Coeur Mining Inc (CDE) 2013 Q1 法說會逐字稿

Good afternoon. My name is Kendra, and I will be your conference operator today. At this time, I would like to welcome everyone to the first-quarter 2013 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the call over to your host, Ms. Wendy Yang, Vice President of Investor Relations. Ma'am, you may begin.

Thank you, Kendra. Welcome to our first-quarter conference call. I am Wendy Yang, Vice President of Investor Relations. This call is also being webcast on our website at www.Coeur.com, where we have posted slides to accompany our remarks.

(technical difficulty) a replay of the call will be available on our website through May 23.

We will be discussing some forward-looking information today and we caution our audience that such statements involve risk and uncertainties that could cause actual results to differ materially from projections. Please review our cautionary statements are shown on slide two and review the risk factors, including some that are specific to our industry, described in our latest annual and quarterly financial reports filed with the US SEC and Canadian regulators.

On the call today we have Mitch Krebs, President and CEO; Frank Hanagarne, Senior Vice President, Chief Operating Officer and Chief Financial Officer; Don Birak, Senior Vice President of Exploration; and Joe Phillips, Senior Vice President and Chief Development Officer. We'll get started. Mitch, please go ahead.

Thanks, Wendy. Good morning, everyone. Good afternoon to those on the East Coast. During the first four months of the year, we have continued to pursue several key strategic objectives that are shown on slide four. None of these objectives will be achieved overnight, but we are making steady progress. And none of these objectives will be achieved without the right people and the right level of technical expertise in place.

We are committed to succeeding in this new world of capital discipline, execution, cost reduction, returns and better management of the risks inherent in our industry. Success requires building a team of technical and financial talent that can become a true competitive advantage for our Company. And that is exactly what we've been doing, and I'm really excited about the people that have recently joined Coeur.

We've added a new, seasoned Chief Financial Officer in Peter Mitchell, who will help us maintain a flexible balance sheet, mitigate risks and appropriately deploy free cash flow to achieve optimal returns and lead our efforts to better manage costs and information.

We've also added a new Chief Development Officer in Joe Phillips to lead the Company's capital project initiatives. Joe and his group are keenly focused on the importance of delivering projects on time and on budget, whether they are projects in support of existing operations or more significant projects, such as La Preciosa or Rochester's expansion.

In order to better identify and manage risks, we've hired a new head of Health & Safety in Bill Holder, who is providing leadership, support and the tools necessary to achieve our goal of making sure everyone goes home safely to their families every night.

We have new general managers in place at Palmarejo, San Bartolome and Rochester who are driven to make their operations as safe, consistent and efficient as possible. In addition, we have added a stable of very talented technical, financial, IT and operations professionals who are driving the Company forward in ways that will lead to more consistency, better planning and better decision-making.

What we've undertaken here is essentially a complete overhaul of this Company. We are serious about making Coeur a true leader in the precious metals industry. Being a leader doesn't necessarily mean the biggest. That is a lesson this industry has learned the hard way over the past decade. We're striving to become the example of how a mining company should be run and demonstrate a willingness to embrace new ideas and approaches in an effort to make our shareholders money.

This will all be accomplished over time, with a new name and a new headquarters location, which we believe sets the tone for the kind of change we are talking about.

Despite recent volatility in silver and gold prices, we've been aggressively pursuing cost reductions and efficiency gains at our operations since late last year, and we are beginning to see results. We've begun a top-to-bottom review of all ongoing and planned capital expenditures to ensure we are deploying capital into projects that are either necessary for the long-term sustainability of the operation or will generate an appropriate return on that capital. It is important that we stress test all projects and operations for prices to determine the optimal path forward without being too reactionary to the volatility in silver and gold prices we experienced during April. We need to maintain our focus on long-term prices, given we are making decisions that are over a five- to 20-year time period.

Although we are primarily focused on our existing operations, we will continue to be opportunistic toward external growth. We currently see a lot of dislocation in the market, especially within the late-stage exploration company sector, that we will selectively pursue.

We remain committed to repurchasing our shares, which we believe represent tremendous value at current levels. So far, we've completed $32.5 million of the $100 million program our Board authorized in June of last year.

