3:19 PM ET, April 13, 2009
MEXICO CITY, Apr 13, 2009 (Dow Jones Commodities News Select via Comtex) --By Anthony Harrup Of DOW JONES NEWSWIRES
Precious metals miner Coeur D'Alene Mines Corp. (CDE) is banking on its start-up Mexican project to virtually double output, while exploring to extend the life of the mine.
The Palmarejo mine, located in the northern state of Chihuahua, turned out its first gold and silver bars at the end of March and production is expected to reach 9 million ounces of silver and 120,000 ounces of gold a year.
It's the Idaho-based mining company's first move into Mexico, which behind Peru is the world's No. 2 silver producing country.
Coeur expects Palmarejo to reach full production capacity in July, and produce 5.3 million ounces of silver and 72,000 ounces of gold in 2009, as the company's overall output of the metals rises 66% and 85%, respectively, from 2008.
Coeur acquired the Palmarejo concession for $1.1 billion in 2007 under an all-stock deal, and has invested $300 million in getting the mine up and running, Chief Financial Officer Mitchell Krebs said in a telephone interview.
The company still has about $75 million more to invest to finalize the development and then plans to invest about $8 million a year in exploration, as it has only explored 30% of the total land under concession, Krebs added.
Palmarejo was one of few promising prospects around as Coeur looked to expand, and that was reflected in the high acquisition price, the official said.
At the end of 2008, the concession had proven and probable reserves of 756,000 ounces of gold and 63.6 million ounces of silver. Indicated and inferred resources boost that to 175 million ounces of silver and 2.3 million ounces of gold.
Recent swings in metals prices, which soared then fell last year and have since recovered somewhat, are likely to have little impact on the economic view of the asset, Krebs said. The company feels comfortable with its conservative, long-term assumption for planning purposes of $11 an ounce for silver and $800 an ounce for gold, he said.
The key to improving the economics of the Palmarejo mine lies in exploration. The aim is to extend the planned mine life to 20 from the current 11 years, he said.
"Our big task is to move into higher quality reserves and add new reserves," Krebs said.
-By Anthony Harrup, Dow Jones Newswires; (5255) 5001 5727, anthony.harrup@dowjones.com
(END) Dow Jones Newswires
04-13-09 1519ET
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