Good day, and welcome to the Coeur Mining First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mitchell Krebs, Chief Executive Officer. Please go ahead..

Good morning, and thank you for joining our first quarter 2022 earnings call. Joining me here are Mick Routledge; and Tom Whelan, along with other members of our team. Before I begin, please note our cautionary language on forward-looking statements in our slide deck and refer to our SEC filings, which are available on our website.

Our first quarter results were in line with expectations and position us to achieve our full year production and cost guidance ranges as we look to deliver sequential production growth over the remainder of 2022. Palmarejo and Wharf led the way with solid starts to the year offset by slower starts at Kensington and Rochester.

As those who follow the sector are keenly aware, lingering effects from COVID and inflationary pressures were two key themes during the quarter.

However, COVID-related disruptions appear to be dissipating and we’re managing our way through the supply chain shortages, disruptions and higher cost environment through our commitment to continuous business improvement initiatives at each of our operations. Both Mick and Tom will go into more detail on operating costs.

We provided an update on several important steps we’ve taken to materially bolster our liquidity levels to support the ongoing Rochester expansion, which Tom will detail shortly. The expansion is gaining momentum and advancing according to plan.

You can see from the photos on Slides 10 and 11 that the key elements of the project are quickly coming together. Mick will provide a more detailed update in a couple of minutes.

On the exploration front, we provided another update last week, this time highlighting new high grade intercepts that are Kensington and Palmarejo operations that point to future potential mine life additions.

Meanwhile, the exploration team at Silvertip hit the ground running this year after delivering strong double-digit resource growth last year with several additional high grade intercepts, including a new discovery called Camp Creek West that is opening up even greater possibilities at this emerging world-class deposit.

Another first quarter highlight that flew a bit under the radar was the receipt of the final record of decision from the United States Forest Service to increase the tailings and waste rock storage capacity at Kensington.

As our recent exploration success that Kensington indicates, we think the mine may have a much longer life than the current reserve suggests and receiving this record of decision provides us room to accommodate another decade of future growth.

Finishing up with the highlights we released our 2021 ESG report last week, which detailed our efforts to extend our leadership position in these critical areas of our business.

We have substantially increased our commitment to reducing our greenhouse gas emissions net intensity, raising our goal to a 35% reduction by 2024, compared to last year’s goal of a 25% reduction by 2025. A summary of highlights from the ESG report can be found in the deck beginning on Slide 17. I’ll now pass the call over to Mick..

Thanks, Mitch. Slide 6 includes the details of our first quarter operating results and how we’re tracking versus the balance of the year. As Mitch mentioned, the first quarter has expected to be our weakest, but we are pleased with the overall start of 2022.

Starting with Palmarejo, gold production ticked up slightly compared to the prior quarter while silver production remained consistent. Turning to costs and what will be a common theme as I go through operations. Higher consumable costs led to increases in unit costs for both gold and silver.

Completion of the Mexican peso hedging program, we had in place last year also contributed to higher costs compared to prior periods. As expected, Palmarejo’s first quarter cash flows were impacted by the annual Mexican EBITDA tax payment. In short, a solid start to the year ahead of production for Palmarejo.

Reaching over to Rochester, lower ore placement at the end of last year, January led to a slower start to 2022 production, compounded by lower average silver grade on pad four. On the plus side, tons placed increased 14% this quarter driven by better fleet availability and supplemented by 1.5 million tons of run-of-mine material during the quarter.

The team is making solid progress dialing in the optimum crush size with some excellent work in the pit. At the current ex-pit crusher and out on pad four.

You’ll recall that we’re incorporating prescreens into both the existing crusher and the new Limerick crusher that has been constructed to maximize our flexibility to process all mine with varying hardness and [indiscernible], which if too high can affect solution floors through the heat bleach and potentially negatively impact recoveries.

An important next step in this process will be the installation of prescreens on the existing ex-pit crusher, the work is already underway with concrete now being poured for the foundation. It’s important to point out that prescreen construction is expected to inhibit our ability to crush material for up to 30 days during the second quarter.

