COEUR D ALENE MINES CORP
10-Q/A, 1996-11-14
GOLD AND SILVER ORES
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                            SECURITIES AND EXCHANGE
                               Washington, D. C.

                               -----------------

                               FORM 10-Q/A No. 1

                    Pursuant to Section 13 or 15 (d) of the
                      Securities and Exchange Act of 1934

    Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended
    September 30, 1996.


                        COEUR D'ALENE MINES CORPORATION
            (Exact name of registrant as specified on its charter)

               IDAHO                     1-8641                82-0109423
   -------------------------------     ------------          -----------------
   (State or other jurisdiction of     Commission             (I.R.S. Employer
    incorporation or organization)     File Number:            Ident.No.)

   505 Front Avenue
   P. O. Box I, Coeur d'Alene, Idaho                   83816-0316
  ----------------------------------         --------------------------------
  (Address of principal executive                     (Zip Code)
   offices)

Registrant's telephone number, including area code:       (208) 667-3511
  --------------------------------------------------------------------------

     The undersigned registrant hereby amends the following item of its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as set
forth in the pages attached hereto:

           Part 1 - Item 1 (Financial Statements) and Item 2 (Management's
                    Discussion and Analysis of Financial Condition and Results
                    of Operations)

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereby duly authorized.

                                             COEUR D'ALENE MINES CORPORATION

Date:  November 13, 1996                      By:/s/JAMES A. SABALA
                                                 -------------------------
                                                 James A. Sabala
                                                 Senior Vice President and
                                                  Chief Financial Officer

<PAGE>

                AMENDMENT NO. 1 TO QUARTERLY REPORT ON 10-Q FOR

                     THE QUARTER ENDED SEPTEMBER 30, 1996


     Coeur  d'Alene  Mines  Corporation  (the  "Company")  hereby  amends  its
Quarterly  Report on Form 10-Q for the quarter ended  September 30, 1996.  The
following briefly summarizes the revisions made by the amendment:

     PART I ITEM 1. FINANCIAL STATEMENTS.  Note B of the Notes to Consolidated
Financial  Statements,  which appeared on page 9 of the originally  filed Form
10-Q,  has been revised to clarify the nature of the  acquisition  transaction
and eliminate the pro forma  financial  information  relating to the Company's
acquisition  on  September  4, 1996,  of the shares of Compania  Minera CDE El
Bronce,  a  Chilean  corporation  ("CDE El  Bronce").  As a result of a review
conducted  in  Chile  by the  Company  with  the  assistance  of  its  outside
independent  auditing firm last week, the Company has determined that upon the
preparation of the CDE El Bronce financial statements in conformance with U.S.
generally accepted accounting  principles,  all of the conditions specified in
Rule  1-02(w)  of  Regulation  S-X fall  below  20%.  Consequently,  pro forma
financial  information  relating to the  acquisition  is not  required and the
erroneous pro forma financial  information  previously  reported in Note B has
been deleted from the note as set forth below.

     PART  I.  ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION  AND RESULTS OF  OPERATIONS.  Two of the  sentences set forth in the
fourth paragraph under the caption  "General" in the MD&A are being revised to
clarify  one of the  sentences  and to add a clause to the other  sentence  to
present supporting information.  The two revised sentences,  which appeared on
page 13 of the originally filed Form 10-Q, are highlighted below.

                                       2

<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

                                                                     UNAUDITED

               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
ASSETS                                               September 30,           December 31,
                                                         1996                    1995
                                                     -------------           ------------
                                                                 (In Thousands)
<S>                                                     <C>                   <C>
CURRENT ASSETS
     Cash and cash equivalents                          $  33,211             $  16,485
     Funds held in escrow                                   2,271                 2,271
     Short-term investments                               115,316                63,076
     Receivables                                           30,332                13,809
     Inventories                                           33,686                30,981
                                                        ----------            ----------
          Total Current Assets                            214,816               126,622

PROPERTY, PLANT AND EQUIPMENT
     Property, plant and equipment                        118,623               118,083
     Less accumulated depreciation                        (50,734)              (34,152)
                                                        ----------            ----------
                                                           67,889                83,931

MINING PROPERTIES
     Operational mining properties                        170,455               150,656
     Less accumulated depletion                           (36,640)              (38,529)
                                                        ----------            ----------
                                                          133,815               112,127
     Developmental properties                             107,491               108,820
                                                        ----------            ----------
                                                          241,306               220,947
OTHER ASSETS

     Investment in mining company                          47,660
     Debt issuance costs, net of
        accumulated amortization                            4,236                 4,703
     Notes receivable                                       4,000                 5,000
     Marketable securities and other                           62                 4,443
                                                        ----------            ----------
                                                           55,958                14,146
                                                        ----------            ----------
                                                        $ 579,969             $ 445,646
                                                        ==========            ==========
</TABLE>


                                       3

<PAGE>


                                                                     UNAUDITED

               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY                 September 30,           December 31,
                                                         1996                    1995
                                                     -------------           ------------
                                                                 (In Thousands)
<S>                                                     <C>                   <C>
CURRENT LIABILITIES
    Accounts payable                                    $   4,136             $   5,743
    Accrued liabilities                                     5,056                 3,525
    Accrued interest payable                                2,537                 4,526
Accrued salaries and wages                                  4,923                 5,039
    Bank Loans                                             23,962
    Current portion of remediation                          6,000
    Current portion of obligations under
        capital leases                                        593                 2,193
                                                        ----------            ----------
                Total Current Liabilities                  47,207                21,026

LONG-TERM LIABILITIES
    6% Subordinated Convertible Debentures                 49,840                50,000
    6 3/8% Subordinated Convertible Debentures            100,000               100,000
    Limited recourse project financing                     24,000                24,000
    Other liabilities                                      10,506                 9,386
    Deferred income taxes                                                         1,402
                                                        ----------            ----------
           Total Long-Term Liabilities                    184,346               184,788

