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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8641
COEUR D'ALENE MINES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IDAHO
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
505 FRONT AVE., P.O. BOX "I"
COEUR D'ALENE, IDAHO
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
82-0109423
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
83816
(ZIP CODE)
(208) 667-3511
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, PAR VALUE $1.00
6 3/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. (The aggregate market value is computed by reference to the
last sale price of such stock, as of February 28, 1996.)
$484,287,030
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of February 28, 1996.
20,464,882 shares of Common Stock, Par Value $1.00
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DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of the Form 10-K is incorporated by
reference from the registrant's definitive proxy statement which will be filed
pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
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PART I
ITEM 1. BUSINESS
Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is engaged in
the exploration, development, operation and/or ownership of gold and silver
mining properties located in the western United States and in New Zealand and
Chile. In addition, during 1995 and early 1996, the Company took steps to
acquire interests in certain Australian mining companies.
OVERVIEW OF MINING PROPERTIES
The Company's most significant properties are: (i) the ROCHESTER MINE, a
silver and gold surface mining operation located in northwestern Nevada, which
is 100% owned and operated by Coeur and which is believed to be one of the
largest and lowest cost of production primary silver mines in the United States
and is a significant gold producer as well; (ii) the GOLDEN CROSS MINE, an
underground and surface gold mining operation located near Waihi, New Zealand,
which is operated by Coeur and in which it has an 80% operating interest
acquired on April 30, 1993; (iii) the FACHINAL MINE, located in southern Chile,
South America which Coeur acquired in 1990, at which construction of an open pit
and underground gold and silver mine and processing plant was completed and
initial production commenced in late October 1995; (iv) the EL BRONCE MINE, a
Chilean gold mine in which the Company acquired operating control and 51% of the
operating profits in October 1994 and in which the Company has an option to
acquire a 51% equity interest; (v) ownership of 50% of the capital stock of
SILVER VALLEY RESOURCES CORPORATION ("SILVER VALLEY"), which owns the COEUR and
the GALENA underground silver mines in the Coeur d'Alene Mining District of
Idaho which are scheduled to resume production in June 1996; and (vi) 100% of
the KENSINGTON PROPERTY, located north of Juneau, Alaska, which is being
developed as an underground gold mine by Coeur and where it is anticipated that
a decision will be made during the third quarter of 1996 whether construction
will commence for the mine facilities. In addition, Coeur has an option to
acquire a 51% operating interest through January 15, 1998 in the fully-developed
Faride Mine, a gold and silver mine located in northern Chile which has not been
operational since 1988 and where the Company currently is conducting exploratory
activities and feasibility studies. Coeur also has interests in other properties
which are the subject of silver or gold exploration activities at which no
commercially minable ore bodies have yet been identified.
RECENT AUSTRALIAN INITIATIVES
In December 1995, the Company announced that it (i) had entered into an
agreement with the principal shareholder of Gasgoyne Gold Mines NL, an
Australian gold mining company ("Gasgoyne"), pursuant to which Coeur acquired an
option to acquire 19.9% of Gasgoyne's outstanding shares, and (ii) intended to
extend an offer to Gasgoyne shareholders to acquire all the remaining shares of
Gasgoyne. A competing bid for the shares has been announced by another
Australian mining company which has instigated a lawsuit to enjoin the Company's
offer. The suit has delayed the delivery of the Company's offer to Gasgoyne
shareholders. There can be no assurance that the Company's proposed offer will
be successful.
In January 1996, the Company acquired shares and options to acquire shares
of Orion Resources NL, an Australian gold mining company ("Orion"), as a result
of which Coeur presently holds approximately 13.1% of Orion's outstanding shares
and, upon exercise of its options, would own approximately 19.2% of Orion's
outstanding shares.
Gasgoyne and Orion own 50% and 45%, respectively, of the Yilgarn Star Mine
located in western Australia which produced approximately 110,600 ounces of gold
in Gasgoyne's fiscal year ended June 30, 1995 and approximately 50,000 ounces of
gold in the six months ended December 31, 1995.
SALE OF NON-MINING BUSINESS
In December 1991, the Company acquired Callahan Mining Corporation which
owned the Galena Mine and the Flexaust Company (a non-mining business involved
in the manufacturing of flexible hose and duct and metal tubing) ("Flexaust").
On May 2, 1995, the Company sold the assets of Flexaust for approximately
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$10 million, of which approximately $4 million was paid at the closing and the
balance is payable over the five years thereafter. During 1995, Coeur recognized
a pre-tax gain of approximately $4.0 million ($2.2 million after tax) as a
result of the sale.
SOURCES OF REVENUE
The Rochester Mine, Golden Cross Mine and El Bronce Mine, which are
operated by the Company, constituted the Company's sources of mining revenues in
1995. The Rochester Mine accounted for approximately 64.1%, 56.8% and 57.0% of
the Company's total revenues in 1993, 1994 and 1995, respectively. The Golden
Cross Mine accounted for 28.8%, 29.8% and 33.4% of the Company's total revenues
for 1993, 1994 and 1995, respectively. The El Bronce Mine accounted for
approximately 1% of the Company's total revenues in 1994 (4% of total revenues
for the three-month period subsequent to its acquisition on October 3, 1994) and
.3% of total revenues in 1995. The Fachinal Mine commenced operations in late
October 1995 and will report revenues commencing in 1996. The balance of the
Company's revenues was attributable to interest, dividends and other income.
DEFINITIONS
The following sets forth definitions of certain important mining terms used
in this report. "Ore reserve" means that part of a mineral deposit which could
be economically and legally extracted or produced at the time of the reserve
determination. "Proven reserves" means reserves for which (a) quantity is
computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspections, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well established. "Probable reserves" means
reserves for which quantity and grade and/or quality are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points of observation.
"Mineralized material" is a mineralized underground body which has been
intersected by sufficient closely spaced drill holes and/or underground sampling
to support sufficient tonnage and average grade of metal(s) to warrant further
exploration development work. Such material does not qualify as an "ore reserve"
until a final and comprehensive economic, technical and legal feasibility study
based upon the test results is concluded. References to "silver" mean an alloy
with a minimum fineness of 999 parts per 1000 pure silver; references to "gold"
mean an alloy with a minimum fineness of 995 parts per 1000 pure gold; and
references to an "ounce" mean a troy ounce, which is 31.10348 grams. References
to "dore" mean a bullion produced by smelting, containing gold, silver and minor
amounts of impurities. References to a "ton" mean a short ton, which is 2,000
pounds.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
This report contains numerous 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.
ROCHESTER MINE
The Rochester Mine is a silver-gold surface mine located in Pershing
County, Nevada, approximately 25 road miles northeast of Lovelock. The mine
utilizes the heap-leaching process to extract both silver and
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gold from ore mined using open-pit methods. The property consists of 16 patented
and 544 unpatented contiguous mining claims and 74 mill-site claims totaling
approximately 9,370 acres. The Company owns 100% of the Rochester Mine by virtue
of its 100% ownership of its subsidiary, Coeur Rochester, Inc. Asarco, Inc., the
prior lessee, has a net smelter royalty interest which varies from 0 to 5% when
the market price of silver equals or exceeds $17.35 per ounce.
Based on the reserve-review report dated February 1996, of Independent
Mining Consultants, Inc., and accounting for production through December 31,
1995, in-place, proven and probable ore reserves at the Rochester Mine, as of
January 1, 1996, total approximately 75.9 million tons averaging 1.20 ounces per
ton silver and 0.0102 ounces per ton gold. The reserve estimate is based on a
1.10 ounce per ton silver-equivalent, breakeven-design cutoff grade and silver
and gold prices of $5.50 and $385.00, respectively. The average grades do not
reflect losses in the recovery process nor any allowance for extractive dilution
during the mining process. The amount of proven and probable reserves will vary
depending on the relative price of silver and gold.
A reserve estimate calculated at various silver and gold prices, is set
forth below:
<TABLE>
<CAPTION>
$ PER TROY OUNCE ORE SILVER GOLD STRIP
GOLD/SILVER TONS GRADE GRADE RATIO
----------------------------- ----------- ------------ ------------ -----
(THOUSANDS) (OUNCES/TON) (OUNCES/TON)
<S> <C> <C> <C> <C>
$455.00/$6.50................ 81,500 1.193 .0100 1.52
$400.00/$6.00................ 78,100 1.198 .0101 1.33
$385.00/$5.50................ 75,900 1.203 .0102 1.23
$375.00/$5.00................ 63,500 1.281 .0111 1.46
</TABLE>
Based upon its experience and certain metallurgical testing, the Company
estimates recovery rates of 55% for silver and 85% for gold. Although, as shown
in the preceding table, the average strip ratio for the remaining life of the
mine will vary based primarily on future gold and silver prices, the actual
strip ratio may vary significantly from year-to-year during the remaining life
of the mine. The realization of the Company's production estimates is subject to
actual rates of recovery, continuity of ore grades, mining rates, the levels of
silver and gold prices and other uncertainties inherent in any mining and
processing operation.
The leach cycle at the Rochester Mine requires approximately five years
from the point ore is mined until all recoverable metal is recovered. The above
costs are based upon actual operating experience at the mine. There can be no
assurance that these costs will remain at the same level for future operations.
The following table sets forth information for the periods indicated
relating to Rochester Mine production. Production may decrease during the winter
due to slower solution flow from the heaps resulting in increased dore'
production during warmer weather. Such conditions are not expected to affect
annual production levels since mining, crushing and heap construction are
expected to continue during winter months at normal rates. Also, production will
vary from time to time depending upon the area being mined.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ore processed (tons).................... 6,982,366 7,356,336 7,247,553 7,759,637 8,243,609
Silver (ounces)......................... 5,707,700 5,431,369 5,943,894 5,937,770 6,481,825
Gold (ounces)........................... 60,565 56,562 66,412 56,886 59,307
</TABLE>
The following table sets forth the costs of production per ounce of silver
and gold on a silver equivalent basis during the periods indicated at the
Rochester Mine. Such costs include mining, processing and direct administration
costs, financing costs, royalties and exploration expenses. To obtain the silver
equivalent, each ounce of gold produced is multiplied by the same ratio as the
then current ratio of the price of gold to the price
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of silver. This silver equivalent gold production is then added to actual silver
production to determine total silver equivalent production.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cash costs per ounce..................................... $3.28 $2.82 $3.55 $3.57 $3.71
Depreciation, depletion and amortization per ounce....... .48 .40 .54 .59 .61
------ ------ ------ ------ ------
Total costs per ounce.................................... $3.76 $3.22 $4.09 $4.16 $4.32
===== ===== ===== ===== =====
</TABLE>
In 1994, the Company completed construction of a new ore conveyor system.
In addition, the waste to ore strip ratio is expected to decline commencing in
1996 while the silver equivalent grade of the ore mined is expected to increase.
These three factors are expected to beneficially impact future operations.
GOLDEN CROSS MINE
Effective April 30, 1993, a wholly-owned subsidiary of the Company acquired
from a wholly-owned subsidiary of Cyprus Minerals Company all of the outstanding
capital stock of Cyprus Gold New Zealand Limited ("Cyprus NZ"), the name of
which was changed by the Company to Coeur Gold New Zealand Limited ("Coeur NZ").
The principal asset of Coeur NZ is its undivided 80% participating joint venture
interest in the Golden Cross Mine located near Waihi on the North Island of New
Zealand, approximately 100 miles southeast of Auckland, and certain other
exploration properties in New Zealand. The remaining undivided 20% joint venture
interest is owned by a subsidiary of The Todd Company Limited, a New Zealand
corporation.
In addition to all the capital stock of Cyprus NZ, the Company also
acquired from the former parent of Cyprus NZ a term loan receivable from Cyprus
NZ in the principal amount of approximately $53.2 million which was owed by
Cyprus NZ to its former parent and is now owed by Coeur NZ to the Company. A
cash purchase price of approximately $54 million was paid by the Company for the
Cyprus NZ capital stock and term loan. The Company accounted for the acquisition
as a purchase transaction.
The Golden Cross Mining License covers an area of approximately 961 acres
of which 274 acres are occupied by the current Golden Cross Mine operation. The
mine property includes the open-pit and underground mine facilities, process
plant, tailings pond, water treatment plant and mine offices which are all
accessible by road from the town of Waihi. Construction of the Golden Cross Mine
began in April 1990, and commercial production commenced in December 1991. Ore
is mined from an extensive precious-metals bearing, epithermal vein system
hosted in Tertiary volcanic rocks.
Based upon a resource and reserve report review dated January 6, 1996 for
open-pit underground reserves by Snowden Associates Pty Ltd, an independent
consulting firm, in-place, open-pit and underground, proven and probable ore
reserves at July 1, 1995, less actual production through December 31, 1995,
total 4.830 million tons averaging 0.084 ounces per ton gold. The open-pit
reserve estimate, totaling 4.216 million tons averaging 0.071 ounces per ton
gold, is based on a 0.029 ounce per ton gold cutoff, a gold price of $409 per
ounce (after credit for byproduct revenues) and a currency exchange rate of US$
= 0.65 NZ$. The underground-reserve estimate, totaling 614,000 tons averaging
0.171 ounces per ton gold, is based on a 0.117 ounce per ton cutoff, a gold
price of $409.00 (after credit for byproduct revenues) and a currency exchange
rate of US$ = 0.65 NZ$. The reserve estimate reflects an allowance for
extractive dilution during the mining process, but does not reflect losses
during the recovery process. In addition, the reserve estimate has identified
5.286 million tons of mineralized material averaging 0.05 ounce per ton gold
which is insufficiently defined to be included in the reserve, but may be
mineable given additional definition or changes in economic parameters.
Silver reserves are empirically estimated using past production/recovery
ratios for silver and gold. Open pit and underground silver and gold ratios have
historically averaged 4:1 and 5:1, respectively. Total contained silver ounces
are estimated at 1.729 million ounces, with an average grade of 0.36 ounces of
silver per ton, for
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open pit and underground proven and probable reserves. No mineralized material
grades for silver were estimated.
The following table sets forth Golden Cross Mine production data.
Information relating to production prior to April 30, 1993 was obtained from the
former owner of Cyprus NZ. Because the Company's acquisition of Cyprus NZ was
accounted for as a purchase, results of its operations prior to April 30, 1993
are not included in the Company's reported results of operations. The following
data reflects the amount of production attributable to Coeur's 80% interest in
the mine:
<TABLE>
<CAPTION>
YEAR ENDED
FOUR MONTHS EIGHT MONTHS DECEMBER 31,
YEAR ENDED ENDED ENDED ------------------
DECEMBER 31, 1992 APRIL 30, 1993 DECEMBER 31, 1993 1994 1995
----------------- -------------- ----------------- ------- -------
<S> <C> <C> <C> <C> <C>
Ore milled (tons).............. 566,935 243,725 492,617 727,427 731,453
Gold (ounces).................. 69,899 26,360 56,898 67,400 83,058
Silver (ounces)................ 274,905 103,690 175,325 222,246 286,216
</TABLE>
The following table sets forth the costs of production per ounce of gold
during the periods indicated at the Golden Cross Mine. Such costs include
mining, processing and direct administration costs, royalties and exploration
expenses, but do not include financing costs associated with the term loan
formerly owed by Coeur Gold NZ to its parent. The production costs per ounce of
gold for any period is computed net of by-product credits.
<TABLE>
<CAPTION>
YEAR ENDED
FOUR MONTHS EIGHT MONTHS DECEMBER 31,
YEAR ENDED ENDED ENDED ------------------
DECEMBER 31, 1992 APRIL 30, 1993 DECEMBER 31, 1993 1994 1995
----------------- -------------- ----------------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash costs per ounce........... $261.00 $ 245.00 $220.26 $276.96 $231.70
Depreciation, depletion and
amortization per ounce....... 130.00 174.00 116.40 111.53 82.12
------------ ----------- ------------ ------- -------
$391.00 $ 419.00 $336.66 $388.49 $313.82
============ ========== ============ ======= =======
</TABLE>
The above-reported Golden Cross Mine production and cost data relating to
operations subsequent to the commencement of commercial production in December
1991 reflect an initial under-utilization of the mine's productive capacity
associated with commencement of operations as well as other start-up costs
expected to be nonrecurring in nature. The 1994 increase in the cash costs of
production per ounce of gold was primarily attributable to the presence of a
harder grinding ore in the open pit requiring more milling and chemicals in the
processing and a lower grade of ore being provided from the underground portion
of the mine. The 1995 decrease in cash costs was primarily attributable to the
availability of additional higher grade underground production, a better
blending of open-pit and underground ores, and the mining of less waste in the
open-pit. The increases in ore reserves during 1994 and 1995 enabled the Company
to lower the depletion at the mine, which had the effect of reducing non-cash
costs per ounce.
The Company estimates the current waste-to-ore strip ratio of the open pit
to be approximately 3.69 to 1. Approximately 2,000 tons per day of ore is
currently being mined at the open pit operation. The underground mine is a
trackless operation with a declining access from the surface, currently mining
approximately 680 to 850 tons per day of ore and utilizing mechanized cut and
fill and long hole benching methods. A 2,750 ton per day mill processes ore from
both the open pit and underground operations. Coeur NZ estimates that
approximately 89% of the gold and 55% of the silver contained in the ore mined
is recovered. The production of gold and silver is subject to the risks of
actual rates of recovery, continuity of ore grades, mining rates, the levels of
gold and silver prices and other uncertainties inherent in any mining and
processing operation. Tailings are treated by a proprietary process that removes
and recycles cyanide used in the milling process.
The Company obtained favorable variances to the Golden Cross Mine's
effluent discharge permit by a decision from the Waikato Regional Council issued
in August 1993. This decision was appealed to the Planning Tribunal by
environmental organizations. The appeal was resolved by a decision of the
Planning Tribunal in favor of the Company.
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On May 15, 1995, the Golden Cross Mine received an environmental award from
the Environment Waikato Regional Counsel, citing the environmental compliance
enhancement program implemented by the Company at that mine. The enhancement
program included the collection of seeds of native tree species and increasing
their growth through replanting on Golden Cross land to provide native wildlife
habitat. In addition, the program included three water treatment systems,
biological monitoring systems, a "fish friendly" fish passage, pest control
programs and a public bush access track.
During the Fall of 1995, the Company became aware of some evidence that the
tailings impoundment at the Gold Cross Mine may have sustained movement.
Subsequent investigation revealed that the impoundment is situated on a block of
land that is apparently moving down slope at the rate of approximately 3.5cm
(1 1/2") per annum. The movement is the result of a naturally occurring
deep-seated geologic phenomenon not caused by the mine's operations. The Company
is implementing remedial measures, including the construction of a 600 meter
drain tunnel designed to ensure the stability of the tailings dam, and presently
estimates that the costs associated with those remedial measures during 1996
will approximate U.S. $4 million. The Company believes the work will solve the
stability issue, but whether further work will be required and additional costs
will be incurred cannot be known with absolute certainty until the planned work
is completed and tested.
Coeur NZ expended approximately $579,313 and $598,793 during 1994 and 1995,
respectively, to explore properties adjacent to the Golden Cross Mine and
various other properties in the eastern portion of the North Island of New
Zealand. Such exploratory activities included drilling, sampling and assaying.
Coeur NZ plans during 1996 to expend approximately $.4 million to explore Waihi
East, Waitekauri and three other New Zealand licenses on the North Island.
FACHINAL MINE
In January 1990, the Company acquired, through its wholly-owned subsidiary,
CDE Chilean Mining Corporation, ownership of the Fachinal gold and silver
property. As discussed below, the Company completed the construction of the
Fachinal Mine on schedule and under budget in October 1995 when initial mining
operations commenced.
The Fachinal property covers about 90 square miles and is located south of
Coihaique, the capital of Region XI in southern Chile, and approximately 10
miles west of the town of Chile Chico. The project lies on the east side of the
Andes at an elevation ranging from 600 to 4,500 feet and is serviced by a gravel
road from Chile Chico. The Fachinal property is known to contain 67 veins
containing gold and silver located in five mineralized zones. The Company has
been granted exploitation concessions (the Chilean equivalent to an unpatented
claim except that the owner does not have title to the surface which must be
separately acquired from the surface owner) covering the mineralized areas of
Fachinal property as well as the necessary surface rights to permit mining
there.
During 1994 and the first half of 1995, the work program at the Fachinal
property included diamond drilling, underground drifting and cross-cutting at
Laguna Verde, Temer and Guanaco, initiation of metallurgical testing, mine
modeling, mine planning and cost estimating. Following the completion by an
independent engineering firm of a final feasibility study, the Company commenced
in July 1994 with the construction of mining facilities on the Fachinal
property.
Construction of new mining facilities was completed on schedule in October
1995 and include both underground and open pit mining operations, with an
estimated 1,650 tons per day of throughput. The milling facility uses
conventional crush/grind/floatation methods to produce a gold/silver
concentrate, which is then shipped to off-site smelters for processing. As of
December 31, 1995, the total project construction cost was approximately $40.8
million, which was less than the originally budgeted $41.8 million. Initial
production began in October 1995 at the Fachinal Mine, which is one of the
southern most mining operations in the world, employing approximately 225
workers near the town of Chile Chico, located 800 miles south of Santiago at an
elevation of approximately 1,200 feet. The Company estimates that the Fachinal
Mine will produce approximately 44,000 ounces of gold and 2.8 million ounces of
silver during its first full year of
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production. As of December 31, 1995, the Company had expended a total of $79.0
million (including capitalized interest of $7.4 million) in connection with the
development of the Fachinal Mine.
Subsequent to the commencement of initial production activities at the
Fachinal Mine on October 19, 1995, a total of 96,212 tons of ore was milled
during the balance of 1995, and a total of 3,586 ounces of gold and 334,816
ounces of silver were produced during that period.
Open pit and underground ores are being processed in a mill that processes
540,000 tons per year. Coeur estimates that cash operating costs at the Fachinal
mining facilities will approximate $225 per gold equivalent ounce in the future.
Furthermore, Coeur estimates that Fachinal's underground and open pit mining
operations will process approximately 1,650 tons per day. Prior to January 1,
1996, initial production costs were capitalized as project startup costs.
During the startup phase, a variance between mine and mill head grades from
those anticipated in the feasibility study occurred. This was caused by
excessive dilution and inadequate grade control procedures at the open pit mine.
The Company has addressed these matters by implementing stricter geologic
controls and additional equipment operator training.
Economic, precious metals bearing mineralization at Fachinal occurs in an
extensive epithermal, quartz-veins system hosted in Jurassic volcanic rocks.
Based on a reserve-review report dated April 1994, by Micon International
Limited, less 1995 production of 127,201 tons, the total remaining, in-place,
open-pit and underground proven and probable reserves at the Fachinal property
are approximately 4.431 million tons averaging 0.072 ounces per ton gold and
3.22 ounces per ton silver. The Fachinal open-pit reserve estimate, totaling
3.472 million tons averaging 0.058 ounces per ton gold and 2.53 ounces per ton
silver, is based on an internal cutoff grade of 0.041 ounces per ton equivalent
gold. The underground reserve which totals 959,000 tons at 0.122 ounces per ton
gold and 5.73 ounces per ton silver is based on internal cutoff grades ranging
from 0.088 to 0.102 ounces per ton equivalent gold. Both reserve estimates are
based on gold and silver prices of $375.00 per ounce and $5.00 per ounce,
respectively. Average grades reflect extractive dilution, but not losses during
the recovery process. The Company estimates, based upon thorough metallurgical
testing, recovery rates between 89% -- 94% for gold and 85% -- 93% for silver.
The open-pit reserve estimate has also identified 872,000 tons of mineralized
material, averaging 0.05 ounces per ton gold and 1.14 ounces per ton silver.
Likewise, the underground resource estimate has identified an additional 990,000
tons of mineralized material averaging 0.09 ounces per ton gold and 8.55 ounces
per ton silver. Confidence in these additional tonnages is insufficient for them
to be included in the Fachinal reserve. Numerous other attractive exploration
targets with known precious-metals mineralization remain to be evaluated.
Although the government and economy of Chile have been relatively stable in
recent years, the ownership of property in a foreign country is always subject
to the risk of expropriation or nationalization with inadequate compensation.
Any foreign operation or investment may also be adversely affected by exchange
controls, currency fluctuations, taxation and laws or policies of particular
countries as well as laws and policies of the United States affecting foreign
trade, investment and taxation.
EL BRONCE MINE
In July 1994, the Company entered into an agreement with Compania Minera El
Bronce de Petorca, a Chilean corporation ("CMEB"), pursuant to which the Company
acquired operating control and a 51% interest in any operating profits and an
option exercisable through July 1997 to also purchase from CMEB a 51% equity
interest in the producing El Bronce Mine. The El Bronce Mine is an underground,
gold-silver mine located on approximately 34,000 acres in the Andean foothills
about 90 miles north of Santiago, Chile and is accessible by road. The property
consists of 64 exploitation concessions and 10 exploration concessions. Surface
rights to permit mining on the property are leased from private owners. Ore is
produced from an extensive, precious-metals bearing, epithermal, quartz-vein
system hosted in Cretaceous volcanic rocks. Pursuant to the agreement, the
Company has made option payments totaling $12.7 million to CMEB and has expended
$4.3 million through 1995 for exploration and mine development activities. In
addition, in January 1996, the Company made the option payment of $3.9 million
due in July 1996. In order to exercise its option to acquire a 51% equity
interest in the mine, the Company will be required to invest an additional $5.0
million
8
<PAGE> 10
by July 1997. Current exploratory and developmental activities are designed to
increase ore reserves and increase annual gold production to 65,000 ounces from
the present level of 40,000 ounces of gold. The Company expended $1.2 million
and $3.1 million during 1994 and 1995, respectively, for exploratory and
developmental activities.
In October 1994, the Company assumed operating control of the El Bronce
Mine, in which the Company has a 51% interest in any operating profits. The
Company plans to maintain the 500 to 600 tons per day milling rate at the mine,
improve the mining method to increase ore reserves and to restructure the work
force. The mill currently has a 1,200 ton per day capacity. In addition, the
Company is conducting exploratory activities at three main exploration sites
within the exploration exploitation area surrounding the mine.
Based on a reserve-report review dated January 1996 by Compania Minera CDE
El Bronce, in-place, proven and probable ore reserves on the El Bronce property
total 777,000 tons averaging 0.205 ounces per ton gold. An additional 608,000
tons of mineralized material, averaging 0.20 ounce per ton gold, has been
identified, but is currently insufficiently defined to be included in the
reserve. The reserve is based on an internal cutoff of 0.088 ounces per ton
gold. The Company estimates, based on past experience and metallurgical testing,
mill recovery rates are 92% for gold and 90% for silver. The mineralized system
remains geologically open both along strike and down-dip.
