Coeur Mining's credit rating upgraded by Moody's Ratings

Investing.com -- Moody’s Ratings has upgraded the corporate family rating (CFR) of Coeur Mining (NYSE: CDE ), Inc. to B2 from B3. The credit rating agency also elevated the company’s probability of default rating (PDR) to B2-PD from B3-PD, and the rating of its senior unsecured notes to B3 from Caa1. The speculative grade liquidity rating (SGL) of the company has also been improved to SGL-2 from SGL-3. The outlook for these ratings remains stable.

A significant factor influencing the ratings upgrade was the consideration of ESG, specifically governance.

The upgrade in Coeur’s CFR is attributed to various factors. These include the enlarged scale of the company following the acquisition of SilverCrest Metals Inc (TSX: SIL )., which added a low-cost asset to Coeur’s portfolio. The successful expansion of the Rochester project, a return to positive free cash flow generation after years of substantial investments, prioritizing free cash flow for reducing debt, and a robust gold and silver price environment are also contributing factors. These conditions are expected to enable further cash flow generation and de-leveraging in the next 12-18 months.

Coeur’s B2 CFR is supported by a favorable geographical footprint, with over 55% of its revenues originating from the U.S. The company’s potential for significant organic growth from its geologically promising asset in Nevada and Silvertip mine in Canada, and the low-cost position of its recently acquired Las Chispas mine also back the rating. However, the rating is limited by the company’s modest scale, exposure to fluctuating gold and silver prices, high cost position of its other mines, and a relatively shorter mine life.

The acquisition of SilverCrest, which added the low-cost Las Chispas gold and silver mine in Mexico to Coeur’s portfolio, improved the company’s blended cost profile. This, coupled with the all-equity nature of the transaction, was a credit positive. Coeur’s recent completion of the production ramp up at its Rochester mine in Nevada, which required significant capital investment in recent years, along with the current strong price environment for both gold and silver, have allowed Coeur to return to positive free cash flow generation.

Based on gold and silver price assumptions of $2,400/oz and $25/oz respectively, Moody’s expects Coeur to generate adjusted EBITDA of around $485 million in 2025, and adjusted free cash flow of around $70 million. The majority of this free cash flow is expected to be used to reduce outstanding amounts on the revolver. Moody’s expects Coeur’s adjusted Debt/EBITDA to improve to 1.0x by the end of 2025 from 1.9x at the end of 2024.

Coeur’s SGL-2 reflects good liquidity to support operations over the next 12-18 months. As of December 31, 2024, Coeur had $55 million of cash, and $175 million of availability under its $400 million revolving credit facility, net of $29.3 million of LCs outstanding. Moody’s expects Coeur to generate positive free cash flow in 2025, which is expected to be used to further reduce revolver borrowings.

The stable outlook reflects Moody’s expectation for stable operating performance at its mines, successful integration of Las Chispas, a successful extension of the mining permit at Palmarejo which currently expires in October 2025, and continued de-leveraging through the prioritization of free cash flow for debt reduction.

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