Good morning, and welcome to the Coeur Mining Second 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 Mitch Krebs, President and CEO. Please go ahead..

Good morning, and thank you for joining our second quarter earnings call. With me here in Chicago are Mick Routledge, Tom Whelan, Aoife McGrath, 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 second quarter was marked by solid top-line growth and continued progress at the Cornerstone Rochester POA 11 Expansion Project. As highlighted on Slide 3 in the earnings deck, three of our four operating mines delivered strong production growth compared to the first quarter.

Solid metal sales, coupled with some positive changes in working capital led to a strong rebound in quarterly operating cash flow as well. As we look toward the second half of the year, our operations remain on track to achieve our full year production guidance.

On the cost side, inflationary pressures continue to impact our results, especially from sharply higher diesel costs. So we have made some minor adjustments to our 2022 cost guidance that Mick and Tom will review in more detail in a moment.

We also modified our full year guidance to reflect our decision to invest an additional $11 million in exploration during the second half to follow-up on recent positive drilling results at Kensington, Palmarejo and the Silvertip project, which Aoife will talk more about shortly.

Most importantly, the ongoing expansion at Rochester is now at peak levels of activity, and remains on track to be completed mid next year. There are over 400 contractors going through the gate every day now.

And several key milestones were achieved during the quarter, including the completion of major concrete pouring and the start of steel erection at the Merrill-Crowe facility and secondary crusher. Almost all components and equipment are now on site. The photographs on Slide 10 and 11 demonstrate the terrific progress being made.

We reached an important milestone a couple of weeks ago with the successful installation of pre-screens at Rochester’s existing Crusher, that Mick will talk more about in a few minutes.

The balance sheet remains in solid shape, with total adjusted liquidity of nearly $360 million, including the recent Victoria Gold share sale proceeds with an additional $59 million of potential liquidity in the form of marketable securities.

With the completion of the Rochester expansion coming into view, we look forward to delevering the balance sheet with the strong cash flow we expect to generate.

The next stage that awaits us post expansion, higher production, lower costs, positive free cash flow and reduced debt, will place Coeur in a great position to pursue other opportunities to further enhance the business. Finishing up with the highlights, I'm very pleased to welcome Jeane Hull to Coeur's Board of Directors.

Jeane brings over 35 years of engineering, operational and leadership experience. Her unique background will be particularly valuable as the Rochester expansion progresses toward completion. Jeane's work on advancing ESG initiatives also meshes very well with our commitment to be an industry leader in this area.

Coeur's diverse independent board is stronger with the addition of Jeane, and we'll continue to pursue opportunities to further enhance and refresh our board in the future. Shifting gears, I want to turn your attention to Slide 17 that highlights some important progress we're making on the people side of the business.

The ability to attract and retain the best talent remains a critical priority in our business, especially in the current tight labor market.

We continue to address that opportunity head on through the creation of programs and training designed to maintain our reputation as a place where people want to work and develop themselves and build rewarding careers.

Before having Mick provide an overview of our operations, I'd like Aoife to provide an update on her first 90 days with the company and give some additional color on our second half exploration priorities..

After three months in the new role, I've had an opportunity to visit all of the company's projects and meet the exploration teams across the organization. I've been very impressed both with the people and the potential of our assets.

One thing that became quickly apparent to me was the near term opportunity to invest additional exploration funds in the second half of the year to allow three sites to accelerate drilling on targets showing some excellent results. We look forward to reporting back at year-end and the impact of these programs.

At Kensington, wide and high grade results in the upper areas of the main Kensington deposit point to a very real potential for meaningful mine life extension from its current three year reserve life.

A key priority in the second half of 2022 will be to continue to target the lowest risk, potentially highest value and traditions by testing the southern extensions to Kensington, Elmira and Johnson veins.

At Palmarejo recent drilling in the Hidalgo zone at the Independencia underground mines have returned some of the highest grade gold silver intercepts the team has intended this year with drilling plan to continue for the remainder of 2022.

At Silvertip, which is at a very exciting stage right now, drilling continues to show the robustness of the deposit, with consistently impressive intercepts in the Discovery South, Southern Silver and Camp Creek zones. Drilling will continue to step out from and extend known deposits.

But in addition, summer season programs are being expanded to include testing of the regional package with the aim of vectoring towards the mineralizing source. We believe that the resource outlined to date has been defined and what is likely a small part of a larger mineralizing system.

And we firmly believe that Silvertip has the possibility to become a much larger resource and be a future source of high quality growth for the company. I'll now turn the call over to Mick..

first, steadily advancing POA 11 and carefully managing Rochester’s transition; second, implementing business improvement initiatives that drive efficiency and productivity at our operations; and third, and most importantly, focusing on safety and wellbeing of our people.

