<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to __________________________
Commission File Number 1-8641
COEUR D'ALENE MINES CORPORATION
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(Exact name of registrant as specified in its charter)
Idaho 82-0109423
------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 Front Ave., P. O. Box "I"
Coeur d'Alene, Idaho 83816
------------------------------- -----------------------------
(Address of principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (208) 667-3511
Securities Registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00
6 3/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES
------------------------------------------------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No .
------- ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. (The aggregate market value is computed by
reference to the last sale price of such stock, as of March 17, 1997.)
$327,165,673
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 17, 1997.
21,890,971 shares of Common Stock, Par Value $1.00
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of the Form 10-K is
incorporated by reference from the registrant's definitive proxy statement
which will be filed pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
<PAGE> 3
PART I
ITEM 1. BUSINESS
Coeur d'Alene Mines Corporation is engaged through its subsidiaries in
the exploration, development, operation and/or ownership of gold and silver
mining properties and companies located primarily within the United States
(Nevada, Idaho and Alaska), Australasia (New Zealand and Australia) and South
America (Chile). Coeur d'Alene Mines Corporation and its subsidiaries are
hereinafter referred to collectively as "Coeur" or the "Company".
OVERVIEW OF MINING PROPERTIES AND INTERESTS
The Company's most significant mining properties and interests are:
- the ROCHESTER MINE, a silver and gold surface mining operation
located in northwestern Nevada, which is 100% owned and
operated by Coeur and which is believed to be one of the
largest and lowest cost of production primary silver mines in
the United States and is a significant gold producer as well;
- the FACHINAL MINE, an open pit and underground gold and silver
mining operation wholly-owned by Coeur and located in southern
Chile, South America, which Coeur acquired in 1990 and at
which initial production commenced in October 1995 and which
entered the commercial production stage as of January 1, 1997;
- the EL BRONCE MINE, a Chilean gold mine in which the Company
acquired operating control and 51% of the operating profits in
October 1994 and in which the Company acquired 100% ownership
in September 1996;
- the GOLDEN CROSS MINE, an underground and surface gold mining
operation located near Waihi, New Zealand in which Coeur has
an 80% operating interest acquired on April 30, 1993, and
Coeur's operation of which is expected to continue through at
least the end of 1997;
- ownership of 50% of the capital stock of SILVER VALLEY
RESOURCES CORPORATION ("SILVER VALLEY"), which owns the COEUR
and the GALENA underground silver mines and the CALADAY
development project in the Coeur d'Alene Mining District of
Idaho where the Coeur Mine resumed production in June 1996;
- ownership of 36% of the capital stock of GASGOYNE GOLD MINES
NL, which the Company expects to increase to 50% during 1997,
an Australian gold mining company ("Gasgoyne"), which owns 50%
of THE YILGARN STAR MINE, a gold mine in Western Australia,
and certain other exploration-stage properties; and
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- 100% of the KENSINGTON PROPERTY, located north of Juneau,
Alaska, which is being developed as an underground gold mine
by Coeur and where it is anticipated that a decision will be
made during the second quarter of 1997 whether construction of
the mine facilities will commence.
Coeur also has interests in other properties which are the subject of silver or
gold exploration activities at which no minable ore reserves have yet been
identified.
SOURCES OF REVENUE
The Rochester Mine, Golden Cross Mine and El Bronce Mine, which are
operated by the Company, and the Company's interests in Silver Valley and
Gasgoyne, constituted the Company's principal sources of mining revenues in
1996. The following table sets forth information regarding the percentage
contribution to the Company's total revenues (i.e., revenues from the sale of
concentrates and dore plus other income) by the sources of those revenues
during the past three years:
<TABLE>
<CAPTION>
Percentage of
Coeur
Mine/Company Ownership Percentage of Total Revenues in Year Ended December 31,
------------ --------- -------------------------------------------------------
1994 1995 1996
----------- --------- ----------
<S> <C> <C> <C> <C>
Rochester Mine 100% 56.8% 57.0% 57.6%
Golden Cross Mine 80% 29.8% 33.4% 24.9%
El Bronce Mine(1) 100% 1.0%(2) 0.3% 2.0%
Silver Valley 50% - - 2.2%(3)
Gasgoyne 35% - - .9%(4)
Other - 12.4% 9.3% 12.4%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
(1) The reported percentages of total revenues reflect the fact that
Coeur's interest in the revenue of the mine was 51% until September
1996, when it acquired a 100% ownership interest. Therefore, prior to
September 1996, the Company's share of net profits was reported as
other income.
(2) The El Bronce Mine accounted for approximately 4.0% of total revenues
for the approximately three months subsequent to its start-up by the
company in October 1994.
(3) The Company's interest in Silver Valley accounted for approximately
3.0 % of total revenues for the approximately eight months subsequent
to its acquisition by the Company in May 1996.
(4) The Company's interest in Gasgoyne accounted for approximately 1.2% of
total revenues for the approximately six months subsequent to its
acquisition by the Company in May 1996. The Company's interest in
Gasgoyne is reported in accordance with the equity method; therefore,
revenues, net of expenses are reported as other income.
The above table does not reflect the operations of the Fachinal Mine,
which commenced pre-production in late October 1995 and has been accounted for
as a development stage property until December 31, 1996 (i.e., operating costs
have been capitalized net of revenues from pre-commercial production).
Commencing January 1, 1997, the mine will be accounted for as a commercial
production property.
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In January and March 1996, Coeur acquired additional shares of Orion
Resources NL, an Australian gold mining company ("Orion"), as a result of which
Coeur owned 19.2% of Orion's outstanding shares. In September 1996, Coeur sold
its shares of Orion, in connection with which Coeur recognized a gain of
approximately $1.3 million from the sale to Sons of Gwalia, the only other
shareholder in Gasgoyne.
DEFINITIONS
The following sets forth definitions of certain important mining terms
used in this report. "Ore reserve" means that part of a mineral deposit which
could be economically and legally extracted or produced at the time of the
reserve determination. "Proven reserves" means reserves for which (a) quantity
is computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspections, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. "Probable reserves"
means reserves for which quantity and grade and/or quality are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for
proven reserves, is high enough to assume continuity between points of
observation. "Mineralized material" is a mineralized underground body which has
been intersected by sufficient closely spaced drill holes and/or underground
sampling to support sufficient tonnage and average grade of metal(s) to warrant
further exploration-development work. Such material does not qualify as an
"ore reserve" until a final and comprehensive economic, technical and legal
feasibility study based upon the test results is concluded. References to
"silver" mean an alloy with a minimum fineness of 999 parts per 1000 pure
silver; references to "gold" mean an alloy with a minimum fineness of 995 parts
per 1000 pure gold; and references to an "ounce" mean a troy ounce, which is
31.10348 grams. References to "dore" mean a bullion produced by smelting,
containing gold, silver and minor amounts of impurities. References to a "ton"
mean a short ton, which is 2,000 pounds.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
This report contains numerous forward-looking statements relating to
the Company's gold and silver mining business, including estimated production
data, expected operating schedules and other operating data. Actual production,
operating schedules and results of operations could differ materially from
those projected in the forward-looking statements. The factors that could cause
actual results to differ materially from those projected in the forward-looking
statements include (i) changes in the market prices of gold and silver, (ii)
the uncertainties inherent in the Company's production, exploratory and
developmental activities, including risks relating to permitting and
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regulatory delays, (iii) the uncertainties inherent in the estimation of gold
and silver ore reserves, (iv) changes that could result from the Company's
future acquisition of new mining properties or businesses, (v) the risks and
hazards inherent in the mining business (including environmental hazards,
industrial accidents, weather or geologically related conditions), (vi) the
effects of environmental and other governmental regulations, and (vii) the
risks inherent in the ownership or operation of or investment in mining
properties or businesses in foreign countries.
ROCHESTER MINE
The Rochester Mine is a silver and gold surface mine located in
Pershing County, Nevada, approximately 25 road miles northeast of Lovelock. The
mine utilizes the heap-leaching process to extract both silver and gold from
ore mined using open-pit methods. The property consists of 16 patented and 544
unpatented contiguous mining claims and 74 mill-site claims totaling
approximately 9,370 acres. The Company owns 100% of the Rochester Mine by
virtue of its 100% ownership of its subsidiary, Coeur Rochester, Inc. ("Coeur
Rochester"). Asarco, Inc., the prior lessee, has a net smelter royalty
interest which varies from up to 5% when the market price of silver equals or
exceeds $17.71 per ounce.
Based on the ore reserve-review report dated December 1996, of
Independent Mining Consultants, Inc. ("IMC"), and accounting for production
through December 31, 1996, mineable, proven/probable ore reserves at the
Rochester Mine, as of January 1, 1997, total approximately 71.795 million tons
averaging 1.12 ounces per ton silver and 0.0097 ounces per ton gold. The
reserve estimate is based on a 1.05 ounce per ton silver-equivalent,
breakeven-operational cutoff grade and silver and gold prices of $5.50 and
$385.00, respectively. The average grades do not reflect losses in the recovery
process. The amount of proven and probable reserves will vary depending on the
relative price of silver and gold. In addition, 9.941 million tons of
mineralized material averaging 0.007 ounces per ton gold and 1.11 ounces per
ton silver have been identified.
The Coeur Rochester ore reserve estimate, calculated at various silver
and gold prices, is set forth below:
<TABLE>
<CAPTION>
$ Per Troy Ounce Ore Silver Gold Strip
Gold/Silver Tons Grade Grade Ratio
- ---------------- --------- ---------- ---------- -----
(Thousands) (Ounces/ton) (Ounces/ton)
<S> <C> <C> <C> <C>
$455.00/$6.50 81,736 1.121 .0094 1.07
$385.00/$5.50 71,795 1.122 .0097 1.35
$325.00/$4.65 58,464 1.217 .0107 .85
</TABLE>
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Based upon its experience and certain metallurgical testing, the
Company estimates recovery rates of 55% for silver and 85% for gold. The leach
cycle at the Rochester Mine requires approximately five years from the point
ore is mined until all recoverable metal is recovered. As shown in the
preceding table, the average strip ratio for the remaining life of the mine
will vary based primarily on future gold and silver prices. Furthermore, the
actual strip ratio may vary significantly from year-to-year during the
remaining life of the mine. The realization of the Company's production
estimates is subject to actual rates of recovery, continuity of ore grades,
mining rates, projected operating costs, the levels of silver and gold prices,
and other uncertainties inherent in any mining and processing operation.
The following table sets forth information for the periods indicated
relating to Rochester Mine production. Production may decrease during the
winter due to slower solution flow from the heaps. Such conditions are not
expected to affect annual production levels since mining, crushing and heap
construction are expected to continue during those months at normal rates,
resulting in increased dore' production during warmer weather. Also,
production will vary from time to time depending upon the area being mined.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Ore processed
(tons) 7,356,336 7,247,553 7,759,637 8,243,609 8,127,691
Silver (ounces) 5,431,369 5,943,894 5,937,770 6,481,825 6,251,180
Gold (ounces) 56,562 66,412 56,886 59,307 74,293
</TABLE>
The following table sets forth the costs of production per ounce of
silver and gold on a silver equivalent basis during the periods indicated at
the Rochester Mine. Cash costs include mining, processing and direct
administration costs, financing costs, royalties and exploration expenses. To
obtain the silver equivalent, each ounce of gold produced is multiplied by the
same ratio as the then current ratio of the price of gold to the price of
silver. This silver equivalent gold production is then added to actual silver
production to determine total silver equivalent production.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Cash operating
costs per ounce $ 2.82 $ 3.55 $ 3.57 $ 3.71 $ 3.64
Refining .07 .07 .08 .08 .07
Depreciation, depletion
and amortization
per ounce .40 .54 .59 .61 .54
-------- -------- -------- --------- -------
Total costs per ounce $ 3.29 $ 4.16 $ 4.24 $ 4.40 $ 4.25
======== ======== ======== ========= =======
</TABLE>
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In 1995, the Company completed construction of a new ore conveyor
system. In addition, the waste-to-ore strip ratio declined in 1996 while the
silver equivalent grade of the ore mined increased. Those three factors
beneficially impacted 1996 operations.
On August 8, 1996, Coeur entered into a three-year lease option
agreement with the right to explore and purchase the Nevada Packard property,
adjacent to the Rochester Mine. The property includes 35 claims totaling
approximately 1,200 acres of land. Phase 1 of a 22,000 foot drilling program
began in August 1996.
GOLDEN CROSS MINE
Effective April 30, 1993, a wholly-owned subsidiary of the Company
acquired from a wholly-owned subsidiary of Cyprus Minerals Company all of the
outstanding capital stock of Cyprus Gold New Zealand Limited ("Cyprus NZ"), the
name of which was changed by the Company to Coeur Gold New Zealand Limited
("Coeur NZ"). The principal asset of Coeur NZ is its undivided 80%
participating joint venture interest in the Golden Cross Mine located near
Waihi on the North Island of New Zealand, approximately 100 miles southeast of
Auckland, and certain other exploration properties in New Zealand. The
remaining undivided 20% joint venture interest is owned by a subsidiary of The
Todd Company Limited, a New Zealand corporation.
In addition to all the capital stock of Cyprus NZ, the Company also
acquired from the former parent of Cyprus NZ a term loan receivable from Cyprus
NZ in the principal amount of approximately $53.2 million which was owed by
Cyprus NZ to its former parent and is now owed by Coeur NZ to the Company. A
cash purchase price of approximately $54.0 million was paid by the Company for
the Cyprus NZ capital stock and term loan. The Company accounted for the
acquisition as a purchase transaction.
The Golden Cross Mining License covers an area of approximately 961
acres of which 274 acres are occupied by the current Golden Cross Mine
operation. The mine property includes the open-pit and underground mine
facilities, process plant, tailings pond, water treatment plant and mine
offices which are all accessible by road from the town of Waihi. Construction
of the Golden Cross Mine began in April 1990, and commercial production
commenced in December 1991. Ore is mined from a precious-metals bearing,
epithermal vein system hosted in Tertiary volcanic rocks.
Based upon an open-pit mineral resource report review dated November
1996 by Snowden Associates Pty Ltd, an independent consulting firm, and
accounting for production through December 31, 1996, Coeur Golden Cross
estimates open-pit and underground proven and probable ore reserves totaling
2.989 million tons, averaging 0.086 ounces per ton gold. The open-pit reserve
estimate, totaling 2.476 million tons averaging 0.069 ounces per ton gold, is
based on a 0.029 ounce per ton
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gold cutoff, a gold price of $414 per ounce (including credit for byproduct
revenues) and a currency exchange rate of NZ$ = .69 US$. The
underground-reserve estimate, totaling 513,000 tons averaging 0.165 ounces per
ton gold, is based on a 0.117 ounce per ton cutoff, a gold price of $414.00
(after credit for byproduct revenues) and a currency exchange rate of NZ$ = .69
US$. On March 17, 1997, the price of gold (London final) had declined to
$351.40. The reserve estimate reflects an allowance for extractive dilution
during the mining process, but does not reflect losses during the recovery
process. In addition, the reserve estimate has identified 7.226 million tons of
mineralized material averaging 0.05 ounce per ton gold.
Silver reserves are empirically estimated using past production and
recovery ratios for silver and gold. Open pit and underground silver and gold
ratios have historically averaged 4:1 and 5:1, respectively. Total contained
silver ounces are estimated at 1.112 million ounces, with an average grade of
0.37 ounces of silver per ton, for open pit and underground proven and probable
reserves. No mineralized material grades for silver were estimated.
The following table sets forth Golden Cross Mine production data
attributable to Coeur's 80% interest in the mine:
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended December 31,
December 31, 1993 1994 1995 1996
----------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Ore milled (tons) 492,617 727,427 731,453 827,642
Gold (ounces) 56,898 67,400 83,058 64,365
Silver (ounces) 175,325 222,246 286,216 205,070
</TABLE>
The following table sets forth the costs of production per ounce of
gold during the periods indicated at the Golden Cross Mine. Cash costs include
mining, processing and direct administration costs, royalties and exploration
expenses, but do not include financing costs associated with the term loan owed
by Coeur Gold NZ to the Company. The production costs per ounce of gold for any
period is computed net of by-product credits.
