<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COEUR D'ALENE MINES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IDAHO
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
82-0109423
(I.R.S. EMPLOYER IDENTIFICATION NO.)
400 COEUR D'ALENE MINES BUILDING
505 FRONT AVENUE
COEUR D'ALENE, IDAHO 83814
208-667-3511
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DENNIS E. WHEELER
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COEUR D'ALENE MINES CORPORATION
400 COEUR D'ALENE MINES BUILDING
505 FRONT AVENUE
COEUR D'ALENE, IDAHO 83814
208-667-3511
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
PLEASE SEND COPIES OF COMMUNICATIONS TO:
Arthur H. Bill, Esq.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of this prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE(1) OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated Debentures due
2005........................................ $143,750,000 100% $143,750,000 $43,560.61
Common Stock, par value $1.00 per share, and
Rights to purchase Series A Junior Preferred
Stock attached thereto...................... (2) -- -- None
=========================================================================================================================
</TABLE>
(1) Plus accrued interest. Estimated solely for purpose of determining the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
(2) Plus such indeterminate number of shares of Common Stock and Rights attached
thereto as may be issuable upon the possible conversion of the Convertible
Subordinated Debentures being registered hereunder.
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1997
PROSPECTUS $143,750,000
[COUER D'ALENE MINES LOGO]
[COUER D'ALENE MINES LOGO]
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
Interest payable April 30 and October 31
------------------------
This Prospectus relates to $143,750,000 aggregate principal amount of
7 1/4% Convertible Subordinated Debentures due 2005 (the "Debentures") of Coeur
d'Alene Mines Corporation ("Coeur" or the "Company"), and the shares of common
stock, par value $1.00 per share (the "Common Stock"), of the Company which are
issuable from time to time upon conversion of the Debentures. Either the
Debentures or Common Stock issued upon conversion may be offered from time to
time for the account of holders of Debentures named herein (the "Selling
Debentureholders"). The Company will not receive any proceeds from this
offering. Prior to this offering, there has not been any public market for the
Debentures.
The Debentures are convertible into 8,237,822 shares of Common Stock on or
before October 31, 2005, unless previously redeemed, at a conversion price of
$17.45 per share (or approximately 57 shares per $1,000 principal amount of
Debentures), subject to adjustment in certain events. On November 18, 1997, the
last reported sale price of the Common Stock on the New York Stock Exchange
Composite Tape was $8.94 per share. The Common Stock is traded under the symbol
"CDE."
The Debentures are redeemable, in whole or in part, at any time on or after
October 31, 2000, at the redemption prices set forth herein plus accrued
interest. The Debentures are required to be repurchased at the option of the
holder if a Designated Event (as defined herein) occurs, at 100% of the
principal amount thereof plus accrued interest. No assurance can be given that
the Company will have the financial resources necessary to repurchase the
Debentures upon the occurrence of a Designated Event.
The Debentures are unsecured and subordinate in right of payment to all
existing or future Senior Debt (as defined herein) and rank pari passu with the
Company's other outstanding convertible debentures. The Debentures are also
effectively subordinated to liabilities of the Company's subsidiaries. The
Indenture relating to the Debentures does not restrict the incurrence of Senior
Debt or other indebtedness by the Company or any subsidiary. See "Description of
Debentures."
See "Risk Factors" for information that should be considered by prospective
investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. To the extent required, the principal amount of Debentures or the
number of shares of Common Stock to be sold, the names of the Selling
Debentureholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement. The aggregate
proceeds to the Selling Debentureholders from the sale of Debentures and Common
Stock offered by the Selling Debentureholders hereby will be the purchase price
of such Debentures or Common Stock less any commissions. See "Plan of
Distribution" herein for indemnification arrangements between the Company and
the Selling Debentureholders.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Debentures or shares of Common
Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Debentures were issued by the Company in October 1997 in connection
with an offering to "qualified institutional buyers" as defined in Rule 144A
under the Securities Act and to certain non-U.S. persons in reliance upon
Regulation S under the Securities Act.
The date of this Prospectus is December , 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the Commission's public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained by mail from the Commission's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
and such materials may be inspected and copied at the Commission's Web Site
(http://www.sec.gov). Such reports, proxy statements and other information also
can be inspected at the offices of the New York Stock Exchange, Inc. ("NYSE"),
20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8641) pursuant to Section 12 or 13 of the Exchange Act are hereby incorporated
by reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1996 (the "Form 10-K").
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1997 (the "Forms 10-Q").
3. Current Report on Form 8-K filed on October 16, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debentures hereby shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the Registration Statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to William F. Boyd, Esq.,
Secretary, Coeur d'Alene Mines Corporation, 400 Coeur d'Alene Mines Building,
505 Front Avenue, Coeur d'Alene, Idaho 83814, telephone number (208) 667-3511.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the detailed information and financial statements (including
the notes thereto) incorporated by reference in this Prospectus.
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production and silver reserves of any
primary silver producer located in the United States and certain of the silver
mines in which it has an interest are the lowest cost of production primary
silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $560 million on September 30, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 9.5 million ounces of silver and 214,000 ounces of gold in 1996.
Production continued to increase in the first nine months of 1997 to
approximately 8.2 million ounces of silver and 213,209 ounces of gold, compared
to approximately 6.7 million ounces of silver and 145,604 ounces of gold during
the first nine months of 1996.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the nine
months ended September 30, 1997 were approximately $6.4 million, an increase of
approximately 23% over the first nine months of 1996. Total exploration expenses
for 1997 are expected to approximate $7.6 million compared to $7.7 million in
1996.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL MINING PROPERTIES. The Company's most significant mining
properties are:
- The Rochester Mine ("Rochester"), a silver and gold surface mining
operation located in northwestern Nevada. Rochester is 100% owned and
operated by Coeur and is the largest primary silver mine in the United
States. Silver and gold production in 1997 are expected to approximate
6.1 million ounces and 84,000 ounces, respectively.
- A 50% interest in Silver Valley Resources Corporation ("Silver Valley
Resources"), which owns and operates several mining properties in the
Coeur d'Alene Mining District of northern Idaho, including the Coeur and
Galena underground silver mines, which are historically among the largest
and lowest cost of production silver mines in the United States.
Operations at the Coeur Mine and the Galena Mine, which were suspended in
April 1991 and July 1992, respectively, due to low silver prices,
3
<PAGE> 5
resumed in June 1996 and May 1997, respectively. Production attributable
to Coeur's 50% interest in Silver Valley Resources is estimated at
approximately 1.8 million ounces of silver for 1997.
- The 100% owned Fachinal open pit and underground gold and silver mine
("Fachinal Mine") in Chile, which the Company developed and constructed
on schedule and under budget in October 1995, following its acquisition
of the property in 1990. The Fachinal Mine is expected to produce
approximately 2.6 million ounces of silver and 34,000 ounces of gold in
1997.
- The El Bronce underground gold and silver mine in Chile ("El Bronce
Mine"), in which the Company acquired a 51% operating interest in October
1994 and increased to 100% ownership in September 1996. Coeur is
evaluating its option to purchase the Boton de Oro gold mine, which is
adjacent to the El Bronce Mine and where Coeur is engaged in limited gold
production and underground exploration. The El Bronce Mine is expected to
produce approximately 122,000 ounces of silver and 55,000 ounces of gold
in 1997.
- A 25% interest in the Yilgarn Star Mine, a gold mine in Western
Australia, through a 50% ownership interest in Gasgoyne Gold Mines NL
("Gasgoyne") acquired in May 1996 and May 1997. The net gold production
attributable to Coeur's interest in the Yilgarn Star Mine is expected to
be approximately 41,000 ounces of gold in 1997.
- The Kensington property ("Kensington"), located north of Juneau, Alaska,
in which Coeur increased its participation from 50% to 100% in July 1995
and in which Coeur has invested a total of $118 million with a view to
developing the property into an underground gold mine. A production
decision at Kensington is subject to a realized price of gold through
spot or forward sales of at least $400 per ounce and the receipt of
required key permits. The U.S. Forest Service issued a supplemental
Environmental Impact Statement for Kensington on August 15, 1997, the
City and Borough of Juneau issued a Large Mine Permit for the project on
November 4, 1997, and the Company anticipates that it will receive the
remaining key permits by the end of 1997.
- The Golden Cross underground and surface gold mine in New Zealand, which
is 80% owned and operated by Coeur and is planned to be closed toward the
end of 1997 or early 1998. Estimated production in 1997, which will be
the mine's final year of production, is expected to be approximately
80,000 ounces of gold and 284,000 ounces of silver.
PRINCIPAL EXPLORATION PROJECTS. Coeur is conducting substantial silver and
gold exploratory activities. The Fachinal Mine reserve base and production is
expected to be enhanced by exploratory drilling in the Fachinal Mine area and at
the Furioso project in southern Chile. Exploratory activities to expand ore
reserves and production are underway at the El Bronce Mine and at the Boton de
Oro project in central Chile. Silver Valley Resources is engaged in silver
exploration projects at Vein 123 of the Galena Mine, at the Coeur Mine and
adjacent Caladay project and at the adjoining leased Sterling Mining Company,
Placer Creek Mining Company, Silver Buckle Mines, Inc. and American Silver
Mining Company properties in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Activities at the Galena Mine during 1997 have revealed a previously
undiscovered vein known as the 123 Vein. Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being conducted
at (i) the Groete Creek property, a low-grade gold, potential bulk volume mining
property located near Georgetown, Guyana, 75% of which Coeur has the option to
purchase; (ii) the KM 66 property in the State of Durango, Mexico, which has
low-grade silver, bulk tonnage open pit mining potential, and which Coeur has
the option to purchase in its entirety; and (iii) several other gold and silver
exploration projects located throughout Chile, the more important of which is
the Puchuldiza gold project in northern Chile. No assurance can be given that
the Company's exploration projects will yield mineable ore reserves.
4
<PAGE> 6
THE DEBENTURES
Securities Offered......... $143,750,000 principal amount of 7 1/4% Convertible
Subordinated Debentures due 2005.
Maturity Date.............. October 31, 2005.
Interest Payment Dates..... April 30 and October 31, commencing April 30, 1998.
Conversion................. Convertible into Common Stock on or before October
31, 2005, unless previously redeemed, at a
conversion price of $17.45 per share, subject to
adjustment in certain events.
Optional Redemption........ Redeemable at the option of the Company, in whole
or in part at any time on or after October 31, 2000
at the redemption prices set forth herein plus
accrued interest. See "Description of
Debentures -- Optional Redemption of Debentures."
Repurchase at Option of
Holder Upon Occurrence of a
Designated Event......... The Debentures are required to be repurchased at
100% of their principal amount at the option of the
holder, if a Designated Event (as defined herein)
occurs. See "Description of
Debentures -- Repurchase at Option of Holder Upon
Occurrence of a Designated Event."
Subordination.............. The Debentures are subordinated to all Senior Debt
(as defined herein), which was approximately $9.2
million at October 31, 1997. The Debentures are
also effectively subordinated to liabilities of the
Company's subsidiaries. The Indenture will not
restrict the incurrence of Senior Debt or other
indebtedness by the Company or any subsidiary.
5
<PAGE> 7
SUMMARY FINANCIAL, OPERATING AND RESERVE DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995(6) 1996 1996 1997(7)
------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates and dore........ $41,414 $67,990 $79,606 $89,239 $92,731 $62,920 $ 96,757
Less cost of mine operations......... 37,829 59,804 67,802 72,210 83,283 56,622 103,258
------- ------- ------- ------- ------- ------- --------
Gross profit (loss).................. 3,585 8,186 11,804 17,029 9,448 6,298 (6,501)
Other income......................... 4,812 5,388 12,587 9,504 13,159 9,158 20,427
------- ------- ------- ------- ------- ------- --------
Total income......................... 8,397 13,574 24,391 26,533 22,607 15,456 13,926
Other expenses....................... 14,118 31,548 29,392 27,591 23,946 17,069 22,193
Writedown of mining properties(1).... -- -- -- -- (54,415) (54,415) --
Loss from continuing operations...... (1,488) (14,042) (4,736) (1,258) (54,570) (54,870) (8,265)
Income (loss) before cumulative
effect of change in accounting
method(2).......................... (759) (13,290) (3,943) 1,154 (54,570) (54,870) (8,265)
Cumulative effect of change in
accounting method(3)............... -- 5,181 -- -- -- -- --
Net income (loss).................... (759) (8,109) (3,943) 1,154 (54,570) (54,870) (8,265)
Net income (loss) attributable to
common shareholders................ (759) (8,109) (3,943) 1,154 (62,967) (60,634) (16,164)
Income (loss) per share before
cumulative effect of change in
accounting method.................. (0.05) (0.87) (0.26) 0.07 (2.54) (2.57) (0.38)
Net income (loss) per share(4)....... (0.05) (0.53) (0.26) 0.07 (2.54) (2.57) (0.38)
Net income (loss) attributable to
common shareholders................ (0.05) (0.53) (0.26) (0.07) (2.93) (2.84) (0.74)
Ratio of earnings to fixed
charges(5)......................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................... $324,878 $325,249 $412,361 $445,646 $580,330 $ 560,113
Working capital....................... 179,370 104,883 170,087 105,597 179,626 128,182
Cash, equivalents and short-term
investments......................... 155,796 844,899 142,189 79,562 167,627 122,532
Long-term liabilities................. 134,427 133,241 234,009 184,789 202,566 193,475
Shareholders' equity.................. 180,991 170,849 160,292 239,832 346,198 329,107
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOW DATA:
Net cash provided by (used in)
operating activities............... $(3,007) $ 4,202 $ 7,898 $ 20,915 $ 7,784 $(1,567) $ 9,604
Capital expenditures................. 21,547 16,015 34,745 108,432 62,297 36,614 24,056
</TABLE>
6
<PAGE> 8
PRODUCTION DATA(8)
(In ounces)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SILVER
Rochester Mine.......... 5,431,369 5,943,894 5,937,770 6,481,825 6,251,180 4,483,700 5,023,757
Golden Cross Mine....... -- 175,325 222,246 286,216 205,070 150,578 216,919
El Bronce Mine.......... -- -- 20,199 72,537 76,145 48,175 73,803
Fachinal Mine(9)........ -- -- -- 334,816 2,154,347 1,564,261 1,581,125
Coeur Mine(10).......... -- -- -- -- 833,267 486,049 925,908
Galena Mine(10)......... 822,904 -- -- -- -- -- 370,420
--------- --------- --------- --------- --------- --------- ---------
6,254,273 6,119,219 6,180,215 7,175,394 9,520,009 6,732,763 8,191,932
GOLD
Rochester Mine.......... 56,562 66,412 56,886 59,307 74,293 51,659 65,398
Golden Cross Mine....... -- 56,898 67,400 83,058 64,365 46,441 61,804
El Bronce Mine.......... -- -- 4,953 22,034 35,676 22,496 36,398
Fachinal Mine(9)........ -- -- -- 3,586 25,064 16,871 23,417
Galena Mine(10)......... 76 -- -- -- -- -- --
Yilgarn Star Mine....... -- -- -- -- 14,732 8,137 26,192
--------- --------- --------- --------- --------- --------- ---------
56,638 123,310 129,239 167,985 214,130 145,604 213,209
</TABLE>
OTHER PRODUCTION DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------------------
SILVER ORE GOLD ORE GRADE (OZ/TON) METAL RECOVERY % OPERATING COST ($/OZ)
ORE PROCESSED/ GRADE ----------------------- ------------------ ----------------------
MILLED (OZ/TON) OPEN PIT UNDERGROUND SILVER GOLD CASH(12) FULL
-------------- ---------- -------- ----------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rochester Mine...... 8,127,691 1.181 0.010 -- 65.11% 93.38% $ 3.71 $ 4.25
Golden Cross Mine... 827,642 0.444 0.056 0.178 55.79 87.02 365.79 407.78
El Bronce Mine...... 229,735 0.394 -- 0.168 84.25 92.94 259.43 337.06
Fachinal Mine(9).... 591,074 4.292 0.048 -- 84.93 87.58 (10) (10)
Coeur Mine(10)...... 39,034 21.810 -- -- 97.88 -- 2.46 3.25
Yilgarn Star Mine... 90,823 -- -- 0.179 -- 95.1 214.92 261.99
</TABLE>
RESERVE DATA
(In ounces)
<TABLE>
<CAPTION>
TOTAL NET CONTAINED OUNCES OF ESTIMATED
PROVEN AND PROBABLE RESERVES(12)
(AMOUNTS IN THOUSANDS)
---------------------------------------
PROPERTY GOLD SILVER
- --------------------------------------------------------------- ----- -------
<S> <C> <C>
Rochester Mine................................................. 696 80,554
Golden Cross Mine.............................................. 80 284
El Bronce Mine................................................. 224 577
Fachinal Mine.................................................. 251 10,169
Kensington Property............................................ 1,896 --
Coeur Mine..................................................... -- 2,319
Galena Mine.................................................... -- 14,453
Yilgarn Star Mine.............................................. 225 --
----- -------
Total...................................................... 3,372 108,356
</TABLE>
- ---------------
(1) In July 1996, the Company wrote off its $53 million interest in the Golden
Cross Mine and the nearby Waihi East property in New Zealand, which
included accrual of the estimated future closure and remediation costs and
the
7
<PAGE> 9
entire carrying value of the Company's 80% interest in the property, as
well as $1.2 million relating to its Faride property in Chile.
