Coeur on the Prowl
Coeur Mining (CDE) is in a pickle of their own making. In September of 2011, Coeur Rochester neglected to pay their claim fees on some BLM land under part of their Rochester/Nevada Packard mine in Spring Valley Nevada. Rye Patch Gold (RPM) realized the mistake and 56 days after Coeur had not paid the claim fees, staked 402 claims on land that had been controlled by Coeur Rochester. The issue is naturally in dispute and a two-week trial is scheduled for September of 2013.
Coeur claims that Rye Patch didn’t make a significant mineral discovery. Rye Patch claims Coeur didn’t pay mandatory fees on time, therefore lost their right to the claims. It could go either way but if Coeur wins, the industry will be in a pickle.
Someone sent me a presentation made by the CDE CEO Mitchell Krebs at a Barclays Conference last week. It’s quite interesting because he makes it clear that they have undergone a period of rapid growth in the last five years and intend to continue. In five years, sales are up some 600% and operating cash flow up 3300%. They spent about $2 billion to accomplish that.
Coeur has a policy of establishing a toehold in junior companies by buying between 5 and 15% of companies worth in the $50-$100 million range. In the last two years, CDE has invested in eight juniors. In his presentation Krebs adds, “They have projects we think we ultimately would like one day to own, build and operated ourselves.”
I just came back from visiting Silver Bull in Mexico. I wrote about them just over a week ago. At the time I thought that they might be a natural takeover candidate for CDE but now I have changed my mind after reading the Coeur CEO’s presentation. CDE just completed a buyout of Orko Silver in Mexico. I now think they may be looking a little closer to home and will let First Majestic takeover Silver Bull.
The disputed Coeur Rochester/Nevada Packard Mine is located in Spring Valley. Just south of the Nevada Packard Mine is a project named Relief Canyon owned by Pershing Gold (PGLC). I don’t care for OTCBB companies but Pershing is an exception. The company is run by one of the sharpest people in the business, Steve Alfers.
Mr. Alfers was the Chief of U.S. Operations for Franco-Nevada from 2007 until 2011. Prior to that he was President and CEO of NewWest Gold that Fronteer Gold bought for $187 million in 2007. He continued to serve as an advisor to Fronteer until Newmont bought them for $2.3 billion in early 2011.
At the very least, Steve Alfers knows what the majors want to see on a project before doing a take-over. He has initiated and supervised a drill program that increased the resource at the Relief Canyon Mine by 500% to over 550,000 ounces. The drill results show open mineralization in all directions and have been completed on just 3% of Pershing's land holdings thus far.
More importantly, Steve has consolidated the land position in a series of deals whereby Pershing now controls more than 25,000 acres of land and mill sites, up from 1,500 originally. All of this work was designed to make the project more interesting to the major. This area has never been consolidated before and it took a series of deals to complete the land package.
So we have a major in the Spring Valley with a legal problem that could lead to losing a lot of their potential future and we have a junior with a giant consolidated land position in the Spring Valley that the major has already taken a position in. Pershing has 273 million shares. In June of 2012, Coeur participated in a private placement and bought some 11 million shares. Coeur’s position is a tiny 4% of Pershing.
Coeur knows the ground and type of deposit in Spring Valley better than any of their other projects. After all, they mined at Rochester for 25 years. Their technical people understand exactly the potential for Relief Canyon and they need a backup in Spring Valley.
Steve Alfers has made a major leap forward with Relief Canyon in his land consolidation program. The company owns a mill and leach pads at Relief Canyon and has plans in place for getting back into production in 2014. He’s completed a drill program that increased the resources by 500%. Pershing can either go into production or sell the asset. Alfers is quite used to selling assets at a nice profit.
I think Coeur is either going to step up to the plate and take a major piece of Pershing or simply buy them out to protect their Rochester Mine.
I own shares in Pershing purchased years ago as an investment in another company therefore I am biased. Neither Coeur nor Pershing is an advertiser. All information is from public documents. Do your own due diligence.
Pershing Gold Company