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended December 31,
December 31, 1993 1994 1995 1996
----------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Cash operating
costs per ounce $216.93 $273.84 $228.16 $365.79
Refining 3.33 3.12 3.54 3.08
Depreciation,
depletion and
amortization
per ounce 116.40 111.53 82.12 38.91
------- ------- ------- -------
$336.66 $388.49 $313.82 $407.78
======= ======= ======= =======
</TABLE>
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The above reported 1994 increase in the cash costs of production per
ounce of gold was primarily attributable to the presence of a harder grinding
ore in the open pit requiring more milling and chemicals in the processing and
a lower grade of ore being provided from the underground portion of the mine.
The 1995 decrease in cash costs was primarily attributable to the availability
of additional higher grade underground production, a better blending of
open-pit and underground ores, and the mining of less waste in the open-pit.
The increases in ore reserves during 1994 and 1995 enabled the Company to lower
the depletion at the mine, which had the effect of reducing non-cash costs per
ounce. The increase in the cash costs in 1996 is attributable to the land
movement issue identified in late 1995 and discussed below. As a result, the
Company was unable to complete a planned expansion of the existing facilities
which would have resulted in lower unit operating costs. (See additional
discussion regarding Golden Cross under Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.)
The Company estimates the current waste-to-ore strip ratio of the open
pit to be approximately 3.88 to 1. Approximately 2,300 tonnes per day of ore
are currently being mined at the open pit operation. The underground mine is a
trackless operation with a declining access from the surface, currently mining
approximately 700 to 1,000 tonnes per day of ore and utilizing mechanized cut
and fill and long hole benching methods. A 3,000 tonne per day mill processes
ore from both the open pit and underground operations. Coeur NZ estimates that
approximately 87.3% of the gold and 54.4% of the silver contained in the ore
mined is recoverable. The production of gold and silver is subject to the risks
of actual rates of recovery, continuity of ore grades, mining rates, projected
operating costs, possible ground movement, the levels of gold and silver prices
and other uncertainties inherent in any mining and processing operation.
Tailings are treated by a proprietary process that removes and recycles cyanide
used in the milling process.
During the Fall of 1995, the Company became aware of evidence
suggesting that the tailings impoundment at the Gold Cross Mine may have
sustained movement. Subsequent investigation revealed that the impoundment is
situated on a block of land that was apparently moving very slowly down slope
at a variable rate of movement actuated by heavy rainfall events. The movement
is the result of a naturally occurring, deep-seated geologic phenomenon. With
the assistance of independent engineering firms, the Company formulated
remedial measures that included the construction of a drain tunnel, horizontal
and vertical drain holes and buttressing with waste rock all designed to ensure
the stability of the tailings dam. When the Company commenced the
implementation of those remedial measures during the first four months of 1996,
it believed that additional expenditures of approximately $4 million would be
required for the planned measures. As of the end of May, however, it had become
apparent that the geographical area of the down-slope movement was larger than
initially believed, and the project recieved the highest rainfall in
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the past fifteen years. As of June 1996, after obtaining a consensus from
several consulting engineers regarding remedial measures, it appeared that the
amount required to implement the planned program could approximate $11 million.
In addition, it also became evident that (i) production could be expected to
significantly decrease as a result of the Company's inability to implement a
previously planned mill optimization because the dam had not been stabilized
and, (ii) capital and operating costs could be expected to significantly
increase due to the production shortfall and ground movement remediation
program costs. In early July 1996, the Company, following consultation with
its independent accountants, determined that in these circumstances generally
accepted accounting principles called for an asset write-down. On July 10,
1996, the Company announced a $53 million write-down of its interest in the
Golden Cross Mine and the nearby Waihi East property, which included accrual of
the estimated future closure and remediation costs and the entire carrying
value of its 80% interest in the property.
As discussed below under Item 3 ("Legal Proceedings"), Coeur has
asserted legal claims against Cyprus Amax Minerals Company based on alleged
misrepresentations by that company as well as its failure to make certain
required disclosures relating to ground movement and instability when Coeur
purchased the property in 1993.
In the last quarter of 1996, it appeared that the interim slide
remedial measures were stabilizing the extent of the ground movement. In July
1996, the Company filed an application with New Zealand governmental
authorities to permit the raising of the Golden Cross Mine tailings impoundment
crest. On October 31, 1996, the New Zealand regulatory authorities approved
Coeur's application. On October 31, 1996, a local New Zealand environmental
group filed an action seeking to enjoin the Company's raising of the tailings
dam crest. On December 20, 1996, the New Zealand High Court ruled in favor of
Coeur with respect to a motion for preliminary injunction. Coeur believes that
as a result of that crest raising, which is expected to be completed in April
1997, it will be able to implement the previously planned mill optimization and
continue to operate the Golden Cross Mine through at least the end of 1997.
The Company also believes that the continued operation of the mine will have a
beneficial impact on the end-of-mine-life closure and reclamation requirements.
Coeur NZ plans no significant exploratory activities during 1997.
FACHINAL MINE
In January 1990, the Company acquired through its wholly-owned
subsidiary, CDE Chilean Mining Corporation, ownership of the Fachinal gold and
silver property. As discussed below, the Company completed the construction of
the Fachinal Mine on schedule and under budget in October 1995 when initial
mining operations commenced.
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The Fachinal property covers about 90 square miles and is located
south of Coihaique, the capital of Region XI in southern Chile, and
approximately 10 miles west of the town of Chile Chico. The project lies on
the east side of the Andes at an elevation ranging from 600 to 4,500 feet and
is serviced by a gravel road from Chile Chico. The Fachinal property is known
to include multiple epithermal veins containing gold and silver located in five
mineralized zones. The Company has been granted exploitation concessions (the
Chilean equivalent to an unpatented claim except that the owner does not have
title to the surface which must be separately acquired from the surface owner)
covering the mineralized areas of the Fachinal property as well as the
necessary surface rights to permit mining there.
Construction of new mining facilities, which includes both underground
and open pit operations, was were completed on schedule in October 1995 with an
estimated 1,600 tons per day of throughput. The milling facility uses
conventional crush/grind/flotation methods to produce a gold/silver
concentrate, which is then shipped to off-site smelters for processing. The
total project construction cost was approximately $41.4 million, which was less
than the originally budgeted $41.8 million. Initial production began in October
1995 at the Fachinal Mine, which is one of the southernmost mining operations
in the world, employing approximately 225 workers. As of December 31, 1996, the
Company had expended a total of $83.5 million (including capitalized interest
of $12.1 million) in connection with the development of the Fachinal Mine.
The following table sets forth Fachinal Mine production data for (i)
the period from October 19, 1995, on which date initial production activities
commenced, through December 31, 1995, and (ii) the year ended December 31,
1996. Because the mine had not yet reached commercial production levels prior
to January 1, 1997, results of the mine's operations have been accounted for as
a development stage property (i.e., costs net of pre-production revenues have
been capitalized).
<TABLE>
<CAPTION>
October 19, 1995 Year
through Ended
December 31, 1995 December 31, 1996
----------------- -----------------
<S> <C> <C>
Ore milled (tons) 96,212 591,074
Gold (ounces) 3,586 25,064
Silver (ounces) 334,816 2,154,347
</TABLE>
Open pit and underground ores are being processed in a mill that
processes approximately 584,000 tons per year. Coeur estimates that cash
operating costs at the Fachinal Mine will approximate $272 per gold equivalent
ounce in 1997. Furthermore, Coeur estimates that the Fachinal Mine's
underground and open pit mining operations in 1997 will process approximately
1,600 tons per day.
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During the startup phase, a variance between mine and mill head grades
from those anticipated in the feasibility study occurred. This was caused by
excessive dilution and inadequate grade control procedures in the open pit
mining operations. The Company has addressed these matters by implementing
stricter geologic controls and additional equipment operator training. In July
1996, the Company commenced production activities in a second underground
mining operation at the Fachinal Mine in order to improve gold grades being
delivered to the mill.
Economic, precious metals bearing mineralization at the Fachinal Mine
occur in an extensive epithermal, quartz-veins system hosted in Jurassic
volcanic rocks. Based on an ore reserve review report dated January 1997, by
Micon International Limited, the total remaining, mineable, open-pit and
underground proven and probable reserves at the Fachinal Mine are approximately
3.653 million tons averaging 0.069 ounces per ton gold and 2.78 ounces per ton
silver. The Fachinal Mine's open-pit reserve estimate, totaling 2.713 million
tons averaging 0.053 ounces per ton gold and 2.01 ounces per ton silver, is
based on an internal cutoff grade of 0.041 ounces per ton equivalent gold. The
underground reserve which totals 940,000 tons at 0.115 ounces per ton gold and
5.02 ounces per ton silver is based on internal cutoff grades ranging from
0.088 to 0.117 ounces per ton equivalent gold. Both reserve estimates are
based on gold and silver prices of $400.00 per ounce and $5.50 per ounce,
respectively. Average grades reflect extractive dilution, but not losses
during the recovery process. The Company estimates, based upon thorough
metallurgical testing and initial operating experience, recovery rates between
89% - 94% for gold and 85% - 93% for silver. The open-pit reserve estimate has
also identified 594,000 tons of mineralized material, averaging 0.04 ounces per
ton gold and 1.03 ounces per ton silver. Likewise, the underground resource
estimate has identified an additional 988,000 tons of mineralized material
averaging 0.10 ounces per ton gold and 6.73 ounces per ton silver. Numerous
other attractive exploration targets with known precious-metals mineralization
remain to be evaluated.
Although the government and economy of Chile has been stable in recent
years, the ownership of property in a foreign country is always subject to the
risk of expropriation or nationalization with inadequate compensation. Any
foreign operation or investment may also be adversely affected by exchange
controls, currency fluctuations, taxation and laws or policies of particular
countries as well as laws and policies of the United States affecting foreign
trade, investment and taxation.
EL BRONCE MINE
The El Bronce Mine is an underground, gold-silver mine located on
approximately 34,000 acres in the Andean foothills approximately 90 miles north
of Santiago, Chile. In July 1994, the Company entered into an agreement with
Compania Minera El Bronce de Petorca, a Chilean
12
<PAGE> 14
corporation ("CMEB"), pursuant to which the Company acquired operating control
and a 51% interest in any operating profits and an option exercisable through
July 1997 to also purchase from CMEB a 51% equity interest in Compania Minera
CDE El Bronce, a Chilean corporation ("CDE El Bronce") that owns the producing
El Bronce Mine. On September 4, 1996, the Company exercised its option to
purchase that 51% of the shares of CDE El Bronce and also purchased the
remaining 49% of the shares of CDE El Bronce from CMEB, as a result of which
Coeur increased its ownership interest of CDE El Bronce to 100%. The property
consists of 64 exploitation concessions and 10 exploration concessions. Surface
rights to permit mining on the property have been granted by the private
owners. Ore is produced from an extensive, precious-metals bearing,
epithermal, quartz-vein system hosted in Cretaceous volcanic rocks. Coeur has
expended a total of $30.6 million in connection with its original acquisition
of operating control of the El Bronce Mine, exercise of the option to acquire
51% ownership of CDE El Bronce and acquisition of the remaining 49% of the
shares of CDE El Bronce. In addition, Coeur is obligated to pay CMEB a 3% net
smelter return royalty payable quarterly, commencing on January 1, 1997.
Current exploratory and developmental activities are designed to
increase ore reserves and increase annual gold production to 65,000 ounces in
1997 from the present level of approximately 52,000 ounces of gold. The Company
expended $1.2 million, $3.1 million and $2.9 million during the last half of
1994, 1995 and 1996, respectively, for exploratory and developmental
activities.
The Company plans to gradually increase production above a 600 ton per
day milling rate at the mine, improve the mining method to increase ore
reserves and to restructure the work force. The mill has a 1,200 ton per day
capacity. In addition, the Company is conducting exploratory activities at
three main exploration sites within the exploration-exploitation area
surrounding the mine.
Based on resource-reserve reports dated January 1997 by NCL Ingenieria
& Construction S.A. and CDE El Bronce, proven and probable ore reserves of the
El Bronce Mine total 1.066 million tons averaging 0.21 ounces per ton gold. An
additional 1.269 million tons of mineralized material, averaging 0.34 ounce per
ton gold, has been identified. The reserve is based on an internal cutoff of
0.088 ounces per ton gold. The Company estimates, based on past experience and
metallurgical testing, mill recovery rates are 92% for gold and 89% for silver.
The mineralized system remains geologically open both vertically and
horizontally.
The following table sets forth El Bronce Mine production data
subsequent to its acquisition by Coeur on October 3, 1994. As stated above,
prior to September 4, 1996, the Company had a 51% interest in any operating
profits from the mine. The Company's 5l% interest in the mine's operating
profits from October 3, 1994 through December 31, 1994
13
<PAGE> 15
amounted to $1,023,537 and for the year ended December 31, 1995 amounted to
$763,166. Subsequent to September 4, 1996, the Company has had a 100% interest
in any operating profits from the mine. Giving effect to the Company's 51%
interest through September 4, 1996 and its 100% interest thereafter, the
Company received operating profits from the mine of $522,151 in 1996. The
following data sets forth 100% of the mine's production.
<TABLE>
<CAPTION>
Three Months
Ended Year Ended Year Ended
December 31, 1994 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Ore milled (tons) 56,761 286,512 339,509
Gold (ounces) 9,712 43,204 52,917
Silver (ounces) 39,605 142,229 112,633
</TABLE>
The following table sets forth the costs of production per ounce of
gold during the periods set forth below at the El Bronce Mine. Cash costs
include mining, processing and direct administration costs, royalties and
exploration expenses.
<TABLE>
<CAPTION>
Three Months
Ended Year Ended Year Ended
December 31, 1994 December 31, 1995 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash operating costs
per ounce $ 174.67 $ 305.68 $ 259.43
Smelting and refining 30.98 24.69 36.62
Depreciation,
depletion and
amortization
per ounce 20.40 20.51 41.01
--------- --------- --------
$ 226.05 $ 350.88 $ 337.06
========= ========= ========
</TABLE>
Prior to Coeur's assuming ownership, the mine was not investing
sufficient amounts to expand production and cash costs were in excess of $400
per ounce. During 1995, a significant effort was commenced to improve
infrastructure and develop additional mine production areas which are expected
to lead to higher mine output. As a result, operating costs initially increased
as planned; however, during 1996 cash costs declined.
INTEREST IN SILVER VALLEY RESOURCES CORPORATION - THE COEUR D'ALENE MINING
DISTRICT
Silver Valley Resources Corporation ("Silver Valley") owns the Coeur
and Galena Mines and the Caladay project situated in the Coeur d'Alene Mining
District of Idaho. During 1995, Silver Valley commenced an underground
development program designed to increase ore reserves at the Galena Mine.
During the year, 1,496 feet of drifting and 8,499 feet of diamond drilling and
recalculations resulted in the addition of 300,000 tons of ore containing 6.633
million ounces of silver to the
14
<PAGE> 16
ore reserves. As a result of this program and increased silver prices, a
decision was made on February 8, 1996 by Silver Valley to reopen the mines.
During 1996, underground development and exploration activities
continued. At the Galena Mine, a total of 6,977 feet of drifts, raises, and
cross-cuts were developed, including 29,124 feet of core drilling. An
additional 285,000 tons of reserves were delineated, containing 21.2 ounces per
ton silver, 0.54% copper and 4.30% lead. The additional 6,040,000 silver
ounces were added predominately on the 4,900 to 5,200 levels. In June 1996,
production resumed at the Coeur Mine. It is expected that production at the
Coeur Mine will discontinue in late 1997 or early 1998 unless additional
exploration work adds to the remaining ore reserves; however, production will
resume at the Galena Mine in July 1997.