(2) In May 1995, the Company sold the non-mining assets of Callahan Mining
Company which consisted primarily of its flexible hose and tubing division,
The Flexaust Company, and shares of a related subsidiary for approximately
$10.0 million payable in cash, of which approximately $4 million was paid
at the time of closing with the balance payable over the following five
years. The results of operations and the gain on sale of the Flexaust
manufacturing segment are not reflected in the results from continuing
operations. The Company recorded income from discontinued operations of
$2.4 million in 1995.
(3) See note (3) of the notes to the "Selected Consolidated Financial Data."
(4) 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.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes
and fixed charges, and fixed charges consist of interest and that portion
of rent deemed representative of interest. Earnings were insufficient to
cover fixed charges in the following amounts: $8.7 million in 1992, $21.9
million in 1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million
in 1996, $63.2 million in the nine months ended September 30, 1996 and
$11.3 million in the nine months ended September 30, 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for the nine months ended September
30, 1997 are (i) the receipt of $8.0 million of insurance proceeds for
business interruption and property damage at the Golden Cross Mine and (ii)
a gain of $5.3 million arising from the sale of gold purchased in the open
market which was delivered pursuant to fixed price forward contracts in the
first quarter of 1997.
(8) Production figures are those attributable to the Company's ownership
interest. Production data includes (i) production for the Golden Cross Mine
since April 1993 when the Company acquired an 80% interest in that mine;
(ii) 51% of production for the El Bronce Mine from October 1994 through
August 1996 and 100% of production in and subsequent to September 1996;
(iii) production for the Fachinal Mine since October 1995 when initial
production commenced on a limited basis; (iv) 50% of production for the
Coeur Mine since June 1996 when production was resumed at that mine; (v)
50% of production for the Galena Mine since May 1997 when production was
resumed at that mine; and (vi) 17.5% (i.e., 35% of one-half) from May 1996
to May 1997 and 25% (i.e., 50% of one-half) in June 1997 of production for
the Yilgarn Star Mine.
(9) The Fachinal Mine was classified as a development stage property during
1995 and 1996. Operating costs, net of production revenues, were
capitalized. The property was classified as an operating property for
financial reporting purposes on January 1, 1997.
(10) Operations at the Coeur and Galena Mines were suspended in April 1991 and
July 1992, respectively, due to then prevailing silver prices and those
mines were placed on a care and maintenance basis to conserve ore reserves.
Silver Valley Resources resumed operations at the Coeur Mine in June 1996
and plans to continue to mine existing ore reserves there until early 1999.
Silver Valley Resources is exploring the Coeur Mine in an attempt to
discover additional ore reserves in order to lengthen the mine life.
Operations at the Galena Mine resumed in May 1997.
(11) Excludes smelting and refining costs.
(12) Estimated reserve figures are for proven and probable reserves which do not
reflect loss of metal in the metallurgical process. The Company's net share
of silver and gold ounces reflect its interest in each mine or property.
Estimates are as of December 31, 1996, except with respect to the Yilgarn
Star Mine, which data is as of April 27, 1997. In the case of the Rochester
Mine, El Bronce Mine, Fachinal Mine and the Kensington Property, the
reserve estimates were verified by independent consulting geologists or
mining engineers. The Golden Cross Mine data is based on estimated
production during the year ended December 31, 1997, as closure of the mine
is expected during the last quarter of 1997 or the first quarter of 1998.
The Galena Mine and Coeur Mine reserve figures are based on the estimates
of Silver Valley Resources, of which the Company owns 50%. The Yilgarn Star
ore reserve data is based
8
<PAGE> 10
on the estimates of the operator. Based on experience and certain
metallurgical testing, the Company estimates recovery rates are 55% of the
silver and 85% of the gold contained within the ore mined at the Rochester
Mine, 87% of the gold and 54% of the silver at the Golden Cross Mine, 84%
of the silver and 93% of the gold at the El Bronce Mine and 90% of the gold
and 89% of the silver at the Fachinal Mine, 97% of the silver at the Coeur
and Galena Mines and 95% of the gold at the Yilgarn Star Mine; and based on
metallurgical testing, the estimated recovery rate at the Company's
Kensington development property is 96% of the gold. The prices used in
preparing the above estimated ore reserves range from $5.00 to $6.00 per
ounce for silver and from $375 to $410 per ounce for gold. The market
prices of silver (as reported by Handy & Harmon) and gold (London final) on
November 17, 1997 were $5.09 and $304.10, respectively. Use of
significantly lower silver and gold prices in the ore reserve estimation
could materially reduce such reserve estimates. The above ore reserve data
does not include Coeur's share (based on its current ownership interest) of
the following additional mineralized material at December 31, 1996, which
material does not qualify as ore reserves:
<TABLE>
<CAPTION>
GOLD SILVER
TONS GRADE GRADE
(IN THOUSANDS) (OZ/TON) (OZ/TON)
-------------- -------- --------
<S> <C> <C> <C>
Rochester Mine................................ 9,941 0.007 1.11
El Bronce Mine................................ 1,269 0.34 0.8
Fachinal Mine................................. 1,582 0.08 4.59
Kensington Property........................... 9,050 0.12 --
Coeur Mine.................................... 83 -- 14.42
Galena Mine................................... 394 -- 8.43
Yilgarn Star Mine............................. 1,596 0.13 --
</TABLE>
9
<PAGE> 11
RISK FACTORS
Investors should carefully review the factors set forth below as well as
the other information included or incorporated by reference in this Prospectus.
The forward-looking statements dealing with future mining production and
operations, ore reserves and capital expenditure and exploration expense levels
contained or incorporated by reference in this Prospectus, and particularly
those involving estimates of 1997 silver and gold production, are expressly
qualified by the following cautionary statements. Each of the important factors
summarized below could cause actual production and operating results to
materially differ from those presented in the forward-looking statements.
CURRENTLY LOW MARKET PRICES OF SILVER AND GOLD
The market price of gold has declined to levels that are the lowest since
1985. The average market price of silver to date in 1997 is lower than the
annual average market prices experienced since 1993. The market prices of silver
(London final) and gold (as reported by Handy & Harmon) on November 18, 1997
were $5.09 per ounce and $304.10 per ounce, respectively. The average market
price of silver declined from $5.19 per ounce in 1995 and $5.18 per ounce in
1996 to $4.53 per ounce in the quarter ended September 30, 1997. The average
market price of gold declined from $384.16 per ounce in 1995 and $387.70 per
ounce in 1996 to $323.65 per ounce in the quarter ended September 30, 1997.
Overall world stability and declining inflation has resulted in a decrease in
the market price of gold. Furthermore, in recent years the central banks of
several countries and such multilateral organizations as the European Monetary
Institute and the International Monetary Fund have sold portions of gold held by
them as reserves and may sell additional amounts of gold in the future, which
could result in further declines in the market price of gold. If the currently
depressed levels of gold prices continue, the Company will need to reduce
production costs and/or expand minable ore reserves at the Fachinal and El
Bronce Mines to operate the mines profitably. Furthermore, in the event of the
continuation of such depressed price levels, the Company may elect to place such
mines on temporary standby and halt production there to conserve ore reserves
until gold prices increase. Furthermore, under certain circumstances asset
write-downs could be required. See "Possible Write-Downs Pursuant to Statement
of Financial Accounting Standards No. 121" below.
DEPENDENCE UPON SILVER AND GOLD PRICES
The results of the Company's operations and the market price of its Common
Stock are significantly affected by the market prices of silver and gold. Those
prices historically have fluctuated widely and are affected by many factors
beyond the Company's control, including interest rates, expectations regarding
inflation, currency values, global and regional political and economic
conditions and other factors. The suspension of mining operations at the Coeur
and Galena Mines in April 1991 and July 1992, respectively, during which months
the average price of silver was $3.97 and $3.95 per ounce, respectively, was
attributable to declining silver prices. The Company's decision to place its
Kensington Property into commercial production will be subject, among other
things, to there being a price of gold realized (through spot or forward sales)
of at least $400 per ounce. As stated above, the market prices of silver and
gold on November 18, 1997 were $5.09 per ounce and $304.10 per ounce,
respectively. No assurance can be given regarding market prices of silver and
gold in the future.
PAST LOSSES AND ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES
For the nine months ended September 30, 1997, two of the Company's
principal operating properties did not operate profitably. The Company reported
net losses for 1996 and the first nine months of 1997 and each of the five years
prior to 1995. In addition to depressed silver and gold market prices,
significantly contributing to those net losses were (i) the Company's deliberate
pursuit of a corporate policy of growth through the acquisition of mining
companies and properties and the financing of such growth to a significant
extent by incurring indebtedness and (ii) the Company's write-off of $53.0
million relating to its interests in the Golden Cross Mine and nearby Waihi East
property in New Zealand in July 1996. Annual interest expense, which prior to
1993 was less than $2 million, rose to $5.4 million in 1993, $11.4 million in
1994 and $9.7 million in 1995. As a result of the Company's call for redemption
of its 7% Convertible Subordinated Debentures due
10
<PAGE> 12
2002 in December 1995, the Company's interest expenses in 1996 and the first
nine months of 1997 were reduced to $3.6 million and $6.3 million, respectively.
In the future, the Company's interest expenses will be increased as a result of
its issuance of $143.75 million of the Debentures in October 1997 and reduced as
a result of its repayment on October 31, 1997 of $42.9 million principal amount
of bank indebtedness incurred in connection with construction of the Fachinal
Mine and the investment in Gasgoyne.
As a result of the losses discussed above, the Company has not achieved
earnings adequate to satisfy fixed charges (i.e., interest, preferred stock
dividends plus that portion of rent deemed representative of interest) in each
of the last five years and in the nine months ended September 30, 1997. The
amounts by which earnings were inadequate to cover fixed charges were
approximately $18.7 million in 1991, $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996, $63.2
million in the nine months ended September 30, 1996, and $11.3 million in the
nine months ended September 30, 1997. Interest payable to holders of Debentures
through their maturity on October 31, 2005 will initially approximate $10.4
million per year, subject to reduction to the extent that Debentures are earlier
converted or redeemed. Other outstanding securities requiring the payment of
fixed charges include (i) 7,077,833 shares of Mandatory Adjustable Redeemable
Convertible Securities (the "MARCS") requiring the quarterly payment of
approximately $10.5 million of annual dividends per year through March 15, 2000,
when those shares mandatorily convert into Common Stock; (ii) $49.8 million
principal amount of the Company's 6% Convertible Debentures due 2002 (the "6%
Debentures") requiring the semi-annual payment of approximately $3.0 million of
interest per year; and (iii) $95 million principal amount of the Company's
6 3/8% Convertible Subordinated Debentures due 2004 (the "6 3/8% Debentures")
requiring the semi-annual payment of approximately $6.1 million of interest per
year. Prior to the mandatory conversion of the MARCS on March 15, 2000, the
MARCS are convertible at the option of the holder into Common Stock at a
conversion price of $25.713 per share. The 6% Debentures and 6 3/8% Debentures
are convertible prior to their maturity at conversion prices of $25.57 and
$25.77 per share, respectively.
The Company expects to satisfy its fixed charges, dividends on shares of
MARCS and other expense obligations in the future from cash flow from operations
and, in the event that cash flow from operations is insufficient, from working
capital, which amounted to approximately $128.2 million at September 30, 1997
and, if necessary, the sale of assets. The Company's net cash provided by
operating activities for the years ended December 31, 1995 and 1996 and the nine
months ended September 30, 1997 was approximately $20.9 million, $7.8 million
and $9.6 million, respectively. The availability of future cash flow from
operations or working capital to fund the payment of interest on the Debentures
and other fixed charges will be dependent upon numerous factors, including the
Company's results of operations, silver and gold prices, levels of production
and costs of production at the Company's mining properties, the amount of the
Company's capital expenditures and expenditures for acquisitions, developmental
and exploratory activities, and the extent to which the Debentures, the shares
of MARCS or the Company's outstanding 6 3/8% Debentures and 6% Debentures are
converted or redeemed.
UNCERTAINTY OF ORE RESERVE ESTIMATES
Although the Company has established criteria for reporting ore reserves in
conformity with standards of the Commission, there are numerous uncertainties
inherent in the estimation of ore reserves, including many geological and
economic factors beyond the Company's control. Reserve estimation is a
necessarily imprecise and subjective process and the accuracy of such estimates
is a function of the quality of available data and of engineering and geological
interpretation, judgment and experience. Assumptions about silver and gold
market prices are subject to great uncertainty and such prices have fluctuated
widely in the past. Declines in the market prices of silver or gold may render
reserves containing relatively lower grades of ore uneconomic to exploit. Should
the Company encounter mineralization or geologic formations at any of its mines
or projects different from those predicted by drilling, sampling and similar
examinations, reserve estimates may be adjusted and mining plans may be altered.
Such adjustments and alterations might adversely affect the Company's actual
production and operating results. Furthermore, if the prices realized by the
Company for the silver and gold it produces were to decline substantially below
the prices at which ore reserves were calculated for a sustained period of time,
the Company could experience reductions in reserves and asset
11
<PAGE> 13
write-downs. Under such circumstances, the Company could discontinue the
development of a project or mining at one or more of its properties. Ore
reserves at mining properties operated by the Company are the subject of
verification by independent consulting geologists or mining engineers. Ore
reserves at mining properties operated by other companies in which Coeur has an
ownership interest are prepared by such other companies, reviewed by the Company
and may not be subject to such independent verification.
