Good day and welcome to the Coeur Mining Third Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Paul DePartout, Director of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to Coeur Mining's third quarter earnings conference call. Our results were released after yesterday's market close and a copy of the press release and slides are available on our website. I would like to remind everyone that our press release, slides, and some of our comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation as well as the risk factors described in our 2020 10-Qs and 2019 10-K. Now, I'll turn it over to Mitch.

Thanks Paul and good morning everyone. Joining me here are Tom Whelan and Mick Routledge along with several other members of the management team. We had our best quarterly financial results in nearly a decade driven by strong performances at Palmarejo and Wharf along with higher gold and silver prices. Starting off on slides three and four in today's presentation materials, I'd like to point out a few headlines from the quarter before turning the call over to Mick and Tom. The first is just how great of a job the Palmarejo team did to bounce back from the government-mandated suspension in the second quarter to basically double production levels and generate nearly $45 million of free cash flow in the third quarter which is one of their highest quarterly free cash flows ever. I also want to emphasize just how big of a record-breaking quarter the team at Wharf had producing over 33,000 ounces of gold and generating almost $40 million of free cash flow which is nearly two times higher than the previous record. We also successfully kicked off construction on POA 11 at Rochester. Once completed Rochester's expected step change in its cash flow from less than $5 million a year to over $100 million a year will help to fundamentally reposition the company. We look forward to sharing the details of this important expansion with you when the updated technical report is issued in December. Another headline is the fact that we ratcheted up our momentum in exploration and are now on pace to invest over $50 million company-wide this year. We continue to view this as an excellent capital allocation decision that has tremendous potential to grow our near-mine resource base, generate new discoveries, and lead to larger reserves and longer mine lives. And finally,…

Thanks Mitch. Before covering the operational highlights I'd like to thank our entire workforce from our miners to our office employees and our contractors and suppliers for their relentless commitment to health and safety and for all the hard work and dedication during these challenging times. Let's continue to strive for excellence and pursue a higher standard each and every day. Now, digging into the results on slide 6 and starting off with Palmarejo, which was our top free cash flow generator this quarter. We bounced back strong with gold production over -- up over 90% and silver production more than doubling after being down for roughly 45 days in the second quarter. Much of the increase in production was due to higher throughput, which averaged to just over 5,300 tons per day. Along with solid cost controls, this helped us generate $45 million of free cash flow during the quarter. We were able to accomplish these results through efficiencies in the mine and in the mill together with higher staffing levels to ensure business continuity in case of any COVID-19 impact. While there may be periodic changes to workforce restrictions from the government we are focused on what we can control and consistently executing our operating plans. Looking forward, we expect to offset the 45 days we lost in the second quarter with slightly higher production and considerably lower cash costs for gold for the full year. Switching to Rochester, the team did an excellent job crushing and stacking during the quarter, which led to the placement of 4.5 million tons 21% higher than the prior period and 80% higher than the third quarter of 2019. That said, production increases were less than anticipated for a couple of key reasons. First, we are still seeing the impact of dilution…

Thanks, Mick. Starting off on slide 5. Our third quarter financials reflect excellent results at Palmarejo and Wharf as well as higher realized prices which led to nearly 50% revenue growth and $91 million of adjusted EBITDA at a 40% margin. As we continue to increase profitability LTM EBITDA has grown by almost 60% to $239 million compared to $151 million just one year ago. Operating and free cash flow totaled $80 million and $57 million, respectively significant improvements quarter-over-quarter. Turning over to slide 12. Our balance sheet remains in excellent shape with no near-term maturities and ended the quarter with over $285 million of liquidity. We used much of the cash flow generated during the quarter to repay nearly $50 million of debt including $40 million of revolver borrowings. We plan to repay the remaining $20 million balance on the revolver by year end if not sooner and expect our cash position to remain strong as we head into the end of the year. I'd like to also mention that we did not execute any additional hedges since our latest investor call. Additionally, the ATM remains untouched and in place for now as a last resort liquidity backstop. By generating better financial results and our commitment to further bolster the balance sheet we continue to see our leverage ratios trend downward significantly. At the end of the third quarter, our net debt-to-EBITDA was under 1 time for the first time since late 2017. We are proud of the progress that has been made to strengthen the balance sheet and believe we are very well-positioned heading into major construction at Rochester over the next two years. I'll now pass the call back to Mitch.