In late 1994, the Company, Callahan (a wholly-owned subsidiary of the
Company) and Asarco formed Silver Valley, a Delaware corporation, and effective
January 1, 1995, the Company, Callahan and Asarco transferred certain assets,
including their interests in the Coeur, Galena and Caladay mines, to Silver
Valley. Specifically, Asarco contributed Asarco's (i) ownership interest in
the Joint Venture Agreement, dated August 31, 1964, related to the Coeur Mine
property; (ii) interest in the lease, dated January 15, 1947, relating to the
Galena Mine property; (iii) ownership interest in the Osburn tailings pond;
(iv) 75% interest in the royalty deficit related to the Galena Mine property;
and (v) ownership interest in certain other assets located in the Coeur d'Alene
Mining District. Coeur and Callahan contributed Coeur's or Callahan's (i)
ownership and lease interest in the Coeur Mine property; (ii) ownership and
lease interest in the Galena Mine property; (iii) ownership interest in the
Caladay operating agreement; (iv) ownership interest in certain properties
surrounding the above properties; and (v) a 25% interest in the royalty deficit
related to the Galena Mine property.
The Board of Directors of Silver Valley consists of six directors,
three of whom, including the Chairman of the Board, are appointed by Asarco and
three of whom, including the President, are appointed by Coeur. Pursuant to a
Shareholders' Agreement between the parties, certain specified corporate action
requires a majority vote. If the voting results in a tie at any Board Meeting,
the Chairman of the Board of Silver Valley, who also is the Chairman of the
Board of Asarco, will decide the issue. The President of Coeur also is the
President of Silver Valley and serves on its Executive Committee. Certain
other officers of Silver Valley are officers of Coeur or Asarco, which
companies may provide management and other services to Silver Valley upon the
request of its Board of Directors. A summary of the properties owned by Silver
Valley is set forth below.
15
<PAGE> 17
GALENA MINE
The Galena Mine property consists of approximately 1,100 acres lying
immediately west of the City of Wallace, Shoshone County, Idaho adjoining the
Coeur Mine's eastern boundary. The property consists of 52 patented mining
claims and 25 unpatented mining claims. The Galena Mine is primarily an
underground silver-copper mine ,and is served by two vertical shafts.
On July 26, 1992, Asarco, which was the Galena Mine operator,
suspended operations at the Galena Mine due to then prevailing silver prices
($4.31 per ounce average for the month of July 1992) and placed the property on
a care and maintenance basis to conserve ore reserves. Silver Valley expects to
resume production at the Galena Mine in late 1997.
Based on the ore-reserve estimate dated January 1997, of Silver
Valley, proven and probable ore reserves at the Galena Mines total 1.628
million tons averaging 17.76 ounces per ton silver, 2.02% lead and 0.51%
copper. The Silver Valley reserve estimate is based on a minimum mining width
of 4 - 4.5 feet with minimum dilution at 0.5-1.0 along vein margins for most
silver-copper and silver-lead veins. Cutoff grade is based on the cost of
breaking and producing ore from a stope, but do not include development costs
and administrative overhead. The cutoff grade varies from area-to-area within
the mine due to changing silver-copper ratios of the ore.
The reserve estimate has also identified an additional 788,000 tons of
mineralized material which averages 8.43 ounces per ton silver and 0.15% copper
and 3.91% lead.
The following table sets forth information relating to total Galena
Mine production:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1991 1992
---------- ----------
(through
July)
<S> <C> <C>
Ore milled (tons) 182,836 91,617
Silver (ounces) 3,278,650 1,572,501
Copper (pounds) 1,993,649 1,064,085
Gold (ounces) 332 143
</TABLE>
The Company's previous ownership interest in the above production,
giving retroactive effect to Coeur's acquisition of Callahan on December 31,
1991, amounted to 50% through June 11, 1992, and 62.5% thereafter until such
ownership was transferred to Silver Valley effective January 1, 1995. Coeur
will have a 50% interest in any future operating profits from Galena Mine
operations.
16
<PAGE> 18
The total cost of production per ounce of silver (net of credit for
copper byproduct), including mining, processing, direct administrative costs
and exploration expenses, but not including financing costs, royalties and
smelter charges, amounted to $3.94 in 1991 and $4.23 in 1992 prior to the
temporary discontinuation of operations at the Galena Mine on July 26, 1992.
Such costs are not necessarily indicative of actual costs that will be incurred
in connection with future mining operations.
COEUR MINE
The Coeur Mine is an underground silver mine located adjacent to the
Galena Mine in the Coeur d'Alene Mining District in Idaho, and consists of
approximately 868 acres comprised of 38 patented mining claims and four
unpatented mining claims. Commercial production began in 1976, and total
pre-production expenditures of approximately $20 million were recovered by
April 1979, at which time the Company commenced receiving revenues from its
non-operating joint venture interest in the mine. Asarco was the operator of
the Coeur Mine pursuant to a joint venture agreement with the Company, Callahan
and, prior to November 30, 1990, Hecla. Until November 30, 1990, the Company
owned 40% of the ores produced from the Coeur Mine and was obligated to pay 40%
of the costs. On November 30, 1990, the Company purchased Hecla's 5% interest
thereby increasing the Company's interest to 45%. Effective December 31, 1991,
Coeur increased its non-operating joint venture interest in the mine to 50% as
a result of Coeur's acquisition of Callahan, which had acquired a 5% interest
in the mine in March, 1968. Effective January 1, 1995, Coeur and Asarco
transferred their interests in the Coeur Mine to Silver Valley.
Asarco suspended operations at the Coeur Mine on April 3, 1991 due to
then prevailing silver prices ($3.90 per ounce average for April 1991) and
placed the property on a care and maintenance basis to conserve ore reserves.
Silver Valley resumed production activities at the Coeur Mine in June 1996.
The following table sets forth information, for the periods indicated,
relating to total Coeur Mine production:
<TABLE>
<CAPTION>
Year Ended Three Months Six Months
December 31, Ended March 31, Ended
1990 1991 December 31, 1996
--------- ------------ -----------------
<S> <C> <C> <C>
Ore milled (tons) 147,883 37,165 78,067
Silver (ounces) 2,113,341 379,856 1,666,534
Copper (pounds) 1,843,638 335,865 1,407,771
Gold (ounces) 480 80
</TABLE>
The Company's ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan's 5% interest on
17
<PAGE> 19
December 31, 1991, amounted to 45% prior to November 30, 1990 and 50%
thereafter.
The following table sets forth the costs of production per ounce of
silver (net of credit for copper by product) at the Coeur Mine. Cash costs
include mining, processing, direct administration costs and exploration
expenses, but do not include financing costs, royalties and smelter charges.
<TABLE>
<CAPTION>
Three Months Six Months
Year Ended Ended Ended
December 31, 1990 March 31, 1991 December 31, 1996
----------------- -------------- -----------------
<S> <C> <C> <C>
Cash operating costs
per ounce $4.68 $5.38 $2.46
Depreciation, depletion
and amortization
per ounce $ $ $ .79
------ ------ ------
$4.68 $5.38 $3.25
====== ====== ======
</TABLE>
Based on a Silver Valley Resources ore reserve report dated January
1997, estimated proven and probable ore-reserves at the Coeur Mine total
285,000 tons averaging 16.27 ounces per ton silver and 0.71% copper. The ore
reserve estimate is based on a minimum mining width of 4.5 to 5.0 feet with a
minimum dilution of 1.0 foot along each margin of the vein. The reserve
estimate has also identified an additional 166,000 tons of mineralized material
which averages 14.42 ounce per ton silver and 0.66% copper.
CALADAY PROJECT
The Caladay Project adjoins the Galena Mine. Prior to its acquisition
by the Company, approximately $32.5 million was expended on the property to
construct surface facilities, a 5,101 ft. deep shaft and associated underground
workings to explore the property. The Company believes the same geologic
structures which exist at the Galena extend into the Caladay below the level of
the current Caladay workings. In addition, the Caladay facilities may be used
to benefit the Galena Mine operations.
KENSINGTON PROPERTY
On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur
Alaska, Inc. ("Coeur Alaska"), acquired the 50% ownership interest of Echo Bay
Exploration Inc. ("Echo Bay") in the Kensington property from Echo Bay and Echo
Bay Alaska, Inc. (collectively the "Sellers"), giving Coeur 100% ownership of
the Kensington property. As a result of that transaction, Coeur assumed full
ownership and operating control of the project. Pursuant to the Venture
Termination and Asset Purchase Agreement among Coeur Alaska and the Sellers,
dated as of June 30,
18
<PAGE> 20
1995, Coeur Alaska paid to the Sellers a total of $32.5 million and, pursuant
to the Royalty Deed set forth as an exhibit to the Venture Termination and
Asset Purchase Agreement, Coeur Alaska agreed to pay Echo Bay a scaled net
smelter return royalty on 1 million ounces of future gold production after
Coeur Alaska recoups the $32.5 million purchase price and its construction
expenditures incurred after July 7, 1995 in connection with placing the
property into commercial production. The royalty ranges from 1% at $400 gold
prices to a maximum of 2 1/2% at gold prices above $475, with the royalty to be
capped at 1 million ounces of production. Performance by Coeur Alaska of its
obligations under the agreement is guaranteed by Coeur and performance of the
obligations of the Sellers under the agreement is guaranteed by Echo Bay.
The Kensington ore deposit consists of multiple, precious metals
bearing, mesothermal, quartz, carbonate, pyrite vein swarms and discrete
quartz-pyrite veins hosted in the Cretaceous Jualin diorite. The
gold-telluride-mineral calaverite is associated with the pyrite mineralization.
Based on an ore reserve endorsement dated February 1997 by Steffen, Robertson &
Kirsten, independent mining consultants, Kensington proven and probable ore
reserves as of January 1, 1997 are estimated at 13.9 million tons at a grade of
0.136 ounces per ton gold, containing 1.9 million gold ounces. The reserve
estimate is based on an average life-of-mine breakeven price of $410 per ounce
of gold. The reserve estimate reflects the effects of extractive dilution
during the mining process, but not losses during the recovery process. An
additional 9.050 million tons of mineralized material averaging 0.120 ounces
per ton gold has been identified. Not all Kensington ore zones have been fully
delineated at depth and several peripheral zones and veins remain to be
explored. Based upon metallurgical testing work, and with the conversion to
off-site processing of flotation concentrates in lieu of on-site cyanidation,
overall metallurgical recovery at Kensington improves to 93.84%, including 96%
flotation recovery, with 2.25% additional losses incurred during final
treatment off-site.
During 1996, activities at Kensington continued to be directed toward
completing the permitting process, project optimization studies and feasibility
study updates. During the year, the Company completed a series of project
enhancements, including off-site ore processing which eliminates on-site
cyanide use and the use of a dry tailings storage facility which eliminates the
need for a tailings dam and reduces the surface area disturbance as well as the
inclusion of paste backfill technology to allow improved extraction of
underground ore. As of December 31, 1996, the Company had invested a total of
$108.1 million (including capitalized interest of $20.8 million) in the
Kensington property.
Based on a recently updated feasibility study completed by Bechtel
Corporation, an independent engineering firm engaged to perform detailed design
and engineering at the Kensington property, Coeur
19
<PAGE> 21
estimates that in the event it is decided to proceed with the construction of
the Kensington facility, approximately $197 million (in addition to monies
previously expended), will be required in order to place the property into
commercial production. The feasibility study contemplates that after an
eighteen-month construction phase, the mine is expected to produce an average
of approximately 200,000 ounces of gold per year. Furthermore, the study
estimates the average cash cost of gold production at $247 per ounce during
the initial years of operation.
Further development of Kensington is contingent upon several factors,
including an initial gold price of $400 and the ability of the Company to
obtain valid permits. As of March 17, 1997, the market price of gold (London
final) was $351.40 per ounce.
The major permits necessary for the construction and operation of the
facility are U.S. Forest Service ("USFS") approval of the Plan of Operations,
Army Corps of Engineers Section 404 permit for dry tailings facility
construction, an EPA National Pollution Discharge Elimination System ("NPDES")
permit for the discharge of waste water and the City and Borough of Juneau
("CBJ")Large Mine Permit. In 1992, the CBJ Large Mine Permit was approved for
issuance and the USFS approved the Plan of Operations. However, to respond to
concerns expressed by the environmental community, the Company decided in July
1995 and 1996 to make limited changes to the project. This triggered the need
for a Supplemental Environmental Impact Statement ("SEIS") process and
amendment of the key permits.
The changes were made to optimize the project. They have the support
of several environmental groups in Alaska. The key changes made in July 1995
involve relocating the effluent discharge point from Lynn Canal to Sherman
Creek, at a point adjacent to the tailings impoundment, and construction of a
water treatment plant. In addition, the Company proposed to utilize diesel fuel
rather than liquid petroleum gas for power generation. The primary change in
May 1996 was from a tailings impoundment to a dry tailings storage system.
While these changes are not required by law, they are proposed in response to
comments raised by environmental organizations that they prefer fresh water
discharge instead of a marine discharge. As a result, a SEIS was prepared and
associated changes required to be made to the NPDES, the CBJ and USFS operating
plan. Numerous additional minor permits are required by government agencies
which authorize construction and operations. The required state air quality
permits were issued in January 1997.
In February 1997, the USFS issued the draft SEIS, which facilitated
the issuance of the EPA's draft NPDES Permit for the project. In addition, in
February 1997, the Army Corps of Engineers issued its public notice for a
section 404 permit. Following a 45-day comment period, the USFS, EPA and the
Army Corps of Engineers will evaluate any comments recieved with respect to the
draft permits and consider
20
<PAGE> 22
whether any changes therein are warranted. It is expected that the agencies
will then issue the permits in final form. The City and Borough of Juneau is
proceeding with its process to issue its Large Mine Permit.
As previously reported, in 1993 a group opposed to the Kensington
Project appealed the prior CBJ Large Mine Permit approval to the Alaska Supreme
Court. In November 1996, the parties settled the matter and the appeal was
dismissed.
On February 1, 1996, Coeur entered into an agreement with
representatives of a coalition of environmental groups, the Kensington
Coalition, represented in part by the Sierra Club Legal Defense Fund, which is
intended to eliminate potential legal challenge by the groups to the Kensington
project, and which remains to be ratified by various constituent
organizations. Representatives of the parties to that agreement are expected
to approve an amendment to the agreement reflecting the recent change from a
tailings impoundment to a dry tailings storage system. Under the terms of the
agreement, Coeur will provide for additional environmental input at the project
while maintaining its schedule for permitting the property, which permitting
process is currently in its final phase. Pursuant to the agreement, the
environmental groups will not appeal or litigate the permits required for the
project. The coalition of environmental groups are now in the process of
considering ratification of the agreement, which agreement is not binding until
ratified.
In September 1995, Coeur entered into an agreement with the EPA and
the Alaska Department of Environmental Conservation which provides for time
lines to be met by the parties for the permitting process and is expected to
facilitate issuance of final permits by approximately May 1997.
In February 1996, Coeur and a consortium of three Alaska native groups
announced that they reached an agreement which, if a decision is made to
commence construction of the mine, should assist in facilitating construction
and operation of the project, while meeting certain employment and training
goals for the Native groups working on the project. Under the terms of the
agreement between the Company and Goldbelt, Inc., Kake Tribal Corporation and
Klukwan, Inc., the native corporations have agreed to assist the Kensington
project by providing support during permitting and during mine construction and
operation, assisting in communications with local organizations and agencies
involved in mining development, as well as filling certain labor requirements
for the project. Coeur also agreed to develop and participate in training
programs for the jobs that will become available if and when mine construction
begins.