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
    Mandatory Adjustable Redeemable Convertible
    Securities (MARCS), par value $1.00 per
        share, (a class of preferred stock)-
        authorized 10,000,000 shares,
        7,077,833 issued and outstanding                    7,078
    Common Stock, par value $1.00 per share-
        authorized 60,000,000 shares, issued
        22,950,182 and 21,524,093 shares
        (including 1,059,211 shares
        held in treasury stock)                            22,950                21,524
    Capital surplus                                       402,820               247,100
Accumulated deficit                                       (70,759)              (15,889)
    Unrealized gains (losses) on
        short-term investments                               (455)                  361
    Repurchased and Nonvested Shares                      (13,218)              (13,264)
                                                        ----------            ----------
                                                          348,416               239,832
                                                        ----------            ----------
                                                        $ 579,969             $ 445,646
                                                        ==========            ==========

See notes to consolidated financial statements
</TABLE>


                                       4

<PAGE>


                                                                     UNAUDITED

               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                            3 MONTHS ENDED                   9 MONTHS ENDED
                                             SEPTEMBER 30                     SEPTEMBER 30
                                    -----------------------------     -----------------------------
                                       1996               1995           1996               1995
                                    ----------         ----------     ----------         ----------
                                            (In Thousands)                    (In Thousands)
<S>                                 <C>                <C>            <C>                <C>
INCOME
  Sales of concentrates
      and dore'                     $  21,559          $  24,802      $  62,920          $  66,314
  Less cost of mine
     operations                        18,480             19,151         56,622             53,123
                                    ----------         ----------     ----------         ----------
            Gross profits               3,079              5,651          6,298             13,191

OTHER INCOME
  Interest, dividends and
    other                               5,004              4,218          9,158              8,665
                                    ----------         ----------     ----------         ----------
            Total income                8,083              9,869         15,456             21,856

EXPENSES
  Administration                          952                844          3,007              2,810
  Accounting and legal                    487                348          1,130              1,205
  General corporate                     1,873              1,496          5,273              4,697
  Mining exploration                    2,488              1,529          5,183              3,521
  Interest                              1,016              2,177          2,476              7,794
  Idle facilities                                            357                             1,481
  Write down of mining
    properties                             33                            54,415
                                    ----------         ----------     ----------         ----------
            Total expenses              6,849              6,751         71,484             21,508
                                    ----------         ----------     ----------         ----------

Net income (loss) from
  continuing operations
  before taxes                          1,234              3,118        (56,028)               348
Provision (benefit) for
  income taxes                           (644)             1,079         (1,158)               437
                                    ----------         ----------     ----------         ----------
Net income (loss) from
  continuing operations                 1,878              2,039        (54,870)               (89)
Income from discontinued
  operations                                                                                 2,360
                                    ----------         ----------     ----------         ----------
NET INCOME (LOSS)                   $   1,878          $   2,039      $ (54,870)         $   2,271
                                    ==========         ==========     ==========         ==========
</TABLE>


                                       5

<PAGE>

                                                                     UNAUDITED


               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                            3 MONTHS ENDED                   9 MONTHS ENDED
                                             SEPTEMBER 30                     SEPTEMBER 30
                                    -----------------------------     -----------------------------
                                       1996               1995           1996               1995
                                    ----------         ----------     ----------         ----------
                                              (In thousands except for per share data)
<S>                                 <C>                <C>            <C>                <C>   
EARNINGS PER SHARE DATA

Earnings per share data:
     Weighted average number
        of shares of Common Stock
        and equivalents used in
        calculation                    21,893             15,613         21,327             15,602
                                    ==========         ==========     ==========         ==========

Net income (loss) from
  continuing operations             $     .09          $     .13      $   (2.57)         $     .00
Net income from
  discontinued operations                                                                      .15
                                    ----------         ----------     ----------         ----------
Net income (loss) per share         $     .09          $     .13      $   (2.57)               .15
                                    ==========         ==========     ==========         ==========

Net income (loss) per share attributed to Common Shareholders:

Income (loss) from continuing
  operations                        $    (.03)         $     .13      $   (2.84)         $     .00
Income (loss) from discontinued
  operations                                                                                   .15
                                    ----------         ----------     ----------         ----------
Net Income (Loss)                   $    (.03)         $     .13      $   (2.84)         $     .15
                                    ==========         ==========     ==========         ==========

Fully Diluted Earnings Per Share:
Weighted average number
  of shares of Common
  Stock outstanding                    34,800             26,315
                                    ==========         ==========

NET INCOME (LOSS)                   $     .06          $     .12
                                    ==========         ==========


Cash Dividends per share
  of Common Stock                                                     $     .15          $     .15
                                                                      ==========         ==========


See notes to consolidated financial statements.
</TABLE>


                                       6

<PAGE>

                                                                     UNAUDITED


               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES


<TABLE>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the nine months ended September 30, 1996 and 1995

<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES                                           1996                   1995
                                                                            -----------            -----------
                                                                                     (In Thousands)
<S>                                                                          <C>                   <C>
     Net loss from continuing operations                                     $ (54,870)            $      (89)
     Add (less) noncash items:
        Depreciation, depletion and
            amortization                                                         9,234                 12,767
        Deferred income taxes                                                   (1,402)                (1,541)
        (Gain) loss on disposition of property,
          plant and equipment                                                      (51)                   273
        (Gain) loss on foreign currency transactions                                73                    (36)
        (Gain) loss on disposition of marketable
          securities                                                            (1,262)                   877
        Write down of mining property                                           54,382


     Changes in operating assets and liabilities:
        Receivables                                                               (360)                (3,201)
        Inventories                                                                130                  2,033
        Accounts payable and
            accrued liabilities                                                 (5,452)                   279
        Accrued interest payable                                                (1,989)                  (934)
                                                                            -----------            -----------
                                                                                (1,567)                10,428