Turning to our second quarter production summary on Slide 6 and beginning with Palmarejo, metallurgical recoveries improved due to ongoing blending optimization, and metals grid remained consistent. We are confident in our ability to achieve production targets for the year.

We have a good handle on unit costs at Palmarejo guidance has been adjusted largely to reflect an expected change in the allocation of costs on a core product basis. Moving to Rochester, gold and silver production benefited from strong ore placement rates in the first quarter.

Gold ounces produced increased 37% quarter-over-quarter while silver ounces produced increased 5%. Tons placed in the second quarter were impacted by the installation of the pre-screen pilot system, which was completed on July 22. Ramp up of the pre-screen pilot system as well as optimization of the product size placed on the leach is now underway.

These learnings should help us further de-risk and optimize POA 11 as we move forward with our pre-screen system. Following a slower first half of the year, we remain confident that Rochester is on-track to achieve 2022 production guidance for gold and silver.

COGS guidance for 2022 has been revised upwards to reflect higher diesel, labor and maintenance cost. As a general matter, we anticipate period of elevated costs throughout Rochester’s transition period, as experience is gained and best practices are developed.

These learnings we believe will ultimately lead to a major reversal on costs of the scale and efficiencies in an expanded operation are fully realized. Being with Rochester and the POA 11 expansion for a moment, Mitch hit the key Q2 highlights.

On July 29, the transmission lane and onsite substation was successfully energized by Nevada Energy, as another example of the tangible progress taking place.

In the second half of the year, we will see the pace of activity continue, with the start of the product conveyor installation along the crusher corridor roof set of secondary conveyors, commencement of pre-screen installation and the completion of the metal Coeur electrical systems among many others.

The mining and project teams are aligned and working well together with over 1 million hours without a lost time injury, zero on the project to date.

At quarter end, the project's estimated cost remained approximately $600 million, roughly $523 million of the project capital has been committed and we incurred $350 million of that estimated total through the end of the second quarter.

Key Q3 updates on the final engineering and procurement of the pre-screen along with an updated multicolor analysis of the contingency will be completed as part of our ongoing governance over the project.

This work is not yet complete, but it is fair to say, we continue to see some inflationary pressures and could see the final cost of the project end up around 5% higher than the current estimate. Switching over to Kensington.

Production increased on the back of Kensington's highest ever quarterly throughput, driven by improved mining and mill efficiencies. The team continues to catch up on delayed stock development due to COVID impacts on the workforce in the first quarter, and we remain optimistic that Kensington is on-track to achieve the 2022 production guidance.

Wrapping up with Wharf, we continue to place higher grade material, which led to a 15% increase in gold production versus the first quarter. Wharf remains on track to achieve its 2022 production guidance range. 2022 gold cost guidance has been revised upwards to reflect high anticipated diesel costs. With that, I'll pass the call over to Tom..

Thanks, Mick. I'll briefly run through our consolidated financial results that are highlighted on Slide 4. An 8% increase in revenue quarter-over-quarter was driven by increased metal sales at each of our operating mines.

This higher production coupled with favorable changes in working capital led to $23 million of operating cash flow during the quarter. We are positioned for a stronger second half of the year with 2022 production guidance reaffirmed. We remain focused on opportunities to contain industry-wide cost pressures.

Slide 5 in the deck provides additional detail on four of Coeur's key costs and their impact on our business. As the slide demonstrates cost increases other than diesel have moderated compared to the increases we experienced last quarter. Diesel however, remains our largest line item in terms of cost exposure.

Coeur consumes between 16 million to 18 million gallons of diesel per year, and we're currently running at approximately $1.50 per gallon over budget through the end of the second quarter. Accordingly, we have increased our cost guidance at Rochester, Kensington and Wharf primarily related to diesel prices.

Next, turning to Slide 12 and looking at the balance sheet, we ended the quarter with $319 million of liquidity, including $74 million of cash and $245 million of availability under our revolving credit facility.

Additionally, we had $99 million of strategic investments in equity securities, leaving us with $418 million of potential liquidity as shown on the slide. We monetized a portion of our position in Victoria Gold at quarter end, and received proceeds of approximately $40 million in early July.

We're comfortable that the balance sheet remains well positioned to fund the CapEx and exploration priorities that we've highlighted during the call. Lastly, I wanted to remind everyone of the downside protection that we've put in place during the POA 11 build.