In September 1996, the Company made an agreement with Goldbelt, Inc.,
a Juneau Native corporation, the effect of which is to facilitate the
performance of the Company's obligation to provide 102 units of
21
<PAGE> 23
housing in Juneau. Pursuant to the agreement, Goldbelt will secure the
necessary land, arrange for and supervise construction and arrange non-recourse
financing for the development. In exchange, the Company is obligated to
provide third-party financial assurances with regard to any project loans and
is required to guarantee occupancy rates with regard to multi-family housing
and to guarantee minimum realized sale prices with regard to single family
houses developed for resale.
The Company owns 100% of the Jualin property, an exploratory property
located adjacent to the Kensington Property. The Jualin property consists of
approximately 9,400 acres, of which approximately 345 acres is patented claims.
INTERESTS IN GASGOYNE GOLD MINES NL
In May 1996, Coeur acquired approximately 35% of the outstanding
shares of capital stock of Gasgoyne, an Australian gold mining company, in
exchange for a total of 1,419,832 shares of Coeur common stock and cash
totaling approximately $15.4 million. Sons of Gwalia Limited, an Australian
gold mining company, ("Sons of Gwalia") conducted a competing offer for
outstanding Gasgoyne shares in connection with which it acquired approximately
61% of Gasgoyne's outstanding shares. As a result of a selective reduction of
capital effected by Gasgoyne in February 1997 by purchasing its publicly held
shares from the shareholders other than Coeur and Sons of Gwalia, Coeur's
ownership interest increased to 36% of Gasgoyne's outstanding shares. It is
the intent of the Company and Sons of Gwalia to equalize their respective
ownership interests in Gasgoyne, thereby giving the Company a 50% interest in
that company or its underlying assets. It is expected that the equalization
will be completed in the second quarter of 1997 and that the additional cost to
Coeur will be approximately $18 million. This acquisition will be funded out
of the Company's existing cash resources.
Gasgoyne is principally engaged in the exploration, development and
ownership of gold properties located in Western Australia. Headquartered in
Perth, Australia, Gasgoyne's principal asset is its 50% interest in the Yilgarn
Star Gold Mine in Marvel Loch, located approximately 70 km east of Perth, which
started production in 1991. Gasgoyne also has 50% interests in the Southern
Star and Nevoria Gold Mines, which are also in the Marvel Loch region of
Australia, and a 45% interest in the Awak Mas Gold Project ("Awak Mas") in
Indonesia.
Coeur's cash payments to Gasgoyne shareholders in connection with the
above-referred exchange offer were financed by a loan facility with Rothschild
Australia Ltd., which provides for a maximum of $20 million of borrowings at an
annual interest rate equal to LIBOR plus 1.5%. Borrowings under that agreement
as of December 31, 1996 amounted to $18.9 million.
22
<PAGE> 24
During the second quarter ended June 30, 1996, Coeur began reporting
its share of Gasgoyne's net results of operations pursuant to the equity method
of accounting for investments. Such amounts are reflected as a component of
other income and interest and amounted to approximately $907,000 for the eight
months ended December 31, 1996.
The following table sets forth information relating to total Yilgarn
Star Gold Mine production during the period from May 1, 1996 to December 31,
1996. Coeur had a 17.5% interest in such production (i.e., 35% of one-half)
for the approximately seven months subsequent to the acquisition of its
interest in Gasgoyne in May 1996.
<TABLE>
<CAPTION>
May 1, 1996
December 31, 1996
-----------------
<S> <C>
Ore milled (tons) 587,582
Gold (ounces) 85,591
</TABLE>
The following table sets forth the costs of production per ounce of
gold during the year ended December 31, 1996. Cash costs include mining,
processing and direct administration costs, royalties and exploration expenses.
<TABLE>
<CAPTION>
Year Ended
December 31, 1996
-----------------
<S> <C>
Cash operating costs per ounce $ 214.92
Depreciation, depletion and
amortization per ounce 47.07
---------
$ 261.99
=========
</TABLE>
The Yilgarn Star Gold Mine operated as an open pit surface mine from
1991 through September 1995 and an underground mine commenced operations there
on a limited basis in October 1995.
Yilgarn Star reserves estimated by Gasgoyne Gold Mines, effective
December 30, 1996, are proven reserves of 1.757 million tons averaging 0.107
ounces per ton gold, or a total of 188,000 ounces of gold, and probable
reserves of 2.989 million tons averaging 0.173 ounces per ton or 517,000 ounces
of gold. An additional 2.297 million tons of mineralized material has been
identified at a grade of 0.23 ounces of gold per ton gold.
SILVER AND GOLD PRICES
The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely. The volatility of such prices is
illustrated by the following table, which sets forth the high and low prices of
silver (as reported by Handy and
23
<PAGE> 25
Harman) and gold (London final) per ounce during the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------------------
1993 1994 1995 1996
------------------- ------------------- ------------------- --------------------
High Low High Low High Low High Low
------- ------- ------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Silver $ 5.37 $ 3.55 $ 5.76 $ 4.63 $ 6.01 $ 4.36 $ 5.79 $ 4.67
Gold $405.60 $326.10 $396.25 $369.65 $395.55 $372.40 $414.80 $367.40
</TABLE>
MARKETING
Coeur has historically sold its gold and silver from its mines both
pursuant to forward contracts and at spot prices prevailing at the time of sale
to various precious metals firms. Generally, its policy is to sell forward
not more than 50% of its estimated annual gold production; however, actual
forward-selling activities have not approached the 50% threshold. As of
December 31, 1996, the Company had entered into forward contracts to deliver a
total of 146,670 ounces of gold over a three-year period at an average price of
$421.51 per ounce. In January 1997, those forward contract positions were
closed, resulting in a net gain of approximately $5.3 million that will be
recorded in the first quarter of 1997.
EXPLORATORY MINING PROPERTIES
Coeur, either directly or through its wholly-owned subsidiaries, owns,
leases and has interests in certain exploration-stage mining properties located
in the United States, Chile, Guyana, Mexico and New Zealand. Exploration
expenses of approximately $3.9 million, $4.9 million and $7.7 million were
incurred by the Company in connection with exploration activities in 1994, 1995
and 1996, respectively.
GOVERNMENT REGULATION
General
The Company's mining and mineral processing operations and property
exploration and development activities are subject to extensive federal, state
and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have
never required the Company to close any mine and the Company is not presently
subject to any material regulatory proceedings related to such matters, the
costs associated with compliance with such regulatory requirements are
substantial and possible future legislation and regulations could cause
additional expense, capital expenditures, restrictions and delays in the
development of the Company's properties, the extent of which cannot be
predicted. In the context of environmental permitting, including the approval
of reclamation plans, the Company must comply with known standards and
regulations which may entail significant
24
<PAGE> 26
costs and delays. Although Coeur has been recognized for its commitment to
environmental responsibility and believes it is in substantial compliance with
applicable laws and regulations, amendments to current laws and regulations,
the more stringent implementation thereof through judicial review or
administrative action or the adoption of new laws, could have a materially
adverse effect upon the Company.
For the years ended December 31, 1995 and 1996, the Company expended
$2.9 million and $3.1 million, respectively, in connection with routine
environmental compliance activities at its operating properties and expects to
expend approximately $2.4 million for that purpose in 1997. The Company
expended approximately $12.1 million in connection with its ground movement
remediation activities at the Golden Cross Mine in 1996 and expects its
remediation costs at that mine will approximate $2.9 million in 1997. In
addition, as of December 31, 1996, the Company had expended approximately $10.6
million on environmental and permitting activities at the Kensington Property
and expects to spend approximately $3.1 million for that purpose in 1997. The
expenditures at Kensington have been capitalized as part of its development
cost. Future environmental expenditures will be determined by governmental
regulations and the overall scope of the Company's operating and development
activities.
Federal Environmental Laws
Mining wastes are currently exempt to a limited extent from the
extensive set of Environmental Protection Agency ("EPA") regulations governing
hazardous waste. The EPA is proceeding with development of 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, as well as high volume extraction and benefication wastes, are
expected to eventually be regulated by the EPA under RCRA. In this connection,
the EPA is studying regulations concerning how mine wastes should be managed
and regulated. If the Company's mine wastes were treated as hazardous waste or
such wastes resulted in operations being designated as a "Superfund" site under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund") for cleanup, material expenditures would be required
for the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, any owner or operator of the land
since the time of its contamination may be held liable and may be forced to
undertake remedial cleanup action or to pay for the government's cleanup
efforts. Additional regulations or requirements may also be imposed upon the
Company's tailings and waste disposal operations under state environmental
protection laws.
The Company's commitment to environmental responsibility has been
recognized in 14 awards received since 1987, which included the Dupont/Conoco
Environmental Leadership Award, awarded to the Company
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<PAGE> 27
on October 1, 1991 by a judging panel that included representatives from
environmental organizations and the federal government and the "Star" award
granted on June 23, 1993 by the National Environmental Development Association,
and the Environmental Waikato Regional Council award for Golden Cross
environmental initiative granted on May 15, 1995. In 1994, the Company's
Chairman and Chief Executive Officer, and in 1996, the Company's Vice President
of Environmental and Governmental Affairs, were awarded the American Institute
of Mining, Metallurgical and Petroleum Engineers' Environmental Conservation
Distinguished Service Award. The receipt of such awards does not relieve the
Company of its obligations to comply with all applicable environmental laws.
Natural Resources Laws
The Company is subject to federal and state laws designed to protect
natural resources. In March 1996, as discussed under Item 3 below, the United
States government commenced a lawsuit against various parties, including the
Company, asserting claims under CERCLA and under the Clean Water Act for
alleged damages to federal natural resources in the Coeur d'Alene river basin
in northern Idaho as a result of alleged releases of hazardous substances from
mining activities conducted in the area since the late 1800s.
Pending Mining Legislation
Legislation is expected to be proposed in 1997 in the U.S. Congress to
change the Mining Law of 1872 (the "Mining Act") under which the Company holds
mining claims on public lands. It is considered possible that the Mining Act
will be amended or be replaced by stricter legislation in the future. It is
expected that the legislation will propose strict new environmental standards
and conditions, additional reclamation requirements and extensive new
procedural steps which would be likely to result in delays in permitting. It is
also expected that the proposed legislation may include a royalty of 5% to 8%
on the value of minerals mined on public lands, payable to the U.S. government.
Coeur believes that if and when any royalty is imposed, it will not be a gross
royalty and that it is not likely that such legislation will be adopted in
1997. A significant portion of Coeur's U.S. mining properties are on public
lands. Whether changes will be enacted or the extent of any changes is not
presently known and the potential impact on the Company's United States
activities is difficult to predict.
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<PAGE> 28
Foreign Government Regulations
The mining properties of the Company that are located in New Zealand
and Chile are subject to various government laws and regulations pertaining to
the protection of the air, surface water, ground water and the environment in
general, as well as the health of the work force, labor standards and the
socioeconomic impacts of mining facilities upon the communities. The Company
believes it is in substantial compliance with all applicable laws and
regulations to which it is subject in both Chile and New Zealand.
EMPLOYEES
At March 1, 1997, the Company employed a total of 1,217 full-time
employees, of which 43 are located at the Company's executive offices in Coeur
d'Alene, Idaho, 286 are employed at the Rochester Mine, 165 are employed at the
Golden Cross Mine in New Zealand, 704 are employed at the Fachinal and El
Bronce Mines in Chile, and 19 are employed at the Kensington property in
Alaska. The Company maintains labor agreements under country statutes in New
Zealand at the Golden Cross Mine and in Chile at the Fachinal and El Bronce
Mines. The agreements at the El Bronce and Fachinal Mines expire in 1998 and
1999, respectively. In the opinion of the Company, its labor relations have
been satisfactory. The employees of Silver Valley Resources and Gasgoyne are
employees of those companies.
ITEM 2. PROPERTIES.
Information regarding the Company's properties is set forth under
Item 1 above.
ITEM 3. LEGAL PROCEEDINGS.
On March 22, 1996, an action was filed in the United States District
for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States against
various defendants, including Coeur, 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 alleged releases of
hazardous substances from mining activities conducted in the area since the
late 1800s. No specific monetary damages were identified in the complaint.
However, in July 1996, the government indicated that 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
connection with the investigation, removal and remedial action and the
restoration or replacement of affected natural resources. In 1986 and 1992,
the Company had settled similar issues with the State of Idaho and the Coeur
d'Alene Indian Tribe, respectively, and believes that those prior settlements
exonerate it of further involvement with alleged
27
<PAGE> 29
natural resource damage in the Coeur d'Alene River Basin. Accordingly, the
Company intends to vigorously defend this matter and on March 27, 1997, filed a
motion for summary judgment seeking dismissal of the Company from the action.
At this stage of the proceeding, it is not possible to predict the ultimate
outcome thereof.
As reported in the Company's Form 10-K for the year ended December 31,
1995, the Company had one issue pending at the beginning of 1996 in connection
with the tax deficiency letter issued by the Internal Revenue Service ("IRS")
on February 7, 1995 to the Company. In October 1996, the Company and the IRS
settled the matter and in connection with that settlement, the Company received
a refund of $50,000.
The Company's Form 10-K for the year ended December 31, 1995 also
referred to a lawsuit commenced in Australia in February 1996 by Sons of Gwalia
against the Company seeking to enjoin Coeur's proposed offer to acquire
Gasgoyne shares. In May 1996, that lawsuit was settled by the parties.
On July 15, 1996, Coeur filed, and on October 24, 1996 it amended, a
complaint against Cyprus Amax Minerals Company ("Cyprus") in the U.S. District
Court for the District of Idaho (Civ. No. 96-0301-N-EJL) alleging violations by
Cyprus of the anti-fraud provisions of the Securities Exchange Act of 1934 and
certain provisions of the Idaho and Colorado Securities Acts as well as common
law fraud in connection with Cyprus' sale in April 1993 to Coeur of Cyprus
Exploration and Development Corporation, which owned all the shares of Cyprus
Gold New Zealand Limited, which, in turn, owned an 80% interest in the Golden
Cross Mine in New Zealand. Coeur's lawsuit seeks an unspecified amount of
damages arising from alleged misrepresentations and failure to disclose
material facts alleged to have been known by Cyprus officials regarding ground
movement and instability, threatening the integrity of the Golden Cross Mine
tailings impoundment, at the time of Coeur's purchase of the property. In
August 1996, Cyprus filed a counterclaim alleging libel by Coeur in its press
release announcing the write-off of the Golden Cross Mine and seeking an
unspecified amount of damages. Certain pre-trial motions presently are
pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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<PAGE> 30
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the
Company's current executive officers:
<TABLE>
<CAPTION>
Office with Appointed
Name Age the Company to Office
- ---- --- --------------- ---------
<S> <C> <C> <C>
Dennis E. Wheeler 54 Chairman of the Board 1992
President 1980
Chief Executive Officer 1986
Michael L. Clark 52 Senior Vice President 1992
Chief Operating Officer
James A. Sabala 42 Senior Vice President 1987
Chief Financial Officer
Michael C. Tippett 58 Senior Vice President 1995
Exploration and New
Business Development
William F. Boyd 58 Vice President - 1990
Corporate Counsel & Secretary
Alan L. Wilder 48 Vice President- 1992
Project Development
Robert Martinez 50 Vice President - Engineering, 1996
Operational Services and
South American Operations
Thomas T. Angelos 41 Vice President - Controller 1987
James K. Duff 52 Vice President - Business 1996
Development
Robert T. Richins 49 Vice President 1989
Environmental Services and
Governmental Affairs
Kevin L. Packard 36 Treasurer 1996
</TABLE>
Messrs. Wheeler, Sabala, Boyd, Martinez, Angelos, Richins and Duff
have been principally employed by the Company for more than the past five
years. Prior to his employment with the Company in October 1992, Mr. Clark had
served as the Executive Vice President and Chief Operating Officer of another
New York Stock Exchange listed mining company since 1990. Mr. Wilder was a
consultant in 1990 and 1991, and was the Manager of Engineering and
Construction for the Company in 1991 until his appointment as an executive
officer effective January 1,
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<PAGE> 31
1992. Prior to his appointment to his current position on May 9, 1995, Mr.
Tippett was Executive Vice President - CDE Chilean Mining Corporation from May
13, 1991 to May 9, 1995. Prior to his appointment as Vice President - Business
Development, Mr. Duff held the position of Director of New Business
Development. Prior to his employment by the Company in 1992, Mr. Packard was a
certified public accountant and a Tax Manager at Deloitte & Touche LLP.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") and the Pacific Coast 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
</TABLE>
The Company paid per share cash distributions or dividends on its
Common Stock of $.15 on each of April 19, 1996, April 21, 1995, April 15, 1994,
April 16, 1993 and April 15, 1992. In March 1997, the Company announced the
Board's decision not to pay a dividend on its Common Stock in April 1997.