Turning to slide five, a couple of weeks ago, I was in New York for the release of the 2013 World Silver Survey. Although industrial demand declined last year, investment demand remained strong, and is expected to continue to be the key to sustained silver prices. Other key highlights from the Silver Survey are summarized on slide five.

And just a quick comment on gold, which makes up 47% of our sales. I haven't seen the sentiment for gold this negative in a long time, yet here we are at $1470 announced, after touching $1380 announced just three weeks ago. We think the long-term case for gold remains intact, and we like our metals mix of silver and gold.

Turning to slide six, I would say we had a mixed first quarter that ended much stronger than it started. As we announced in our April 15 news release, first-quarter production was steady, and we expect it to accelerate during the remaining three quarters of the year. Overall, silver production was flat compared to the fourth quarter. Gold production was down slightly compared to the fourth quarter, but up 30% compared to the year-ago first quarter.

Our largest operation, the Palmarejo silver and gold mine in Mexico, rebounded compared to the prior quarter in terms of higher production levels and significantly lower costs. Having said that, Palmarejo started slowly in January and February, but had a strong March which resulted in a decent quarter. We expect to see more months like we experienced in March and April and what we are seeing so far in May, and fewer like January and February throughout the rest of the year. And we are confident in our full-year guidance at Palmarejo.

Our Rochester silver and gold operation in Nevada, which is undergoing a further expansion this year, started the year slowly due to cold, snowy weather and fewer tons being crushed than planned. The mine is catching up, but the first two months of the year has put Rochester behind budget.

Performance at our San Bartolome silver mine was solid in the first quarter, and results at our Kensington gold mine were stable, and we expect production there to increase during the remainder of the year.

So operationally for us, the two big keys are to sustain the performance at Palmarejo that we've seen in March, April and so far in May and accelerate the crushing rates at Rochester to make up for the slow January and February.

Overall sales and operating cash flow or down, but there was above $39 million of metal sales that didn't make it into the first quarter that were realized in the current quarter. If you add that back into the first-quarter results, we were ahead of the fourth quarter and in line with the year-ago first quarter.

Overall costs were down. In particular, Palmarejo's cost per count dropped from $7.55 per ounce in the fourth quarter to $2.20 per ounce in the first quarter. San Bartolome's cost per ounce also declined by 5% versus the prior quarter.

We recently closed the Orko Silver acquisition, which adds the world-class La Preciosa silver project in Mexico to our list of long-life assets, and Joe will have more to say about La Preciosa in a few minutes.

We were opportunistic in the capital markets during the first quarter, which has resulted in a very flexible balance sheet.

Our strategic objectives for 2013 remain clear and unchanged and are shown on slide seven.

Turning now to the financial update, slide nine highlights our first-quarter financial results. We produced 3.8 million ounces of silver and almost 57,000 ounces of gold in the quarter, but only sold 3.1 million ounces of silver and 52,000 ounces of gold due to timing, which gave rise to a $39 million lag in metal sales that I mentioned earlier.

We generated about $59 million in operating cash flow from about $172 million in metal sales. Production costs at our mines are on plan and we are now seeing some reductions versus budget thanks to a lot of hard work. Consolidated production costs were about $89 million in the first quarter, which was 4% lower than last year's first quarter and 17% lower than the fourth quarter of last year.

On a per ton milled basis, production costs were 16% lower compared with the first quarter of 2012.

Capital expenditures were about $13 million in the first quarter, which was a 59% decrease from the first quarter of 2012. And cash, cash equivalents and short-term investments ended the quarter at about $333 million. We used $99 million of this balance to fund the cash portion of the Orko Silver acquisition last month, and the Company's $100 million revolving credit facility remains undrawn.

The table on slide 10 shows average realized prices, ounces produced and sold and cash operating costs on a per ounce basis. Now I'll turn the call over to Frank, who will take us through first-quarter operational performance.

Thanks, Mitch. We'll turn to slide 12. This slide lists the first-quarter 2013 operational highlights and priorities for all of our four operating mines.