Silver and gold reserves at mining properties owned by the Company or in
which it has an ownership interest were calculated at December 31, 1996, except
that Yilgarn Star reserve data is as of April 27, 1997. Ore reserve
determinations are based upon varying prices ranging from $5.00 to $6.00 per
ounce for silver and from $375 to $410 per ounce of gold. Recently, silver and
gold prices have been significantly below those levels and prolonged declines in
such market prices could render ore reserves containing relatively lower grades
of silver and gold mineralization uneconomic to exploit and could materially
reduce the Company's mineable reserves. Should such reduction occur, material
write-downs of the Company's investment in mining properties might be required,
and there could be material delays in the development of new projects, increased
net losses and reduced cash flow.
POSSIBLE WRITE-DOWNS PURSUANT TO STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
121
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121") entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 was effective for periods beginning after December 15, 1995,
and established new accounting standards for, among other things, the impairment
of the value of tangible long-lived assets. SFAS No. 121 requires a company to
review the recoverability of its assets by estimating the future undiscounted
cash flow expected to result from the use and eventual disposition of the asset.
In July 1996, as a result of deep-seated ground movement under the Golden
Cross Mine tailings impoundment area, the Company determined that its Golden
Cross Mine asset had been impaired and that because the undiscounted cash flow
from the project was estimated to be less than the project's carrying value, it
would be necessary under SFAS No. 121 to effect a $53 million write-off of the
asset.
While the Company does not believe that any of its other properties
presently requires a write-down pursuant to SFAS No. 121, a continuation of the
currently depressed levels of silver and gold market prices for a period of time
and/or a failure to reduce production costs or expand mineable ore reserves at
the Company's mining properties, particularly in the case of the Fachinal and El
Bronce Mines and the Kensington Property, could result in the need for the
Company to effect further asset write-downs pursuant to SFAS No. 121.
CASH FLOW; HOLDING COMPANY STRUCTURE
The Company does not currently generate sufficient cash flow from operating
activities to cover its interest obligations under presently outstanding debt
instruments. Assuming a continuation of the current low levels of precious
metals prices, the Company anticipates that it will not generate sufficient cash
flow to cover the interest obligation on outstanding debt instruments in the
future, including the Debentures. In the future, the ability of the Company to
pay interest accruing on and the principal amount of the Debentures will be
dependent upon the success of the Company's operations and the operations of
properties or businesses which may hereafter be acquired by the Company, as to
which there can be no assurance. In the event the Company's cash flow from
operating activities is not sufficient to fund its interest obligations, the
Company will rely upon working capital or the sale of assets to cover such
payments. In addition, the Company's operating assets are presently in
subsidiaries and it is expected that any businesses acquired will be operated
through subsidiaries. The payment of interest on and principal amount of the
Debentures will be effectively subordinated to all liabilities of the Company's
subsidiaries. The Debentures are also expressly subordinated in the right of
payment to all Senior Debt (as defined herein) of the Company.
12
<PAGE> 14
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
An important element of the Company's business strategy is the Company's
opportunistic acquisition of silver and gold mines, properties and businesses.
There can be no assurance that mining properties acquired by the Company can be
developed profitably, or if profitable when acquired, that profitability can be
sustained. See "Past Losses and Absence of Earnings to Satisfy Fixed Charges"
above. In connection with future acquisitions, the Company may incur
indebtedness or issue equity securities, resulting in dilution of the percentage
ownership of existing shareholders. The Company intends to seek shareholder
approval for any such acquisitions only to the extent required by applicable
law, regulations or stock exchange rules.
RISKS AND COSTS ASSOCIATED WITH THE COMPANY'S EXPLORATION AND DEVELOPMENT
ACTIVITIES
Mineral exploration, particularly for silver and gold, involves many risks
and frequently is nonproductive. Once mineralization is discovered, it may take
a number of years until production is possible, during which time the economic
viability of any project may change. Substantial developmental expenditures are
required to establish ore reserves, extract the metals from the ore and, in the
case of new properties, to construct mining and processing facilities.
The Company expended approximately $54.4 million and $32.0 million
(excluding capitalized interest) in the years ended December 31, 1995 and 1996,
respectively, in connection with the exploration and development of its mining
properties. Furthermore, the Company plans to expend approximately $21.2 million
(excluding capitalized interest) in connection with exploration and other
developmental activities during 1997. In the event the Kensington Property is
placed into commercial production, the Company estimates that approximately $197
million of capital expenditures would be required over an approximate 18-month
period to construct the mine facilities.
RISKS ASSOCIATED WITH THE COMPANY'S MINING ACTIVITIES
Following the commencement of production, the mining business continues to
be subject to risks and hazards, including quantity of production, quality of
the ore, environmental hazards, industrial accidents, encountering unusual or
unexpected formations, cave-ins, flooding and periodic interruptions due to
inclement or hazardous weather conditions. Examples of such risks include the
ground movement discovered at the Golden Cross Mine tailings impoundment area,
requiring a $53.0 million write-off in 1996 and earlier-than-planned closure of
that mine, and the recent flooding that required the two-week closure of the El
Bronce Mine. Moreover, remedial environmental activity at the Golden Cross Mine
required payments of $12.1 million in 1996 and are estimated to require an
additional $5.1 million in 1997, and additional estimated costs associated with
the closure of the mine are expected to approximate $5.7 million (net of salvage
revenues), all of which have been accrued. The occurrence of events caused by
the above risks and hazards could result in damage to, or destruction of,
mineral properties or producing facilities, personal injury, environmental
damage, reduced production and delays in mining, asset write-downs, monetary
losses and possible legal liability. Insurance fully covering certain
environmental risks (including potential liability for pollution or other
hazards as a result of disposal of waste products occurring from exploration and
production) is not generally available to the Company or to other companies
within the industry. The Company has been recognized in recent years for its
commitment to environmental responsibility.
POSSIBLE DECLINES IN FUTURE PRODUCTION
The Company expects that future silver and gold production derived from the
mining of existing reserves at existing mines will decline as a result of the
exhaustion of reserves and possible closure of mines. The Company expects that
production from its existing mines will be less in 1998 than in 1997. It has
been and will continue to be the Company's business strategy to conduct silver
and gold exploratory activities at its existing mining and exploratory
properties as well as at new exploratory projects, and to acquire silver and
gold mining properties and/or businesses that possess mineable ore reserves and
are expected to become operational in the near future. No assurance, however,
can be given that the Company's silver and gold production will not decline in
the future.
13
<PAGE> 15
GOVERNMENT REGULATION
General. The Company's mining 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 administrative proceedings relating 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. The Company expended approximately $2.9 million
and $3.1 million in connection with routine compliance activities at its
operating properties in 1995 and 1996, respectively, and expects to expend a
total of approximately $5.6 million for that purpose in 1997. The Company
expended approximately $12.1 million in connection with its ground remediation
activities at the Golden Cross Mine in 1996 and expects additional remediation
costs at that mine to approximate $5.1 million in 1997. Although the Company
believes that estimated additional costs associated with the closure of the
Golden Cross Mine will approximate $5.7 million, net of salvage revenues,
approval by the appropriate New Zealand regulatory authorities of the proposed
plan of closure has not been obtained and no assurance can be given that actual
costs required to be incurred in connection with the closure will not exceed
that amount. The Company had expended a total of approximately $10.6 million on
environmental and permitting activities at the Kensington Property through
December 31, 1996, and expects to expend a total of approximately $3.1 million
for that purpose in 1997.
EPA Regulations. Mining wastes are currently exempt to a limited extent
from the extensive set of Environmental Protection Agency ("EPA") regulations
governing hazardous waste. The EPA plans to develop a program to regulate mining
waste pursuant to its solid waste management authority under the Resource
Conservation and Recovery Act ("RCRA"). Certain processing and other wastes are
currently regulated as hazardous wastes by the EPA under RCRA. The EPA is
studying how mine wastes from extraction and beneficiation should be managed and
regulated. If the Company's mine wastes were treated as hazardous waste or such
wastes resulted in the mine facility being designated as a "Superfund" site
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund") for cleanup, material expenditures would be required
for the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, any owner or operator of a Superfund
site since the time of its contamination generally 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 in Idaho and Alaska under the federal
Clean Water Act ("CWA") and in Nevada under the Nevada Water Pollution Control
Law which implements the CWA. Air emissions are subject to controls under
Nevada's, Idaho's and Alaska's air pollution statutes implementing the Clean Air
Act.
Natural Resources Laws. The Company is subject to federal and state laws
designed to protect natural resources. In March 1996, an action was filed in the
United States District Court for the District of Idaho by the United States
against various defendants, including the Company, asserting claims under CERCLA
and the Clean Water Act for alleged damages to Federal natural resources in the
Coeur d'Alene River Basin of northern Idaho as a result of releases of hazardous
substances from mining activities conducted in the area since the late 1800s. No
specific monetary damages are identified in the complaint. However, in July
1996, the Government indicated damages may approximate $982 million. The United
States asserts that the defendants are jointly and severally liable for costs
and expenses incurred by the United States in investigation, removal and
remedial action and the restoration or replacement of affected natural
resources. In 1986 and 1992 the Company had settled similar issues with the
State of Idaho and the Coeur d'Alene Indian Tribe, respectively,
14
<PAGE> 16
and believes that those prior settlements exonerate it of further involvement
with alleged natural resource damage in the Coeur d'Alene River Basin. The
Company intends to vigorously defend this matter and, in March 1997, filed a
motion for summary judgment which is pending decision by the court. At this
initial stage of the action, it is not possible to predict its ultimate outcome.
Proposed Mining Legislation and Regulations. 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
possible that the Mining Act will be amended or be replaced by more onerous
legislation in the future. The legislation under consideration, as well as
regulations under development by the Bureau of Land Management, contain new
environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would likely result in delays in
permitting. Among the bills under consideration are bills calling for an 8%
gross royalty, a 2.5% or 5% net smelter return royalty or a 3.5% net proceeds
royalty on the value of minerals mined on public lands, payable to the U.S.
Government. The Company believes that if and when any royalty is imposed, it
will not be a gross royalty. A significant portion of the Company's U.S. mining
properties are on public lands. Any reform of the Mining Act or regulations
thereunder based on these initiatives could increase the costs of mining
activities on unpatented mining claims, and as a result could have an adverse
effect on the Company and its results of operations. Until such time, if any, as
new reform legislation or regulations are enacted, the ultimate effects and
costs of compliance on the Company cannot be estimated.
FOREIGN ACTIVITIES
Reserves outside of the United States currently account for approximately
20% of the Company's total reserve base and foreign operations contributed
approximately 50% of total 1996 production. Although the governments and
economies of New Zealand, Australia and Chile, the most significant foreign
countries in which the Company directly or indirectly owns or operates mining
properties, have been relatively stable in recent years, the ownership of
property in a foreign country generally is subject to the possible 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.
COMPETITION FOR MINERAL PROPERTIES
Mining companies are continually seeking to replace and expand their ore
reserves. The Company encounters strong competition from other mining companies
in connection with the acquisition of properties producing or capable of
producing silver and gold. Because some of those companies have greater
financial resources than the Company, the Company may be unable to acquire
attractive mining properties on terms it considers acceptable. As a result,
there can be no assurance that the Company will be able to replace and expand
current reserves through the acquisition of new properties.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold silver and gold produced by its mines pursuant
to forward contracts and at spot prices prevailing at the time of sale. Entering
into forward sale contracts is a strategy used to mitigate some of the risks
associated with fluctuating precious metals prices. The Company continually
evaluates the potential benefits of engaging in these strategies based on the
then current market conditions. The Company currently is not a party to any
forward sale or purchase contracts other than through Silver Valley Resources
and Gasgoyne. At November 7, 1997, Silver Valley Resources had purchased
contracts in the open market requiring it to purchase 500,000 ounces of silver
attributable to Coeur's interest in Silver Valley Resources at an average cost
of $5.70 per ounce. The Company marks these contracts to market and,
accordingly, records any gain or loss on these contracts on a monthly basis. At
November 7, 1997, Gasgoyne had sold forward 196,200 ounces of gold attributable
to Coeur's interest in the Yilgarn Star Mine at an average minimum price of
approximately $A 601 per ounce (or approximately $US 419 per ounce based on
currency exchange rates on November 7, 1997). The Company's future revenues will
be adversely affected in connection with the sale
15
<PAGE> 17
of its silver and gold production in the future to the extent that is not
covered by forward sale contracts and silver and gold market prices decline.
During the first quarter of 1997, the Company recorded a $5.3 million gain
arising from the sale of gold purchased in the open market which was delivered
pursuant to fixed-price forward contracts. However, no assurance can be given
that the use of forward sale and purchase contract strategies in the future will
always benefit the Company. For example, the Company could lock in forward
deliveries at prices lower than the market price at the time of delivery. The
Company also could be subject to margin calls if the market price were to
significantly rise above the contracted forward delivery price. Furthermore, the
Company could fail to produce enough silver or gold to satisfy a forward
delivery obligation, possibly requiring the Company to purchase silver or gold
in the spot market at a higher price to fulfill its delivery obligation.
DIVIDENDS
Although the Company paid an annual cash dividend to the holders of its
Common Stock in April of each of the years from 1989 through 1996, it has not
paid a dividend since. No assurance can be given as to whether the Company will
resume the payment of cash dividends on its Common Stock in the future.
CLASS ACTION LAWSUIT
On July 2, 1997 a suit was filed by a purchaser of the Company's common
stock in Federal District Court for the District of Colorado naming the Company
and certain of its officers and its independent auditor as defendants. Plaintiff
alleges that the Company violated the Securities Exchange Act of 1934 during the
period January 1, 1995 to July 11, 1996, and seeks certification of the law suit
as a class action. The class members are alleged to be those persons who
purchased publicly traded debt and equity securities of the Company during the
time period stated. On September 22, 1997 an amended complaint was filed in the
proceeding adding other security holders as additional plaintiffs. The action
seeks unspecified compensatory damages, pre-judgment and post-judgment interest,
attorney's fees and costs of litigation. The complaint asserts that the
defendants knew material adverse non-public information about the Company's
financial results which was not disclosed, and which related to the Golden Cross
and Fachinal Mines; and that the defendants intentionally and fraudulently
disseminated false statements which were misleading and failed to disclose
material facts. The Company believes the allegations are without merit and
intends to vigorously defend against them. On October 27, 1997, the Company, its
auditors and the individual defendants filed with the Court motions to dismiss
the amended complaint on the ground that it fails to state a valid claim. No
assurances can be given at this early stage of the action as to its ultimate
outcome.
16
<PAGE> 18
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production and silver reserves of any
primary silver producer located in the United States and certain of the silver
mines in which it has an interest are the lowest cost of production primary
silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $560 million on September 30, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 9.5 million ounces of silver and 214,000 ounces of gold in 1996.
