Bridget Freas - Director, Investor Relations Mitchell Krebs - President and Chief Executive Officer Frank Hanagarne - Senior Vice President and Chief Operating Officer Peter Mitchell - Senior Vice President and Chief Financial Officer Keagan Kerr - Senior Vice President, Corporate Affairs and Human Resources.

Chris Thompson - Raymond James Joseph Reagor - ROTH Capital Partners Michael Dudas - Sterne, Agee Chris Terry - Deutsche Bank Andrew Kaip - BMO Capital Markets Arjun Chandar - JPMorgan Craig Johnston - Scotiabank Garrett Nelson - BB&T Capital Markets Ben Shen - Symphony Asset Management.

Good morning and welcome to the Coeur Mining second quarter 2015 financial results conference call. [Operator Instructions] I would now like to turn the conference over to Bridget Freas. Please go ahead..

Good morning. Welcome to our second quarter 2015 earnings conference call. There are slides available on our website to accompany today's remarks. Please review the cautionary statements and the risk factors in our latest 10-K and 10-Qs for risks and uncertainties that could cause actual results to differ from any forward-looking statements made today.

Mitch, please go ahead..

Thanks, Bridget. Good morning, everyone, and thanks for joining the call. I'd like to hit some of the second quarter highlights, call your attention to a few of the slides that we posted, and give you a quick update on our progress on the major priorities and how we see the business looking forward, before we open up the call to questions.

The company delivered some solid results in the second quarter. EBITDA was $35 million on revenue of $166 million. I think consensus EBITDA for the quarter was something like $22 million. Operating cash flow of $37 million against CapEx of $24 million.

Production was up 13% compared to the first quarter and all-in sustaining costs of $16.60 were down 6% after declining 8% in the first quarter of the year. Now that's on a silver equivalent basis using a constant 60:1 silver to gold ratio.

It's easy to get distracted in such a dismal market and with a disappointing share price, but we're staying focused on our strategy to keep reducing cost, improve the quality of the ounces we mine, capture the benefits of larger scale mining at certain of our operations and maintain our liquidity, as we transition into expected positive free cash flow, starting about 15 months from now.

I look back at our February and May conference calls this year with you all, and it seems like everything we said we'd do, we've either done or are on track to do. Our first half performance was very strong and has led us to bump up our full year production guidance range a bit.

Probably more importantly, we've lowered our cost guidance range based on the reductions we've realized during the first half of the year. I am very proud of the way our team is responding to the challenge of lower prices by meaningfully reducing cost at all of our mines.

In fact, I think it'd be hard for us to find another mining company, reducing cost more meaningfully than we are. For our three silver mines, as a group, production costs were $12.56 per silver equivalent ounce, which is down 8% from the first quarter. And the first quarter was actually down 5% compared to the quarter before that.

If you compare that $12.56 to last year's second quarter, it was $14 an ounce a year ago. Rochester's cost dropped 7% to $12.01 per silver equivalent ounce. Mining cost there actually declined about 9% during the quarter, down to $1.39 a ton.

Palmarejo's cost dropped 9% to $13.21 per silver equivalent ounce, which I think is really impressive, given all the changes taking place there this year. In fact, underground mining cost there dropped by over 30% from $64 a ton in the first quarter to $44 a ton in the second quarter.

This year-to-date performance has prompted us to lower Palmarejo's cost guidance for 2015 by about 8%. Kensington's cost declined 7% to $745, announced during the quarter, and we lowered its full year cost guidance as well. San Bartolomé's costs decreased 8% and remain on track to hit the original guidance.

We did lower San Bartolomé's production guidance for the full year due to some local political demonstrations and disruptions that impacted our ability to mine and process ore for about three weeks in July.

This decline in guidance was more than offset by the outperformance we're seeing at Kensington and Palmarejo, which is a good example of the benefit of having a diverse portfolio of five operations. A year ago, our all-in sustaining costs were $19.10 per silver equivalence ounce, which means we've reduced it by $2.50 an ounce or about 13%.

Definitely heading in the right direction, but obviously still above where the price of silver is today, which means cost maybe keep coming down, and that's exactly what we expect to happen here. As we all know there are limits to the amount of dollar spend that can be cut at any given operation.

To keep reducing cost in a sustainable way, better grades and efficiency gains are required to the extent an operation offers those opportunities, and fortunately most of our mines do.