The following table sets forth El Bronce Mine production data subsequent to
its acquisition by Coeur on October 3, 1994. As stated above, the Company has a
51% interest in any operating profits from the mine. The Company's 5l% interest
in the mine's operating profits from October 3, 1994 through December 31, 1994
amounted to $1,023,537 and for the year ended December 31, 1995 amounted to
$763,166. The following data represents 100% of the mine s production.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Ore milled (tons)......................... 56,760 286,512
Gold (ounces)............................. 9,712 43,204
Silver (ounces)........................... 39,605 142,229
</TABLE>
The following sets forth the costs of production per ounce of gold during
the periods set forth below at the El Bronce Mine. Such costs include mining,
processing and direct administration costs, royalties and exploration expenses.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- -----------------
<S> <C> <C>
Cash costs per ounce...................... $ 174.67 $ 305.68
Depreciation, depletion and
amortization per ounce.................. 20.40 20.51
------------- -------------
$ 195.07 $ 326.19
============= =============
</TABLE>
Prior to Coeur's assuming ownership, the mine was not investing sufficient
amounts to expand production and cash costs were in excess of $400 per ounce.
During 1995, a significant effort was commenced to develop additional working
areas which are expected to lead to higher mine output. As a result, operating
costs initially increased; however, it is management's expectation that costs
will decline to approximately $250 per ounce of gold as production increases
over a three-year development program.
COEUR D'ALENE MINING DISTRICT -- SILVER VALLEY RESOURCES CORPORATION
Silver Valley Resources Corporation ("Silver Valley") owns the Coeur,
Galena and Caladay mines situated in the Coeur d'Alene Mining District of Idaho.
Silver Valley decided on February 9, 1996 to resume mining operations at the
Coeur and Galena mines with full production planned in June 1996.
9
<PAGE> 11
In late 1994, the Company, Callahan (a wholly-owned subsidiary of the
Company) and Asarco formed Silver Valley, a Delaware corporation, and effective
January 1, 1995, the Company, Callahan and Asarco transferred certain assets,
including their interests in the Coeur, Galena and Caladay mines to Silver
Valley. Specifically, Asarco contributed to Silver Valley Asarco's (i) ownership
interest in the Joint Venture Agreement, dated August 31, 1964, related to the
Coeur Mine property; (ii) interest in the lease, dated January 15, 1947,
relating to the Galena Mine property; (iii) ownership interest in the Osburn
tailings pond; (iv) 75% interest in the royalty deficit related to the Galena
Mine property; and (v) ownership interest in certain other assets located in the
Coeur d'Alene Mining District. Coeur and Callahan contributed to Silver Valley
Coeur's or Callahan's (i) ownership and lease interest in the Coeur Mine
property; (ii) ownership and lease interest in the Galena Mine property; (iii)
ownership interest in the Caladay operating agreement; (iv) ownership interest
in certain properties surrounding the above properties; and (v) 25% interest in
the royalty deficit related to the Galena Mine property.
The Board of Directors of Silver Valley consists of six directors, three of
whom, including the Chairman of the Board, are appointed by Asarco and three of
whom, including the President, are appointed by Coeur. Pursuant to a
Shareholders' Agreement between the parties, certain specified corporate action
requires a majority vote. If the voting results in a tie at any Board Meeting,
the Chairman of the Board of Silver Valley, who also is the Chairman of the
Board of Asarco, will decide the issue. The President of Coeur also is the
President of Silver Valley and serves on its Executive Committee. Certain other
officers of Silver Valley are officers of Coeur or Asarco, which companies may
provide management and other services to Silver Valley upon the request of its
Board of Directors.
During 1995, Silver Valley commenced an underground development program
designed to increase ore reserves at the Galena Mine. During the year, 1,496
feet of drifting and 8,499 feet of diamond drilling and recalculations resulted
in the addition of 300,000 tons of ore containing 6.633 million ounces of silver
to the ore reserves. As a result of this program and increased silver prices, a
decision was made on February 8, 1996 by Silver Valley to reopen the mines. It
is anticipated that shipments of concentrate will commence in June 1996.
Furthermore, the Company estimates that the mines will produce approximately 3
million ounces of silver during the first full year of operations. A summary of
the properties owned by Silver Valley follows.
GALENA MINE
The Galena Mine property consists of approximately 1,100 acres lying
immediately west of the City of Wallace, Shoshone County, Idaho adjoining the
Coeur Mine's eastern boundary. The property consists of 52 patented mining
claims and 25 unpatented mining claims. The Galena Mine is primarily an
underground silver-copper mine, with lead credits, which is served by two
vertical shafts.
On July 26, 1992, Asarco, which was the Galena Mine operator, suspended
operations at the Galena Mine due to then prevailing silver prices ($4.31 per
ounce average for the month of July 1992) and placed the property on a care and
maintenance basis to conserve ore reserves.
Based on the ore-reserve estimate dated January 1996, of Silver Valley,
proven and probable ore reserves at the Galena Mine total 1,251,000 tons
averaging 16.76 ounces per ton silver, 8.80% lead and 0.55% copper. The Asarco
reserve estimate is based on a minimum diluted mining width of 5.0 feet for most
silver-copper and silver-lead veins and 5.5 feet for lead-zone veins. Cutoff
grade is based on the cost of breaking and producing ore from a stope, but do
not include development costs and administrative overhead. The cutoff grade
varies from area-to-area within the mine due to changing silver-copper ratios of
the ore.
The reserve estimate has also identified an additional 290,000 tons of
mineralized material which has not been included in the reserve, but given
additional definition drilling or more favorable silver prices, may become
mineable. This material averages 17.00 ounces per ton silver and 0.47% copper.
10
<PAGE> 12
The following table sets forth information, for the periods indicated,
relating to total Galena Mine production:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1988 1989 1990 1991 1992
--------- --------- --------- --------- ---------
(THROUGH
JULY)
<S> <C> <C> <C> <C> <C>
Ore milled (tons)....................... 202,097 201,494 173,687 182,836 91,617
Silver (ounces)......................... 3,048,633 3,080,539 3,066,246 3,278,650 1,572,501
Copper (pounds)......................... 1,996,045 2,058,393 1,808,408 1,993,649 1,064,085
Gold (ounces)........................... 459 323 337 332 143
</TABLE>
The Company's previous ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan on December 31, 1991,
amounted to 50% through June 11, 1992, and 62.5% thereafter until such ownership
was transferred to Silver Valley effective January 1, 1995.
The total cost of production per ounce of silver (net of credit for copper
byproduct), including mining, processing, direct administrative costs and
exploration expenses, but not including financing costs, royalties and smelter
charges, amounted to $4.50 in 1988, $4.35 in 1989, $4.19 in 1990, $3.94 in 1991
and $4.23 in 1992 prior to the temporary discontinuation of operations at the
Galena Mine on July 26, 1992. Such costs are not necessarily indicative of
actual costs that will be incurred for current mining operations.
COEUR MINE
The Coeur Mine is an underground silver mine located adjacent to the Galena
Mine in the Coeur d'Alene Mining District in Idaho, and consists of
approximately 868 acres comprised of 38 patented mining claims and four
unpatented mining claims. Commercial production began in 1976, and total
pre-production expenditures of approximately $20 million were recovered by April
1979, at which time the Company commenced receiving revenues from its
non-operating joint venture interest in the mine. Asarco was the operator of the
Coeur Mine pursuant to a joint venture agreement with the Company, Callahan and,
prior to November 30, 1990, Hecla. Until November 30, 1990, the Company owned
40% of the ores produced from the Coeur Mine and was obligated to pay 40% of the
costs. On November 30, 1990, the Company purchased Hecla's 5% interest thereby
increasing the Company's interest to 45%. Effective December 31, 1991, Coeur
increased its non-operating joint venture interest in the mine to 50% as a
result of Coeur's acquisition of Callahan, which had acquired a 5% interest in
the mine in March, 1968. Effective January 1, 1995, Coeur and Asarco transferred
their interests in the Coeur Mine to Silver Valley.
Asarco suspended operations at the Coeur mine on April 3, 1991 due to then
prevailing silver prices ($3.90 per ounce average for April 1991) and placed the
property on a care and maintenance basis to conserve ore reserves.
The following table sets forth information, for the periods indicated,
relating to total Coeur Mine production:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1988 1989 1990 1991
--------- --------- --------- -------
(THROUGH
APRIL 3)
<S> <C> <C> <C> <C>
Ore milled (tons)................................... 144,386 159,045 147,883 37,165
Silver (ounces)..................................... 2,115,623 2,198,465 2,113,341 379,856
Copper (pounds)..................................... 1,893,318 2,002,864 1,843,638 335,865
Gold (ounces)....................................... 313 433 480 80
</TABLE>
The Company's ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan's 5% interest on December
31, 1991, amounted to 45% prior to November 30, 1990 and 50% thereafter until
such ownership was transferred to Silver Valley Resources effective January 1,
1995.
11
<PAGE> 13
The total cost of production per ounce of silver (net of credit for copper
byproduct), including mining, processing, direct administration costs and
exploration expenses, but not including financing costs, royalties and smelter
charges, amounted to $4.71 in 1988, $4.36 in 1989, $4.68 in 1990 and $5.38 in
1991 prior to the suspension of operations at the Coeur Mine on April 3, 1991.
Such costs are not necessarily indicative of actual costs that will be incurred
during current mining operations.
The ore reserves at the Coeur Mine are projected to total 377,000 tons
averaging 17.33 ounces per ton silver and 0.80% copper. The Coeur unit ore
reserve estimate, dated January 1, 1991, is based on a minimum mining width of
4.5 to 5.0 feet with a minimum dilution of 1.0 foot from each margin of the
vein. Cutoff grades used in the reserve are estimated from costs based on the
unit superintendent's forecast for 1991. The reserve estimate has also
identified an additional 172,000 tons of mineralized material which has not been
included in the reserve, but given additional definition drilling or more
favorable precious silver prices, may become mineable. This material averages
14.21 ounces of silver per ton and 0.64% copper.
CALADAY MINE
The Caladay property adjoins the Galena Mine. Historically, Callahan
expensed approximately $32.5 million on the property to construct surface
facilities, a 5,101 ft. deep shaft and associated underground workings to
explore the property. The Company believes the same geologic structures which
exist at the Galena extend into the Caladay below the level of the current
Caladay workings. In addition, the Caladay facilities may be used to benefit the
Galena Mine operations.
KENSINGTON PROPERTY
On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur Alaska,
Inc. ("Coeur Alaska"), acquired the 50% ownership interest of Echo Bay
Exploration Inc. ("Echo Bay") in the Kensington venture from Echo Bay and Echo
Bay Alaska, Inc. (collectively the "Sellers"), giving Coeur 100% ownership of
the Kensington property. As a result of that transaction, Coeur assumed full
ownership and operating control of the project. Pursuant to the Venture
Termination and Asset Purchase Agreement among Coeur Alaska and the Sellers,
dated as of June 30, 1995, Coeur Alaska paid to the Sellers a total of $32.5
million and, pursuant to the Royalty Deed set forth as an exhibit to the Venture
Termination and Asset Purchase Agreement, Coeur Alaska agreed to pay Echo Bay a
scaled net returns royalty on 1 million ounces of future gold production after
Coeur Alaska recoups the $32.5 million purchase price and its construction
expenditures incurred after July 7, 1995 in connection with placing the property
into commercial production. The royalty ranges from 1% at $400 gold prices to a
maximum of 2 1/2% at gold prices above $475, with the royalty to be capped at 1
million ounces of production. Performance by Coeur Alaska of its obligations
under the agreement is guaranteed by Coeur and performance of the obligations of
the Sellers under the agreement is guaranteed by Echo Bay.
The Kensington ore body consists of multiple, precious-metals bearing,
mesothermal, quartz-pyrite-carbonate-stockwork and massive quartz purite veins
hosted in Cretaceous intrusive rocks. Based on a previous Kensington Venture
ore-reserve study, as audited during December 1994, by Woollett Consulting Ltd.,
independent consulting geologists, Kensington proven and probable ore reserves,
as of December 31, 1995, are estimated to be 13.641 million tons averaging 0.143
ounces of gold per ton totaling 1.946 million ounces of gold. An additional
3.188 million tons of mineralized material averaging 0.147 ounces per ton gold
has been identified, but is insufficiently defined to be included in the
reserve. The Kensington ore zone has not been fully delineated at depth and
several peripheral veins remain to be explored. The reserve estimate reflects
the effects of extractive dilution during the mining process, but not losses
during the recovery process. A gold price of $375.00 per ounce was used in
calculating the reserve estimate. Based upon metallurgical testing work, the
Company expects that 92% of the gold contained in ores milled will be recovered.
Coeur has completed metallurgical testing primarily consisting of bench-scale
grinding, flotation, cyanide leaching, carbon recovery and other tests, and a
subsequent pilot scale test conducted on a bulk ore sample to simulate
full-scale plant operations and to confirm selected operating parameters.
12
<PAGE> 14
During 1995, activities at Kensington continued to be directed toward
completing the permitting process, project optimization studies and feasibility
study updates. As of December 31, 1995, the Company had invested a total of
$95.4 million (including capitalized interest of $15.6 million) in the
Kensington property.
Based on a feasibility study prepared by an independent engineering firm
engaged to perform detailed design and engineering at the Kensington property,
Coeur estimates that in the event it is decided to proceed with the construction
of the Kensington facility, approximately $195 million (in addition to monies
previously expended), will be required in order to place the property into
commercial production. That estimate is based upon the engineering firm's
completion of 30% of the engineering upon the project. An updated feasibility
study is now being conducted and is expected to be completed during the second
quarter of 1996. The feasibility study contemplates that after a two-year
construction phase, the mine is expected to produce an average of approximately
200,000 ounces of gold per year.
Further development of Kensington is contingent upon several factors,
including completion of the updated feasibility study, gold prices and the
ability of the Company to obtain valid permits. The initial Kensington
feasibility study contemplates a gold price of $400 per ounce. As of February
16, 1996, the market price of gold (London final) was $404.85 per ounce.
The major permits necessary for the construction and operation of the
facility are U.S. Forest Service ("USFS") approval of the Plan of Operations,
Army Corps of Engineers Section 404 permit for tailing impoundment construction,
an EPA NPDES permit for the discharge of waste water and the City and Borough of
Juneau ("CBJ") Large Mine Permit. In 1992, the CBJ Large Mine Permit was
approved for issuance and the USFS approved the Plan of Operations. However, to
respond to concerns expressed by the environmental community, the Company
decided in July 1995 to make limited changes to the project. This triggered the
need for a supplemental environmental impact statement process and amendment of
the key permits.
The changes were made primarily to gain the support of several
environmental groups in Alaska. The key changes involve relocating the effluent
discharge point from Lynn Canal to Sherman Creek, at a point adjacent to the
tailings impoundment, and construction of a water treatment plant. While these
changes are not required by law, they are proposed in response to comments
raised by the environmental organization that they prefer fresh water discharge
instead of a marine discharge. In addition, the Company proposed to switch to
diesel fuel rather than liquid petroleum gas for power generation. As a result,
a supplemental environmental impact statement is being prepared and associated
changes will be required to be made to the National Pollution Discharge
Elimination System, the CBJ, USFS operating plan and state air quality permits.
Numerous more minor permits are required by government agencies which authorize
construction and operations.
The USFS approved the original environmental impact statement ("EIS") in
February 1992. Thereafter, administrative appeals were filed by parties opposed
to the project. The appeals alleged that the EIS did not satisfy the
requirements of the National Environmental Policy Act due to, among other
alleged reasons, inadequacy of baseline data used to analyze environmental
impacts and failure to adequately consider alternative methods of mining and
waste disposal. The appellants sought to prevent USFS approval of an operating
plan for the project pending completion of an EIS meeting all legal
requirements. On July 7, 1992, the USFS approved the Company's proposed Plan of
Operations for the project. On July 28, 1992, the USFS ruled against the
appellants upon their appeal. While Coeur believes a court would uphold the USFS
determination in the event it were to be further appealed, no assurance can be
given as to the outcome of any such appeal if filed. On September 16, 1992,
parties opposed to the project requested that the USFS withdraw its decision to
approve the operating plan on the grounds that the plan was not complete at the
time it was approved. The USFS decided not to withdraw the July 7, 1992 approval
of the Plan of Operations on November 10, 1992.
In November 1992, the project's Large Mine Permit was approved by the CBJ.
On April 30, 1993, a group opposed to the project filed an appeal in state court
to that approval, which has been denied. The appeal is now pending before the
Alaska Supreme Court.
13
<PAGE> 15
On February 1, 1996, Coeur entered into an agreement with a coalition of
environmental groups, the Kensington Coalition, represented in part by the
Sierra Club Legal Defense Fund, which eliminates potential legal challenge by
the groups to the Kensington project, and dismissal of the Supreme Court appeal.
Under the terms of the agreement, Coeur will provide for additional
environmental input at the project while maintaining its schedule for permitting
the property, which permitting process is currently in its final phase. Pursuant
to the agreement, the environmental groups will not appeal or litigate the
permits required for the project. The coalition of environmental groups are now
in the process of considering ratification of the agreement, which agreement is
not effective until ratified.
In September 1995, Coeur entered into an agreement with the EPA and the
Alaska Department of Environmental Conservation which provides for time lines to
be met by the parties for the permitting process and is expected to facilitate
issuance of draft major permits for the property by approximately May 1, 1996
and final permits by approximately July 1, 1996.
In February 1996, Coeur and a consortium of three Alaska native groups
announced that they reached an agreement which, if a decision is made to
commence construction of the mine, should assist in facilitating construction
and operation of the project, while meeting certain employment and training
goals for the Native groups working on the project. Under the terms of the
agreement between the Company and Goldbelt, Inc., Kake Tribal Corporation and
Klukwan, Inc., the native corporations have agreed to assist the Kensington
project by providing support during permitting and during mine construction and
operation, assisting in communications with local organizations and agencies
involved in mining development, as well as filling certain labor requirements
for the project. Coeur also agreed to develop and participate in training
programs for the jobs that will become available if and when mine construction
begins.
The Company owns 100% of the Jualin property, an exploratory property
located adjacent to the Kensington Property. The Jualin property consists of
approximately 9,400 acres, of which approximately 345 acres is patented claims.
FARIDE MINE
The Faride Mine is 170 meters above sea level and located in the central
plain of Region II, 10 km north of Sierra Gorda and 140 km northeast of
Antofagasta, in Chile. Access is via a well-kept 12 km long dirt road that joins
the area with paved road between Antofagasta and Calama and with the
Antofagasta/Bolivia railroad. Infrastructure in the area is very good.
In September 1994, Coeur d'Alene acquired an option exerciseable through
January 15, 1998 to acquire a 51% operating interest in the fully-developed
mine. A mine was opened in 1977 and operated through 1988, producing a total of
70,500 tons of concentration ores averaging 4.4 grams per ton gold, 224 grams
per ton silver and some direct smelting ores averaging 8.96 grams per ton gold,
1.190 grams per ton silver and 0.98% copper. Under the option, Coeur d'Alene can
acquire its 51% operating interest by paying US$4 million over a four-year
period and investing US$3.5 million in exploration.
The Faride property consists of 36 exploitation concessions covering
approximately 2,830 hectares.
Mineralization at the Faride Mine consists of at least 15 precious metal
epithermal veins that contain structurally controlled shoots, hosted in
competent granitoids. Stockworks and hydrothermal breccias of unknown extent
have been detected at depth. Several vein systems have been defined in the area,
the largest known is 1,800 meters long. The major veins being explored are
2.5 - 3.0 meters wide. Mineralization is known to extend to at least 200 meter
depths. The Company estimates that as of January 1, 1996, ore reserves at the
Faride Mine amounted to 1,785,000 tons averaging .051 ounces of gold and 3.81
ounces of silver per ton.
Coeur is performing feasibility studies, including a mill test, which, when
complete, will allow a decision to be made as to the potential of this mining
property.
14
<PAGE> 16
INTERESTS IN AUSTRALIAN MINING COMPANIES
In December 1995, the Company announced it (i) had acquired an option to
acquire 19.9% of Gasgoyne's outstanding shares and (ii) intended to extend an
offer to Gasgoyne shareholders to acquire all of Gasgoyne's outstanding shares.
In addition, in January 1996, Coeur acquired additional shares, and options
to acquire additional shares, of Orion, as a result of which Coeur presently
holds approximately 13.1% of Orion's outstanding shares, and upon exercise of
such options, would own approximately 19.2% of Orion's outstanding shares.
Additional information relating to Coeur's acquisitions of interests in Gasgoyne
and Orion are set forth below. Those transactions represent Coeur's proposed
entry into the Australian gold sector and are intended to position Coeur for
further expansion in the Australasian Region.
GASGOYNE
Gasgoyne is principally engaged in the exploration, development and
ownership of gold properties located in western Australia and Indonesia.
Headquartered in Perth, Australia, Gasgoyne's principal asset is its 50%
non-operating interest in the Yilgarn Star Gold Mine in Marvel Loch, located
approximately 70km east of Perth, which started production in 1991. Gasgoyne's
other major asset is its 45% interest in the Awak Mas Gold Project, located in
the Province of South Sulawesi of Indonesia.
On December 21, 1995, the Company announced that it (i) had entered into an
agreement with the principal shareholder of Gasgoyne pursuant to which Coeur
acquired an option (the "Option") to acquire a portion of the Gasgoyne ordinary
shares owned by such shareholder (constituting 19.9% of Gasgoyne's outstanding
shares), and (ii) intended to extend an offer (the "Offer") to Gasgoyne
shareholders to acquire all of the outstanding shares of Gasgoyne. In late
January 1996, Coeur made the filings required under the Australian securities
laws with the Australian Securities Commission ("ASC") and the Australian
Securities Exchange ("ASX"), upon which Gasgoyne's shares are listed. Coeur s
offer has been delayed by court action in Australia instituted by another
company which announced its intention to conduct a competing bid for all of
Gasgoyne's shares. There can be no assurance that the Company's proposed Offer
will be successful.
The Option
The Company entered into the above-referred Option agreement with Ioma Pty
Ltd. ("Ioma"), which is the principal shareholder of Gasgoyne and is a private
investment company controlled by Mr. Phil Crabb, Chief Executive Officer of
Gasgoyne, Mr. Rick Crabb, a director of Gasgoyne, and other members of the Crabb
family. Pursuant to that agreement, Coeur has the Option to purchase from Ioma
approximately 10.6 million Gasgoyne shares, representing approximately 19.9% of
Gasgoyne's outstanding shares, on the basis of 7 shares of Coeur common stock
plus A$60 cash (or US$45.30 based on the currency exchange rate in effect on
February 16, 1996) in exchange for each 100 Gasgoyne shares. Exercise of the
Option would require Coeur to issue 742,791 Coeur shares and pay approximately
A$6.4 million (or approximately US$4.8 million based on the currency exchange
rate in effect on February 16, 1996) to Ioma.
The right of Coeur to exercise the Option is subject to Coeur's conducting
the Offer on terms no less favorable to Gasgoyne shareholders than the terms
contained in the Option. The Option automatically will terminate if Ioma accepts
the Offer prior to receipt by Ioma of Coeur's notice to exercise the Option
(which notice cannot be given until five business days after dispatch of the
Offer to Gasgoyne shareholders). Therefore, Ioma has the ability, following the
delivery of Coeur s Offer to Gasgoyne shareholders, to accept the Offer and
thereby terminate the Option.
The Offer
On January 29, 1996, Coeur delivered the Offer and the related Part A
Statement (which are the disclosure documents required under Australian law) to
the ASC. Those documents were then registered by the ASC on January 30, 1996,
and on January 31, 1996, Coeur delivered them to the Board of Directors of
Gasgoyne and the ASX in accordance with Australian law.
15
<PAGE> 17
The Offer is subject to Coeur's becoming entitled to at least 50.1% of
Gasgoyne's outstanding Shares. In addition, the Offer also is subject to (i)
there being no takeover offer by another party for Gasgoyne shares which becomes
or is declared unconditional before the end of the Offer, (ii) there being no
material adverse change in Gasgoyne's business, financial or trading position or
condition, and (iii) there being no prescribed occurrence (as defined under the
Australian law) occurring or being threatened with respect to Gasgoyne.
Non-Australian shareholders of Gasgoyne accepting the Offer and Gasgoyne's
shareholders accepting the Offer that are entitled to less than 50 Coeur shares
will be entitled to receive only cash from Coeur in exchange for their Gasgoyne
shares by means of a nominee sale. Holders of Gasgoyne options granted prior to
December 21, 1995, may participate in the Offer by exercising their options.
The Coeur shares planned to be offered in the Offer have not been
registered under the Securities Act of 1933 (the "Act") in reliance upon
Regulation S thereunder and, consequently, the shares may not be offered or sold
by former Gasgoyne shareholders to "U.S. persons" (as defined in Rule 902(o) of
Regulation S under the Act) unless the shares are registered thereunder or an
exemption from such registration requirement is available. Pursuant to Rule
903(c)(2) of Regulation S, any Coeur shares issued to Gasgoyne shareholders may
not be offered or sold to any U.S. person prior to the expiration of a 40-day
restricted period commencing on the date of the closing of the Offer.
Coeur may decide to borrow the funds required for the cash portion of the
Offer from Rothschild Australia Limited ("Rothschild") pursuant to a loan
facility providing for a maximum of US$50 million of borrowings at an annual
interest rate equal to LIBOR plus 1.5%.
Based on there being 53,891,993 Gasgoyne shares outstanding on January 25,
1996, and assuming the exercise of outstanding options to purchase an additional
3,689,000 Gasgoyne shares, the maximum number of Coeur shares Coeur could be
required to issue in connection with the Offer, assuming that all Gasgoyne
shareholders (including Ioma) accept the Offer, would be 4,030,669 shares, which
constitutes approximately 19.7% of Coeur's presently outstanding shares.
Furthermore, the maximum amount of cash that Coeur would be required to pay to
all Gasgoyne shareholders (including Ioma) in the Offer would be approximately
A$34.5 million (or approximately US$26.0 million based on the currency exchange
rate in effect on February 16, 1996). Coeur has applied to list its shares on
the ASX in connection with the Offer.
On January 17, 1996, Sons of Gwalia Limited ("Sons of Gwalia") and Burmine
Limited ("Burmine"), both of which are Australian mining companies, jointly
announced that they intend to merge and that Sons of Gwalia, as the survivor of
the merger, will make a takeover offer for Gasgoyne's outstanding shares on the
basis of offering one Sons of Gwalia share for every three Gasgoyne shares. On
February 14, 1996, Sons of Gwalia commenced a lawsuit in Australia to enjoin the
delivery by Coeur of its Offer to Gasgoyne shareholders. As a result of that
lawsuit, the extension by Coeur of the Offer to Gasgoyne shareholders has been
delayed. Coeur cannot predict whether or the extent to which its plan to acquire
Gasgoyne shares will be successful.
