Coeur Mining Inc (CDE) 2003 Q2 法說會逐字稿

ladies and gentlemen, thank you for standing by. Welcome to the second quarter results conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press star, then 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to Tony Ebersole, director of investor relations. Please go ahead.

Thank you, behind all. Good day, everyone. I'm Tony Ebersole, director of investor relations. This is our second quarter conference call. The call is also being broadcast live on the internet through our web site www.couer.com where in the investor relations presentation section you can both hear the presentation and scroll through slides highlighting second quarter information. The slides and audio replay of the call will be available for two weeks afterward on our web site. Here from Couer today are Dennis Wheeler, chairman and chief executive officer of Couer, Bob Martinez, president and chief operating officer, Jim Sabala chief financial officer and Dieter Krewedl, senior vice-president exploration. There will be a question and answer period following the presentation by management. As most of you are aware any forward-looking testament made today by management come under the private securities litigation reform ac of 1995 and involve a number of risks and that could that could cause result actual that differ from projections. With that I'd look to turn the call over to Dennis.

Thanks, Tony, and we'd like to welcome everyone to Couer's second quarter conference call and thanks for joining us this morning. After waiting for more than a year, silver prices have finally strengthened to hue highs reaching $5.10 an ounce this morning, and gold, which is a metal of growing importance to Couer, has once again breached $350, being quoted as high as $359 today. Many of you will recall that Couer, because of our unhedged position, has the most leverage to silver prices of all the silver companies, and each 10-cent rise in silver price means an added $1.5 million in annual cash load to our shareholders. You've been rewarded in this marketplace with Couer being quoted today at $1.77. We're pleased to report that since the end of the first quarter we have not only improved our operating and financial performance relative to a year ago but the team at Couer has continued to put in place a number of strategic initiatives that we believe will set us up for a good solid growth later this year and a strong 2004.

We've seen growth in both our gold and silver production in the second quarter and six months compared to 2002. At [Cerro Bayo] cash costs were just $1.33 per ounce of silver establishing clearly as one of the lowest cost silver mines in the world. Our revenues increased 18% in the second quarter and 42% in the first six months. More importantly, year-to-date operating cash flow before changes in working capital grew by almost $15 million. Our exploration program continues to produce dramatic results, and we're going to be increasing exploration spending in South America at our mine sites and surrounding areas. Our most recent find announced yesterday was a new mineralized zone discovered at Cerro Bayo returning an amazing 27 feet of .77 ounce of gold equivalent in our initial drill hole. People are beginning to talk about very oh by and we believe it is becoming one of the emerging new major silver/gold mining districts in the world.

At[San Bartolome] in Bolivia the silver resources were upgraded to measuring 126 million ounces, this moves the project closer to production and effectively has increased your company-wide silver reserves by 164%. We are steadily moving into a leading position of financial strength among the primary silver producing companies with the elimination of 66% of our debt since the end of the first quarter. In fact, since 1998 we have now eliminated $260 million in indebtedness from our books and now have clearly in our sights being debt-free in '03. This strengthened financial base will give us the platform to continue our growth into the future. We believe we have in place the necessary development property portfolio and growing financial capacity to exhibit profitable, strong cash flow growth for the benefit of our shareholders as we move into 2004. And now I'd like to ask Bob Martinez to give us an over view of operations. Bob.

Thank you, Dennis. I'll begin with Cerro Bayo and Martha in southern Chile and Argentina covered on the next slide. Cerro Bayo remains one of the most competitive mines in the world. In the second quarter we produced silver to cash cost of 1.33 an ounce. Silver production increased 417% in the second quarter compared against the second quarter of last year to 1.3 million ounces. The quarter's gold production improved by 145% to 14,558 ounces compared to last year, and for the first six months of this year Cerro Bayo and Martha have produced 2.68m ounces of silver and 36,954 ounces of gold. Moreover, we have just completed the second production portal into the Javiera vein which will allow us to increase production from that high-grade vein system as the year progresses. The next slide is on Silver Valley which has [--] which had second quarter production of 1.1 million ounces of silver and cash operating costs of 4.73. We've begun some of the initial elements of our long-term optimization plan which has a target of 7 million ounces of silver production a year with costs being reduced to below the $4.00 per ounce range. As the optimization plan moves forward, costs will be declining and production will ramp to the 7 million-ounce per year which represents a 40% increase in production at the mine.