Production continued to increase in the first nine months of 1997 to
approximately 8.2 million ounces of silver and 213,209 ounces of gold, compared
to approximately 6.7 million ounces of silver and 145,604 ounces of gold during
the first nine months of 1996.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the nine
months ended September 30, 1997 were approximately $6.4 million, an increase of
approximately 23% over the first nine months of 1996. Total exploration expenses
for 1997 are expected to approximate $7.6 million compared to $7.7 million in
1996.
The Company is an Idaho corporation organized in 1928. Its executive
offices are located at 505 Front Avenue, Coeur d'Alene, Idaho 83814. The
telephone number is (208) 667-3511.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL 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, is the largest primary silver mine in the
United States and has significant gold production; (ii) a 50% interest in Silver
Valley Resources, which was formed in late 1994 and owns and operates the Coeur
and Galena underground silver mines in the Coeur d'Alene Mining District of
northern Idaho, historically among the largest and lowest cost of production
silver mines in the United States, and in which District Silver Valley Resources
is conducting extensive developmental and exploratory activities; (iii) the 100%
owned and operated Fachinal Mine, an open pit and underground gold and silver
mine located in southern Chile, which the Company developed and constructed on
schedule and under budget in October 1995 following its acquisition of the
property in 1990 and classified as an operating property for financial reporting
purposes on January 1, 1997; (iv) the 100% owned and operated El Bronce Mine, an
underground gold and silver mine located in northern Chile, in which the Company
acquired a 51% operating interest in October 1994 and 100% ownership in
September 1996; (v) a 25% interest in the Yilgarn Star Mine, a gold mine in
Western Australia, which interest results from the
17
<PAGE> 19
Company's ownership of 50% of the outstanding capital stock of Gasgoyne acquired
in May 1996 and May 1997; (vi) the Kensington Property, located northwest of
Juneau, Alaska, in which Coeur increased its ownership interest from 50% to 100%
in July 1995, is the subject of optimization and development activities with a
view to its ultimate construction as an underground gold mine; and (vii) the
Golden Cross Mine, an underground and surface gold mining operation located near
Waihi, New Zealand, which is 80% owned and operated by Coeur and is planned to
be closed during the last quarter of 1997 or the first quarter of 1998. The
Fachinal and El Bronce Mines are not currently profitable.
Coeur has a number of current projects which may result in increased future
production and ore reserve expansion. The Company also is implementing steps to
reduce its production costs at its mining properties. The following sets forth
information regarding the Company's pursuit of these strategies.
ROCHESTER MINE
The Rochester Mine, which commenced operations in August 1986, is a silver
and gold surface mine located approximately 25 miles northeast of Lovelock,
Nevada. The mine utilizes the heap-leaching process to extract both silver and
gold from ore mined using open-pit methods. Rochester is the largest primary
silver mine in the U.S. and is one of the largest in the world. Coeur estimates
that the Rochester Mine, which it has operated since 1986, will increase its
1997 gold production by approximately 13% to 84,000 ounces in 1997 over the
74,293 ounces of gold produced in 1996. Silver production in 1997 is expected to
approximate 6.10 million ounces compared to 6.25 million ounces in 1996.
Cash costs and full costs of production per ounce of silver equivalent at
the Rochester Mine in the nine months ended September 30, 1997 were $3.74 per
ounce and $4.34 per ounce, respectively, compared to $3.56 per ounce and $4.11
per ounce, respectively, in the prior year's comparable period. Historically low
strip ratios are expected through the remainder of the mine life, which should
favorably impact costs and cash flow.
In July 1995, the Company implemented an employee incentive program at the
Rochester Mine that rewards employees for operating improvements reflected in
cost savings and production increases. The program has resulted in the
achievement of numerous operating improvements and efficiencies.
SILVER VALLEY RESOURCES
Formation of Silver Valley Resources completed Coeur's six-year strategy to
expand the Company's interests in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Operations at the Coeur Mine and the Galena Mine were suspended in April 1991
and July 1992, respectively, due to low silver prices and the properties were
placed on a care and maintenance basis to conserve ore reserves. In July 1995,
Coeur, Callahan Mining Corporation, and Asarco, Inc. transferred their interests
in the Coeur and Galena Mines and Caladay project to Silver Valley Resources, an
entity created for that sole purpose, as a result of which Coeur and Asarco each
now own 50% of Silver Valley Resources.
Silver Valley Resources reopened the Coeur Mine in June 1996 and plans to
continue mining existing reserves until early 1999. Exploration at the Coeur
Mine is ongoing in an effort to increase silver reserves and extend the mine's
life beyond 1999. Silver Valley Resources also resumed production at the Galena
Mine in May 1997.
Silver Valley Resource's cash costs and full costs of production per ounce
of silver for the nine months ended September 30, 1997 amounted to $3.35 and
$4.39 per ounce, respectively. Those costs include start-up costs at the Galena
Mine and are expected to decrease during the balance of 1997. The Coeur and
Galena Mines were not open during the prior year's comparable period.
Activities at the Galena Mine during 1997 revealed a previously
undiscovered vein known as the 123 Vein. The vein and associated structures have
been drilled on numerous levels over a vertical depth of 600 feet and are
believed to continue into lower levels of the mine. The vein has been
intersected by underground workings on two levels along a maximum horizontal
length of up to 230 feet. Although a
18
<PAGE> 20
mineable ore reserve has not yet been identified, based on the limited work done
to date, the vein is believed by the Company to be amenable to extraction due to
its grade and width.
During 1996 and 1997, Silver Valley Resources entered into agreements with
Sterling Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc.
and American Silver Mining Company pursuant to which Silver Valley Resources
obtained operating control of contiguous properties near the Coeur and Galena
Mines in the Coeur d'Alene Mining District in exchange for net profit royalty
interests. Silver Valley Resources silver reserves attributable to Coeur's 50%
ownership interest have been expanded, increasing 32% in 1995 and 22% in 1996.
Rehabilitation of the mine shaft at the Caladay project is nearing completion
and Silver Valley Resources plans to conduct extensive exploratory and
developmental activities at the Coeur, Galena and Caladay Mines as well as at
contiguous properties in the Coeur d'Alene Mining District with a view toward
the expansion of silver reserves there. Production for 1997 attributable to
Coeur's 50% interest in Silver Valley Resource is estimated at approximately 1.8
million ounces of silver.
FACHINAL MINE
The Fachinal Mine, which commenced initial production in October 1995 and
has both open pit and underground mining operations, completed its first full
year of pre-commercial operations in 1996. Following its opening and during
1996, unexpected operational problems were encountered and a lower than
anticipated ore grade in the open pit resulted in decreased ore reserves and
higher than expected cash costs of production that exceeded current market
prices. Production from higher-grade underground mining commenced in July 1996
and the property was classified as an operating property for financial reporting
purposes on January 1, 1997. Production from the higher-grade underground
operations has been increased to compensate for the lower open pit ore grades.
Furthermore, with respect to the open pit, an improved ore reserve mine model,
an increase in the pit slope to decrease waste tons mined and a reduction in
manpower have contributed to operational efficiencies. With respect to the
underground mining, an improved mine plan, a manpower reduction, improved
ventilation and drainage, improved safety program and improvements in contractor
performance have favorably affected production and cost performance. The amount
of tonnage processed at the mill has been increased without a decrease in metal
recovery and equipment has been added in the flotation plant to improve metal
recovery. While these actions have favorably impacted the Fachinal Mine's
operating performance, the cash costs of production continue to exceed the
current spot market price of gold. The Company intends to continue its
implementation of the operating improvements and to identify and implement
additional cost-reduction steps. Cash costs and full costs of production in the
nine months ended September 30, 1997 were $350.21 and $529.19 per ounce of gold,
which were higher than cost levels experienced in the first half of 1997.
Additional reserves must be found at Fachinal in order to achieve the economic
criteria upon which the decision to construct the mine was based.
The Fachinal Mine is expected to produce approximately 2.6 million ounces
of silver and 34,000 ounces of gold in 1997, increases of 19% and 36% over 1996
levels, respectively. Drilling is underway at Fachinal's underground and open
pit mines in an effort to replace the reserve base decreases. Additional
developmental activities are being conducted at the Furioso property, located
approximately 60 kilometers southwest of the Fachinal Mine, where the Company
believes additional high grade gold reserves may exist. An internal feasibility
study is being conducted by the Company to determine if the Furioso ore reserves
may be processed at existing Fachinal facilities. The Company has an option to
purchase 100% of the Furioso property at a price of $2.0 million on or prior to
June 30, 1999. No assurance can be given that the Company will exercise that
option. Emphasis is being directed at increasing underground higher grade
reserves to replace lower-grade open pit reserves in the production mix. See
"Principal Exploration Projects" below for additional information relating to
exploratory activities in the Fachinal Mine area.
EL BRONCE MINE
The El Bronce Mine is an underground gold and silver mine in Chile of which
the Company owns 100%. In 1997, cash costs of production have increased
primarily because of lower ore grades due to narrower veins in the area mined.
Cash costs and full costs of production per ounce of gold were $335.58 and
$397.57 per ounce, respectively, in the nine months ended September 30, 1997,
compared to $296.84 and $322.55 per
19
<PAGE> 21
ounce in the prior year's comparable period. In addition, near drought
conditions occurred in the first quarter of 1997 and heavy rainfall occurred in
the second quarter of 1997. Heavy rains and flooding resulted in a two-week
closure of the mine in August 1997 and have contributed to increases in cash
costs of production to levels in excess of current market prices. El Bronce Mine
1997 production is expected to approximate 122,000 ounces of silver and 55,000
ounces of gold, increases of approximately 60% and 54%, respectively, over 1996
production levels, due in large part to the increase in the Company's ownership
interest from 51% to 100% in September 1996. Ongoing exploration efforts are
being conducted to identify and, if successful, develop wider veins in order to
increase reserves as well as to lower costs.
In February 1997, Coeur acquired an option to purchase the Boton de Oro
operating gold mine adjacent to the El Bronce Mine, from which ore is already
being processed through Coeur's mill at El Bronce and where Coeur is engaged in
underground exploration of mineralization believed to be similar to El Bronce's
vein systems. A feasibility study is being prepared to evaluate the possible
incorporation of Boton de Oro's mineralization into El Bronce operations. The
option agreement entitles Coeur to purchase 100% of Boton de Oro on or prior to
February 7, 1998 at a price of $2.5 million. There can be no assurance that the
Company will exercise the purchase option. In addition, the agreement requires
Coeur to spend $500,000 to conduct exploratory activities on the property.
AUSTRALIAN INTERESTS
Through its wholly-owned subsidiary, Coeur Australia Limited ("Coeur
Australia"), Coeur owns 50% of the outstanding shares of Gasgoyne which in turn
holds a 50% interest in the Yilgarn Star Mine, which is expected to produce a
total of 41,000 ounces of gold attributable to Coeur's 25% interest in the mine
in 1997. By contract with the other 50% shareholder of Gasgoyne, Coeur has the
right to acquire its 25% share of gold production from this mine at a price
equivalent to the Yilgarn Star Mine's cost of production. Cash costs and full
costs of production per ounce of gold at the Yilgarn Star Mine amounted to
$259.78 and $409.22 per ounce, respectively, for the nine months ended September
30, 1997, compared to $259.46 and $351.43 per ounce for the prior year's
comparable period. The $351.43 and $409.22 full costs of production per ounce of
gold for the nine months ended September 30, 1996 and 1997, respectively,
included $65.28 and $112.19, respectively, of non-cash amortized goodwill.
Gasgoyne also has a 45% interest in the Awak Mas Gold Project in Indonesia which
it has entered into a contract to sell to the principal owner of that project.
The 225,000 ounces of Yilgarn Star Mine gold reserves as of April 27, 1997
which are attributable to Coeur's 25% interest in the mine represent an 81.2%
increase over the amount of Coeur's interest in Yilgarn Star Mine gold reserves
reported as of December 31, 1996. Such increase primarily is attributable to the
inclusion of reserve data for a nearby ore body known as the Southern Star Mine
and an increase in Coeur's ownership of Gasgoyne from 35% to 50%.
In addition to its 50% interest in the Yilgarn Star Mine, Gasgoyne is a
participant in a joint venture conducting exploratory activities in Western
Australia.
The Company currently is exploring a possible combination of Coeur
Australia with another Australian gold mining company. The proposed transaction
is in its preliminary stages and no assurance can be given that it will be
consummated.
KENSINGTON PROPERTY
A production decision at the Kensington Property, in which Coeur had
invested a total of $118 million (including $25 million of capitalized interest)
at September 30, 1997, is subject to a realized price of gold through spot or
forward sales of at least $400 per ounce and the receipt of required key
permits, satisfactory completion of a project optimization study and approval by
the Company's Board of Directors. The U.S. Forest Service issued a decision
approving the Supplemental Environmental Impact Statement for the Kensington
Project on August 15, 1997. On October 2, 1997, a coalition of environmental
organizations filed an administrative appeal with the Forest Service challenging
the decision. On November 13, 1997, the appeal was denied. On November 4, 1997,
the Company received the City and Borough of Juneau Large Mine Permit for the
Kensington project. The Company anticipates that it will receive the remaining
key permits by
20
<PAGE> 22
the end of 1997. Currently, Coeur is working on a mine optimization study
intended to reduce the project's capital and operating costs, and a development
program designed to increase the current 1.9 million ounce gold reserve. Coeur
does not intend to develop Kensington unless the optimization study and
developmental program demonstrate the results required to make Kensington an
economically viable project. Based on the current mine design, Kensington
requires an average realized price of $400 per ounce over the life of the
project in order to generate the necessary return on investment.
After an approximate 18-month construction phase, Kensington, at currently
estimated mineable reserve levels of approximately 1.9 million ounces of gold,
could be expected to produce an average of approximately 200,000 ounces of gold
per year over the initial 10-year life of the mine. Coeur has not completed its
exploration of all of the identified veins on the Kensington Property or on the
adjacent Jualin exploratory property, and the Company plans to conduct a
development program at Kensington with a goal of expanding the current 1.9
million ounces of gold reserves.
GOLDEN CROSS MINE
Production costs at the Golden Cross Mine significantly declined in 1997.
Cash costs and full costs of production per ounce of gold in the nine months
ended September 30, 1997 amounted to $247.09 and $292.65 per ounce,
respectively, compared to $378.48 and $424.77 per ounce in the nine months ended
September 30, 1996, when costs and production were most unfavorably impacted by
remediation work.
Although the deep-seated ground movement below the Golden Cross Mine
tailings impoundment that necessitated the Company's 1996 write-off of the mine
appears to have stabilized, the limited tailings disposal capability requires
that the mine be closed during the last quarter of 1997 or the first quarter of
1998. In the second quarter of 1997, Coeur received its 80% share of a $10
million insurance recovery relating to business interruption and property damage
at the mine. The Company expended approximately $12.1 million in connection with
additional remediation activities at the mine in 1996 and expects additional
remediation costs at the mine will approximate $5.1 million in 1997. The Company
estimates that costs associated with the closure of the mine, net of salvage
revenues, will approximate $5.7 million.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold a portion of its silver and gold production
pursuant to forward contracts and at spot prices prevailing in the open market
at the time of sale. Entering into forward sale contracts is a strategy used to
mitigate some of the risks associated with fluctuating precious metals prices.