Gasgoyne Business
Gasgoyne's partners in the Yilgarn Star Gold Mine are Orion (the operator)
with a 45% interest, and Gemini Mining Pty Ltd., a private Australian company
owned by the Crabb family with a 5% interest. The Yilgarn Star Gold Mine
operated as an open pit surface mine from 1991 until September 1995 and an
underground mine commenced operations on a limited basis there in October 1995.
Gasgoyne also has interests in exploration projects surrounding the Yilgarn Star
Mine.
Gasgoyne's joint venture partners in the Awak Mas Gold Project in Indonesia
are Lone Star Exploration NL, an Australian gold company which is the project
manager and holds a 45% interest in the project, and a private Indonesian
company that has a 10% interest.
The Part A Statement, which is the disclosure document required under
Australian law to be sent to Gasgoyne shareholders, was filed by Coeur as an
exhibit to its Current Report on Form 8-K filed on January 31, 1996, and
includes pro forma financial information and financial forecasts that assume the
16
<PAGE> 18
acquisition by Coeur of 100% of Gasgoyne's outstanding shares. Australian law
required the inclusion of that information in the Part A Statement.
ORION
On January 24, 1996, Coeur announced that it acquired from Homestake Mining
Company ("Homestake") the shares of and options to acquire shares of Orion held
by Homestake. As a result of that purchase, Coeur presently holds approximately
13.1% of Orion's outstanding shares and, upon exercise of such options, would
own approximately 19.2% of Orion's outstanding shares. Coeur acquired from
Homestake, for a total consideration of approximately US$10.7 million, 5.5
million Orion shares and options to purchase an additional 5.0 million shares of
Orion for an exercise price of A$1.00 per share (or U.S.$.755 based on the
currency exchange rate in effect on February 16, 1996). Coeur utilized its own
cash resources to fund the acquisition. Earlier in January 1995 and during the
last quarter of 1994, Coeur had acquired a total of 3.33 million shares of Orion
primarily in transactions on the ASX for a total cost of approximately US$3.8
million.
Orion is the operator of and has a 45% interest in the Yilgarn Star Gold
Mine. Coeur will be required to obtain the approval of Australia's Foreign
Investment Review Board prior to exercising options that would result in Coeur's
owning more than 15% of Orion's outstanding shares. Orion's shares are listed on
the Australian Stock Exchange. It is headquartered in Mt. Pleasant Western
Australia and, in addition to owning its 45% operating interest in the Yilgarn
Star Mine, also has a 49% non-operating interest in the Salsigne Mine in France
as well as exploration interests in Australia and New Zealand.
SILVER AND GOLD PRICES
The Company's operating results are substantially dependent upon the world
market prices of silver and gold. The Company has no control over silver and
gold prices, which can fluctuate widely. The volatility of such prices is
illustrated by the following table, which sets forth the high and low prices of
silver (as reported by Handy and Harman) and gold (London final) per ounce
during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1992 1993 1994 1995
------------------ ------------------ ------------------ ------------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Silver....................... $ 4.32 $ 3.63 $ 5.37 $ 3.55 $ 5.76 $ 4.63 $ 6.01 $ 4.36
Gold......................... $359.60 $330.35 $405.60 $326.10 $396.25 $369.65 $395.55 $372.40
</TABLE>
MARKETING
Coeur has historically sold its gold and silver from its mines both
pursuant to forward contracts and at spot prices prevailing at the time of sale
to various precious metals firms. Generally, its hedging policy is to sell
forward not more than 50% of its estimated annual gold production; however,
actual hedging activities have not approached the 50% threshold. As of December
31, 1995, the Company has entered into forward contracts to deliver a total of
68,444 ounces of gold at an average price of $431.52 per ounce, which represents
8% of its scheduled production through 1998 and less than 2% of its total gold
reserves.
EXPLORATORY MINING PROPERTIES
Coeur, either directly or through its wholly-owned subsidiaries, owns,
leases and has interests in certain exploration-stage mining properties located
in the United States, Guyana, Chile, and New Zealand. Exploration expenses of
approximately $2.5 million, $3.9 million and $4.9 million were incurred by the
Company in connection with exploration activities in 1993, 1994 and 1995,
respectively.
17
<PAGE> 19
GOVERNMENT REGULATION
General
The Company's mining and mineral processing operations and property
exploration and development activities are subject to extensive federal, state
and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have never
required the Company to close any mine and the Company is not presently subject
to any material regulatory proceedings related to such matters, the costs
associated with compliance with such regulatory requirements are substantial and
possible future legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development of the
Company's properties, the extent of which cannot be predicted. In the context of
environmental permitting, including the approval of reclamation plans, the
Company must comply with known standards and regulations which may entail
significant costs and delays. Although Coeur has been recognized for its
commitment to environmental responsibility and believes it is in substantial
compliance with applicable laws and regulations, amendments to current laws and
regulations, the more stringent implementation thereof through judicial review
or administrative action or the adoption of new laws, could have a materially
adverse effect upon the Company.
For the years ended December 31, 1994 and 1995, the Company expended
approximately $3.0 million and $2.9 million, respectively, in connection with
routine environmental compliance activities at its operating properties and
expects to expend approximately $3.0 million for that purpose in 1996. In
addition, as of December 31, 1995, the Company had expended approximately $6.6
million on environmental and permitting activities at the Kensington property
and expects to spend approximately $2.1 million for that purpose in 1996. The
expenditures at Kensington have been capitalized as part of its development
cost. Future environmental expenditures will be determined by governmental
regulations and the overall scope of the Company's operating and development
activities.
Federal Environmental Laws
EPA Regulations. Mining wastes are currently exempt to a limited extent
from the extensive set of Environmental Protection Agency ("EPA") regulations
governing hazardous waste. While extraction and bonification wastes are
generally exempt from the Resource Conservation and Recovery Act ("RCRA"),
certain processing and other wastes are now regulated as hazardous wastes. The
EPA continues to evaluate the development of a program to regulate mining waste
pursuant to its solid waste management authority under RCRA. In this connection,
legislative re-authorization of RCRA is being discussed in Congress and the EPA
is studying regulations concerning how mine wastes should be managed and
regulated. If the Company's mine wastes were treated as hazardous waste or such
wastes resulted in operations being designated as a "Superfund" site under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"
or "Superfund") for cleanup, material expenditures would likely be required for
the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, the current owner or operator of the
land and the owner or operator at the time of its contamination may be held
liable and may be forced to undertake remedial cleanup action or to pay for the
government's cleanup efforts.
Additional regulations or requirements may also be imposed upon the
Company's tailings and waste disposal operations at the Rochester Mine under the
Nevada Water Pollution Control Law.
The Company's commitment to environmental responsibility has been
recognized in 14 awards received since 1987, which included the Dupont/Conoco
Environmental Leadership Award, awarded to the Company on October 1, 1991 by a
judging panel that included representatives from environmental organizations and
the federal government, the "Star" award granted on June 23, 1993 by the
National Environmental Development Association, and the Environmental Waikato
Regional Council award for Golden Cross environmental initiative granted on May
15, 1995. The receipt of such awards does not relieve the Company of its
obligations to comply with all applicable environmental laws.
18
<PAGE> 20
Natural Resources Laws
The Company is subject to federal and state laws designed to protect
natural resources. The Company and Callahan were advised by the U.S. Department
of Interior in July 1995 that they were identified as potentially responsible
parties for damages resulting from alleged injury to federal natural resources
with respect to the Bunker Hill Superfund Site. The Company presently cannot
state whether or estimate the extent to which, if any, it will be liable for any
such damages. However, the Company does not believe its liability, if any,
relating to the matter will be material in amount.
Pending Mining Legislation
Legislation is presently being considered in the U.S. Congress to change
the Mining Law of 1872 (the "Mining Act") under which the Company holds mining
claims on public lands. It is considered possible that the Mining Act will be
amended or be replaced by stricter legislation in the future. The legislation
under consideration contains strict new environmental standards and conditions,
additional reclamation requirements and extensive new procedural steps which
would be likely to result in delays in permitting. Among the bills under
consideration are bills calling for an 8% gross royalty; a 2.5% net smelter
return royalty; and a 3.5% or 5% net proceeds royalty on the value of minerals
mined on public lands, payable to the U.S. government. Coeur believes that if
and when any royalty is imposed, it will not be a gross royalty. A significant
portion of Coeur's U.S. mining properties are on public lands. Whether changes
will be enacted or the extent of any changes is not presently known and the
potential impact on the Company's United States activities is difficult to
predict.
Foreign Government Regulations
The mining properties of the Company that are located in New Zealand and
Chile are subject to various government laws and regulations pertaining to the
protection of the air, surface water, ground water and the environment in
general, as well as the health of the work force, labor standards and the
socioeconomic impacts of mining facilities upon the adjacent communities. The
Company believes it is in substantial compliance with all applicable laws and
regulations to which it is subject in both Chile and New Zealand.
EMPLOYEES
At January 31, 1996, the Company employed a total of 1,183 full-time
employees, of which 47 are located at the Company's executive offices in Coeur
d'Alene, Idaho, 290 are employed at the Rochester Mine, 167 are employed at the
Golden Cross Mine in New Zealand, 663 are employed at the Fachinal and El Bronce
Mines in Chile, and 16 are employed at the Kensington property in Alaska. The
Company maintains labor agreements under country statutes in New Zealand at the
Golden Cross Mine and in Chile at the Fachinal and El Bronce Mines. Both
agreements are for three years and currently are being proactively administered.
In the opinion of the Company, its labor relations have been satisfactory. The
employees of Silver Valley Resources are employees of that company.
ITEM 2. PROPERTIES.
Information regarding the Company's properties is set forth under Item 1
above.
ITEM 3. LEGAL PROCEEDINGS.
On February 7, 1995, the Internal Revenue Service ("IRS") issued a 30-day
letter assessing tax deficiencies of $738,806, which, if resolved in favor of
the IRS, would have (i) subjected the Company to the deficiency, decreased net
operating loss carry forwards by $28.2 million and resulted in the forfeiture of
approximately $2 million appending tax refunds. Coeur filed a petition in the
U.S. Tax Court to contest the assessment and on August 7, 1995, the Company
settled the issues. Pursuant to the settlement, no deficiency was imposed and
income tax refunds totaling $2,939,903, including accrued interest, were
released by the IRS to the Company. The Company is still disputing one issue
involving the deductibility of certain costs which, if resolved in favor of the
IRS, would require the payment of approximately $130,000 by the Company. The
19
<PAGE> 21
Company believes the remaining matter in dispute has been treated by it in a
manner that is consistent with applicable law.
Reference is made to Item 1 (Business) -- "Interests in Australian Mining
Companies -- Gasgoyne -- The Offer" -- above for information relating to a
lawsuit commenced in Australia in February 1996 against the Company to enjoin
its proposed Offer to acquire Gasgoyne shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the Company's
current executive officers:
<TABLE>
<CAPTION>
OFFICE WITH APPOINTED
NAME AGE THE COMPANY TO OFFICE
- ------------------- --- ------------------------------ ----------
<S> <C> <C> <C>
Dennis E. Wheeler 53 Chairman of the Board 1992
President 1980
Chief Executive Officer 1986
Michael L. Clark 51 Senior Vice President 1992
Chief Operating Officer
James A. Sabala 41 Senior Vice President 1987
Chief Financial Officer 1982
Treasurer
Michael C. Tippett 57 Senior Vice President -- 1995
Exploration and New Business
Development
William F. Boyd 57 Vice President, 1990
Corporate Counsel & Secretary
Alan L. Wilder 47 Vice President -- 1992
Engineering and
Operations Management
Thomas T. Angelos 40 Controller 1987
</TABLE>
Messrs. Wheeler, Sabala, Boyd and Angelos have been principally employed by
the Company for more than the past five years. Prior to his employment with the
Company in October 1992, Mr. Clark had served as the Executive Vice President
and Chief Operating Officer of Pegasus Gold, Inc. since 1990. Mr. Wilder was a
consultant in 1990 and 1991, and was the Manager of Engineering and Construction
for the Company in 1991 until his appointment as an executive officer effective
January 1, 1992. Prior to his appointment to his current position on May 9,
1995, Mr. Tippett was Executive Vice President -- CDE Chilean Mining Corporation
from May 13, 1991 to May 9, 1995.
20
<PAGE> 22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") Composite Tape and the Pacific Stock Exchange. The following table sets
forth, for the periods indicated, the high and low closing sales prices of the
Common Stock as reported on the NYSE Composite Tape:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1994:
First Quarter......................................... $23.000 $18.375
Second Quarter........................................ 21.750 16.625
Third Quarter......................................... 22.125 17.500
Fourth Quarter........................................ 21.375 14.750
1995:
First Quarter......................................... 18.500 14.750
Second Quarter........................................ 21.500 17.500
Third Quarter......................................... 20.875 17.250
Fourth Quarter........................................ 20.875 16.625
</TABLE>
The Company paid per share cash distributions or dividends on its Common
Stock of $.15 on each of April 21, 1995, April 15, 1994, April 16, 1993 and
April 15, 1992; $.12 on April 12, 1991; and $.11 on each of April 20, 1990 and
April 21, 1989. Future distributions or dividends on the Common Stock, if any,
will be determined by the Company's Board of Directors and will depend upon the
Company's results of operations, financial conditions, capital requirements and
other factors.
At February 16, 1996, there were 8,246 record holders of the Company's
outstanding Common Stock.
21
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates and dore........... $ 49,035 $ 41,414 $ 67,990 $ 79,606 $ 89,239
Less cost of mine operations............ 44,072 37,829 59,804 67,802 72,210
-------- -------- -------- -------- --------
Gross profits........................... 4,963 3,585 8,186 11,804 17,029
Other income............................ 7,714 4,812 5,388 12,587 9,504
-------- -------- -------- -------- --------
Total income............................ 12,677 8,397 13,574 24,591 26,533
Expenses.................................. 29,178 14,118 31,548 29,392 27,591
-------- -------- -------- -------- --------
Net loss from continuing operations before
income taxes............................ (16,501) (5,721) (17,974) (5,001) (1,058)
Provision (benefit) for income taxes...... (1,198) (4,233) (3,932) (265) 200
-------- -------- -------- -------- --------
Loss from continuing operations........... (15,303) (1,488) (14,042) (4,736) (1,258)
Income from discontinued operations
(net of taxes)(1)....................... 904 729 752 793 2,412
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of
change in accounting method............. (14,399) (759) (13,290) (3,943) 1,154
Cumulative effect of change in accounting
method(2)............................... 5,181
-------- -------- -------- -------- --------
Net income (loss)......................... $(14,399) $ (759) $ (8,109) $ (3,943) $ 1,154
======== ======== ======== ======== ========
Per Share Data:(3)
Earnings per share data:
Loss from continuing operations......... $(1.00) $(0.10) $(0.92) $(0.31) $(.08)
Income from discontinued operations (net
of taxes)............................ 0.06 0.05 0.05 0.05 0.15
------ ------ ------ ------ -----
Income (loss) before cumulative change
in accounting method................. (0.94) (0.05) (0.87) (0.26) 0.07
Cumulative effect of change in
accounting method.................... -- -- 0.34 -- --
------ ------ ------ ------ -----
Net income (loss)....................... $(0.94) $(0.05) $(0.53) $(0.26) $0.07
======== ======== ======== ======== ========
Cash dividends per share................ $ 0.12 $ 0.15 $ 0.15 $ 0.15 $0.15
======== ======== ======== ======== ========
Weighted average number of shares
of Common Stock and equivalents
used in calculation..................... 15,308 15,317 15,328 15,388 15,888
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets.............................. $261,034 $324,878 $325,249 $412,361 $445,646
Working capital........................... 129,883 179,370 104,883 170,087 105,597
Long-term debt............................ 57,902 131,134 129,234 227,193 174,000
Shareholders' equity...................... 183,938 180,991 170,849 160,292 239,832
</TABLE>
- ---------------
(1) On May 2, 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4.0 million was paid at
the time of closing and the balance is payable over the next five years. The
results
22
<PAGE> 24
of operations and the gain on sale of Flexaust manufacturing segment are
presented as "Discontinued Operations." The Company recorded a pre-tax gain
on the sale of approximately $3.9 million ($2.2 million net of income taxes)
during the second quarter of 1995.
(2) Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards (FAS)
109, "Accounting for Income Taxes." FAS 109 requires an asset and liability
approach to accounting for income taxes and establishes criteria for
recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related
to federal and certain state net operating loss carryforwards. FAS 109 also
contains new requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of an
incremental interest in the Rochester Mine acquired in 1988 and CDE Chilean
Mining Corp. acquired in 1990 to reflect the gross purchase value previously
reported net-of-tax. The cumulative effect of the accounting change on prior
years at January 1, 1993 is a nonrecurring gain of $5,181,188, or $.34 per
share, and is included in the Consolidated Statement of Operations for the
year ended December 31, 1993. Other than the cumulative effect, the
accounting change had no material effect on the results of operations for
the year ended December 31, 1993.
As of January 1, 1993, after giving effect to the implementation of FAS
109, the significant components of the Company's net deferred tax liability
were as follows:
<TABLE>
<CAPTION>
DEFERRED INCOME TAXES
---------------------------
ASSETS LIABILITIES
----------- -----------
<S> <C> <C>
Property, plant and equipment.................. $16,756,918
AMT credit carryforwards....................... $ 938,672
Business credit carryforwards.................. 628,933
Net operating loss carryforwards............... 17,721,115
----------- -----------
Total..................................... 19,288,720 16,756,918
Less -- valuation allowance.................... (7,927,904)
----------- -----------
Net....................................... $11,360,816 $16,756,918
=========== ==========
</TABLE>
As permitted by FAS 109, prior year financial statements have not been
restated to reflect the change in accounting method.
(3) Earnings per share are calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are deemed
to be dilutive. The 6% Convertible Subordinated Debentures Due 2002 are
considered to be Common Stock equivalents. Accordingly, such debentures are
assumed to be converted, and interest expense on such debentures, net of tax
expense, has been considered in the computation of earnings per share,
except in those instances where the effects of conversion would be
antidilutive.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
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. 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; the El Bronce Mine, a Chilean gold mine of which the Company
acquired operating control in October 1994; and the Fachinal Mine, a Chilean
gold mine wholly-owned by the Company at which initial production commenced in
late October 1995.
23
<PAGE> 25
Effective January 1, 1995, the Company, Callahan (a wholly-owned subsidiary
of the Company) and Asarco contributed to Silver Valley their interests in and
relating to the Galena and Coeur Mines in Idaho, at which mining activities were
suspended in July 1992 and April 1991, respectively, due to then prevailing
silver prices and a desire to conserve ore reserves, and the adjoining Caladay
property, a silver exploration property. On February 9, 1996, Silver Valley
announced a program to resume operations at the Coeur and Galena Mines in June
1996. Silver Valley estimates that during the mine's first full year of
operations, they will produce a total of approximately 3,000,000 ounces of
silver per annum. Silver Valley, of which Asarco owns 50% and the Company and
Callahan own 50%, is in the second year of a two-year program pursuant to which
it is investing approximately $25 million over the initial mine life in
development and exploration at the properties in connection with which it is
expanding the existing workings, improving infrastructure and diamond drilling
to increase reserves and mine life.
The Company has an option until July 1997 to purchase a 51% ownership
interest in the El Bronce Mine if it invests the remaining $3.9 million option
payment and also invests a minimum of an additional $1.1 million for exploration
and mine development designed to expand ore reserves and increase annual gold
production above the current level of 40,000 ounces per year.
Construction of the new Fachinal mine was completed at a total cost of
approximately $40.8 million and initial production commenced in October 1995.
The mine presently is expected to produce approximately 44,000 ounces of gold
and 2.8 million ounces of silver in its first full year.
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 February 16, 1996 was $404.85 per ounce. The Company is unable
to control the timing of the issuance of the remaining required permits.
During 1995 and early 1996, the Company acquired shares and options to
acquire shares of two Australian gold mining companies, Orion and Gasgoyne, and
commenced an effort to acquire all of Gasgoyne's outstanding shares, thereby
positioning itself for expansion in the Australasian Region. If the offer for
all of Gasgoyne's outstanding shares is fully accepted and completed, Coeur
estimates that it would issue approximately 4.0 million additional shares of
Common Stock and pay approximately US$26 million (based on the currency exchange
rate in effect on February 16, 1996). If Coeur exercises its option to acquire
additional Orion shares, Coeur would be required to pay approximately US$3.8
million (based on the currency exchange rate in effect on February 16, 1996) to
fund such exercise.
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.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Sales and Gross Profits
Sales of concentrates and dore in 1995 increased by $9,633,113, or 12%,
over 1994. The increase is primarily attributable to an increase in gold and
silver production. Silver and gold prices averaged $5.19 and $384.16 per ounce,
respectively, in 1995 compared to $5.28 and $384.01 per ounce, respectively, in
1994. During 1995, the Company produced 7,175,394 ounces of silver and 167,985
ounces of gold compared to 6,180,215 ounces of silver and 129,239 ounces of gold
in 1994.
The cost of mine operations in 1995 increased by $4,408,045, or 7%, over
1994. Gross profit from mine operations increased by $5,225,060, or 44%, over
1994. Mine operations gross profit as a percent of sales increased to 19% in
1995 compared to 15% in 1994. The gross profit increase was primarily
attributable to the decreases in silver and gold production costs in 1995 and
increased silver and gold production.
24
<PAGE> 26
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $232 per ounce in 1995, compared to $277 per ounce during 1994. The
decrease was primarily attributable to (i) the presence in 1994 of a harder
grinding ore in the open pit requiring more milling and chemicals in the
processing and lower grade of ore being provided from the underground portion of
the mine; and (ii) the availability of additional underground production, a
better blending of open-pit and underground ore, and the mining of less waste in
the open pit in 1995. The cash costs of production per ounce of silver on a
silver equivalent basis at the Rochester Mine amounted to $3.71 per ounce in
1995, compared to $3.57 per ounce in 1994. Cash operating costs at the El Bronce
Mine averaged $306 per ounce of gold during its first full year of operation.
Other Income
Interest and other income in 1995 decreased by $3,083,291, or 24%, compared
with 1994. The decrease is primarily due to a decrease in the level of the
Company's cash and securities portfolio in 1995, notwithstanding a gain of $2.7
million arising from the sale by the Company of common shares of International
Curator in the third quarter of 1994 and a gain of approximately $4.4 million
from the sale of gold and silver purchased in the open market which was then
delivered pursuant to fixed price forward contracts during 1995.
Expenses
Total expenses in 1995 decreased by $1,801,138, or 6%, from 1994. The
decrease is primarily due to a significant decrease in interest expense of
$1,653,115 in 1995 compared to 1994. In addition, a non-recurring write-off of
$800,000 was recorded in 1994 as a result of an adverse judgment in a lawsuit
described below relating to four promissory notes issued by a predecessor of the
Company.
Loss From Continuing Operations
As a result of the above, the Company's loss from continuing operations
before income taxes decreased to $1,057,887 in 1995 compared to a loss from
continuing operations of $5,000,802 in 1994. The provision for income taxes
amounted to $199,703 in 1995, compared to a benefit of $265,312 in 1994. As a
result, the Company reported a net loss from continuing operations of
$1,257,590, or $.08 per share, in 1995, compared to a net loss from continuing
operations of $4,735,490, or $.31 per share, in 1994.
Income From Discontinued Operations
On May 2, 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4 million was paid at the
time of closing and the balance is payable over the next five years. The results
of operations and the gain on sale of Flexaust manufacturing segment are
presented as "Discontinued Operations." The Company reported income from
discontinued operations of $2.4 million, or $.15 per share, compared with
$792,926, or $.05 per share in 1994.
Net Income (Loss)
As a result of the above, the Company reported net income of $1,154,352, or
$.07 per share, in 1995, compared to a net loss of $3,942,564, or $.26 per
share, in 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Sales and Gross Profits
Sales of concentrates and dore in 1994 increased by $11,616,272, or 17%,
over 1993. The increase is primarily attributable to an increase in gold
production and increases in metal prices. Silver and gold prices averaged $5.28
and $384.01 per ounce, respectively, in 1994 compared to $4.30 and $359.77 per
ounce, respectively, in 1993. During 1994, the Company produced 6,180,215 ounces
of silver and 129,239 ounces of gold compared to 6,119,219 ounces of silver and
123,310 ounces of gold in 1993. The increase in gold production is due to the
Company's acquisition of an 80% interest in the Golden Cross Mine effective
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April 30, 1993. The Company's 80% interest in Golden Cross production in 1994
amounted to 67,400 ounces of gold and 222,246 ounces of silver compared to
56,898 ounces of gold and 175,325 ounces of silver in 1993.
The cost of mine operations in 1994 increased by $7,998,962, or 13%, over
1993. Gross profit from mine operations increased by $3,617,310, or 44%, over
1993. Mine operations gross profit as a percent of sales increased to 15% in
1994 compared to 12% in 1993. The increase was primarily attributable to the
increases in silver and gold prices in 1994 over the prior year.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $277 per ounce in 1994, compared to $245 per ounce during the four
months ended April 30, 1993 and $220 per ounce during the eight months ended
December 31, 1993. The increase was primarily attributable to the presence of a
harder grinding ore in the open pit requiring more milling and chemicals in the
processing and lower grade of ore being provided from the underground portion of
the mine. The cash costs of production per ounce of silver on a silver
equivalent basis at the Rochester Mine amounted to $3.57 per ounce in 1994,
compared to $3.55 per ounce in 1993.
Other Income
Interest and other income in 1994 increased by $7,199,593, or 134%, over
1993. The increase is primarily due to an increase in the level of the Company's
cash and securities portfolio and a gain of $2.7 million arising from the sale
by the Company of common shares of International Curator Ltd. in the third
quarter of 1994.
Expenses
Total expenses in 1994 decreased by $2,155,812, or 7%, from 1993. The
decrease is primarily due to the non-recurring write-offs of $9,374,000, or $.61
per share, effected in the third quarter of 1993. Those write-offs are discussed
below and included one-time provisions for litigation settlement of $5,875,000,
environmental settlement of $1,230,000 and the write-off of uncollectible notes
receivable of $2,268,564. A non-recurring write-off of $800,000 was recorded in
1994 as a result of an adverse judgment in a lawsuit described below relating to
four promissory notes issued by a predecessor of the Company.
On September 22, 1994, a judgment was entered against the Company in the
United States District Court for the District of Idaho in a case entitled
Goldberg v. Coeur d'Alene Mines Corporation in the amount of $725,688 plus
attorney fees. The action involves an alleged claim by the plaintiff to recover
on four promissory notes made by a predecessor of the Company. The notes are
claimed to be the obligation of the Company by virtue of successive mergers
which occurred in 1974 and in 1988. Plaintiff filed with the court a cost bill
in the approximate amount of $225,000. The claim was settled on January 11, 1995
by a payment of $800,000.