In July we began some of the initial elements of the long-range plan with scheduled repairs on the mind's hoisting equipment, operations were suspended temporarily while these and other maintenance took place which lays the ground work for the optimization plan. We will also be exploring and developing some of the well-known ore bodys at the [Goleenah] mine work than eventually toward the Couer and the Calahday mines where additional shafts are already built and functioning. The next slide shows Rochester. In the first quarter our production level and cash costs were adversely affected by delays associated with reclamation, bonding and appreciate relocation. We initiated a number of measures, including increased cyanide addition, adding selected high grade ores to the pad as well as delivering ore from Nevada Packard to improve operations. These have all been successful in increasing production and lowering costs in the second quarter. In the just-completed quarter the mine produced 1.3 million ounces of silver and 15,144 ounces of gold. And cash costs declined to $4.33 per ounce of silver, which was a 33% reduction from the first quarter. We expect costs to decline further at Rochester in the second half of this year to their historical level of under $4.00 per ounce of silver. The real case of the crusher is on schedule for the end of October and remains on its projected budget. When this work is completed, we will access some of the highest grade gold ores at the mine, and we should see the benefit of this high-grade material late this year and into 2004. I'll now turn things over to Dieter to expand on the exploration results in South America.

Well, thank you, Bob. To highlight the exploration this second quarter centers around the discovery of a new thick high grade zone near the existing underground workings at Cerro Bayo. As Dennis mentioned, this recent intercept in the central Cerro Bayo area measured 27 feet of 0.77 gold equivalent ounces per ton. This thick, high-grade zone will certainly help us reach our goal of discovering an additional 267,000 ounces of gold equivalent end at Cerro Bayo during 2003. About half of these ounces we expect to be converted into the proven and probable reserve category. The next slide includes the area of the most recent discovery, a wide mineralized zone located between the Javiera and Wendy veins which are shown in bright yellow on the left side of the map.

The initial discovery hole is located only 600 feet west of the existing underground infrastructure at the Cerro Bayo mine. On a map it is located at the lower end of the intersecting yellow lines. This new zone is actually composed of two very high grade veins containing 5.7 feet of 0.97 ounces per ton gold equivalent and 7.7 feet of 1.33 ounces per ton gold equivalent. One important fact about this recent discovery was that unlike other veins we know of, there is no surface exposure. This discovery was based on our new geologic model and demonstrates clearly our ability to find new high grade zones through the application of that model. The majority of the new resources discovered thus far during 2003 have been from the Javiera and Wendy veins. Exploration on the Javiera vein has now expanded. The gold and silver mineralization to over 3,300 feet along strike and vertically over 525 feet. The Javiera vein still remains open to the north and to the south. High grade mineralization in the Wendy vein has now been expanded to over 3,000 feet in strike length and vertically over 400 feet. It also remains open to the north and south. In the central Cerro Bayo area alone, we now have more than 15 veins that contain ore grade mineralization. They're still many more to be explored. In fact, we have a total of over eight miles of strike length on various veins to explore in the central Cerro Bayo area. The following slide shows the veins around the Martha mine in the Santa Cruz province of Argentina. In the second quarter at the Martha mine we continued to discover very high grade ore suits such as the R4 zone along the eastern extension of the Martha vein. The R4 zone, which is shown on the map, is readily mineable, being less than 600 feet east of the Martha mine. Average grades in the R4, zone are in excess of 100 silver equivalent ounces per ton. One drill intercept in the R4 zone contained 44 feet of .42 ounces gold per ton and 666 ounces per ton of silver.

