Coeur Mining Inc (CDE) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Coeur d'Alene Mines Corporation second quarter earnings 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 our host, Tony Ebersole, Director of Investor Relations. Please go ahead.

Thank you, Linda. Good morning everyone. I'm Tony Ebersole, Director of Investor Relations for Coeur. This is our second quarter and first six months 2004 results conference call. The call is also being broadcast live on the Internet to our website, www.Coeur.com. In the Investor Relations section, you can both hear our presentation and manually scroll through the slides highlighting second quarter information. The slides and audio replay will be available for two weeks afterwards on our website. On the call today from Coeur are Dennis Wheeler, Chairman and Chief Executive Officer, Bob Martinez, President and Chief Operating Officer, Jim Sabala, Executive Vice President and Chief Financial Officer, and Don Birak, Senior Vice President Exploration. There will be question and answer period following a brief presentation by management. Any forward-looking statements made today by management come under the Private Securities Litigation Reform Act of 1995 and involve a number of risks that could cause actual results to differ from projections. With that I would like to turn the call over to Dennis.

Thank you, Tony. We'd like to welcome all of you today and thank you for joining Coeur's second quarter and mid-year 2004 conference call. We're pleased to report today that at the halfway mark of 2004, the company remains on track for significant growth in metals production, cash flow earnings and our major growth projects, Kensington and San Bartolome, continue to advance with production start-ups expected by 2006. We're expecting the second half of this year to be much stronger than the first half, due in part to a gold production rate more than twice the first half of the year. As recovery of high-grade gold ores already on the pat of Rochester accelerate, and as high grade ores at Cerro Bayo and Martha are mined with the resulting impact on the company's production and financial results. Bobby Martinez is going to have more to say about our second half production profile later on.

Highlighting this recently completed second quarter, we've made investments that are critical to the company's future reserve and production growth. Which had a short-term impact on our bottom line. We spent $4 million in completing additional updated feasibility work at both Kensington and San Bartolome, which had the beneficial results of improved economics at both of these high potential gold and silver projects. In addition, our stepped up exploration program announced early in the year around our operating properties in Idaho and South America, almost three times the level of a year ago, is returning very positive results for mid-year and will continue through the remainder of 2004, and Don Birak is going to be talking to you later on about our exploration results and potential. The company remains very strong financially.

Our balance sheet has a healthy $227 million in cash and short-term investments. Our gold and silver production remains completely unhedged allowing shareholders maximum leverage to metals price movements. And our balance sheet strength will continue to remain a key to the future growth of the company, allowing to us move forward with our internal growth initiatives as well as look elsewhere such as Wheaton for growth that can bring shareholder value. You're all aware that we've initiated a tender offer for the acquisition of Wheaton River Minerals, a combination we're excited about. It will create the fourth largest North American precious metals company. We'll significantly add to the gold and silver production of both companies on a combined basis, a meaningful growth in reserves, and will create one of the fastest growing precious metals companies in the world, with four internally generated development projects. We'll discuss this in later detail at the end of the presentation following the overview of Coeur's second quarter results. Earlier this year we set out for you our scorecard so that you could keep track and monitor our expectations and compare them against our results for the year. These were our key objectives. We're going to produce 14.5 million ounces of silver this year. We said that we were going to produce 133,000 ounces of gold for the year, and that our cash cost would approximate $3 an ounce, 8% lower than the forecast or actual results for 2002. At the end of the second quarter, here's where we stand.

We remain on track to reach our silver production and cash cost targets previously given you at the start of the year. We do, however, now expect to exceed our gold estimates by 7%, producing 142,000 ounces of gold this year versus the 133,000 ounces initially announced. We're improving on our quarterly net income, which excluding temporary items compared to the first quarter, showed that the company was moving towards positive net income, and we improved on our operating cash flow in the second quarter compared to the first. As the second quarter ended, both gold and silver production levels were increasing, and we do expect this trend to continue through the balance of the year. Our full-year targets of 14.5 million ounces of silver and 142,000 ounces of gold remain solid in our professional judgment. Representing a 7% increase over the earlier guidance issued in the first quarter of the year, mainly because of the higher gold production at Rochester. Also, we expect you'll see our operating costs continue to decline significantly through the remainder of the year with average full-year cash cost coming in at nearly $3 per ounce for silver, which should add significantly to our cash flow and profitability going forward.