Future distributions or dividends on the Common Stock, if any, will be
determined by the Company's Board of Directors and will depend upon the
Company's results of operations, financial conditions, capital requirements and
other factors.
At March 17, 1997, there were 7,852 record holders of the Company's
outstanding Common Stock.
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<PAGE> 32
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data with respect to the Company and its subsidiaries and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1992 1993 1994 1995 1996
---------- --------- --------- ---------- ---------
(Thousands Except Per Share Information)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates
and dore' $ 41,414 $ 67,990 $ 79,606 $ 89,239 $ 92,731
Less cost of mine
operations 37,829 59,804 67,802 72,210 $ 83,283
---------- --------- --------- ---------- ---------
Gross profits 3,585 8,186 11,804 17,029 9,448
Other income 4,812 5,388 12,587 9,504 $ 13,159
---------- --------- --------- ---------- ---------
Total income 8,397 13,574 24,391 26,533 22,607
Other expenses 14,118 31,548 29,392 27,591 23,946
Writedown of mining properties(4) 54,415
---------- --------- --------- ---------- ---------
Total expenses 14,118 31,548 29,392 27,591 78,361
---------- --------- --------- ---------- ---------
Net loss from continuing
operations before income
taxes (5,721) (17,974) (5,001) (1,058) (55,754)
Provision (benefit) for
income taxes (4,233) (3,932) (265) 200 (1,184)
---------- --------- --------- ---------- ---------
Net loss from continuing
operations (1,488) (14,042) (4,736) (1,258) (54,570)
Income from discontinued
operations(net of taxes)(1) 729 752 793 2,412
---------- --------- --------- ---------- ---------
Income(loss) before cumulative
effect of change in
accounting method (759) (13,290) (3,943) 1,154 (54,570)
Cumulative effect of
change in accounting
method(2) 5,181
---------- --------- --------- ---------- ---------
Net income (loss) $ (759) $ (8,109) $ (3,943) $ 1,154 $(54,570)
========== ========= ========= ========== =========
Net income(loss) attributable
to Common Shareholders $ (759) $ (8,109) $ (3,943) $ 1,154 $(62,967)
========== ========= ========= ========== =========
Earnings per share data(3):
Net loss from continuing
operations $ (.10) $ (.92) $ (.31) $ (.08) $ (2.54)
Income from discontinued
operations(net of taxes) .05 .05 .05 .15 .00
---------- --------- --------- ---------- ---------
Net income (loss) before
cumulative change in
accounting method (.05) (.87) (.26) .07 (2.54)
Cumulative effect of
change in accounting method .34
---------- --------- --------- ---------- ---------
Net income (loss) $ (.05) $ (.53) $ (.26) $ .07 $ (2.54)
========== ========= ========= ========== =========
Net loss from continuing
operations $ (.10) $ (.92) $ (.31) $ (.08) $ (2.93)
Income from discontinued
operations (net of taxes) .05 .05 .05 .15
---------- --------- --------- ---------- ---------
Income (loss) before
cumulative change in
accounting method (.05) (.87) (.26) .07 (2.93)
Cumulative effect of change
in accounting method .34
---------- --------- --------- ---------- ---------
Net income (loss) attributable
to Common Shareholders $ (.05) $ (.53) $ (.26) $ .07 $ (2.93)
========== ========= ========= ========== =========
Cash dividends paid per
Common Share $ .15 $ .15 $ .15 $ .15 $ .15
========== ========= ========= ========== =========
Weighted average
number of shares of
Common Stock and
equivalents used in
calculation 15,317 15,328 15,388 15,888 21,469
========== ========= ========= ========== =========
BALANCE SHEET DATA:
Total Assets $324,878 $325,249 $412,361 $445,646 $580,330
Working capital 179,370 104,883 170,087 105,597 179,626
Long-term debt 131,134 129,234 227,193 174,000 189,953
Shareholders' equity 180,991 170,849 160,292 239,832 346,198
</TABLE>
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<PAGE> 33
(1) On May 2, 1995, the Company sold the assets of its flexible hose and
tubing division, The Flexaust Company, and shares of a related subsidiary
for approximately $10.0 million, of which approximately $4 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.
(2) Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards
(FAS) 109, "Accounting for Income Taxes." FAS 109 requires an asset and
liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted
its existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits
related to federal and certain state net operating loss carryforwards.
FAS 109 also contains new requirements regarding balance sheet
classification and prior business combinations. Hence, the Company
adjusted the carrying values of an incremental interest in the Rochester
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 is a nonrecurring gain of $5,181,188, or $.34 per share, and is
included in the Consolidated Statement of Operations for the year ended
December 31, 1993. Other than the cumulative effect, the accounting
change had no material effect on the results of operations for the year
ended December 31, 1993.
(3) 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.
(4) During the second quarter of 1996, the Company determined that certain
adjustments were required to properly reflect the estimated net realizable
values of certain mining properties in accordance with FASB statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The Golden Cross Mine and the nearby
Waihi East property were written down by approximately $53 million 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-down 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 due to management's decision not to exercise its final option
payment on the project.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
The results of the Company's operations are significantly affected by
the market prices of gold and silver which may fluctuate widely and are
affected by many factors beyond the Company's control, including interest
rates, expectations regarding inflation, currency values, governmental
decisions regarding the disposal of precious metals stockpiles, global and
regional political and economic conditions, and other factors.
The Company's currently operating mines are the Rochester Mine in
Nevada, which it wholly owns and operates; the Golden Cross Mine in New
Zealand, in which the Company has an 80% operating interest and which the
Company plans to continue to operate through at least the end of 1997; the El
Bronce Mine, a Chilean gold mine of which the Company acquired operating
control in October 1994 and 100% ownership in September 1996; and the Fachinal
Mine, a Chilean gold mine wholly-owned by the Company at which initial
production commenced in late October 1995 and which commenced commercial
production in January 1997.
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<PAGE> 34
The Company also has significant interests in other companies that
operate gold and silver mines. The Company owns 50% of Silver Valley, which
owns and operates the Coeur Mine (where operations resumed in June 1996 and are
expected to continue until late 1997 or early 1998) and the Galena Mine (where
operations are expected to resume in July 1997) in the Coeur d'Alene Mining
District of Idaho. In May 1996, the Company acquired 35% of Gasgoyne, which
owns the Yilgarn Star Gold Mine in Australia.
The Company's total production in 1996 exceeded 214,000 ounces of gold
and 9.5 million ounces of silver, which was the highest in the Company's
history. Coeur estimates that 1997 gold and silver production will approximate
285,000 ounces and 9.8 million ounces, respectively. Total estimated reserves
at December 31, 1996 amounted to approximately 3.4 million ounces of gold and
109.0 million ounces of silver, compared to estimated gold and silver reserves
at December 31, 1995 of approximately 3.5 million ounces and 124.0 million
ounces, respectively.
A production decision at the Kensington property, a wholly-owned
developmental gold property in Alaska, is subject to a market price of gold of
at least $400 per ounce and the receipt of certain required permits. The market
price of gold (London final) on March 17, 1997 was $351.40 per ounce. The
Company is unable to control the timing of the issuance of the remaining
required permits, which are expected to be issued during the second quarter of
1997.
The Company's business plan is to continue to acquire mining
properties and/or businesses that are operational or expected to become
operational in the near future so that they can reasonably be expected to
contribute to the Company's near-term cash flow from operations and expand the
Company's gold and/or silver production.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Sales and Gross Profits
Sales of concentrates and dore' in 1996 increased by $3,492,000, or
4%, over 1995. The increase is primarily attributable to increased gold
production at the Company's Rochester Mine and increased silver production
attributable to Silver Valley Resources. Silver and gold prices averaged $5.18
and $387.70 per ounce, respectively, in 1996 compared to $5.19 and $384.16 per
ounce, respectively, in 1995. During 1996, the Company produced 9,520,009
ounces of silver and 214,130 ounces of gold compared to 7,175,394 ounces of
silver and 167,985 ounces of gold in 1995.
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<PAGE> 35
The cost of mine operations in 1996 increased by $11,073,000, or 15%,
over 1995. The increase is primarily due to the startup, in the second quarter
of 1996, of operations at Silver Valley's Coeur Mine and higher operating costs
at the Golden Cross Mine resulting from deep-seated ground movement under the
tailings dam. Gross profit from mine operations decreased by $7,581,000, or
45%, compared with 1995. Mine operations gross profit as a percent of sales
decreased to 10% in 1996 compared to 19% in 1995. The gross profit decrease
was primarily attributable to a decrease in gold production from the Company's
Golden Cross Mine, start-up costs at Silver Valley's Coeur Mine and higher
operating costs at the Golden Cross Mine during 1996.
The cash operating costs of production per ounce of gold at the Golden
Cross Mine amounted to $365.79 per ounce in 1996, compared to $228.16 per ounce
during 1995. The increase was primarily attributable to the land slide issue
first identified by the Company in late 1995. As a result, the Company was
unable to complete a planned expansion of the existing facilities which would
have resulted in lower unit operating costs. The cash operating costs per ounce
of silver on a silver equivalent basis at the Rochester Mine amounted to $3.64
per ounce in 1996, compared to $3.71 per ounce in 1995. Cash operating costs at
the El Bronce Mine averaged $259.43 per ounce of gold in 1996 compared with
$305.68 during its first full year of operation in 1995. Cash operating costs
at Silver Valley amounted to $2.46 per silver ounce produced subsequent to its
startup in June 1996.
Other Income
Interest and other income in 1996 increased by $3,655,000, or 38%,
compared with 1995. The increase is primarily due to (i) an increase in the
level of the Company's cash and securities portfolio in 1996 primarily
resulting from the public sale of $150.4 million of Mandatory Adjustable
Redeemable Convertible Securities ("MARCS") in March and April 1996, and a gain
of $1,300,000 arising from the sale by the Company of common shares of Orion
Resources, NL in the third quarter of 1996, (ii) a gain of $1,400,000 from the
sale of other fixed assets in the fourth quarter of 1996, and (iii) the
Company's share of income resulting from its interest in the operations of
Gasgoyne Gold Mines in 1996.
Expenses and Writedown of Mining Properties
Total expenses, including writedown of mining properties, in 1996
increased by $50,770,000 over 1995. The increase is primarily due to writedowns
of mineral properties of $54,415,000 related to a $53,245,000 writedown of the
Company's interest in the Golden Cross Mine and nearby Waihi East property in
New Zealand and a $1,170,000 writedown of the Company's interest in the Faride
Mine in Chile. The impact of the increase in expenses due to the writedowns is
partially offset by decreases in idle facilities of $1,481,000 and interest
expense of $6,111,000.
-34-
<PAGE> 36
The $53,245,000 charge related to the Company's investment in the
Golden Cross Mine and the nearby Waihi East property, which included accrual of
the estimated future closure and remediation costs and a write-down of the
entire carrying value of the Company's 80% interest in the property, was
announced in July 1996 following the determination by the Company, following
consultation with its independent accountants, that generally accepted
accounting principles called for an asset writedown. The writedown was
necessitated by the Company's discovery in late 1995 of deep-seated ground
movement, actuated by heavy rainfall events not caused by the mine's
operations, under the mine's tailings impoundment. Following investigative
activities and the formulation of remedial measures, the Company's
determination as of June 1996 was the amount required to implement the planned
remedial measures could approximate $11 million. In addition, it had become
evident by that time that (i) production could be expected to significantly
decrease as a result of the Company's inability to implement a previously
planned mill optimization because the dam had not been stabilized, and,
consequently, it was believed the government would not likely consent to a
raising of the tailings dam crest to obtain necessary tailings storage capacity
to accommodate the increased mill throughput, and (ii) capital and operating
costs could be expected to significantly increase due to the production
shortfall and ground movement remediation program costs.
In October 1996, New Zealand regulatory authorities approved the
Company's application to permit the raising of the Golden Cross Mine tailings
impoundment crest and the Company believes it will be able to continue to
operate the mine through at least the end of 1997. The Company also believes
that the continued operations of the mine will have a beneficial impact on the
end-of-mine-life closure and reclamation requirements.
Net Loss From Continuing Operations
As a result of the above, the Company's loss from continuing
operations before income taxes increased to $55,754,000 in 1996 compared to a
loss from continuing operations of $1,058,000 in 1995. The benefit from income
taxes amounted to $1,184,000 in 1996, compared to a provision of $200,000 in
1995. As a result, the Company reported a net loss from continuing operations
of $54,570,000, or $2.54 per share, in 1996, compared to a net loss from
continuing operations of $1,258,000, or $.08 per share, in 1995.
Net Income (Loss)
As a result of the above, the Company reported a net loss of
$54,570,000 ($62,967,000 attributable to Common Shareholders), or $2.54 per
share ($2.93 per share attributable to Common Shareholders), in 1996, compared
to a net income of $1,154,000, or $.07 per share, in 1995.
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<PAGE> 37
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Sales and Gross Profits
Sales of concentrates and dore' in 1995 increased by $9,633,000, or
12%, over 1994. The increase is primarily attributable to an increase in gold
and silver production. Silver and gold prices averaged $5.19 and $384.16 per
ounce, respectively, in 1995 compared to $5.28 and $384.01 per ounce,
respectively, in 1994. During 1995, the Company produced 7,175,394 ounces of
silver and 167,985 ounces of gold compared to 6,180,215 ounces of silver and
129,239 ounces of gold in 1994.
The cost of mine operations in 1995 increased by $4,408,000, or 7%,
over 1994. Gross profit from mine operations increased by $5,225,000, or 44%,
over 1994. Mine operations gross profit as a percent of sales increased to 19%
in 1995 compared to 15% in 1994. The gross profit increase was primarily
attributable to the decreases in silver and gold production costs in 1995 and
increased silver and gold production.
The cash operating costs of production per ounce of gold at the Golden
Cross Mine amounted to $228.16 per ounce in 1995, compared to $273.84 per ounce
during 1994. The decrease was primarily attributable to (i) the presence in
1994 of a harder grinding ore in the open pit requiring more milling and
chemicals in the processing and lower grade of ore being provided from the
underground portion of the mine; and (ii) the availability of additional
underground production, a better blending of open-pit and underground ore, and
the mining of less waste in the open pit in 1995. The cash operating costs per
ounce of silver on a silver equivalent basis at the Rochester Mine amounted to
$3.71 per ounce in 1995, compared to $3.57 per ounce in 1994. Cash operating
costs at the El Bronce Mine averaged $305.68 per ounce of gold during its first
full year of operation.
Other Income
Interest and other income in 1995 decreased by $3,083,000, or 24%,
compared with 1994. The decrease is primarily due to (i) a decrease in the
level of the Company's cash and securities portfolio in 1995 and a gain of
$2,700,000 arising from the sale by the Company of common shares of
International Curator in the third quarter of 1994, and (ii) a gain of
approximately $4,400,000 from the sale of gold and silver purchased in the open
market which was then delivered pursuant to fixed price forward contracts
during 1995.
Expenses
Total expenses in 1995 decreased by $1,801,000, or 6%, from 1994. The
decrease is primarily due to a significant decrease in interest expense of
$1,653,000 in 1995 compared to 1994. In addition, a non-recurring write-off of
$800,000 was recorded in 1994 as a result of an
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adverse judgment in a lawsuit described below relating to four promissory
notes made by a predecessor of the Company.