Income from discontinued operations 2,360 Add (less) noncash items:
     Depreciation, depletion and amortization                                                              86
     Gain on disposition of
       discontinued operations                                                                         (3,878)
     Deferred income taxes                                                                              1,574
Change in operating assets and liabilities:
     Receivables                                                                                          601
     Inventories                                                                                          (31)
     Accounts payable and accrued liabilities                                                            (109)
                                                                            -----------            -----------
                                                                                                          603
                                                                            -----------            -----------
NET CASH (USED IN) PROVIDED BY
         OPERATING ACTIVITIES                                               $   (1,567)            $   11,031
</TABLE>


                                       7

<PAGE>

                                                                     UNAUDITED


               COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES

<TABLE>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the nine months ended September 30, 1996 and 1995

<CAPTION>
CASH FLOWS FROM INVESTING ACTIVITIES                                           1996                   1995
                                                                            -----------            -----------
                                                                                     (In Thousands)
<S>                                                                          <C>                   <C>
     Purchase of El Bronce (net of cash received)                            $ (14,208)            $
     Investment in mining company                                              (20,057)
     Purchase of property, plant and equipment                                  (2,503)                (2,913)
     Purchase of short-term investments                                       (118,697)                (2,423)
     Proceeds from sale of short-term investments
       and marketable securities                                                51,136                 68,367
     Proceeds from sale of discontinued operations                               2,566                  3,133
     Expenditures on operational
        mining properties                                                      (25,026)               (14,889)
     Expenditures on developmental properties                                   (9,085)               (80,302)
     Proceeds from other assets                                                    603                      3
                                                                            -----------            -----------
        NET CASH USED IN INVESTING ACTIVITIES                                 (135,271)               (29,024)

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from short-term borrowing                                         19,227                 23,585
     Retirement of obligations under capital
        leases                                                                  (1,688)                (1,517)
     Proceeds from MARCS issuance                                              144,626
     Retirement of other long-term liabilities                                    (156)
     Payment of cash dividend                                                   (8,395)                (2,339)
     Payment for issuance of common stock                                          (50)
                                                                            -----------            -----------
        NET CASH PROVIDED BY
            FINANCING ACTIVITIES                                               153,564                 19,729
                                                                            -----------            -----------
        INCREASE (DECREASE) IN CASH AND
            CASH EQUIVALENTS                                                    16,726                  1,736

Cash and cash equivalents at beginning
     of year                                                                    16,485                 15,148
                                                                            -----------            -----------
Cash and cash equivalents at September 30,
     1996 and 1995                                                          $   33,211             $   16,884
                                                                            ===========            ===========


See notes to consolidated financial statements.
</TABLE>


                                       8

<PAGE>

                                                                     UNAUDITED


                        Coeur d'Alene Mines Corporation
                               and Subsidiaries
                  Notes to Consolidated Financial Statements

NOTE A:    Basis of Presentation

     The accompanying  unaudited condensed  consolidated  financial statements
have been prepared in accordance with generally accepted accounting principles
for interim  financial  information and with the instructions to Form 10-Q and
Article 10 of  Regulation  S-X.  Accordingly,  they do not  include all of the
information and footnotes required by generally accepted accounting principles
for  complete  financial  statements.  In  the  opinion  of  management,   all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation  have been included.  Operating results for the three- and
nine-month periods ended September 30, 1996 are not necessarily  indicative of
the results  that may be expected for the year ended  December  31, 1996.  For
further  information,  refer  to the  consolidated  financial  statements  and
footnotes  thereto  included in the Coeur  d'Alene  Mines  Corporation  annual
report on Form 10-K for the year ended December 31, 1995.

NOTE B:  Acquisition of El Bronce

     On September 4, 1996, the Company exercised its option to acquire 51% and
purchased the  remaining  49% of the shares of Compania  Minera CDE El Bronce,
bringing its total  ownership  interest to 100%. In July 1994, the Company had
made an agreement  pursuant to which the Company acquired operating control, a
51%  interest  in  operating  profits  and an option to  acquire a 51%  equity
interest in the producing El Bronce Mine. With this  acquisition,  the Company
owns  100%  of the  mine.  The  terms  of the  purchase  are  the  payment  of
$10,500,000  in cash,  prepayment  of the remainder of the option price in the
approximate  amount of $3,800,000 and a net smelter return royalty of 3% to be
paid  quarterly,  commencing  on  January 1, 1997.  The  acquisition  has been
accounted for as a purchase.

                                       9

<PAGE>

NOTE C:  Inventories are comprised of the following:

<TABLE>

<CAPTION>
                                                                  SEPTEMBER 30,          DECEMBER 31,
                                                                      1996                  1995
       (In Thousands)
<S>                                                                  <C>                   <C>     
        Ore in process and on leach pads                             $ 22,579              $ 25,727
        Dore' inventory                                                 2,702                 2,052
        Concentrate inventory                                           1,913
        Supplies                                                        6,492                 3,202
                                                                     --------              --------
                                                                     $ 33,686              $ 30,981
                                                                     ========              ========
</TABLE>

     Inventories  of ore on leach pads and in the  milling  process are valued
based on actual costs incurred to place such ore into  production,  less costs
allocated to minerals  recovered  through the leaching and milling  processes.
Inherent in this valuation is an estimate of the percentage of the minerals on
leach  pads and in  process  that will  ultimately  be  recovered.  Management
evaluates this estimate on an ongoing  basis.  Adjustments to the recovery are
accounted for prospectively.  All other inventories are stated at the lower of
cost or market  with  cost  being  determined  using  first in,  first out and
weighted  average cost methods.  Dore' inventory  includes product at the mine
site and product held by refineries.

NOTE D:  Income Taxes

     The  Company's  income  tax  benefit  for the three  month and nine month
periods ended September 30, 1996 results primarily from the recognition of tax
benefits associated with operating losses.