We completed our updated feasibility study work at Kensington and secured the environmental permits for San Bartolome. In the second half of 2004 we look to advance these major projects and we fully expect these new mines will be in production by 2006. Significantly growing Coeur in terms of its production levels and adding low-cost ounces for several years to come. We were very gratified by recent public hearings and receptions held in Alaska, where several hundred people turned out to voice their strong support for the Kensington mining project. We expect to maintain our strong balance sheet while executing the second half of our announced 2004 exploration program, anticipating further reserve increases to extend the mine life at both our operations in the Coeur d'Alene mining district of Idaho and in Argentina and Chile in South America.

I'm going to return with additional comments in a few minutes and talk to you more about the Wheaton River offer, but first I'm going to ask Bob Martinez to give you an overview of our operations for the second quarter. Don Birak is then going to talk about our exciting exploration program results, then Jim Sabala is going to get an overview for financials for the second quarter and first half of the year.

Our operations through second quarter and first half of the year showed some significant increases with production on plan for our yearly targets. Our gold production levels has been -- as Dennis mentioned, should increase through the remainder of the year, principally due to higher gold production at Rochester and at Cerro Bayo which also results in lowering full-year operating costs.

Turning first to Cerro Bayo and Martha, silver production in the second quarter was 1.1 million ounces, in addition to 11,944 ounces of gold. Cash operating costs were $3.74 per ounce of silver. This was due primarily to development at Martha of higher grade silver veins through the quarter. While these veins were being developed, the veins mined during the second quarter were more variable than planned. We also drew from existing lower-grade stock piles which resulted in a higher cost per ounce. First six months production at Cerro Bayo and Martha was 2.3 million ounces of silver and 22,480 ounces of gold at a cash cost of $2.85 per ounce silver. Our exploration work at Martha in the second quarter has resulted in higher grade veins and ore bodies that not only add reserves in 2004, but extend mine life to 2005. These ore bodies are deeper than past mining and the new structures mined this year, at approximately 175 feet below the previous bottom of the mine. The remodeling work done at Martha in the quarter should result in the mining of higher grade veins typical of historical production at the mine, and cost profiles should decrease significantly for the remainder of the year. We've also been developing extensions of the Javiera vein at Cerro Bayo which had been a very good gold producer for us. These extensions are now ready for the second half of the year and will produce much higher gold grades. The consolidated full-year cash costs at Cerro Bayo and Martha, are expected to come in at approximately $1.75 per ounce of silver.

Both gold and silver production should pickup for the remainder of the year from South America with silver production coming in at 4.9 million ounces and gold production at 60,000 ounces. This is on plan with our earlier production and cost projections at the two mines. We also had good progress on the exploration front at both Cerro Bayo and Martha which Don will talk about in a minute. Moving on to Silver Valley, the next slide, it's producing beyond our expectations for the year. The exploration and development work through the first half has been confirming the long-term plan for the mine, which is designed to double our production levels and lower cost per ounce to $4 per ounce by 2007. Second quarter production was 954,964 ounces of silver at a cash cost of $4.95 per ounce. Through the first six months production, 1.9 million ounces of silver, at a cash operating cost of $4.94 per ounce. Production and cost through the first half of the year are consistent with what we've anticipated and announced in our last call. As we continue to make good progress in the development of this asset.

At Rochester we said in our last conference that higher grade gold ore is placed on the plant earlier in the year would begin to be realized during the course of the year and we began to see this by the end of the second quarter. In fact, second quarter gold production increased 39% over this year's first quarter. Second quarter production totaled 1.3 million ounces of silver and 16,000 ounces of gold at a cash cost of $4.54 per ounce of silver. First six months production was 2.6 million ounces of silver and 27,480 ounces of gold at a cash cost of $5.06 per ounce silver. As this higher grade gold ore is recovered through the second half of 2004, we are expecting gold production to double the gold production rate of the first half. The new crusher at Rochester is performing very well and we are exceeding budgeted throughput. For the full year, we are expecting a total of 82,500 ounces of gold and 5.8 million ounces of silver. This much accelerated gold production will work to lower total yearly cash costs to approximately $2.75 per ounce silver by year end.

So we remain on track at Rochester for very good yearly results for the following reasons: Crusher throughput is exceeding budget. Gold grade has increased 20% to the pad. Contained ounces delivered to the pad has increased and solutions to the pad is up. Gold production at Rochester will increase for the remainder of the year. We will also take advantage of the new pad areas for ounces leeched quickly. I'll turn the call over to Don who will now discuss what we're seeing on the exploration front. Don.