Net Loss From Continuing Operations
As a result of the above, the Company's loss from continuing
operations before income taxes decreased to $1,058,000 in 1995 compared to a
loss from continuing operations of $5,001,000 in 1994. The provision for
income taxes amounted to $200,000 in 1995, compared to a benefit of $265,000 in
1994. As a result, the Company reported a net loss from continuing operations
of $1,258,000, or $ .08 per share, in 1995, compared to a net loss from
continuing operations of $4,736,000, or $.31 per share, in 1994.
Income From Discontinued Operations
On May 2, 1995, the Company sold the assets of its flexible hose and
tubing division, The Flexaust Company, and shares of a related subsidiary for
$10,000,000, of which approximately $4,000,000 was paid at the time of closing
and the balance was payable through five years. The results of operations and
the gain on sale of Flexaust manufacturing segment are presented as
"Discontinued Operations." The Company reports income from discontinued
operations of $2,412,000, or $.15 per share, compared with $793,000, or $.05
per share in 1994.
Net Income (Loss)
As a result of the above, the Company reported net income of
$1,154,000, or $.07 per share, in 1995, compared to a net loss of $3,943,000,
or $.26 per share, in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Cash and Cash Equivalents
The Company's working capital at December 31, 1996 was $179,626,000
compared to $105,597,000 at December 31, 1995. The ratio of current assets to
current liabilities was 6.69 to one at December 31, 1996 compared to 6.02 to
one at December 31, 1995.
Net cash provided by operating activities in 1996 was $7,784,000
compared with $20,915,000 net cash provided by operating activities in 1995. A
total of $131,297,000 of cash was used in investing activities in 1996 compared
to $37,852,000 in 1995. The Company's financing activities provided
$150,483,000 of cash during 1996 compared to $18,274,000 in 1995. As a result
of the above, the Company's net cash increase in 1996 was $26,970,000 compared
with a net cash increase of $1,337,000 in 1995.
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Acquisition of Remaining El Bronce Interest
In July 1994, the Company had made an agreement pursuant to which the
Company acquired operating control, a 51% interest in operating profits, and an
option to acquire a 51% equity interest in the producing El Bronce Mine. On
September 4, 1996, the Company exercised its option to acquire that 51% equity
interest and also purchased the remaining 49% of the shares of El Bronce,
bringing its total ownership interest to 100%. The terms of the purchase
included the payment of $10.5 million in cash, prepayment of the remainder of
the option price in the approximate amount of $3.8 million and a net smelter
return royalty of 3% to be paid to the seller quarterly, commencing on January
1, 1997. The acquisition has been accounted for as a purchase with the excess
of the purchase price over the net book value of the mine ($4.9 million) being
allocated to mining properties.
Public Offering of MARCS
In March 1996, the Company conducted a public offering of $150.4
million of MARCS. The Company sold a total of 7,077,833 shares of MARCS at a
public offering price of $21.25 per share and received net proceeds of $144.6
million. Each share of MARCS is mandatorily convertible four years after
issuance into 1.111 shares of Common Stock of the Company, subject to
adjustment in certain events, unless earlier converted by the holder into
Common Stock or redeemed for Common Stock by the Company. The annual dividend
payable on the MARCS is $1.488 per share, payable quarterly.
Interest in Gasgoyne
In May 1996, subject to its tender offer, Coeur issued a total of
1,419,832 shares of Common Stock and paid a total of A$19.5 million (or US$15.4
million based on then prevailing currency exchange rates) to acquire a total of
20,293,691 Gasgoyne shares constituting approximately 35% of Gasgoyne's then
outstanding shares. Coeur's purchase offer for outstanding Gasgoyne shares was
conducted on the basis of seven Coeur shares of Common Stock plus A$96 in
exchange for each 100 Gasgoyne shares. Coeur's cash payments to Gasgoyne
shareholders were financed by a loan facility with Rothschild Australia
Limited, which provides for a maximum of US$20 million of borrowings at an
annual interest rate equal to LIBOR plus 1.5%. In February 1997, Gasgoyne
effected a selective reduction of capital by repurchasing its publicly held
shares from those shareholders other than Coeur and Sons of Gwalia, as a result
of which Coeur's ownership interest increased to 36% of Gasgoyne's outstanding
shares. It is the intent of the Company and Sons of Gwalia to equalize their
respective ownership interests in Gasgoyne, thereby giving the Company a 50%
interest in that company or its underlying assets. It is expected that the
equalization will be completed in the second quarter of 1997 and that the total
cost to
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Coeur will be approximately $18 million. This acquisition will be funded out
of the Company's existing cash resources.
Purchase and Sale of Interest in Orion
On January 24, 1996, at a cost of $10.7 million, Coeur acquired from
Homestake Mining Company ("Homestake") 5.5 million shares of and an option to
acquire an additional 5.0 million shares of Orion held by Homestake. Earlier in
January 1995 and in the last quarter of 1994, Coeur had acquired 3.3 million
outstanding Orion shares for a total cost of $3.8 million on the open market.
On March 26, 1996, Coeur exercised the options previously acquired for a
purchase price of $3.8 million. As a result of the above acquisitions of Orion
shares, which were funded by Coeur's own cash resources, Coeur then held 19.2%
of Orion's outstanding shares. On September 30, 1996, the Company sold its
shares of Orion and recorded a gain of $1.3 million on the transaction.
Federal Natural Resources Action
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States
against various defendants, including the Company, asserting claims under
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 alleged
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 U.S.
government in investigation, removal and remedial action and the restoration or
replacement of affected natural resources. In 1986 and 1992 the Company had
settled similar issues with the State of Idaho and the Coeur d'Alene Indian
Tribe, respectively, and believes that those prior settlements exonerate it of
further involvement with alleged natural resource damage in the Coeur d'Alene
River Basin. Accordingly, the Company intends to vigorously defend this matter
and at an appropriate stage will seek to be dismissed from this action. At
this initial stage of the proceedings it is not possible to predict its
ultimate outcome.
Restructuring of Fachinal Mine Financing
Effective December 23, 1996, the Company restructured the terms of
its $24 million Loan Agreement with a bank syndicate lead by N.M. Rothschild &
Sons, Ltd. ("Rothschild"), the borrowings under which were used by the Company
to finance a portion of the $40.8 million cost of constructing the Fachinal
mining facilities in Chile, which construction was completed in October 1995.
The earlier limited recourse project financing agreement, dated April 19, 1995,
required
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<PAGE> 41
Coeur to guarantee repayment of the borrowing until the project met certain
production and financial covenants, after which the project alone would have
been liable for repayment of the loan. The restructured borrowing is a
general corporate obligation, matures on September 30, 2001 and is repayable in
16 equal quarterly installments commencing on September 1, 1997. Interest is
calculated on a floating rate basis equal to LIBOR plus 1.5% per year.
Environmental Compliance Expenditures
For the years ended December 31, 1996, 1995 and 1994, the Company
expended $3.1 million, $2.9 million, and $3.0 million, respectively, in
connection with routine environmental compliance activities at its operating
properties. Such activities at the Rochester, Golden Cross, El Bronce and
Fachinal Mines include monitoring, bonding, earth moving, water treatment and
revegetation activities. In addition, at December 31, 1996, the Company had
expended a total of $10.6 million on environmental and permitting activities at
the Kensington Property, which expenditures have been capitalized as part of
its development cost.
The Company also expended $12.0 million in 1996 in connection with its
ground movement remediation activities at the Golden Cross Mine in New Zealand.
Furthermore, the Company estimates that its remediation costs at that mine in
1997 will approximate $2.9 million.
The Company estimates that environmental compliance expenditures at
its Kensington developmental property during 1997 will approximate $3.1 million
related to activities associated with obtaining permits required for
construction. Future environmental expenditures will be determined by
governmental regulations and the overall scope of the Company's operating and
development activities. The Company places a very high priority on its
compliance with environmental regulations.
Exploration and Development Expenditures
During 1996, the Company expended $7.5 million (excluding capitalized
interest) for developmental costs at the Kensington property, $3.4 million at
the Rochester Mine, $.3 million (excluding capitalized interest) for the
development of the Fachinal Mine, $17.9 million for investment at the El Bronce
Mine and $2.9 million to continue its planned exploration and development
programs. During 1997, the Company presently plans to expend $7.8 million
(excluding capitalized interest) to bring the Kensington property to a
construction decision, $2.4 million for the Fachinal Mine, and $3.2 million for
developmental and exploration activities at the El Bronce Mine. It is expected
that a decision will be made during the second quarter of 1997 as to whether to
place the Kensington Property into commercial production. If the Company were
to decide to construct a Kensington mining facility, the Company estimates that
it would be required to expend approximately $197 million over an
eighteen-month
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period in connection with the construction of the Kensington mining facilities.
The cost of such construction would be financed out of the proceeds of the
public offering of the MARCS as well as project financing, working capital
and/or cash flow sources.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item regarding directors is hereby incorporated by reference
from the Company's definitive proxy statement to be filed pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report. Information regarding the Company's executive officers is set
forth above under Item 4A of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
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<PAGE> 43
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) The following consolidated financial statements of Coeur
d'Alene Mines Corporation and subsidiaries are included in
Item 8.
Consolidated Balance Sheets-December 31, 1995 and 1996.
Consolidated Statements of Operations--Years Ended December
31, 1994, 1995 and 1996.
Consolidated Statements of Changes in Shareholders'
Equity--Years Ended December 31, 1994, 1995 and 1996.
Consolidated Statements of Cash Flows--Years Ended December
31, 1994, 1995 and 1996.
Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K: On November 12, 1996, the Company filed
Amendment No. 1 to its Form 8-K filed on November 5, 1996 reporting
the purchase of the El Bronce Mine.
(c) Exhibits: The following listed documents are filed as Exhibits to
this report:
3(a) - Articles of Incorporation of the Registrant and
amendments thereto. (Incorporated herein by reference
to Exhibit 3(a) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1988.)
3(b) - Bylaws of the Registrant and amendments thereto.
(Incorporated herein by reference to Exhibit 3(b) to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988.)
3(c) - Certificate of Designations, Powers and Preferences
of the Series A Junior Preferred Stock of the
Registrant, as filed with Idaho Secretary of State on
May 25, 1989 (Incorporated by reference to Exhibit
4(a) of the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1989.)
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<PAGE> 44
4 - Specimen certificate of the Registrant's stock.
(Incorporated herein by reference to Exhibit 4 to the
Registrant's Registration Statement on Form S-2 (File
No. 2-84174).)
10(c) - Executive Compensation Program. (Incorporated herein
by reference to Exhibit 10(e) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1989.) *
10(d) - Lease agreement, dated as of October 10, 1986,
between Manufacturers Hanover Commercial Corporation
and Coeur-Rochester, Inc. (Incorporated herein by
reference to Exhibit 10(a) to Registrant's Current
Report on Form 8-K, dated October 10, 1986.)
10(e) - Indenture, dated as of June 10, 1987, between the
Registrant and Citibank, N.A., as Trustee, relating
to the Registrant's 6% Convertible Subordinated
Debentures Due 2002. (Incorporated herein by
reference to Exhibit 4 to the Registrant's Current
Report on Form 8-K dated June 10, 1987.)
10(f) - Agreement, dated January 1, 1994, between
Coeur-Rochester, Inc. and Johnson Matthey Inc.
(Incorporated herein by reference to Exhibit 10(m) of
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
10(g) - Refining Agreement, dated January 24, 1994, between
the Registrant and Handy & Harman. (Incorporated
herein by reference to Exhibit 10(n) of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.)
10(h) - Master Equipment Lease No. 099-03566-01, dated as of
December 28, 1988, between Idaho First National Bank
and the Registrant. (Incorporated herein by
reference to Exhibit 10(w) of the Registrant's Annual
Report on Form 10-K for the year ended December 31,
1988.)
-------------
* Management contract or compensatory plan
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<PAGE> 45
10(i) - Master Equipment Lease No. 01893, dated as of
December 28, 1988, between Cargill Leasing
Corporation and the Registrant. (Incorporated herein
by reference to Exhibit 10(x) of the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1988.)
10(j) - Rights Agreement, dated as of May 24, 1989, between
the Registrant and First Interstate Bank of Oregon,
N.A., as Rights Agent. (Incorporated herein by
reference to Exhibit 2 to the Registrant's Form 8-A
relating to the registration of the Rights on the
American and Spokane Stock Exchanges.)
10(k) - Agreement and Plan of Merger, dated as of September
16, 1991, by and among the Registrant, CMC
Acquisition Corporation and Callahan Mining
Corporation. (Incorporated herein by reference to
Exhibit A to the Prospectus, dated November 22, 1991,
contained in the Registrant's Registration Statement
on Form S-4 (File No. 33-44096).
10(l) - Agreement, dated June 11, 1992, between Callahan
Mining Corporation and Hecla Mining Company
(Incorporated herein by reference to Exhibit 10(z) to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992.)
10(m) - Stock Purchase Agreement, dated as of April 30, 1993,
among Coeur New Zealand, Inc., the Registrant, Cyprus
gold New Zealand Limited, Cyprus Exploration and
Development Corporation and Cyprus Minerals Company.
(Incorporated herein by reference to Exhibit 2 to the
Registrant's Current Report on Form 8K dated April
30, 1993.)
10(n) - Amended and Restated Profit Sharing Retirement Plan
of the Registrant. (Incorporated herein by reference
to Exhibit 10(ff) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.) *
-------------
* Management contract or compensatory plan
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<PAGE> 46
10(o) - Indenture, dated as of January 26, 1994, between the
Registrant and Bankers Trust Company relating to the
Registrant's 6 3/8% Convertible Subordinated
Debentures Due 2004. (Incorporated herein by
reference to Exhibit 10(gg) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(p) - Purchase Agreement, dated January 18, 1994, between
the Registrant and Kidder, Peabody & Co. Incorporated
relating to the 6 3/8% Convertible Subordinated
Debentures Due 2004. (Incorporated herein by
reference to Exhibit 10(hh) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(q) - Registration Rights Agreement, dated January 26,
1994, between the Registrant and Kidder, Peabody &
Co., Incorporated relating to the 6 3/8% Convertible
Subordinated Debentures Due 2004. (Incorporated
herein by reference to Exhibit 10(ii) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.)
10(r) - 1993 Annual Incentive Plan and Long-Term Performance
Share Plan of the Registrant. (Incorporated herein by
reference to Exhibit 10(jj) to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.) *
10(s) - Supplemental Retirement and Deferred Compensation
Plan, dated January 1, 1993, of the Registrant.
(Incorporated herein by reference to Exhibit 10(kk)
to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.) *
10(t) - Lease Agreement, dated January 12, 1994, between
First Security Bank of Idaho and Coeur Rochester,
Inc. (Incorporated herein by reference to Exhibit
10(mm) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
10(u) - Agreement, dated January 1, 1994, between Coeur Gold
New Zealand Limited and Johnson Matthey (Aust.) Ltd.
(Incorporated herein by reference to Exhibit 10(mm)
to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.)
-------------
* Management contract or compensatory plan
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<PAGE> 47
10(v) - Non-employee Directors' Retirement Plan effective as
of March 19, 1993, of the Registrant. (Incorporated
herein by reference to Exhibit 10(oo) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.) *
10(w) - Extension of Employment and Severance Agreement
between the Registrant and Dennis E. Wheeler, dated
June 28, 1994. (Incorporated by reference to Exhibit
10 (nn) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.)*
10(x) - Form of letter extending the terms of the Severance
Agreements between the Registrant and James Sabala,
Tom Angelos, Michael Clark, Al Wilder, William Boyd,
Robert Martinez, Kevin Packard, James Duff and
Michael Tippett. (Incorporated by reference to
Exhibit 10(oo) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.)*
10(y) - 401k Plan of the Registrant. (Incorporated by
reference to Exhibit 10 (pp) to the Registrants
Annual Report on Form 10-K for the year ended
December 31, 1994.)*
10(z) - Option Agreement of October 24, 1994 between Compania
Minera El Bronce and CDE Chilean Mining Corporation.