NOTE E:  Shareholders' Equity

     On March 8, 1996, the Company completed a public preferred stock offering
of $140.0 million of Mandatory Adjustable  Redeemable  Convertible  Securities
(MARCS).  The Company issued 6,588,235 shares of MARCS which were offered at a
public offering price of $21.25 per share.  Each share of MARCS is mandatorily
convertible four years after issuance into 1.111 shares of Common Stock of the
Company,  subject to adjustment in certain events, unless earlier converted by
the holder into Common Stock or redeemed for Common Stock by the Company.  The
annual  dividend  payable  on the MARCS  will be  $1.488  per  share,  payable
quarterly.   The  dividends  are  deducted  in  computing  net  income  (loss)
attributable  to Common  Shareholders.  On April 8, 1996,  the Company sold an
additional  489,598 shares of MARCS to the  underwriters  as a result of their
exercise of an  overallotment  option  granted to them in connection  with the
public offering. With the


                                      10

<PAGE>

exercise  of the  overallotment  option,  the  Company  has  sold a  total  of
7,077,833  shares of MARCS for a total  offering price of $150.4 million which
resulted in net proceeds to the Company of $144.6 million.

NOTE F:  Acquisition of Australian Mining Company

     In May 1996, Coeur acquired  approximately 35% of the outstanding  shares
of a  publicly  listed  Australian  gold  producer,  Gasgoyne  Gold  Mines  NL
("Gasgoyne")  by issuing a total of 1,419,832  shares of the Company's  Common
Stock  and  paying  a  total  of  approximately   $15.4  million  to  Gasgoyne
shareholders.  Coeur cash payments to Gasgoyne shareholders were financed by a
loan facility with  Rothschild  Australia Ltd. which provided for a maximum of
US$50  million of  borrowings  at an annual  interest rate equal to LIBOR plus
1.5%.  Borrowings  under the agreement  were $18.9 million as of September 30,
1996. During the second quarter ended June 30, 1996, Coeur began reporting its
proportionate  share of Gasgoyne's  net results of operations  pursuant to the
equity method of accounting for  investments.  Such amounts are reflected as a
component of interest and other income.

     The  following  table sets forth a  condensed  summary of the  results of
operations of Gasgoyne for the nine-month period ended September 30, 1996.

<TABLE>
<CAPTION>
         (In thousands - US$)                              September 30, 1996
                                                           ------------------
<S>                                                             <C>    
         Total Revenues                                         $25,632
         Operating profit                                        $8,719
         Net Income from
           continuing operations                                 $4,325
</TABLE>

     The following  pro forma  information  reflects the Company's  results of
operations as if the Gasgoyne  transaction,  that occurred in April 1996,  had
occurred at the beginning of the periods presented.


<TABLE>
<CAPTION>
                                                             For the Nine Months Ended
         (In thousands - US$)                     September 30, 1996           September 30, 1995
                                                  ------------------           ------------------
<S>                                                  <C>                           <C>    
         Total Income                                 $17,142                      $23,225
         Net Income (Loss)                           $(53,465)                      $2,926
         Net Income (Loss) per share                   $(2.51)                      $  .19
</TABLE>


                                      11

<PAGE>

NOTE G:  Marketable Securities

     On January 26, 1996, for a total  consideration of approximately  US$10.7
million,  the Company  acquired  5.5 million  shares and options to acquire an
additional 5.0 million shares of Orion Resources NL, an Australian gold mining
company  ("Orion").  Prior to 1996, Coeur had acquired a total of 3.33 million
shares of Orion for a total cost of US$3.8  million.  On March 27,  1996,  the
Company  exercised its option to acquire the  additional 5.0 million shares of
Orion. As a result, Coeur then held approximately 19.2% of Orion's outstanding
shares.  On  September  28,  1996,  the Company  sold its holdings of Orion of
13,830,000  shares at A$1.80 per share for  A$24,894,000,  or US$ 19.6 million
that is included in  Receivables  at  September  30,  1996.  As a result,  the
Company recorded a gain on the sale of  approximately  $1.3 million during the
third quarter.

NOTE H:  Write Off of Golden Cross Mine

     During the second  quarter of 1996, the Company  determined  that certain
adjustments  were required to properly  reflect the  estimated net  realizable
values of certain mining properties in accordance with FASB statement No. 121,
"Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets
to be Disposed  Of." The Golden Cross Mine was written  down by  approximately
$53 million due to increased  expenditure  requirements related to remediation
of ground movement which impacts the tailings impoundment area. An engineering
evaluation is continuing to determine the full extent and cost of the remedial
measures  required to stabilize  the on-site  land  movement.  The  write-down
included  accrual of the anticipated  remediation  costs.  The Faride property
write down of $1.1 million was necessary due to  management's  decision not to
exercise its final option payment on the project.

NOTE I:  Reclassifications

     Certain  reclassifications  of prior  year  balances  have  been  made to
conform to current year classifications.


                                      12

<PAGE>

Item 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND
         RESULTS OF OPERATIONS

GENERAL

     The Company's currently operating mines are the Rochester Mine in Nevada,
which it wholly owns and  operates;  the Golden Cross Mine in New Zealand,  in
which the Company has an 80% operating  interest and the operation of which is
not expected to continue  after the end of 1997; the El Bronce Mine, a Chilean
gold mine of which the Company  completed  its  purchase of 100% in  September
1996; and the Fachinal Mine, a Chilean gold mine  wholly-owned  by the Company
at which initial production  commenced in late October 1995. In addition,  the
Company owns 50% of Silver Valley Resources  ("Silver  Valley") which owns and
operates the Coeur and Galena silver mines which  commenced  operation in June
1996;  and  35% of  Gasgoyne  Gold  Mines  NL  ("Gasgoyne"),  which  has a 50%
non-operating  interest in the Yilgarn Star gold mine in Australia and Coeur's
proportionate  interest  in which is  accounted  for by the  equity  method of
accounting for investments.