Thanks, Bob. The focus of our exploration program this year has been at our large land holdings around existing operations at Cerro Bayo, Martha, and at Silver Valley. We're having some very encouraging results at each of these properties. The slide shows the location of Cerro Bayo and Martha where we completed over 127,000 feet of drilling for the first half of the year, the total 2004 program of 314,000 feet on various target sites at or near the two mines. So far we've had good success in discovering additional mineralized material, in areas at or near existing mining operations at both mines. This is important because it can be brought into future production very efficiently.

The next slide shows Cerro Bayo with the highlighted yellow highlighting vein systems and exploration areas. We have budgeted $3.4 million this year, of which over 42% is for development of new reserves. We're continuing to drill on vein systems in the main Cerro Bayo area including Havier Sur, Luz Eliana, and Raoul veins, as well as veins in the Laguna Verde area, approximately 7 miles west of the Cerro Bayo mine as well as targets between the two. So far at Cerro Bayo drilling has identified 340,900 tons of new mineralized material, measuring 0.17 ounces of gold per ton, 6.3 ounces of silver per ton this new mineralized material would be classified as indicated and inferred mineral resources according to Canadian national instrument 43-101. The inferred component of this estimate amounts to 86,800 tons, creating 0.16 ounces of gold per ton and 3.54 ounces of silver per ton. We'll continue to work through the remainder of the year to expand and refine this new mineralization and test other targets.

The next three slides are of Martha mine area. We've budgeted approximately 2.3 million for new discovery and reserve development in 2004. In the first half of the year more than 40,000 feet of drilling were completed in the program. The first slide is an aerial view of the Martha mine area where drilling is underway to discover to find new reserves nearby to our existing operation. 2004 work to date is to find new mineralized material measuring approximately 33,400 tons, an average grade of 0.138 ounces of gold per ton, 87.3 ounces of silver per ton, very high grade silver, consistent with historical reserves there and continues to support our belief that Martha is the highest-grade silver mine in the world. This new material would be classified as indicated and deferred mineral resource according to Canadian national instrument 43-101. Inferred component of this estimate is 19,300 tons, creating 0.16 ounces of gold per ton and 97.5 ounces of silver per ton.

We've had very good success in intercepting some very high grade silver veins, in particular two new high grade veins beneath the known Martha ore system. The next slides show two zones of mineralization in longs section, that we discovered below the current Martha and R4 mines. Planning is underway to ramp into the Martha deep occurrence, while drilling is underway to expand and define the new R4 deep zone. The next slide is a plan view of the R-4 deep drilling on the 210-meter level, which is about 40 meters below the current R-4 mine workings. The new Francisca and Catalina vein and vein loot discoveries are shown. In the second quarter we drilled nine holes, six of which define the limits of the veins, and loops shown on this level plan. Three holes intersect at the vein at deeper levels. These new discoveries remain open on strike and at depth.

The next slide shows a long section of Silver Valley looking north-northeast and the areas of exploration drilling. Our 2004 program is part of a premier effort to discover and to find new reserves to support potential mine production increase and cost reduction. A total of 11 targets were identified for testing this year. Since our exploration program commenced, drilling has encountered new high grade silver mineralization in three of those targets. One of the exploration is the 4,000 level Polaris fault shown on the slide. In 2004, we drilled 4 core holes from underground headings into this area, which intersected mineralization ranging from 5.1 to 49.3 ounces of silver per ton over [duro]widths of 1.8 to 4.4 feet. Another area is the upper country 2400 silver vein, where drilling has identified new mineralization boarding the silver vein deposit to the west. This new chute is close to the existing workings and is located in the upper parts of mines which could be quickly converted to future production. We'll continue drilling on these and other targets throughout the remainder of the year. I'll turn the presentation back to Bob who will give an update on our development project.

Thank you, Don. Next slide shows San Bartolome. As Dennis mentioned earlier our development projects made very positive progress during the most recent quarter.

At San Bartolome based on the company's assessment of the updated final feasibility study, we have revised several of the key benchmarks of the property resulting in lower capital and operating costs. Estimated construction costs were lowered by 20% from earlier feasibility study estimates to $105 million. We've also seen a 5% reduction in operating costs to $3.55 per ounce. This is a result of focusing on the silver ores and replacing filtered tailings with pace tails. Additional engineering work at San Bartolome is scheduled for completion in the third quarter. All our environmental permits are now in hand from the Bolivian authorities and we're still expecting a 2006 production start-up. With first full-year production of six million ounces of silver per year and a 15-year mine life.