We look forward to measuring the impact of the screens of Rochester’s second half operating performance. And of course, applying these learnings to further de-risk the POA 11 project and incorporating them into our post-expansion operating plan.

Before covering the other operations, I want to provide a brief update on the progress taking place at the Rochester expansion project starting on Slide 9. The pace of activity is entering a new phase with the majority of essential materials and components now at site.

Approximately $283 million has now been spent towards the project and a total of $477 million of the estimated capital has now been committed, representing about 80% of the total capital.

With the majority of the Stage VI leach pad now completed, structural steel for the Merrill-Crowe processing facility is being erected and concrete at the new crusher corridors being poured. We look forward to sharing our progress as this important year unfolds.

Turning to Kensington, fantastic news as Mitch shared earlier that Kensington received the permits required to extend the tailings and waste rock capacity by up to 10 years. COVID-19 related workforce availability impacted mine sequencing and led to lower than anticipated production during the quarter.

Thankfully, the excellent controls we have in place developed over the last two years led to a quick resolution. Workforce availability has since resumed to normal levels and the team is working to catch up on delayed stope development.

Lastly, at Wharf, gold production was delivered slightly ahead of plan due to solid production rates as mining takes place in a lower grid area of the pit throughout 2022. On the cost side, the team did a great job with fleet efficiency improvements, helping offset increased prices for consumables. With that, I’ll pass the call over to Tom..

Thanks, Mick. Turning to Slide 4, I’ll quickly run through our consolidated financial results before spending some time to review the recent balance sheet enhancements.

Strong performances at Palmarejo and Wharf were offset by weaker than expected performances at Rochester and Kensington, leading to quarterly revenues and costs that were in line with our expectations.

Revenues decreased 9% quarter-over-quarter, based on a 15% and 6% decrease in gold and silver ounces sold, respectively, partially offset by a 4% increase in average realized gold and silver prices.

Operating costs were in line with our expectations as our 2022 budgeting process has generally captured most of the cost inflation pressures other than diesel. We typically consume 16 to 18 million gallons of diesel per year and are currently running approximately $0.60 per gallon over budget through the end of the first quarter.

A couple of other items to note on the first quarter. Operating cash was negative $6 million, reflecting the chunky outflows typical of our first quarter, including the annual Mexican EBITDA tax and annual employee incentive payments, as well as the semi-annual interest payment on our senior notes.

Capital expenditures for the quarter were $70 million, reflecting lower than expected POA 11 expenditures, primarily due to timing of invoices. Our guidance for expected POA 11 expenditures in 2022 remains unchanged at between $217 million to $257 million.

With production and cash flows expected to increase over the course of 2022, coupled with the recent actions that have significantly enhanced the balance sheet, we’re confident in our ability to fully fund our growth objectives both this year and in 2023, as POA 11 construction winds down.

Turning to Slide 12, the initiatives that we have taken since our year-end conference call strongly positions the company to be able to comfortably fund the remainder of the POA 11 expansion and our other internal growth initiatives according to our capital allocation framework.

As of March 31, adjusted to reflect recent initiatives I’ll describe in a moment, we had liquidity of approximately $378 million. We’ve completed three important initiatives to significantly enhance our liquidity.

First, we took advantage of elevated gold prices during the quarter to significantly bolster our gold hedging program to provide a meaningful source of downside protection during this time of price volatility and elevated capital investment. Second, we expanded our revolving credit facility by $90 million to $390 million.

As of March 31, we had $55 million drawn on the facility. We would like to thank the banks in the syndicate, including Goldman Sachs, who joined the lender group for their confidence in supporting our strategic plans. Third, we completed our previously announced ATM program during the first quarter for gross proceeds of $100 million.

We also continued to hold approximately $160 million of equity investments, with roughly $378 million of pro forma liquidity and the additional potential liquidity from our equity investments.

We feel very comfortable that the balance sheet will provide the required flexibility during this time of significant investment and expected high return growth initiatives. I’ll now pass the call back to Mitch..

Thanks, Tom. As these recent actions highlight, we continue to systematically build in uncertainty and eliminate risk as we advance Coeur’s growth strategy. With proper execution, we expect to conclude 2022 on the cusp of a new phase of multi-year growth in production and cash flow from our North American asset base.