For example, based on market prices prevailing on November 7, 1997, the average
price of gold that could be realized three years from that date was
approximately $347 per ounce compared to the spot market price of gold of $310
per ounce. The Company continually evaluates the potential benefits of engaging
in these strategies based on the then current market conditions. The Company
currently is not a party to any forward sale or purchase contracts other than
through Silver Valley Resources and Gasgoyne. At November 7, 1997, Silver Valley
Resources had purchased contracts in the open market requiring it to purchase
500,000 ounces of silver attributable to Coeur's interest in Silver Valley
Resources at an average cost of $5.70 per ounce. The Company marks these
contracts to market and, accordingly, records any gain or loss on these
contracts on a monthly basis. At November 7, 1997, Gasgoyne had sold forward
196,200 ounces of gold attributable to Coeur's interest in the Yilgarn Star Mine
at an average minimum price of approximately $A 601 per ounce (or approximately
$US 419 per ounce based on currency exchange rates on November 7, 1997).
ACQUISITIONS
The Company plans to continue its practice of acquiring silver and gold
mining properties and/or businesses that are operational or expected to become
operational in the near future. In addition to contributing to the Company's
reserve and production expansion potential, such properties and businesses must
be able to demonstrate a low cost of production.
21
<PAGE> 23
PRINCIPAL EXPLORATION PROJECTS
Coeur is conducting extensive silver and gold exploratory activities at or
adjacent to its existing mining properties. In particular, exploratory drilling
on properties close to the Fachinal Mine in southern Chile indicates an
internally calculated geologic resource of 403,000 tons averaging 0.18 ounces of
gold equivalent per ton on four mineralized areas within the Fachinal District.
Drilling on the Laguna Vein at the Furioso project in southern Chile indicates
an estimated 129,180 tons of mineralized material averaging 0.62 ounces of gold
and 6.64 ounces of silver per ton and an internal feasibility study is currently
focusing upon the transportability of such mineralization to the Fachinal Mine
mill. Furthermore, exploratory activities at the Boton de Oro project close to
the El Bronce Mine in central Chile has indicated an internally calculated
resource of 1,610,000 tons averaging 0.10 ounces of gold and 0.18 ounces of
silver per ton that has the potential of expanding the El Bronce Mine resource
base and production. An internal feasibility study is analyzing the
transportation of Boton de Oro mineralization to the El Bronce Mine mill above
the approximately 3,000 tons per month currently being delivered.
Silver Valley Resources is engaged in exploration projects at the Coeur and
Galena Mines and adjacent Caladay project as well as on the leased Sterling
Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc. and
American Silver Mining Company properties in the Coeur d'Alene Mining District
in northern Idaho, which historically has been one of the largest silver
producing regions in the world; and Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being conducted
in Guyana, Mexico and Chile. At the Groete Creek property, a low-grade gold,
potential bulk volume mining property located near Georgetown, Guyana, Coeur has
completed an internally generated resource calculation that estimates 57.5
million tons of mineralized material averaging 0.03 ounces of gold per ton and
is drilling the deposit in an endeavor to further expand mineralized material
inventory. Coeur has an option to purchase 75% of the mineral rights at Groete
Creek on or prior to December 20, 1998 for $700,000. At the KM66 property in the
state of Durango, Mexico, which has low-grade silver, bulk tonnage open pit
mining potential, Coeur's continuing drilling program has indicated extensive
silver-zinc-lead mineralization. Coeur has an option to purchase 100% of the
mineral rights at the KM 66 property on or before January 2000 for $4.0 million.
Finally, Coeur has several other exploration projects located throughout Chile,
the most important of which is the Puchuldiza project. Preliminary drilling by
the Company at the Puchuldiza property in northern Chile, 100% of which is held
by Coeur under exploitation concessions, indicates a mineralized material
inventory of 33.7 million tons averaging 0.03 ounces of gold per ton. The
Company's proposed exploration program at that property is designed to expand
the mineralized material inventory and explore for possible high-grade
mineralization within the extensive low-grade deposit.
22
<PAGE> 24
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the 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
by the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C> <C>
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
1996: First Quarter.................................................... 25.125 18.375
Second Quarter................................................... 22.250 18.375
Third Quarter.................................................... 19.375 13.750
Fourth Quarter................................................... 16.375 13.875
1997: First Quarter.................................................... 18.250 13.875
Second Quarter................................................... 16.000 12.500
Third Quarter.................................................... 16.3125 12.6875
Fourth Quarter (through November 18, 1997)....................... 16.250 8.9375
</TABLE>
No dividend on the Common Stock was paid in 1997. The Company paid per
share cash distributions and dividends of $.15 on its Common Stock on each of
April 19, 1996, 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.
On November 12, 1997, there were 7,535 record holders of the Company's
outstanding Common Stock.
23
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and was derived from the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, which
reports are incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995(6) 1996 1996 1997(7)
------- -------- ------- ------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates and dore.......... $41,414 $ 67,990 $79,606 $89,239 $ 92,731 $ 62,920 $ 96,757
Less cost of mine operations........... 37,829 59,804 67,802 72,210 83,283 56,622 103,258
------- -------- ------- ------ -------- -------- --------
Gross profit (loss).................... 3,585 8,186 11,804 17,029 9,448 6,298 (6,501)
Other income........................... 4,812 5,388 12,587 9,504 13,159 9,158 20,427
------- -------- ------- ------ -------- -------- --------
Total income........................... 8,397 13,574 24,391 26,533 22,607 15,456 13,926
Other expenses............................. 14,118 31,548 29,392 27,591 23,946 17,069 22,193
Writedown of mining properties(1).......... 54,415 54,415 --
------- -------- ------- ------ -------- -------- --------
Total expenses............................. 14,118 31,548 29,392 27,591 78,361 71,484 22,193
------- -------- ------- ------ -------- -------- --------
Net loss from continuing operations before
income taxes............................. (5,721) (17,974) (5,001) (1,058) (55,754) (56,028) (8,267)
Provision (benefit) for income taxes....... (4,233) (3,932) (265) 200 (1,184) (1,158) (2)
------- -------- ------- ------ -------- -------- --------
Net loss from continuing operations........ (1,488) (14,042) (4,736) (1,258) (54,570) (54,870) (8,265)
Income from discontinued operations (net of
taxes)(2) 729 752 793 2,412 -- -- --
------- -------- ------- ------ -------- -------- --------
Income (loss) before cumulative effect of
change in accounting method.............. (759) (13,290) (3,943) 1,154 (54,570) (54,870) (8,265)
Cumulative effect of change in accounting
method(3)................................ -- 5,181 -- -- -- --
------- -------- ------- ------ -------- -------- --------
Net income (loss).......................... $ (759) $ (8,109) $(3,943) $1,154 $(54,570) $(54,870) $ (8,265)
======= ======== ======= ====== ======== ======== ========
Net income (loss) attributable to Common
Shareholders............................. $ (759) $ (8,109) $(3,943) $1,154 $(62,967) $(60,634) $(16,164)
======= ======== ======= ====== ======== ======== ========
Earnings per share data(4):
Net loss from continuing operations.... $ (0.10) $ (0.92) $ (0.31) $(0.08) $ (2.54) $ (2.57) $ (0.38)
Income from discontinued operations
(net of taxes)....................... 0.05 0.05 0.05 0.15 -- -- --
------- -------- ------- ------ -------- -------- --------
Net income (loss) before cumulative
change in accounting method.......... (0.05) (0.87) (0.26) 0.07 (2.54) (2.57) (0.38)
Cumulative effect of change in
accounting method.................... 0.34
------- -------- ------- ------ -------- -------- --------
Net income (loss)...................... $ (0.05) $ (0.53) $ (0.26) $ 0.07 $ (2.54) $ (2.57) $ (0.38)
======= ======== ======= ====== ======== ======== ========
Net income (loss) attributable to Common
Shareholders:
Net loss from continuing operations.... $ (0.10) $ (0.92) $ (0.31) $(0.08) $ (2.93) $ (2.84) $ (0.74)
Income from discontinued operations
(net of taxes)....................... 0.05 0.05 0.05 0.15 -- -- --
------- -------- ------- ------ -------- -------- --------
Income (loss) before cumulative change
in accounting method................. (0.05) (0.87) (0.26) 0.07 (2.93) (2.84) (0.74)
Cumulative effect of change in
accounting method.................... -- 0.34 -- -- -- -- --
------- -------- ------- ------ -------- -------- --------
Net income (loss)...................... $ (0.05) $ (0.53) $ (0.26) $ 0.07 $ (2.93) $ (2.84) $ (0.74)
======= ======== ======= ====== ======== ======== ========
Cash dividends paid per Common Share....... $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.15 --
======= ======== ======= ====== ======== ======== ========
Ratio of earnings to fixed charges(5)...... -- -- -- -- -- -- --
Weighted average number of shares of Common
Stock and equivalents used in
calculation.............................. 15,317 15,328 15,388 15,888 21,469 21,327 21,891
======= ======== ======= ====== ======== ======== ========
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $324,878 $325,249 $412,361 $445,646 $580,330 $ 560,113
Working capital................................ 179,370 104,883 170,087 105,597 179,626 128,182
Cash, equivalents and short-term investments... 155,796 844,899 142,189 79,562 167,627 122,532
Long-term liabilities.......................... 134,427 133,241 234,009 184,789 202,566 193,475
Shareholders' equity........................... 180,991 170,849 160,292 239,832 346,198 329,107
</TABLE>
- ---------------
(1) During July 1996, the Company determined that certain adjustments were
required to properly reflect the estimated net realizable values of certain
mining properties in accordance with FASB statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." A write-off of the Golden Cross Mine and the nearby Waihi East property
of approximately $53 million was effected due to increased expenditure
requirements related to remediation of ground movement which impacts the
tailings impoundment area and the ultimate viability of the mine. The
write-off includes amounts necessary to increase the Company's recorded
remediation and reclamation liabilities at Golden Cross to approximately
$7.02 million as of December 31, 1996. In addition, the Faride property in
Chile was written down by $1.2 million in July 1996 due to management's
decision not to exercise its final option payment on the project.
(2) 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 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.
(3) Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards 109,
"Accounting for Income Taxes ("FAS 109")." 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
contained requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of an
incremental interest in the Rochester Property 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 was a nonrecurring gain of
$5,181,188, or $.34 per share, and was 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.
(4) Earnings per share is 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.
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest and that portion of rent deemed
representative of interest. Earnings were insufficient to cover fixed
charges in the following amounts: $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996,
$63.2 million in the nine months ended September 30, 1996 and $11.3 million
in the nine months ended September 30, 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for the six months ended June 30, 1997
are (i) the receipt of $8.0 million of insurance proceeds for business
interruption and property damage at the Golden Cross Mine and (ii) a gain of
$5.3 million arising from the sale of gold purchased in the open market
which was delivered pursuant to fixed price forward contracts in the first
quarter of 1997.
25
<PAGE> 27
RATIO OF EARNINGS TO FIXED CHARGES
The Company's earnings were inadequate to cover fixed charges for each of
the last five years and the nine months ended September 30, 1997. The amounts by
which earnings were inadequate to cover fixed charges for such periods were
approximately $18.7 million in 1991, $8.7 million in 1992, $21.9 million in
1993, $9.2 million in 1994, $8.3 million in 1995, $64.1 million in 1996, $63.2
million in the nine months ended September 30, 1996, and $11.3 million in the
nine months ended September 30, 1997. The Company's net cash provided by
operating activities during the year ended December 31, 1996 was approximately
$7.8 million and during the nine months ended September 30, 1997 was
approximately $9.6 million. The availability in the future of cash flow from
operations or working capital to fund the payment of interest on the Debentures
and repayment of the principal amount of Debentures upon maturity will be
dependent upon numerous factors that cannot now be predicted, including gold and
silver prices and production levels, the amount of the Company's expenditures
for acquisitions as well as mining property developmental and exploratory
activities, the results of the Company's operations and the extent to which the
Debentures are converted or redeemed.
SELLING DEBENTUREHOLDERS
The Debentures being offered hereby were originally issued by the Company
to Lazard Freres & Co. LLC in October 1997 in connection with an offering of the
Debentures effected in accordance with Rule 144A and Regulation S under the
Securities Act. The following table sets forth information concerning the
principal amount of Debentures beneficially owned by each Selling
Debentureholder. Other than as a result of the ownership of Debentures or Common
Stock, none of the Selling Debentureholders has had any material relationship
with the Company within the past three years, except as noted herein. The
Debentures and shares of Common Stock offered by this Prospectus may be offered
from time to time by the Selling Debentureholders named below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL
OF DEBENTURES AMOUNT OF PERCENT OF
BENEFICIALLY DEBENTURES OUTSTANDING
NAME OWNED BEING OFFERED DEBENTURES
---------------------------------------------- ---------------- ------------- -----------
<S> <C> <C> <C>
TABLE TO COME
Total............................... $ $ %
</TABLE>
Because the Selling Debentureholders may offer all or some of the
Debentures which they hold and/or shares of Common Stock issued upon conversion
thereof pursuant to the offering contemplated by this Prospectus, and because
there are currently no agreements, arrangements or understandings with respect
to the sale of any of the Debentures or shares of Common Stock that will be held
by the Selling Debentureholders after completion of this offering, no estimate
can be given as to the principal amount of Debentures or shares of Common Stock
that will be held by the Selling Debentureholders after completion of this
offering. See "Plan of Distribution."
The Company and the Selling Debentureholders are obligated to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay the costs and expenses incurred in connection with the
preparation and filing under the Securities Act of the Registration Statement of
which this Prospectus forms a part.
26
<PAGE> 28
DESCRIPTION OF DEBENTURES
Debentures in the total principal amount of $143,750,000 were issued in
October 1997 pursuant to an Indenture (the "Indenture") between the Company and
Bankers Trust Company, as trustee (the "Trustee"). The terms of the Debentures
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the date of the Indenture. The Debentures are subject to all such
terms, and holders of the Debentures are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below.
GENERAL
The Debentures are general unsecured obligations of the Company limited to
$143,750,000 in aggregate principal amount. The Debentures bear interest at
7 1/4% per annum, payable semiannually on April 30 and October 31 in each year
to holders of record of Debentures at the close of business on the April 15 or
October 15 next preceding the interest payment date. The first interest payment
date will be April 30, 1998. Interest is computed on the basis of a 360-day year
of twelve 30-day months. The Debentures mature on October 31, 2005.
Holders must surrender the Debentures to a Paying Agent to collect
principal payments. The Company may pay principal and interest by its check and
may mail interest checks to a holder's registered address. The Trustee will act
as Conversion Agent, Paying Agent and Registrar. The Company may change the
Conversion Agent, Paying Agent or Registrar without prior notice to
Debentureholders. The Company or any of its subsidiaries may act as Conversion
Agent, Paying Agent or Registrar.
CONVERSION OF DEBENTURES
The holder of any Debenture is entitled at any time prior to the close of
business on October 31, 2005, subject to prior redemption, to convert such
Debenture (or portions thereof which are in denominations of $1,000 or integral
multiples thereof) at the principal amount thereof, into shares of Common Stock,
at the conversion price set forth on the cover page of this Offering Circular,
subject to adjustment as described below. No payment or adjustment will be made
on conversion of any Debenture for interest accrued thereon or dividends on any
Common Stock issued and the holder will lose any right to payment of interest on
the Debentures surrendered for conversion; provided, however, that upon a call
for redemption by the Company, accrued and unpaid interest to the redemption
date shall be payable with respect to Debentures that are converted after a
notice of redemption has been mailed and on or prior to the redemption date.