Also this past week we received approval from the Overseas Private Investment Corporation, OPIC, for up to 135 million in political risk insurance for San Bartolome. This is an important milestone in the project, as it provides for political risk insurance by this major U.S. agency charged with helping U.S. businesses interest overseas. OPIC will provide this political risk insurance to Coeur for both the construction and operations of San Bartolome.

At Kensington the final feasibility study has been completed. The project is expected to produce approximately 100,000 ounces of gold annually over its expected 10 to 15-year mine life. Estimated construction costs are 91.5 million, with projected cash operating costs of $220 per ounce gold. The current estimates are within the original estimated range set by the pre feasibility study. At its recent meeting the board of directors approved final expenditures to complete the work necessary to reach a construction decision in the fourth quarter. The project is expected to commence production during 2006. By the end of the second quarter, all remaining draft permits for Kensington had been released for public comment and all hearings had been held by the EPA, Army Corps of Engineers, and the state of Alaska which marked the final phase of the major permits required for construction.

We also had updated work done on Kensington's mineral inventory. In addition to the one million ounces of probable reserves new geologic modeling has resulted in an update in the properties mineralized material inventory, which indicates the opportunity for a potential 50% increase in mine life beyond the initial 10-year estimate through future definition drilling. So there have been positive developments in Kensington and we remain on track for production to begin in 2006. I'll now hand things over to Jim for the financial update.

Thank you, Bob. In the second quarter and first six months of 2004, the company reported increased revenues, cash flow, and improvement in the company's operating earnings. In the second quarter we realized $398 per ounce of gold sold versus $330 in the last year's second quarter. Silver prices realized in the recent quarter were $6.40 per ounce compared to $4.53 ounce a year ago. Revenues in the second quarter were up 3% from last year's period to $27.1 million. For the first six months period, revenues increased 1% from a year ago to 56.1 million, primarily the result of continued robust metals prices. The increase was the result of higher prices, partially offset by lower production in the first six months. In the second half of 2004 we expect production levels to continue to increase.

Positive cash flow from operations was 1 million compared to a negative cash flow from operations of 3 million in the second quarter of 2003. Again, we expect increased production levels in the second half of this year to continue to improve operating cash flow. For the recent quarter the company reported a loss of 5.4 million compared to a loss of 4.4 million in the same period last year. However, included in these recent quarterly results, were a number of items which impacted the income statement. These include: 4 million in pre development costs associated with the updated feasibility work at the Kensington and San Bartolome projects, and as Bob mentioned earlier this work resulted in future cost savings -- excuse me, further cost savings and improved economics for these projects that are key to our future growth and profitability. In addition our accelerate exploration program in Idaho and South America resulted in increased exploration expenditures in the quarter. 3 million compared to 1.1 million in last year's second quarter and which as Don mentioned, has returned positive results. These expense -- there are -- these are expenses we anticipate will result in future reserve and production growth. In addition revenues for the quarter were impacted by a 3.4 million dollar charge that related to the reduction in metals prices that related to the value of metal settlements outstanding at the end of the second quarter. I'll have a few more comments on this in just a minute. Exclusive of these pre development costs and the charge related to the timing of metal settlements our net income would have been 1.8 million.

Our cash and cash equivalents at the end of the quarter stood at 227 million giving us a very strong balance sheet to fund the growth we've talked about. Metals production remains unhedged during the quarter.

Now with regard to the restatement. The company will restate its results of operations for year ended December 31, 2003, and the fiscal quarter ended March 31, 2004. These restatements result from an error in accounting for price changes related to the sales of our concentrate. The restatements are expected to increase revenues and reduce net loss by approximately 1.2 million and 1.3 million respectively from the amounts previously reported for 2003 in the first quarter of 2004. The restatements are the result of a correction in Coeur's recognition of revenue related to concentrate sales contracts. Historically Coeur has recorded revenues under these contracts based on gold and silver prices prevailing at the time that risk of loss and title of the concentrates passes to third party smelters based on prevailing metals prices at that time, which is generally upon shipment or arrival at the smelter. Vital settlement price occurs at a later date, usually 60 to 90 days later based upon quoted metals prices, by an established metals exchange, as set forth in each contract at such date. When a settlement spans reporting periods, the receivable needs to be marked to market, either up in rising metals prices or down in falling prices, so that interim periods are affected. However, total revenues recorded over the term of the contract remain unchanged. This revenue adjustment for periods prior to the second quarter of 2004 was not made since the final adjustment was made only upon final settlement.