And we believe we're about 15 months away from seeing our cost trend down another 10% to 15% from the level seen in the second quarter into the 14s on a silver equivalent basis. At Palmarejo the transition to higher-grade lower-cost underground mining remains on track.

Mining rates at Guadalupe are now at 1,400 tons a day, after only beginning production there last December. The twin declines over to the high-grade Independencia deposit are scheduled to reach the ore body by yearend and mining there is expected to begin in the first quarter of next year.

We still expect to complete open pit mining there at Palmarejo during the second half. We're seeing fantastic drilling results to expand Guadalupe to the south and at depth and to define new high-grade resources on known structures located in the half-mile corridor between Guadalupe and Independencia.

We'll provide a more fulsome exploration update on everything going at Palmarejo later this year.

We planned also to file an updated 43-101 technical report later this year, most likely in November that will incorporate the drilling results through mid-year of this year and it will layout a mine plan for the 100% underground operation based on the combined Guadalupe and Independencia deposits.

At Rochester, larger scale mining is driving double-digit production growth at considerably lower unit costs this year. Mining and crushing rates have increased about 20% over the past year and should increase more, once we complete the expansion of our crusher unit later this year. Permitting remains on track there for the next leach pad expansion.

We still expect to have all the required permitting there completed early next year. And as we said in late June, we found a way to defer that $26 million capital project from 2016 into 2017 in order to improve our near-term cash flow and liquidity.

At Kensington, a combination of higher mining and milling rates and higher grades, as we look into the second half, have this operation on track for significant product gains at substantially lower cost this year and beyond. It's great to see Kensington's cost per ounce start with a 7, again now for the third consecutive quarter.

We've now started the decline into the high-grade Jualin deposit, where grades are three times higher than the reserve grade at the main Kensington zone and we plan to start underground drilling there next year.

In the meantime, we're mining and milling at a rate of about 1,875 tons per day, which is about 50% higher than the design capacity for that plant when it was started up in 2010. In late June, we announced the 39% increase in the gold reserves at Wharf, which we acquired in February for a $100 million.

We just filed a technical report yesterday afternoon that shows an after-tax NPV of $138 million using a 10% discount rate based on reserves only and a flat gold price of $1,275 an ounce. So that TR is a huge win for us.

The TR shows a mine plan with average annual production of about 90,000 ounces and average annual operating cash flow of over $30 million and average annual CapEx of only about $2.5 million. Now, that all equates to an internal rate of return on that acquisition of well over 20%.

There is not a lot of acquisitions that you can point to in our industry with that kind of rate of return. And we think we can further extend Wharf's mine life based on some near-pit drilling currently taking place there.

Gold production at Wharf for 2015 is second half weighted as we accelerate mining and crushing rates and as we mine some higher grades in an area called Golden Rewards. Production for the 10 months, we'll have owned Wharf this year, should be in the 75,000 ounce range with cost around $800 an ounce.

The company's total reserves have increased 24%, since the beginning of the year as a result of the two acquisitions we've completed; Wharf, as I mentioned and then Paramount Gold and Silver. Slide 4 in the slides we posted highlights these changes since yearend.

I think what's important for investors to know is that the reserves we've added as a result of these acquisitions represent immediate or near-term sources of production that we expect to boost overall margins and cash flow over the next several years.

I want to now switch gears to one of our other key strategic priorities I mentioned, which is maintaining and managing our liquidity as these operational initiatives continue to take hold and drive down our unit costs. Slide 11 in the posted slides summarizes our balance sheet.

Late in the second quarter, we closed a five-year $100 million secured loan that matures in 2020 and we repaid a $50 million bridge loan that was set to mature early next year.

We ended the quarter with a little over $200 million of cash and equivalents and what we consider to be a flexible patient capital structure with minimal restrictions and no significant maturities until mid-2020. Total debt at the end of the quarter was $548 million and net debt was about $342 million at the end of the second quarter.

At current prices, we forecast full year 2015 EBITDA of around $115 million and expect that to increase in 2016 and 2017, as we've laid in out in three-year outlook.

Our near-term focus remains on maintaining liquidity and financial flexibility that we expect to be able to delever as our cost continue to decline, EBITDA and free cash flow climb and our cash balance begins to build, which should be well in advance of the maturity dates on any of our debt.