First-quarter of 2013 production at our Kensington gold mine in Alaska was down 12% from fourth quarter 2012, while costs remained constant. Kensington contributed 20% of our operating cash flow. We expect production from this mine to increase and cash operating costs to decline in the second half of the year, as we mine expected higher ore grades.

Our Rochester silver/gold mine in Nevada had a good quarter, with silver and gold production up 47% and 65%, respectively, over the first quarter of last year. Rochester started the year slowly due to processing challenges from severe winter weather in January and February. The mine contributed 23% of Coeur's total operating cash flow for the quarter. The capital expansion underway at Rochester will increase 2013 production 35% to 50% year-over-year.

Underground and open pit mining rates at our Palmarejo mine in Mexico improved and stabilized in the first quarter compared with the last few months of 2012. Palmarejo contributed 37% of Coeur's total operating cash flow. Development of Guadalupe continues, and we are optimizing the mine plan to incorporate a new open pit production plan to augment underground production.

San Bartolome demonstrated strong mill throughput and silver recovery rates, contributing 18% of Coeur's consolidated operating cash flow for the quarter. The planned mill expansion at San Bartolome is expected to drive annual production levels up over 6 million ounces of silver in 2014 and for the next several years.

Turning to slide 13, the bar charts at the bottom of slide 13 show the steady increase in silver and gold production from our operations over the past five years. 2012 production totaled 18 million silver ounces and a record 226,486 gold ounces. We expect to produce 18 million to 19.5 million ounces silver and a record 250,000 to 265,000 ounces of gold in 2013.

Looking at Coeur's metal production by mine, Palmarejo continues to contribute the majority of silver and gold production. But the increased production at Rochester and Kensington has been notable. Our longest-lived operation, Rochester, is poised to be our second-largest cash flow contributor in 2013 and could become the Company's largest cash flow contributor in five years.

Turning now to the operating performance details of each of our mines, slide 14 shows the first-quarter 2013 highlights for Palmarejo. Although production levels at Palmarejo started off slowly this year as a result of mining lower than planned ore grades, March and April were strong months, and we remain confident in our 2013 guidance for this important asset. Palmarejo generated metal sales of $57 million from 1.1 million ounces of silver and 14,500 ounces of gold in the first quarter. As mentioned earlier, we produced more ounces than we sold due to quarter-end timing.

Palmarejo produced 1.65 million ounces of silver and 22,965 ounces of gold at cash operating costs of $2.20 per silver ounce. Operating cash flow was $31.5 million. Capital expenditures were $5 million for the quarter.

Palmarejo's underground and open pit mining rates improved and stabilized during the first quarter compared to the last four months of 2012. Silver and gold ore grades from both the open pit and underground operations are generally expected to improve through the rest of the year, as they did in March and April.

Progress at Guadalupe is accelerating through improved development results, and we anticipate intercepting the ore horizon in second quarter. We are proud to report that Palmarejo's mine rescue team are in first place and the first-aid response team earned second place in their respective competitions at the Northern Mexico Mine Rescue and First-Aid competition, held in mid-March 2013. In addition, for the fifth consecutive year, Coeur Mexicana was recognized by the Mexican Center for Philanthropy with a socially responsible business distinction award for demonstrated leadership excellence in corporate social responsibility, environmental stewardship and sustainability in Mexico. We are very, very proud of our Palmarejo team for these achievements.

Turning to slide 15, San Bartolome generated $33 million in sales in the first quarter from 1.1 million ounces of silver sold. This was less than metal production of 1.4 million ounces of silver. Cash operating costs per silver ounce were $13.27 in the first quarter 2013 compared to $13.97 in the fourth quarter 2012. Operating cash flow totaled $12 million.

The $17 million to $20 million mill expansion project underway at San Bartolome is expected to increase processing capacity at the mine by approximately 10% to 15% in 2013. We expect the expansion to generate a less than two year payback and to increase the mine's annual production to over 6 million ounces of silver for the next several years at reduced cash operating costs per ounce. This expansion project is on schedule and expected to be completed late this year. Capital expenditures at San Bartolome were $500,000.