We have 108,500 ounces of gold hedges remaining in 2022 at an average forward price of $1,965 per ounce, and additional 112,500 ounces hedged in 2023. At an average forward price of $1,982 per ounce, which is providing meaningful downside protection in this current market price environment.

The fair value of the gold hedge brook at quarter end was approximately $29 million. I'll now pass the call back to Mitch..

Thanks, Tom. Before moving on to the Q&A, I want to quickly highlight Slide 13 that summarizes our top priorities for the second half of the year. By delivering on these priorities, we remain confident that Coeur is well on its way to being a truly differentiated opportunity for investors seeking industry leading organic growth from a U.S.

company with a balanced portfolio of North American precious metals assets. With that, let's go ahead and open it up for questions..

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Trevor Turnbull of Scotiabank..

I was interested in the higher throughput scenarios that you mentioned for Silvertip. I assume these are being driven by exploration success, and just wondered if you could talk a little bit about maybe the framework around those scenarios.

For example, are you weighing these expansions in terms of having a -- maintaining a minimum mined life? Or are you looking at things that might be more scalable, depending on exploration success?.

There's no doubt Silvertip is a large system that continues to grow, the more we drill. I know in Aoife's first 90 days, it's been a project that she's particularly enthusiastic about.

As we continue to sort of pursue this much larger scenario, that will obviously take some time to continue to do the drilling, the design and engineering and develop a compelling business case, which is okay.

While that goes on, we'll continue to focus on getting Rochester as POA 11, completed and commissioned, generating positive free cash flow, delivering the balance sheet. And so while we're doing those things Silvertip can -- the work there can continue.

With that, Mick, do you want to talk a little bit more about sort of expansion scenarios and size and how we're thinking about that?.

Yeah, absolutely. The original idea was a fairly small site at Silvertip, but since we've continued to get this success with the exploration results, at Silvertip we have to have a rethink of that. And now we're looking at what is that rate size.

So as you mentioned, we have to target a minimum mine life, which is then going to make a successful capital project, and effectively support that investment case. And as we continue to hit with the exploration program, then we'll reevaluate size.

But at the moment, we're going through that trade off study to look at what that rate size is, for the asset as it stands today, with an expectation that we'll continue to explore while we finish off the POA 11 project..

And just to put a fine point on that, Trevor, I think last year, a lot of the work that we did focused around a 1,750 ton a day scenario, we're sort of in the range of double that now plus or minus, and we'll fine tune that range as the work continues.

But Aoife, is there anything you want to jump in and say, from your standpoint on Silvertip?.

Yeah, I mean, it's -- I think it's at such a really exciting stage right now. And we've taken a bit of a step back to look at the larger mineralizing system in the context of the hub and spoke CRD deposit model.

Basically, what this means is that the hub is the intrusive source or a porphyry that provides the heat and fluids to move outwards and mineralize the surrounding rock in sort of a radial fashion. So you get the hub and spoke effect.

And from what we're seeing in the data, there's evidence that the resources outlined to date are on -- only one of -- potentially one of several potential spokes. And also in the geophysical data, there are indicators for the location of the porphyry source. So what we want to do is step back a little bit this summer and test some additional spokes.

And as the underground development gets closer to that potential hub, we would -- we plan to drill test that too..

Great. Sounds exciting, and look forward to hearing what you come up with. Thanks again, Mitch, for letting me jump in..

The next question is from Mark Reichman with Noble Capital Markets..

So I've got two questions, one question for Tom and then one for Mitch. So the first question for Tom is, you know, when the 2020 technical report on Rochester was completed, the capital costs was roughly $397 million and now it's $600 million. And it seems like the NPV has also declined under the base case discounting of 5%.

So I wanted to ask you, has the cost topped out? Is $600 million kind of the ceiling? And could you just kind of roughly walk through for investors, kind of a comparison between the technical report outcome and kind of where you stand today?.

Thanks, Mark. Hi, good morning, Tom, feel free to take a crack at. I'll start off with a couple of my own thoughts, if that's all right, Mark. The $600 million, obviously as we get further along here with nearly 90% committed, there is less and less uncertainty remaining.

The one piece that we are trying to pin down here in the third quarter are these pre-screens that will go into the new crusher. And as Mick said, we are seeing some cost pressure coming back on the bids for some of that work which, after the last nine months shouldn't be a huge surprise. Nothing seems to be coming back lower than prior estimates.

So, we did put some language, I think Mick mentioned, a 5% sort of indication of potential increase above and beyond the $600 million, kind of our attempt to provide an indication of -- to capture some of those potentials that may or may not arise between now and when we have this thing wrapped up middle of next year.