Before opening it up for questions, I just want to take a moment to extend my appreciation for the tireless efforts of the entire Coeur workforce. I was recently at Palmarejo and Rochester and was reminded once again of everyone’s incredible dedication.

I’m very proud of the combined efforts of our nearly 2,000 dedicated employees and hundreds of contractors, who are pulling together to consistently safely and responsibly deliver results and pursue a higher standard. I’d also like to welcome our newest member of this team, Aoife McGrath, Coeur’s new Senior Vice President of Exploration.

Aoife joined us last month, bringing with her an impressive track record of value creation over a distinguished career. We look forward to benefiting from her leadership and expertise going forward. With that, let’s go ahead and open it up for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Thank you. And the first question will come from Trevor Turnbull with Scotiabank. Please go ahead..

Yes, thanks for taking my call guys. I was looking at the slide deck and I was quite impressed. I thought it was just a good way to see the impact of inflation, the way you presented it. And perhaps you’ve done that in the past, but it was the first time I’d noticed it.

I was curious, can you comment a little bit on some of the CapEx inflation pressures? You gave a really good breakdown of some of the operating cost pressures and how they’ve changed.

But can you make any comment on things like maybe structural steel and the bigger hard items that you might have to order? Have you – can you just comment on how inflation has played a role in those?.

Yes, sure. Appreciate that feedback. And this was a first time for this slide. We just thought given the focus both internally and externally on these pressures that this might be a good slide to create and include, so appreciate that feedback. On the capital side, I’ll let Mick talk a little bit more specifically.

We started to see those pressures on the capital side really sort of mid-summer last year, and going into the fall as we had a couple of large remaining contracts to award relating to the Rochester expansion. And maybe between Mick and Tom, you guys can give Trevor a little bit of color on how inflation has shown up on the capital side..

Yes. So on the project, the great thing is that we’re about 80% committed on the project at POA 11. And we predicted quite well from last year’s plan process that expectation. So when we re-baseline the project and looked at the new schedule in capital. We then communicated that last time round and were sticking with that guidance.

So on the capital project front, we’re pretty happy with where we’re at with POA 11. And on the operations side, in fact, the planning process was a robust one last year, and we built a lot of that expectation for some inflation into this year. And that’s why we’re holding the cost guidance for 2022..

Tom, anything to add?.

Trevor, I think just to put a fine point on what Mick said, I think third quarter last year, we flagged 10% to 15% potential inflation on the project.

And then when we came back early this year with a re-baseline estimate, it was – it came in right in that range kind of the high end of that range, mostly on the steel, piping, electrical, and then labor.

And really one of the big themes that I took away from that was just how contractors were kind of inflating their bids to reflect the risk of labor scarcity and trying to incorporate that into their estimates. And that was a source of probably some of the more significant escalation that we were seeing..

Right. And I do recall you telegraph that back in Q3..

Yes. Happy to follow-up offline and give you more color if you’d like..

No, I appreciate that. And I hate to harp on inflation, but I haven’t heard this ask before, and I am just a bit curious. Does exploration – is it starting to reflect inflation as well in terms of drilling rates and what’s availability like these days? It just seems like there’s so much interest in the sector for exploration.

Is it – are you starting to see cost pressures just from trying to keep rigs available and so forth?.

Yes. The place that I think of first is on the labor side drill crews very tough. And then also in the assay labs, scarcity of labor there is impacting turnaround times on assay results. On the actual cost side, I don’t – we’re not really seeing that, but I know – are we seeing a little on….

[Indiscernible] The great thing is we got what we needed so far and well planned for this year. And the efficiencies that we’re seeing across portfolio in fact were cost efficiencies per foot are helping us to stay off some of that inflation..

Great. Thank you. And just while we’re talking about exploration, I’ll use it as an excuse to congratulate both you and Aoife on her appointment, but that’s all I had. Thank you, Mitch..

Thanks, Trevor..

Thanks a lot..

The next question will be from Ryan Thompson from BMO. Please go ahead..

