After years of battling dwindling precious-metals prices, dimming U.S. exploration prospects, and a decline in its own share price, Coeur dAlene Mines Corp. might have unearthed richer diggings.


The company says that two mineral deposits in South America look like the type of low-cost properties it needs to solidify its future.


On Jan. 9, Coeur said it will keep and mine one of the properties, the Cerro Bayo deposit in Chile, after earlier looking at selling it and other Chilean assets.


Were very excited about what weve found down there so far, company spokesman Michael A. Steeves says of the Cerro Bayo.


At the second property, the San Bartolome silver deposit in south-central Bolivia, the Coeur dAlene-based company is scheduled to complete in the first quarter this year a final feasibility study for a proposed mine.


Weve been extremely pleased by the work that weve done to date there, Steeves says.


Coeurs future lies in developing low-cost deposits that can produce earnings and attractive rates of return even when metals prices are low, as they have been for years, says company Chairman, President, and CEO Dennis Wheeler. Cerro Bayo and San Bartolome serve this role, and represent a new generation of producing properties for Coeur, he adds.


The exploration numbers at both sites show promise.


Coeur says it has proven and probable reserves of about 250,000 gold-equivalent troy ounces of gold and silver at the Cerro Bayo, located hundreds of miles south of Santiago, and also has identified what could be another 318,000 gold-equivalent ounces there. (Gold-equivalent ounces represent the expected value, expressed in terms of ounces of gold, of all of the metals a company believes it could produce at a property.)


Coeur adds that the exploration potential at the Cerro Bayo remains promising, and says it has increased its target of metal there to 3 million gold-equivalent ounces, from 1 million ounces. Steeves cautions, though, that the 3 million ounces is a target. Its not a promise. Its not a projection.


At the San Bartolome, the company says it has defined a resource of 122 million troy ounces of silver, much of which Coeur expects to be upgraded to proven and probable reserves as a result of the final feasibility study. For comparison, Coeurs flagship Rochester Mine, northeast of Lovelock, Nev., produced roughly 6.7 million ounces of silver in 2000.


Nearby facilities


The Cerro Bayos viability stems partly from work that Coeur did previously in Chile. The deposit is near Coeurs disappointing Fachinal Mine, where the company suspended operations in the fourth quarter of 2000 after taking a $42.9 million writedown at the end of 1998 because costs had risen unacceptably and it believed it wouldnt recover the full value of its remaining investment. The company continued to explore the surrounding property.


We made a discovery at Cerro Bayo about nine miles east of our facilities at the old Fachinal mine site, Steeves says. Every time we looked at the thing, it looked better and better. Finally, we realized we had found something that had the potential to be a major discovery. It just proves the old adage: To find a new mine, look near an old mine.


Because Coeur already has ore-processing facilities at Fachinal, including a flotation mill that was designed to handle up to 1,620 tons of material a day, it can put the Cerro Bayo deposit into commercial production for a capital investment of just $6 million (U.S.), the company says. Steeves says the project is made more economical because the resource can be exploited through open-pit and shallow underground mining, and Coeur wouldnt have to do the kind of expensive deep underground mining thats done in the Coeur dAlene Mining District.


On Nov. 1, Coeur began developing an underground mining ramp at the Cerro Bayo, and it projects it will launch production there in May and produce 60,000 gold-equivalent ounces of metal this year at a cash cost of less than $150 an ounce. Gold sold for a cash price of $283.40 an ounce last week. Steeves says Coeur defines its cash cost as all mine-site costs, including royalties if theyre involved, less head-office administrative costs.


Next year, Coeur projects production of 80,000 gold-equivalent ounces at the Cerro Bayo, and it says its projections for the third year of production in 2004 are being adjusted upward.


In February last year, the company announced that it had engaged a financial adviser to help it sell its gold holdings in Chile, and Steeves says Coeur met with some potential buyers of those assets, including the Cerro Bayo. Coeur announced earlier this month that it had changed its mind and would keep full ownership of the Cerro Bayo and develop it as quickly as possible.


The company isnt releasing an estimate on how much it would expect to spend to build a mine at the San Bartolome property, but in a pre-feasibility study on that deposit, it had said a mine there could cost somewhere between $60 million and $70 million (U.S.), Steeves says. He says that property is in a historic silver-producing region. Last month, the company received a $760,000 grant from the U.S. Trade and Development Agency to complete its final feasibility study at San Bartolome.


Also last month, Coeur said that because its stock price had fallen below $1 a share for more than 30 consecutive trading days, the New York Stock Exchange had notified it that its share price had dipped underneath the exchanges price-level standard for continued listing.


Coeur said the NYSEs rules allow the curing of the share-price deficiency in six months time or after the companys next annual meeting of shareholders if shareholders approve an action that relates to the deficiency. In April last year, the company submitted a business plan to the NYSE to bring it into compliance with other listing standards.