Thanks, Tom. Slide 13 shows several near-term priorities as we approach the end of the year. And while our third quarter performance was very strong, we can achieve even stronger results with Kensington returning to its first half form and getting Rochester dialed in the way we know we can. We're looking forward to hosting a virtual Investor Day on December 17 to walk through the updated Rochester technical report, as well as provide a status update on Silvertip. We'll also highlight the progress of our exploration program to build off the strong mid-year results we published back in August. Our team is extremely excited about delivering the kind of results and creating the amount of value we all believe is possible in the near future based on our strengthening operational performance, executing our near-term organic growth projects and advancing our expanded pipeline of longer-term opportunities we're developing from our higher level of exploration investment. We'll keep pursuing a higher standard in every facet of our business with the goal of delivering consistent, operating and financial results from our balanced portfolio of North American-based precious metals assets. With that let's go ahead and open it up for questions.

And we will now begin the question-and-answer session [Operator Instructions] And our first question today will come from Mark Reichman with Noble Capital Markets. Please go ahead.

Good morning. With a much more active exploration program in 2020 and probably expected for 2021. Just wanted to get your take on kind of the environment for permits et cetera, because I know that you just recently got that 300-acre disturbance permit at Crown Block. And was wondering if there's any other kind of key permits that you need to get to execute the exploration program?

Yes. Okay. Hi, Mark, it's Mitch. I'll ask Hans to cover that. Hans?

Hey, Mark. Well, as far as permitting, yes, we just got the 300-acre permit for 300 acres of disturbance at Crown. We're also working on specifically on the Seahorse discovery, where we've got six new pads permitted through this 5-acre notice. So no real problems as far as headwinds there. Where I think the industry will see some issues is in drill rig availability and we're grabbing a couple more drill rigs so we'll end up with three RC rigs at Crown and one Coeur rig by the end of the year. And the other headwind of course I'm sure you're seeing with a lot of companies is the assay turnaround issue and we've switched labs at Crown and now we're down to about a two to two-week turnaround from two to three month turnaround earlier in the year. The other permits were that are in process are drilling at the Lincoln Hill, Independence Hill assets we got from Alio, where we expect to permit by Q3 next year for 200 acres of disturbance. In the interim though, we have a 5-acre notice permit that we can drill on out there. Other than that, no real slowdowns in Mexico or D.C., so we're moving forward with those programs pretty easily.

That's very helpful. And just my follow-up is for Tom. And with the much improved earnings I was thinking about the net operating loss carryforwards which I guess could be an advantage in terms of making acquisitions in the U.S. or even shielding income, once the Rochester expansion is in effect. Could you just maybe address what the NOL position is and kind of the mechanics and the plans to employ it?

Sure. Great question, thanks for noticing that. Yes, we've got over $400 million of net operating losses, which are going to allow us to not pay federal income tax in the United States for the foreseeable future. And so again with the major expansion coming up at Rochester, again we're – we should be not paying federal income taxes for quite some time still. So that's – and that fits right into our capital allocation framework. So when we're thinking about where we want to allocate funds Mexico or the U.S. The U.S. wins hands down because of this tax advantage that we have.

Thank you very much.

Thanks, Mark.

[Operator Instructions] Our next question will come from Joseph Reagor with Roth Capital Partners. Please go ahead.

Hi, Joe.

Hey, guys. Well, first congrats on a great quarter and great cash flow.

Thanks, Joe.

So I guess first thing at Palmarejo, the recovery rates, particularly for gold have been pretty high this year compared to last year. Can you guys give us any color on what's driving that? And like what the possibilities are for sustaining those levels of recoveries?

Yes good question. Mick, do you want to cover that?

Yes, for sure. So, yeah we've seen some great results, so far. We expect those results generally to continue. Of course it's driven somewhat by the mineralogy, but the team down there have got a great BI program ongoing, optimizing the performance of the process plant and delivering some really sustainable improvements.

And has there been any capital expense related to those improvements at the plant, or is it just better maintenance, better care of machinery?

Certainly a very small amount so far. We have a little bit ongoing with projects, to continue that optimization.