Hey guys thanks for the updates. I would echo Trevor’s comments on that slide. I thought that was a very informative slide. So thanks for that. Maybe just a couple of questions for me, first on Kensington.

Can you maybe just dig in a little bit more on that record of decision that you got and how do you see the mind life sort of evolving there over the next, call it, 12 to 24 months?.

Yes, sure. We started that permitting process almost five years ago. And just to give you a sense of how long those things can take here in the U.S. We – I think we said in the earnings materials that that should give us another decade or so of capacity for both tailings and waste rock. Now the onus is on us to fill up that 10 – next 10 years.

We’ve been investing mostly on the expansion side of the drilling budget at Kensington. We’ve built up a pretty decent inventory of resources, reserves declined year-over-year. But now the focus is to convert some of that resource into reserve this year.

Some of the drilling results that we put out last week were from Kensington, which I found very encouraging in terms of some of the results coming from the upper areas of Kensington, of the main Kensington Zone that we’ve – where we’ve been mining since the mine started up in 2010.

And so going up higher there in what we call Zone 30, 30A, 30B, that’s an interesting development that we think can give us some additional resources and then ultimately reserves.

Mick, do you want to add any to that or have I some of the other deposits besides the main Kensington?.

No, we have, obviously, if I joined us and were really excited about that to get some strategic interpretation of that region and Cal – Robert Callaghan joined us, who has a lot of experience in that region as well. And we’ve put together a great target list and we’re going to work through that conversion pipeline.

We’ll have a strong tiered approach, Tier 4, 3, 2 and all the way down to reserves at Tier 1. And we’re going to get after those targets. When you look at what options – we have options to get after there. And we’re hopeful that we’ll find the right targets to convert and fill up that capacity over time..

Perfect. Thanks for that and I’m looking forward to tracking that as the work unfolds there. Maybe just another one for me.

Can you just give us an update on Crown and Sterling? Are you still active there? What’s the latest thinking on that project?.

Yes, still active. A pretty healthy allocation of our exploration budget is to Southern Nevada a lot of activity in the area as I think most people know a lot – and the reason there’s a lot of activity is because there’s a lot of potential in that.

Historic district that’s now sort of got a new lease on life with AngloGold announcing a resource just immediately to the north of us on what they call Silicon and then them acquiring Corvus Gold right there in the region. There’s just been a lot of corporate activity and a lot of exploration investment taking place.

So look, we’re going to continue to invest in drilling and keep growing our resource base. We’re having continued very good success there.

That said, I think always said, if there’s a compelling opportunity that comes along to really unlock value in Southern Nevada share risk, rationalize capital whether it’s partnerships, consolidation, we’re always open to those conversations, whatever we can do to maximize the value of Southern Nevada.

But if you look at the map down there, we really like the land position that we have. We kind of have the guts of that district tied up and so it’s an exciting part of the longer term growth story that we have here..

Perfect. Thanks a lot for the update. That’s all I’ve got..

Thanks, Ryan..

The next question will be from Carl Landon from Goldman Sachs. Please go ahead..

Hi. Good morning. Thanks for the time. Just sort to focus in on CapEx and the full year guidance there.

When you look at that and the main factors that could drive you to be toward the lower or higher end of that range, I’d be interested to hear what the big buckets are, perhaps more focused on those that are not really in your control, so, unhedged material costs or something of that nature..

Yes. Overall CapEx basis for 2022, obviously the lion share of that is dedicated to the ongoing Rochester expansion. And we’ve started to kind of transition out of what was a lot of procurement risk. And now much more toward just the project management risk, which sits more in our control than the procurement phase.

We still have to nail down the pre-screen capital estimate that we’re going to design in and incorporate into the expanded crusher facility. But the nature of the spend out there at Rochester is starting to kind of shift from that procurement to more project management of contingency owners costs et cetera, et cetera.

Tom, anything you want to – that’s the bulk of it. The next biggest bucket of our CapEx this year is really underground development, capitalized development at our underground mines, which I think we’ve got a good process, good controls over those buckets at Kensington and Palmarejo.

Did I leave anything else?.