On November 12, 1993, the Company's Board of Directors approved the
proposed settlement of Kassover v. Coeur d'Alene Mines Corporation, a class
action originally filed in November 1990 and amended in March 1991 alleging
violations of the federal securities laws and common law primarily in connection
with the Company's public offering of Common Stock in September 1990. The
proposed settlement called for the Company to (i) issue to the class members
Common Stock of the Company having a fair market value of $4 million based on
the average closing sale price of the Common Stock on the New York Stock
Exchange during the five trading days immediately preceding the court hearing to
be held in connection with the settlement and (ii) pay $1,875,000 in cash. On
June 24, 1994, the U.S. District Court for the District of Idaho approved the
settlement and prior to the end of 1994, a total of 220,083 shares of Common
Stock were issued in connection with the settlement. The Board's decision
reflected its desire to avoid the continuing substantial costs and expenses
associated with the lawsuit and the inherent uncertainties of litigation. The
Company recorded a litigation settlement expense of $5,875,000 in the third
quarter of 1993.
During October 1993, the Company and Callahan negotiated a tentative
settlement agreement with the U.S. Environmental Protection Agency (the "EPA")
and a group of other companies that are potentially responsible parties ("PRPs")
in connection with the Bunker Hill Superfund site. The Company and Callahan had
been notified in February 1990 by the EPA that they were PRPs in connection with
that site, where the
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EPA claimed there was a need for cleanup action under the Comprehensive
Environmental Response Compensation and Liability Act of 1980. The negotiated
settlement agreement called for the Company and Callahan to pay a total of
$1,230,000 to a group of other PRPs in order to remove the Company and Callahan
from any additional cleanup liability relating to the site. Accordingly, the
Company recorded a non-recurring environmental settlement expense of $1,230,000
during the third quarter of 1993. An order approving the settlement was issued
by the United States District Court for the District of Idaho on November 17,
1994, and the settlement amount was paid on December 16, 1994.
During September 1993, the Company commenced foreclosure proceedings upon
the collateral underlying two delinquent collateralized promissory notes, the
recorded principal and accrued interest on which amounted to $2,268,564. The
notes originally were acquired by a corporation that merged with the Company in
1988. Demand for payment had been made without satisfaction and the Company
discontinued accruing interest on the notes in October 1991. As a result of the
institution of the foreclosure proceedings and the Company's inability to
ascertain what amounts, if any, could be realized therefrom, the Company
effected a non-recurring write-off of uncollectible notes receivable of
$2,268,564 in the third quarter of 1993.
The above-described decrease in non-recurring expenses in 1994 from 1993
was partially offset by an increase in interest expense of approximately $6.0
million in 1994, which was related to the issuance of $100 million principal
amount of 6 3/8% Convertible Subordinated Debentures Due 2004 in the first
quarter of 1994, and increases in administrative expenses of approximately $.2
million and mining exploration of approximately $1.3 million.
Loss From Continuing Operations Before Accounting Change
As a result of the above, the Company's loss from continuing operations
before income taxes amounted to $5,000,802 in 1994 compared to $17,973,517 in
1993. The benefit for income taxes amounted to $265,312 in 1994, compared to a
benefit of $3,931,839 in 1993. As a result, the Company reported a net loss from
continuing operations of $4,735,490, or $.31 per share, in 1994, compared to a
net loss from continuing operations of $14,041,678, or $.92 per share, in 1993.
Income From Discontinued Operations
The Company reported income from discontinued operations of $792,926, or
$.05 per share, compared with $751,618, or $.05 per share, in 1993.
Loss Before Accounting Change
As a result of the above, the Company's loss before the cumulative effect
of a change in accounting amounted to $3,942,564, or $.26 per share, in 1994,
compared to $13,290,060, or $.87 per share, in 1993.
Change in Accounting
Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards (FAS) 109,
"Accounting for Income Taxes." FAS 109 requires an asset and liability approach
to accounting for income taxes and establishes criteria for recognizing deferred
tax assets. Accordingly, the Company adjusted its existing deferred income tax
assets and liabilities to reflect current statutory income tax rates and
previously unrecognized tax benefits related to federal and certain state net
operating loss carry forwards. The cumulative effect of the accounting change on
prior years at January 1, 1993, resulted in a non-recurring gain of $5,181,188,
or $.34 per share, and is included in the results of operations for 1993.
Net Income (Loss)
As a result of the above, the Company reported a net loss of $3,942,564, or
$.26 per share, in 1994, compared to a net loss of $8,108,872, or $.53 per
share, in 1993.
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LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Cash and Cash Equivalents
The Company's working capital at December 31, 1995 was approximately $105.6
million compared to $170.1 million at December 31, 1994. The ratio of current
assets to current liabilities was 6.0 to one at December 31, 1995 compared to
10.4 to one at December 31, 1994.
Net cash provided by operating activities in 1995 increased substantially
to $20,915,707 compared to $7,897,723 in 1994. Net cash used in investing
activities in 1995 was $37,852,262 compared to $98,738,789 in 1994. Net cash
provided by financing activities in 1995 was $18,273,414 compared to $91,310,877
net cash used in financing activities in 1994. As a result of the above, cash
and cash equivalents increased by $1,336,859 in 1995 compared to a $469,811
increase in 1994.
Conversion of Debenture Indebtedness Into Equity
On December 19, 1995, the Company completed the underwritten call for
redemption of the approximately $75 million principal amount of its 7%
Convertible Subordinated Debentures Due 2002. The transaction was effected
pursuant to a Standby Agreement, dated as of November 15, 1995, between the
Company and UBS Securities Inc., as the standby purchaser. As a result of the
transaction, the outstanding principal amount of the Debentures was converted
into a total of 4,866,929 shares of Common Stock. A Registration Statement on
Form S-3 relating to the underwritten call for redemption was declared effective
by the Securities and Exchange Commission on November 15, 1995.
Proposed Public Offering of Mandatory Adjustable Redeemable Convertible
Securities
The Company plans, immediately following the filing of this Form 10-K, to
file a Registration Statement on Form S-3 relating to a proposed underwritten
public offering of shares of a new series of preferred stock, the Mandatory
Adjustable Redeemable Convertible Securities, with the total expected aggregate
offering price expected to range between approximately $125 million to $150
million. The proposed securities are a class of convertible preferred stock that
will be mandatorily convertible four years after issuance into Common Stock,
unless earlier converted by the holder into Common Stock or redeemed for Common
Stock by the Company. If that public offering is consummated, the Company
presently plans to use the proceeds therefrom, together with internally
generated funds, (i) to fund the Company's developmental expenditures on
existing or new gold and silver mining properties, including a portion of the
expenditures to be incurred by the Company in the event it decides to place its
Kensington property into commercial production; and (ii) for general corporate
purposes, including the possible acquisition of, or investment in, additional
gold and silver mining properties businesses.
Construction of Fachinal Mine
In July 1994, the Company's Board of Directors approved, and in late
October 1995 the Company completed construction of the Fachinal mining
facilities. The total cost of project construction at December 31, 1995 was
approximately $40.8 million. On April 19, 1995, the Company completed a limited
recourse project financing agreement with a bank syndicate lead by N.M.
Rothschild & Sons, Ltd. The agreement provided for the borrowing of up to $24
million for use in the construction of the Fachinal Mine, contains various
covenants and is dependent upon attainment of certain completion tests.
Furthermore, the agreement restricts the recourse of the banks in the event of
default to the assets of the Company's Chilean subsidiary, Compania Minera CDE
Fachinal Limitada. The Company is required to guarantee repayment of the
borrowing until construction of the project reaches defined completion, which is
expected to occur in the first half of 1996, after which the project alone is
liable for repayment. (The agreement requires the project to demonstrate
compliance with certain ore throughput and financial covenants in order for
construction to be deemed complete in which event the Company's loan guarantee
is removed.) The interest rate prior to completion of construction of the
project was equal to LIBOR plus 1.5% and increases to LIBOR plus 2.75% after
completion. The borrowing is repayable in eight equal remaining semiannual
installments after completion of project construction.
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Environmental Compliance Expenditures
For the years ended December 31, 1995, 1994 and 1993, the Company expended
approximately $2.9 million, $3.0 million and $2.4 million, respectively, in
connection with environmental compliance activities at its operating properties.
Such activities at the Rochester, Golden Cross, El Bronce and Fachinal Mines
include monitoring, bonding, earth moving, water treatment and revegetation
activities. In addition, at December 31, 1995, the Company had expended a total
of approximately $6.6 million on environmental and permitting activities at the
Kensington Property, which expenditures have been capitalized as part of its
development cost.
The Company estimates that environmental compliance expenditures at its
Kensington developmental property during 1996 will approximate $2.1 million
related to activities associated with obtaining permits required for
construction. Future environmental expenditures will be determined by
governmental regulations and the overall scope of the Company's operating and
development activities. The Company places a very high priority on its
compliance with environmental regulations.
Exploration and Development Expenditures
During 1995, the Company expended approximately $39.5 million (excluding
capitalized interest) for its share of the developmental costs at the Kensington
property including the acquisition of the remaining 50% of the property at a
cost of $32.5 million, approximately $0.4 million at the Rochester Mine, $39.5
million (excluding capitalized interest) for the development of the Fachinal
Mine, $7.9 million for investment at the El Bronce Mine and $3.1 million to
continue its planned exploration and development programs. During 1996, the
Company presently plans to expend approximately $4.8 million (excluding
capitalized interest) to bring the Kensington property to a construction
decision, approximately $0.2 million for the Fachinal Mine, and $5.0 million for
developmental and exploration activities at the El Bronce Mine. It is expected
that a decision will be made during the third quarter of 1996 as to whether to
place the Kensington property into commercial production. The Company estimates
that it will be required to expend approximately $195 million over a two-year
period in connection with the construction of the Kensington mining facilities.
If the Company decides to construct mining facilities at the Kensington
property, the Company plans to finance the cost of construction out of the
proposed public offering of Mandatory Adjustable Redeemable Convertible
Securities as well as project financing, working capital and/or cash flow
sources.
Internal Revenue Service Audit
On February 7, 1995, the Internal Revenue Service ("IRS") issued a 30-day
letter assessing tax deficiencies of $738,806, which, if resolved in favor of
the IRS, would have (i) subjected the Company to the deficiency, decreased net
operating loss carry forwards by $28.2 million and resulted in the forfeiture of
approximately $2.0 million appending tax refunds. Coeur filed a petition in the
U.S. Tax Court to contest the assessment and on August 7, 1995, the Company
settled the issues. Pursuant to the settlement, no deficiency was imposed, and
income tax refunds totaling $2,939,903, including accrued interest, were
released by the IRS to Coeur. The Company is still disputing one issue involving
the deductibility of certain costs which, if resolved in favor of the IRS, would
require the payment of approximately $130,000 by the Company. The Company
believes the remaining matter in dispute has been treated by it in a manner that
is consistent with applicable law.
Federal Natural Resources Matter
The Company and its wholly-owned subsidiary, Callahan, were advised by the
Fish and Wildlife Service (the "Service") of the U.S. Department of the Interior
on July 18, 1995 that they were identified as potentially responsible parties
for damages resulting from injury to federal natural resources with respect to
the Bunker Hill Superfund Site. By letter dated July 24, 1995, the Company and
Callahan requested the Service to identify the federal natural resources
allegedly injured, set forth the basis for the assertion that they are
potentially responsible parties and quantify the dollar amount of the alleged
damages. There has been no response. The Company presently cannot state whether
or estimate the extent to which, if any, it may be liable
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for damages in connection with the matter. However, the Company does not believe
its liability, if any, will be material in amount.
Possible Source of Financing for Proposed Acquisition of Gasgoyne
Coeur may decide to borrow the funds required for the cash portion of its
Offer for Gasgoyne shares in Australia from Rothschild Australia Limited
pursuant to a loan facility providing for a maximum of US$50 million of
borrowings at an annual interest rate equal to LIBOR plus 1.5%.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item regarding directors is hereby incorporated by reference from
the Company's definitive proxy statement to be filed pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this report.
Information regarding the Company's executive officers is set forth above under
Item 4A of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) The following consolidated financial statements of Coeur d'Alene
Mines Corporation and subsidiaries are included in Item 8.
Consolidated Balance Sheets -- December 31, 1994 and 1995.
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Consolidated Statements of Operations -- Years Ended December
31, 1993, 1994 and 1995.
Consolidated Statements of Changes in Shareholders'
Equity -- Years Ended December 31, 1993, 1994 and 1995.
Consolidated Statements of Cash Flows -- Years Ended December
31, 1993, 1994 and 1995.
Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K: No Form 8-K was filed by the Company during the
fourth quarter of 1995. On January 31, 1996, the Company filed a Form 8-K
reporting its acquisition of interests in Orion and Gasgoyne and on February 15,
1996, that Form 8-K was amended.
(c) Exhibits: The following listed documents are filed as Exhibits to this
report:
<TABLE>
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3(a) -- Articles of Incorporation of the Registrant and amendments thereto.
(Incorporated herein by reference to Exhibit 3(a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988.)
3(b) -- Bylaws of the Registrant and amendments thereto. (Incorporated herein by
reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1988.)
3(c) -- Certificate of Designations, Powers and Preferences of the Series A
Junior Preferred Stock of the Registrant, as filed with Idaho Secretary
of State on May 25, 1989 (Incorporated by reference to Exhibit 4(a) of
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989.)
4 -- Specimen certificate of the Registrant's stock. (Incorporated herein by
reference to Exhibit 4 to the Registrant's Registration Statement on
Form S-2 (File No. 2-84174).)
10(a) -- Agreement, dated August 31, 1964, between the Registrant, Rainbow Mining
and Milling Company Ltd. and American Smelting and Refining Company, and
amendments thereto. (Incorporated herein by reference to Exhibit H to
the Registrant's Registration Statement on Form 10 dated April 25,
1977.)
10(b) -- Agreement, dated August 1, 1979, between the Registrant, Callahan Mining
Corporation, Day Mines Incorporated and ASARCO Incorporated.
(Incorporated herein by reference to Exhibit (a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1979.)
10(c) -- Executive Compensation Program. (Incorporated herein by reference to
Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989.)*
10(d) -- Lease agreement, dated as of October 10, 1986, between Manufacturers
Hanover Commercial Corporation and Coeur-Rochester, Inc. (Incorporated
herein by reference to Exhibit 10(a) to Registrant's Current Report on
Form 8-K, dated October 10, 1986.)
10(e) -- Indenture, dated as of June 10, 1987, between the Registrant and
Citibank, N.A., as Trustee, relating to the Registrant's 6% Convertible
Subordinated Debentures Due 2002. (Incorporated herein by reference to
Exhibit 4 to the Registrant's Current Report on Form 8-K dated June 10,
1987.)
10(f) -- Agreement, dated January 1, 1994, between Coeur-Rochester, Inc. and
Johnson Matthey Inc. (Incorporated herein by reference to Exhibit 10(m)
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(g) -- Refining Agreement, dated January 24, 1994, between the Registrant and
Handy & Harman. (Incorporated herein by reference to Exhibit 10(n) of
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1993.)
</TABLE>
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<TABLE>
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10(h) -- Master Equipment Lease No. 099-03566-01, dated as of December 28, 1988,
between Idaho First National Bank and the Registrant. (Incorporated
herein by reference to Exhibit 10(w) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1988.)
10(i) -- Master Equipment Lease No. 0 1893, dated as of December 28, 1988,
between Cargill Leasing Corporation and the Registrant. (Incorporated
herein by reference to Exhibit 10(x) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1988.)
10(j) -- Rights Agreement, dated as of May 24, 1989, between the Registrant and
First Interstate Bank of Oregon, N.A., as Rights Agent. (Incorporated
herein by reference to Exhibit 2 to the Registrant's Form 8-A relating
to the registration of the Rights on the American and Spokane Stock
Exchanges.)
10(k) -- Participation Agreement, dated as of November 1, 1988, between the
Registrant and ASARCO, Incorporated. (Incorporated herein by reference
to Exhibit 10(y) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989.)
10(l) -- Lease dated January 15, 1947 between Vulcan Silver-Lead Corporation and
American Smelting and Refining Company. (Incorporated herein by
reference to Exhibit 10(v) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991.)
10(m) -- Supplemental Agreement dated June 4, 1959 between Callahan Mining
Corporation, American Smelting and Refining Company and Day Mines, Inc.,
amending lease dated January 15, 1947. (Incorporated herein by reference
to Exhibit 10(w) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991.)
10(n) -- Operating Agreement dated as of March 18, 1970 between Callahan Mining
Corporation, American Smelting and Refining Company and Day Mines, Inc.
with respect to the Caladay Project. (Incorporated herein by reference
to Exhibit 10(x) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991.)
10(o) -- Lease dated September 20, 1982 between Callahan Mining Corporation and
Hecla Mining Company for the Hornsilver-Peerless properties
(Incorporated herein by reference to Exhibit 10(y) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991.)
10(p) -- Agreement and Plan of Merger, dated as of September 16, 1991, by and
among the Registrant, CMC Acquisition Corporation and Callahan Mining
Corporation. (Incorporated herein by reference to Exhibit A to the
Prospectus, dated November 22, 1991, contained in the Registrant's
Registration Statement on Form S-4 (File No. 33-44096).
10(q) -- Agreement, dated June 11, 1992, between Callahan Mining Corporation and
Hecla Mining Company (Incorporated herein by reference to Exhibit 10(z)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992.)
10(r) -- Stock Purchase Agreement, dated as of April 30, 1993, among Coeur New
Zealand, Inc., the Registrant, Cyprus gold New Zealand Limited, Cyprus
Exploration and Development Corporation and Cyprus Minerals Company.
(Incorporated herein by reference to Exhibit 2 to the Registrant's
Current Report on Form 8K dated April 30, 1993.)
10(s) -- Amended and Restated Profit Sharing Retirement Plan of the Registrant.
(Incorporated herein by reference to Exhibit 10(ff) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.)*
10(t) -- Indenture, dated as of January 26, 1994, between the Registrant and
Bankers Trust Company relating to the Registrant's 6 3/8% Convertible
Subordinated Debentures Due 2004. (Incorporated herein by reference to
Exhibit 10(gg) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
</TABLE>
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<TABLE>
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10(u) -- Purchase Agreement, dated January 18, 1994, between the Registrant and
Kidder, Peabody & Co. Incorporated relating to the 6 3/8% Convertible
Subordinated Debentures Due 2004. (Incorporated herein by reference to
Exhibit 10(hh) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
10(v) -- Registration Rights Agreement, dated January 26, 1994, between the
Registrant and Kidder, Peabody & Co., Incorporated relating to the
6 3/8% Convertible Subordinated Debentures Due 2004. (Incorporated
herein by reference to Exhibit 10(ii) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.)
10(w) -- 1993 Annual Incentive Plan and Long-Term Performance Share Plan of the
Registrant. (Incorporated herein by reference to Exhibit 10(jj) to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)*
10(x) -- Supplemental Retirement and Deferred Compensation Plan, dated January 1,
1993, of the Registrant. (Incorporated herein by reference to Exhibit
10(kk) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)*
10(y) -- Lease Agreement, dated January 12, 1994, between First Security Bank of
Idaho and Coeur Rochester, Inc. (Incorporated herein by reference to
Exhibit 10(mm) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
10(z) -- Agreement, dated January 1, 1994, between Coeur Gold New Zealand Limited
and Johnson Matthey (Aust.) Ltd. (Incorporated herein by reference to
Exhibit 10(mm) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
10(aa) -- Nonemployee Directors' Retirement Plan effective as of March 19, 1993,
of the Registrant. (Incorporated herein by reference to Exhibit 10(oo)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)*
10(bb) -- Extension of Employment and Severance Agreement between the Registrant
and Dennis E. Wheeler which extension is dated June 28, 1994.
(Incorporated by reference to Exhibit 10 (nn) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.)*
10(cc) -- Form of letter, dated June 28, 1994, extending the terms of the
Severance Agreements dated march 30, 1989 between the Registrant and
James Sabala, Tom Angelos, Michael Clark, Al Wilder and William Boyd.
(Incorporated by reference to Exhibit 10(oo) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.)*
10(dd) -- 401k Plan of the Registrant. (Incorporated by reference to Exhibit 10
(pp) to the Registrants Annual Report on Form 10-K for the year ended
December 31, 1994.)*
10(ee) -- Option Agreement of October 24, 1994 between Compania Minera El Bronce
and CDE Chilean Mining Corporation. (Incorporated by reference to
Exhibit 10(qq) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.)
10(ff) -- Asset Contribution Agreement, effective as of January 1, 1995, among the
Registrant, ASARCO Incorporated, Callahan Mining Company and Silver
Valley Resource Corporation. (Filed herewith.)
10(gg) -- Asset and Stock Purchase Agreement, dates as of April 28, 1995, among
Schauemburg International, Inc., The Flexaust Company, Inc. and Callahan
Mining Corporation. (Incorporated herein by reference to Exhibit 2 to
the Registrant's Current Report on Form 8-K dated May 2, 1995.)
10(ii) -- Limited Recourse Project Financing Agreement, dated April 19, 1995,
between the Registrant and N.M. Rothschild & Sons, Ltd. (Incorporated
herein by reference to Exhibit 10(b) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995.)
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C> <C>
10(jj) -- Venture Termination and Asset Purchase Agreement, dated as of June 30,
1995, among Coeur Alaska, Inc., Echo Bay Alaska, Inc. and Echo Bay
Exploration, Inc. (Incorporated herein by reference to Exhibit 10 to the
Registrant's Current Report on Form 8-K dated July 7, 1995.)
10(kk) -- Form of Standby Agreement, dated November 15, 1995, between the
Registrant and UBS Securities Inc. (Incorporated herein by reference to
Exhibit 1 to the Registrant's Registration Statement on Form S-3 (File
No. 33-64255).)
10(ll) -- Form of Offer, dated January 29, 1996, by the Registrant to acquire all
the ordinary shares of Gasgoyne Gold Mines NL. (Incorporated herein by
reference to Exhibit 10(a) to the Registrant's Current Report on Form
8-K filed January 31, 1996 (date of earliest event reported--December
21, 1995).)
10(mm) -- Part A Statement of the Registrant relating to its offer to acquire all
the ordinary shares of Gasgoyne Gold Mines NL. (Incorporated herein by
reference to Exhibit 10(b) to the Registrant's Current Report on Form
8-K filed January 31, 1996 (date of earliest event reported--December
21, 1995).)
10(nn) -- Call Option Agreement Over Shares, dated December 20, 1995, between the
Registrant and Ioma Pty Ltd. (Incorporated herein by reference to
Exhibit 10(c) to the Registrant's Current Report on Form 8-K filed
January 31, 1996 (date of earliest event reported--December 21, 1995).)
21 -- List of subsidiaries of the Registrant. (Filed herewith.)
23 -- Consent of Ernst & Young. (Filed herewith.)
</TABLE>
- ---------------
* Management contract or compensatory plan
(d) Independent auditors' reports are included herein as follows:
Coeur d'Alene Mines Corporation
Report of Ernst & Young at December 31, 1994, and 1995, and for each of
the three years in the period ended December 31, 1995.