We're hopeful of discovering more high grade ore suits on the Martha vein which is exposed for over one mile and is only one of six veins discovered so far. In fact, from all that we've seen on the properties that we control in the Santa Cruz province in Argentina, we believe that the geologic potential is excellent to find in excess of 70 million silver ounces on our properties. The next slide is a cross-section at the Mull Beck property located six miles north of the Martha mine. This slide shows the Poly metallic mineralization that is exposed on the surface and where it was intercepted in various drill holes in the subsurface. One of our holes, which was a core hole, contained over 37 feet of polymetallic mineralization. It contained 37 feet of .04-ounce per ton gold, 14.2 ounces per tons silver, 2.8% copper, 9.2% led, and an amazing 19% zinc. We've now traced this polymetallic zone down to 130 feet below the surface and because there is such limited exposure surround thing outcrop we have conducted an IP [resistively] geophysical survey over a 1300 by 1300-foot area to find extensions of this high grade mineralization. Geophysics has detected a very large chargeability anomaly at a tenth of approximately 200 feet below the surface. The anomaly is somewhat flat lined underneath the entire survey area and approximately 30 to 60 feet thick. The flat line layer may represent an altered unit with disseminations of massive sulfide similar to those intersected in the recent drilling. A drilling program is planned during the third quarter to test the geophysical anomalies. This type of poly metallic mineralization is the first of its kind to be described in Santa Cruz province. It represents a new geologic environment similar to other known high grade precious metal and base metal deposits currently being mined in other parts of the world. That's a look at recent exploration in South America. I'll turn things back now to Dennis.

Thanks, Dieter. Now a few comments on the next slide about our large silver project in South America, is [San Bartolome in Bolivia]. In the major mile stone regarding the final feasibility stud at the silver resource at san Bart has been converted to reserves. A total now of 126 million ounces of silver which effectively increases your total company-wide silver reserves by 164%. The completion of the reserve study at[San Bartolome]in conjunction with the final feasibility study underway now allows us to proceed with the final mine plan and construction cost estimates scheduled for completion by the end of this year. Our project targets at San Bartolome] are a $3.30 per ounce cash cost and a $4.00 per ounce full cost. We're looking at a potential decision now by early 2004 to build the mine with an estimated 18-month construction window. Production could begin as early as 2005.

The project's production profile calls for an average 6 million ounces of silver per year which would further solidify your company's position as the world's largest primary silver producer and the preeminent silver company. Now I'd like Jim Sabala to take you through an overview of our financial performance during the second quarter and first half. Jim.

Thank you, Dennis. When you look at a summary of second quarter results on this slide, the company showed a significant improvement in almost every area compared to the second quarter and first six months of last year. We saw increased revenues in metal sales, bore I can cash costs through the first half of the year, much stronger cash flow, and significant further reductions in the company's indebtedness. This slide summarizes the second quarter financial highlights. In the second quarter 2003 compared to last year we saw 18% increase in revenue, $26.2 million, a total of 3.6 million ounces of silver sold, up 17%, 33,000 ounces of gold sold, up 74% from last year's second quarter, our consolidated cash costs were $3.37 per ounce of silver compared to $3.29 a year ago. This low cost is driven by a production in South America at the Cerro Bayo and Martha mines which are among the lowest cost silver mines in the world. On a per share basis there was a loss of $4.5 million or 3 cents per share which is also a significant improvement over the year earlier loss of $11.4 million or 16 cents per share.

