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