CDE Q2 2025: Free Cash Flow Surges to $146M as Las Chispas Integration Drives Margin Expansion
Core Mining’s second quarter marked a pivotal inflection, with record free cash flow and margin expansion reflecting the full impact of Las Chispas and operational execution across all mines. The company’s transformation into a best-in-class silver producer is now visible in both financial results and operational leverage, positioning CDE for accelerated capital returns and organic growth. With guidance raised and every site generating free cash flow, the focus shifts to disciplined capital allocation and sustained production growth from both brownfield and exploration upside.
Summary
- Las Chispas Integration Unlocks Margin Expansion: Seamless ramp-up accelerates CDE’s shift to a high-grade silver portfolio.
- Balance Sheet Strength Enables Buybacks: Net debt reduction and cash build support a $75M share repurchase program.
- Exploration Pipeline Extends Production Visibility: Brownfield drilling and new discoveries set up multi-year growth runway.
Performance Analysis
Core Mining delivered a step-change quarter, with record free cash flow of $146 million and adjusted EBITDA margin reaching 51%, more than double last year’s level. The full inclusion of Las Chispas, a high-grade, low-cost silver and gold mine, was a primary catalyst, while rising gold and silver prices and a 20% increase in sales volumes amplified results. All five operations contributed positive free cash flow, with Palmarejo and Wharf posting standout performances and Rochester showing sequential improvement after operational upgrades.
Cost discipline was evident as adjusted cash costs per ounce for both gold and silver fell 5% and 6% respectively versus Q1, even with an 8% appreciation of the Mexican peso. Notably, the company fully repaid its revolving credit facility a quarter ahead of schedule, reducing total debt by $250 million year-over-year. Cash and equivalents climbed 44% sequentially, creating the financial flexibility to fund both buybacks and organic growth. The company reaffirmed full-year production and cost guidance, with expectations for even stronger production and margin expansion in the second half as Rochester and Las Chispas ramp further.
- All Operations Deliver Free Cash Flow: Each mine contributed, with Palmarejo and Wharf generating $42M and $38M respectively.
- Las Chispas Drives Portfolio Quality: First full quarter contribution outperformed guidance, accelerating silver exposure and margin profile.
- Operational Leverage Materializes: Higher prices and throughput, coupled with cost control, doubled EBITDA margin YoY.
The quarter’s results mark a transition from turnaround to growth, with the company now positioned to reinvest and return capital while maintaining balance sheet strength.
Executive Commentary
"The numerous all time records achieved during the quarter highlight the fundamental step change that is now fully underway. The intersection of higher prices with a mine portfolio hitting its stride led to these impressive results, including free cash flow of $146 million, which led to the repayment of the remaining balance on a revolving credit facility, helped fund initial repurchases under our new share repurchase program, and still resulted in a much higher cash balance at quarter end."
Mitch Krebs, Chairman, President, and CEO
"A 15% and 5% increase in gold and silver prices respectively, combined with 20% higher sales volumes, led to an adjusted EBITDA margin of 51%, which is more than double our margin this time last year. It was great to have Rochester and Kensington join the free cash flow party this quarter. In fact, all five mines delivered meaningful free cash flow for the company, which led us to achieve several quarterly record numbers."
Tom Whalen, Chief Financial Officer
Strategic Positioning
1. Las Chispas Integration and Silver Exposure
Las Chispas, a recently acquired high-grade silver and gold mine, is now fully integrated and exceeding production guidance, helping Core Mining achieve a peer-leading silver growth profile. The operation’s low cost and robust output are central to the company’s margin expansion and capital return capacity.
2. Exploration-Driven Organic Growth Pipeline
Exploration spend and drilling intensity are at multi-year highs, with up to 27 rigs active across the portfolio. Las Chispas, Palmarejo, and Kensington are all yielding new vein discoveries and resource extensions, while brownfield targets at Wharf and Silvertip offer additional upside. Management is prioritizing near-mine and infill drilling to extend mine life and support sustainable production growth.