Debentures surrendered for conversion during the period from the regular record
date for an interest payment to the corresponding interest payment date (except
Debentures called for redemption as described in the preceding sentence) must be
accompanied by payment of an amount equal to the interest thereon which the
holder is to receive on such interest payment date. The Company is not required
to issue fractional shares of Common Stock upon conversion of Debentures and, in
lieu thereof, will pay a cash adjustment based upon the market price of the
Common Stock on the last business day prior to the date of conversion. In the
case of Debentures called for redemption, conversion rights will expire at the
close of business on the business day prior to the redemption date.
The conversion price will be subject to adjustment in certain events,
including (i) the issuance of dividends (and other distributions) payable in
Common Stock on any class of capital stock of the Company, (ii) the issuance to
all holders of Common Stock of rights or warrants entitling them to subscribe
for or purchase Common Stock at less than the current market price (as defined
in the Indenture), (iii) subdivisions, combinations and reclassifications of
Common Stock, and (iv) distributions to all holders of Common Stock of evidences
of indebtedness of the Company or assets (including securities, but excluding
those rights, warrants, dividends and distributions referred to above and
dividends and distributions paid in
27
<PAGE> 29
cash out of the earned surplus of the Company). No adjustment in the conversion
price will be required unless such adjustment would require a change of at least
1% of the conversion price then in effect; provided, however, that any
adjustment that would otherwise be required to be made will be carried forward
and taken into account in any subsequent adjustment. In addition to the
foregoing adjustments, the Company will be permitted to make such reductions in
the conversion price as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the holders of the Common Stock. In case of certain
consolidations or mergers to which the Company is a party or the sale or
transfer of all or substantially all of the assets of the Company, each
Debenture then outstanding would, without the consent of any Holders of
Debentures, become convertible only into the kind and amount of securities, cash
and other property receivable upon the consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock of the Company into which
such Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon the consolidation, merger,
sale or transfer (provided that if the kind or amount so receivable is not the
same for each non-electing share, then the kind and amount so receivable by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares).
If the Company consolidates or merges into or sells, leases, conveys or
otherwise disposes of all or substantially all of its assets to any person, the
Debentures will become convertible into the kind and amount of securities, cash
or other assets which the holders of the Debentures would have owned immediately
after the transaction if the holders had converted the Debentures immediately
before the effective date of the transaction at the conversion price in effect
immediately prior to such effective date.
OPTIONAL REDEMPTION OF DEBENTURES
The Debentures are redeemable at the option of the Company, in whole or in
part, on or after October 31, 2000, at the redemption prices (expressed as
percentages of the principal amount) set forth below plus accrued interest to
the redemption date, if redeemed during the 12 month period beginning October 31
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------------------------------- ----------
<S> <C>
2000............................................................ 103.62500%
2001............................................................ 102.71875%
2002............................................................ 101.81250%
2003............................................................ 100.90625%
2004 and thereafter............................................. 100.00000%
</TABLE>
In the event of redemption of less than all of the Debentures, the
Debentures will be chosen by lot for redemption by the Trustee as provided in
the Indenture. Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Debentures to be
redeemed at its registered address. On and after the redemption date interest
ceases to accrue on Debentures or portions thereof called for redemption.
REPURCHASE AT OPTION OF HOLDER UPON OCCURRENCE OF A DESIGNATED EVENT
If at any time there occurs any Designated Event (as defined below) with
respect to the Company, each holder of Debentures shall have the right, at the
holder's option, to require the Company to repurchase all of such holder's
Debentures, or a portion thereof which is $1,000 or any integral multiple
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at 100% of their principal amount,
together with accrued interest to the date fixed for repurchase.
Within 30 days after the occurrence of a Designated Event, the Company is
obligated to mail to all holders of record of the Debentures a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company shall deliver a copy
of the Company Notice to the Trustee and shall cause a copy of such notice to be
published in a newspaper of
28
<PAGE> 30
general circulation in the Borough of Manhattan, The City of New York. To
exercise the repurchase right, holders of Debentures must deliver on or before
the 30th day after the date of the Company Notice irrevocable written notice to
the Company (or an agent designated by the Company for such purpose) of the
holder's exercise of such right, together with the Debentures with respect to
which the right is being exercised, duly endorsed for transfer.
A Designated Event shall be deemed to have occurred upon the consummation
of a purchase, merger or acquisition constituting a "Change in Control." As used
herein, a "Change in Control" of the Company shall be deemed to have occurred
when: (i) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons; (ii) there shall be
consummated any consolidation or merger of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation or
merger with a wholly owned subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
each case, other than a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger, or (iii) any person, or any persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act (other
than the Company, any Subsidiary, any employee stock purchase plan, stock option
plan or other stock incentive plan or program, retirement plan or automatic
dividend reinvestment plan or any substantially similar plan of the Company or
any Subsidiary or any person holding securities of the Company for or pursuant
to the terms of any such employee benefit plan), together with any affiliates
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act) at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company.
Notwithstanding the foregoing, a Change in Control as described above shall
not be deemed to have occurred if (i) the Current Market Price (as defined in
the Indenture) of the Common Stock is at least equal to 105% of the conversion
price of the Debentures in effect immediately preceding the time of such Change
in Control, or (ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in Control to
the holders of Common Stock consists of shares of common stock that are, or
immediately upon issuance will be, listed on a national securities exchange or
quoted in the National Association of Securities Dealers, Inc. National Market
System ("NASDAQ-NMS"), and as a result of such transaction the Debentures become
convertible solely into such common stock, or (iii) the consideration in the
transaction giving rise to such Change in Control to the holders of Common Stock
consists of cash, securities that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted in the NASDAQ-NMS, or a
combination of cash and such securities, and the aggregate fair market value of
such consideration (which, in the case of such securities, shall be equal to the
average of the daily closing prices of such securities during the ten
consecutive trading days commencing with the sixth trading day following
consummation of such transaction) is at least 105% of the conversion price of
the Debentures in effect on the date immediately preceding the closing date of
such transaction.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Change in Control could create an event of default under
Senior Debt of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Debentures. See
"Subordination." Failure by the Company to repurchase the Debentures when
required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions. The
Company's ability to pay cash to the holders of Debentures upon a repurchase may
be limited by certain financial covenants contained in the Company's Senior
Debt.
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, such
transaction would be subject to the requirements of Rule 13e-4, including the
filing of an Issuer Tender Offer Statement on Schedule 13D-4 with the Commission
and the furnishing of certain information contained therein to the
Debentureholders. The holders' repurchase right upon the occurrence of a
Designated Event could discourage the acquisition of the Company by a potential
acquiror.
29
<PAGE> 31
SUBORDINATION
The Debentures are subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Debt. Senior Debt is defined to include all indebtedness, whether now
outstanding or hereafter created, incurred, assumed or guaranteed by the Company
for money borrowed from others (including obligations under capitalized leases
or purchase money mortgages) or in connection with the acquisition by it or a
Subsidiary of any other business or entity, and, in each case, renewals,
extensions and funding thereof, other than (i) any such indebtedness as to
which, in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the Debentures, (ii)
indebtedness of the Company to any Affiliate, (iii) the Company's 6% Convertible
Subordinated Debentures Due 2002 and the Company's 6 3/8% Convertible
Subordinated Debentures Due 2004 and (iv) the Debentures.
As of October 31, 1997, the Company had approximately $9.2 million of
Senior Debt outstanding. The Company's 6% Convertible Subordinated Debentures
Due 2002, of which $49.84 million principal amount is outstanding, and 6 3/8%
Convertible Subordinated Debentures Due 2004, of which $95 million principal
amount is outstanding, rank pari passu with the Debentures. The Company conducts
significant operations through its subsidiaries. The rights of the Company's
creditors, including the holders of the Debentures, to participate in the assets
of any subsidiary will be subject to prior claims of such subsidiary's
creditors. The Indenture will not restrict the incurrence of Senior Debt or
other indebtedness, secured or unsecured, by the Company or any subsidiary.
No payment of principal, if any, or interest on the Debentures may be made
and no Debentures may be purchased if the Company is then in default in the
payment of any Senior Debt or if at the time any other event of default under
the terms of any Senior Debt exists permitting acceleration thereof.
Furthermore, no Debentures may be purchased by the Company without the prior
approval of the syndicate of banks with whom the Company has its revolving
credit agreement. Upon any payment or distribution of assets of the Company in
the event of any insolvency, reorganization, liquidation or similar proceeding,
all Senior Debt must be repaid in full (including any interest thereon accruing
after the commencement of any proceeding) before the Holders of the Debentures
will be entitled to receive or retain any payment. If the Debentures are
declared due and payable before their stated maturity because of any Event of
Default, no payment may be made in respect of the Debentures unless and until
all Senior Debt shall have been paid in full.
By reason of such subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Debt may recover more, ratably, than
Holders of Debentures, and creditors of the Company who are neither holders of
Senior Debt nor Holders of Debentures may recover less, ratably, than holders of
Senior Debt.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to,
another corporation, person or entity unless (i) the Company is the surviving
person or the successor or transferee is a corporation organized under the laws
of the United States, any state thereof or the District of Columbia, (ii) the
successor assumes all the obligations of the Company under the Debentures and
the Indenture and (iii) after such transaction no Event of Default exists.
COVENANTS
The Company shall not adopt any plan of liquidation which provides for,
contemplates or the effectuation of which is preceded by (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company otherwise than substantially as an entirety and (ii) the distribution of
all the proceeds of such sale, lease, conveyance or other disposition unless the
Company makes provisions for satisfaction of the Company's obligation to pay
principal and interest on the Debentures.
30
<PAGE> 32
EVENTS OF DEFAULT AND REMEDIES
An Event of Default includes: (i) default in the payment of any interest,
continued for 30 days; (ii) default in the payment of principal or premium, if
any, when due; (iii) default in the payment of the repurchase price in respect
of any Debenture on the Repurchase Date in accordance with the Indenture; (iv)
default in the performance of any other covenant continued for 60 days after
written notice as provided in the Indenture; (v) default in respect of
indebtedness of the Company for money borrowed which results in acceleration of
the maturity of $1,000,000 or more of indebtedness, if such acceleration is not
rescinded or indebtedness discharged within 10 days after written notice to the
Company as provided in the Indenture; and (vi) certain events in bankruptcy,
insolvency or reorganization. If any Event of Default shall happen and be
continuing, the Trustee or the holders of 25% in principal amount of the
outstanding Debentures may declare the Debentures due and payable. At any time
after a declaration of acceleration with respect to the Debentures has been
made, but before a judgment or decree based on acceleration has been obtained,
the holders of a majority in principal amount of the outstanding Debentures may,
under certain circumstances, rescind and annul such acceleration.
The Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during any Default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnification. Subject to such provisions
for indemnification of the Trustee, the holders of a majority in principal
amount of the outstanding Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee.
The holders of a majority in principal amount of the outstanding Debentures
may on behalf of the holders of all Debentures waive compliance by the Company
with certain restrictive provisions of the Indenture. The holders of a majority
in principal amount of the outstanding Debentures may on behalf of the holders
of all Debentures waive certain past defaults except a default in payment of the
principal of (or premium, if any) or interest on, any Debenture or in respect of
a provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture affected thereby.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon becoming aware of any Default
or Event of Default, a statement specifying such Default or Event of Default.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Debentures
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of the Debentures by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Debentures.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Debentures to the Trustee for cancellation. After
all the Debentures have been called for redemption, the Company may terminate
all of its obligations under the Indenture, other than its obligations to pay
the principal of and interest on the Debentures and certain other obligations,
at any time, by depositing with the Trustee money or non-callable U.S.
Government obligations sufficient to pay all remaining indebtedness on the
Debentures.
REGISTRATION AND TRANSFER OF DEBENTURES
Global Debenture; Book-Entry Procedures. The Debentures are represented by
a single global debenture (the "Global Debenture") issued to the Depository
Trust Company ("DTC") for its book-entry settlement system and are registered in
the name of Cede & Co., as nominee of DTC. Bankers Trust Company, as custodian
(the "Custodian"), acts as custodian of the Global Debenture for DTC. Because
31
<PAGE> 33
Cede & Co. is the holder of record of the Global Debenture, each person owning a
beneficial interest in the Global Debenture must rely upon the procedures of the
institutions having accounts with DTC to exercise or be entitled to any of the
rights of a holder of a Debenture.
DTC has advised the Company that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Purchaser), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants may beneficially
own securities held by DTC only through participants.
Upon the original issuance by the Company of the Debentures represented by
the Global Debenture, DTC credited, on its book-entry registration and transfer
system, the respective principal amounts of the Debentures represented by the
Global Debenture to the accounts of participants. Ownership of beneficial
interests in the Global Debenture is limited to participants or persons that
hold interests through participants. Ownership of beneficial interests in the
Debentures represented by the Global Debenture is shown on, and the transfer of
that ownership may be effected only through, records maintained by DTC (with
respect to interests of participants in DTC), or by participants in DTC or
persons that may hold interests through such participants (with respect to
persons other than participants in DTC). A copy of the Notice of Transfer
Pursuant to Registration Statement, which must be delivered to the Trustee by
any Selling Debentureholder upon any sale of Debentures pursuant to this
Prospectus, is set forth as Appendix A to the Prospectus. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in the Global Debenture.
So long as DTC, or its nominee, is the registered owner of the Global
Debenture, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Debentures represented by such Global Debenture for all
purposes under the Indenture. Owners of beneficial interests in Debentures
represented by the Global Debenture will be entitled to receive physical
delivery of Debenture in definitive form as provided below under "Definitive
Debentures."
Payments of principal of and interest and premium, if any, on the
Debentures represented by the Global Debentures registered in the name of DTC or
its nominee will be made by the Company through the Trustee to DTC or its
nominee, as the case may be, as the registered owner of the Global Debenture.
None of the Company, the Trustee, the Paying Agent, the Conversion Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Debenture or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company expects
that DTC, upon receipt of any payment of principal, premium or interest in
respect of the Global Debenture, will immediately credit the accounts of the
related participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Debenture as
shown on the records of DTC. The Company also expects that payments by
participants to owners of beneficial interests in the Global Debenture will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository of the
Global Debenture and a successor depository is not appointed by the Company
within 90 days, the Company will issue Debentures in fully registered,
certificated form ("Definitive Debentures") in exchange for the Debentures
represented by
32
<PAGE> 34
the Global Debenture. In addition, the Company may at any time and in its sole
discretion determine not to have a Global Debenture, and, in such event, will
issue Definitive Debentures in exchange for the Debentures represented by the
Global Debenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of such then outstanding Debentures, and any existing
default or compliance with any provision may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Debentures.