Sub-$15 silver and sub-$1,100 gold makes it an even more challenging environment for our industry, and it certainly makes it even tougher on investors. But we see our company is having a unique opportunity to create value for stockholders over the next several years, even in a low price environment.

And our strategy is designed to deliver that value as quickly as we can. So to wrap up, we feel we have a sound strategy in place, a strong team and organization that are doing a great job executing the strategy and a set of assets that are starting to deliver higher-quality production and lower costs.

Executing the strategy and managing our liquidity are the name of the game, and we'll continue to stay focused on delivering the plan we've laid out. So with that, we'd now be happy to open it up for any questions..

[Operator Instructions] The first question comes from Chris Thompson from Raymond James..

Couple of quick questions here, just firstly starting off with Palmarejo. Could you just sort of maybe just expand on there, the mine plan for the second half of this year as far as -- obviously, you're going to be ramping up open pit and underground mining at Palmarejo.

Are you looking at the Q3 or the Q4 there?.

We actually take bets on that very question around here, because it keeps giving more than what we think, which is overall a good thing. I think probably likely it will be fourth quarter. Frank, you're on that side of the bet as well..

Yes. That's where I placed my bet..

Will that be for the open pit and underground?.

No, that'd be the open pit. I think the old underground will continue at least in the early 2016. We're having some great -- the guys are doing a great job there with some ground support, that's allowing us to access some areas there, especially in the lower 76 Clavo that have some really nice grade.

And without some of these ground support techniques that they're applying, I don't think we'd ever be able to get in there. So that keeps it kind of going along and giving us a nice extra little boost to go along with everything that we have going on down at Guadalupe..

What sort of runway should we be modeling I guess for the underground there, as far as competing the mill feed do you think?.

Sorry, Chris.

Did you mean that the old underground at Palmarejo or at Guadalupe?.

Yes, the underground at the Palmarejo.

I'm just sort of trying to figure out what to put in the model?.

Go ahead Frank..

Previously this year we did some development work in an area of the Palmarejo underground called Rosario, and that development is done, and we're in there actively mining and seeing on average around 500 metric tons per day coming out of that zone. And then we get remnants from Clavo 76, both upper and lower, but those will be gone before too long.

But it's Rosario that carries this certainly into this year and a little bit into 2016. The grades have been very, very good though, even though the tonnage has dropped off quite a bit.

The grade has been really nice ranging between 250 grams, 350 grams per ton silver, and some pretty decent gold values as well ranging between 3 grams and sometime 4 grams per ton. So it's a really nice shot, still coming out of Palmarejo complex.

Meanwhile, the open pit we're still mining somewhere in the vicinity of 3,000 tons per day on average and getting good grades for the open pit..

Just moving on just to Rochester quickly. Again, looking at, I guess, obviously you're increasing the crushing capacity there.

What should we model, I guess, as far as the crush rate I guess in the second half of this year into next year?.

As we look at 2016 kind of run rate, I think it's around 16.5 million tons. And I think Frank that crusher expansion project should be done, what? October, September..

Yes. We're looking at having the commissioning done either September, October, and then starting to add the additional tons to be equivalent to like 16.5 million tons per year run rate..

And then just moving on to Kensington. It's nice to see the cost coming down there.

What was the gain there? Was that a mining cost reduction or any relief on the price raising cost there or the G&A, can you quantify that a little bit?.

The reductions are being seen in the mine predominantly, across these facilities run at a very flat rate in terms of cost per ton and G&A is relatively flat as well. But as far as the themes that are helping our cost there so much this year that have been beneficial, fuel costs.

We've had a very well-balanced capital development program underground that we need on to execute the delivery of ore to the surface.

It just really optimize that process, so that we're not in these modes and trying to catch up on development at greater than normal expense or just developing too far ahead, where the benefits aren't going to come until later. And we've got that all balanced out really well, but it's really the fuel efficiency.

Then if you look at where we've been, as Mitch mentioned, for the last three quarters, cost there is starting with a 7. We're very, very intent on maintaining that through the end of the year. But as you will note, that we've got guidance that's just slightly higher.

I always have to kind of hedge reserve -- make sure I've got a reserve there in case there is anything that will go on with our generators in the way of maintenance, that's going to be required, can sometimes be quite expensive, and kind of scheduled mill maintenance.