Coeur's calculated impact of the restatement on its net losses for year 2003 and first quarter 2004 and expects net losses to be reduced from 67 million to approximately 65.8 million for 2003, and from 3 million to approximately 1.7 million for the first quarter. And as indicated earlier, results of revenues for the current quarter were reduced by 3.2 million. As a result, Coeur has delayed filing of its quarterly report on Form 10-Q for three months ended June 30, 2004 and has filed an extension for five days to allow our auditors and SEC to review the restatement. Upon such completion, Coeur will file an amended 10-K for year ended December 31, 2003, amended Form 10-Q for three months ended March 31 2004, in each case reflecting the restated financial statements.

Now with regard to 2004 financial outlook while our metals production in the first half of the year were lower compared to a year ago, particularly on the gold side, we're looking to more than make up for that in the second half of this year. Cash costs are expected to decline significantly through the remainder of the year, due in large part to the gold production increase this should significantly impact our cash flow with the current silver and gold market price levels. We look forward to continuing to advance both the Kensington and San Bartolome projects, in particular San Bartolome with the receipt of permits is now in the development stage. Our balance sheet will remain very strong and is more than adequate to fund these projects.

The next slide shows annualized silver production rates. Silver production is expected to increase by about 8% in the second half, above production levels in the first half of this year as the Martha mine returns to delivering its normal high-grade ore. Full-year silver production is expected to be comparable to last year's levels. The next several charts give an overview of our production and costs going forward in the context of the last couple of years. While this past six months saw modest decrease in gold production, which we should see a very dramatic increase in the second half of this year, with increased output coming from both Rochester and Cerro Bayo.

Gold production is expected to be approximately 19% above last year's levels. The higher gold production through the remainder of this year is projected to result in lower cash costs as represented on this slide. Our anticipated full-year costs of $3 per ounce of silver, are 8% lower than last year's consolidated costs.

Higher production combined with lower costs bode well for improved cash flow and profitability in the second half of this year. Our EBITDA leverage to silver and gold price movements remains very strong since we are completely unhedged. On an annualized base every 10 cent move in silver prices impacts annual EBITDA by 1.4 million, and every $10 move in gold prices impacts EBITDA by 1.4 million. Coeur's stock price continues to perform well, relative to the metals markets and the major indices. Since last year, CDE has outperformed on a relative basis the price movements of the underlying metals. Since July of last year to the middle of this week, Coeur's stock price has increased 74% while gold is up 13% and silver is up 39%. Coeur's shares continue to do well on a relative basis in comparison to both the X A U gold and silver index as well as the S & P 500. The X A U is up 10%, and S & P 500 is up 21% compared to Coeur's 74% increase. With that I'd like to turn the presentation back to Dennis for closing remarks.

Thanks, Jim. We're looking at a strong second half of 2004 coming up. We project that our gold production rate is going to double in the second half of the year, compared to the first half, and our silver production increase an additional 8% for the same period. And our yearly cash costs declining 32% from the first six months levels for the reasons that have been explained here today by Bobby Martinez and the group. We're going to wrap up all the necessary feasibility work and permitting associated with the Kensington and San Bartolome so we can move forward with construction, and we expect to report ongoing positive news from our exploration program in both North and South America. And we're going to remain in a very advantageous position financially. To continue to fund our growth initiatives internally and externally.

The last two charts demonstrate the impact of our internal growth projects, but they have based on our future silver and gold production forecast, an impact we expect to begin in 2006. San Bartolome will add 6 million ounces of silver in the first year alone, an increase of 42% over our current levels. And we're confident that Kensington will add 100,000 ounces of gold production in its initial year, a 70% increase over 2004 levels.

Now I'd like to just talk to you for a few minutes about our current tender offer for Wheaton. We're doing this transaction because we know it's going to result in significant shareholder value and a much stronger Coeur and combined company. It will be beneficial to both sets of shareholders. As you know our tender offer relates to the acquisition of all of the outstanding shares of Wheaton River. It provides the shareholders of both companies the most unique opportunity in the sector to create a new leader in the precious metals industry. Both from an operating and financial perspective.

Here's what the combined company's going to look like. It's going to be North America's fourth largest precious metals company. It's going to be a top ten world gold producer with a management team with proven established operating expertise. It's going to be the world's leading silver producer, initially with over 22 million ounces of annual silver production. It's going to give our shareholders of both companies one of the most liquid publicly traded precious metals stocks in the world, with listings on both the New York Stock Exchange and the Toronto Stock Exchange. The new company is going to have four fast growing attractive development projects. Anumb Parry, Kensington, los Fellows, and San Bartolome Bolivia.

