Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Coeur Mining (NYSE:CDE), the largest US-based primary silver producer, is temporarily halting operations at its Silvertip silver-zinc-lead mine, located in Canada’s northern British Columbia, due mainly to low prices for lead and zinc.
The decision caused Coeur to book a $251 million impairment charge on the underperforming asset, acquired from private investor Denham Capital in 2017 for up to $250 million.
Mid-morning Friday, Coeur’s stock was down 14% and trades reached over 10 million, already twice the daily average.
The miner has booked a $251 million impairment charge on the underperforming asset
Severance costs related to work suspension are estimated to reach between $5-10 million during the first half of the year, while quarterly care and maintenance will cost $6 million.
Chief executive Michael J. Krebs said the move ultimately sought to increase Silvertip’s long-term value. While mining and processing activities are paused, he said Coeur planned to more than double its investment in drilling to further expand the asset’s high-grade deposit and extend its mine life.
The Chicago, Illinois-based company has already begun working on a pre-feasibility study to evaluate a mill expansion, which could cost between $50-$75 million. The project, it says, would “significantly enhance Silvertip’s economics.”
The mine, located just below the Yukon border, accounted for about 6% of Coeur’s 2019 revenue. According to the company’s website, it employs 167 people.
Coeur does not anticipate restarting Silvertip until late in 2021, depending on the results from exploration and new feasibility study, as well as prevailing market conditions.
Comments
An affected employee
Coeur laid off 225 people on Wednesday, plus contractors who lost their positions were not included in the total. Also the mine manager told us Wednesday that they are planning on reopening January 2021.