Things that have been deferred in the first half, we may not be able to defer for the entire year. But our goal is to run where we're at and try to achieve by yearend as close to where we're out as we possibly can. And it's been fantastic to see this happening..

The next question comes from Joseph Reagor from ROTH Capital Partners..

So two questions.

First one, on the San Bartolomé, with the issue you had in the early part of the quarter, is there something that you think is fully resolved or something that could resurface later in the year? I know the political situation there has been a bit unstable?.

Which I have complete clarity on the answer to that. I'd say that the last time we saw kind of a dustup like this, it was about five years ago. As you know, Bolivia is a complicated place. You've got a lot of things at play there in terms of -- that region of Potosí really is suffering from the impact of lower commodity prices and unemployment rates.

They want the federal government to invest more in that region to try and spark some employment and economic activity. And you had the Pope coming through Bolivia and they kind of took advantage of that to put a spotlight on their situation and their views and demands.

So you kind of had a few things that came together there that created that set of disruptions. I think, just by the way it kind of ran out of stream, people were ready to get back to work. And I think that that is how it will remain. I mean I can't predict that it's going to never flare-up again. But I think things are as back to as normal as normal is.

And we'll just continue to run it as we have. And it wasn't like this disruption was due to anything that we caused or did. We kind of got caught in the middle of an in-country dispute between the government and the civic committee there in Potosí that's called Comcipo.

But I'm glad that we've done the things we've done to grow the business in places like the U.S. and Mexico, and Bolivia has become less and less of a significant component to our production and cash flow..

Continuing kind of on that thought line then.

Is it possible that you guys might look to sell off the San Bartolomé mine at some point?.

Well, we definitely are always looking at ways we can monetize or optimize our portfolio. And a lot I think will depend for Bolivia on what does the 2016 mine plan and budget look like in this kind of a price environment. I know we're not in the business of running money losing minds.

So to the extent that it's a meaningful cash flow contributor next year. That will weigh on our decision making. Obviously, the market to sell assets right now is a bit depressed as well. So you got to weigh what you'd get versus what you'd give up in terms of cash flow.

So that's not really a direct answer to your question, but kind of how we think about it at least..

And then kind of on the cost side at Kensington.

Can you kind of give us maybe a little bit more color of how you guys got such a significant drop in the underground mining cost there?.

Frank, do you want to?.

Yes, I guess I'll just reiterate what I said before. We're benefiting tremendously from lower fuel prices.

And to see efficiency of our mining, the quality of our mine plan that we're executing against this year and how well in-sync it is with capital development spending, bringing under control a lot of other costs related to camp and various things there.

It's just all adding up to the history of Kensington, really in my view, where we started with a mine that was four years ago quite a bit more chaotic than it is today. It's very orderly and run very similarly sound in unchaotic way on a day-to-day basis right now. And I think we're just really starting to see the benefits of that being reaped.

But big driver of the lower fuel costs and then just the way that we're, the efficiency that we're seeing and executing the mine plan..

I would add a couple of things to that. Maintenance costs have come down. That's been a real area of focus up there this year. We also took Frank's point about the more orderly way we're running things there.

We have gotten rid off so much equipment rental expense there that, that the site was sort of reliant on external sources for all kinds of things during, what was a pretty rough startup and now we've kind of absorbed that in and are running things in a way that I think is reflective of the cost and consistency now that we're seeing there..

Could you maybe, I guess maybe provide percentage basis of what fuel represents of the total cost today?.

13% of our cost at Kensington is represented by diesel. Just to put a little more perspective on that, we budgeted this year at $3.10 per gallon on that 13% cost. And so far pricing has been around $2.21 per gallon. So it gives you the sense of the scale and savings associated with diesel..

The next question comes from Michael Dudas from Sterne, Agee..

Mitch, some pretty good news out of Wharf.

Tell me what, without having to go through the report, which I didn't get a chance to look at yet, some of the key drivers of how that report exceeded expectations and maybe some of the upside that we could see from that property going forward?.

Frank, you want to take that..

Michael, what upside are you thinking about there?.

I'm just thinking of, you were talking about the extra added reserves and how much more drilling and how much more opportunity as you look out the next few years with the property?.

During due diligence before acquisition, and then certainly after, we started our process of evaluating the resources there. And we've just implemented our standard protocols for geologic structural mapping, geologic interpretation of the resources themselves. So I'm making sure that we're accounting for those resources in proper domains.