Okay. So that sounds good. Switching gears a bit, Rochester obviously is still kind of lagging behind, where you guys hoped it would be. When do you think you'll get this thing running like a top? And what would you say your conviction level of reaching that point is?

Well, I'll start off. And then Mick you can pickup, from where I leave off. I'll start Joe with the last question there which won't surprise you to hear me say that we have a very high level of conviction. We've thrown a lot at Rochester all at once. There's a lot of moving parts, right, with between the crusher configuration, introducing HPGR. Obviously, we're dealing with a very mature leach pad out there, in that Stage IV. We're putting a lot of solution into a Merrill-Crowe plant out there. And so going through and optimizing all of those things, here in 2020 is -- can be a little painful at times. But it's very worthwhile, right, as we think about fine-tuning and dialing it in, before we invest a lot of capital. And then have two HPGR units, at the end of this expansion. And when you go back and think about -- we put in one HPGR unit, late last year, for precisely this reason, right, which is to have a year or two of run time with it. So that we can get comfortable with it, understand it, from the mine through the leach pad. And then that's the process that, we're kind of systematically working through right now. And I think it's nice that, we'll have this Investor Day, in December. We can provide everybody with an update. But if things continue as we see them. And as we plan, second half of the year versus first half of the year out there, gold production should be kind of a double, second half versus first half. Silver should be up 40% or 50% over the first half. So it's happening. These commissioning things with the inter-lift liner strategy is typical and we've only been doing that now for two or three months, but I think we're getting those -- that debugged as well. So Mick I don't know, if I've left anything for you to cover. But ...

You covered a lot there, Mitch. But I mean, in an end-to-end sort of view right, the mine, the milling, the heat leach and the Merrill-Crowe. This short interval control that we can now apply because we have these inter-lift liners, allows us very high visibility in a short period of time. So we can optimize blasting, and powder factors, and bench heights at the mine and then the HPGRs getting optimized for sizing fraction, through the heat leach of course and floor rates. And that opportunity for that short interval control. So we're not, having to wait long periods with a high depth delay, now to understand how things are performing. And then, the Merrill-Crowe plant, I mean, we talked about it earlier in the call this commissioning of the new heap leach pad. It's very typical and normal. You see some fines come through, when you start-up a new heap leach pad. We're getting through those issues now and managing them. A little bit of extra clarification at the Merrill-Crowe plant and we're seeing better results. And we expect to see a stronger second half as we said earlier. And then, even better and more powerful, the lessons learned, that are supporting the program to derisk POA 11. That's fantastic. Great learnings that are going to, help us to apply in the project, the upcoming project and have a really robust startup for the POA 11 project in the next couple of years.

Okay. Thanks for that color on that guys. One final thing, just, any intention to add, any more gold and silver price color kind of stuff, or are we done with that for now? Is just what you have is enough?

Yeah. I guess, the short answer Joe is, I think, we're comfortable with having that $1,600 floor underneath, a pretty good chunk of next year. And then, a smaller chunk of 2022, which covers the bulk of the, spend out there at Rochester. We don't intend to become a perpetual hedger. We're doing this to protect an important source of funding for POA 11 over this limited period of time. And so today, we're comfortable with what we have. Obviously, that thinking evolves as the markets sort of evolve, but Tom, anything to add?

And look, Joe as you know, we need to do what we need to do, to make sure we get to -- through the Rochester expansion. And so we're kind of modeling this out. We took a pause, as we saw prices running up. And where we saw performance improving and felt, like we had sufficient cushion at this point in time. We still have that flexibility to add a few more ounces in '22. And if we think it's the right thing to do to maintain that balance sheet flexibility we'll do so. But we have taken a pause for now.

Good to hear. I will turn it over. Thanks guys.

And our next question will come from Mark Mihaljevic with RBC. Please go ahead.

Thanks and good morning guys.

Hi Mark.

I guess to kick it off actually why not ask about Wharf. It feels like it never gets the attention despite being a great cash generator for you guys. So just kind of wondering obviously you guys benefited from the higher stacking rates you've had in some of the contract crushing you've done as well. Like is that something that especially at higher prices make sense for you to put a little more money into that and keep production levels elevated to try to capture this part of the cycle rather than kind of going back to your historical run rate?