In celebration of the city of Potosi's bicentennial, San Bartolome donated silver bars, which were made into commemorative medallions. We are grateful for the positive relationships we have in Bolivia and welcome the opportunity to give back to the community where we operate.

Turning to slide 16, first-quarter production at Rochester was 648,000 ounces of silver and 8742 ounces of gold, at a cash operating cost of $13.54 per silver ounce, lower than the first quarter of 2012, but higher than the first quarter of 2012. Metal sales totaled $39.5 million and operating cash flow was $17 million.

We remain very enthusiastic about the 2013 expansion underway at Rochester. We will invest about $4 million this year to expand crushing capacity from 9 million tons to 14 million tons. Monthly crusher throughput is expected to be between 1.2 million tons and 1.4 million tons in the second half of 2013, leading to expected higher second-half production of silver and gold.

In addition, we are expanding the mine's heap leach capacity to approximately 67 million tons at an estimated capital cost of about $15 million. This planned expansion will accommodate sustained higher production rates driven by mining or contained in historic stockpiles. These stockpiles were created during the mine's 26 year operating history, when gold and silver prices were significantly lower than the current market. Capital expenditures at Rochester were $3 million in the first quarter.

Rochester is located in Nevada, the Silver State. This month, Coeur donated a 1000-ounce silver bar to Nevada Governor Brian Sandoval to produce commemorative coins marking the state's 150th anniversary. We are proud to be a part of the community and the state, both rich in mining history.

Moving to slide 17, Kensington produced 25,206 ounces of gold in the first quarter at cash operating costs of $1055 per ounce, which is much improved over the first quarter of 2012. Costs were higher at that time due to a temporary production scaleback to complete several critical underground and surface infrastructure projects. Metal sales totaled $39 million and operating cash flow was $15 million first quarter of 2013.

(technical difficulty) availability of generators during the first quarter reduced underground backfilling, which impacted overall mining efficiency and costs at Kensington. Mill throughput was 129,057 tons, consistent with the fourth quarter of 2012. Bulk grade is expected to gradually increase during the remaining quarters of 2013 as scheduled stopes are mined and processed. Capital expenditures at Kensington were $3 million.

As we mentioned, Joe Phillips recently joined our team as Chief Development Officer and brings with him international mine development experience, including the successful construction of two mines in Mexico. Joe will lead our development efforts at La Preciosa and other capital projects. I will now turn the call over to him.

Thank you, Frank. I'd like to start by saying it is a pleasure to be part of Coeur's team and to work on developing exciting projects like La Preciosa. I'd like to start with slide 19.

On April 16, Coeur acquired Orko Silver. The key asset of this acquisition is the La Preciosa project in Mexico with 32,400 hectares of contiguous mining claims, almost three times the size of the Palmarejo district.

This acquisition provides four key benefits to our shareholders. First, it diversifies Coeur's portfolio across a larger platform of assets. Second, it reduces our overall political risk profile. Third, it provides accretive, significant growth in production and cash flow over a long mine life. Finally, it is expected to generate a rate of return in excess of our cost of capital.

La Preciosa is one of the largest undeveloped silver deposits in the world, with the potential to grow even larger through further drilling. The silver resource estimate is 99 million ounces of indicated and 140 million ounces of inferred. The property is well-located, with significant infrastructure in place, including paved highway access to the property and close proximity to power and railroad lines.

Our efforts at La Preciosa are focused on three principal areas. First is to complete a preliminary economic assessment, which will provide a scoping level look at the mine, plant and project economics. M3 Engineers will prepare the PEA by the end of the second quarter of 2013.

Following completion of the assessment, we expect to start basic engineering and full feasibility work in the second half of 2013, along with exploration, infill and development drilling.

As mentioned in previous announcements, our studies indicate that a large surface mine will provide the most robust projects at current metal prices and will enable the recovery of a larger percentage of the resource.

Our second effort is to build a team which will take La Preciosa forward to feasibility, construction and operation. We've hired Bruce Kennedy as a general manager of the project. Bruce most recently led the turnaround of the large Pirquitas silver mine in northern Argentina, and has successfully managed projects in Latin America, including Gold Corp.'s large Penasquito mine in Mexico, where he was the operation manager.

