressure on silver prices. After ending 2013 near its lows for the year, silver managed to push higher early in the year and made another attempt to climb in the early summer months. Recently, though, prices have fallen sharply once again, and now, prices are at their worst levels since early 2010 and show few signs of improving.

Low silver prices hit Coeur especially hard, because its costs of production are high enough that profitability is now a concern for the company. In 2013, Coeur had all-in sustaining costs of almost $19 per silver equivalent ounce. With silver trading at $17.50 per ounce right now, Coeur faces an environment in which continuing to produce silver could become a money-losing enterprise unless it can find ways to reduce its all-in costs. Moreover, Coeur has reined in capital expenditures in order to conserve cash and keep itself in solid financial condition, and that could hamper efforts to boost its resource base in the future.

One potential remedy for high costs is to expand production, enabling a company to spread fixed costs across a greater number of ounces. Yet unlike Hecla and First Majestic Silver (NYSE:AG), both of which announced increases in their output early in 2014, Coeur Mining's production levels have remained flat. With second-quarter results suggesting that Coeur will likely hit the lower end of its production targets for the year, investors need to accept the high-cost structure of its operations for the foreseeable future.

Cde Rochester
Rochester mine. Source: Coeur Mining.

Another long-term issue is liquidity and availability of credit-market financing. So far, Coeur has managed to avoid taking on an unreasonable amount of debt, limiting its exposure to its high financing costs. But without improving fundamentals, Coeur will have to consider adding debt to its balance sheet and potentially putting itself at risk of credit-related problems in the long run.

How can Coeur Mining get its luster back?
Despite its poor performance, Coeur Mining still has potential. The company's La Preciosa mine in Mexico has impressive reserves, and if silver prices recover, then the hundreds of millions of dollars that Coeur has invested there could finally start producing a solid return. Coeur's Joaquin project in Argentina isn't quite as large, but it too could contribute to a recovery if industry conditions become more favorable.

But even Coeur doesn't seem optimistic about silver's prospects. The company has started to hedge its exposure to silver prices by writing put options that would trigger if the metal drops further. Combined with the renegotiation of a gold streaming agreement with Franco-Nevada Gold at its Palmarejo mine, Coeur appears to be taking steps to endure a long down period for precious metals.

Silver has endured an incredibly tough period, and Coeur Mining has suffered more than most of its peers. Yet with so many internal issues to deal with as well, Coeur will have to overcome huge challenges in order to remain in position to profit when and if silver prices start climbing again.

Dan Caplinger 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.