Identifying the flaws
There were two flaws that best illustrate the problems Coeur Mining faced in 2011. The first centered on the vast amount of operating and planning that goes into being a strong company in the mining industry.
“It takes a lot of technical expertise and time to drill an ore body that sits down in the ground to a point where you can estimate what that ore body looks like underground — and then develop a plan to extract it in a way that is safe, efficient and earns a certain rate of return,” Krebs says.
“And all that is based on something you don’t actually see. That whole aspect of the business, we just didn’t have it. Our mining was being done based on a lot of estimates that sometimes proved correct and too often, proved to be incorrect.”
The other problem made itself known shortly after Krebs became CEO.
“In the past, things like maintaining our mining rights were left to the individual sites in our company to be managed,” Krebs says. “If you were leasing land or had property payments, all that stuff was assumed to be handled by people at the various locations. About three months after I became CEO, I got a call that the site in Nevada had failed to make annual payments to the Bureau of Land Management. All the claims on which we conduct our operations were invalid. A competitor had come in and picked them all up.”
Litigation ensued and the situation was settled, but it exposed a critical problem in the way the company managed its operations.
“That all wouldn’t have happened if we had the proper organization in place at the time,” Krebs says. “Fast forward to today and all those payments are automated and centralized. We have a land group that does nothing but manage our mining rights globally.”