We've published to you Coeur's forecasted cost and production targets and important economic questions relating to our two projects, Kensington and San Bartolome. The new company's going to be very highly leveraged to commodity prices. And it's going to be financially powerful with strong free cash flow generation, balance sheet strength, and even greater access to capital markets. Importantly, it's going to be accretive for both sets. That's both sets of shareholders. And I can assure you we remain unreservedly enthusiastic and confident about our offer and what it means for Coeur and its shareholders, but also the reason why it's so beneficial to Wheaton and its shareholders. And I can assure you we are receiving ongoing expressions of support and encouragement both from Coeur and Wheaton River shareholders. Just a few comments about the terms of the transaction.

Wheaton River shareholders may elect to receive per each share of their Wheaton River common stock either Canadian $5.47 in cash, that's subject to proration. If the total Wheaton shareholder base requests in the aggregate more than $570 million Canadian cash, or they can receive .796 shares of Coeur's common stock or exchangeable shares of the Canadian subsidiary of Coeur in the event of Canadian holders. Based upon the number of issued and outstanding Wheaton River common shares as of May 27th, and assuming that all Wheaton River shareholders elected to receive cash, the Wheaton River holders would then receive Canadian $1 per Wheaton River common share in cash, and .65 shares of Coeur common stock or exchangeable shares. Coeur's offer represents a premium of approximately 13% to Wheaton River's closing share price as of August 6th, assuming all shareholders elected to receive cash. This is a narrowing from the premium of nearly 18% a week ago, and it's a trend that further encourages, because it indicates to us that the spread is narrowing, that the shareholders are, in fact, saying this is a deal worth doing and that the shares of Coeur are trading in the short term as a deal stock, exactly what we want to see.

I'd like to take a few moments just to discuss with you some of the significant milestones that have been achieved in the Wheaton transaction over the last few weeks, and what we are going to accomplish in the weeks ahead to make this combination a reality. We commenced our mailing to Wheaton's U.S. River shareholders on July 13th. Canadian laws and regulations are different, and consequently it is more complex for a U.S. company to move forward with a Canadian offer. But we're making progress. The requirements include that we provide a good deal of added disclosure, different mining formats than our customary under the securities exchange laws and regulations of the United States, and we're also required to make a French translation of the offer. However, these items are progressing well and we fully expect we're going to be in a position to make our Canadian mailing soon, and that the expiration date of the offer will be amended to conclude at least 35 days from the commencement of the formal Canadian offer. We filed on July 19th our preliminary proxy statement with the SEC. Ultimately asking Coeur's shareholders to approve at a special meeting. First of all, a reorganization transaction to create a holding company structure for Coeur in conjunction with the proposed acquisition of Wheaton River. And to approve the issuance of the shares of common stock of the new Coeur holding company to be formed in conjunction with this acquisition. We think we're still on target to mail definitive proxy materials to our Coeur shareholders for a meeting in the second half of September, and following approval by our shareholders and all regulatory approvals we expect to be in a position to take up the Wheaton shares in our tender offer near the latter part of September. So those are the highlights of Wheaton, and why we're committed to seeing the transaction through to completion, and why we're confident we're going to succeed. And I can assure you we'll continue to keep you very timely posted in the developments within the company and externally, and to keep you updated on the Wheaton transaction and our other initiatives as events progress.

I want to thank you all for participating here today. And for listening to our presentations. And now, we'll be happy to open up the call to questions, operator, please.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star then 1 on your touch-tone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from the queue at any time by pressing the pound key. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press star 1 at this time. One moment, please, for the first question. Again, if you wish to ask a question, please press star 1 at this time. Our first question comes from the line of Colby Skelton from University Capital. Please go ahead.

Hi guys. We're one of the Wheaton shareholders Ian chooses to ignore, who strongly supports the Coeur D'Alene premium offer, and my question is regarding the timing. Obviously with the Silver Wheaton date rapidly approaching on September 9th, I'm wondering if you, obviously there's pressure to get the Canadian filing made. It's imperative that it's made quickly. Have you been in discussions with them at all about that date?