     In February of 1996,  Silver Valley announced  reopening of the Coeur and
Galena Mines.  Silver Valley began shipping  concentrates in June 1996 and 50%
of Silver Valley's results of operations are consolidated in Coeur's Statement
of Operations.  Silver Valley estimates that during the mines' first full year
of  operations  of 1997,  it will produce a total of  approximately  3,000,000
ounces  of  silver.  Silver  Valley  is  also  conducting  a  development  and
exploration program at the properties in connection with which it is expanding
the  existing  workings,   improving  infrastructure  and  conducting  diamond
drilling to further increase reserves and mine life.

     Construction  of the new Fachinal  mine was  completed at a total cost of
approximately $41.1 million and initial production  commenced in October 1995.
The  mine,  while  currently  producing  gold  and  silver,  has  not  reached
commercial  production  and was in the  developmental  stage  as of the end of
1996's third quarter.

     During the second  quarter of 1996, the Company  determined  that certain
adjustments  were required to properly  reflect the  estimated net  realizable
values of certain mining properties. The Golden Cross Mine was written down by
approximately $53 million due to increased expenditure requirements related to
remediation of ground movement which impacts the tailings impoundment area. An
engineering evaluation is continuing to determine the full extent and costs of
the remedial  measures  required to stabilize the on-site land  movement.  The
write-down  included accrual of the anticipated  remediation costs. Based 


                                      13

<PAGE>

upon the  engineering  evaluation  by  independent  experts,  the  progress of
remedial  measures and the approval by New Zealand  regulatory  authorities on
October  31,  1996 of the  Company's  application  to raise the  height of the
tailings  impoundment  at the Golden Cross Mine,  the Company  expects that it
will be able to  continue  the  mine's  operations  through  the end of  1997.
HOWEVER,  ON OCTOBER 31, 1996, AN  ENVIRONMENTAL  GROUP IN NEW ZEALAND FILED A
STATEMENT OF CLAIM IN THE HIGH COURT OF NEW ZEALAND AGAINST THE PERMIT ISSUING
AUTHORITY  AND THE COMPANY  SEEKING TO  INVALIDATE  THE  PERMIT.  BASED ON THE
ADVICE OF NEW ZEALAND COUNSEL, THE COMPANY BELIEVES THE CLAIM IS WITHOUT MERIT
AND THAT THE LEGAL ACTION WILL NOT SUCCEED IN PREVENTING  CONTINUED OPERATION,
BUT NO  ASSURANCES  CAN BE GIVEN AS TO THE OUTCOME OF THE  LITIGATION  AT THIS
TIME.  During  1997,  the Company  expects  the mine to produce  approximately
100,000  ounces of gold and provide  operating cash flow of  approximately  $9
million.  The Company also  believes  that  continued  operations  will have a
beneficial impact on the  end-of-mine-life  reclamation  requirements.  At the
same time, the Company wrote down its investment of $1.1 million in the Faride
property due to management's decision not to exercise its final option payment
on the project.

        A  production  decision  at the  Kensington  Property  is  subject  to
completion of an updated feasibility study, a market price of gold
of at least $400 per ounce and the receipt of certain  required  permits.  The
market price of gold (London final) on October 31, 1996 was $379.50 per ounce.
The Company  expects to receive the results of the updated  feasibility  study
during the fourth quarter of 1996. With respect to the permits, the Company is
unable to control the timing of their issuance;  however,  it is expected that
all permits will be received by early 1997.

     The Company's  business plan is to continue to acquire mining  properties
and/or  businesses that are  operational or expected to become  operational in
the near future so that they can  reasonably  be expected to contribute to the
Company's  near-term  cash flow from  operations and expand the Company's gold
and/or silver production.

     The results of the Company's operations are significantly affected by the
market prices of gold and silver which may  fluctuate  widely and are affected
by many  factors  beyond the  Company's  control,  including  interest  rates,
expectations  regarding  inflation,  currency values,  governmental  decisions
regarding  the  disposal of precious  metals  stockpiles,  global and regional
political and economic conditions, and other factors.


                                      14

<PAGE>

     This report contains certain  forward-looking  statements relating to the
Company's  gold and silver mining  business,  including  estimated  production
data,   expected   operating   schedules  and  other  operating  data.  Actual
production,  operating  schedules  and  results  of  operations  could  differ
materially from those projected in the forward-looking statements. The factors
that could cause actual results to differ  materially  from those projected in
the  forward-looking  statements  include (i) changes in the market  prices of
gold and silver, (ii) the uncertainties  inherent in the Company's exploratory
and  developmental  activities,   (iii)  the  uncertainties  inherent  in  the
estimation  of gold and silver ore  reserves,  (iv)  changes that could result
from the Company's future  acquisition of new mining properties or businesses,
(v)  the  risks  and  hazards  inherent  in  the  mining  business  (including
environmental hazards,  industrial accidents,  weather or geologically related
conditions),   (vi)  the  effects  of  environmental  and  other  governmental
regulations,  and (vii) the risks inherent in the ownership or operation of or
investment in mining properties or businesses in foreign countries.
RESULTS OF OPERATIONS

         THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS
         ENDED SEPTEMBER 30, 1995.
         
SALES AND GROSS PROFITS

     Sales of concentrates and dore' decreased by $3,243,000,  or 13%, for the
third  quarter  of  1996  from  the  same  quarter  of 1995  and is  primarily
attributable to decreased production at Golden Cross. While overall production
for the Company  increased,  revenue  decreased  due to the fact that revenues
attributable  to the  Fachinal  Mine from  496,266  ounces of silver and 5,039
ounces of gold are not reflected in the sales of concentrates  due to the fact
that the Fachinal Mine has not achieved commercial production;  therefore,  it
continues to be treated as a  development  stage  property.  As a result,  the
revenues  generated  from these  pre-production  metal  sales have been offset
against the capital  cost of the mine.  The  Company has  implemented  various
programs  designed to rectify  certain  start-up  inefficiencies  at Fachinal.
During  the  third  quarter,  a  second  underground  mine  was  brought  into
production and a third  underground  mine is currently being developed to help
offset lower ore grades in the open pit.

