Couer Mining's Silver Prospects: Is CDE a Hidden Gem in the Mining Sector?

Coeur Mining, Inc. (CDE) is a well-diversified, growing precious metals producer that specializes in silver mining. The company has four wholly-owned operations: the Palmarejo gold-silver complex in Mexico, the Rochester silver-gold mine in Nevada, the Kensington gold mine in Alaska, and the Wharf gold mine in South Dakota.

The company's subsidiary recently entered into a definitive agreement to acquire SilverCrest Metals Inc. The addition of SilverCrest’s Las Chispas mine is expected to generate peer-leading 2025 silver production of approximately 21 million ounces. Also, CDE announced key milestones and achievements at the expanded Rochester mine and reaffirmed its full-year silver and gold production ranges.

During the third quarter, Coeur reported higher production at all four of its operations, which drove a 21% increase in gold production and a 15% increase in silver production. Gold production totaled 94,993 ounces, and silver production was 3.0 million ounces respectively. Its costs to sales per gold and silver ounce also declined 12% compared to the prior quarter, leading to higher margins.

The company’s expanding operations and strategic initiatives have positioned it as a strong performer in the market with significant growth in the future. Coeur Mining’s increasing production capabilities and facilities are boosting its prospects. This is further accelerated by the optimistic outlook of the market demand for silver.

The ongoing industrial demand and a recovery in jewelry and silverware are likely to surge silver demand to 1.21 billion ounces in 2024, while mine supply is expected to rise by 1%. Also, silver prices are expected to surge above their previous levels in the coming six to twelve months, reaching over $40 to $42 per ounce.

Shares of CDE have gained 12.6% over the past six months and 142.9% over the past year to close its last trading session at $6.63. However, the stock has declined 11.2% over the past month.

Let’s look at factors that could influence CDE’s performance in the upcoming months.

Recent Developments

On October 4, CDE and SilverCrest Metals Inc. (SILV) entered into a definitive agreement whereby a wholly-owned subsidiary of CDE will acquire all of the issued and outstanding shares of SilverCrest. The addition of the Las Chispas mine, one of the world's lowest-cost and highest-grade silver/gold operations, is expected to produce 21 million ounces of silver annually.

The strategic acquisition will bode well with CDE’s operations by adding world-class Las Chispas operations to its portfolio, significantly increasing its free cash flow, and accelerating Coeur's deleveraging initiatives.

Robust Financials

For the third quarter that ended September 30, 2024, CDE’s revenue increased 61.1% year-over-year to $313.48 million. The company’s adjusted net income came in at $47.16 million or $0.12 per share, against a net loss of $18.62 million and $0.05 per share during the prior year's quarter, respectively.

Furthermore, the company’s adjusted EBITDA of $126.04 million indicates growth of 311.2% year-over-year. And the company’s free cash flow for the quarter was $69.08 million.

As of September 30, 2024, CDE’s total assets stood at $2.23 billion, compared to $2.08 billion as of December 31, 2023.

Favorable Analyst Estimates

Analysts expect CDE’s revenue for the fourth quarter (ending December 2024) to come in at $315.75 million, indicating an increase of 20.5% year-over-year. The consensus EPS for the same quarter is expected to be $0.16. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.

For the fiscal year (ending December 2025), the company’s revenue and EPS are anticipated to grow 30.4% and 305.5% year-over-year to $1.40 billion and $0.67, respectively.

Strong Profitability

CDE's trailing 12-month gross profit margin of 30.76% is 6.3% higher than the 28.94% industry average. Its trailing-12-month EBITDA margin of 22.45% is 36.7% higher than the industry average of 16.42%. And the stock’s trailing-12-month CAPEX/Sales of 22.58% is significantly higher than the industry average of 7.65%.

Mixed Valuation

In terms of forward non-GAAP P/E, CDE is currently trading at 40.43x, 129.8% higher than the industry average of 17.60x but it is 51.2% below its five-year average. Also, the stock’s forward EV/Sales and Price/Sales of 2.96x and 2.46x are considerably higher than the industry average of 1.74x and 1.39x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Cash Flow of 9.84x and 13.53x are 10.6% and 35.1% higher than the industry averages of 8.89x and 10.02x, respectively.

POWR Ratings Reflect Uncertainty

CDE’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, equating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CDE has an A grade for Growth, which is consistent with its strong financial performance in the last reported quarter.

However, the stock has a C grade for Value, justified by its mixed valuation. Also, with a five-year beta of 1.65, the stock has earned a grade of D for Stability.

Within the Miners - Diversified industry, CDE is ranked #11 out of 40 stocks.

Beyond what is stated above, we have also given CDE grades for Momentum, Sentiment, and Quality. Get access to all the CDE ratings here.

Bottom Line

CDE reported strong earnings in the third quarter of fiscal 2024. The company is continuously expanding its reach into different geographies through strategic acquisitions. It is also investing and strategizing to enhance the capabilities of its facilities. These efforts have resulted in impressive growth in its production levels.

Also, with the silver market outperforming other precious metals like Gold and others, the company’s future appears promising.

However, given the stock’s current elevated valuation, it could be wise for investors to watch how its initiatives unfold and wait for a better entry point into the stock.

Stocks to Consider Instead of Coeur Mining, Inc. (CDE)

CDE has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A-rated stocks within the Miners - Diversified industry: Amerigo Resources Ltd. (ARREF), Fortescue Metals Group Ltd. ADR (FSUGY), and Labrador Iron Ore Royalty Corp (LIFZF).

For exploring more Buy-rated Miners - Diversified stocks, click here.

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CDE shares were trading at $6.75 per share on Friday morning, up $0.12 (+1.81%). Year-to-date, CDE has gained 107.06%, versus a 26.10% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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