Then we've taken just look at how the drill resolves over a long -- we really went back, we did very deep dive in terms of the history out there, which is long and took into account all the drill-hole results over a period of at least two, maybe three decades up to and including recent times.

And how did that all fit within the geologic structural and domain concept, and then just applied our block modeling techniques, and we were able to come up with a very nice uplift in the number of resources that we could find there.

The last step is having our mining engineering people apply a mine plan and determine which of these blocks would be economic, that we'd expect money out of it, that the prices that we use. And it held pretty true. It held up.

And we feel that we'll not only be able to produce, as we're predicting debt within our 5% reconciliation as we go forward, so just a really good outcome, but really nothing magical and we just implemented within that the methodology that we usually use to evaluate resources..

And then, Mitch, I know 15 months can't come soon off you guys up. As you and the Board look at where pricing is and where the company is, and you've done terrific job getting the cost where they are.

Do you see a sense that you need to -- what some of the levers that you can pull to get through maybe more elongated price decline, if it does occur through the second half of the year, not to impede your targets for 2017?.

Yes, that's a very relevant question, one we are talking about every day and night. Well, we have a lot of levers that we're always evaluating. Our liquidity, I'd said at quarter-end of $200 million. We just got done the couple of weeks ago with the strategic planning process with our Board.

And in that exercise, we were kind of focusing in on $15 and $1,100 set of price assumptions. Those sort of prices -- cash doesn't move all that much between now and the end of the year.

I think we do hit our, as I think we've said before, kind of trough cash for us is kind of Q2 about this time next year before we start to see the trend really reverse itself.

With what we have taken out of 2016 in terms of capital at mostly at Rochester, a little bit of Kensington, a little bit of Palmarejo and then with some higher grade material that we've re-sequenced into 2016 out there at Rochester, that makes a huge difference in terms of what that trough cash looks like.

Obviously, prices take another leg down from here that trough cash starts to get pretty uncomfortable.

And then if we need to start enacting some of the other or pushing up some of these other levers, whether it's slowing down at Rochester and getting the kick of some residual leach benefit there, the Jualin and development up at Kensington that's about $30 million over the next 18 months or so, that's really a capital project of our own timing and choosing.

And with cost running at Kensington in the mid-700s, the urgency to get that higher grade ore out of Jualin and into the mine plant is less urgent when that mine is kicking off free cash flow kind of as is. We've got some wiggle room there.

Obviously, Joe asked earlier in the call about San Bartolomé, in a lower price environment from where we are now, that is something we need to take an honest look at under that assumption. So I think the one thing that we won't do is change anything we're doing at Palmarejo.

That to me is the highest priority, biggest impact, capital deployment that we have, that's taking cost from an all-in basis of north of 18 close to 10 by the time we get to the other side of the tunnel. And that's worthy of continuing. In fact, the faster we can get there the better we'll all be. And then just even to your point, Mike, on Wharf.

If you look at the kind of cash flow, that's going to be kicking off in 2016 and beyond, and as of for us, that's a significant improvement and moves the needle on the liquidity discussion as well. So we're thinking about all those things and we do everyday..

One more quick thing to add to that. Mitch, in his comments touched on our long-term debt and the patient capital structure. And I would point out with that $100 million loan that we took on, its 1% annual mandatory amortization, there is a excess cash flow suite.

But in terms of just underscoring that patient capital, the fact that we don't have mandatory amortization associated with that, so it would be exception of that 1%, which is $1 million a year. So that positions us well to withstand in terms of calls on our cash flow as well..

The next question comes from Chris Terry from Deutsche Bank..

I just have a couple of questions on behalf of Jorge. I know you've gone on about the cost already quite a bit, but just sort of complete this picture.

Is there anything specific around consumables or reset of contracts on the mining side that's coming up in the near-term? I guess, you focused a lot on what has happened on the cost side and how you've held wins just trying to say how far you can squeeze the lemon from here? And then just around the currency, do you have an approximate number that you win on the currency generally given this South American assets?.

We'll take the second one first, Peter, Mexican peso. Really the exposure there it's obviously worked very much in our favor. Since the beginning of the year, we budgeted it MXN13.25 and the current level is around MXN16. So for us about half of our costs at Palmarejo are denominated in peso.