We have not been, Colby, although I will tell you that I have communicated in writing to the Wheaton board and to Ian, that we are not impressed by the silver Wheaton transaction. You know, several of these spin-offs of minority interests in metals companies have been attempted in the past, largely without the expected result of adding meaningfully to shareholder value. And if you look at what the market has said since the Wheaton silver transaction was announced, it seems to me that the market itself has not been particularly pleased with this transaction. I guess the question is why not move forward and create a 22 million ounce producer, doing a transaction with Coeur, versus a spin-out of what looks, based on today's reports, to be a little less than 7 million ounces of silver a year. So we have communicated that we do not consider this to be an attractive transaction from Coeur's standpoint, and that it should not go forward and Wheaton has announced a closing date of September 9th for silver Wheaton, the financing. We have -- and Wheaton well knows that our closing date is projected to have extended beyond that, well before they announce a closing date of September 9 and despite comments to the contrary, we continue to view that as a transaction that is detrimental to Wheaton's shareholders and is meant to do nothing other than an attempt to derail Coeur's tender offer for Wheaton shareholders which offers significant added value to them.

Well, we look forward to the Canadian filing so that we can put the full court press on Wheaton management, because I think that -- is there any attempt to sit down with those guys once you do make the Canadian filing?

Well, our line's always open to talk, and we've communicated that consistently to the Wheaton board. We requested to meet as well with their special committee of the company that was formed, presumably to allow an independent review of the Coeur transaction, and it's benefits to Wheaton holders. We were not accorded an invitation for such a meeting. We received basically the same response after the public response had been made to our proposal by the Wheaton special committee, but certainly we're always interested in talking and perhaps now that the Coeur proposal is the only one out there, that as time goes forward, they'll choose to sit down and have that kind of a dialogue.

With a significant premium, might I add. Thank you.

Thank you.

Our next question comes from the line of Garrett Watson from Scotia Capital. Please go ahead.

Good afternoon. Curious whether or not you would consider the silver Wheaton transaction to represent a material adverse change to the deal.

No, we won't make any comments on that at this time, Garrett, I think other than to repeat what I've said, we view this as transaction primarily meant to be an attempt to derail the Coeur tender offer and we do not view it favorably to either Wheaton shareholders or ourselves compared to our proposal.

Well, in that case, would you let such a circumstance derail your proposal?

I think I'd just tell you what I've already said, and that's that we do not view it favorably.

Thank you very much.

Our next question comes from the line of Trevor Turnbull from Nesbitt Burns. Please go ahead.

Yes. I was just wondering, given that Wheaton has two development projects ready to go and progressing and that you have both the San Bartolome and Kensington projects in development as well, if the combined company going forward had all four of these together, would there be any change in the prioritization or the time lines associated with getting these four projects into production?

Well, that's a good question. You know, I think one of the first responsibilities of the new company management would be to closely scrutinize the timetables of all four projects, and to see if there were a different prioritization. We can't tell exactly the current economics from the present news release, the targets of the Wheaton new projects, but we're assuming they remain found. We've set forth pretty well what our timetable is. I am confident that because of the additions to the Coeur management team recently made, in terms of our project development expertise that these projects can be handled in a very orderly and successful fashion. And so, you know, I remain confident that we certainly would have the ability of the new company to do all, if that choice were made, but I -- as I say, I think that it's a matter that also the management of the new company should review as an immediate priority.

Fair enough. My other question is that given that there's obviously support out there for Coeur d'Alene's offer can you give us any indication of what level of support there may be or how much of the share base may be tendering to the offer to this point?

I think the only way I can answer this is two-fold. First of all, we encouraged and we're gratified when Wheaton's shareholders, we assume turned down the Ian gold transaction, because the vote wasn't held and the meeting didn't proceed. We've received a number of calls. I want to say this without any question because of some of the negative or incorrect information that's been floating around. We've received several expressions of support from Wheaton River's shareholders, and the suggestion that no single Wheaton shareholder has been interested in this proposal is untrue. We've had a number of shareholders communicate to us their interest in this transaction, or obviously we wouldn't be pursuing it. So we remain confident for the reasons that I have suggested, that together we can put forward a world leading company. And that's our stance, and that's where we remain.

Great. Thank you very much.

If there are any additional questions, please press star 1 at this time. Again, if you wish to ask a question, please press star 1 at this time. Our next question comes from the line of Pierre Vaillancourt from Orion. Please go ahead.

Hi, Dennis.

Hi, Pierre. Good morning.

Just a clarification here. The Kensington cash costs that you talked about, you mentioned they were operating cash costs. Would the total cash cost be any different this I mean, are there royalties that come on top of that, or does 220 represent your total cash cost?

Yeah, Pierre, Jim Sabala, that's the all-in cash cost, total operating including any costs whatsoever.