34
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Coeur d'Alene Mines Corporation
By: DENNIS E. WHEELER
-----------------------------------
Dennis E. Wheeler
Chairman of the Board, President and
Chief Executive Officer
Date: February 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE
<S> <C> <C>
DENNIS E. WHEELER Chairman of the Board of February 28, 1996
--------------------------------- Directors, President,
Dennis E. Wheeler Chief Executive Officer
and Director (Principal
Executive Officer)
JAMES A. SABALA Senior Vice President, February 28, 1996
--------------------------------- Chief Financial Officer,
James A. Sabala Treasurer and Director
(Principal Financial and
Accounting Officer)
CECIL D. ANDRUS Director February 28, 1996
---------------------------------
Cecil D. Andrus
JOSEPH C. BENNETT Director February 28, 1996
---------------------------------
Joseph C. Bennett
JAMES J. CURRAN Director February 28, 1996
---------------------------------
James J. Curran
DUANE B. HAGADONE Director February 28, 1996
---------------------------------
Duane B. Hagadone
JAMES A. MCCLURE Director February 28, 1996
---------------------------------
James A. McClure
JEFFREY T. GRADE Director February 28, 1996
---------------------------------
Jeffrey T. Grade
</TABLE>
35
<PAGE> 37
ANNUAL REPORT
ON
FORM 10-K
ITEM 8, ITEM 14(a), AND ITEM 14(d)
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
COEUR D'ALENE MINES CORPORATION
COEUR D'ALENE, IDAHO
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Coeur d'Alene Mines Corporation
We have audited the accompanying consolidated balance sheets of Coeur
d'Alene Mines Corporation and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coeur d'Alene Mines Corporation and subsidiaries at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note I to the financial statements, in 1993, the Company
changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Seattle, Washington
February 2, 1996
F-1
<PAGE> 39
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................................................................... $ 16,484,767 $ 14,707,278
Funds held in escrow.......................................................................... 2,270,695
Short-term investments........................................................................ 63,077,064 128,112,407
Receivables................................................................................... 13,809,248 11,112,918
Inventories................................................................................... 30,980,765 34,215,127
------------ ------------
TOTAL CURRENT ASSETS...................................................................... 126,622,539 188,147,730
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment................................................................. 118,083,535 83,872,789
Less accumulated depreciation................................................................. 34,152,342 37,394,296
------------ ------------
83,931,193 46,478,493
MINING PROPERTIES
Operational mining properties................................................................. 150,655,767 102,571,977
Less accumulated depletion.................................................................... 38,528,902 38,162,432
------------ ------------
112,126,865 64,409,545
Developmental properties...................................................................... 108,819,693 95,896,774
------------ ------------
220,946,558 160,306,319
NET ASSETS OF DISCONTINUED OPERATIONS........................................................... 6,000,741
OTHER ASSETS
Funds held in escrow.......................................................................... 2,270,695
Notes receivable.............................................................................. 5,000,000
Debt issuance costs, net of accumulated amortization of $3,374,762 and $2,416,963............. 4,702,535 8,240,209
Marketable equity securities.................................................................. 4,390,362 418,052
Other......................................................................................... 52,886 499,154
------------ ------------
14,145,783 11,428,110
------------ ------------
$445,646,073 $412,361,393
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.............................................................................. $ 5,743,125 $ 2,289,808
Accrued liabilities........................................................................... 3,525,305 5,226,925
Accrued interest payable...................................................................... 4,525,925 4,634,961
Accrued salaries and wages.................................................................... 5,038,506 3,867,801
Current portion of obligations under capital leases........................................... 2,192,856 2,041,057
------------ ------------
TOTAL CURRENT LIABILITIES................................................................. 21,025,717 18,060,552
LONG-TERM LIABILITIES
6% convertible subordinated debentures........................................................ 50,000,000 50,000,000
6 3/8% convertible subordinated debentures.................................................... 100,000,000 100,000,000
7% convertible subordinated debentures........................................................ 75,000,000
Limited recourse project financing............................................................ 23,999,997
Obligations under capital leases.............................................................. 2,192,856
Other long-term liabilities................................................................... 9,386,347 5,234,899
Deferred income taxes......................................................................... 1,402,330 1,580,804
------------ ------------
TOTAL LONG-TERM LIABILITIES............................................................... 184,788,674 234,008,559
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1.00 per share -- authorized 10,000,000 shares, none outstanding
Common Stock, par value $1.00 per share -- authorized 60,000,000 shares, issued 21,524,093 and
16,633,163 shares (including 1,059,211 shares held in treasury)............................. 21,524,093 16,633,163
Capital surplus............................................................................... 247,099,977 182,881,071
Accumulated deficit........................................................................... (15,889,154) (17,043,506)
Unrealized gains (losses) on short-term investments........................................... 361,173 (8,820,137)
Repurchased and nonvested shares.............................................................. (13,264,407) (13,358,309)
------------ ------------
239,831,682 160,292,282
------------ ------------
$445,646,073 $412,361,393
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 40
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
INCOME
Sale of concentrates and dore...................... $89,239,051 $79,605,938 $ 67,989,666
Less cost of mine operations....................... 72,210,413 67,802,368 59,803,406
----------- ----------- ------------
GROSS PROFITS................................. 17,028,638 11,803,570 8,186,260
OTHER INCOME -- interest, dividends, and other....... 9,504,065 12,587,356 5,387,763
----------- ----------- ------------
TOTAL INCOME.................................. 26,532,703 24,390,926 13,574,023
EXPENSES
Administration..................................... 3,677,354 3,824,946 3,618,772
Accounting and legal............................... 1,625,609 1,673,223 3,108,705
General corporate.................................. 6,206,628 6,258,111 5,089,224
Mining exploration................................. 4,853,789 3,877,614 2,533,542
Idle facilities.................................... 1,481,243 1,558,752 2,459,159
Interest........................................... 9,745,967 11,399,082 5,364,574
Nonrecurring charges............................... 800,000 9,373,564
----------- ----------- ------------
TOTAL EXPENSES................................ 27,590,590 29,391,728 31,547,540
----------- ----------- ------------
NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES.............................................. (1,057,887) (5,000,802) (17,973,517)
Income tax provision (benefit)....................... 199,703 (265,312) (3,931,839)
----------- ----------- ------------
NET LOSS FROM CONTINUING OPERATIONS.................. (1,257,590) (4,735,490) (14,041,678)
Income from discontinued operations (net of taxes)... 2,411,942 792,926 751,618
----------- ----------- ------------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING...................................... 1,154,352 (3,942,564) (13,290,060)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD..... 5,181,188
----------- ----------- ------------
NET INCOME (LOSS)............................... $ 1,154,352 $(3,942,564) $ (8,108,872)
========== ========== ===========
EARNINGS PER SHARE DATA
Weighted average number of shares of Common Stock
outstanding........................................ 15,888,357 15,387,889 15,327,862
========== ========== ===========
Net loss from continuing operations.................. $ (.08) $ (.31) $ (.92)
Income from discontinued operations.................. .15 .05 .05
----------- ----------- ------------
Net income (loss) before cumulative effect of change
in accounting...................................... .07 (.26) (.87)
Cumulative effect of change in accounting method..... .34
----------- ----------- ------------
NET INCOME (LOSS) PER SHARE.......................... $ .07 $ (.26) $ (.53)
========== ========== ===========
CASH DIVIDENDS PER SHARE............................. $ .15 $ .15 $ .15
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 41
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED GAINS REPURCHASED AND
------------------------ (LOSSES) ON NONVESTED SHARES
PAR CAPITAL ACCUMULATED SHORT-TERM ----------------
SHARES VALUE SURPLUS DEFICIT INVESTMENTS SHARES
---------- ----------- ------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...... 16,377,228 $16,377,228 $183,050,612 $ (4,992,070) (1,058,453)
Net Loss.......................... (8,108,872)
Sale of Common Stock for cash..... 8,675 8,675 139,535
Cash Dividends.................... (2,297,520)
Issuance of shares under Stock
Compensation Plan (net)......... 10,374 10,374 181,545
Other............................. (1,975) (1,975) (35,541)
---------- ----------- ------------ ------------ ---------------- ----------------
Balance at December 31, 1993...... 16,394,302 16,394,302 181,038,631 (13,100,942) (1,058,453)
Net Loss.......................... (3,942,564)
Cash Dividends.................... (2,303,194)
Issuance of shares under Stock
Compensation Plan (net)......... 18,778 18,778 365,717
Unrealized losses................. $ (8,820,137)
Other............................. 220,083 220,083 3,779,917 (758)
---------- ----------- ------------ ------------ ---------------- ----------------
Balance at December 31, 1994...... 16,633,163 16,633,163 182,881,071 (17,043,506) (8,820,137) (1,059,211)
Net Income........................ 1,154,352
Cash Dividends.................... (2,339,376)
Issuance of shares under Stock
Compensation Plan (net)......... 24,001 24,001 384,263
Unrealized Gains.................. 9,181,310
Conversion of 7% debentures....... 4,866,929 4,866,929 66,174,019
---------- ----------- ------------ ------------ ---------------- ----------------
Balance at December 31, 1995...... 21,524,093 $21,524,093 $247,099,977 $(15,889,154) $ 361,173 (1,059,211)
========= ========== =========== =========== =============== =========
<CAPTION>
REPURCHASED AND
NONVESTED SHARES
----------------
AMOUNT TOTAL
---------------- ----------------
<S> <C> <C>
Balance at December 31, 1992...... $ (13,444,270) $ 180,991,500
Net Loss.......................... (8,108,872)
Sale of Common Stock for cash..... 148,210
Cash Dividends.................... (2,297,520)
Issuance of shares under Stock
Compensation Plan (net)......... (39,016) 152,903
Other............................. (37,516)
---------------- ----------------
Balance at December 31, 1993...... (13,483,286) 170,848,705
Net Loss.......................... (3,942,564)
Cash Dividends.................... (2,303,194)
Issuance of shares under Stock
Compensation Plan (net)......... 124,977 509,472
Unrealized losses................. (8,820,137)
Other............................. 4,000,000
---------------- ----------------
Balance at December 31, 1994...... (13,358,309) 160,292,282
Net Income........................ 1,154,352
Cash Dividends.................... (2,339,376)
Issuance of shares under Stock
Compensation Plan (net)......... 93,902 502,166
Unrealized Gains.................. 9,181,310
Conversion of 7% debentures....... 71,040,948
---------------- ----------------
Balance at December 31, 1995...... $ (13,264,407) $ 239,831,682
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 42
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
----------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations........................... $(1,257,590) $ (4,735,490) $ (8,860,490)
Add (less) noncash items:
Depreciation, depletion, and amortization............................ 16,893,392 17,537,499 13,661,502
Cumulative effect of change in accounting method..................... (5,181,188)
Deferred income taxes................................................ (1,786,435) (629,356) (4,217,259)
Loss on disposition of assets........................................ 457,895 132,099 444,950
(Gain) loss on foreign currency transactions......................... 597,009 (783,894) (302,287)
Gain (loss) on disposition of securities............................. 885,160 (1,541,735)
Nonrecurring charges................................................. 9,373,564
Changes in Operating Assets and Liabilities:
Accounts receivable.................................................. (1,238,697) (2,932,231) (2,883,201)
Inventories.......................................................... 3,234,362 (953,103) (2,132,683)
Accounts payable and accrued liabilities............................. 2,527,843 759,065 3,183,344
----------- ------------- -------------
Net cash provided by continuing operations............................. 20,312,939 6,852,854 3,086,252
Income from discontinued operations.................................... 2,411,942 792,926 751,618
Add (less) noncash items:
Depreciation, depletion & amortization............................... 85,381 288,522 191,260
Gain (loss) on disposition of discontinued operations................ (3,963,879) 1,528
Deferred income taxes................................................ 1,607,961 528,618 501,079
Change in operating assets and liabilities
Accounts receivable.................................................. 601,242 (267,250) (242,100)
Inventories.......................................................... (30,661) (322,553) (165,368)
Accounts payable and accrued liabilities............................. (109,218) 23,078 79,636
----------- ------------- -------------
Net cash provided by discontinued operations........................... 602,768 1,044,869 1,116,125
----------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... 20,915,707 7,897,723 4,202,377
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of Cyprus Gold New Zealand, Ltd. (net of cash received)....... (52,818,247)
Purchases of short-term investments.................................... (2,424,374) (107,900,947) (85,387,368)
Proceeds from sales of short-term investments.......................... 70,111,964 43,349,371 34,548,248
Purchases of property, plant and equipment............................. (44,895,523) (9,248,331) (4,563,607)
Proceeds from sale of assets........................................... 1,177,328 488,353 680,873
Proceeds from sale of discontinued operations.......................... 3,133,133
Expenditures on operational mining properties.......................... (21,027,029) (12,736,653) (2,524,454)
Expenditures on developmental properties............................... (42,509,841) (12,760,036) (8,926,809)
Other.................................................................. (1,417,920) 69,454 (567,011)
----------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES.............................. (37,852,262) (98,738,789) (119,558,375)
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of obligations under capital leases......................... (2,041,056) (1,899,771) (1,775,333)
Payment of cash dividends.............................................. (2,339,376) (2,303,194) (2,297,520)
Proceeds from bond issuance............................................ 95,513,842
Proceeds from project financing........................................ 23,999,997
Payment of bond conversion costs....................................... (1,346,151)
----------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................ 18,273,414 91,310,877 (4,072,853)
----------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................... 1,336,859 469,811 (119,428,851)
Cash and cash equivalents at beginning of year:
Related to continuing operations....................................... 14,707,278 14,388,998 133,838,430
Related to discontinued operations..................................... 440,630 289,099 268,518
----------- ------------- -------------
15,147,908 14,678,097 134,106,948
----------- ------------- -------------
Cash and cash equivalents at end of year:
Related to continuing operations....................................... 16,484,767 14,707,278 14,388,998
Related to discontinued operations..................................... 440,630 289,099
----------- ------------- -------------
$16,484,767 $ 15,147,908 $ 14,678,097
============ ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 43
NOTE A -- BUSINESS OF COEUR D'ALENE MINES CORPORATION
Coeur d'Alene Mines Corporation (Coeur or the Company) is principally
engaged in the exploration, development and operation of silver and gold mining
properties located in the United States (Nevada, Idaho and Alaska), New Zealand
and South America, primarily Chile.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the wholly-owned subsidiaries of the Company, the most significant of which are
Coeur Rochester, Callahan Mining Corporation including Coeur New Zealand, Inc.,
Coeur-Alaska, Inc. and CDE Fachinal Ltd. The consolidated financial statements
also include all non-wholly owned entities in which voting control of more than
50% is held by the Company. Related minority interests are not material and are
included in other assets. Intercompany balances and transactions have been
eliminated in consolidation. Investments in unincorporated joint ventures are
accounted for on a proportionate consolidation basis, the most significant of
which is the Golden Cross Mine.
Revenue Recognition: Revenue is recognized when title to gold and silver
passes to the buyer. The effects of forward sales are reflected in revenue at
the date the related precious metals are delivered or the contracts expire.
Inventories: Inventories of ores on leach pads and in the milling process
are valued based on actual costs incurred to place such ores into production,
less costs allocated to minerals recovered through the leaching and milling
processes. Inherent in this valuation is an estimate of the amount 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 rate are accounted for prospectively. Dore inventory includes product
at the mine site and product held by refineries. All other inventories are
stated at the lower of cost or market, cost being determined using the first-in,
first-out and weighted average cost methods.
Property, Plant, and Equipment: Property, plant, and equipment are
recorded at cost. Depreciation, using the straight-line method, is provided over
the estimated useful lives of the assets. Certain mining equipment is
depreciated using the units of production method based upon estimated total
reserves. Maintenance and repairs are charged to operations as incurred.
Mining Properties: Values for mining properties represent acquisition
costs or fair market value of Common Stock issued for properties plus
developmental costs. Cost depletion has been recorded based on the
units-of-production method over the estimated total reserves. Management
evaluates the net carrying value of all operations, property by property, on a
regular basis to reach a judgment concerning possible permanent impairment of
value and the need for a write-down in asset value to net realizable value.
These reviews require significant judgment and the use of estimates, and are
affected by the risks and uncertainties inherent in normal operations.
Considerations include the level of maintenance and standby costs, current
projections of metal prices and other nonoperating alternatives.
Reclamation Costs: Post-closure reclamation and site restoration costs are
estimated based upon environmental regulatory requirements and are accrued over
the life of the mine using the units of production method. Current expenditures
relating to ongoing environmental and reclamation programs are expensed as
incurred. As of December 31, 1995 and 1994 the Company provided approximately
$4.3 million and $2.8 million for post-closure reclamation and restoration, and
anticipates the total of such costs will be approximately $12.7 million. Amounts
provided are included as Other long-term liabilities.
Exploration and Development: Costs incurred in the search for new mineral
properties are charged directly to expense. Development expenditures incurred
prior to reaching the production stage, related to mining and drilling
properties with identified economic reserves, are capitalized. Interest costs
are capitalized on development properties until the properties are placed into
operation.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. As of December 31, 1995 and 1994, cash and cash equivalents
included $15,256,078 and $13,741,430 of cash, respectively. The balance of the
reported
F-6
<PAGE> 44
amounts consists principally of investment grade commercial paper. Amounts
reported represent cost which approximates fair value.
Short-term Investments: The Company invests in debt and equity securities
which are classified as available for sale, according to provisions of FAS 115
"Accounting for Certain Investments in Debt and Equity Securities". Accordingly,
securities are carried at fair value, determined by quoted prices. Unrealized
holding gains and losses on such securities are excluded from earnings and
reported as a separate component of shareholders' equity until realized.
Foreign Currencies: Monetary assets and liabilities of the Company's New
Zealand and Chilean operations are translated into U.S. dollars at year-end
exchange rates and revenue and expenses are translated at average exchange
rates. Translation gains and losses are reflected in income. Non-monetary assets
and liabilities are converted at historical rates. Realized gains and losses
from foreign currency transactions are reflected in income.
Foreign Currency Forward Exchange Contracts: As part of its program to
manage foreign currency risk, the Company has entered into foreign currency
forward exchange contracts. Contracts related to firm commitments are designated
and effective as hedges. Gains and losses are deferred and recognized in the
same period as the related transactions.
Forward Delivery Contracts: The Company sells refined gold and silver from
its mines to various precious metals refiners pursuant to forward contracts or
at spot prices prevailing at the time of sale. Revenue from forward sales
transactions is recognized as metal is delivered.
Earnings Per Share: Earnings per share are calculated based on the
weighted average number of common stock and common stock equivalents
outstanding, unless the addition of common stock equivalents would be
anti-dilutive.
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares on the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
New Accounting Standard: In March 1995, The Financial Accounting Standards
Board (FASB) issued Statement No. 121 Accounting for Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of. The Company adopted the
statement in 1995 and there was no material impact as a result of the adoption.
Reclassification: Certain reclassifications of prior year balances have
been made to conform to current year classifications.
NOTE C -- DISCONTINUED OPERATIONS
Flexaust Company
On May 2, 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4.0 million was paid at the
time of closing and the balance is payable over the next five years. The results
of operations and the gain on sale of Flexaust manufacturing segment are
presented as "Discontinued Operations." The Company recorded a pre-tax gain on
the sale of approximately $4.0 million ($2.4 million net of income taxes) during
1995. Flexaust generated revenues of $3,949,715 and net income from operations
of $56,023 in the period January 1, 1995 to May 5, 1995 which is reflected as a
component of income from discontinued operations.
F-7
<PAGE> 45
NOTE D -- SHORT TERM INVESTMENTS AND MARKETABLE SECURITIES
The amortized cost of available-for-sale securities is adjusted for premium
and discount amortization. Such amortization is included in Other Income. The
following is a summary of Available-for-Sale Securities as of December 31, 1995
and 1994.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST LOSSES GAINS VALUE
-------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1995
U.S. Corporate...................................... $ 27,369 $ 6 $109 $ 27,472
U.S. Government..................................... 30,239 87 30,152
-------- -------- ------- ---------
Total Debt Securities............................... 57,608 93 109 57,624
Equity Securities................................... 9,498 239 584 9,843
-------- -------- ------- ---------
$ 67,106 $ 332 $693 $ 67,467
======== ======== ======= ========
1994
U.S. Corporate...................................... $ 67,856 $3,438 $ 64,418
U.S. Government..................................... 48,314 2,461 45,853
-------- -------- ------- ---------
Total Debt Securities............................... 116,170 5,899 110,271
Equity Securities................................... 21,180 3,184 263 18,259
-------- -------- ------- ---------
$137,350 $9,083 $263 $ 128,530
======== ======== ======= ========
</TABLE>
The gross realized gains on sales of Available-For-Sale Securities totaled
$348,052 and $2,731,499 during 1995 and 1994, respectively. The gross realized
losses totaled $1,233,213 and $1,189,764 during 1995 and 1994, respectively.
Short-term investments mature at various dates through December 1996.
NOTE E -- INVENTORIES
Inventories are composed of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
In process inventory............................. $ 25,727,357 $ 28,895,419
Dore inventory................................... 2,052,043 1,748,207
Supplies......................................... 3,201,365 3,571,501
------------ ------------
$ 30,980,765 $ 34,215,127
=========== ===========
</TABLE>
NOTE F -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Land............................................. $ 2,509,016 $ 2,072,573
Buildings and improvements....................... 63,444,150 22,311,170
Machinery and equipment.......................... 43,780,014 51,138,691
Capital leases, buildings and equipment.......... 8,350,355 8,350,355
------------ ------------
$118,083,535 $ 83,872,789
=========== ===========
</TABLE>
F-8
<PAGE> 46
Assets subject to capital leases consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Buildings.......................................................... $ 5,104,730 $ 5,104,730
Equipment.......................................................... 3,245,625 3,245,625
----------- -----------
TOTAL BUILDINGS AND EQUIPMENT................................. 8,350,355 8,350,355
Operational mining property........................................ 7,871,007 7,871,007
----------- -----------
16,221,362 16,221,362
Less allowance for accumulated amortization and depletion.......... 9,255,298 8,633,847
----------- -----------
NET ASSETS SUBJECT TO CAPITAL LEASES............................... $ 6,966,064 $ 7,587,515
========== ==========
</TABLE>
Lease amortization is included in depreciation and depletion expense.
The Company has a capital lease agreement for the Rochester mineral
processing facilities which expires in 1996. The Company has renewed the lease
for two additional years. The lease will be accounted for as an operating lease
during the renewal period. Upon expiration of the lease, the Company is entitled
to purchase the facilities for the lesser of $5,850,000 or fair market value.
The Company is required to maintain a security deposit of approximately $2.3
million in an interest-bearing escrow account with the interest payable to the
Company until the initial term of the lease expires.
The Company has entered into various operating lease agreements, which
expire over a period of five years. The total rent expense charged to operations
under these agreements was $4,432,470, $3,697,791 and $3,636,876 for 1995, 1994
and 1993, respectively.
Minimum lease payments under capital and operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
DECEMBER 31 LEASES LEASES
------------------------------------------------------------ ---------- -----------
<S> <C> <C>
1996...................................................... $2,292,947 $ 3,943,297
1997...................................................... 4,750,363
1998...................................................... 3,461,156
1999...................................................... 944,356
2000...................................................... 137,682
---------- -----------
TOTAL MINIMUM PAYMENTS DUE.................................. 2,292,947 $13,236,854
==========
Less amount representing interest......................... 100,091
----------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS................. 2,192,856
Less current maturities................................... 2,192,856
----------
$ 0
=========
</TABLE>
F-9
<PAGE> 47
NOTE G -- MINING PROPERTIES
Capitalized costs for mining properties consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Operational mining properties:
Rochester Mine, less accumulated depletion of $32,712,208 and
$28,399,912................................................ $ 40,071,933 $ 38,315,940
Golden Cross Mine, less accumulated depletion of $5,263,131
and $3,631,051............................................. 12,680,097 12,894,206
Silver Valley Resources, less accumulated depletion of
$5,715,913................................................. 8,705,942 7,176,695
Fachinal Mine................................................. 34,200,181
El Bronce Mine less accumulated depletion of $553,564 and
$101,598................................................... 16,468,712 5,936,518
Other......................................................... 86,186
------------ ------------
TOTAL OPERATIONAL MINING PROPERTIES...................... 112,126,865 64,409,545
Developmental mining properties:
Kensington................................................. 95,402,895 52,139,488
Fachinal................................................... 32,444,979
Waihi East................................................. 8,454,000 8,454,000
Other...................................................... 4,962,798 2,858,307
------------ ------------
TOTAL DEVELOPMENTAL MINING PROPERTIES.................... 108,819,693 95,896,774
------------ ------------
TOTAL MINING PROPERTIES.................................. $220,946,558 $160,306,319
=========== ===========
</TABLE>
OPERATIONAL MINING PROPERTIES
The Rochester Mine: The Company owns and operates this silver and gold
surface mining operation. The Company has conducted operations at the Rochester
Mine since September 1986. It is one of the largest primary silver mines in the
United States and a significant gold producer as well. A prior owner of the
property has retained a royalty interest that varies between 0% and 5% of the
net smelter revenues of the Rochester Mine, provided the market price of silver
is at least $17.35.
Golden Cross Mine: On April 30, 1993, the Company acquired an 80%
operating interest in the Golden Cross Mine. The mine is a gold and silver
surface and underground mining operation located near Waihi, New Zealand.
The Company's 80% interest in the Golden Cross Mine, accounted for by the
proportionate consolidation method, is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1995 1994
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Sales of dore.......................................... $ 32,341 $ 27,582
Cost of mine operation................................. (26,598) (27,819)
-------- --------
Net income (loss) before income taxes.................. $ 5,743 $ (237)
======== ========
Assets................................................. $ 41,926 $ 44,931
Liabilities............................................ (32,809) (41,188)
-------- --------
Shareholders' equity................................... $ 9,117 $ 3,743
======== ========
</TABLE>
Silver Valley Resources Corporation: On January 1, 1995, the Company
entered into an agreement with Asarco Incorporated and formed a new company
named Silver Valley Resources Corporation ("Silver Valley"). Both Coeur and
Asarco contributed to Silver Valley their respective interests in the Galena and
Coeur Mines as well as other assets and waived certain cash flow entitlements at
the Galena Mine in return for
F-10
<PAGE> 48
shares of capital stock of Silver Valley. Coeur's 50% investment is included on
the balance sheet as operational mining properties. The transaction resulted in
no gain or loss to the Company. On February 9, 1996, Silver Valley announced
that it will reopen the Coeur and Galena Mines with full production beginning in
June 1996. The two mines had previously been on standby status due to then
prevailing silver prices and the desire to conserve reserves. A development
program during 1995 has increased ore reserves by 20% to 1,628,000 tons and
increased the ore reserve grade. When the mines are at full capacity, which is
expected by June 1996, they will produce approximately 3 million ounces of
silver per year. The Company capitalized $665,470 of development expenditures
during the fourth quarter of 1995.
Fachinal: The Fachinal Mine is a gold and silver open pit and underground
mine located in southern Chile which commenced preproduction in October 1995.
The mine is in a pre-production phase until designated production levels are
achieved and can be maintained. Until that time, operating costs are capitalized
as start up costs. Revenue generated during the pre-production period will be
credited against deferred start up costs. The mine is expected to produce 44,000
ounces of gold and 2.8 million ounces of silver in its first full year of
operation.
El Bronce Mine: On October 3, 1994, the Company assumed operating control
of the El Bronce gold mine under terms of a management agreement. The mine is an
underground gold and silver mine located in central Chile, approximately 90
miles north of Santiago. According to the terms of the management agreement, the
Company is entitled to 51% of the net profits, and has an option to acquire a
51% equity interest in CDE El Bronce by July 1997 for a total price of $25.5
million (of which $17 million had been expended as of December 31, 1995). Coeur
has commenced a four year program designed to increase gold production and
improve the reserve base and profitability levels. Management fees earned in
1995 and 1994, reflected as a component of "Other Income," totaled $.8 million
and $1.0 million, respectively. Total capital investment as of December 31, 1995
is $17.0 million. In January 1996, an additional $3.9 million was invested in El
Bronce under the option agreement.
DEVELOPMENTAL PROPERTIES
Kensington: On July 7, 1995, the Company became the 100% owner and
operator of the Kensington property near Juneau, Alaska, by acquiring the 50%
interest held by its former joint venture partner, Echo Bay Mines, Ltd., for
$32.5 million plus a scaled net returns royalty on 1 million ounces of future
gold production after Coeur recoups the $32.5 million purchase price and its
construction expenditures incurred after July 7, 1995 in connection with placing
the property into commercial production. The royalty ranges from 1% at $400 gold
prices to a maximum of 2 1/2% at gold prices above $475, with a royalty to be
capped at 1 million ounces of production. The Company plans to continue its
development activities at the Kensington property.
NOTE H -- LONG-TERM DEBT
On December 19, 1995, the Company completed the underwritten call for
redemption of its approximately $75 million principal amount of 7% Convertible
Subordinated Debentures due 2002 with the entire debenture indebtedness
converted into equity. Debenture holders received approximately 64.6 shares of
common stock for each $1,000 principal amount with cash paid in lieu of any
fractional shares. Coeur issued a total of approximately 4.9 million shares of
common stock in connection with the debenture conversions, increasing its total
shares of outstanding common stock to approximately 21.5 million shares.
On April 19, 1995, the Company completed a limited recourse project
financing agreement with a bank syndicate led by N.M. Rothschild & Sons, Ltd.
The agreement provided for the borrowing of $24 million for use in the
construction of the Fachinal project, contains various covenants and is
dependent upon attainment of certain completion tests. Furthermore, the
agreement restricts the recourse of the banks in the event of default to the
assets of the Company's Chilean subsidiary, Compania Minera CDE Fachinal
Limitada, if certain completion tests are attained. The Company is required to
guarantee repayment of the borrowing until construction of the project reaches
defined completion, after which the project alone is liable for repayment.
Construction of the project was completed in October 1995; however, the
agreement requires the project to demonstrate compliance with certain ore
throughput and financial covenants in order for construction to be
F-11
<PAGE> 49
deemed complete in which event the Company's loan guarantee is removed. The
Company expects this to occur during early 1996. The interest rate prior to
completion of construction of the project is equal to LIBOR plus 1.5% and
increases to LIBOR plus 2.75% after completion. The borrowing is repayable in
eight equal remaining semiannual installments commencing nine months after
completion of project construction as defined.