(Incorporated by reference to Exhibit 10(qq) to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.)
10(aa) - Asset Contribution Agreement, effective as of January
1, 1995, among the Registrant, ASARCO Incorporated,
Callahan Mining Company and Silver Valley Resource
Corporation. (Incorporated herein by reference to
Exhibit 10(ff) to the Company's Annual Report of Form
10-K for the year ended December 31, 1995.)
10(bb) - Asset and Stock Purchase Agreement, dates as of April
28, 1995, among Schauemburg International, Inc., The
Flexaust Company, Inc. and Callahan Mining
Corporation. (Incorporated herein by reference to
Exhibit 2 to the Registrant's Current Report on Form
8-K dated May 2, 1995.)
------------
* Management contract or compensatory plan
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<PAGE> 48
10(cc) - Limited Recourse Project Financing Agreement, dated
April 19, 1995, between the Registrant and N.M.
Rothschild & Sons, Ltd. (Incorporated herein by
reference to Exhibit 10(b) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995.)
10(dd) - Venture Termination and Asset Purchase Agreement,
dated as of June 30, 1995, among Coeur Alaska, Inc.,
Echo Bay Alaska, Inc. and Echo Bay Exploration, Inc.
(Incorporated herein by reference to Exhibit 10 to
the Company's Current Report on Form 8-K dated July
7, 1995.)
10(ee) - Form of Standby Agreement, dated November 15, 1995,
between the Registrant and UBS Securities Inc.
(Incorporated herein by reference to Exhibit 1 to the
Registrant's Registration Statement on Form S-3 (File
No. 33-64255).)
10(ff) - Form of Offer, dated January 29, 1996, by the
Registrant to acquire all the ordinary shares of
Gasgoyne Gold Mines NL. (Incorporated herein by
reference to Exhibit 10(a) to the Registrant's
Current Report on Form 8-K filed January 31, 1996
(date of earliest event reported - December 21,
1995).)
10(gg) - Part A Statement of the Registrant relating to its
offer to acquire all the ordinary shares of Gasgoyne
Gold Mines NL. (Incorporated herein by reference to
Exhibit 10(b) to the Registrant's Current Report on
Form 8-K filed January 31, 1996 (date of earliest
event reported - December 21, 1995).)
10(hh) - Call Option Agreement Over Shares, dated December 20,
1995, between the Registrant and Ioma Pty Ltd.
(Incorporated herein by reference to Exhibit 10(c) to
the Registrant's Current Report on Form 8-K filed
January 31, 1996 (date of earliest event reported
-December 21, 1995).)
10(ii) - Agreement for the Purchase and Sale of Shares, dated
August 30, 1996, by Compania Minera El Bronce to CDE
Chilean Mining Corporation and Coeur d'Alene Mines
Corporation. (Incorporated herein by reference to
Exhibit 10(a) of the Registrant's Current Report on
Form 8-K filed November 5, 1996 (date of earliest
event reported - September 4, 1996).)
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<PAGE> 49
10(jj) - Amendment, dated August 30, 1996, to Purchase and
Sale, Cancellation and Receipt of Payment of Purchase
Sale Installments and Release of Mortgage, Chattel
Mortgages and Prohibitions between Compania Minera El
Bronce and Compania Minera CDE El Bronce.
(Incorporated herein by reference to Exhibit 10(b) of
the Registrant's Current Report on Form 8-K filed
November 5, 1996 (date of earliest event reported -
September 4, 1996).)
10(kk) - Loan Agreement, dated as of December 23, 1996, among
the Registrant (as the Borrower), NM Rothschild &
Sons Limited and Bayerische Vereinsbank AG (as the
Banks) and NM Rothschild & Sons Limited (as the Agent
for the Banks). (Filed herewith.)
21 - List of subsidiaries of the Registrant.
(Filed herewith.)
23 - Consent of Ernst & Young LLP. (Filed herewith.)
27 - Financial Data Schedule
(d) Independent auditors' reports are included herein as follows:
Coeur d'Alene Mines Corporation
Report of Ernst & Young LLP at December 31, 1995, and 1996, and for
each of the three years in the period ended December 31, 1996.
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<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Coeur d'Alene Mines Corporation
(Registrant)
Date: March 17, 1997 By: DENNIS E. WHEELER
----------------- ---------------------------
Dennis E. Wheeler
(Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature
---------
<S> <C> <C>
DENNIS E. WHEELER Chairman, President, March 17, 1997
- ---------------------- Chief Executive Officer
Dennis E. Wheeler and Director
JAMES A. SABALA Senior Vice President, March 17, 1997
- ---------------------- Chief Financial Officer
James A. Sabala and Director
CECIL D. ANDRUS Director March 17, 1997
- ----------------------
Cecil D. Andrus
JOSEPH C. BENNETT Director March 17, 1997
- ----------------------
Joseph C. Bennett
JAMES J. CURRAN Director March 17, 1997
- ----------------------
James J. Curran
DUANE B. HAGADONE Director March 17, 1997
- ----------------------
Duane B. Hagadone
JAMES A. MCCLURE Director March 17, 1997
- ----------------------
James A. McClure
JEFFERY T. GRADE Director March 17, 1997
- ----------------------
Jeffery T. Grade
</TABLE>
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<PAGE> 51
ANNUAL REPORT ON FORM 10-K
Item 8, Item 14(a), and Item 14(d)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1996
COEUR D'ALENE MINES CORPORATION
COEUR D'ALENE, IDAHO
<PAGE> 52
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Shareholders and Board of Directors
Coeur d'Alene Mines Corporation
We have audited the accompanying consolidated balance sheets of Coeur d'Alene
Mines Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Coeur
d'Alene Mines Corporation and subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Seattle, Washington ERNST & YOUNG LLP
February 5, 1997
F-1
<PAGE> 53
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1996 1995
--------- ---------
ASSETS (In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 43,455 $ 16,485
Funds held in escrow 2,271
Short-term investments 124,172 63,077
Receivables 11,573 13,809
Inventories 31,992 30,981
-------- ---------
TOTAL CURRENT ASSETS 211,192 126,623
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment 118,993 118,083
Less accumulated depreciation 50,743 34,152
--------- ---------
68,250 83,931
MINING PROPERTIES
Operational mining properties 171,517 150,656
Less accumulated depletion 38,264 38,529
--------- ---------
133,253 112,127
Developmental properties 110,985 108,820
--------- ---------
244,238 220,947
OTHER ASSETS
Investment in unconsolidated affiliate 48,231
Notes receivable 4,000 5,000
Debt issuance costs, net of accumulated
amortization 4,081 4,702
Marketable equity securities and other 338 4,443
---------- ----------
56,650 14,145
---------- ----------
$580,330 $ 445,646
========== ==========
</TABLE>
F-2
<PAGE> 54
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1996 1995
---------- ---------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,327 $ 5,743
Accrued liabilities 4,976 3,525
Accrued interest payable 4,968 4,526
Accrued salaries and wages 5,242 5,039
Bank loans 8,021
Current portion of remediation costs 3,500
Current portion of obligations under
capital leases 532 2,193
--------- ---------
TOTAL CURRENT LIABILITIES 31,566 21,026
LONG-TERM LIABILITIES
6% subordinated convertible debentures 49,840 50,000
6 3/8% subordinated convertible debentures 100,000 100,000
Long-term borrowings 39,900 24,000
Obligations under capital leases 213
Other long-term liabilities 12,613 9,386
Deferred income taxes 1,402
--------- ---------
TOTAL LONG-TERM LIABILITIES 202,566 184,788
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock) -
authorized 10,000,000 shares, 7,077,833
issued and outstanding 7,078
Common Stock, par value $1.00 per share-
authorized 60,000,000 shares, issued 22,950,182
and 21,524,093 shares (including 1,059,211
shares held in treasury) 22,950 21,524
Capital surplus 400,187 247,100
Accumulated deficit (70,459) (15,889)
Unrealized gains (losses) on short-term
investments (352) 361
Repurchased and nonvested shares (13,206) (13,264)
--------- ---------
346,198 239,832
--------- ---------
$580,330 $445,646
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 55
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- --------- --------
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
INCOME
Sale of concentrates and dore' $ 92,731 $ 89,239 $ 79,606
Less cost of mine operations 83,283 72,210 67,802
--------- --------- ---------
GROSS PROFITS 9,448 17,029 11,804
OTHER INCOME--interest, dividends,
and other 13,159 9,504 12,587
--------- --------- ---------
TOTAL INCOME 22,607 26,533 24,391
EXPENSES
Administration 3,716 3,677 3,825
Accounting and legal 1,753 1,626 2,473
General corporate 7,147 6,207 6,258
Mining exploration 7,695 4,854 3,878
Idle facilities 1,481 1,559
Interest 3,635 9,746 11,399
Writedown of mining properties 54,415
--------- --------- ---------
TOTAL EXPENSES 78,361 27,591 29,392
--------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (55,754) (1,058) (5,001)
Provision (benefit) for income taxes (1,184) 200 (265)
--------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS (54,570) (1,258) (4,736)
Income from discontinued operations
(net of taxes) 2,412 793
--------- --------- ---------
NET INCOME (LOSS) $(54,570) $ 1,154 $ (3,943)
========= ========= =========
NET INCOME(LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS $(62,967) $ 1,154 $ (3,943)
========= ========= =========
EARNINGS PER SHARE DATA
Weighted average number of shares
of Common Stock and equivalents
used in calculation (in thousands) 21,469 15,888 15,388
========= ========= =========
Net loss from continuing operations $ (2.54) $ (.08) $ (.31)
Income from discontinued operations .15 .05
--------- --------- ---------
Net income (loss) per share $ (2.54) $ .07 $ (.26)
========= ========= =========
Net income (loss) attributable to
Common Shareholders:
Net loss from continuing operations $ (2.93) $ (.08) $ (.31)
Income from discontinued operations .15 .05
--------- --------- ---------
Net income (loss) per share $ (2.93) $ .07 $ (.26)
========= ========= =========
CASH DIVIDENDS PER COMMON SHARE $ .15 $ .15 $ .15
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 56
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For Years Ended December 31, 1996, 1995, and 1994
(In Thousands)
<TABLE>
<CAPTION>
Preferred Stock
(MARCS) Common Stock
---------------------- -----------------------
Par Par Capital Accumulated
Shares Value Shares Value Surplus Deficit
-------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 16,394 $16,394 $181,038 $(13,100)
Net Loss (3,943)
Cash Dividends (2,303)
Issuance of Shares Under
Stock Compensation Plan
(net) 19 19 366
Unrealized Losses on
Marketable Securities
Other 220 220 3,780
-------- -------- -------- --------- --------- ---------
Balance at December 31, 1994 16,633 16,633 182,881 (17,043)
Net Income 1,154
Cash Dividends (2,339)
Issuance of Shares Under
Stock Compensation Plan
(net) 24 24 384
Unrealized Gains on
Marketable Securities
Conversion of 7% Debentures 4,867 4,867 66,174
-------- -------- -------- --------- --------- ---------
Balance at December 31, 1995 21,524 21,524 247,100 (15,889)
Net Loss (54,570)
Issuance of MARCS 7,078 7,078 137,548
Cash Dividends (11,028)
Issuance of Shares Under
Stock Compensation Plan
(net)
Shares Issued on
Acquisition of 1,420 1,420 26,467
Unconsolidated
Affiliate
Unrealized Loss on
Marketable Securities
Conversion of 6% Debentures 6 6 150
Other (50)
-------- -------- -------- --------- --------- ---------
7,078 $ 7,078 22,950 $22,950 $400,187 $(70,459)
======== ======== ======== ========= ========= =========
<CAPTION>
Unrealized
Gains Repurchased and
(Losses) on Nonvested Shares
Short-Term ----------------------
Investments Shares Amount Total
----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 (1,058) $(13,483) $170,849
Net Loss (3,943)
Cash Dividends (2,303)
Issuance of Shares Under
Stock Compensation Plan
(net) 125 510
Unrealized Losses on
Marketable Securities $(8,820) (8,820)
Other (1) 4,000
--------- -------- --------- ---------
Balance at December 31, 1994 (8,820) (1,059) (13,358) 160,293
Net Income 1,154
Cash Dividends (2,339)
Issuance of Shares Under
Stock Compensation Plan
(net) 94 502
Unrealized Gains on
Marketable Securities 9,181 9,181
Conversion of 7% Debentures 71,041
--------- -------- --------- ---------
Balance at December 31, 1995 361 (1,059) (13,264) 239,832
Net Loss (54,570)
Issuance of MARCS 144,626
Cash Dividends (11,028)
Issuance of Shares Under
Stock Compensation Plan
(net) 58 58
Shares Issued on
Acquisition of 27,887
Unconsolidated
Affiliate
Unrealized Loss on
Marketable Securities (713) (713)
Conversion of 6% Debentures 156
Other (50)
--------- -------- --------- ---------
$ (352) (1,059) $(13,206) $346,198
========= ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 57
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- --------- --------
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing
operations $(54,570) $ (1,258) $ (4,736)
Add (less) noncash items:
Depreciation, depletion, and
amortization 13,381 16,893 17,537
Deferred income taxes (1,402) (1,786) (629)
(Gain) loss on disposition of property,
plant and equipment (985) 458 132
(Gain) loss on foreign currency
transactions 155 597 (784)
(Gain) loss on disposition of
marketable securities (1,262) 885 (1,542)
Writedown of mining property 54,415
Undistributed earnings of investment in
unconsolidated subsidiary (1,905)
Changes in Operating Assets and Liabilities:
Receivables 3,493 (1,239) (2,932)
Inventories 1,824 3,234 (953)
Accounts payable and
accrued liabilities (5,360) 2,528 759
--------- --------- --------
Net cash provided by continuing operations 7,784 20,312 6,852
Income from discontinued operations 2,412 793
Add (less) noncash items:
Depreciation, depletion and amortization 85 289
Gain (loss) on disposition of
discontinued operations (3,964) 2
Deferred income taxes 1,608 529
Change in operating assets and liabilities
Receivables 601 (267)
Inventories (30) (323)
Accounts payable and accrued liabilities (109) 23
--------- --------- --------
Net cash provided by discontinued
operations 603 1,046
--------- --------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,784 20,915 7,898
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of short-term investments (148,952) (2,424) (107,901)
Investment in unconsolidated affiliate (19,301)
Proceeds from sales of short-term investments
and marketable securities 92,167 70,112 43,349
Purchases of property, plant and
equipment (4,799) (44,895) (9,248)
Proceeds from sale of assets 2,372 1,177 488
Proceeds from sale of discontinued
operations 2,566 3,133
Expenditures on operational mining
properties (44,432) (21,027) (12,737)
Expenditures on developmental
properties (13,066) (42,510) (12,760)
Other 2,148 (1,418) 70
--------- --------- --------
NET CASH USED IN
INVESTING ACTIVITIES (131,297) (37,852) (98,739)
</TABLE>
F-6
<PAGE> 58
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
--------- ---------- ---------
(continued) (In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of obligations under
capital leases (2,041) (2,041) (1,900)
Payment of cash dividends (11,028) (2,339) (2,303)
Proceeds from MARCS issuance 144,626
Proceeds from bond issuance 95,514
Proceeds from bank borrowings 19,186 24,000
Payment of bond conversion costs (1,346)
Retirement of other long-term liabilities (260)
--------- ---------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 150,483 18,274 91,311
--------- ---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 26,970 1,337 470
Cash and cash equivalents at beginning
of year:
Related to continuing operations 16,485 14,707 14,389
Related to discontinued operations 441 289
--------- ---------- ---------
16,485 15,148 14,678
--------- ---------- ---------
Cash and cash equivalents at end
of year:
Related to continuing operations 43,455 16,485 14,707
Related to discontinued operations 441
--------- ---------- ---------
$ 43,455 $ 16,485 $ 15,148
========= ========== =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise specified)
NOTE A--BUSINESS OF COEUR D'ALENE MINES CORPORATION
Coeur d'Alene Mines Corporation (Coeur or the Company) is principally
engaged through its subsidiaries in the exploration, development, operation
and/or ownership of silver and gold mining properties located in the United
States (Nevada, Idaho and Alaska), Australasia (New Zealand and Australia), and
South America (Chile).