Our cash flow continues to show improvement over last year. In the second quarter excluding changes in working capital, operating cash flow was a positive $880,000 compared to cash used in operations last year of $117,000. This cash flow would have been improved even more significantly except for timing issues related to the shipping and concentrate in South America which resulted in a large lot being shipped just after the end of the quarter. In the first six months we also showed similar positive trends. Revenue grew 42% to $55.5 million, the number of silver ounces sold increased 29%, 7.8 million ounces, gold sales nearly doubled to 68,000 ounces compared to 36,000 ounces in the first six months of last year. Excluding changes in working capital, we've had operating cash flow of $6.5 million in the first six months of this year compared to cash used in operations last year of $8.2 million, a $15 million positive swing. Again, this has been primarily due to added gold and silver production and low costs at Cerro Bayo. The next slide shows an overview of the balance sheet restructuring that is near completion. In July we eliminated an additional $34 million in convertible debt, a reduction of 66% since the end of the first quarter.

This reduction involved the conversion of $32.6 million principal amount of 9% senior subordinated notes for 27 and a half million shares of common stock, $500,000 principal amount of 6 and 3/8 convertible dibentures for 400,000 shares of common stock and $800,000 of 7 and a quarter% convertible or 600,000 shares of common stock. It should be noted that the exchange of 9% senior notes actually resulted in a reduction in delusion of 1.1 million shares in the number of shares that would have been issued with the notes been outstanding until maturity. The next slide gives us a pretty dramatic picture of how we've been able to reduce our indebtedness since the first quarter of 2001 from about $200 million to just $28.9 million today so overall the second quarter was a continuation of higher revenues, improving earnings picture, stronger cash flow, and improved balance sheet that began in the first quarter. All of this is has continued to translate in the marketplace which is represented in the next slide. We continue to see growth in the value of our market capitalization despite the fluctuations in silver price. On July 1st, Couer was included into the Russell 2,000 index and of course stock is now being held by those funds which base their investments on that invest. This has accepted helped to further broaden the shareholder base of the company and increase liquidity in our shares. On one other market-related note, [Persarico previously] the company's largest shareholder had indicated earlier this year its intention to sell its shares and has recently formed a form 13D reporting that they have completed the order of the sale of those shares. I'd now like to turn things back over to Dennis for his closing comment.

Thanks, Jim. In closing, let me say that we're looking at another strong year of silver production at Couer of nearly 15 million ounces. Along with 112,000 ounces of gold as we look forward to the balance of the year. On average, cash costs were expecting to come in at around $3.43 per ounce of silver. Our silver reserves have continued to increase significantly with the conversion of our resource to reserves at is an [Bartolmay], and I might mention that we in send to increase our exploration budget through the balance of the year through accelerate further growth in our reserves at Couer. We will complete the final feasibility study at San Bartolome. We also expect to complete the long-range plans for the exploration of both Cerro Bayo and Argentina. We will gnawing rate the long-range optimization plan at Silver Valley to increase production and significantly reduce costs. And we do expect to be debt-free by the end of this year. So we're in pretty strong financial shape and we're looking forward to continued positive results for the second half of the year and as we move into 2004. I think we're all pleased that the silver market appears to be responding to the ongoing supply/demand deficit with its present rally above $5 per ounce, and we continue to believe that the world's most widely used metal for new uses are constantly being developed for consumers will continue to exhibit long-term strong price fundamentals. In fact, today Reuters has announced that the analyst consensus for both silver and gold, our metals, are for higher and stronger prices and markets in 2004. So we thank you for joining us here today, and now real be happy to respond to your questions.

thank you. Ladies and gentlemen, if you wish to ask a question, please press star, then 1 on your touch tone phone. When you hear a phone indicating that you've been placed in queue. You may remove yourself at any time by pressing the pound key you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you if you have a question, please press star 1 at this time. One moment for the first question. Our first question comes from the line of Jeff Thorpe with Lang Lee capital. Please go ahead.

Hi, Dennis and Jim. ConCongratulations on your excellent results. I had a couple of quick questions for you. First one is I'm curious what the company's priorities are during the second half of '03 and heading into '04, and then the next question is I wondered if you could for our benefit as well as others compare your silver reserves to other primary producers.