The $50 million principal amount of 6% Convertible Subordinated Debentures
Due 2002 are convertible into shares of Common Stock prior to maturity, unless
previously redeemed, at a conversion rate of approximately 38 shares of Common
Stock for each $1,000 of principal (equivalent to a conversion price of $25.57
per share of Common Stock). The Company is required to make an annual interest
payment. The debentures are redeemable at the option of the Company. The
debentures mature June 10, 2002.
The $100 million principal amount of 6 3/8% Convertible Subordinated
Debentures Due 2004 are convertible into shares of Common Stock on or before
January 31, 2004, unless previously redeemed, at a conversion price of $25.77
per share. The Company is required to make semi-annual interest payments. The
debentures are redeemable at the option of the Company on or after January 31,
1997. The debentures, which have no other funding requirements until maturity,
mature January 31, 2004.
The carrying amounts and fair values of long-term borrowings, which are
based on published values on December 31, 1995 and 1994, consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------------- ---------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE VALUE VALUE
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
6% Convertible Subordinated
Debentures Due 2002........... $ 50,000,000 $44,375,000 $ 50,000,000 $40,000,000
6 3/8% Convertible Subordinated
Debentures Due 2004........... $100,000,000 $93,375,000 $100,000,000 $83,500,000
7% Convertible Subordinated
Debentures Due 2002........... $ 75,000,000 $85,125,000
</TABLE>
Total interest accrued in 1995, 1994 and 1993 was $17,100,759, $15,641,771
and $9,293,420 respectively, of which $7,354,793, $4,242,689 and $3,928,846, was
capitalized as a cost of the mines under development.
Interest paid was $16,251,997, $12,061,341 and $8,834,559 in 1995, 1994 and
1993, respectively.
NOTE I -- INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards (FAS) 109,
"Accounting for Income Taxes." FAS 109 requires an asset and liability approach
to accounting for income taxes and establishes criteria for recognizing deferred
tax assets. Accordingly, the Company adjusted its existing deferred income tax
assets and liabilities to reflect current statutory income tax rates and
previously unrecognized tax benefits related to federal and certain state net
operating loss carryforwards. The cumulative effect of the accounting change on
prior years at January 1, 1993 is a non-recurring gain of $5,181,188, or $.34
per share, and is included in the accompanying Consolidated Statement of
Operations for the year ended December 31, 1993.
F-12
<PAGE> 50
The components of the provision (benefit) for income taxes in the
consolidated statements of operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1994 1993
----------- --------- -----------
<S> <C> <C> <C>
From Continuing Operations:
Current............................................... $ 1,986,138 $ 364,044 $ 285,420
Deferred.............................................. (1,786,435) (629,356) (4,217,259)
----------- --------- -----------
PROVISION (BENEFIT) FOR INCOME TAX............... $ 199,703 $(265,312) $(3,931,839)
========== ========= ==========
From Discontinued Operations:
Current............................................... $ -0- $ -0- $ -0-
Deferred.............................................. 1,607,961 528,618 501,079
----------- --------- -----------
PROVISION FOR INCOME TAX......................... $ 1,607,961 $ 528,618 $ 501,079
========== ========= ==========
Total:
Current............................................... $ 1,986,138 $ 364,044 $ 285,420
Deferred.............................................. (178,474) (100,738) (3,716,180)
----------- --------- -----------
PROVISION (BENEFIT) FOR INCOME TAX............... $ 1,807,664 $ 263,306 $(3,430,760)
========== ========= ==========
</TABLE>
Deferred taxes arise due to temporary differences in deductions for tax
purposes and for financial statement accounting purposes. The tax effect and
sources of these differences are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
Reserve for loss on mine closure....................... $ 99,528 $ 122,881 $ (84,541)
Net mine exploration and development costs............. (2,714,890) 1,248,575 1,329,435
Net lease payments..................................... 498,401 469,745 547,783
Regular tax expense (benefit) on utilization of net
operating losses..................................... 3,673,116 (1,196,892) (7,341,935)
Adjustments to net operating loss and credit
carryforwards........................................ (2,083,448) (159,421)
Environmental costs.................................... 87,100 430,500 (426,273)
Amortization of bond premium........................... 689,447 (689,447)
Unrealized investment losses........................... 3,087,048 (3,087,048)
Change in valuation allowance.......................... (2,419,687) 2,691,752 334,689
Change in deferred state taxes......................... (411,746) (40,077) 617,119
Other.................................................. (683,343) 108,694 1,307,543
----------- ---------- -----------
Deferred income tax benefit............................ (178,474) (100,738) (3,716,180)
----------- ---------- -----------
Less differences attributable to discontinued
operations........................................... 1,607,961 528,618 501,079
----------- ---------- -----------
Deferred income tax benefit from continuing
operations........................................... $(1,786,435) $ (629,356) $(4,217,259)
========== ========= ===========
</TABLE>
F-13
<PAGE> 51
As of December 31, 1995 the significant components of the Company's net
deferred tax liability were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994
----------- ------------
<S> <C> <C>
Deferred tax liabilities:
PP&E, net............................................... $15,598,685 $ 20,624,892
State taxes............................................. 15,358 427,104
----------- ------------
Total deferred tax liabilities....................... 15,614,043 21,051,996
Deferred tax assets:
Net operating loss carryforwards........................ 20,690,050 26,549,914
AMT credit carryforwards................................ 2,097,221 938,670
Business credit carryforward............................ 541,995 432,800
Unrealized losses on short-term investments............. 3,087,048
----------- ------------
Total deferred tax assets............................ 23,329,266 31,008,432
Valuation allowance for deferred tax assets............... (9,117,553) (11,537,240)
----------- ------------
Net deferred tax assets.............................. 14,211,713 19,471,192
----------- ------------
Net deferred tax liabilities......................... $ 1,402,330 $ 1,580,804
========== ===========
</TABLE>
Changes in the valuation allowance in 1995 relate primarily to changes in
unrealized losses on short-term investments.
Coeur d'Alene Mines Corporation intends to reinvest the unremitted earnings
of its non-U.S. subsidiaries and postpone their remittance indefinitely.
Accordingly, no provision for U.S. income taxes was required on such earnings
during the three-year period ended December 31, 1995. It is not practicable to
estimate the tax liabilities which would result upon such repatriation.
A reconciliation of the Company's effective income tax rate with the
federal statutory tax rate for the periods indicated is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Tax benefit on continuing operations computed at statutory
rates..................................................... (35.0%) (35.0%) (35.0%)
Percentage depletion........................................ (190.0%) (46.1%) (7.4%)
Dividend received deduction................................. (15.4%) (5.2%) (.7%)
Interest on foreign subsidiary debt......................... 177.7% 37.8% 7.0%
Equity in earnings of unconsolidated subsidiaries........... 49.0%
State income tax provision.................................. (25.0%) 0.9% 3.4%
Change in valuation allowance............................... 2.7% 43.4% 10.0%
Utilization of net operating losses......................... (73.4%) (4.4%) (0.2%)
Federal tax assessments and withholding..................... 116.7% 9.3% 1.6%
Other (net)................................................. 11.6% (6.0%) (0.6%)
------ ----- -----
EFFECTIVE TAX RATE ON CONTINUING OPERATIONS.......... 18.9% (5.3%) (21.9%)
====== ===== =====
</TABLE>
For tax purposes, as of December 31, 1995, the Company has an operating
loss carryforward of approximately $59.1 million and an alternative minimum tax
loss carryforward of approximately $28.1 million which expire through 2010. The
Company also has alternative minimum tax credit carryforwards of approximately
$2,097,000 and regular tax credit carryforwards of $542,000.
As of December 31, 1994, Callahan Mining Corporation, a subsidiary, has a
net operating loss carryforward of approximately $14.0 million and an
alternative minimum tax loss carryforward of approxi-
F-14
<PAGE> 52
mately $7.5 million which expire through 2006. The utilization of Callahan
Mining Corporation's net operating losses is subject to limitations.
NOTE J -- SHAREHOLDERS' EQUITY AND STOCK PLANS
In June 1989, the shareholders adopted a shareholder rights plan which
entitles each holder of the Company's Common Stock to one right. Each right
entitles the holder to purchase one one-hundredth of a share of newly authorized
junior preferred stock. The exercise price is $100, making the price per full
preferred share $10,000. The rights will not be distributed and become
exercisable unless and until ten days after a person acquires 20% of the
outstanding common shares or commences an offer that would result in the
ownership of 30% or more of the shares. Each right also carries the right to
receive upon exercise that number of Coeur common shares which has a market
value equal to two times the exercise price. Each preferred share issued is
entitled to receive 100 times the dividend declared per share of Common Stock
and 100 votes for each share of Common Stock and is entitled to 100 times the
liquidation payment made per common share. The Board may elect to redeem the
rights prior to their exercisability at a price of one cent ($.01) per right.
Any preferred shares issued are not redeemable.
The Company has an Annual Incentive Plan (the "Annual Plan") and a
Long-Term Incentive Plan ("Long-Term Plan"). Under the Annual Plan in 1995,
benefits were payable 50% in cash and 50% in shares of Common Stock. Under the
Long-Term Plan, benefits consist of (i) nonqualified stock options that are
exercisable at prices equal to the fair market value of the shares on the date
of grant and vest cumulatively at an annual rate of 25% during the four-year
period following the date of grant, and (ii) performance units comprised of
Common Stock and cash, the value of which is determined four years after the
award. The first award performance units were granted in 1994.
As of December 31, 1995 and December 31, 1994, nonqualified stock options
to purchase 281,518 shares and 153,600 shares, respectively, were outstanding
under the Long-Term Plan. The options are exercisable at prices ranging from
$13.75 to $27.00 per share. The Company continues to account for stock options
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees."
For the years ended December 31, 1995 and December 31, 1994, the Company
awarded 21,656 shares and 18,778 shares, respectively, of Common Stock under the
Annual Plan, representing additional compensation of $384,394 and $382,602,
respectively, based on the fair market value of the shares at the date of the
award.
The Company has a Non-Employee Directors' Stock Option Plan under which
200,000 shares of Common Stock are authorized for issuance and which was
approved by the shareholders in May 1995. Under the Plan, options are granted
only in lieu of an optionee's foregone annual directors' fees. As of December
31, 1995, 11,287 options were granted in lieu of $90,000 of foregone directors'
fees.
F-15
<PAGE> 53
Total compensation expense charged to operations under the Plans was
$1,105,798, $1,359,692 and $396,212 for 1995, 1994 and 1993, respectively.
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------- --------
<S> <C> <C>
Stock options outstanding at 1/1/93...................... 104,500 $17.28
Issued................................................... 39,963 18.50
Exercised................................................ (8,675) 13.86
Canceled................................................. (9,900) 17.86
------- --------
Stock options outstanding at 12/31/93.................... 125,888 17.85
Issued................................................... 27,712 20.38
------- --------
Stock options outstanding at 12/31/94.................... 153,600 18.31
Issued................................................... 141,096 17.26
Exercised................................................ (3,425) 15.13
Canceled................................................. (9,753) 19.45
------- --------
Stock options outstanding at 12/31/95.................... 281,518 $17.78
======= ======
</TABLE>
As of December 31, 1995 and 1994, 427,443 shares and 101,530 shares,
respectively, were available for grant under the Plans and 5,835,898 shares of
Common Stock were reserved for potential conversion of Convertible Subordinated
Debentures.
NOTE K -- EMPLOYEE BENEFIT PLANS
The Company provides a noncontributory defined contribution profit-sharing
plan for all eligible employees. Total plan expense charged to operations was
$495,123, $531,227, and $585,477 for 1995, 1994 and 1993, respectively, which is
based on a percentage of salary of qualified employees.
Effective January 1, 1995, the Company has adopted a savings plan (which
qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all
full-time U.S. employees. Under the plan, employees may elect to contribute up
to 10% of their cash compensation, subject to ERISA limitations. The Company is
required to make matching cash contributions equal to 50% of the employee's
contribution or up to 3% of the employee's compensation. Employees have the
option of investing in four different types of investment funds. Total plan
expenses charged to operations were $319,101 in 1995.
NOTE L -- FINANCIAL INSTRUMENTS
Off Balance Sheet Risks
The Company enters into forward foreign exchange contracts denominated in
foreign currencies to hedge certain firm commitments. The purpose of the
Company's foreign exchange hedging program is to protect the Company from risk
that the eventual dollar cash flows resulting from the firm commitments will be
adversely affected by changes in exchange rates. At December 31, 1995, 1994 and
1993, the Company had forward foreign exchange contracts of $41.0 million, $31.8
million and $19.6 million, respectively. In addition, the Company enters into
forward metal sales contracts to hedge a portion of its cash flows against
fluctuating gold and silver prices. As of December 31, 1995, the Company had
sold 68,444 ounces of gold for delivery on various dates through 1998 at an
average price of $431.52 The table below summarizes, by contract, the
contractual amounts of the Company's forward exchange contracts at December 31,
1995, 1994 and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------- --------------------------- ---------------------------
FORWARD UNREALIZED FORWARD UNREALIZED FORWARD UNREALIZED
CONTRACTS GAIN (LOSS) CONTRACTS GAIN (LOSS) CONTRACTS GAIN (LOSS)
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Currency:
New Zealand............... $23,268,595 $ (27,406) $ 6,218,551 $730,898 $19,645,606 $302,287
Chilean................... 17,699,099 (1,993,279) 22,136,461 569,035
Australian................ 3,417,782 181,002
Forward Metal Sales......... 29,534,791 1,528,237 31,287,729 358,484
</TABLE>
F-16
<PAGE> 54
Gains and losses related to contracts associated with firm commitments are
deferred and will be recognized during 1996 as the related commitments mature.
For the years ended December 31, 1995, 1994, and 1993, the Company realized
gains from its foreign exchange hedging programs of $1,947,472, $1,503,022 and
$-0-, respectively, of which $328,172 in 1995 was capitalized in connection with
development projects.
For metal delivery contracts, the realized price pursuant to the contract
is recognized when physical gold or silver is delivered in satisfaction of the
contract. During 1995, the Company realized a gain of $4.4 million arising from
the sale of silver and gold purchased on the open market which was delivered
pursuant to forward contracts.
The credit risk exposure related to all hedging activities is limited to
the unrealized gains on outstanding contracts based on current market prices. To
reduce counter party credit exposure, the Company deals only with a group of
large creditworthy financial institutions, and limits credit exposure to each.
In addition, to allow for situations where positions may need to be reversed,
the Company deals only in markets that it considers highly liquid. The Company
does not anticipate non-performance by any of these counter parties.
NOTE M -- LITIGATION
The Company and its wholly-owned subsidiary, Callahan Mining Corporation
("Callahan"), were advised by the Fish and Wildlife Service (the "Service") of
the U.S. Department of the Interior on July 18, 1995 that they were identified
as potentially responsible parties for damages resulting from injury to federal
natural resources with respect to the Bunker Hill Superfund Site. By letter
dated July 24, 1995, the Company and Callahan requested the Service to identify
the federal natural resources allegedly injured, set forth the basis for the
assertion that they are potentially responsible parties and quantify the dollar
amount of the alleged damages. The Service has not responded. The Company
presently cannot state whether or estimate the extent to which, if any, it will
be liable for damages in connection with the matter. However, the Company does
not believe its liability, if any, will be material in amount.
On September 29, 1994, following a jury trial, a judgment was entered in
favor of Callahan in a lawsuit commenced in March 1992 by FN Enterprises, Inc.
("FN"), a business consulting firm for Callahan, which seeks to recover a
"success fee" in the approximate amount of $673,000 in connection with the
merger that resulted in Callahan becoming a wholly-owned subsidiary of the
Company. Post trial motions were decided in favor of Callahan after which FN
appealed the judgement against it to the Ninth Circuit Court of Appeals. While
the appeal was pending, Callahan settled the litigation for the sum of $13,500.
On September 22, 1994, a judgment was entered against the Company in the
United States District Court for the District of Idaho in a case entitled
Goldberg v. Coeur d'Alene Mines Corporation in the amount of $725,688, plus
costs and attorney fees in the approximate amount of $225,000. The action
involved an alleged claim by the plaintiff to recover on four promissory notes
made by a predecessor of the Company. The notes were claimed to be the
obligation of the Company by virtue of successive mergers which occurred in 1974
and in 1988. On January 19, 1995 the case was resolved by virtue of a settlement
in the amount of $800,000. The amount was fully accrued as of December 31, 1994.
The Company is also subject to other pending or threatened legal actions
that arise in the normal course of business. In the opinion of management,
liabilities arising from these claims, if any, will not have a material effect
on the financial position of the Company. Depending on the timing of any future
liabilities, the amount of which cannot now be reasonably estimated, relating to
these matters, such amounts could possibly have a material impact on the results
of operations for a given period.
F-17
<PAGE> 55
NOTE N -- GEOGRAPHIC SEGMENT INFORMATION
The following table sets forth certain financial information relating to
international and domestic operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Revenues:
United States............................................... $ 65,903 $ 63,048 $ 52,288
New Zealand................................................. 32,967 27,450 21,089
South America............................................... (127) 1,695
-------- -------- --------
Consolidated revenues.................................. $ 98,743 $ 92,193 $ 73,377
======== ======== ========
Loss From Continuing Operations Before Income Taxes:
United States............................................... $ (3,558) $ (5,068) $(13,937)
New Zealand................................................. 5,773 (803) 1,556
South American Operations................................... 311 921
South American Exploration.................................. (3,584) (51) (411)
-------- -------- --------
Consolidated loss from continuing operations before
taxes and cumulative effect of accounting change.... $ (1,058) $ (5,001) $(12,792)
======== ======== ========
Depreciation, Depletion and Amortization:
United States............................................... $ 9,657 $ 10,707 $ 7,291
New Zealand................................................. 6,699 6,632 6,230
South America............................................... 537 198 141
-------- -------- --------
Total.................................................. $ 16,893 $ 17,537 $ 13,662
======== ======== ========
Property, Plant and Equipment Additions
(Including Noncash Expenditures):
United States............................................... $ 1,512 $ 5,253 $ 3,818
New Zealand................................................. 1,975 303 29,310
South America............................................... 41,408 3,692 160
-------- -------- --------
Total.................................................. $ 44,895 $ 9,248 $ 33,288
======== ======== ========
Identifiable Assets:
United States............................................... $286,318 $318,590 $242,929
New Zealand................................................. 42,765 46,613 54,452
South America............................................... 112,214 47,158 27,869
Australia................................................... 4,349
-------- -------- --------
Consolidated assets.................................... $445,646 $412,361 $325,250
======== ======== ========
</TABLE>
F-18
<PAGE> 56
NOTE O -- SUMMARY OF QUARTERLY FINANCIAL DATA
The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(THOUSANDS OF DOLLARS-EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
- ----------------------------------------------
Net Sales..................................... $17,891 $23,621 $24,803 $22,925
Gross Margin.................................. $ 1,851 $ 5,689 $ 5,651 $ 3,838
Net income (loss) from continuing
operations.................................. $(3,367) $ 1,239 $ 2,039 $(1,169)
Net income (loss)............................. $(3,175) $ 3,408(a) $ 2,039 $(1,118)
Net Income (loss) per share................... $ (.20) $ .22(a) $ .13 $ (.07)
Fully diluted income (loss) per share......... (c) $ .19 $ .12 (c)
1994
Net Sales(b).................................. $20,210 $19,463 $20,667 $19,266
Gross Margin(b)............................... $ 2,870 $ 2,978 $ 4,258 $ 1,698
Net income (loss) from continuing
operations.................................. $(2,720) $(1,560) $ 1,424 $(1,880)
Net income (loss)(b).......................... $(2,597) $(1,335) $ 1,643 $(1,653)
Net income (loss) per share................... $ (.17) $ (.09) $ .11 $ (.11)
</TABLE>
- ---------------
(a) Includes income from discontinued operations(net of tax), of approximately
$2.4 million ($.15 per share) related to the sale of the Flexaust Company in
May 1995.
(b) Amounts have been reclassified giving effect to the sale of the Flexaust
Company in May 1995. Includes net income from discontinued operations (net
of taxes).
(c) Effect of fully diluted earnings per share is antidilutive and is therefore
not presented.
NOTE P -- SUBSEQUENT EVENTS
On December 21, 1995, the Company announced it had entered into an option
agreement to acquire a 19.9% interest in a publicly listed Australian gold
producer, Gasgoyne Gold Mines NL, and intended to extend an offer to Gasgoyne's
shareholders to acquire all of the outstanding shares of Gasgoyne. On January
31, 1996, Coeur made the filings required under the Australian securities laws
with the Australian Securities Commission ("ASC") to initiate proceedings for
the public offer. The offer proceedings have been delayed by court action in
Australia brought by another company which has announced it intends to conduct a
competing bid for the shares. If accepted as originally presented, the Offer
would result in Coeur paying US$23,114,991 and issuing 3,644,255 shares of
Common Stock for 100% ownership of Gasgoyne.
On January 26, 1996, 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 for a total consideration of approximately US$10.7 million.
Earlier in 1995 and 1994, Coeur had acquired a total of 3.33 million shares of
Orion for a total cost of US$3.8 million. As a result, as of January 26, 1996,
Coeur holds approximately 13.1% of Orion's outstanding shares and upon exercise
of the options, would own approximately 19.2% of Orion's then outstanding
shares.
F-19
<PAGE> 1
(EXHIBIT 10(ff)
- --------------------------------------------------------------------------------
ASSET CONTRIBUTION AGREEMENT
EFFECTIVE AS OF JANUARY 1, 1995
AMONG
ASARCO INCORPORATED,
COEUR D'ALENE MINES CORPORATION,
CALLAHAN MINING CORPORATION
AND
SILVER VALLEY RESOURCES CORPORATION
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Contribution of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 No Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ASARCO
CONCERNING THE ASARCO ASSET CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. ASARCO Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Certain Rights of ASARCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4 ASARCO Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5 ASARCO Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.6 Other ASARCO Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COEUR D'ALENE
CONCERNING THE COEUR D'ALENE ASSET CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Coeur d'Alene Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3 Certain Rights of Coeur d'Alene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Coeur d'Alene Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Coeur d'Alene Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.6 Other Coeur d'Alene Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COEUR D'ALENE AND
CALLAHAN CONCERNING THE CALLAHAN ASSET CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Callahan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.1 Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 Certain Rights of Callahan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.4 Callahan Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.5 Callahan Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.6 Other Callahan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V
FURTHER REPRESENTATIONS AND WARRANTIES OF ASARCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Representations and Warranties of
ASARCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.2 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.3 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.4 Ownership and Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.5 Leases; Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.7 Governmental Approval; Third Party
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.8 Compliance with Laws; Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.9 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.10 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.11 Brokers' or Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI
FURTHER REPRESENTATIONS AND WARRANTIES
OF COEUR D'ALENE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Representations and Warranties of
Coeur d'Alene and Callahan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.2 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.3 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.4 Ownership and Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6.5 Leases; Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.7 Governmental Approval; Third Party
Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.8 Compliance with Laws; Coeur D'Alene
Permits or Callahan Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.9 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6.10 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.11 Brokers' or Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII
CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.1 Conditions Precedent to Obligations
of ASARCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.2 Conditions Precedent to Obligations
of Coeur d'Alene and Callahan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII
ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.1 Expenses of Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IX
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.1 Indemnification by Silver Valley
Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.2 Indemnification by ASARCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.3 Indemnification by Coeur d'Alene and
Callahan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.4 Notice and Opportunity to Defend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.5 Recovery for Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.1 Survival of Representations,
Warranties and Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.4 Waivers and Amendments; Non-
Contractual Remedies; Preservation of
Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.5 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.7 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.9 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10.11 Coeur Agreement and Galena Lease
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10.12 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10.13 Exhibits, Schedules and Annexes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.14 Table of Contents; Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.15 Bulk Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.16 Best Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
EXHIBITS
Exhibit A Undertaking and Assumption Agreement
Exhibit B Letter Agreement
Exhibit C Management Services Agreement
SCHEDULES
Schedule 2.1 ASARCO Assets
Schedule 2.5 ASARCO Permits
Schedule 3.1 Coeur d'Alene Assets
Schedule 3.5 Coeur d'Alene Permits
Schedule 4.1 Callahan Assets
Schedule 4.5 Callahan Permits
Schedule 5.2 No Conflict
Schedule 5.4(a) Title to and Condition of ASARCO
Assets (Personalty)
Schedule 5.4(b) Title to ASARCO Assets (Realty)
Schedule 5.5 ASARCO Leases; ASARCO Contracts
Schedule 5.6 Litigation
Schedule 5.7(b) Third Party Consents
Schedule 5.9(a) Material Returns and Reports
Schedule 5.9(b) Material Taxes Arising Out of ASARCO
Assets
Schedule 5.9(c) Tax Inspections, Etc.
Schedule 5.9(e) Extensions and Waivers
Schedule 5.9(f) Tax Allocation Agreement
Schedule 6.2 No Conflict
Schedule 6.4(a) Title to and Condition of Coeur
d'Alene and Callahan Assets
(Personalty)
Schedule 6.4(b) Title to Coeur d'Alene and Callahan
Assets (Realty)
Schedule 6.5 Coeur d'Alene and Callahan Leases;
Coeur d'Alene and Callahan Contracts
Schedule 6.6 Litigation
Schedule 6.7(b) Third Party Consents
Schedule 6.9(a) Material Returns and Reports
Schedule 6.9(b) Material Taxes Arising Out of Coeur
d'Alene and Callahan Assets
Schedule 6.9(c) Tax Inspections, Etc.
Schedule 6.9(e) Extensions and Waivers
Schedule 6.9(f) Tax Allocation Agreement
</TABLE>
(iv)
<PAGE> 6
ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT ("THIS AGREEMENT"), effective
January 1, 1995 (the "EFFECTIVE DATE"), among ASARCO Incorporated ("ASARCO"),
a New Jersey corporation, Coeur d'Alene Mines Corporation ("COEUR D'ALENE"), an
Idaho corporation, Callahan Mining Corporation ("CALLAHAN"), an Arizona
corporation, and Silver Valley Resources Corporation ("SILVER VALLEY
RESOURCES"), a Delaware corporation.