     Silver  and  gold   prices   averaged   $5.05  and   $384.65  per  ounce,
respectively, in the third quarter of 1996 compared with $5.33 and


                                      15

<PAGE>

$384.31 per ounce,  respectively,  in the third  quarter of 1995. In the third
quarter of 1996, the Company  produced  2,432,794  ounces of silver and 56,138
ounces of gold  compared to  1,873,605  ounces of silver and 43,791  ounces of
gold in the third quarter of 1995.

     The cost of mine  operations  for the third quarter of 1996  decreased by
$671,000,  or 4%, below the prior year's comparable  quarter.  The decrease is
primarily attributable to decreased costs at the Golden Cross Mine as a result
of a decision to write down the  investment in the mine in the second  quarter
of 1996. (See Note G of the Notes to Consolidated  Financial Statements.) As a
result,  depreciation and depletion charged to mine operations  decreased from
$1,448,000  in the third  quarter  of 1995 to $2,300 in the third  quarter  of
1996.  Because of the changes stated above, gross profits from mine operations
decreased by $2,572,000.  Mine  operations  gross profit as a percent of sales
decreased  from 23% in the  quarter  ended  September  30,  1995 to 14% in the
quarter ended September 30, 1996.

     The cash costs of production  per ounce of silver on a silver  equivalent
basis at the Rochester  Mine amounted to $3.25 in the quarter ended  September
30, 1996, compared to $3.29 per ounce in the quarter ended September 30, 1995.
The cash  costs of  production  per ounce of gold at the El  Bronce  Mine were
$247.29  during the third  quarter of 1996  compared to $334.21 in 1995's same
quarter.  The cash costs of  production  per ounce of gold at the Golden Cross
Mine  amounted to $327.71 per ounce in the quarter  ended  September 30, 1996,
compared  to $222.27 per ounce in the prior  year's  comparable  quarter.  The
increase in Golden  Cross costs of  production  is primarily  attributable  to
decreased  ore  grades  and  lower  ore  throughput  associated  with the land
stabilization program. In addition, the land stabilization issue has prevented
the Company from implementing a mill  optimization  program which was designed
to increase mill throughput and decrease operating costs.

INTEREST AND OTHER INCOME

     Interest  and other income  increased  by $786,000,  or 19%, in the third
quarter  of 1996  compared  to the third  quarter  of 1995.  The  increase  is
primarily  the  result  of the  gain  on the  sale  of  the  Orion  marketable
securities  of  approximately  $1.3  million  and  increased  interest  income
resulting from a higher level of short-term investments.  The third quarter of
1995 included a gain of $3.2 million  arising from the sale of gold and silver
purchased  on the open market  which was  delivered  pursuant  to  fixed-price
forward contracts.


                                      16

<PAGE>

TOTAL INCOME

     As a result  of the  above,  the  Company's  total  income  decreased  by
$786,000,  or 19%, in the third  quarter of 1996 compared to the third quarter
of 1995.

EXPENSES

     For the third quarter of 1996,  total expenses  increased by $98,000,  or
1%, above the prior year's comparable  quarter.  The increase is primarily due
to increases in mining  exploration of $959,000 and general corporate expenses
of $377,000  which is partially  offset by  decreases  in interest  expense of
$1,161,000 and idle facilities expense of $357,000.

NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES

     As a result of the above, the Company's income from continuing operations
before  income  taxes  amounted to  $1,234,000  for the third  quarter of 1996
compared  to  income  from  continuing   operations  before  income  taxes  of
$3,118,000 for the third quarter of 1995.  The Company  reported an income tax
benefit for the third quarter of 1996 of $644,000  compared to a tax provision
of $1,079,000 for the same period of 1995. As a result,  the Company  reported
net income  from  continuing  operations  of  $1,878,000,  or $.09 per primary
share,  for the third  quarter  of 1996  compared  to income  from  continuing
operations of  $2,039,000,  or $.13 per primary share,  for 1995's  comparable
quarter.

NET INCOME (LOSS)

     As a result of the above,  the Company reported net income of $1,878,000,
or  $.09  per  primary  share  (net  loss  of  $.03   attributable  to  common
shareholders  and net income of $.06 per fully diluted  share),  for the third
quarter  of  1996  compared  with  $2,039,000,   or  $.13  per  primary  share
attributable to common  shareholders  ($.12 per fully diluted share),  for the
third quarter of 1995.


     NINE MONTHS  ENDED  SEPTEMBER  30,  1996,  COMPARED TO NINE MONTHS  ENDED
     SEPTEMBER 30, 1995

SALES AND GROSS PROFITS

     Sales of concentrates  and dore' decreased by $3,394,000,  or 5%, for the
nine months ended September 30, 1996 compared with the same period of 1995 and
was  primarily  attributable  to decreased  production


                                      17

<PAGE>

at Golden  Cross in 1996  compared to the same period in 1995.  While  overall
production for the Company increased substantially,  revenues decreased due to
the fact that  revenues from  1,564,261  ounces of silver and 16,871 ounces of
gold  attributable  to the  Fachinal  Mine are not  reflected  in the sales of
concentrates  due  to the  fact  that  the  Fachinal  Mine  has  not  achieved
commercial production;  therefore, it continues to be treated as a development
stage property.  As a result,  revenues generated from  pre-production  metals
sales have been offset  against the capital cost of the mine.  The Company has
implemented   various   programs   designed   to  rectify   certain   start-up
inefficiencies  at Fachinal.  During the third quarter,  a second  underground
mine was brought into  production  and a third  underground  mine is currently
being developed to help offset lower ore grades in the open pit.