Let's take your last question first, Jeff, and thanks for joining us this morning. No other company has the quality of the silver reserves, silver production, or better leverage to silver prices than Couer, and we believe that we are going to continue to enhance the resource and reserve portfolio within the company. We are the leader among the primary silver producers, and we intend to stay that way. Regarding our focus, I think it's limited and set forth on these basic objectives. One, we're going to progress the San Bartolome final feasibility study by year-end. Secondly, we're going to implement our optimization plan for the Silver Valley to long-range increase our production there by 40% and significantly reduce costs. Thirdly, we're going to budget increased expenditures for exploration in South America, and we do expect to continue our record of success there at both by Cerro Bayo and the Martha area in Argentina. I think finally, because of our financial strength, we do expect to be debt-free by the end of the year. Those are aggressive targets, I know, but the team here is working very well together and hard, and I think there they are reasonably within our grasp as we go through the balance of the year.

Thanks very much. Keep up the good work.

our next question comes from the line of James Hudville with capital. Please go ahead.

Hi, good afternoon. Question for you. You mentioned you're going to be debt-free by year-end. How do you plan on doing that?

Well, when we take a look at the debt that remains outstanding, one portion is the 13 and ['3/8] senior convertible note which matures this year. Those shares or bonds are convertible into shares of common stock of the company at $1.35 per share. I would expect with the rally in share price that we've seen and the resilience that we've seen in the silver market that those will naturally convert under the terms as that originally existed. Second, we will take a look at again converting the remaining convertible notes into shares of the company or, alternatively, if the company's cash flow, cash funding looks adequate, we will look at actually cash tendering for those securities since all of them would become callable by the end of the year.

Okay. Hopefully the company can get away from issuing shares in the future. Obviously, you've done a good job in getting debt down but hopefully you'll be able to do that.

Thank you. The delusion issue, thats was one of the reasons we decided to enter me the redemption that we entered into last month in what when we looked at the security that had been sold and we looked at the terms under which we could redeem it we actually ended up in less delusion of the company's shareholders than would have existed had we held the bonds out to ma maturity, so I assure you within the company's resource base we're very cognizant of shareholder delusion.

Last question. I appreciate you increasing the production at the company and such and being one of the largest primary producers of silver in the world, but can we be the most profitable in the world?

Well, that's always our goal, and I think we have made absolute tremendous headway in that area during the course of last year as we indicated we're making silver down in South South America for $1.33% ounce. That is among the absolute lowest. We've made tremendous strides in reducing our production costs at Rochester in connection with the crush are relocation. We are looking at optimizing our results at Silver Valley, and we feel that in San Bartoleme we will have very efficient costs in that project so that's our goal we strive for every day we come to work.

work.

Jim I might also add that Couer one of our highest ebbs pens has been interest expense related to our outstanding debt which of course is declining markedly.

Well, keep up the good work. Looking forward to good times ahead.

Thank you.

Thank you.

our next question comes from the line of Jeff Esque. He's a private investor. Please go ahead.

Jim.

Okay. As far as with the sack oh gone with their shareholder position, with the current convertibles in people's hands today, the big blocks of shares that you've sold, by the way, I'm glad you diluted us to get rid of the debt. Nobody likes delusion but it was a necessary evil to get this company turned around. We understand that. Also, we're very happy that that there is no hedging and hope that continues forward. Back to the question. With the [Sarco] now out of the picture, sold some big block of stocks and private placements, in essence, and you've got convertibles. You I know who's going to be converting those, et cetera, who is going to emerge as our top one or two shareholders and major shareholders and that what are their intentions? What kind of talks have you had with these this people?

Well, I honestly can't tell you who is going to emerge as the larger shareholders at Couer. Obviously, we've been very pleased with the strong liquidity that's been evidenced in the market in recent days. We've been among the top and in some days the top precious metals security in North America in terms of volume. We really don't focus very much on that question here at Couer. Our focus is more important attaching value to our shareholders, and it seems to me we're drawing broad interest here. We have not had any conversations with anybody in recent months about any control positions at Couer, and frankly that's not one of our objectives here, as I think you've gathered from the goals that we've stated. We welcome shareholders. We think it's in everybody's benefit.