W I T N E S S E T H :
WHEREAS, ASARCO and Callahan (as successor to Vulcan Silver
Lead Corporation) are parties to a Lease dated January 15, 1947, as amended and
supplemented, relating to the development and mining of property known as the
Galena property (the "GALENA LEASE"), and ASARCO and Coeur d'Alene (as
successor to Rainbow Mining and Milling Company, Ltd.) are parties to an
Agreement dated August 31, 1964, as amended and supplemented, relating to the
development and mining of property known as the Coeur property (the "COEUR
AGREEMENT"); and
WHEREAS, ASARCO and Coeur d'Alene desire to terminate as of
the Effective Date, the Galena Lease and the Coeur Agreement; and
WHEREAS, ASARCO and Coeur d'Alene have organized Silver Valley
Resources to develop and mine certain properties in Shoshone County, Idaho; and
WHEREAS, as of the Effective Date, each of ASARCO, Coeur
d'Alene and Callahan (the "CONTRIBUTORS") wish to contribute, and Silver Valley
Resources wishes to accept, certain of their respective leasehold and ownership
interests in silver mining properties located in Shoshone County, Idaho and in
and to certain other assets, all as more fully described herein and as set
forth respectively on Schedule 2.1, Schedule 3.1 and Schedule 4.1 attached
hereto (such contributed interests, properties and other assets of ASARCO,
Coeur d'Alene and Callahan are hereinafter referred to respectively as the
"ASARCO ASSETS," the "COEUR D'ALENE ASSETS," and the "CALLAHAN ASSETS" and
collectively as the "ASSETS"); and
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WHEREAS, this Agreement sets forth the terms and conditions
upon which ASARCO, Coeur d'Alene and Callahan will contribute assets to Silver
Valley Resources.
NOW, THEREFORE, for the mutual covenants and other
consideration described below, the parties hereto hereby covenant and agree as
follows:
ARTICLE I
CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES
Section 1.1 Contribution of Assets. Upon the terms and
subject to the conditions of this Agreement, each of the Contributors shall
contribute, transfer, convey, assign and deliver to Silver Valley Resources,
and Silver Valley Resources shall accept from the Contributors, all the
Contributors' respective rights and interests, whether tangible or intangible,
real, personal or mixed, accrued, contingent or otherwise in and to the Assets
in exchange for the consideration to be provided by Silver Valley Resources
pursuant to Section 1.2 and Section 1.3 (the "CONSIDERATION").
Section 1.2 Consideration. The Consideration for the
contribution, transfer, conveyance, assignment and delivery of the Assets by
the Contributors to Silver Valley Resources shall consist of the following:
(a) to ASARCO, shares, par value $.01 per share, of Silver
Valley Resources (the "COMMON STOCK"), which constitute 50% of the
issued and outstanding voting securities of Silver Valley Resources as
of the Effective Date;
(b) to Coeur d'Alene, shares of Common Stock, which constitute
31.5% of the issued and outstanding voting securities of Silver Valley
Resources as of the Effective Date; and
(c) to Callahan, shares of Common Stock, which constitute
18.5% of the issued and outstanding voting securities of Silver Valley
Resources as of the Effective Date.
Section 1.3 Assumption of Liabilities. As of the Effective
Date, Silver Valley Resources will assume obligations and liabilities of
ASARCO, Coeur d'Alene and Callahan
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with respect to the Assets described in the Undertaking and Assumption
Agreement in the form of Exhibit A attached hereto (the "UNDERTAKING AND
ASSUMPTION") and listed in Annex A thereto.
Section 1.4 No Encumbrances. The Contributors shall
contribute, transfer, convey, assign and deliver their respective Assets to
Silver Valley Resources free and clear of all liens, claims, charges,
encumbrances and security interests, except as expressly set forth in this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ASARCO
CONCERNING THE ASARCO ASSET CONTRIBUTIONS
Section 2. ASARCO Assets. ASARCO hereby represents and
warrants to Coeur d'Alene, Callahan and Silver Valley Resources on the date
hereof and as of Effective Date, that ASARCO shall have contributed, conveyed,
assigned, transferred and delivered all ASARCO's right, title and interest in
and to the following:
Section 2.1 Property, Plant and Equipment. All property,
plant and equipment of ASARCO that are used in or on the ASARCO Assets,
including those listed in Schedule 2.1 attached hereto.
Section 2.2 Books and Records. All of ASARCO's books and
records wherever located to the extent relating to the ASARCO Assets.
Section 2.3 Certain Rights of ASARCO. All of ASARCO's claims
against third parties with respect to unliquidated rights under manufacturers'
and vendors' warranties, guarantees or similar obligations relating to other
items included in the ASARCO Assets.
Section 2.4 ASARCO Contracts. Subject to Section 7.2(b)
hereof, all of ASARCO's contracts, agreements, understandings, commitments, and
leases (other than those referred to in Section 2.1 above), whether written or
oral, express or implied, relating to the ASARCO Assets and in effect on the
date hereof and as of the Effective Date (the "ASARCO CONTRACTS").
Section 2.5 ASARCO Permits. All certificates of occupancy
and all licenses, permits and authorizations, including those listed in
Schedule 2.5 attached hereto, of
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governmental or quasi-governmental agencies and authorities or private parties
relating to the construction, use, operation or enjoyment of items included in
the ASARCO Assets, to the full extent the same are transferable.
Section 2.6 Other ASARCO Assets. All other assets of ASARCO
used exclusively in and necessary to the operation of the business consisting
of the ASARCO Assets at the date hereof and as of the Effective Date in a
manner consistent with the conduct of such business prior to April 1991 (the
"SUSPENSION DATE").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COEUR D'ALENE
CONCERNING THE COEUR D'ALENE ASSET CONTRIBUTIONS
Section 3. Coeur d'Alene Assets. Coeur d'Alene hereby
represents and warrants to ASARCO and Silver Valley Resources on the date
hereof and as of the Effective Date, that Coeur d'Alene shall have contributed,
conveyed, assigned, transferred and delivered all Coeur d'Alene's right, title
and interest in and to the following:
Section 3.1 Property, Plant and Equipment. All property,
plant and equipment of Coeur d'Alene which are used in or on the Coeur d'Alene
Assets, including those listed in Schedule 3.1 attached hereto.
Section 3.2 Books and Records. All of Coeur d'Alene's books
and records wherever located to the extent relating to the Coeur d'Alene
Assets.
Section 3.3 Certain Rights of Coeur d'Alene. All of Coeur
d'Alene's claims against third parties with respect to unliquidated rights
under manufacturers' and vendors' warranties, guarantees or similar obligations
relating to other items included in the Coeur d'Alene Assets.
Section 3.4 Coeur d'Alene Contracts. Subject to Section
7.1(b) hereof, all of Coeur d'Alene's contracts, agreements, understandings,
commitments, and leases (other than those referred to in Section 3.1), whether
written or oral, express or implied, relating to the Coeur d'Alene Assets and
in effect on the date hereof and as of the Effective Date (the "COEUR D'ALENE
CONTRACTS").
Section 3.5 Coeur d'Alene Permits. All certificates of
occupancy and all licenses, permits and authoriza-
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tions, including those listed in Schedule 3.5 attached hereto, of governmental
or quasi-governmental agencies and authorities or private parties relating to
the construction, use, operation or enjoyment of items included in the Coeur
d'Alene Assets, to the full extent the same are transferable.
Section 3.6 Other Coeur d'Alene Assets. All other assets of
Coeur d'Alene used exclusively in and necessary to the operation of the
business consisting of the Coeur d'Alene Assets and the Callahan Assets at the
date hereof and as of the Effective Date in a manner consistent with the
conduct of such business prior to the Suspension Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COEUR D'ALENE AND
CALLAHAN CONCERNING THE CALLAHAN ASSET CONTRIBUTIONS
Section 4. Callahan Assets. Coeur d'Alene and Callahan
hereby represent and warrant to ASARCO and Silver Valley Resources on the date
hereof and as of the Effective Date, that Callahan shall have contributed,
conveyed, assigned, transferred and delivered all of Callahan's right, title
and interest in and to the following:
Section 4.1 Property, Plant and Equipment. All property,
plant and equipment of Callahan which are used in or on the Callahan Assets,
including those listed in Schedule 4.1 attached hereto.
Section 4.2 Books and Records. All of Callahan's books and
records wherever located to the extent relating to the Callahan Assets.
Section 4.3 Certain Rights of Callahan. All of Callahan's
claims against third parties with respect to unliquidated rights under
manufacturers' and vendors' warranties, guarantees or similar obligations
relating to other items included in the Callahan Assets.
Section 4.4 Callahan Contracts. Subject to Section 7.1(b)
hereof, all of Callahan's contracts, agreements, understandings, commitments,
and leases (other than those referred to in Section 4.1), whether written or
oral, express or implied, relating to the Callahan Assets and in effect on the
date hereof and as of the Effective Date (the "CALLAHAN CONTRACTS").
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Section 4.5 Callahan Permits. All certificates of occupancy
and all licenses, permits and authorizations, including those listed in
Schedule 4.5 attached hereto, of governmental or quasi-governmental agencies
and authorities or private parties relating to the construction, use, operation
or enjoyment of items included in the Callahan Assets, to the full extent the
same are transferable.
Section 4.6 Other Callahan Assets. All other assets of
Callahan used exclusively in and necessary to the operation of the business
consisting of the Callahan Assets and the Coeur d'Alene Assets at the date
hereof and as of the Effective Date in a manner consistent with the conduct of
such business prior to the Suspension Date.
ARTICLE V
FURTHER REPRESENTATIONS AND WARRANTIES
OF ASARCO
Section 5. Representations and Warranties of ASARCO. ASARCO
hereby represents and warrants to Coeur d'Alene, Callahan and to Silver Valley
Resources that on the date hereof and as of the Effective Date:
Section 5.1 Organization, Power and Authority. (a) ASARCO is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New Jersey. ASARCO has all necessary corporate power and
authority to own, lease and operate the ASARCO Assets as heretofore conducted
by ASARCO. ASARCO has all necessary corporate power and authority to enter
into and be bound by the terms and conditions of this Agreement.
(b) The execution, delivery and performance by ASARCO of this
Agreement and any agreement or instrument contemplated hereby, and the
performance by ASARCO of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action. When duly executed and
delivered by the parties hereto and thereto, this Agreement and each such other
agreement and instrument will be legal, valid and binding obligations of
ASARCO, in each case enforceable against ASARCO, except as such enforceability
may be limited by bankruptcy, insolvency or other similar laws from time to
time in effect.
Section 5.2 No Conflict. Except as disclosed in Schedule 5.2
hereto, neither the execution and delivery of this Agreement nor the
consummation of the transactions
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contemplated hereby will (i) result in the creation of any Lien or Other
Encumbrance (as defined in Section 5.4) upon any of the ASARCO Assets pursuant
to the terms of any mortgage, bond, indenture, agreement, franchise or other
instrument or obligation; (ii) violate any judgment, order, injunction, decree
or award of any court, administrative agency, arbitrator or governmental body
against or affecting or binding upon, ASARCO or upon the securities, property
or business of ASARCO; or (iii) constitute a violation by ASARCO of any law or
regulation of any jurisdiction or of any agreement or instrument as such law,
regulation, agreement or instrument relates to ASARCO or to the securities,
property or business of ASARCO.
Section 5.3 Liabilities. To the best of its knowledge,
ASARCO has no material liabilities, debts or obligations, whether accrued,
absolute, contingent or otherwise, known or unknown, relating to or arising out
of the ASARCO Assets or the ownership of the ASARCO Assets, other than as
specifically disclosed in the Schedules attached hereto; provided that ASARCO
makes no representation or warranty herein relating to the absence or
non-disclosure of any such liabilities, debts or obligations relating to or
arising out of the environmental condition of the ASARCO Assets or
non-compliance with any statute, law, rule, regulation, ordinance, code or
directive relating to the environment.
Section 5.4 Ownership and Condition of Assets. (a) Except as
disclosed in Schedule 5.4(a) attached hereto, ASARCO has good and marketable
title to all of the ASARCO Assets that do not constitute real property,
including mine equipment and fixtures, free and clear of any Lien or Other
Encumbrance, except for those which do not materially detract from the value
of, or impair the use of such property by ASARCO or Silver Valley Resources in
the operations of the ASARCO Assets. For purposes of this Agreement, "LIEN OR
OTHER ENCUMBRANCE" shall mean any mortgage, lien, pledge, security interest,
claim, lease, charge, option, right of first refusal, easement, restrictive
covenant or other encumbrance, restriction or limitation other than (i) levies
not due and payable, due and payable but not yet delinquent or which are
currently being contested in good faith by appropriate proceedings and which
are specifically listed in Schedule 5.4(a) attached hereto, (ii) mechanics',
workmen's, repairmen's, materialmen's, warehousemen's, vendors' and carriers'
liens, and other similar liens arising in the ordinary course of business for
charges which are not delinquent, or which are being contested in good faith by
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appropriate proceedings and have not proceeded to judgment and which are
specifically listed in a Schedule attached hereto, and (iii) liens in respect
of judgments or awards with respect to which there shall be a good faith
current prosecution of an appeal or proceedings for review and with respect to
which there shall be secured an appropriate bond or a stay of execution pending
such appeal or proceedings for review and which are specifically listed in a
Schedule attached hereto.
(b) Except as set forth in Schedule 5.4(b), to the best of
its knowledge, ASARCO has good and marketable title in fee simple to all real
property (surface estates, mineral estates and combined surface and mineral
estates, including patented mining claims but excluding unpatented mining
claims) constituting ASARCO Assets and holds sufficient rights in and to all
easements or other rights necessary for access thereto and the substantial
realization of benefits from such easements, and owns all buildings and other
structures, improvements and fixtures on such real property. Title to such real
property is, in each case, free and clear of any Lien or Other Encumbrance
created or incurred by ASARCO, except for those which do not materially detract
from the value of, impair the use of, or have a material adverse impact on the
title to the ASARCO Assets subject thereto or on the operations of the ASARCO
Assets as conducted prior to the Suspension Date.
(c) The representations and warranties contained in the
deeds and bills of sale delivered by ASARCO pursuant to Section 7.2(d)(i) are
specifically incorporated by reference herein and, to the extent of any
conflict between the representations and warranties contained herein and
contained in such deeds or such bills of sale, the representations and
warranties contained in such deeds or such bills of sale, as applicable, shall
govern.
Section 5.5 Leases; Contracts. Set forth in Schedule 5.5
attached hereto is a list of all leased real property (surface estates, mineral
estates and combined surface and mineral estates, including patented and
unpatented mining claims) constituting ASARCO Assets and all leases under which
ASARCO or any of its affiliates is lessee or occupant of any of the ASARCO
Assets ("ASARCO LEASES"), which ASARCO Leases constitute all of the leases and
occupancy agreements entered into in connection with the operations of the
ASARCO Assets and in effect on the date hereof and as of the Effective Date.
Set forth in Schedule 5.5 attached hereto is a complete and correct list of any
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ASARCO Contracts which are material to the operation of the ASARCO Assets,
individually or as a whole. Each ASARCO Lease and each such ASARCO Contract is
valid, binding and in full force and effect and there exists no default or
event of default or event or condition which, after the giving of notice, the
lapse of time or the happening of any other event or condition would constitute
a material default or material event of default thereunder. Each of the ASARCO
Leases and each of such ASARCO Contracts is enforceable against ASARCO in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws.
Section 5.6 Litigation. Except as set forth in Schedule 5.6
attached hereto, there is no pending or, to the best knowledge of ASARCO,
threatened judicial, administrative or arbitral action, claim, suit or
proceeding against ASARCO or any of its affiliates or any of its or its
affiliates' properties or rights which, individually or in the aggregate, could
materially adversely affect the right or ability of ASARCO or Silver Valley
Resources to carry on the operations of the ASARCO Assets as conducted prior to
the Suspension Date or which could materially and adversely affect the
condition, whether financial or otherwise, of Silver Valley Resources or the
ASARCO Assets, or which questions the validity of this Agreement or any action
taken or to be taken in connection herewith, and to the best knowledge of
ASARCO, there is no basis for any of the foregoing.
Section 5.7 Governmental Approval; Third Party Consents. (a)
Except as to any filing required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HART-SCOTT") and state and local filings required
for the transfer of properties, no consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement by ASARCO or the consummation by ASARCO of the transactions
contemplated hereby other than any consent required with respect to the
assignment of ASARCO Contracts, ASARCO Leases and permits of ASARCO described
in Section 5.8.
(b) Except as listed on Schedules 5.7(b) attached hereto, no
third party consents are required for the consummation of the transfer,
conveyance and assignment of the ASARCO Assets to Silver Valley Resources in
accordance with the terms of this Agreement.
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Section 5.8 Compliance with Laws; Permits. ASARCO is in
compliance in all material respects with all applicable permits, licenses,
orders or approvals of any federal, state, local or foreign governmental or
regulatory body, laws, rules, regulations, ordinances, judgments, orders,
injunctions, awards or decrees relating to the ASARCO Assets.
Section 5.9 Tax Matters. (a) Except as disclosed in Schedule
5.9(a) attached hereto, all material returns and reports for Taxes for taxable
years or periods that end on or before the date hereof and with respect to any
taxable year or period beginning before and ending after the date hereof, the
portion of such taxable year or period ending on and including the date hereof
("PRE-CLOSING PERIODS") which are required to be filed by ASARCO with respect
to the ASARCO Assets (collectively the "ASARCO RETURNS") have been filed or, if
not due to be filed, will be filed when due in a timely fashion and such ASARCO
Returns as filed are or will be complete and accurate in all material respects.
For purposes of this Agreement, "TAX" shall mean all taxes, assessments,
charges, duties, fees, levies or other governmental charges, including, without
limitation, all Federal, state, local, foreign and other income, franchise,
profits, capital gains, capital stock, transfer, sales, use, ad valorem,
occupation, property, excise, severance, gross receipts, license, payroll,
withholding, employment occupation, corporation, alternative or add-on minimum
tax and other taxes, assessments, charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a return), and all
estimated taxes, deficiency assessments, additions to tax, penalties, interest
and additional amounts attributable thereto imposed by any Federal, state,
local or foreign taxing authority, including any liabilities for such amounts
as a result of being a member of either a combined, consolidated, unitary or
affiliated group.
(b) Except as disclosed in Schedule 5.9(b) attached
hereto, all material Taxes relating to or arising out of the ASARCO Assets
(whether or not shown on any ASARCO Return) which are due on or before the date
hereof have been fully paid. All Taxes relating to or arising out of the
ASARCO Assets that are due with respect to all Pre-Closing Periods are
disclosed in Schedule 5.9(b). ASARCO hereby agrees to pay and discharge all
such Taxes so disclosed or required to be disclosed other than those listed in
Annex A to the Undertaking and Assumption.
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(c) Except as disclosed in Schedule 5.9(c) attached hereto,
there is no action, suit, proceeding, investigation, audit or claim now pending
or, to the best knowledge of ASARCO, threatened by any authority regarding any
Taxes relating to ASARCO for any Pre-Closing Period which could materially and
adversely affect the ASARCO Assets or the business or operations of Silver
Valley Resources.
(d) There are no liens or security interests on any of the
ASARCO Assets that arose in connection with any failure (or alleged failure) to
pay any Taxes.
(e) Except as disclosed in Schedule 5.9(e) attached hereto,
there are no agreements for the extension or waiver of the time of assessment
of any Taxes relating to the ASARCO Assets for any Pre-Closing Period and
ASARCO has not been requested to enter into any such agreement or waiver.
(f) Except as disclosed in Schedule 5.9(f) attached hereto,
ASARCO is not now nor has been a party to any Tax allocation or sharing
agreement that could result in any liability to Silver Valley Resources.
(g) Immediately prior to, and immediately subsequent to, the
consummation of the contribution of ASARCO Assets pursuant to this Agreement,
ASARCO will be a solvent corporation. For purposes of this Agreement,
"solvent" shall mean, with respect to a Contributor, that the present fair
saleable value of the assets of such Contributor is greater than the amount
that will be required to pay its liability on its existing debts as they become
absolute and matured. ASARCO represents to Silver Valley Resources that its
contribution of the ASARCO Assets pursuant to this Agreement is not being made
with the intent to hinder, delay or defraud any of their respective creditors.
Section 5.10 Disclosure. ASARCO has made full, true and
complete responses to Coeur d'Alene's and Callahan's requests for information,
documents, contracts and records relating to the ASARCO Assets. To the best
knowledge of ASARCO neither this Agreement nor any statement, certificate,
writing or document furnished by ASARCO to Coeur d'Alene, Callahan or to Silver
Valley Resources, in connection with the performance of this Agreement
contains, as of the dates of such documents, any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading.
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Section 5.11 Brokers' or Finders' Fees. No broker, finder or
similar agent has been employed by or on behalf of ASARCO and no person or
entity with which ASARCO has had any dealings or communications of any kind is
entitled to any brokerage commission, finder's fee or any similar compensation,
in connection with this Agreement or the transactions contemplated hereby.
ARTICLE VI
FURTHER REPRESENTATIONS AND WARRANTIES
OF COEUR D'ALENE AND CALLAHAN
Section 6. Representations and Warranties of Coeur d'Alene
and Callahan. Coeur d'Alene and Callahan hereby represent and warrant to
ASARCO and to Silver Valley Resources that on the date hereof and as of the
Effective Date:
Section 6.1 Organization, Power and Authority. (a) Coeur
d'Alene is a corporation duly organized, validly existing and in good standing
under the laws of the State of Idaho and Callahan is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona. Each of Coeur d'Alene and Callahan has all necessary corporate power
and authority to own, lease and operate the Coeur d'Alene Assets and the
Callahan Assets, as applicable, as heretofore conducted by Coeur d'Alene or
Callahan. Each of Coeur d'Alene and Callahan has all necessary corporate power
and authority to enter into and be bound by the terms and conditions of this
Agreement.
(b) The execution, delivery and performance by Coeur d'Alene
and Callahan of this Agreement and any agreement or instrument contemplated
hereby and thereby, and the performance by Coeur d'Alene and Callahan of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action. When duly executed and delivered by the parties
hereto and thereto, this Agreement and each such other agreement and instrument
will be legal, valid and binding obligations of each of Coeur d'Alene and
Callahan, as applicable, in each case enforceable against Coeur d'Alene and
Callahan, except as such enforceability may be limited by bankruptcy,
insolvency or other similar laws from time to time in effect.
Section 6.2 No Conflict. Except as disclosed in Schedule 6.2
hereto, neither the execution and delivery of this Agreement nor the
consummation of the transactions
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contemplated hereby will (i) result in the creation of any Lien or Other
Encumbrance upon any of the Coeur D'Alene Assets or the Callahan Assets
pursuant to the terms of any mortgage, bond, indenture, agreement, franchise or
other instrument or obligation; (ii) violate any judgment, order, injunction,
decree or award of any court, administrative agency, arbitrator or governmental
body against or affecting or binding upon Coeur d'Alene or Callahan or upon the
securities, property or business of Coeur d'Alene or Callahan; or (iii)
constitute a violation by Coeur d'Alene or Callahan of any law or regulation of
any jurisdiction or of any agreement or instrument as such law, regulation,
agreement or instrument relates to Coeur d'Alene or Callahan or to the
securities, property or business of either entity.
Section 6.3 Liabilities. To the best knowledge of Coeur
d'Alene and Callahan, neither Coeur d'Alene nor Callahan has any material
liabilities, debts or obligations, whether accrued, absolute, contingent or
otherwise, known or unknown, relating to or arising out of the Coeur d'Alene
Assets or the Callahan Assets or the ownership of the Coeur d'Alene Assets or
the Callahan Assets, other than as specifically disclosed in the Schedules
attached hereto; provided that neither Coeur d'Alene nor Callahan makes any
representation or warranty herein relating to the absence or non-disclosure of
any such liabilities, debts or obligations relating to or arising out of the
environmental condition of the Coeur d'Alene Assets or the Callahan Assets or
non-compliance with any statute, law, rule, regulation, ordinance, code or
directive relating to the environment.
Section 6.4 Ownership and Condition of Assets. (a) Except as
disclosed in Schedule 6.4(a) attached hereto, each of Coeur d'Alene and
Callahan has good and marketable title to all of the Coeur d'Alene or Callahan
Assets that do not constitute real property, including mine equipment and
fixtures, free and clear of any Lien or Other Encumbrance, except for those
which do not materially detract from the value of, or impair the use of such
property by Coeur d'Alene, Callahan or Silver Valley Resources in the
operations of the Coeur d'Alene Assets or Callahan Assets.
(b) Except as set forth in Schedule 6.4(b), to the best
knowledge of Coeur d'Alene and Callahan, Coeur d'Alene or Callahan has good and
marketable title in fee simple to all real property (surface estates, mineral
estates and combined surface and mineral estates, including patented mining
claims but excluding unpatented mining claims)
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constituting Coeur d'Alene Assets or Callahan Assets and holds sufficient
rights in and to all easements or other rights necessary for access thereto and
the substantial realization of benefits from such easements, and owns outright
all buildings and other structures, improvements and fixtures on such real
property. Title to such real property is, in each case, free and clear of any
Lien or Other Encumbrance created or incurred by Coeur d'Alene or Callahan,
except for those which do not materially detract from the value of, impair the
use of, or have a material adverse impact on the title to the Coeur d'Alene
Assets or Callahan Assets subject thereto or on the operations of the Coeur
d'Alene Assets or Callahan Assets as conducted prior to the Suspension Date.
(c) The representations and warranties contained in the
deeds and bills of sale delivered by Coeur d'Alene and Callahan pursuant to
Section 7.1(d)(i) are specifically incorporated by reference herein and, to the
extent of any conflict between the representations and warranties contained
herein and contained in such deeds or such bills of sale, the representations
and warranties contained in such deeds or such bills of sale, as applicable,
shall govern.
Section 6.5 Leases; Contracts. Set forth in Schedule 6.5
attached hereto is a list of all leased real property (surface estates, mineral
estates and combined surface and mineral estates, including patented and
unpatented mining claims) constituting Coeur d'Alene Assets or Callahan Assets
and all leases under which Coeur d'Alene, Callahan or any of their affiliates
is lessee or occupant of any of the Assets (respectively, the "COEUR D'ALENE
LEASES" or the "CALLAHAN LEASES"), which Coeur d'Alene Leases and Callahan
Leases constitute all of the leases and occupancy agreements entered into in
connection with the Coeur d'Alene Assets or Callahan Assets and in effect on
the date hereof and as of the Effective Date. Set forth in Schedule 6.5
attached hereto is a complete and correct list of any Coeur d'Alene Contracts
and Callahan Contracts which are material to the operation of the Coeur d'Alene
Assets or Callahan Assets, individually or as a whole. Each Coeur d'Alene
Lease and Callahan Lease and each such Coeur d'Alene Contract and Callahan
Contract is valid, binding and in full force and effect and there exists no
default or event of default or event or condition which, after the giving of
notice, the lapse of time or the happening of any other event or condition
would constitute a material default or material event of default thereunder.
Each of the Coeur d'Alene Leases and Callahan Leases and each of such Coeur
d'Alene
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<PAGE> 20
Contracts and Callahan Contracts is enforceable in each case against Coeur
d'Alene or Callahan in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other similar laws.