     Silver  and  gold   prices   averaged   $5.29  and   $391.60  per  ounce,
respectively,  in the first nine months of 1996  compared to $5.17 and $383.78
per ounce,  respectively,  in the same  period in 1995.  During the first nine
months of 1996, the Company  produced  6,732,763  ounces of silver and 145,604
ounces of gold  compared to 5,082,236  ounces of silver and 122,184  ounces of
gold in the first nine months of 1995.

     The cost of mine operations in the first nine months of 1996 increased by
$3,499,000,  or 7%,  over the first  nine  months  of 1995.  The  increase  is
primarily attributable to an increase in the costs of Golden Cross operations.
As a result,  gross profit from mine  operations  decreased by $6,893,000,  or
52%,  in the first nine  months of 1996 from 1995's  comparable  period.  Mine
operations  gross profit as a percent of sales  decreased from 20% in the nine
months ended  September 30, 1995 to 10% in the nine months ended September 30,
1996.

     The cash costs of  production  per ounce of gold at the Golden Cross Mine
amounted to $374.62 per ounce in the nine months  ended  September  30,  1996,
compared to $219.07 in the prior year's  comparable  nine- month  period.  The
increase is  primarily  attributable  to  decreased  mine ore grades and costs
associated  with  the  land  stabilization  program.  In  addition,  the  land
stabilization  issue  has  prevented  the  Company  from  implementing  a mill
optimization  program  which was  designed to  increase  mill  throughput  and
decrease  operating costs. The cash costs of production per ounce of silver on
a silver equivalent basis at the Rochester Mine amounted to $3.49 per ounce in
the nine months ended September 30, 1996, compared to $3.70 in the nine months
ended  September 30, 1995.  The cash costs of production  per ounce of gold at
the El Bronce Mine were $250.21 for the nine


                                      18

<PAGE>

months ended  September 30, 1996 compared to $314.23 for the nine months ended
September 30, 1995.

INTEREST AND OTHER INCOME

     Interest  and other income in the nine months  ended  September  30, 1996
increased  by  $493,000,  or 6%,  compared  to  the  prior  year's  comparable
nine-month  period. The increase is primarily a result of the gain on the sale
of Orion marketable  securities  amounting to  approximately  $1.3 million and
increased  interest  income  resulting  from  a  higher  level  of  short-term
investments. The third quarter of 1995 included a gain of $3.2 million arising
from the sale of gold and  silver  purchased  on the  open  market  which  was
delivered pursuant to fixed-price forward contracts.

TOTAL INCOME

     As a result  of the  above,  the  Company's  total  income  decreased  by
$6,400,000, or 29%, in the nine months ended September 30, 1996, compared with
the prior year's comparable period.

EXPENSES

     Total expenses in the nine months ended September 30, 1996,  prior to the
write-down of mining  properties,  decreased by $4,439,000,  or 21%,  compared
with  the  prior  year's   nine-month   period.   The  decrease  is  primarily
attributable  to decreases of $5,318,000 in interest  expense  resulting  from
reduced  long-term debt and the effect of capitalized  interest and $1,481,000
in  idle  facilities  expense.  As  discussed  in  Note  G  of  the  Notes  to
Consolidated  Financial  Statements in Part I, in the second  quarter of 1996,
the Company  reported total  write-downs  of mining  properties of $54,415,000
related to the Golden Cross Mine and the Faride property.

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES

     As a result of the above,  the Company's loss from continuing  operations
before income taxes  amounted to  $56,028,000 in the first nine months of 1996
compared to income of  $348,000 in the first nine months of 1995.  The Company
reported  an income tax  benefit of  $1,158,000  for the first nine  months of
1996,  compared to a provision  for taxes of $437,000 in the first nine months
of  1995.  As a  result,  the  Company  reported  a net loss  from  continuing
operations  of  $54,870,000,  or $2.57 per share,  in the first nine months of
1996,  compared to a net loss of $89,000, or $.01 per share, in the first nine
months of 1995.


                                      19

<PAGE>

INCOME FROM DISCONTINUED OPERATIONS

     On May 2, 1995, the Company sold the Flexaust division, a manufacturer of
flexible hose and tubing.  In the nine months ended  September  30, 1995,  the
Company  reported  income  from  discontinued  operations  (net of  taxes)  of
$2,360,000, or $.15 per share.

NET INCOME (LOSS)

     As a result of the above, the Company reported a net loss of $54,870,000,
or $2.57 per share ($2.84 attributable to common  shareholders),  in the first
nine months of 1996, compared to net income of $2,271,000,  or $.15 per share,
in the prior year's comparable nine-month period.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL; CASH AND CASH EQUIVALENTS

     The Company's  working  capital at September  30, 1996 was  approximately
$167.6 million compared to approximately  $105.6 million at December 31, 1995.
The ratio of current assets to current  liabilities  was 4.6 to 1 at September
30, 1996,  compared  with 6.0 to 1 at December  31, 1995.  The increase in the
Company's  working capital at September 30, 1996 compared to December 31, 1995
is primarily  attributable  to cash proceeds from the issuance of $150 million
of mandatory adjustable convertible securities during the first half of 1996.

     Net cash  consumed by operating  activities  for the first nine months of
1996 was $1.6  million  compared  with $11.0  million  provided  by  operating
activities  during the first nine months of 1995. A total of $135.3 million of
cash was used in investing  activities  in the nine months of 1996 compared to
$29.0  million used in investing  activities in the first nine months of 1995.
Of the  $135.3  million  used in  investing  activities  during the first nine
months of 1995,  $118.7  million  relates to the purchase of investment  grade
short-term  investments.  The Company's  financing  activities provided $153.6
million  of cash  during  the first nine  months of 1996  compared  with $19.7
million  for the first  nine  months of 1995.  As a result of the  above,  the
Company's  net cash  increase  for the  first  nine  months  of 1996 was $16.7
million  compared  with a net cash increase of $1.7 million for the first nine
months of 1995.