Yes. Well thanks for giving Wharf a shout out. It definitely deserves one. I'll let Mick cover that. As you know there's the loading and unloading offloading of pads and that sequencing that factors into that question. Obviously summer months out there are a lot easier than fourth quarters and first quarters. So that is probably going to play be a factor here in the fourth quarter as they are already dealing with snow and things like that. But Mick do you want to cover Mark's question? And then I might ask Hans also to comment. Wharf is one of these assets that has been around for as you know 30-plus years. But it seems like we never run out of potential and opportunities to keep extending. And there's been more drilling activity out there that gives us some cautious optimism about the future that maybe Hans can talk about briefly after Mick. Go ahead Mick.

Yes. I mean briefly after a great Q2 and Q3 performance pulling ounces -- some ounces forward in the mine plan and seeing some good positive reconciliation. We now expect to just deliver solidly against the plan for Q4 and that's this year. And because as Mitch mentioned we'll have a pad unload and restacking start in Q4 and finish in Q4 then that's why we see those numbers a little bit lower, but fully as expected and planned. And then the go-forward for Wharf is to just continue solid performance year-on-year as we have done in the past. Hans?

Hey Mark. As you know Wharf we haven't done a lot of exploration. The requirements for expansion are pretty minimal just because of the footprint of the mine permit boundary. But this year we've done some work at the Richmond Hill asset which is just north of Wharf, the old Lac and now a Barrick asset that we have an option to purchase on. We're doing some expansion drilling there looking at potentially new ounces that would flow into the mine life near the end of Wharf, if that ever happens. And so that -- we're still in the evaluation stage, Q1 we should have all the assays back from the lab to evaluate what that asset looks like both surface geology, geochemistry and drilling geochemistry. We should have all that done by Q1 and look at what that means for our future there. For next year they're getting a little bit more innovative in terms of where we're going to start drilling to expand mine life and it looks like we'll start stepping to the south a bit permits dependent and do another layback on the highwall if that makes sense. So more news to come from Wharf as far as drilling and we'll be drilling a bit more next year almost double the budget of 2020 in 2021.

Just one last shameless plug there for Wharf. We -- as you probably remember Mark we bought that for $99.5 million. So for it to throw off nearly $40 million just this quarter really kind of highlights just how great that thing has been for us as an acquisition and as an overall contributor. And I think when we bought it in 2015 it had a 6-year mine life, five years later it has plus 6-year mine life, maybe seven years and hopefully more to come. So it's just been a terrific one for us. And the third quarter is a real credit to the hard work out there by that team. So thanks for the question.

Thanks for the color around that. And then I guess between Kensington and Palmarejo you were actually able to get pretty good throughputs there might have been some concern heading into the quarter around maintaining underground mining rates. And obviously you had some challenges with COVID cases at Kensington that you seem to have managed through pretty well. So just kind of, do you think that these run rates are now sustainable with all the protocols in place you can maintain running at these capacity levels, or do you even see some opportunities to push even higher than this?

Yes. I'll start and then Mick can fill in. Kensington I think we were able to run off stockpile material there while we dealt with the COVID issues in the underground team there. But I think those mining and processing rates there, you can kind of continue -- expect to continue. At Palmarejo, we definitely were ahead of plan there with the 5,300 tons a day, which is great to see. I think where we were targeting to get is more on a run rate basis of around 5,000 or so tons a day, which is probably where when you think about the fourth quarter, they might surprise us. But to keep going at 5,300 tons a day and a lot of things have to go right. And there's still a lot of moving parts down there as it relates to COVID and just overall workforce management. But Mick do you want to add any other color, or is that?

Yes. Certainly a couple of things. One on Kensington this year, we had for a while a production limit of 2,000 tons per day and that limit has been lifted. And so now, we're looking at the process plant and debottlenecking that process plant to see really what we can do with Kensington going forward, but that's presenting us with a great opportunity with business improvement opportunities to optimize that asset. At Palmarejo, that BI program we mentioned earlier is really supporting well, the results that we saw in September and how to sustain them going forward into the future. So there's a good confidence there that the team are doing a great job at supporting that future potential.