Without the consent of any holder of the Debentures, the Company and the Trustee
may amend or supplement the Indenture or the Debentures to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Debentures in addition to
or in place of certificated Debentures, to provide for the assumption of the
Company's obligations to holders of the Debentures in the case of a merger or
acquisition, or to make any change that does not materially adversely affect the
legal rights of any holder of the Debentures. Without the consent of each holder
affected, the Company may not reduce the principal amount of Debentures the
holders of which must consent to an amendment of the Indenture; reduce the rate
or change the interest payment time of any Debenture; reduce the principal of or
change the fixed maturity of any Debenture or alter the redemption provision
with respect thereto; make any Debenture payable in money other than that stated
in the Debenture; make any change in the provisions concerning waiver of
Defaults or Events of Default by holders of the Debentures or rights of holders
to receive payment of principal or interest; make any change that adversely
affects the right to convert any Debenture; or make any change in the
subordination provisions that adversely affects the rights of any holder.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture. The Trustee is
trustee under an indenture in respect of $100 million principal amount of 6 3/8%
Convertible Subordinated Debentures Due 2002 issued by the Company in February
1994, which ranks pari passu with the Debentures.
The holders of a majority in principal amount of the then outstanding
Debentures have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee. The Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of the
Debentures, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
33
<PAGE> 35
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 60,000,000 shares of Common Stock,
par value $1.00 per share, of which, at September 30, 1997, 21,890,568 shares
were outstanding and 1,059,211 shares were held as treasury stock, up to
7,500,000 shares were reserved for issuance upon the conversion of the MARCS,
8,237,822 shares were reserved for issuance upon the conversion of the $143.75
million principal amount of outstanding Debentures, 3,686,457 shares were
reserved for possible issuance upon the conversion of the Company's $95 million
principal amount of outstanding 6 3/8% Convertible Subordinated Debentures due
2004, 1,955,416 shares were reserved for issuance upon conversion of the
Company's $49.8 million principal amount of outstanding 6 3/8% Convertible
Subordinated Debentures due 2002, 179,189 shares were reserved for issuance
under the Company's Executive Compensation Program and 200,000 shares were
reserved for issuance under the Company's Non-Employee Directors Stock Option
Plan.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders, and upon giving
notice required by law, may cumulate their votes in elections of directors.
Subject to preferences that may be applicable to any shares of Preferred Stock
of the Company outstanding at the time, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor and, in the event of the liquidation,
dissolution or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other security. The outstanding Common Stock is fully-paid and non-assessable.
The Company's Articles of Incorporation include a "fair price" provision
applicable to certain business combination transactions in which the Company may
be involved. The provision requires that an Interested Shareholder (the holder
of 10% or more of the Company's outstanding shares of Common Stock) not engage
in certain specified transactions (e.g., mergers, sales of assets, dissolution
and liquidation) unless one of three conditions is met: (i) a majority of the
directors who are unaffiliated with the Interested Shareholder and were
directors before the Interested Shareholder became an Interested Shareholder
approve the transaction; (ii) holders of 80% or more of the outstanding shares
of Common Stock approve the transaction; or (iii) the shareholders are all paid
a "fair price," i.e., generally the higher of the fair market value of the
shares or the same price as the price paid to shareholders in the transaction in
which the Interested Shareholder acquired its block. By discouraging certain
types of hostile takeover bids, the fair price provision may tend to insulate
current management against the possibility of removal. The Company is not aware
of any person or entity proposing or contemplating such a transaction.
The transfer agent and registrar for the Company's Common Stock, which is
listed on the New York Stock Exchange, is First Interstate Bank of Oregon, N.A.,
Portland, Oregon.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, par value $1.00 per share, of which 7,077,833 shares of MARCS were issued
in March 1996. The Board of Directors has the authority to determine the
dividend rights, dividend rates, conversion rights, voting rights, rights and
terms of redemption and liquidation preferences, redemption prices, sinking fund
terms on any series of Preferred Stock, the number of shares constituting any
such series and the designation thereof. Holders of Preferred Stock have no
preemptive rights and have no rights to convert their Preferred Stock into any
other securities. While series may be designated and Preferred Stock may be
issued from time to time in the future, except upon exercise of the Rights (as
described below), the Company has no present plans to issue any such shares of
Preferred Stock.
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES (MARCS)
Holders of the 7,077,833 outstanding shares of MARCS, who have no
preemptive rights, are entitled to receive an annual cumulative cash dividend of
$1.488 per share, payable quarterly. The shares of MARCS
34
<PAGE> 36
rank prior to the Common Stock as to payment of dividends and distribution of
assets upon liquidation. The liquidation preference applicable to each share of
MARCS is equal to the sum of $21.25, which was the per share price received by
the Company upon the issuance thereof on March 13, 1996, plus the amount of
accrued and unpaid dividends thereon.
On March 15, 2000 (the "Mandatory Conversion Date"), unless either
previously converted at the option of the holder or redeemed by the Company,
each outstanding share of MARCS will mandatorily convert into (i) 1.111 shares
of Common Stock, subject to adjustment in certain events, and (ii) the right to
receive an amount in cash equal to all accrued and unpaid dividends thereon.
Shares of MARCS are not redeemable prior to March 15, 1999. At any time and
from time to time on and after March 15, 1999 until immediately prior to the
Mandatory Conversion Date, the Company may redeem any or all of the outstanding
shares of MARCS. Upon any such redemption, each holder will receive, in exchange
for each share of MARCS, the greater of: (a) the number of shares of Common
Stock equal to the sum of (i) $21.622, declining after March 15, 1999 to $21.25
until the Mandatory Conversion Date and (ii) all accrued and unpaid dividends
thereon, divided by the current market price of the Common Stock (determined in
accordance with the Certificate of Designations, Rights, Preferences and
Limitations relating to the MARCS) on the applicable date of determination, or
(b) .826 of a share of Common Stock.
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each of the shares of MARCS is convertible at the option of the holder
thereof into .826 of a share of Common Stock (equivalent to a conversion price
of $25.713 per share of Common Stock), subject to adjustment in certain events.
The number of shares of Common Stock a holder will receive upon redemption, and
the value of the shares received upon conversion will vary depending on the
market price of the Common Stock from time to time.
The holders of shares of MARCS, which are listed on the New York Stock
Exchange, have the right with the holders of Common Stock to vote in the
election of directors and upon each other matter coming before any meeting of
the holders of Common Stock on the basis of one vote for each share of MARCS
held. The holders of shares of MARCS and the holders of Common Stock vote
together as one class on such matters except as otherwise provided by law or by
the Company's Articles of Incorporation.
In the event that dividends on the shares of MARCS or any other series of
Preferred Stock are in arrears and unpaid for six quarterly dividend periods, or
if any other series of Preferred Stock is entitled for any other reason to
exercise voting rights, separate from the Common Stock, to elect any directors
of the Company ("Preferred Stock Directors"), the holders of the shares of MARCS
(voting separately as a class with holders of all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable),
with each share of MARCS entitled to one vote on this and other matters in which
holders of Preferred Stock vote as a group, will be entitled to vote for the
election of two directors, such directors to be in addition to the number of
directors constituting the Board of Directors immediately before the accrual of
such right. Such right, when vested, will continue until all dividends in
arrears and payable on the shares of MARCS and such other series of Preferred
Stock have been paid in full and the right of any other series of Preferred
Stock to exercise voting rights, separate from the Common Stock, to elect
Preferred Stock Directors of the Company terminates or has terminated, and, when
so paid and any such termination occurs or has occurred, such right of the
holders of the shares of MARCS will cease. The term of office of any director
elected by the holders of the shares of MARCS and such other series of Preferred
Stock will terminate on the earlier of (i) the next annual meeting of
shareholders at which a successor has been elected and qualified or (ii) the
termination of the right of holders of the shares of MARCS and such other series
of Preferred Stock to elect Preferred Stock Directors.
SERIES A JUNIOR PREFERRED STOCK
On May 24, 1989, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of the Company's Common
Stock to shareholders of record at the close of business on June 16, 1989. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Preferred Stock at a purchase price of $100
in cash ("Purchase Price"), subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement, dated as of May 24,
35
<PAGE> 37
1989 (the "Rights Agreement"), between the Company and First Interstate Bank of
Oregon, N.A., as Rights Agent. The Rights are not exercisable or detachable from
the Common Stock until ten days after any person or group acquires 20% or more
(or commences a tender offer for 30% or more) of the Company's Common Stock. If
any person or group acquires 30% or more of the Company's Common Stock or
acquires the Company in a merger or other business combination, each Right
(other than those held by the acquiring person) will entitle the holder to
purchase Preferred Stock of the Company or common stock of the acquiring company
having a market value of approximately two times the $100 exercise price. The
Rights expire on May 24, 1999, and can be redeemed by the Company at any time
prior to their becoming exercisable. Shares of Common Stock issued prior to the
expiration date of the Rights upon conversion of the Debentures will be
accompanied by Rights.
PLAN OF DISTRIBUTION
The Company, which received the proceeds from the original sale of the
Debentures in October 1997, will not receive any of the proceeds from this
offering. The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders may sell all or a portion of the Debentures or shares
of Common Stock offered hereby from time to time directly by the Selling
Debentureholders or, alternatively, through underwriters, broker-dealers or
agents. Such Debentures may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales maybe effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Debentures may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or services or in the
over-the-market, or (iv) through the writing of options. In connection with
sales of the Debentures or otherwise, the Selling Debentureholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the Debentures in the course of hedging the positions they assume. The
Selling Debentureholders may also sell Debentures short and deliver Debentures
to close out such short positions, or loan or pledge Debentures to
broker-dealers that in turn may sell such Debentures. To the extent required,
the aggregate principal amount of Debentures and/or number of shares of Common
Stock to be sold, the names of the Selling Debentureholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Debentureholders
from the sale of the Debentures and Common Stock offered by the Selling
Debentureholders hereby will be the purchase price of such Debentures and shares
of Common Stock less any broker's commissions.
There is no assurance that the Selling Debentureholders will sell any or
all of the Debentures or shares of Common Stock offered hereby.
The Company has been advised by Lazard Freres & Co. LLC that it is
presently making, and intends to continue making, a market in the Debentures;
however, it is not obligated to do so and any such market making may be
discontinued at any time. The Debentures have been designated as "PORTAL"
securities eligible for quotation in the National Association of Securities
Dealers PORTAL system. However, there can be no assurance that an active market
for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Common Stock will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
36
<PAGE> 38
Pursuant to certain rules under the Exchange Act, any person who
participates in the offering of Debentures or shares of Common Stock made hereby
in one or more transactions that are distinguished from ordinary trading
transactions by the presence of special selling efforts and selling methods, may
not simultaneously engage in market making activities with respect to either the
Debentures or the Common Stock for a period of nine business days (two business
days in the case of Common Stock) prior to the commencement of such offering. In
addition, and without limiting the foregoing, each Selling Debentureholder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Debentures or
shares of Common Stock by the Selling Debentureholders.
The Company will pay all expenses incident to the offering and sale of the
Debentures and Common Stock to the public other than underwriting discounts and
selling commissions and fees. See "Selling Debentureholders."
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Freedman, Levy, Kroll & Simonds, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 have
been audited by Ernst & Young LLP, independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
37
<PAGE> 39
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Bankers Trust Company
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: Coeur d'Alene Mines Corporation (the "Company") 7 1/4% Convertible
Subordinated Debentures due 2005 (the "Securities")
Dear Sirs:
Please be advised that has transferred $ aggregate
principal amount of the above-referenced Securities pursuant to an effective
Registration Statement on Form S-3 (File No. 333- ) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Securities is named as a "Selling Securityholder" in the
Prospectus dated December , 1997 or in supplements thereto, and that the
aggregate principal amount of the Securities transferred are the Securities
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
[NAME]
By:
----------------------------
(Authorized Signature)
38
<PAGE> 40
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY SELLING DEBENTUREHOLDER OR ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Company........................... 17
Price Range of Common Stock and
Dividends........................... 23
Selected Consolidated Financial
Data................................ 24
Ratio of Earnings to Fixed Charges.... 26
Selling Debentureholders.............. 26
Description of Debentures............. 27
Description of Capital Stock.......... 34
Plan of Distribution.................. 36
Legal Matters......................... 37
Experts............................... 37
Appendix A............................ 38
</TABLE>
================================================================================
================================================================================
$143,750,000
[COEUR D'ALENE MINES LOGO]
COEUR D'ALENE MINES CORP
7 1/4% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2005
------------------------
PROSPECTUS
------------------------
December , 1997
================================================================================
<PAGE> 41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Registrant in connection with the
securities being registered are as follows:
<TABLE>
<S> <C>
SEC registration fee................................... $ 43,560.61
Printing expenses...................................... 17,000.00
Legal fees and expenses................................ 75,000.00
Accounting fees and expenses........................... 30,000.00
Miscellaneous.......................................... 4,439.39
-----------
Total............................................. $170,000.00
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Title 30, Section 30-1-5 of the Idaho Code and Article VI(b) of the
Registrant's By-Laws, the Registrant's directors and officers may be indemnified
against certain liabilities which they may incur in their capacities as such.
The material terms of the indemnification provisions are indemnification (i)
with respect to civil, criminal, administrative or investigative proceedings
brought because the defendant is or was serving as an officer, director,
employee or agent of the Company; (ii) for judgments, fines and amounts paid in
settlement reasonably incurred; (iii) if the defendant acted in good faith and
reasonably believed in the case of conduct in his official capacity that his
conduct was in the best interests of the Company, and in all other cases that
his conduct was at least not opposed to the best interests of the Company; and
(iv) if, with respect to a criminal proceeding, he had no reasonable cause to
believe his conduct was unlawful. Attorney's fees are included in such
indemnification to the extent the indemnified party is successful on the merits
in defense of the proceeding. If the foregoing criteria are met, indemnification
also applies to a suit threatened or pending by the Company against the officer,
director, employee or agent with respect to attorney's fees unless there is
negligence on the part of the indemnified party. Indemnification is made only
upon a determination by the Company that it is proper under the circumstances
because the applicable standard is met. The determination shall be made by a
majority vote of (i) a quorum of the board of directors consisting of those
persons who are not parties to the proceeding; (ii) if such a quorum is not
available, by independent legal counsel in writing; or (iii) by the
shareholders. Generally, expenses for defense may be paid in advance of final
disposition of the proceeding if the indemnified party provides a written
affirmation of his good faith belief that he has met the relevant standard of
conduct under the Idaho Code and further provides a written undertaking to repay
such amounts if it is determined that the applicable standard has not been met.
The Registrant also has an officers' and directors' liability insurance policy.
This insurance policy contains a limit of liability of $10 million with a
retention to the Company of $500,000, on a claims made basis. The policy covers
claims against officers and directors for "wrongful acts" and also reimburses
the Company to the extent the Company indemnifies officers and directors in
accordance with applicable law and its by-laws. "Wrongful act" is defined to
mean any breach of duty, neglect, error, misstatement, misleading statement,
omission or act by the directors or officers of the Company in their respective
capacities as such, or any matter claimed against them solely by reason of their
status as directors or officers of the Company. The policy contains numerous
exclusions of liability which are exceptions to coverage.
II-1
<PAGE> 42
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
4 -- Form of Indenture, dated as of October 15, 1997, between the Registrant and
Bankers Trust Company, as Trustee (incorporated herein by reference to Exhibit No.
