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Coeur Mining's Recent Acquisition 'Good For Near-Term, And Long-Term' – CEO

By Alex Létourneau of Kitco News

Thursday December 18, 2014 2:35 PM

http://www.kitco.com/news/2014-12-18/Coeur-Minings-Recent-Acquisition-Good-For-Near-Term-And-Long-Term-CEO.html

(Kitco News) - Coeur Mining, Inc.’s (NYSE:CDE) $146 million acquisition bid for Paramount Gold and Silver Corp. (NYSE MKT:PZG)(TSX:PZG), announced Wednesday, is a good near-term and long-term play, according to a Coeur executive.


All you’d have to do is pull out a map to see where the logic lies in the transaction.


Coeur’s flagship Palmarejo mining complex, located in northern Mexico, is practically encircled by Paramount’s San Miguel land claims.



Mitchell J. Krebs, President and Chief Executive Officer, Coeur Mining Inc.

“They have a huge land position, their land basically surrounds Palmarejo,” said Mitchell J. Krebs, president and chief executive officer of Coeur. “They have resources defined on seven different deposits, one of which is the Don Ese deposit which is an extension of one of our deposits on our side of the boundary.


“Outside of those seven deposits, there’s a lot of other targets that still require drilling and follow ups over the coming years,” he added. “There’s near-term impact on us with Don Ese and all the synergies there. But longer-term there are those deposits as well as all the land and prospectivity those bring.”


The Don Ese deposit is an extension of Coeur’s Guadelupe deposit. Don Ese is expected to start contributing ounces by the end of 2015.


“Now with this transition away from quantity to quality ore, we have excess capacity at our Palmarejo mill and Don Ese ore will partially fill that,” Krebs said. “So we can take advantage of some great, unique and significant synergies like that.”


The company said in its release that they expected to produce roughly 6 million ounces of silver and 110,000 ounces of gold combined from the Don Ese and Guadalupe deposits over the next eight years.


Krebs noted that talks between Christopher Crupi, chief executive officer of Paramount, and himself had been going on-and-off for six or seven years. But the catalyst to the deal being made wasn’t due to any cues in the market.


“It’s not really driven by the dynamics in the market,” Krebs said. “We’ve looked at this when prices were high, we’ve looked at this when prices were low and it was really just a question of both companies advancing themselves individually to a point when it would fall into place, and now I think it has.


“We (Coeur) came into 2014 with a lot of questions being raised about Palmarejo having a life two years ahead of it,” he said. “Here we are at the end of the year, and we’ve done a lot of things at Palmarejo this year, with this [deal] included, we’re looking at another solid eight years and a whole lot of opportunity to extend beyond that.”


Asked about lower metals prices, Krebs pointed out that he and the company expected lower prices and have prepared the company to withstand drops. He also said he believes these lower metals cycles are good for the industry.


“I view lower prices like this as creating great opportunities,” he said. “It gives us a great catalyst for driving significant lead positioning at each of our mines.


“So it gives you a reason to do the things you wouldn’t normally get done when everyone’s fat and happy at much higher prices,” Krebs continued. “The longer prices remain weak, the better it is, ultimately, for the industry.”

Coeur says they expect the transaction to close during the second quarter of 2015.

By Alex Létourneau of Kitco News [e-mail]
Follow Alex Letourneau @alex_letourneau