So the way we think about it is there's about $4 million pickup per 1 peso change, so that our cost position is improving significantly as a result of that weakening peso. And we've done nothing to hedge that or anything at this point. Obviously, we're beneficiaries of just riding with that currency level..

And to your first question I'll take a stab, and then Frank, of course, chime in or Peter, if anybody else has any thoughts on consumables. Obviously, we talked about diesel. Cyanide is a big component of our costs there. That's driven, to a large extent by energy prices.

And if we see, what some people are predicting there in terms of lower oil prices, that you could have a tailwind effect on cyanide. As we've seen some of the overall production levels globally for silver and gold decline, refining treatment, smelting charges, we've done I think a good job there of trying to ratchet those down as much as possible.

Things like tires, and I'm trying to think of other consumables, we've seen some benefit as well there.

Frank, what else do you see on the consumables front that I am forgetting?.

You caught the hard points. I think grinding balls are another big consumable, and we've been able to either hold good pricing flat or in the short-term gain pricing advantages, other than that it's just across the whole theme of commodities.

We're very opportunistically looking for opportunities to look for purchase agreements to secure the lowest price as we possibly can on everything that we can get and add not too far out in the future, but trying to keep those prices of the commodities down..

Our next question comes from Andrew Kaip from BMO Capital Markets..

Look I've just got one question. I know we've had a fairly healthy discussion on costs, but I'm wondering about wage inflation or a lack there of ore or the capacity to actually move wages down. I mean my sense is that you still got improvements on costs from consumable and from an operating standpoint from optimizing operations.

But I'm just wondering whether you're now thinking of wages coming down over the next couple of years, given where metal prices are?.

Great question. We just went through in Bolivia, earlier this year, the one mine where we do have a union, and I think there was a government mandated increase there of, what was it Keagan, 11%..

That's right..

Is that where we ended up with about?.

Yes..

Just to put that in context, I think the average wage we're paying there for a worker is something like $1,100 a month U.S. You contrast that then with Kensington for example, that's our highest cost labor pool, where the average wage we're paying is probably a factor of eight times that.

A lot of that labor pool up in Alaska, I can't remember, Keagan, is it like almost half comes from the lower 48 kind of fly-in, fly-out. And I do think that there is an opportunity there to your point Andrew on wages. Nevada, we're seeing probably supply and demand of the labor pool. We're seeing more supply.

I mean the impact of things like Hycroft just down the interstate from Rochester has created a lot of inflow as far as people looking for work.

And where we are seeing some impact to the good is on benefits, compensation programs, to the extent that we can do more with less and take advantage of what is a little bit of a larger platform that we have now. So we're able as we look into 2016. We just went through the renewal programs for 2016 benefits, and we found some real opportunities there.

But we've come so far over the last two years as a company, the talent that we've been able to attract and really want to keep it in the continuity.

It's really important, especially from the management ranks at each mine up that retaining talent and putting in place good incentive programs that encourage -- the things that are most important in terms of health and safety, environment and cost and cash flow focus. Those are some thoughts at least.

I don't know if that gives you anything Andrew to work with. Frank anything from your perspective that I missed. Frank's gone. That's all we got Andrew..

I mean, at this point in time, I guess the answer is not yet, but that's a lever that potentially come into play sort of longer-term if we continue to see low metal prices..

Yes, without a doubt. And if you look at Palmarejo, right, that was over 900 person operation a year or two ago, when it was cranking out as many ounces as it could. And as we transition to more, well, two underground mining, that pool is going to shrink down to I think 700 or so.

And there was a lot of availability of talent and the labor force down there is much more heavy on the supply side than the demand side, so we could start to see some wage relief I think as we move forward..

This is Frank, and I have one more comment to add. Andrew, a year ago we were looking to building and ramping up one mine in Mexico Palmarejo and that was Guadalupe, while we had a decline, and we're building two now.

And net-net, when we think back of the level of workers that we've had at that side over the years, its going to come down substantially, but it will still take quite a few people to operate two very large mines ultimately..

The next question comes from Arjun Chandar from JPMorgan..

Just a couple of questions from our side. I guess, first, you mentioned in your prepared remarks a forecast to return to free cash flow positive in 15 months.

You've obviously done a lot on the cost side to bring cost down, but what commodity price assumptions are you incorporating in that forecast? Are you running current slot levels or are you incorporating a bit of a recovery in gold and silver prices?.