And not to put it back on the Hans. But the reason, we're spending more at Palmarejo right is to get that inventory built up. And if we can get that mine and the mine life to where it can support it, we've still got some mill excess capacity there and that is in terms of internal opportunities to generate incremental cash flow with no -- or virtually no incremental capital that's high on the list. And so, we're still building toward that over some time obviously.

Yes. No, that all makes sense. And I say this not to belabor Rochester points here, but a couple of follow-ups to the earlier answer is, I guess first off, you mentioned that the fines that have been disrupting the Merrill-Crowe. And obviously, as you mentioned, it's not overly surprising to see it kind of early stages of a new pad. But just wondering kind of whether you are seeing any issues with the HPGR creating more fines than you were expecting, or is that really -- is it really just kind of early days on a new pad that you're starting to see some of that come through?

Go ahead Mick?

Yes. Certainly, I can address that. So the fraction that we're seeing from the HPGR is rate in say the spec. But when we use that material for overliner to put a new heap leach pad in operation then that fine fraction is just a little bit high. We saw that very early. We optimized that and now we're seeing better performance as those fines run through. We normally see some fines when we're commissioning a new heap leach pad of course. It's just the nature of the distribution. But we're certainly optimizing that. And then we implemented a new clarifier at the Merrill-Crowe plant to improve the capacity on the front end of that plant. And give us more operating flexibility, so that we can deal with that as we go forward and put additional inter-lift liners into operation over the next 12 months.

Okay. Perfect. And kind of the second follow-up here. Just that kind of what or how long is the percolation that it takes you to get down for some of that higher -- or some of the material stacked higher on the pad versus kind of molecules that you're placing fresh onto the new inter-lift liner?

So on the ore part of the pad certainly, we already see breakthrough. It's a question of how we track that profile over a long period. It was 400-foot to liner in the old part of the pad now we're placing very close to plastic. So we're seeing that breakthrough very quickly. Within one or two weeks we're seeing a breakthrough now on the new inter-lift liner areas. And that's why we're extending our inter-lift liner strategy. We started off with one area and then Phase 2 and we're now starting the construction work for Phase 3 to implement a wider area within the stage liner so we can implement that short interval control.

Okay. Perfect. Thanks. I think that covers what I had. And again, nice to see the free cash flow this quarter.

Hey, thanks, Mark. Appreciate it.

Yes.

Our next question will come from Brian MacArthur with Raymond James. Please go ahead.

Hi, Brian.

Hello, Brian. Maybe you muted.

Can you hear me?

Yeah. Here you are. Yeah. Got you.

Sorry, I don't know. Sorry, I apologize but that. Just philosophically if you go ahead and I realize Rochester is the first focus, but if you go ahead with restart at Silvertip. Would you consider hedging that as well? I mean to the trade-off between prudent and hedging the capital expenditures, which I think makes sense and you're kind of doing at the moment. But philosophically to some extent if you continue to hedge gold against Silvertip and Rochester to some extent we're capping gold to develop silver. So I'm just kind of trying to figure out how you think through all that. Would you actually go ahead on Silvertip and hedge? I mean or would you just philosophically go ahead with it?

No. Good question. I think you asked a philosophical question last quarter too Brian you're into philosophy.

It's all strategy maybe I should say that.

Yes, that's I think one of the best majors you can have in university is philosophy for life like our General Counsel over here who's raising his hand. Look I think if you think about the pie chart of revenues from a Silvertip and it's a third silver, a third zinc, a third lead roughly. That means two-thirds are metals that nobody really buys I think our stock for exposure to zinc and lead. And I think that makes them good candidates to potentially derisk and bring some higher level of certainty to that project. I think even though silver is not a huge percentage of our business anymore most of our investors really do prefer having that upside to silver which we which we still provide. We have no hedging on any silver at all and we would be less inclined to do something with that silver revenue coming out of Silvertip, but I think those other two metals are fair game.

Great. Thank you very much. Very clear.

Yeah. Okay. Good. Thanks, Brian.

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mitchell Krebs for any closing remarks.

Okay. Great. Well, hey, we appreciate everybody's time this morning. I look forward to speaking with you again at our Investor Day, our Virtual Investor Day on December 17. And in the meantime between now and then hopefully everybody will stay healthy and safe. So have a good day. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.