And as far as the comparison between kind of the $400 million to $600 million, in my mind, there is kind of a bucket of inflation and a bucket of scope enhancements, about 50-50, if I had to say off the cuff.

But Tom, do you want go with another layer on that?.

Yeah, 100%. So, $397 million was the original amount. As we continued through detailed engineering, we found some other opportunities, whether it be to enhance safety, enhance throughput, led us to the $450 million, which we had guided at the end of the third quarter of '21.

Then when this revised technical report came out, we had the two elements, we had the design changed with the pre-screen as well as the inflationary pressures. To be honest, I think we have done a great job of managing. On the procurement side, a lot of the key elements were ordered in. We ordered kind of pre the really heavy inflationary pressure.

And that's why when you look back at where the ultimate capital’s going to be, I think it's going to be a success given where we are at in terms of, if it's now -- maybe it's the top of the seventh inning for us versus some of our peers who are still in the top of the second or third inning in terms of the project.

And then I’ll just go back to the economics. Now, it's pretty compelling, still 17% IRR. Point out these technical reports are a point in time, and hopefully as we continue to advance and take all the learnings that we have had from the existing Stage 4, it's going to be a compelling project and arguably the best mining jurisdiction in the world.

So, I don't know, Mark --.

I think you've managed the project well, given the difficult circumstances, the inflationary environment. I just wanted some assurance on the economics, because clearly the original NAV was about $634 million, now its $348. But I mean, you are still expecting that $90 million of cash flow.

So, I was just kind of more interested in kind of the economics. And then the second question I had for Mitch was really just kind of long-term. I mean the Silvertip project seems to be getting more exciting by the quarter. The challenge is that, I've heard from some investors that, kind of the knock on Coeur’s been that they are always issuing equity.

And I think that there is some concern. I think there are some investors that would like to see kind of a halt in the spending.

And then once Rochester is in place that cash flow would be returned to shareholders in the form of buybacks, whereas it kind of seems like that once Rochester is completed, that the cash flow will be used to delever the balance sheet and then embarked on another big spending project in Silvertip.

So, I mean, will there be any room to return some cash flow to shareholders in the form of buybacks?.

That's a fair question. And we, I'd say, largely agree with the second part of your question around, sort of sequence and timing.

And this is an area where we've given it a lot of thought and frankly, the growing size and scale and potential, significance of Silvertip kind of helps -- has helped guide us to a perspective that, get Rochester completed, generate free cash flow, initially use it to distress the balance sheet that we've been utilizing to help fund the POA 11 expansion and generate positive free cash flow.

Be a consistent generator of free cash flow as we advance Silvertip along, and I think that's a bit of a change from where we were, let's say nine months ago, where we were thinking more of transitioning sooner from POA 11 completion to Silvertip.

And I think within their lives that opportunity then to delevering won't take that long with the kind of free cash flow that we anticipate generating post POA 11 as to whether then we turn to returning capital to stockholders. We'll obviously -- like we always do, we talk about that with our Board and make decisions accordingly at that point in time.

But I do think that getting to positive -- back to positive free cash flow as a company and staying there for a while, while Silvertip comes along, and being open to alternatives with Silvertip in terms of partnership models and other scenarios that could help to kind of share risk, reduce the capital required for a company our size, so that it doesn't create a future big strain on the company's balance sheet if and when we do move ahead with an expansion and restart.

.

[Operator Instructions] The next question is from Brian MacArthur of Raymond James..

I just want to follow-up a little bit on the remaining CapEx at Rochester. You sort of said $600 million, $350 committed, so I guess that's $250 million to go. But when I look at your guidance on page 9, you sort of have to 217 to 257 this year. If I take off the 73 that's spent at the low end and 143, then the low end next year is 131.

So I'm kind of 275 versus that 250. Have you already built that 5% in or how should I think about that? Because I just can't -- I'm just trying to figure out. All I really care about is how much cash there is still at the door, on Rochester, I'm trying to reconcile all that..

Yeah. No, an astute reader of our disclosures. I love it Brian. Thanks for the question. And Tom, I'll let you go into a little bit more detail here in a second. But Brian, that really flags just a -- what we're seeing in terms of timing of billings and payables.

So between cap -- accrual and cash, we have capital going out the door, there's still -- there's more than the 350 that we've incurred today that needs to still be paid.

And so that's been something that we've, obviously we're watching this like a hawk, and the timing of some of this cash in terms of peak capital at POA 11 will be more -- slight more to this current third quarter and into the fourth quarter.

