Wednesday, December 26, 2012

Coeur d'Alene Mines (CDE) Disappoints Me

You'd think that a major silver producer like Coeur d'Alene Mines (CDE) would be able to write its own ticket with silver prices in the stratosphere.  Think again.  The company has manageable long-term debt so long as they can maintain their present net income.  That is in doubt; they suffered major losses in 2009 and 2010, and the quarter ending September 29 showed another loss.

Their free cash flow is positive but their five-year ROE and EPS growth rate are atrocious.  What went wrong?  Maybe it's bad karma from their legal dispute with Rye Patch Gold over a claim in Nevada.  Their net metals sales and OCF have grown significantly since 2008, so this should have translated into net income given their declining capital expenditures.  The trouble at the Kensington mine undoubtedly hurt them.

The fundamentals just aren't compelling enough for me to dig deeper into the company's problems or wait for a turnaround.  There are other silver producers in the resource sector that deserve my attention.

Full disclosure:  No position in CDE at this time.