What: Shares of Coeur Mining (NYSE:CDE), a silver and gold miner in North, Central, and South America, witnessed its shares surge as much as 11% during Thursday's trading session following the release of its first-quarter earnings results, as well as another strong rally in underlying precious metal prices.
So what: For the quarter, Coeur Mining reported revenue of $148.4 million, which was a slight drop from the $153 million it delivered in the year-ago quarter. Revenue was generated by producing 8.1 million silver equivalent ounces (SEO), and selling 8.3 million SEO. More importantly, costs applicable to sales dipped from $115.1 million in Q1 2015 to $101.6 million in Q1 2016, as all-in sustaining costs on an SEO basis dropped 14% to $13.73. Focusing on costs helped reduce Coeur Mining's Q1 loss to an adjusted $0.04 per share. By comparison, Wall Street had been expecting Coeur Mining to report a much wider loss of $0.16 per share.
Looking ahead, Coeur Mining anticipates costs will remain more or less in line with what it produced in 2015, and it expects to produce between 33.8 million SEO and 36.8 million SEO for the full year.
Also helping the company's cause was silver prices approaching a one-year high. As of 4 p.m. ET, silver prices were nearing $17.60 an ounce, a better than 2% gain for the day. As underlying metal prices rise, Coeur could see its margins improve.
Now what: Coeur Mining, like the rest of the mining sector, has benefited of late by reducing its costs and expanding production in areas where ore grades have been better than expected. This is why we've seen revenue falling for some gold and silver miners since they're focusing on quality of production rather than quantity.
However, expect production rates to improve substantially in the coming years. The addition of the Wharf mine in 2015 for $105 million from Goldcorp could quickly pay dividends through mine expansion, and improved recovery rates at Palmarejo in Mexico should lead to rapid production improvement. Coeur still has some work to do to get back to profitability, but if precious metal prices continue to rally, Coeur Mining could be a name you'll want on your watchlist.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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