We had previously anticipated a lot of that to come through the door and get paid out in the second quarter, but that's now happening kind of in the second half of the year. That's, I think one of the key distinction of, of what you've identified there.

Tom, do you want to?.

Yeah, sure. So just some big picture numbers, Brian. So 350 incurred, of which 297 of that's paid. So it's called 300 has actually been paid in cash -- cash gone out the door. So it kind of leaves 300 to go, you have to bear in mind, some of that's going to be funded with via some capital leases.

But 300 is kind of the magical number that's remaining of cash to go. And we updated, as Mitch said, just the timing of invoices, probably 155 of that or 150 or so is what's expected to go here in the second half. And then the numbers for next year remain as is..

And then Brian, just to circle back real quick. The multiple levers, if there's 300 million or so to go, the same kind of levers we've been talking about, still exist, right? There's the cash, there's the revolver capacity, there's the other equity investments.

And then there's the free cash flow from our other operations, which are underpinned with the gold hedges that Tom detailed. So you add all those up together. And you compare that to what's left to go there at POA 11. And we feel good about where we sit and we know the levers we have and ones that we can pull if and when we need to..

That is very, very helpful. I appreciate it, because that's I was always trying to figure out how much timing and whether it was over budget in there. That's one more thing about, the 600. Normally, when these projects -- there's -- working capitals not always included.

Do I need to worry about any timing on working capital on top of that? Obviously, it'll ramp up over time that you have to fund or anything? Do I need to think about anything on that front too?.

We're in the middle of the '23 budgeting process where we’re factoring in all the various ramp up scenarios, when’s the Merrill-Crowe done, et cetera, et cetera. So at this stage, we don't have anything further but that '23 guidance will be very clear about expected timing ranges of cash costs for next year, et cetera, et cetera..

On that second half commissioning. .

Yeah..

I'm imagining there's some pad buildup, but there's also -- or on fresh liner as well. So there is few things that we will sort out as we go through our budgeting and then setting guidance, and we will be sure to articulate that component, Brian..

Great. That's very helpful as well. And maybe just following up on the other question on Silvertip, because I sort of was looking at it the same way. I mean, at one time maybe you were thinking ‘25, maybe ‘26 getting stuff in. It sounds to me like bigger project, going to take some time to figure it all out, against that is obviously time value, money.

If you keep pushing it back and back before developing it, eventually that factors into it.

But should I sort of think about a '26, '27 timeframe? Is that sort of what you're thinking right now to get all the work done for Silvertip, which would then, as you said, give you that gap to pay down debt and potentially return money to shareholders? Is that a fair way to think about things now?.

I'd give you a specific answer, if I had one. The truth is none of us do as we sit here today, but just conceptually that feels much more on target than a -- it's kind of swinging from the POA 11 vine and right onto the Silvertip vine. And if you think of commissioning and ramping up POA 11 back half of 2023, that sets us up for a great 2024.

And if we want to generate some free cash flow and de-lever, that starts to give you a sense of how many additional years potentially beyond that then that we would expect to not be incurring any potential capital at Silvertip. So, I don't know if that kind of helps in -- reflect our thinking as we sit here today.

And bigger also obviously means a different sort of permitting approach, which will take some additional time as well during that window..

Sorry. And that was going to be my next one. I'll give it up. That was my last question then. So for all this -- where this is all being discovered, is there a lot of new permitting that has to be done, or, I mean, I get the interest of another hub and spoke. How much of it would be like on areas that are already done.

So as you said, it goes pretty quickly.

And how much of it would you actually have to spend a fair bit of time permitting?.

Mick, do you want to --.

Okay. So from an exploration perspective, we are in good shape and we have got access to all those areas to be able to go and investigate. From an operational perspective, if we expect to put a plant in place that's twice the size or bigger, then we are going to need an environmental assessment, and that takes some time.

We have actually already started some of that work to understand what that looks like and the timelines for that. And as we progress that planning, then we will share that. But as Mitch said, it's exciting. It's growing and we will have to plan that out and get this right sized..

Thanks.

Does that help Brian?.

It does. Thank you very much for answering all my questions. I appreciate it..

This concludes our question and answer session. I would like to turn the conference back over to Mitch Krebs for closing remarks. .

Okay, thanks. Before wrapping up. I just want to quickly thank all of our employees and contractors for everybody's terrific work and dedication and resilience. I'm so proud of everyone's effort, and seeing the impact you all are having as we continue to pursue a higher standard and turn core into America's premier growing precious metals company.

So with that, thank you for joining the call today and we'll speak again with you in early November to discuss our third quarter results. Have a good day. Thanks..

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