Okay. As far as the hedging position, many of us have been high in silver and other precious metal byproducts. We bought you because you aren't hedging and we hope you don't ever hedge in the near future as far as we can see. What's your position on that as of today?

We don't expect to hedge our existing production at all. That's consistently been our policy. We know that's what our shareholders expect, and frankly, that's what we believe is the best thing for our shareholders.

Wonderful. Thank you, and that will be it. You have a good day, gentlemen.

Thanks for joining us.

our next question comes in the line of Ed Irvin with Liprovia. Please go ahead.

Good quarter. I'm very pleased. Let me ask you this. When do you forecast you will turn into a profitable position?

Well, the first thing when you make that decision or that analysis you have to take a look at silver prices, and it's very enjoyable to do that after the last run we've seen the last couple of days. Let's talk about things held in isolation. First, as we indicated, the company in the first six months has had $15 million of operating cash flow before the changes in working capital. That's nicely covering our cap ex profile, so on a cash basis we were there. We were there with silver prices at around $4.65 last quarter. When we go to a P&L basis, let's talk again about things held in isolation. If you just do a pro forma on the last quarter, about 5 and a quarter silver price would have put us at the break even point on a P&L basis. Now, when we say that, we have to realize that the company has been in a state of transition over the last year. They have showed steadily improving results. We'd expect that to continue. We're continuing to work hard down in Chile. We're continuing to expect to see benefits of Rochester, developing lower operating costs over the course of this year. We're expecting costs to come down at Silver Valley. And over the next couple years we're expecting to add new low cost production down in Bolivia. Oh I'm confident that we have reasonable success in these areas. We'll come down below the $5.00 theshold on a full cost P&L days after all G&A. After all interest, after all DNA.

Do you think that this recent trend in silver prices, do you have any explanation or is it just following gold or do you think that silver is taking its own deal right here?

I'm going to turn that back to Dennis who is much more of an expert in this area than I.

Thanks, Jim. Our sense here, frankly, is that we are seeing now renewed growth in the economy, and that bodes well for silver. As I mentioned, it is the world's most I had widely used metal. We continue to see, frankly, forever going forward deficits between mine supply and demand, and that is going to require a sustained higher silver prices. We don't have any better crystal ball than most, but we are comforted by the consensus that seems to be emerging among the analysts. One of the new trends or one of the new things that keep your eye on is the EPA has begun to review with municipalities their water systems and the presence of chlorine in their water treatment programs. Other than chlorine I would say that the best bacteria side without any question for water treatment is silver-based, and I think there is huge potential here going forward. If, in fact, the EPA moves towards the point of reducing or mandating the elimination of chlorine in our city's water supplies nationwide.

Well, that's good to know. I haven't heard that one. Let me ask you this. I was trying to calculate, what is your total reserves if you add the $125 million to the reserves? I was just trying to get a total.

Well, it's slightly more than 200 million ounces of reserves.

Is that silver?

that's correct.

How much gold would you add to that?

Would you get back to Tony Ebersole about that?

Okay.

Remember, please, the reason --

I have a chart that I look at ounces per share and value per share and so I was just trying to come up with a good figure to use.

Well, at year-end we were [--] we had proven and probable gold reserves of about 2.257 million ounces of gold at year-end, and I have not done the adjustment here in any mine for today but you could get back to Tony Ebersole.

I'll do that.

for some further information there, please.

and my last question is how safe are your South American mines? I mean, you know with all the political upheavals and everything.