Finally, we are working on key infrastructure at the site and in establishing an effective community relations program.

On slide 20, you will see an aerial photo of the property, looking south at the mine site, plant and tailings locations. The La Preciosa property is a favorable location to build a mine.

Slide 21 breaks down the expected timeline for advancing La Preciosa. As mentioned, the PEA will be completed in the second quarter of 2013, and we will continue developing our exploration and development teams. The third quarter, the technical report for the PEA will be filed, and we expect to commence exploration drilling. 2014 will be dedicated to the feasibility study. 2015 through 2016 will be my construction, and we expect initial production in the second half of 2016.

Continuing on to slide 22, I'd like to talk a bit about our capital expenditures for 2013. As Mitch mentioned, we are currently reviewing all of our capital projects in light of recent changes in metal prices to ensure the expected returns meet our investment hurdle rates. We expect this process to result in a reduction of our capital spending in the second half of the year.

Our capital projects for 2013 are focused on increasing production capacity, reducing costs and improving efficiency.

The projections on slide 22 do not yet include a CapEx estimate for the La Preciosa for the remainder of the year. And with that, I will turn the call over to Don to take us through the first-quarter 2013 exploration highlights.

Thanks, Joe. Good morning, everyone. At the peak of the quarter, we had 10 drills and crews working, continuing the pace we set in 2012. The majority of our investment remains focused on our large operating and advanced stage properties, with Palmarejo leading the way. We received some favorable results from the 108, Las Animas, and Tucson Chapotillo zones at Palmarejo and from Rochester, Kensington and San Bartolome. I'll describe some of these in more detail next.

Four core drills were active in the Palmarejo district, two underground and two on-surface. The two underground drills were working at the 108 and 76 zones. On surface, we drilled at Tucson Chapotillo and Las Animas. Favorable results were attained from all of these areas, but particularly from 108 and Las Animas. [As the] compilations are included in the appendix section of this presentation for your reference.

Our objective in 108 is to upgrade and expand our resources, which will lead to new reserves. Slide 26 shows a section view of 108 looking north/northeast, and a three-dimensional view in the upper left corner for perspective. We are pleased with the results received thus far, and a new phase of drilling is being planned.

Shifting to Guadalupe, surface drilling there in the first quarter was devoted to the Las Animas zone. In 2012 we re-examined this zone and saw good potential for it to be mined with surface method. As a result, first-quarter drilling and surface trenching were used to define and upgrade new mineral resources updip and on strike. We are now making plans for follow-up drilling, all of which we expect to increase the size of Las Animas this year.

We recently acquired La Curra, a property which adjoins Las Animas on the southeast. The addition of this property to our portfolio will benefit both surface mine planning and follow-up drilling.

Shifting now to the United States, slide 28 identifies stockpiles built up at our Rochester mine since we began operating there over 25 years ago. Last year, we commenced drilling on the west stockpiles to define mineral resources compliant with current standards. Success from that initial work demonstrated the viability of the stockpiles as a new source for the Company's heap leach processing facilities.

This material now accounts for 42% of our reserve tons and about 40% of the contained silver ounces, all within just one of the stockpiles.

Much of our work at Rochester in the first quarter was devoted to further infill drilling of the west and initial drilling on the south stockpile.

Slide 29 shows the results from first-quarter drilling on the west stockpile in more detail, with 2012 drilling shown for reference. In the coming months, we will continue with reverse circulation and sonic drilling on these stockpiles.

Finally, our first-quarter program at Kensington in Alaska continued to focus largely on definition drilling and outlining new mineral resources. One of the targets for drilling this year is Kensington South. Now, there's a (inaudible) gold-bearing quartz sulfide veining situated about 1000 feet south of the Kensington mine. Late 2000 drill results received this quarter are shown on slide 30. To improve further drilling access this year we commenced driving a new 750-foot-long hanging wall drift. The new drift is on schedule and upon completion expected to improve definition of this exciting new target.

With that, I will turn it over to Mitch.