                                      20

<PAGE>

     For the years ended  September  30, 1996 and 1995,  the Company  expended
$2.0 million and $2.9 million,  respectively, in connection with environmental
compliance activities at its operating properties.  At September 30, 1996, the
Company had expended a total of  approximately  $9.3 million on  environmental
and permitting activities at the Kensington property,  which expenditures have
been capitalized as part of its development cost.

ACQUISITION OF REMAINING EL BRONCE INTEREST

     On September 4, 1996, the Company exercised its option to purchase 51% of
the shares of Compania Minera CDE El Bronce,  and also purchased the remaining
49% of the  shares  of  Compania  Minera  CDE El  Bronce,  bringing  its total
ownership  interest to 100%.  In July 1994,  the Company had made an agreement
pursuant to which the Company acquired  operating  control,  a 51% interest in
operating  profits  and an option  to  acquire a 51%  equity  interest  in the
producing El Bronce Mine. With this acquisition,  the Company owns 100% of the
mine.  The terms of the  purchase  are the  payment  of  $10,500,000  in cash,
prepayment of the remainder of the option price in the  approximate  amount of
$3,800,000  and a net  smelter  return  royalty  of 3% to be  paid  quarterly,
commencing on January 1, 1997.

PUBLIC OFFERING OF MARCS

     On March 8, 1996,  the  Company  completed  a public  offering  of $140.0
million of Mandatory Adjustable Redeemable Convertible Securities (MARCS). The
Company  issued  6,588,235  shares of MARCS  which  were  offered  at a public
offering  price of  $21.25  per  share.  Each  share  of MARCS is  mandatorily
convertible four years after issuance into 1.111 shares of Common Stock of the
Company,  subject to adjustment in certain events, unless earlier converted by
the holder into Common Stock or redeemed for Common Stock by the Company.  The
annual  dividend  payable  on the MARCS  will be  $1.488  per  share,  payable
quarterly.  On April 8, 1996, the Company sold an additional 489,598 shares of
MARCS to the  underwriters  as a result of their exercise of an  overallotment
option  granted  to them in  connection  with the  public  offering.  With the
exercise of the  overallotment  option,  the Company sold a total of 7,077,833
shares of MARCS for a total offering price of $150.4 million which resulted in
net proceeds to the Company of $144.6 million.

ACQUISITIONS OF INTERESTS IN AUSTRALIAN GOLD MINING COMPANIES

     GASGOYNE.  Coeur's Offer for outstanding Gasgoyne shares was conducted on
the basis of seven Coeur shares of Common Stock plus


                                      21
<PAGE>

A$96 in  exchange  for  each  100  Gasgoyne  shares,  Coeur  issued a total of
1,419,832 shares of Common Stock and paid a total of approximately  A$19.5 (or
US$15.4  based  on then  prevailing  currency  exchange  rates)  to  accepting
Gasgoyne  shareholders,  and acquired a total of  20,293,691  Gasgoyne  shares
constituting  approximately 35% of Gasgoyne's outstanding shares. Coeur's cash
payments to  Gasgoyne  shareholders  were  financed  by a loan  facility  with
Rothschild Australia Limited, which provides for a maximum of US$50 million of
borrowings at an annual interest rate equal to LIBOR plus 1.5%.

     ORION. On January 24, 1996, at a cost of US$10.7 million,  Coeur acquired
from  Homestake  Mining  Company  ("Homestake")  5.5 million  shares of and an
option to acquire an additional 5.0 million shares of Orion held by Homestake.
(Earlier in January 1995 and in the last  quarter of 1994,  Coeur had acquired
3.3 million outstanding Orion shares for a total cost of approximately  US$3.8
million.) On March 26, 1996, Coeur exercised the options  previously  acquired
from  Homestake  for the  additional  5.0 million  Orion shares for a purchase
price of  US$3.8  million.  As a result  of the  above  acquisitions  of Orion
shares,  which were  funded by  Coeur's  own cash  resources,  Coeur then held
approximately  19.2% of Orion's outstanding shares. On September 30. 1996, the
Company  sold its shares of Orion and  recorded a gain of  approximately  $1.3
million on the transaction.

FEDERAL NATURAL RESOURCES ACTION

     On March 22,  1996,  an action  was filed in the United  States  District
Court for the District of Idaho (Civ. No.  96-0122-N-EJL) by the United States
against various defendants,  including the Company, asserting claims under the
Comprehensive Environmental Response,  Compensation, and Liability Act of 1980
and the Clean Water Act for alleged  damages to Federal  natural  resources in
the Coeur  d'Alene  River Basin of  northern  Idaho as a result of releases of
hazardous  substances from mining  activities  conducted in the area since the
late 1800s.  No specific  monetary  damages are  identified in the  complaint.
However,  in July 1996, the government  indicated damages may approximate $982
million.  The United  States  asserts  that the  defendants  are  jointly  and
severally  liable for costs and  expenses  incurred  by the  United  States in
investigation,  removal and remedial action and the restoration or replacement
of  affected  natural  resources.  In 1986 and 1992 the  Company  had  settled
similar  issues with the State of Idaho and the Coeur  d'Alene  Indian  Tribe,
respectively,  and  believes  that those  prior  settlements  exonerate  it of
further  involvement with alleged natural resource damage in the Coeur d'Alene
River Basin. Accordingly, the Company intends to vigorously defend this matter
and at an  appropriate  stage will seek


                                      22
<PAGE>

to be dismissed from this action.  At this initial stage of the proceedings it
is not possible to predict its ultimate outcome.


                                      23


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