Wayne’s Pick of the Week: Coeur Mining (CDE:NY)

Quite frequently, analysts just get it wrong. Last week, Coeur came out with its fourth quarter results and analysts found fault. Investors were smarter and the stock went on a tear. And there is probably much more to go, in my opinion.

The good news? Operating cash flows were up to $44.4 million from $36.2 million in Q3, bringing full- year cash flows to $113.5 million. Annualising Q4’s cash flows implies a very low Price/Cash Flow multiple of only 2x. Adjusted costs per ounce of gold sold fell to $663/oz. in the quarter, from $783/oz. in Q3, bringing full-year costs to $764/oz., well below the $940/oz. delivered in 2014. All-in-all, a great performance in a terrible environment for gold and silver producers. Just what you want to see.

However, Coeur also reported a non-cash impairment of $313.3 million on the Palmarejo and San Bartolomé mines, the Endeavor silver stream, and certain royalty assets. This pushed the Q4 adjusted net loss of $38.6 million to a net loss of $303 million and a full-year loss of $367.2 million ($2.83/share). This is ancient history and has nothing to do with current performance. In fact, it’s a good thing they are cleaning up their balance sheet. But the loss is what got headline treatment.

In my opinion, this company has got it together. Costs have been falling faster than its peers and production is set to grow later this year from their Mexican assets following last year’s acquisition of Paramount Gold & Silver.

The problem is that the market does not yet recognize last year’s transition from what was largely a silver producer to mostly gold, thanks to the acquisition of Wharf from Goldcorp. And the market does not yet appreciate that Coeur’s large debt is not a threat due to clever structuring and improved cash flows. Rising metal prices sure don’t hurt, either.

What was once one of the industry’s worst performers is not any more, in my opinion.

Please note: I am not a registered investment advisor and in the interests of full disclosure, I own Coeur.