Section 6.6 Litigation. Except as set forth in Schedule 6.6
attached hereto, there is no pending or, to the best knowledge of Coeur d'Alene
and Callahan, threatened judicial, administrative or arbitral action, claim,
suit or proceeding against Coeur d'Alene or Callahan or any of their affiliates
or any of their or their affiliate's properties or rights which, individually
or in the aggregate, could materially adversely affect the right or ability of
Coeur d'Alene, Callahan or Silver Valley Resources to carry on the operations
of the Coeur d'Alene Assets or Callahan Assets as conducted prior to the
Suspension Date, or which could materially and adversely affect the condition,
whether financial or otherwise, of Silver Valley Resources or the Coeur d'Alene
Assets or Callahan Assets, or which questions the validity of this Agreement or
any action taken or to be taken in connection herewith, and to the best
knowledge of Coeur d'Alene and Callahan, there is no basis for any of the
foregoing.
Section 6.7 Governmental Approval; Third Party Consents. (a)
Except as to any filing required under Hart-Scott and state and local filings
required for the transfer of properties, no consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement by Coeur d'Alene or Callahan or the consummation by Coeur d'Alene or
Callahan of the transactions contemplated hereby other than any consent
required with respect to the assignment of Coeur d'Alene Contracts or Callahan
Contracts, Leases and permits of Coeur d'Alene and Callahan described in
Section 6.8.
(b) Except as listed on Schedule 6.7(b) attached hereto, no
third party consents are required for the consummation of the transfer,
conveyance and assignment of the Coeur d'Alene Assets and the Callahan Assets
in accordance with this Agreement.
Section 6.8 Compliance with Laws; Coeur D'Alene Permits or
Callahan Permits. Coeur d'Alene and Callahan are in compliance in all material
respects with all applicable permits, licenses, orders or approvals of any
federal, state, local or foreign governmental or regulatory body, laws, rules,
regulations, ordinances, judgments, orders,
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<PAGE> 21
injunctions, awards or decrees relating to the Coeur d'Alene Assets or Callahan
Assets.
Section 6.9 Tax Matters. (a) Except as disclosed in Schedule
6.9(a) attached hereto, all material returns and reports for Taxes for all
Pre-Closing Periods which are required to be filed by or with respect to Coeur
d'Alene and Callahan with respect to the Coeur d'Alene Assets and the Callahan
Assets (collectively the "COEUR D'ALENE RETURNS") have been filed or, if not
due to be filed, will be filed when due in a timely fashion and such Coeur
d'Alene Returns as filed are or will be complete and accurate in all material
respects.
(b) Except as disclosed in Schedule 6.9(b) attached
hereto, all material Taxes relating to or arising out of the Coeur d'Alene
Assets or the Callahan Assets (whether or not shown on any Coeur d'Alene
Return) which are due on or before the date hereof have been fully paid. All
Taxes relating to or arising out of the Coeur d'Alene Assets or the Callahan
Assets that are due with respect to all Pre-Closing Periods are disclosed in
Schedule 6.9(b). Coeur d'Alene and Callahan agree to pay and discharge all
such Taxes so disclosed or required to be disclosed, other than those listed in
Annex A to the Undertaking and Assumption.
(c) Except as disclosed in Schedule 6.9(c) attached hereto,
there is no action, suit, proceeding, investigation, audit or claim now pending
or, to the best knowledge of Coeur d'Alene and Callahan, threatened by any
authority regarding any Taxes relating to Coeur d'Alene or Callahan for any
Pre-Closing Period which could materially and adversely affect the Coeur
d'Alene Assets or the Callahan Assets or the operations or business of Silver
Valley Resources.
(d) There are no liens or security interests on any of the
Coeur d'Alene Assets or the Callahan Assets that arose in connection with any
failure (or alleged failure) to pay any Taxes.
(e) Except as disclosed in Schedule 6.9(e) attached hereto,
there are no agreements for the extension or waiver of the time of assessment
of any Taxes relating to the Coeur d'Alene Assets or the Callahan Assets for
any Pre-Closing Period and neither Coeur d'Alene nor Callahan has been
requested to enter into any such agreement or waiver.
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<PAGE> 22
(f) Except as disclosed in Schedule 6.9(f) neither Coeur
d'Alene nor Callahan is now nor has either been a party to any Tax allocation
or sharing agreement that could result in any liability to Silver Valley
Resources.
(g) Immediately prior to, and immediately subsequent to, the
consummation of the contribution of Coeur d'Alene Assets and the Callahan
Assets pursuant to this Agreement, Coeur d'Alene and Callahan will be solvent
corporations. Coeur d'Alene and Callahan represent to Silver Valley Resources
that their respective contributions of the Coeur d'Alene Assets and the
Callahan Assets pursuant to this Agreement are not being made with the intent
to hinder, delay or defraud any of their respective creditors.
Section 6.10 Disclosure. Coeur d'Alene and Callahan have
made full, true and complete responses to ASARCO requests for information,
documents, contracts and records relating to the Coeur d'Alene Assets or the
Callahan Assets. To the best knowledge of Coeur d'Alene and Callahan neither
this Agreement nor any statement, certificate, writing or document furnished by
either of Coeur d'Alene or Callahan to ASARCO or Silver Valley Resources, in
connection with the performance of this Agreement contains, as of the dates of
such documents, any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.
Section 6.11 Brokers' or Finders' Fees. No broker, finder or
similar agent has been employed by or on behalf of Coeur d'Alene or Callahan,
and no person or entity with which Coeur d'Alene or Callahan has had any
dealings or communications of any kind is entitled to any brokerage commission,
finder's fee or any similar compensation, in connection with this Agreement or
the transactions contemplated hereby.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to Obligations of ASARCO.
The obligation of ASARCO to contribute the ASARCO Assets under this Agreement
is subject to the fulfillment, prior to or at the date hereof, of each of the
following conditions (any or all of which may be waived by ASARCO):
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(a) Silver Valley Resources shall have delivered to
ASARCO the Consideration in exchange for the contribution and transfer
of the ASARCO Assets.
(b) Coeur d'Alene and Callahan shall have obtained the
consent to the assignment of any Coeur d'Alene Contract, Callahan
Contract, Coeur d'Alene Lease and Callahan Lease, as applicable, or
any claim, right or benefit arising thereunder or resulting therefrom,
if consent is required for effective assignment thereof to Silver
Valley Resources or to avoid a breach. In addition, Coeur d'Alene and
Callahan shall have obtained the consents to the transfer, conveyance
and assignment to Silver Valley Resources of all other Coeur d'Alene
Assets or Callahan Assets, as applicable, if consent is required for
effective transfer, conveyance and assignment thereof or to avoid a
breach.
(c) The parties shall have executed and delivered a letter
agreement in the form attached hereto as Exhibit B (the "LETTER
AGREEMENT").
(d) Coeur d'Alene and Callahan shall each have delivered, or
caused to be delivered, to Silver Valley Resources (i) executed deeds
in proper form for recording, bills of sale or certificates of title
containing covenants or warranties of title, each dated the date
hereof and effective as of the Effective Date, transferring to Silver
Valley Resources the Coeur d'Alene Assets and the Callahan Assets, as
applicable, in accordance with this Agreement and (ii) all such
further instruments of conveyance, assignment and further assurance as
may reasonably be required in order to vest in and confirm to Silver
Valley Resources all right, title and interest in and to the Coeur
d'Alene Assets and the Callahan Assets.
(e) Silver Valley Resources and Coeur d'Alene shall have
executed and delivered a Management Services Agreement substantially
in the form attached hereto as Exhibit C (the "MANAGEMENT SERVICES
AGREEMENT") and Silver Valley Resources shall have executed and
delivered the Undertaking and Assumption with respect to the ASARCO
Assets.
(f) Each of Coeur d'Alene and Callahan shall have furnished
to Silver Valley Resources a non-foreign person affidavit as required
by Section 1445 of the Internal Revenue Code of 1986, as amended (the
"CODE").
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<PAGE> 24
(g) Coeur d'Alene and Callahan shall each have delivered to
Silver Valley Resources or ASARCO, as applicable, all other documents
and certificates required to be delivered hereunder by Coeur d'Alene
and Callahan at or prior to Closing.
Section 7.2 Conditions Precedent to Obligations of Coeur
d'Alene and Callahan. The obligations of Coeur d'Alene and Callahan to
contribute the Coeur d'Alene Assets and the Callahan Assets under this
Agreement are subject to the fulfillment, prior to or at the date hereof, of
each of the following conditions (any or all of which may be waived by Coeur
d'Alene or Callahan):
(a) Silver Valley Resources shall have delivered the
Consideration to each of Coeur d'Alene and Callahan in exchange for
the contribution and transfer of the Coeur d'Alene Assets and Callahan
Assets.
(b) ASARCO shall have obtained the consent to the assignment
of any ASARCO Contract and ASARCO Lease, as applicable, or any claim,
right or benefit arising thereunder or resulting therefrom, if consent
is required for effective assignment thereof to Silver Valley
Resources or to avoid a breach. In addition, ASARCO shall have
obtained the consents to the transfer, conveyance and assignment to
Silver Valley Resources of all other ASARCO Assets if consent is
required for effective transfer, conveyance and assignment thereof or
to avoid a breach.
(c) The parties shall have executed and delivered the Letter
Agreement.
(d) ASARCO shall have delivered, or caused to be delivered,
to Silver Valley Resources the following (i) executed deeds in proper
form for recording, bills of sale or certificates of title containing
covenants or warranties of title, each dated the date hereof and
effective as of the Effective Date, transferring to Silver Valley
Resources the ASARCO Assets in accordance with this Agreement and (ii)
all such further instruments of conveyance, assignment and further
assurance as may reasonably be required in order to vest in and
confirm to Silver Valley Resources all right, title and interest in
and to the ASARCO Assets.
(e) ASARCO and Silver Valley Resources shall have executed
and delivered the Management Services Agreement
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<PAGE> 25
and Silver Valley Resources shall have executed and delivered
the Undertaking and Assumption with respect to the Coeur d'Alene
Assets and the Callahan Assets.
(f) ASARCO shall have furnished to Silver Valley Resources a
non-foreign person affidavit as required by Section 1445 of the Code.
(g) ASARCO shall have delivered to Silver Valley Resources,
Coeur d'Alene or Callahan, as applicable, all other documents and
certificates required to be delivered by Coeur d'Alene and Callahan
hereunder at or prior to Closing.
ARTICLE VIII
ADDITIONAL COVENANTS OF THE PARTIES
Section 8.1 Expenses of Transfer. Except as otherwise
provided elsewhere in this Agreement, ASARCO, Coeur d'Alene and Callahan shall
each bear their own direct and indirect expenses incurred in connection with
the negotiation and preparation of this Agreement and all related documents,
and the consummation and performance of the transactions contemplated hereby.
All stamp, transfer, documentary, sales, use, recordation, registration, and
other such taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby
(collectively the "TRANSFER TAXES") shall be paid by ASARCO with respect to the
ASARCO Assets and by Coeur d'Alene with respect to the Coeur d'Alene Assets and
the Callahan Assets. Each of ASARCO, Coeur d'Alene and Callahan shall properly
file, on a timely basis, all necessary tax returns, reports, forms and other
documentation with respect to any Transfer Taxes and ASARCO and Coeur d'Alene
shall provide to each other, and Callahan shall provide to ASARCO, evidence of
payment of all Transfer Taxes. ASARCO, Coeur d'Alene and Callahan each agree to
cooperate to obtain all available exemptions from the payment of any such
expenses of transfer.
Section 8.2 Confidentiality. Each party hereto will hold and
will cause its consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all documents and information
concerning the other parties to this Agreement furnished it by such other
parties or their representatives in connection with the transactions
contemplated by this
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<PAGE> 26
Agreement (except to the extent that such information can be shown to have been
(i) previously known by the party to which it was furnished, (ii) in the
public domain through no fault of such party, or (iii) later lawfully acquired
from other sources by the party to which it was furnished), and each party will
not release or disclose such information to any other person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors in connection with this Agreement. If the transactions contemplated by
this Agreement are not consummated, such confidence shall be maintained except
to the extent such information comes into the public domain through no fault of
the party required to hold it in confidence, and such information shall not be
used to the detriment of, or in relation to any investment in, the other
parties and all such documents (including copies thereof) shall be returned to
the other parties immediately upon their written request. Each party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other parties if it exercises the same care as it
takes to preserve confidentiality for its own similar information.
Section 8.3 Publicity. Neither ASARCO nor Coeur d'Alene nor
Callahan shall make or issue, or cause to be made or issued, any announcement
or written statement concerning this Agreement or the transactions contemplated
hereby for dissemination to the general public without the prior consent of the
others, and Silver Valley Resources shall not make or issue, or cause to be
made or issued, any announcement or written statement concerning this Agreement
or the transactions contemplated hereby for dissemination to the general public
without the prior consent of ASARCO, Coeur d'Alene and Callahan. This
provision shall not apply, however, to any announcement or written statement
required to be made by law or the regulations of any federal or state
governmental agency or any stock exchange, except that the party required to
make such announcement shall, whenever practicable, consult with the other
parties concerning the timing and content of such announcement before such
announcement is made.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification by Silver Valley Resources.
Silver Valley Resources agrees to defend, indemnify and hold harmless ASARCO,
Coeur d'Alene, Callahan, their directors, officers, employees, agents and
affiliates
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<PAGE> 27
from and against all costs, damages, losses, Taxes, penalties or expenses
(including, without limitation, attorneys' fees and expenses) ("DAMAGES")
suffered or paid directly or indirectly, as a result of, relating to or arising
out of: (a) any claim (including environmental claims) based on any act or
omission of Silver Valley Resources, or (b) any claim (including environmental
claims) to the extent related to the condition or operation of the Assets or
other assets of Silver Valley Resources (subject to Section 9.2 and Section
9.3); provided, however, that the foregoing indemnity of Silver Valley
Resources shall not apply to any claims of the Coeur d'Alene Tribe of Idaho
(the "TRIBE") for "Covered Matters" as defined in the Settlement Agreement by
and among the Tribe, Callahan and Coeur d'Alene, dated December 31, 1991. As
between the parties hereto any claims of the Tribe arising from the Assets
prior to the date such Assets are transferred to Silver Valley Resources shall
be governed by the Coeur Agreement, the Galena Lease, any other applicable
existing agreement, or applicable law.
Section 9.2 Indemnification by ASARCO. ASARCO agrees,
subject to the other terms and conditions of this Article IX and Section 10.1,
to indemnify, defend and hold Silver Valley Resources, Coeur d'Alene and
Callahan and their respective directors, officers, shareholders, employees,
affiliates and agents harmless from and against any and all Damages based upon,
arising out of or otherwise in respect of any inaccuracy in or any breach of
any representation, warranty, covenant or agreement of ASARCO contained in this
Agreement or in any certificate, agreement, document or instrument delivered
pursuant to this Agreement.
Section 9.3 Indemnification by Coeur d'Alene and Callahan.
Coeur d'Alene and Callahan agree, subject to the other terms and conditions of
this Article IX and Section 10.1, to indemnify, defend, and hold Silver Valley
Resources and ASARCO and their respective directors, officers, shareholders,
employees, affiliates and agents harmless from and against any and all Damages
based upon, arising out of or otherwise in respect of any inaccuracy in or any
breach of any representation, warranty, covenant or agreement of Coeur d'Alene
or Callahan contained in this Agreement or in any certificate, agreement,
document or instrument delivered pursuant to this Agreement.
Section 9.4 Notice and Opportunity to Defend. Promptly after
receipt by any party hereto of the assertion of any claim in respect of Damages
or discovery of any fact upon which such party expects to make a claim for
indemnifi-
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<PAGE> 28
cation hereunder, such party shall give the party who may become obligated to
provide indemnification hereunder (the "INDEMNIFYING PARTY") written notice
describing such claim or fact in reasonable detail (the "NOTICE OF CLAIM").
The Indemnifying Party shall have the right, at its option, to compromise or
defend, at its own expense and by its own counsel, any such matter involving
the asserted liability of the party seeking such indemnification as to which
the Indemnifying Party shall have promptly acknowledged its obligation to
provide indemnification hereunder. Such Notice of Claim, and the opportunity
to compromise or defend, shall be a condition precedent to any liability of the
Indemnifying Party hereunder with respect to the claim or fact described in
such Notice of Claim. If the Indemnifying Party shall undertake to compromise
or defend any such asserted liability, it shall promptly notify the party
seeking indemnification of its intention to do so, and the party seeking
indemnification agrees to cooperate with the Indemnifying Party and its counsel
in the compromise of, or defense against, any such asserted liability. All
costs and expenses incurred in connection with such cooperation shall be borne
by the Indemnifying Party. In any event, the indemnified party shall have the
right at its own expense to participate in the defense of such asserted
liability.
Section 9.5 Recovery for Damages. Where Silver Valley
Resources, ASARCO, Coeur d'Alene or Callahan recover on a claim for Damages
from an unrelated third party, including, without limitation, an insurance
company, payments for indemnification pursuant to this Article IX in respect of
any such claim shall be net (after payment of costs of recovery and allocable
costs of obtaining and maintaining the insurance which provided same) of any
such recoveries on such claim received prior to such payment pursuant to this
Article IX, by the party to be indemnified (the "INDEMNITEE"), and where such
recoveries are received by the Indemnitee after payment pursuant to this
Article IX is made to the Indemnitee, the Indemnitee will remit to the
Indemnifying Party such portion of such recoveries (after payment of costs of
recovery and allocable costs of obtaining and maintaining the insurance which
provided same) as is necessary to prevent double recovery up to the amount paid
to the Indemnitee on such claim by the Indemnifying Party.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Survival of Representations, Warranties and
Indemnities. All representations, warranties, and indemnities of Silver Valley
Resources, ASARCO, Coeur d'Alene and Callahan in this Agreement shall survive
the execution and delivery of this Agreement and the Closing, and shall not be
merged into the deeds or other instruments of conveyance delivered pursuant to
this Agreement, but shall extend as to any claim for which a Notice of Claim
has been submitted therefore for the applicable period of the relevant statute
of limitations.
Section 10.2 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be sufficiently
given if delivered in person or sent by telex or telecopier or by certified or
registered mail, postage prepaid, addressed as follows:
(i) if to Silver Valley Resources, at:
Silver Valley Resources Corporation
Attention: Chairman
c/o ASARCO Incorporated
180 Maiden Lane
New York, New York 10038
with a copy to: President
c/o Coeur d'Alene Mines Corporation
505 Front Avenue
Coeur d'Alene, Idaho 83814
(ii) if to Coeur d'Alene, at:
Coeur d'Alene Mines Corporation
505 Front Avenue
Coeur d'Alene, Idaho 83814
Attention: Dennis E. Wheeler
with a copy to:
Attention: William F. Boyd
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<PAGE> 30
(iii) if to Callahan, at:
Callahan Mining Corporation
505 Front Avenue
Coeur d'Alene, Idaho 83814
Attention: Dennis E. Wheeler
with a copy to:
Attention: William F. Boyd
(iv) if to ASARCO, at:
ASARCO Incorporated
180 Maiden Lane
New York, New York 10038-4991
Attention: General Counsel
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Kevin Keogh, Esq.
Any party may, by notice given in accordance with this Section 10.2 to the
other parties, designate another address or person for receipt of notices
hereunder. Such notice or other communication shall be deemed to have been
given as of the date so delivered (in the case of deliveries in person), or as
of the date so sent (in the case of deliveries by telecopier), or as of the
fifth calendar day after the date so mailed (in the case of deliveries made by
registered or certified mail).
Section 10.3 Entire Agreement. This Agreement (including the
Exhibits and Schedules attached hereto) contains the entire agreement of the
parties with respect to the contribution and transfer of the Assets by ASARCO,
Coeur d'Alene and Callahan and the issuance and delivery of stock by Silver
Valley Resources and supersedes all prior agreements, representations and
warranties, written or oral, with respect thereto.
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<PAGE> 31
Section 10.4 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of Silver Valley Resources,
ASARCO, Coeur d'Alene or Callahan in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of Silver Valley Resources, ASARCO, Coeur d'Alene or Callahan of any such
right, power or privilege, or any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of
any other such right, power or privilege.
Section 10.5 Assignability. This Agreement and the rights
and obligations of the parties hereunder shall not be assignable by any of the
parties hereto without the prior written consent of the other parties.
Section 10.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware,
without reference to the conflict of laws provisions thereof; except that all
issues arising under this Agreement to the extent pertaining to the real or
personAL property or property rights shall be governed and construed in
accordance with the laws of the State of Idaho.
Section 10.7 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns.
Section 10.8 Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
Section 10.9 Further Assurances. (a) ASARCO, Coeur d'Alene
and Callahan shall, at the request of Silver Valley Resources, at any time and
from time to time following the Closing promptly execute and deliver, or cause
to be executed and delivered, to Silver Valley Resources all such further
instruments and take all such further action as Silver Valley Resources may
reasonably request to more effectively transfer to Silver Valley Resources, or
to perfect or record Silver Valley Resources' title to or interest in, or to
enable Silver Valley Resources to use, the Assets or otherwise to confirm or
carry out the provisions
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<PAGE> 32
and intent of this Agreement, including, without limitation, assistance in the
collection or reduction to possession of any such Assets.
(b) Without limiting the generality of the foregoing, if a
required consent to the assignment of any ASARCO Contract, ASARCO Lease, Coeur
d'Alene Contract, Coeur d'Alene Lease, Callahan Contract or Callahan Lease
pursuant to this Agreement has not been obtained by the date hereof effective
as of the Effective Date, or if an attempted assignment of any such contract or
lease would be ineffective, ASARCO, Coeur d'Alene or Callahan, as applicable,
shall continue to use all commercially reasonable efforts to obtain such
consent after the date hereof, and Silver Valley Resources shall use all
commercially reasonable efforts to perform the obligations under such contract
or lease in the name of ASARCO, Coeur d'Alene, or Callahan, as applicable.
ASARCO, Coeur d'Alene and Callahan, as applicable, shall cooperate with Silver
Valley Resources in any commercially reasonable arrangement designed to provide
for Silver Valley Resources all of the benefits, and for Silver Valley
Resources to assume the burdens, liabilities, obligations and expenses under
any such contract or lease.
Section 10.10 Severability. If any term or other provision
in this Agreement is invalid, illegal or unenforceable by any rule or law or
public policy, all other conditions and provisions in this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 10.11 Coeur Agreement and Galena Lease Termination.
Effective as of the Effective Date, the Coeur Agreement and the Galena Lease
are hereby terminated, except for the purposes specifically referred to in this
Agreement and the Undertaking and Assumption or in any other agreement or
document contemplated hereby.
Section 10.12 Third Parties. Except as specifically set
forth or referred to herein, nothing herein expressed or implied is intended or
shall be construed to
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<PAGE> 33
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns and the beneficiaries of contractual
indemnification expressly set forth herein, any rights or remedies under or by
reason of this Agreement.
Section 10.13 Exhibits, Schedules and Annexes. All Exhibits
and Schedules attached hereto and Annexes attached thereto are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Any matter disclosed in any Schedule or Annex referred to herein shall
be deemed also to have been disclosed in any other applicable Schedule or Annex
referred to herein.
Section 10.14 Table of Contents; Captions. The table of
contents and article and section titles or captions contained in this Agreement
or in any Exhibit or Schedule attached hereto or referred to herein are for
convenience only, shall not be deemed a part of this Agreement and shall not
affect the meaning or interpretation of this Agreement.
Section 10.15 Bulk Sales. Silver Valley Resources, ASARCO,
Coeur d'Alene and Callahan hereby waive compliance with applicable provisions,
if any, of Idaho bulk sales law.
Section 10.16 Best Knowledge. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to
"the best knowledge" of a party hereto or by words of similar import, such
phrase shall mean the actual knowledge of such party after due inquiry.
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers hereunto duly authorized
as of the 6th day of January, 1995.
SILVER VALLEY RESOURCES CORPORATION
By
---------------------------------
Name: Richard de J. Osborne
Title: Chairman
ASARCO INCORPORATED
By
---------------------------------
Name: Richard de J. Osborne
Title: Chairman and Chief Executive
Officer
COEUR D'ALENE MINES CORPORATION
By
---------------------------------
Name: Dennis E. Wheeler
Title: Chairman, President, and
Chief Executive Officer
CALLAHAN MINING CORPORATION
By
---------------------------------
Name: Dennis E. Wheeler
Title: President
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<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF COEUR D'ALENE MINES CORPORATION
The following subsidiaries of Coeur d'Alene Mines Corporation, are wholly
owned unless otherwise stated.
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION
- --------------------------------------- --------------------------
<S> <C>
Coeur Rochester, Inc. Delaware
Coeur Bullion Idaho
Coeur Explorations, Inc. Idaho
Coeur Alaska, Inc. Delaware
CDE Chilean Mining Corporation Delaware
Callahan Mining Corporation Arizona
Silver Valley Resources Corporation Delaware (50% owned)
Compania Minera CDE Fachinal Limitada Chile
</TABLE>
The following is a list of the subsidiaries of Callahan Mining Corporation:
<TABLE>
<CAPTION>
STATE OF PERCENTAGE
NAME OF SUBSIDIARY INCORPORATION OF OWNERSHIP
- ---------------------------------- -------------- ------------
<S> <C> <C>
Coeur New Zealand, Inc. Delaware 100%
Pinnacle Exploration, Inc. Colorado 87.2%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Long-Term Incentive Plan of Coeur d'Alene Mines
Corporation, of our report dated February 2, 1996 with respect to the
consolidated financial statements and schedules of Coeur d'Alene Mines
Corporation included in the Annual Report (Form 10-K) for the year ended
December 31, 1995.
/S/ ERNST & YOUNG
Seattle, Washington
February 28, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COEUR
D'ALENE MINES CORPORATION FORM 10-K FOR YEAR ENDED 12/31/95.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 16,484,767
<SECURITIES> 63,077,064
<RECEIVABLES> 13,809,248
<ALLOWANCES> 0
<INVENTORY> 30,980,765
<CURRENT-ASSETS> 126,622,539
<PP&E> 118,083,535
<DEPRECIATION> 34,152,342
<TOTAL-ASSETS> 445,646,073
<CURRENT-LIABILITIES> 21,025,717
<BONDS> 184,788,674
0
0
<COMMON> 21,524,093
<OTHER-SE> 218,307,589
<TOTAL-LIABILITY-AND-EQUITY> 445,646,073
<SALES> 89,239,051
<TOTAL-REVENUES> 98,743,116
<CGS> 72,210,413
<TOTAL-COSTS> 72,210,413
<OTHER-EXPENSES> 27,590,590
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,745,967
<INCOME-PRETAX> (1,057,887)
<INCOME-TAX> 199,703
<INCOME-CONTINUING> (1,257,590)
<DISCONTINUED> 2,411,942
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,154,352
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
