Sell this major silver producer

Among U.S.-based mining companies that focus primarily on producing silver, Coeur Mining, Inc. (TSX—CDE; NYSE–CDE) is the largest. It is also a growing gold producer. As with other silver and gold producers, Coeur’s financial results and shares have tumbled in recent years, along with commodity prices.

Deutsche Bank analyst Jorge Beristain says the slumping price of silver, combined with Coeur’s rising debt load, are “concerning”. With a 12-month target price of $3—significantly below the current share price—he has a “sell” recommendation.

The analyst updated his model to take into account Coeur’s third quarter results, lower guidance for 2015 spending on exploration, and the revised plan for the Palmarejo mine in Mexico, which will reduce revenue by double-digits in both 2015 and 2016.

Mr. Beristain notes too that, with “no feasible growth project in the pipeline”, he expects production to remain flat over the next four years. As well, spot silver prices are currently well below the $18.46 an ounce he expects all-in sustaining costs to average over that period. As a result, he expects Coeur to swing to negative operating cash flow.


Investor’s Digest of Canada, MPL Communications Inc.
133 Richmond St. W., Toronto, On, M5H 3M8, 1-800-804-8846

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