What: Coeur Mining Inc's (NYSE:CDE) shares fell roughly 16% in September, capping a year-long decline that's left the stock down about 45%.
So What: Coeur is a silver and gold miner (revenues are split fairly equally between the two) based in the United States with operations throughout the Americas. Although some of its assets are in difficult to deal with countries (political issues disrupted production at a Bolivian mine earlier in the year), most of its mines are in stable regions. That's good, but it's still a precious metals miner, and silver and gold prices have been weak.
The big problem for Coeur, however, is costs. To be fair, it's been working hard to reduce how much it has to spend to get an ounce of metal out of the ground, but it has a long way to go. For example, the company reports all in sustaining costs on a silver equivalent basis. At the end of the second quarter it pegged its all in costs at about $16.60 per ounce of silver. On the one hand that was the lowest level since the company started reporting all in sustaining costs in 2013, on the other hand the spot price for silver is currently around $14.50 an ounce. See the problem?
Needless to say, Coeur is losing money right now. But more important, the price of silver and gold have an exaggerated impact on the company's business and investors' perceptions of its prospects. The shares of this miner are simply languishing along with the prices of silver and gold.
Now what? Coeur is making progress on its cost, but is a marginal miner at current commodity prices. It either has to cut its costs deeper and faster or silver and gold prices need to go up. Since neither appears likely in the near term, Coeur's bottom line continues to struggle and investors are pushing its shares around with the movements of the metals it mines. Only aggressive investors who believe there's going to be a notable precious metals upturn should really be investing here.