Thanks, Don. Before I close, I want to take a minute to recognize three core directors who will not stand for reelection at this year's shareholder meeting. My thanks go to Jim Curran, Tim Winter and Michael Bogert for their significant contributions and service over the years. I am grateful to each of them for their dedication and support.

Joining the Coeur board in 2013 are Linda Adamany and, pending their election at the annual meeting on May 14, Kevin Crutchfield and Randy Gress, who each have distinguished backgrounds and bring significant expertise to the Company's Board.

I would also like to thank our Chairman, Rob Mellor, and all remaining directors for their continued advice, guidance and support as we work towards a common goal of building a great Company.

On slide 32, as I've said before, our team is driven by the strategic priorities shown on this slide, which are straightforward and achievable and provide a foundation for every decision we make. By accomplishing these objectives, we are confident we will create value over the long term for our shareholders.

This is a great time to be a cash flow generating precious metals company with no external capital needs. There are many opportunities right now, and we feel the landscape will only become more attractive. I've never seen anything like it in my 17 years in the business. Many companies' valuations, ones with quality assets, just don't make a lot of sense at current levels.

Although we will be opportunistic and disciplined as we look at ways to create value, we are first and foremost focused on achieving operational consistency and efficiency. We appreciate the fact that it is the free cash flow from our existing mines that makes everything else possible and makes us unique within our challenged industry.

Thanks again for joining us on the call today. Operator, we are now ready for questions.

(Operator Instructions) Jeff Wright, Global Hunter.

Good afternoon, Mitch. Thanks for taking my questions. Looking at Rochester first, it looks like there was a falloff on the silver recoveries. Could you guys discuss -- is that due to increased dilution or what is being done to address it to get the recoveries back to more of a normal range from the previous quarters?

I'll turn that one over to -- Frank, do you want to handle that?

Yes, there has been really no change in the behavior of the ore in a metallurgical sense. Still target long-term recovery rates of silver of 60% and the range of 90% on gold. We do have interperiod fluctuations of recovery, depending on how much ore has been placed on the pads and (inaudible) up with leach lines and so on. So what I think you would be seeing a slight -- a pattern that would reflect some of those fluctuations that can take place. But we're still looking at 60% over the long term on silver.

Okay. Then if I am -- kind of moving over to Palmarejo, if I'm looking at the grade, obviously, in the press release, you guys mentioned that the grade did come up in March and into April. What do you think we should be looking at for silver grades at Palmarejo for the balance of the year? What number would you guys be comfortable with?

If you look, Jeff, just at March results, in the open pit, we were -- we averaged about 4.5 ounces per ton silver and about 0.03 ounces per ton gold. Those are open pit grades. And the underground grades of a little over 4.5 silver and about 0.12 on gold. What we will see most likely is an increase in the underground grades. But those open pit grades will be about like what I just stated from March.

And given the falloff in silver and gold prices over the past 30 days, have you guys contemplated or are you in the process of contemplating pushing any development or other capital expenses or canceling any development or capital expenses for the balance of the year?

We are taking a look at all of our capital expenditures for the remainder of the year to make sure they make sense under a lower price environment, and prioritizing those that are critical to the sustainability of our operations, or are compliance-driven. Anything after that then has to exceed our hurdle rates based on a lower price assumption. And so that exercise is underway. I think, Joe, that is scheduled to be completed -- what -- the end of June?

Yes.

So we will have more to say about that I guess on our second-quarter call. But we are taking a look at that. From an underground development standpoint there is really nothing that we are looking at changing there. And from a mine planning standpoint, it is pretty much steady as she goes. What we need to do there is just focus on what we would be focusing on at any price, and that is being more efficient and identifying opportunities to reduce costs and improve consistency.

And that -- like I said, that takes place and has been taking place despite the volatility we saw in silver and gold in April.

Thanks for taking my questions. I'll jump back in the queue.

Jorge Beristain, Deutsche Bank.

Congratulations on the quarter. I think you guys actually did accomplish a lot, so clearly there is a sense of a lot of change happening at Coeur, and it sounds like it is for the positive.