So no other royalties or anything like that?

No. Nope.

Again, a clarification, the San Bart, there will be no tin produced, as far as I can tell. Is that correct?

Our present plan, Pierre, based on reduced capital cost, is to focus initially on the silver contained within the deposits, and we will continue to engineer and do further optimization with regard to the tin, probably beginning in the second and third year of production.

Okay. But when you -- when you mention your 350 operating costs, or 355, that --.

that's based on silver only.

Silver only.

Yes, sir.

I'm just confused because originally it was going to be 375, and now, you know, benefiting from a tin credit now there's no more tin credit, at least initially, and yet your costs are down.

That all relates -- excuse me. That all relates, Pierre, to the optimization work that's going on. Includes removal of about $26 million capital costs for the tin, and it relates to other improvements with regard to the silver side of the project.

Okay. I mean, are you -- is your mine plan changed at all, or how are you --

No change at all other than the focus on processing the silver.

Okay.

And increasing the resources there through work going on in an area called [Plihiepo] where we're conducting a substantial confirmation program now to add reserves in that area.

But I guess longer term I'm to assume that you'll ultimately have -- you'll be recovering the tin, so those cost savings from not processing the tin are just pushed back, I guess.

I would not make that assumption because the work won't be done until later on. I would make the assumption of the dynamics we've set forth here along with the production schedule to increase beginning in years two and three and thereafter from six to eight million ounces of silver a year.

Okay. All right. Now, the other thing, with respect to Cerro Bayo you've got quite a wide range in your costs this year. Can you give me an indication where you're headed for '05, '06 on that basis? I mean, what can we expect?

Well, as Bobby mentioned most of the -- most of the costs changed at Cerro Bayo took place because of the mining reduction.

Yeah.

At Martha. With regard to forecast going forward, Jim?

Yeah, Pierre, in the press release we said that we expect the costs to decline down to about $1.75, which is pretty much a normalized range. We haven't provided forward-looking guidance beyond '05 and '06. I would just say that in the second half of this year we expect Cerro Bayo to get back to normal, and normal is around $1.75.

But in terms of your plans for Cerro Bayo/Martha, you still have a fair amount of exploration expenditure to just continue to build up the resource. You'll be spending a fair amount in the ground there to develop the resource.

Yes this is Don Birak. Those programs will continue to the second half of the year. We're in the winter down there now and we're going to continue through the year.

With respect to -- just for clarification on the Wheaton you will have the plan is to have 43-101 on the assets? Is that -- just want to confirm on that.

We're preparing our own Canadian documents under 43-101.

Okay. So that will be forthcoming, then.

Yes.

For all -- for your assets. And can you tell me how much is this cost you so far, this whole process?

Approximately $2 million.

Okay. Thanks a lot, Dennis.

Thank you very much.

We have a question now from the line of Ron Myers from Genoa. Please go ahead.

Mr. Wheeler, just for the sake -- just to -- I'm trying to figure out how to put this -- let you know that there's another point of view out there. We're Wheaton River shareholders and we don't like the bid at all. We don't understand why it's taking so long to develop Canadian documents. I've been in this business for 20 years and have never seen it happen before. There's simply no excuse. I'm not done and I mean no personal disrespect here, but this is a parasitic bid that is holding back the price of Wheaton shares. If you had currency to offer, you would have offered it by now, you can't afford this company, it's out of your league, go away.

Well, look, --.

I mean, if you add another share to this thing --.

This is a free country, in the United States, and you've had an opportunity to express your view, and thank you.

There are no further questions. Mr. Wheeler, please continue.

Thank you very much, operator. I'd like to thank all of you for tuning in to today's Coeur's conference call. We're going forward with the second half of the year with confidence, the plan we laid out for you at the first of the year continues to come together. We're meeting our targets and our forecasts going forward with increased production, reduced costs. The company remains very strong financially. We're set to grow significantly, internally and externally, and we look forward to continue to communicate with you the ongoing results of Coeur and our tender offer for Wheaton River minerals. Thanks very much for joining us today.

Ladies and gentlemen, this conference will be available for replay after 1:30 p.m. pacific time today through midnight on Monday, August 16th of 2004. You may access the AT&T teleconference replay system at any time by dialing 1-800-475-6701, and entering the access code 739310. International participants may dial 320-365-3844. Those numbers again, 1-800-475-6701, and 320-365-3844, access code 739310. That does conclude our conference for today. We thank you for your participation and for using the AT&T Executive TeleConference service. You may now disconnect.