Just on the POA 11 construction and the risk profile. Of course, when we’re digging holes in the ground and we’re doing civil work, there’s always a risk there, but once we get above ground, which we largely are now for this project, then the control of that work on construction and execution is much tighter and largely in our control.

So we’re pretty happy with that risk profile..

That’s very helpful. Great to see on Slide 12, the – basically the summary of balance sheet enhancements, they’re getting you to the total liquidity number that you disclosed there $378 million. As you think about the revolver capacity that you’d like to maintain.

Is there kind of a range that you’d be comfortable with even as we go through kind of the build phase of Rochester? The addition is certainly helpful there but interested in just kind of the sensitivity to the downside..

Tom, do you want to go ahead?.

Yes, sure. We’ve always stated $100 million kind of what we would like to have as a minimum level of availability to make sure that we’ve got the flexibility that we need as a multinational company with opportunities that pop up from time to time. It’s always good to have sort of at least that amount of cushion. So that’s what we target, Carl.

And again, from this, a big part of the math that we did around putting on those hedges was to in fact, ensure that we’ve got that $100 million of liquidity available.

And the hedge program that we put in with 70% of 2022 hedge and 50% of the first half of 2023, we’ve added on a little bit more in the second half of 2023 is all geared up to just make sure we’ve got that downside protection during the construction out at Rochester..

Fantastic. That’s helpful. Thanks very much..

Thanks, Carl..

[Operator Instructions] The next question is from Mark Reichman from Noble Capital Markets. Please go ahead..

Good morning. And thanks for taking my question.

It may be a little early, but with the exploration success at Silvertip, have you received any encouraging signs from the market, whether that be discussions of off-take agreements or even interest from other parties in buying the project that you’re making the right decision on that project, moving it forward.

And what are your expectations for Silvertip at this point?.

Yes. Thanks for the question. I’ll start. And then Tom, maybe you can tack on anything on the – especially on the off-take side. Like we’ve said, Mark we’ll know a lot more here in late this year as we gain some clarity from the work that’s going on.

We certainly like the grade profile and we always have, I think that’s starting to get a bit more attention from – even from other companies that see that this is among the highest grade silver zinc led deposits anywhere in the world. And now they’re starting like us to see the tonnage increase fairly rapidly. And so that’s creating some interest.

The fact that it’s sitting in British Columbia, also checks the box for external parties and it always has for us. And we’re looking forward to getting to the end of this year and seeing what does some potential higher tonnage scenarios look like in terms of the overall economics for the project.

And then most importantly, we need to find a way to make that capital and the sequencing of the project work for the economics of the project and for us as a company, balancing other priorities like delevering on the back of POA 11, getting Rochester obviously completed. Those are – those come first.

But certainly is attracting a lot of interest externally and a lot of excitement here in internally. Tom, do you have any other....

Yes, I would just talk about the – all the various metallurgical testing that we’ve done across all the zones. And certainly the concentrate grades that we are – have come out of those testing are showing that both the zinc and the lead cons are going to be highly desirable.

And given the geographic location, logistics was never an issue to get the concentrates out to market. And so there continues to be heavy interest. And again, we’ll come out with more news here towards the end of the year..

And I think just one last thought there is, with everything going on in Eastern Europe, disruptions, supply disruptions, geopolitical uncertainty that’s even put more of – and with the higher base metals prices has created more of a buzz around Silvertip..

Yes. Particularly at a higher tonnage, it’s going to be even that much more interesting. So wait and see..

So it sounds like there’s growing recognition that the project is really shaping up to look very competitive and whether you decide to hang onto it or decide to do something else with it. At this point, you’re feeling pretty good about how it’s progressing in terms of as you’re working towards your process at the end of the year..

Yes. I think that’s well said, Mark. I’m looking at Mick over here to see if he’s nodding or shaking his head and he is nodding his head..

That’s better than a no, anyway. Thanks very much. That’s really helpful. And very much appreciate it..

Thanks Mark..

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks..

Okay. Well, we appreciate everybody’s time this morning. Look forward to speaking with everybody again this summer. So thanks again for the time. I know it’s a busy reporting week and have a great day. Thanks..

Thank you, sir. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..