Appreciate you saying that. It is ongoing, and doesn't show up necessarily in the results, but will with time.

My question had to do a little bit with capital discipline, sort of in light of the new perceived reality of gold and silver prices. In terms of La Preciosa -- and I don't want to put the cart before the horse here -- but could you talk a little bit about if you did get to a construction decision there, do you have any kind of optionality in terms of doing a phased or a staged project? And would you contemplate perhaps bringing in a joint venture partner at some point down the road, again, given the concern we've seen with companies historically of perhaps biting off more than they can chew? I just wonder if you could talk about how you would do the development potentially of that project without endangering your Company's equity value.

I'll say a couple things and then I will turn it over to Joe on that. We will only do things with our capital that exceed our cost of capital, and I don't think that has been a rule followed all that frequently historically by the industry.

And we hope to be and plan to be to the point of having a construction decision to be made on La Preciosa next summer.

So in the meantime, we will be doing the feasibility study, first the PEA, then the feasibility, design, engineering, condemnation drilling. And so the price that we've seen fall off here in the last few weeks is certainly a consideration, but then it also has to be factored against where we think silver prices will be in a year from now when that construction decision needs to be made. And then what that outlook we think looks like over the following 20 years, which is always a challenge.

This is a large deposit, but from a size standpoint relative to our Company, it is not a huge bite. It is not a multi-billion-dollar project. It is not something we see ourselves putting the Company at great risk over. We are comfortable with the size of this project.

So we don't really have any interest in bringing in a joint venture partner. This is sort of right down the middle of our fairway for a Company our size, at least we feel that way. I'll turn the call -- I'll let Joe answer from his perspective on the rest of your question, Jorge.

Thanks for the question. One of the things that I think the benefit that we will be taking advantage of with Coeur being a cash flowing company at a time like this is -- my view from being a mine builder -- this is the best time in history for someone to build a mine. All of the engineering companies, suppliers and consultants are starving for work, so you get good prices, you get the A team and you get things delivered on time. So again, presuming, as we hope, positive result from our PEA, we would be looking to go forward.

Great. Thanks for that color. Maybe just for Don, a follow-up. You mentioned at Rochester that 40% of the resource was identified in one stockpile. Could you talk a little bit about the legalities -- the legal challenges around the ownership there, and if you could still be proceeding ahead now based on the fact that there is a lot of concentration of the ore in one stockpile?

Let's -- I'll come back to your question. I mentioned 40 some percent basically is in the reserve category on this. So if you look at the technical reports that we filed, you will see that in there on the Rochester. These stockpiles are personal property, so I won't discuss more about the legal aspects of it. Just that we feel comfortable putting them where we have them.

Okay, thank you.

Andrew Kaip, BMO Capital Markets.

Thanks very much for taking my call. With respect to La Preciosa, I'm just wondering if -- you indicated that you haven't set a budget for the project over the next 12 years as you move to a decision. But I'm wondering if you can give us a sense of what are the key priorities that you think can be -- need to be done. And then with respect to that, it would include items like land acquisitions. Has that been started?

And then also, I would like to get a better sense on the infill drilling program. I know that Pan American had done quite a bit of infill drilling in certain aspects of the deposit. But there are other portions of the deposit that remain very widely-spaced in drilling. And I'm just wondering what your view on infill drilling and the quantity of infill drilling that you foresee.

We can answer each of those, and Joe, I'll turn it over to you.

Thanks, Andrew. It's a good question. Looking at our spending and our activity over the remainder of the year, probably three main things we will be working on. Land acquisition being one. Water rights being a second one. And our exploration and infill drilling activities being the third.

We will have ongoing engineering studies and design which will also add to the cost. So we are looking at expenditures probably in the range of $10 million to $20 million.

Your second question on the infill drilling -- and I'll pass that on to Don if he wants to add anything else -- but being familiar with the property, the previous PEA was done on the evaluation of I believe 16 of the veins on the property. And there is a reasonable amount of drilling on the property, certainly enough for my design. But there is certainly an opportunity for us to upgrade the confidence in some of those resources.