Well, actually, we're in what we consider to be areas with low political risk, which is always a major item for consideration here at Couer. You probably saw yesterday President Kerchner, of Argentina meeting with President Bush. I think that's a very strong signal that the economy is on the rebound in Argentina and it's likely that they are going to continue to get United States support for a restructured debt program with the IMF. Chile, of course, has for ten years now been a free market economy, strong growth, and a partner of the United States, and I think the [--] it is most likely that the free trade agreement with Chile is ultimately going to be consummated further aligning our interests. It's a great place to mine. Bolivia has had some hiccups in recent months following the transition to the new presidency; however, President Goney is a mining man. He supports, as does the country, natural resource development. And we feel that we have exceedingly good relationships currently in Bolivia.

Good. Thank you very much.

Thank you.

our next question comes from the line of Trevor Steel with Baker Steel capital. Please go ahead.

Gavin, gentlemen. Very interesting conference call, and I think you have a lot of interesting things going on in the company. One thing which I don't remember you covering was the gold project, and I just wanted to know what your thoughts were about the potential timetable for a development decision on that.

Well, we have set a targeted year-end to complete the permitting for Kensington on our optimized plan. Recently an agreement has been reached with all of the major parties involve at Kensington, including the United States forest services, the lead agency; the environmental protection agency, is the State of Alaska, the army Corps of Engineers, and Couer to outline the completion of the permitting process. We now have introduced in both the House and the Senate of the United States a land exchange measure whereby the title to land surrounding Kensington will be exchanged, and this would have some very positive benefits in terms of our cost of regulation going forward. We are in the process of beginning to look at what we believe are several opportunities to reduce capital and operating costs at Kensington, and are very enthusiastic about what we are presently seeing at today's gold prices for Kensington. And we believe that with the certainty now attached to the permitting at Kensington, that we will be successful in attracting one of the world's major gold companies to join us as a partner there.

Okay. Thank you very much for that. Can I just ask a supplementary question now?

Yes, please.

Obviously, that's looking very exciting in terms of the drilling results you're getting on that. Could you just share with me your thoughts about the potential production that can come out of Cerro Bayo by looking out over the next couple of years? I know it's difficult to predict. But as the asset is shaping up, are you sort of were about rethinking how, you know, the scale of this project?

Well, the answer to that is yes, we are rethinking the scale of the project. I mentioned to you that Dieter and the exploration group are in the process of putting together through the balance of the year the long-range exploration programs for both Cerro Bayo and Martha. That will have a bearing clearly on our production capabilities and forecast. Bobby mentioned to you that [--] Bobby mentioned to you that we have completed the second portal tunnel in the project which gives us added capacity, and we do have significant remaining mill capacity on site at Cerro Bayo, so our success has been coming quickly down there, and that requires us to be flexible, frankly, and to deal quite well so far with the moving target, but we will have for you later in the year clear guidance for all of our investors as to our future production profiles for Cerro Bayo.

Okay. But just based on your existing capacity, what sort of production rate would that support from what you've got at the moment?

We have about a 25% additional capacity presently at the mill facility.

Thanks very much.

Yes. I might also mention that we do have the ability there in the future, depending on the outcome of some of our chest work [metalergicly] to think about implementing a [heap] leach companion operation at the Cerro Bayo mine site.

Okay. Thanks very much, gentlemen.

Thank you.

if there are any additional questions, please press star 1 at this time.

Well, on behalf of Couer and our management team here, we appreciate your attend an at today's second quarter conference call. If you have any follow-up questions, please don't hesitate to call Tony Ebersole, our director of investor relations. We appreciate your interest. We are excited, and we look forward to communicating to you through the balance of the year. Thanks again for joining us.

ladies and gentlemen, this conference will be available for replay after 1:30 p.m. Pacific time through midnight on Thursday, July 31, 2003. You may ac test is ATAF telephone replay system at any time by dialing 1-800-475-6701 and entering access code 692229. In a national participants may dial 320-365-3844. Those numbers again are 1-800-475-6701 and 320-365-3844, access code 692-229. That does conclude our conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.