That's kind of at or close to spot.

In my mind I'm thinking about the case that we're working through with the board last month, where it was $15 and $1,100, which is a few dollars and a few pennies I guess above where we are now, but obviously getting our cost all-in down into the low-14s is great and represents a huge step down from where this company has been historically, but we need to do more.

And if there is one thing that I've seen over what's been, I guess now, 20 years, with this company is that the planning and the scenario planning and the optimization of mine plans that never stops.

And as prices should they continue to grind down, we'll continue to try and offset that through better mine planning, and obviously targeting our drilling as we have on higher quality, higher grade material.

Keep in mind here we go into the second half of the year again already and as we start working on -- well, I guess the work has already started on our yearend reserves, we've got 150,000 meters of drilling from the last 12 months that will go into yearend reserves. And a lot of that is very successful and very focused on grade and quality.

Getting all that in to the drill databases and into the resource models and into the mine planning will give us a much clearer picture to as far as how we reposition and keep improving on those costs, and trying to work against what's been kind of a falling knife in terms of prices..

And with regards to minimum liquidity, I think you've mentioned historically $150 million to run the business. And I know earlier during the Q&A session you mentioned cash costing in Q2 of '16 based on your current forecast.

Do you still think that that's a necessary minimal liquidity number or do you think you can run the business a little bit leaner than that?.

Arjun, its Peter Mitchell. I quoted that number on the last conference call and it was really in the context of certainly the macro price environment where we are in as well as the CapEx plans that we had in front of us at that point.

As Mitch has mentioned, with the deferral at Rochester of about $26 million in managing our CapEx as well as being pretty significantly advanced on Palmarejo at this point, we can definitely dial that number back. And there was no special magic in that number when I quoted it before.

I was just saying, in light of the environment we're in and with our CapEx that buffer needed to be more significant, but we can dial it back. And I almost hesitate to quote a number, but if I were to quote a number, now I'd probably be sort of in the $100 million range.

But the reality is we will manage around that number tactically as the environment dictates as well. But certainly we're comfortable with a slightly lower number than that given where we are right now and where we're managing, so we've got plenty of headroom from a liquidity standpoint at this point..

And is there anything in either the credit agreement or the indenture for your senior notes that restrict you from entering into any streaming agreements?.

That would be a subordinated type arrangement, so I don't think it would be a restriction, but we would have to obviously see the specifics of the agreement itself..

And then finally you talked about your latest thoughts around potential asset sales, including potentially core capital?.

We'll continue to always look at ways. We can potentially monetize really anything that we have, if the price is attractive enough. In this climate prices typically aren't attractive enough, especially when you're giving up return on cash flow. And you mentioned core capital, that's a $9 million or $10 million a year contributor to EBITDA for us.

So to give that up, it would have to be obviously for the right economics. But we are always looking at those things and that's kind of one of the levers that you always have to be looking at is working the free-ups and cash for monetizing something that makes you better off and continuing to own it yourself..

The next question comes from Craig Johnston from Scotiabank..

Just more of probably a question for Peter. Just, Peter, wondering if you could just walk us through the accounting around the Paramount acquisition, and just I noted the increase in deferred taxes on the balance sheet.

Just wondering if you could walk us through how that worked? And then just on that note, looking at the payment of taxes in Mexico going forward kind of when you think you'd be paying taxes as well as kind of where you see it going forward in terms of tax payments?.

Paramount, even though we acquired a public entity with stock, we accounted for as an asset acquisition, and really that's just sort of GAAP definition that it falls into, given that it's not entity with inputs and outputs, it's a development-stage property. So we accounted for an asset acquisition.

In terms of the deferred income taxes, it's really the deferred tax liability as a result of the acquisition of those mineral interests and the deferred tax obligation that that creates in the acquisition itself. From a taxability standpoint, in Mexico we are not taxable currently.

Modeling out, we're probably going to see a need with a lift in commodity prices to elevate as into a significantly taxable position. So it's hard for me to give dates as to when we'd become a cash tax payer in Mexico..

And then just on Wharf in terms of the mining cost. I saw they are relatively high on a per ton basis, but more related probably to year in an unloading phase.

Thinking in terms of kind of the cycle of that, is it fair to assume you'd be into an unloading phase again maybe come Q1 next year, and you'd see mining costs increase around then in a similar fashion?.