3. Balance Sheet and Capital Allocation Discipline
Rapid deleveraging and strong cash flow generation have enabled the launch of a $75 million share buyback program and funded organic growth. With net debt approaching zero, CDE has flexibility to pursue capital returns and high-return projects without compromising financial strength.
4. Operational Improvements at Rochester and Palmarejo
Rochester, the largest US source of domestically produced silver, saw a 24% increase in crushed tons, driving higher recoveries and positioning the site for further gains in the second half. Palmarejo’s Hidalgo access portal is unlocking new zones and operational flexibility, supporting consistent cost performance and free cash flow.
Key Considerations
Core Mining’s inflection quarter is the result of both strategic M&A and disciplined operational execution, but sustaining this trajectory will require continued focus on brownfield growth, cost management, and capital allocation rigor.
Key Considerations:
- Las Chispas Outperformance: Continued high-grade production and exploration success are central to margin durability and silver exposure.
- Exploration as Growth Engine: Brownfield drilling around existing mines is prioritized for low-risk, high-return resource additions.
- Capital Return Commitment: The $75M buyback reflects confidence in cash generation and balance sheet strength, with repurchases set to accelerate post-blackout.
- Operational Leverage at Rochester and Palmarejo: Incremental throughput and efficiency gains at these sites are key to delivering on second-half guidance.
- Accounting and Tax Nuances: Purchase accounting for Las Chispas and deferred tax volatility impact EPS, but not free cash flow, and are set to normalize by Q4.
Risks
Execution risks remain around sustaining high-grade production at Las Chispas, timely conversion of exploration success into reserves, and maintaining cost discipline amid currency volatility, especially with further Mexican peso appreciation. Permitting and development timelines for Silvertip and other growth projects could extend if regulatory or technical hurdles arise, potentially delaying incremental production. Commodity price fluctuations and non-cash tax accounting volatility could also introduce earnings variability.
Forward Outlook
For Q3 2025, Core Mining guided to:
- Further production increases at Las Chispas and Rochester
- Stronger free cash flow and margin expansion as cost controls persist
For full-year 2025, management raised guidance:
- Adjusted EBITDA above $800 million
- Free cash flow above $400 million
Management highlighted several factors that will shape the second half:
- Operational momentum at Rochester and Las Chispas expected to drive production and cash flow higher
- Buyback activity to increase post-blackout, with capital returns and organic growth both prioritized
Takeaways
Core Mining’s Q2 results demonstrate a structural shift in profitability and capital allocation flexibility, driven by high-grade production, cost control, and exploration-led growth.
- Margin Expansion Now Embedded: Portfolio improvements and price leverage have doubled profitability, with sustainability hinging on operational discipline and resource conversion.
- Capital Returns and Growth Not Mutually Exclusive: Buybacks and exploration can be funded from free cash flow, but will require ongoing prioritization as growth projects mature.
- Watch for Exploration to Resource Conversion: The pace at which drilling success at Las Chispas, Palmarejo, and Kensington translates to reserves and mine life will be a key forward indicator.
Conclusion
CDE’s transformation is now visible in both financials and operations, with Las Chispas and brownfield exploration underpinning a multi-year growth and capital return story. Sustaining this momentum will require continued execution, but the company’s balance sheet and portfolio quality now set a higher baseline for value creation.
Industry Read-Through
Core Mining’s record free cash flow and rapid deleveraging highlight the tailwinds for silver-weighted producers in a rising price environment, especially those with recently integrated high-grade assets. The operational leverage and margin expansion seen this quarter set a new benchmark for peers, underscoring the importance of disciplined M&A, rigorous cost control, and brownfield exploration. For the broader gold and silver mining sector, the ability to translate higher prices into sustainable capital returns and organic growth—rather than just short-term windfalls—will increasingly separate leaders from laggards as investors focus on long-term value creation and balance sheet quality.