The second thing is there's, I believe, another 14 veins on the property that were identified and classified one or two holes, but don't have a confidence level for us to be included in the current PEA. And we are quite interested and anxious to do a little more drilling on those to see if they might be rolled in, reduce our strip ratios and improve the economics.

I would mirror what Joe said, Andrew. This deposit, you can see lots of opportunities to grow this, both internally and externally. The first thing we need to do is see how the results of the PEA that Joe talked about come out and design the drilling program accordingly. Right now, we could do it on paper, but it would be better to look at where we need to strategically place drill holes based upon the results of the analysis.

Okay, so you're really going to use that PEA as really the template for moving it forward?

Yes, that's right, Andrew.

Okay. Thanks very much for taking my question.

Good to talk to you.

Anant Inani, JPMorgan.

Most of my questions have been answered, but a couple of quick ones. So you talked about the (inaudible) market and opportunities in junior mining space. Are you looking at some more specific assets?

We always are, and we stay focused on really the jurisdictions where we currently have a presence. Like I said, our priority number one is achieving a level of consistency in our operations. But we do have our head up and opportunistically looking at some situations that we think represent some real fundamental value and make sense for us to be evaluating.

It is nice now to have more of a technical staff and skill set here than we've had, I think, historically, to be able to evaluate these things a bit more thoroughly. And we are going through that process on several different situations. But we'll only do something that the organization can handle or absorb. We'll only do something that seems the right kind of return. And we will only do something in the right jurisdiction for the business.

We are not going to go out there and do anything real huge or anything that really gets us off of what we consider to be our core business.

Thank you. And do you have any thumb rule as to the size of the project, et cetera, that you seek out?

Like I said, we don't want to do anything -- back to Jorge's point earlier -- that is a Company maker or breaker. That is not we think the right thing for this Company right now. But at the same time, we want to make sure that we are spending our time and resources on opportunities that would at least move the needle for the Company.

So I know that is a pretty wide range I just painted there, but we are not looking for anything really big and we are not going to waste our time on something really small.

Okay, got it. And more generally, you also talked about change in your opening comments. So with this (inaudible) staff movement, your move to Chicago, changing the Company name, what message are you trying to send to investors and the market?

We are trying to send the message that we are serious about following a different path than the one that has been followed by the industry over the last 20 years. That playbook has not scored a lot of touchdowns over the last couple of decades, and we are willing to go our own path and be a bit of a pioneer. And that is reflected in the selection of a new headquarter city and in not completely stepping away from the heritage of our name, but simplifying it a bit, and reflecting the fact that it is a bit of a restart for a Company that has had a long presence in the silver industry.

Thank you. I appreciate you taking my questions.

(Operator Instructions) Brett Levy, Jefferies.

Most of my questions have been answered. You guys mentioned that you were potentially looking at more acquisitions. And I guess I figured between La Preciosa and other rampups that you've got going on here, and share buyback, it feels like your plate is pretty full. Are you looking for large acquisitions, tuck-in acquisitions? And then -- sort of obviously more from a bondholder standpoint, would you add more leverage to make these acquisitions?

We don't have an appetite to do anything that is significant in size, tuck-in, anything where we can leverage existing infrastructure, people, know-how, there has to be some strategic merit to an acquisition and not just going out to acquire ounces. That is a bit of a futile exercise, in our opinion. Would we add more debt to the balance sheet? You know, we have a pretty conservative philosophy there of one times or less trailing EBITDA.

If there was an acquisition opportunity that had existing cash flow that would provide us with the ability to maintain that conservative ratio, but add a little bit of leverage to make an acquisition in a shareholder-friendly way, that is a situation we would certainly consider. But we are very mindful of the fact that we are in a cyclical commodity business, and we want to maintain a balance sheet that reflects that.

Got it. Thanks very much, guys.

Okay. Sounds like we don't have anybody else in the queue, so with that, we will wrap up. Again, I appreciate everybody's time, and we will be back with you again in three months with, hopefully, progress on all the initiatives that we laid out for you here today. Thanks again for your time.

This does conclude today's conference call. Thank you for your participation. At this time, you may now disconnect.