4 to the Registrant's Current Report on Form 8-K filed on October 16, 1997)
5 -- Legal opinion, dated November 19, 1997, of Freedman, Levy, Kroll & Simonds
regarding legality of securities offered
10 -- Registration Rights Agreement, dated as of October 15, 1997, between the
Registrant and Lazard Freres & Co. LLC (incorporated herein by reference to
Exhibit 10(b) to the Registrant's Current Report on Form 8-K filed on October 16,
1997)
12 -- Statement re Computation of Ratios
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Freedman, Levy, Kroll & Simonds (included in Exhibit 5)
24 -- Power of Attorney (included on Page II-4 as part of the signature pages hereto)
26 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(3) That, for purposes of determining liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in Coeur d'Alene, Idaho, on the 18th day of November,
1997.
COEUR D'ALENE MINES CORPORATION
By: /s/ DENNIS E. WHEELER
------------------------------------
Dennis E. Wheeler
Chairman of the Board,
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints DENNIS E. WHEELER, JAMES A. SABALA and WILLIAM F.
BOYD his true and lawful attorneys-in-fact and agents, each acting alone, with
full powers of substitution, for him and in his name, place and stead, in any
and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with exhibits
thereto, and other documents in connection therewith with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform for all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------- ------------------
<C> <S> <C>
/s/ DENNIS E. WHEELER Chairman of the Board of Directors, November 18, 1997
- ----------------------------------- President, Chief Executive Officer
DENNIS E. WHEELER and Director (Principal Executive
Officer)
/s/ JAMES A. SABALA Senior Vice President, Chief November 18, 1997
- ----------------------------------- Financial Officer, Treasurer and
JAMES A. SABALA Director (Principal Financial and
Accounting Officer)
/s/ CECIL D. ANDRUS Director November 18, 1997
- -----------------------------------
CECIL D. ANDRUS
/s/ JOSEPH C. BENNETT Director November 18, 1997
- -----------------------------------
JOSEPH C. BENNETT
/s/ JAMES J. CURRAN Director November 18, 1997
- -----------------------------------
JAMES J. CURRAN
/s/ JEFFREY T. GRADE Director November 18, 1997
- -----------------------------------
JEFFREY T. GRADE
/s/ DUANE B. HAGADONE Director November 18, 1997
- -----------------------------------
DUANE B. HAGADONE
/s/ JAMES A. MCCLURE Director November 18, 1997
- -----------------------------------
JAMES A. MCCLURE
</TABLE>
II-3
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <C> <S>
4 -- Form of Indenture, dated as of October 15, 1997, between the Registrant and
Bankers Trust Company, as Trustee (incorporated herein by reference to Exhibit
No. 4 to the Registrant's Current Report on Form 8-K filed on October 16, 1997)
5 -- Legal opinion, dated November 19, 1997, of Freedman, Levy, Kroll & Simonds
regarding legality of securities offered
10 -- Registration Rights Agreement, dated as of October 15, 1997, between the
Registrant and Lazard Freres & Co. LLC (incorporated herein by reference to
Exhibit 10(b) to the Registrant's Current Report on Form 8-K filed on October
16, 1997)
12 -- Statement re Computation of Ratios
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Freedman, Levy, Kroll & Simonds (included in Exhibit 5)
24 -- Power of Attorney (included on Page II-4 as part of the signature pages hereto)
26 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
<PAGE> 1
EXHIBIT 5
November 19, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Coeur d'Alene Mines Corporation
Registration Statement on Form S-3
Gentlemen:
We are counsel to Coeur d'Alene Mines Corporation (the "Company") and have
represented the Company in connection with the Registration Statement on Form
S-3 filed with the Securities and Exchange Commission (the "Commission") today
(together with all exhibits thereto, the "Registration Statement"). The
Registration Statement relates to $143,750,000 principal amount of 7 1/4%
Convertible Subordinated Debentures due 2005 (the "Debentures") and a presently
indeterminable number of shares (the "Conversion Shares") of the Company's
Common Stock, par value $1.00 per share (the "Shares") issuable upon conversion
of the Debentures. The Debentures were issued pursuant to an Indenture, dated as
of October 15, 1997 (the "Indenture"), between the Company and Bankers Trust
Company, as trustee (the "Trustee").
This opinion is being delivered to the Commission as Exhibit 5 to the
Registration Statement.
We have examined (1) the Articles of Incorporation, and all amendments
thereto, of the Company, as certified by the Secretary of State of the State of
Idaho, (2) the By-Laws of the Company, as certified by the Secretary of the
Company as being those currently in effect, (3) the Registration Statement, (4)
the Indenture, (5) the global certificate that currently evidences the
Debentures (the "Global Certificate") and the form of definitive Certificate for
the Debentures (the "Definitive Certificate"), and (6) such other corporate
records, certificates, documents and other instruments as in our opinion are
necessary or appropriate in connection with expressing the opinions set forth
below.
Based upon the foregoing, it is our opinion that:
1. The Debentures have been duly authorized and the Global Certificate for
the Debentures has been validly issued. The Global Certificate for the
Debentures constitutes, and the Definitive Certificates for the Debentures, when
issued as provided in the Indenture, will constitute legal and binding
obligations of the Company in accordance with their terms and the terms of the
Indenture. This opinion is subject to (i) the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
court decisions with respect thereto, and (ii) the application of equitable
principles or remedies in any proceeding, whether at law or in equity.
2. The Conversion Shares, when issued upon conversion of the Debentures in
accordance with the terms of the Debentures and the Indenture, will be validly
issued, fully paid and nonassessable.
This firm hereby consents to the reference to it under the heading "Legal
Matters" appearing in the Prospectus which is a part of the Registration
Statement.
Sincerely,
FREEDMAN, LEVY, KROLL & SIMONDS
<PAGE> 1
EXHIBIT 12
Coeur d'Alene Mines Corporation
Calculation of
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 Nine Months Ended
------------------------------------------------------------------------- ----------------------------
1992 1993 1994 1995 1996 1997 1996
----------- ------------ ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
- -------------
Interest expense $ 912,915 $ 4,820,251 $10,444,761 $ 8,788,167 $ 3,578,933 $ 6,061,002 $ 2,918,716
Interest capitalized 2,994,716 3,928,846 4,242,689 7,266,412 9,504,616 4,233,337 7,125,338
Amortization of public
offering costs 183,858 544,323 954,320 957,799 618,113 460,179 463,584
Amortization of
capital lease costs 25,444 25,444 25,444 57,750 409,037 1,047,601 84,112
MARCS dividend 7,518,930 7,898,862 4,885,976
Portion of rent
expense repre-
sentative of
interest 317,691 290,831 215,486 220,303 406,867 259,925 287,222
----------- ------------ ----------- ----------- ------------ ------------ ------------
TOTAL FIXED CHARGES $ 4,434,624 $ 9,609,695 $15,882,700 $17,290,431 $ 22,036,496 $ 19,960,908 $ 15,764,948
=========== ============ =========== =========== ============ ============ ============
Earnings
- --------
Income (Loss) from
continuing opera-
tions before taxes $(5,721,171) $(17,973,517) $(5,000,802) $(1,057,590) $(54,569,642) $ (8,266,651) $(56,028,009)
Fixed charges
per above 4,434,624 9,609,695 15,882,700 17,290,431 22,036,496 19,960,908 15,764,948
Less interest
capitalized (2,994,716) (3,928,846) (4,242,689) (7,266,412) (9,504,616) (4,233,337) (7,125,338)
Current period
amortization of
capitalized interest -0- -0- -0- -0- -0- 1,197,110 -0-
----------- ------------ ----------- ----------- ------------ ------------ ------------
$(4,281,263) $(12,292,668) $ 6,639,209 $ 8,966,429 $(42,037,762) $ 8,658,030 $(47,388,399)
----------- ------------ ----------- ----------- ------------ ------------ ------------
Earnings insufficient
to cover fixed charges $ 8,715,887 $ 21,902,363 $ 9,243,491 $ 8,324,002 $(64,074,258) $(11,303,878) $(63,153,347)
=========== ============ =========== =========== ============ ============ ============
Ratio of earnings to
fixed charges * * * * * * *
=========== ============ =========== =========== ============ ============ ============
</TABLE>
* Coverage ratio of less than 1.0
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and in the related prospectus of Coeur
d'Alene Mines Corporation for the registration of $143,750,000 principal amount
of 7 1/4% Convertible Subordinated Debentures due 2005 and to the incorporation
by reference therein of our report dated February 5, 1997 with respect to the
consolidated financial statements of Coeur d'Alene Mines Corporation included in
its Annual Report on Form 10-K for the year ended December 31, 1996, filed with
the Securities and Exchange Commission.
Ernst & Young LLP
Seattle, Washington
November 19, 1997
ATTORNEYS' CONSENT
The consent of Freedman, Levy, Kroll & Simonds to the use of Exhibit 5
hereto, and to the reference to their name under the heading "Legal Matters" in
the Prospectus constituting a part of this Registration Statement, is included
in that Exhibit.
<PAGE> 1
EXHIBIT 26
-----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)
-----------
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
</TABLE>
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
COEUR D'ALENE MINES CORPORATION
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C> <C>
IDAHO 82-0109423
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
400 COEUR D'ALENE MINES BUILDING
505 FRONT AVENUE
COEUR D'ALENE, IDAHO 83814
` (Address of principal executive offices) (Zip Code)
</TABLE>
COEUR D'ALENE MINES CORPORATION
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
(Title of the indenture securities)
<PAGE> 2
ITEM 1.GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
</TABLE>
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2.AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers
Trust Company dated August 7, 1990, Certificate
of Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced
to Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 19, 1997, copy
attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No.
33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated herein by
reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as
amended on February 18, 1997, Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 333-24509-01.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. - Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust
Company dated as of June 30, 1997. Copy
attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 18th day of November, 1997.
BANKERS TRUST COMPANY
By:
-------------------------------
Jason Krasilovsky
Assistant Treasurer
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 18th day of November, 1997.
BANKERS TRUST COMPANY
By: Jason Krasilovsky
Jason Krasilovsky
Assistant Treasurer
-5-
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated,
reported the amount outstanding as of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
----------------
C400
----------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS / / / / / / / / / / /
<S> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin(1) ..................... 0081 1,724,000 1.a.
b. Interest-bearing balances(2) .............................................. 0071 2,648,000 1.b.
2. Securities: / / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A) ................ 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............... 1773 3,990,000 2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic offices 1350 26,430,000 3.
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: / / / / / / / / / / /
a. Federal funds sold .........................................................
b. Securities purchased under agreements to resell ............................
4. Loans and lease financing receivables: / / / / / / / / / / /
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 17,815,000 / / / / / / / / / / / 4.a.
b. LESS: Allowance for loan and lease losses....................RCFD 3123 723,000 / / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve .......................RCFD 3128 0 / / / / / / / / / / / 4.c.
d. Loans and leases, net of unearned income, / / / / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c) ........................ 2125 17,092,000 4.d.
5. Assets held in trading accounts .................................................. 3545 40,350,000 5.
6. Premises and fixed assets (including capitalized leases) ......................... 2145 937,000 6.
7. Other real estate owned (from Schedule RC-M) ..................................... 2150 195,000 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) 2130 96,000 8.
9. Customers' liability to this bank on acceptances outstanding ..................... 2155 691,000 9.
10. Intangible assets (from Schedule RC-M) ........................................... 2143 85,000 10.
11. Other assets (from Schedule RC-F) ................................................ 2160 4,633,000 11.
12. Total assets (sum of items 1 through 11) ......................................... 2170 98,871,000 12.
----------------------------
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION> ---------------------------------------
Dollar Amounts in Thousands / / / / / Bil Mil Thou
-- --
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES / / / / / / / / / / / / /
<S> <C>
13. Deposits: / / / / / / / / / / / / /
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 18,026,000 13.a.
(1) Noninterest-bearing(1) .................RCON 6631 3,184,000..... / / / / / / / / / / / / / 13.a.(1)
(2) Interest-bearing .......................RCON 6636 14,842,000..... / / / / / / / / / / / / / 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E / / / / / / / / / / / / /
part II) RCFN 2200 22,173,000 13.b.
(1) Noninterest-bearing ....................RCFN 6631 1,454,000 / / / / / / / / / / / / / 13.b.(1)
(2) Interest-bearing .......................RCFN 6636 20,719,000 / / / / / / / / / / / / / 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in / / 2800 14,623,000 14.
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: / / / / / / / / / / / / /
a. Federal funds purchased ........................................................... RCFD 0278 14.a.
b. Securities sold under agreements to repurchase .................................... RCFD 0279 14.b.
15. a. Demand notes issued to the U.S. Treasury .......................................... RCON 2840 0 15.a.
b. Trading liabilities ............................................................... RCFD 3548 19,819,000 15.b.
16. Other borrowed money: / / / / / / / / / / / / /
a. With original maturity of one year or less ........................................ RCFD 2332 6,877,000 16.a.
b. With original maturity of more than one year ...................................... A547 217,000 16.b.
c. With a remaining maturity of more than three years ................................ A548 4,848,000 16.c.
17. Nortgage indebtedness and obligations under capitalized leases .........................
18. Bank's liability on acceptances executed and outstanding ............................... RCFD 2920 691,000 18.
19. Subordinated notes and debentures ...................................................... RCFD 3200 1,251,000 19.
20. Other liabilities (from Schedule RC-G) ................................................. RCFD 2930 4,872,000 20.
21. Total liabilities (sum of items 13 through 20) ......................................... RCFD 2948 93,397,000 21.
/ / / / / / / / / / / / /
22. Limited-life preferred stock and related surplus ....................................... RCFD 3282 0 22.
EQUITY CAPITAL / / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus .......................................... RCFD 3838 1,000,000 23.
24. Common stock ........................................................................... RCFD 3230 1,001,000 24.
25. Surplus (exclude all surplus related to preferred stock) ............................... RCFD 3839 540,000 25.
26. a. Undivided profits and capital reserves ............................................ RCFD 3632 3,314,000 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ............ RCFD 8434 ( 3,000) 26.b.
27. Cumulative foreign currency translation adjustments .................................... RCFD 3284 ( 378,000) 27.
28. Total equity capital (sum of items 23 through 27) ...................................... RCFD 3210 5,474,000 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, / / / / / / / / / / / / /
and 28) ................................................................................ RCFD 3300 98,871,000 29.
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
<S> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1996 ......................................................... RCFD 6724 N/A M.1
--------------------------------
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- ----------------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 8
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER
SECTION 8005 OF THE BANKING LAW," dated June 19, 1997, providing for an
increase in authorized capital stock from $1,601,666,670 consisting of
100,166,667 shares with a par value of $10 each designated as Common Stock and
600 shares with a par value of $1,000,000 each designated as Series Preferred
Stock to $2,001,666,670 consisting of 100,166,667 shares with a par value of
$10 each designated as Common Stock and 1,000 shares with a par value of
$1,000,000 each designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 27TH day of June in the Year of our
Lord one thousand nine hundred and
NINETY-SEVEN.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE> 9
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a
Managing Director and an Assistant Secretary of Bankers Trust Company, do
hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby
amended to increase the aggregate number of shares which the corporation shall
have authority to issue and to increase the amount of its authorized capital
stock in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is One Billion, Six Hundred and One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,601,666,670),
divided into One Hundred Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 600 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Two Billion One Million, Six Hundred Sixty-Six Thousand,
Six Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 10
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
James T. Byrne, Jr.
-----------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
-----------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows
the contents thereof, and that the statements herein contained are true.
Lea Lahtinen
-------------------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
Sandra L. West
- -----------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19,
1998
