Coeur would mull holding silver over cash, says CEO

TORONTO (miningweekly.com) – Idaho-based Coeur d’Alene Mines would at a future point consider holding some of its reserves in silver, as an alternative to keeping all of its money in the bank, CEO Mitchell Krebs told Mining Weekly Online on Wednesday.

The silver and gold miner will increase production “modestly” next year over 2011’s output, it added.

Sprott Asset Management CEO Eric Sprott and David Baker in a letter titled 'Silver Producers:
A Call to Action', the day before, floated the idea that, instead of selling all their product for cash to put in the bank, miners should retain some of their reserves in the precious metal.

The argument is that currencies in the Western world are losing value as soaring debts force governments to debase their money. Sprott has also said he believes the financial system faces a solvency crisis, and may not be a safe place to keep money.

Asked to comment on the idea, Krebs was not dismissive.

“It would provide additional leverage to investors. If we are bullish on silver and gold as companies, one of the underlying themes there is the weakening US dollar, in our case,” he said in an interview in Toronto.

“It’s an idea that’s consistent with why we feel good about silver and gold prices.”

However, Krebs, who took over as CEO of the TSX- and NYSE-listed company in July, said Coeur would first have to build up what he called a “sufficient cash cushion” before it would consider holding some of it in precious metals. The firm ended the September quarter with $208-million in the bank.

He said the miner would be in the position to consider such moves, as well as paying a dividend, in the latter part of 2012.

Coeur was one of the 17 silver producers that Sprott called upon to store their reserves in silver rather than in the bank.

One of Sprott’s beliefs is that gold and silver have become de facto currencies, and a real store of value in a world where governments will have to ease monetary policies and print more cash to pay off debts.

That is why many investors believe precious metals will continue to climb in price.

Gold has risen for the past 11 years to trade at $1 747/oz on Wednesday, after hitting an all-time high above $1 900/oz in September.

Silver prices have shot up from less than $5/oz to the current $32.73/oz over the same time period.

Krebs said he believed prices would continue to climb.

“Getting silver into the $40s next year, if it pushes $50/oz I wouldn’t be surprised at all,” he said, adding that the volatile nature of the metal’s price meant that he likewise would not be surprised if it dipped “in the mid-$20s for some period of time”.

PRODUCTION

Coeur, the biggest primary silver producer in the US, expects to produce 19.5-million ounces of the metal this year, along with 220 000 oz of gold.

Krebs said the miner had not yet given production guidance for 2012, but that output would rise “modestly”, as expansion projects added ounces.

The company built a new heap leach pad at its Rochester operation in Nevada, which would contribute to production next year.

At the Kensington mine in Alaska, which began producing last year, 2012 output would likely match this year’s 85 000 oz of gold, as Coeur sacrifices some production in the first half of the year to address problems at the mine.

The measures include advancing underground development, commented Krebs.