Yes. Frank, we just talked about that. You want to cover that..

We've just completed an unload stage five out there, Craig, and have started the process, have installed the new liner and we're now reloading that pad.

It's really the driver for the operating plan for the rest of the year, where we're going to go over and campaign mine in the Golden Reward area, taking advantage of some very good high-grade material, which will all go on that stage five. But I looked at the breakdown of our mining costs, because we do have this pad loading and unloading function.

You don't really have the opportunity to see the breakouts of what that cost per ton is. I can give you a couple of metrics to perhaps help you out. Mining cost at least through recent period were like $2.27 a ton. So that's your cost of mine ore and waste, and get it either hauled off to waste dump or sent to a crusher to add for a leach pad.

We add to that pad loading costs, unloading cost, I'm sorry, that will happen at the end of the lead cycle and that is $0.97. So you've got to add the $2.27 and $0.97. And then, yes, you do end up with a number north of $3 that looks kind of odd.

But if you back out the unloading cost, it's pretty reasonable it's pretty typical with most opened pit operations.

The other side of the coin is the pad unloading and that is $0.66 a ton, and that gets charged to the process cost, which just contain the normal things of crushing, getting the ore out on to the pad, pit loading, and contouring maintaining elevations and everything and all the costs of the reagents you saw and to leach the ore.

There is that $0.66 a ton. So that's where you come in at $4 and I think some $0.50 somewhat per ton for processing. And then there is something just a little bit about $2 per ton for G&A. So that's pad loading and unloading. So we're always in some sort of a sequence or either loading or we're unloading. And it's over a roughly eight to 12 months cycle.

So I don't know, I haven't looked at the timing. I'm not sure if it will be happening that way in the first quarter next year, but certainly in the first half. And I'd be happy to take a look at that if that timing would be, if you need to know that, that will be a useful thing to know..

The next question comes from Garrett Nelson from BB&T Capital Markets..

A couple of follow-up questions on CapEx.

Can you provide the CapEx assumptions that are embedded in the three-year outlook? And looking out to 2016, 2017, it sounds like you're saying you're going to be flexible with spending plans depending on the price environment? And also, what is Coeur's company-wide maintenance CapEx at this juncture?.

I'll start and you guys fill in what I miss. But to just to take your second question first, maintenance sustaining kind of $50 million to $60 million annually, is a good number to use.

And as far as CapEx goes in the three-year guidance that we -- the three-year outlook that we put out in late June, I think what it showed is in 2016, it was about $100 million. And then 2017, since we're pushing some of that Rochester leach pad out of '16 into '17, I think the total number is around $120 million.

And I think our guidance for this year is right at $100 million. So $100 million, $100 million and then $120 million, with about roughly half of that each year being that maintenance figure..

And those are the CapEx plans based on those precious metals price assumptions, correct?.

That's right, yes. So in 2016, I'm sitting on top of that maintenance number is expansion capital related to Kensington and Jualin, expansion capital related to Independencia and to the lesser extent Guadalupe. And then in '17, we've got a little more Jualin. You've got the big nut there at Rochester.

Those are the big chunks, unless I'm forgetting something, but that kind of give you a sense for what makes up those CapEx numbers and timing..

The next question comes from Ben Shen from Symphony Asset Management..

I just wanted to confirm, when you gave the free cash guidance in late June, I think I noted that it didn't include the annual interest payment.

So first of all, can you confirm whether that's correct? And then when you say you expect to return to free cash flow positive in around 15 months, is it also x the annual interest payment of around, I think, I calculated $45 million or is it inclusive?.

Those free cash flow numbers do include interest. That's sort of a fully bate number, all everything. So when I say 15 months from now, that's after interest, any royalty payments and anything else, but it's in both of those numbers..

This concludes our question-and-answer session. I would now like to turn the conference back over to Mitch Krebs for any closing remarks. End of Q&A.

Well, thanks everybody. We appreciate your interest and your time and your questions.

Just a quick note, 20 years ago this month I joined this company, which sounds kind of bizarre, just trivia, average price for silver that month, August of 1995 was $5.38 and the average price for gold in August of '95 was $383 an ounce, so just to give you a perspective of how things change. Anyway, thanks again for your time today.

We look forward to speaking with you again in November. Thanks..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..