http://sumfolio.com/coeur-dalene-mounts-impressive-turnaround-189...

http://sumfolio.com/coeur-dalene-mounts-impressive-turnaround-189/

30 October 2009 Simon Monger

Coeur d’Alene Mines Corporation [[CDE]], a silver producer with gold assets in North America, has mounted an impressive turnaround over the past year. The company transformed from a lackluster silver company into a robust free-cash-flow-generating machine that can offer investors great protection against the threat of rising inflation.

Coeur d’Alene Mines’ has turned itself around through a 46% increase in top-line revenues from three new large, long-life mines and significant bottom-line reductions in costs. These efforts have combined to provide a 692% boost in its second-quarter operating cash flow, while also solidifying the company’s balance sheet with added liquidity.

The fundamental picture for Coeur d’Alene Mines is also expected to improve going forward. Industry supply is expected to decline 2% due to lower production at base metal mines and less scrap due to less photographic usage. At the same time, demand is expected to be flat to marginally higher due to investment demand from technology uses.

Gold prices have already increased 15% year-to-date to higher than $1,000 per ounce, while central bank gold sales plunged by 73% in the first half of 2009. At the same time, silver prices increased 50% year-to-date to a $13.38 per ounce average price for the year. Meanwhile, prices of both commodities have been increasing due to a lower dollar.

On a valuation basis, Coeur d’Alene Mines trades at just 12.91x, according to data from Capital IQ. Considering its substantial growth rates, the company could be trading at a multiple closer to 20x to 30x earnings, which would imply a share price of over $40 per share. For more information on this valuation technique, see “PEG: The Pinnacle of Valuation”.

Coeur d’Alene Mines is set to report its third quarter 2009 earnings on Thursday, November 5, 2009 before market open. The company will hold its earnings conference call at 1:00pm EDT on the same day with investors being able to dial-in at 866-853-4681 with conference ID 34563098.

Takeaway Points
Commodity prices may increase as an inflation threat could lead to a lower dollar value.
Coeur d’Alene Mines has improved its top-line and bottom-line results, which has resulted in sharply higher operating cash flows.
Three new mines coming online in the near-term means continued revenue improvements, providing a long-term growth driver.
On a valuation basis, shares of Coeur d’Alene Mines could be worth in excess of $40 per share given its growth potential.
Earnings on November 5, 2009 and an earnings conference call could provide a further catalyst for an increase in share price.