The Palmarejo Property is located along the Sierra Madre Occidental silver-gold belt. Surface mining is by conventional drill and blast, truck and shovel operations. Underground mining is accessed from three primary portals to the underground ramp systems designed for life of mine access. The operation is running at full capacity.
Ore feed to the mill is from a combination of surface and underground sources. Ore is blended and fed through a primary crusher at a rate of approximately 6,000 tons per day. Processing entails grinding, flotation, carbon-in-leach and Merrill Crowe-electrowinning recovery of silver and gold and produces a doré, which is shipped to Coeur’s smelting and refining partners in the U.S. and Europe.
(Regarding royalties at Palmarejo, please see Palmarejo Gold Production Royalty Obligation.)
View the latest Technical Report for the Palmarejo mine.
Geology and Exploration Potential
The gold and silver deposits at the Palmarejo mine, typical of many of the other silver and gold deposits in the Sierra Madre, are classified as epithermal deposits and are hosted in multiple veins, breccias and fractures. These geologic structures trend generally northwest to southeast and dip either southwest or northeast. The dip on the structures ranges from about 45 degrees to 70 degrees. In the mineralized portions of the structures gold and silver are zoned from top to bottom with higher silver values occurring in the upper parts of the deposit and higher gold values in the lower parts, sometimes accompanied by base metal mineralization, though local variations are common. The Palmarejo property contains a number of mineralized zones or areas of interest. The most important of these to date is the Palmarejo zone in the north of the concessions which covers the old Palmarejo gold-silver mine formed at the intersection of the northwest-southeast trending La Prieta and La Blanca gold-and-silver bearing structures. In addition to Palmarejo, other mineralized vein and alteration systems in the district area have been identified all roughly sub-parallel to the Palmarejo zone. The most significant of these additional targets are the Guadalupe (including Animas) and La Patria vein systems in the southern part of the property which are currently under development and exploration by the Company.
Exploration in 2015 was focused primarily around expanding and further defining the Gudalupe and Independencia deposits and defining the newly discovered Los Bancos and Nacion veins. A total of $6.8 million was spent in 2015 on mapping, sampling, drill target generation and drilling to identify and define new silver and gold mineralization.
Palmarejo Gold Production Royalty Obligation
On January 21, 2009, the Company entered into a gold production royalty transaction with Franco-Nevada Corporation under which Franco-Nevada purchased a royalty covering 50% of the life of mine gold to be produced by Coeur from the Palmarejo mine. Coeur received $75.0 million in cash plus a warrant to acquire Franco-Nevada Common Shares (the "Franco-Nevada warrant"), which was valued at $3 million at closing of the Franco-Nevada transaction. In September 2010, the warrant was exercised and the related shares were sold for $10.0 million.
The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight year period. Each monthly payment is an amount equal to the greater of 4,167 ounces of gold or 50% of actual gold production multiplied by the excess of the monthly average market price of gold above $400 per ounce (the $400 floor is subject to a 1% annual inflation compounding adjustment beginning on January 21, 2013).
After payments have been made on a total of 400,000 ounces of gold, the royalty obligation is payable in the amount of 50% of actual gold production per month multiplied by the excess of the monthly average market price of gold above $400 per ounce, adjusted as described above. Payments under the royalty agreement are to be made in cash or gold bullion.
On October 2, 2014, Coeur terminated the Palmarejo gold production royalty effective upon completion of the minimum ounce delivery requirement. Subsequently, Coeur entered into a gold stream agreement with a subsidiary of Franco-Nevada Corporation whereby Coeur Mexicana will sell 50% of Coeur Mexicana Property gold production upon completion of the gold production royalty minimum ounce delivery requirement for the lesser of $800 or spot price per ounce. The properties acquired by Coeur in the Paramount acquisition are not subject to the Franco-Nevada gold production royalty or the gold stream agreement.
(For further information, please see “Debt and Royalty Obligation – Palmarejo Gold Production Royalty Obligation” in the Company’s latest Form 10-K and the Notes on “Debt and Capital Lease Obligations” and “Derivative Financial Instruments and Fair Value of Financial Instruments” in the Company’s latest Form 10-Q.)