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements
include the wholly-owned subsidiaries of the Company, the most significant of
which are Coeur Rochester Inc., Callahan Mining Corporation and its subsidiary
Coeur New Zealand, Inc., Coeur Alaska, Inc., CDE Fachinal Ltd. and Compania
Minera CDE El Bronce. The consolidated financial statements also include all
entities in which voting control of more than 50% is held by the Company.
Related minority interests are not material and are included in other assets.
Intercompany balances and transactions have been eliminated in consolidation.
Investments in joint ventures are accounted for on a proportionate
consolidation basis, the most significant of which are the Golden Cross Mine
(80%) and Silver Valley Resources Corporation(50%).
Revenue Recognition: Revenue is recognized when title to gold and
silver passes at the shipment or delivery point. The effects of forward sales
are reflected in revenue at the date the related precious metals are delivered
or the contracts expire.
Inventories: Inventories of ore on leach pads and in the milling
process are valued based on actual costs incurred to place such ores into
production, less costs allocated to minerals recovered through the leaching and
milling processes. Inherent in this valuation is an estimate of the percentage
of the minerals on leach pads and in process that will ultimately be recovered.
Management evaluates this estimate on an ongoing basis. Adjustments to the
recovery rate are accounted for prospectively. All other inventories are
stated at the lower of cost or market, with cost being determined using the
first-in, first-out and weighted average cost methods. Dore' inventory includes
product at the mine site and product held by refineries.
Property, Plant, and Equipment: Property, plant, and equipment are
recorded at cost. Depreciation, using the straight-line method, is provided
over the estimated useful lives of the assets. Certain mining equipment is
depreciated using the units-of-production method based upon
F-8
<PAGE> 60
estimated total reserves. Maintenance and repairs are charged to operations as
incurred.
Mining Properties: Values for mining properties represent acquisition
costs and/or the fair market value of Common Stock issued for properties plus
developmental costs. Cost depletion has been recorded based on the
units-of-production method based on proven and probable reserves. Management
evaluates the net carrying value of all operations, property by property, on a
regular basis to reach a judgment concerning possible permanent impairment of
value and the need for a write-down in asset value to net realizable value.
These reviews require judgment and the use of estimates, and are affected by
the risks and uncertainties inherent in normal operations. Considerations
include the level of maintenance and standby costs, current projections of
metal prices, and other nonoperating alternatives.
Reclamation Costs: Post-closure reclamation and site restoration
costs are estimated based upon environmental regulatory requirements and are
accrued ratably over the life of the mine using the units-of-production method.
Current expenditures relating to ongoing environmental and reclamation programs
are expensed as incurred. Although the ultimate amount of the obligations to
be incurred is uncertain at December 31, 1996 and 1995, the Company has
recorded accrued liabilities of $6.0 million and $4.3 million as of December
31, 1996 and 1995, respectively. These amounts are included as other long-term
liabilities.
Exploration and Development: Costs incurred in the search for new
mineral properties are charged directly to expense. Development expenditures
incurred prior to reaching the production stage, related to mining and drilling
properties with identified economic reserves, are capitalized. Mine development
costs incurred to access reserves on producing mines are also capitalized.
Interest costs are capitalized on development properties until the properties
are placed into operation.
Cash and Cash Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. As of December 31, 1996 and 1995, cash and cash equivalents
included $15.9 million and $15.3 million of cash, respectively. The balance of
the reported amounts consists principally of investment grade commercial paper.
Amounts reported represent cost which approximates fair value.
Short-term Investments: The Company invests in debt and equity
securities which are classified as available for sale, according to provisions
of FAS 115 "Accounting for Certain Investments in Debt and Equity Securities".
Accordingly, securities are carried at fair value, determined by quoted prices.
Unrealized holding gains and losses on such securities are excluded from
earnings and are reported as a separate component of shareholders' equity until
realized.
F-9
<PAGE> 61
Foreign Currencies: Monetary assets and liabilities of the Company's
New Zealand and Chilean operations are translated into U.S. dollars at year-end
exchange rates and revenue and expenses are translated at average exchange
rates. Translation gains and losses are reflected in operations. Nonmonetary
assets and liabilities are converted at historical rates. Realized gains and
losses from foreign currency transactions are reflected in operations.
Foreign Currency Forward Exchange Contracts: As part of its program
to manage foreign currency risk, the Company has entered into foreign currency
forward exchange contracts. Contracts related to firm commitments are
designated and effective as hedges. Gains and losses are deferred and
recognized in the same period as the related transactions.
Forward Delivery Contracts: The Company sells refined gold and silver
from its mines to various precious metals refiners pursuant to forward
contracts or at spot prices prevailing at the time of sale. Revenue from
forward sales transactions is recognized as metal is delivered.
Earnings Per Share: Earnings per share is calculated based on the
weighted average number of common stock and common stock equivalents
outstanding, unless the addition of common stock equivalents would be
anti-dilutive.
Use of Estimates: The Company's management has made a number of
estimates and assumptions relating to the reporting of assets, liabilities, and
expenses to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
New Accounting Standard: In 1996, the Company adopted the
disclosure-only requirement of Financial Accounting Standards Board (FASB)
Statement No. 123 "Accounting for Stock-Based Compensation." Accordingly, no
compensation expense has been recognized for options issued under the plan.
The adoption of this disclosure standard has no material effect on the
disclosed results of the Company.
Reclassification: Certain reclassifications of prior year balances
have been made to conform to current year classifications.
NOTE C--ACQUISITION OF A MINING COMPANY AND UNCONSOLIDATED AFFILIATE
El Bronce: In July 1994, the Company had made an agreement
pursuant to which the Company acquired operating control, a 51% interest in
operating profits, and an option to acquire a 51% equity interest in the
producing El Bronce Mine. On September 4, 1996, the Company exercised its
option to acquire that 51% equity interest and also purchased the remaining 49%
of the shares of El Bronce, bringing its total ownership interest to 100%. The
terms of the purchase included the payment of $10.5 million in cash, prepayment
of the remainder of the option price in the
F-10
<PAGE> 62
approximate amount of $3.8 million and a net smelter return royalty of 3% to be
paid to the seller quarterly, commencing on January 1, 1997. The acquisition
has been accounted for as a purchase with the excess of the purchase price over
the net book value of the mine ($4.9 million) being allocated to mining
properties.
Gasgoyne: In May 1996, Coeur acquired approximately 35% of the
outstanding shares of a publicly listed Australian gold producer, Gasgoyne Gold
Mines NL ("Gasgoyne"), by issuing a total of 1,419,832 shares of the Company's
Common Stock and paying a total of approximately $15.4 million to Gasgoyne
shareholders. Coeur cash payments to Gasgoyne shareholders were financed by a
$20.0 million loan facility with Rothschild Australia Ltd., which provided for
borrowings at an annual interest rate equal to LIBOR plus 1.5%. Borrowings
under the agreement were $18.9 million as of December 31, 1996. During the
second quarter ended June 30, 1996, Coeur began reporting its share of
Gasgoyne's net results of operations pursuant to the equity method of
accounting for investments. Such amounts are reflected as a component of
interest and other income.
The following table sets forth a condensed summary of the results of
operations of Gasgoyne for the twelve-month period ended December 31, 1996.
Coeur's proportionate share of Gasgoyne net income is included from May to
December 1996 under the caption "Other Income" in the Company's consolidated
statement of operations.
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Total Revenues $35,098
Operating Profit $13,679
Net Income $12,404
</TABLE>
The following pro forma information reflects the Company's results of
operations as if the Gasgoyne transaction, that occurred in May 1996, had
occurred at the beginning of the periods presented.
<TABLE>
<CAPTION>
For the Twelve Months Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Total Income $ 25,922 $ 26,995
Net Income (Loss) $(51,590) $ 965
Net Income (Loss) per share $ (2.40) $ .06
</TABLE>
F-11
<PAGE> 63
NOTE D--WRITE-DOWN OF MINING PROPERTIES
During the second quarter of 1996, the Company determined that certain
adjustments were required to properly reflect the estimated net realizable
values of certain mining properties in accordance with FASB statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." The Golden Cross Mine and the nearby Waihi East property
were written down by approximately $53 million 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-down 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 due to management's decision not to exercise its final option payment
on the project.
NOTE E--DISCONTINUED OPERATIONS
Flexaust Company
On May 2, 1995, the Company sold the assets of its flexible hose and
tubing division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4.0 million was paid at
the time of closing and the balance was payable over the next five years. The
results of operations and the gain on sale of Flexaust manufacturing segment
are presented as "Discontinued Operations." The Company recorded a pre-tax gain
on the sale of approximately $4.0 million ($2.4 million net of income taxes)
during 1995. Flexaust generated revenues of $3.9 million and net income from
operations of $.056 million in the period from January 1, 1995 to May 5, 1995
the latter of which is reflected as a component of income from discontinued
operations.
F-12
<PAGE> 64
NOTE F--SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
The amortized cost of available-for-sale securities is adjusted for
premium and discount amortization. Such amortization is included in Other
Income. The following is a summary of Available-for-Sale Securities as of
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Available-For-Sale Securities
----------------------------------------------------------------------------------
(in thousands) Gross Gross Estimated
Unrealized Unrealized Fair
1996 Cost Losses Gains Value
----------------- ------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
U.S. Corporate $ 83,236 $ 40 $ 2 $ 83,198
U.S. Government 39,658 25 97 39,730
------------- ------------ ----------- ------------
Total Debt Securities 122,894 65 99 122,928
Equity Securities 1,672 389 3 1,286
------------- ------------ ----------- ------------
$124,566 $ 454 $ 102 $124,214
1995
-----------------
U.S. Corporate $ 27,369 $ 6 $ 109 $ 27,472
U.S. Government 30,239 87 30,152
------------- ------------ ----------- ------------
Total Debt Securities 57,608 93 109 57,624
Equity Securities 9,498 239 584 9,843
------------- ------------ ----------- ------------
$ 67,106 $332 $693 $ 67,467
============= ============ =========== ============
</TABLE>
The gross realized gains on sales of available-for-sale securities
totaled $1.3 million and $.3 million during 1996 and 1995, respectively. The
gross realized losses totaled $.05 million and $1.2 million during 1996 and
1995, respectively. The gross realized gains and losses are based on a
carrying value (cost net of discount or premium) of $90.9 million and $71.3
million of short-term investments sold during 1996 and 1995, respectively.
Short-term investments mature at various dates through December 1997.
On January 26, 1996, for a total consideration of approximately
US$10.7 million, the Company acquired 5.5 million shares and options to acquire
an additional 5.0 million shares of Orion Resources NL, an Australian gold
mining company (Orion). Prior to 1996, Coeur had acquired a total of 3.3
million shares of Orion for a total cost of US$3.8 million. On March 27, 1996,
the Company exercised its option to acquire the additional 5.0 million shares
of Orion. As a result of these transactions, Coeur then held approximately
19.2% of Orion's outstanding shares. On September 28, 1996, the Company sold
its holdings of Orion of 13.8 million shares for A$1.80 per share or
F-13
<PAGE> 65
A$24,894,000, (US$ 19.6 million). As a result, the Company recorded a gain on
the sale of approximately US$1.3 million during 1996.
NOTE G--INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
---------- ---------
<S> <C> <C>
In process and on leach pads $ 19,948 $ 25,728
Concentrate inventory 4,996
Dore' inventory 739 2,052
Supplies 6,309 3,201
---------- ---------
$ 31,992 $ 30,981
========== =========
</TABLE>
NOTE H--PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
--------- --------
<S> <C> <C>
Land $ 1,350 $ 2,509
Buildings and improvements 60,851 63,444
Machinery and equipment 47,697 43,780
Capital leases of buildings
and equipment 9,095 8,350
--------- ---------
$118,993 $118,083
========= =========
</TABLE>
Assets subject to capital leases consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
-------- --------
<S> <C> <C>
Buildings $ 5,105 $ 5,105
Equipment 3,990 3,245
-------- --------
TOTAL BUILDINGS AND EQUIPMENT 9,095 8,350
Rochester operational mining
property 7,871 7,871
-------- --------
16,966 16,221
Less allowance for accumulated
amortization and depletion 9,863 9,255
-------- --------
NET ASSETS SUBJECT TO CAPITAL
LEASES $ 7,103 $ 6,966
======== ========
</TABLE>
Lease amortization is included in depreciation and depletion expense.
F-14
<PAGE> 66
The Company has a lease agreement for the Rochester mineral processing
facilities through October 1998. Upon expiration of the lease, the Company is
entitled to purchase the facilities for the lesser of $5.9 million or fair
market value.
The Company has entered into various operating lease agreements which
expire over a period of five to seven years. The total rent expense charged to
operations under these agreements was $4.6 million, $4.4 million and $3.7
million for 1996, 1995, and 1994, respectively.
Minimum lease payments under leases are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Capital Operating
----------- --------- ---------
<S> <C> <C> <C>
1997 602 5,818
1998 228 3,820
1999 1,351
2000 343
2001-2003 463
-------- -------
TOTAL MINIMUM PAYMENTS DUE 830 $11,795
=======
Less amount representing
interest 85
--------
PRESENT VALUE OF NET
MINIMUM LEASE PAYMENTS 745
Less current maturities 532
--------
$ 213
========
</TABLE>
F-15
<PAGE> 67
NOTE I - MINING PROPERTIES
<TABLE>
<CAPTION>
Capitalized costs for mining properties December 31,
consist of the following: 1996 1995
--------- ---------
<S> <C> <C>
Operational mining properties:
Rochester Mine, less accumulated
depletion of $36,904
and $32,712 $ 42,372 $ 40,072
Silver Valley Resources, net investment
in mining property 13,207 8,706
El Bronce Mine less accumulated
depletion of $1,360 and $554 36,222 16,469
Fachinal Mine, pre-production phase 41,452 34,200
Golden Cross Mine, less
accumulated depletion of
$5,263 in 1995 12,680
--------- ---------
TOTAL OPERATIONAL MINING PROPERTIES 133,253 112,127
Developmental mining properties:
Kensington 108,100 95,403
Other 2,885 13,417
--------- ---------
TOTAL DEVELOPMENTAL MINING PROPERTIES 110,985 108,820
--------- ---------
TOTAL MINING PROPERTIES $244,238 $220,947
========= =========
</TABLE>
OPERATIONAL MINING PROPERTIES
The Rochester Mine: The Company owns and operates this silver and
gold surface mining operation. The Company has conducted operations at the
Rochester Mine since September 1986. It is one of the largest primary silver
mines in the United States and is a significant gold producer as well. A prior
owner of the property has retained a royalty interest that varies up to 5% of
the net smelter revenues of the Rochester property, provided the market price
of silver is at least $17.71.
Golden Cross Mine: On April 30, 1993, the Company acquired an 80%
operating interest in the Golden Cross Mine. The mine is a gold and silver
surface and underground mining operation located near Waihi, New Zealand.
F-16
<PAGE> 68
The Company's 80% interest in the Golden Cross Mine joint venture,
accounted for by the proportionate consolidation method, is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---------- ----------
<S> <C> <C>
Sales of dore' $ 26,293 $ 32,341
Cost of mine operation (28,069) (26,598)
Writedown of mining property (52,036)
---------- ----------
Net income (Loss) before
income taxes $(53,812) $ 5,743
========= =========
Assets $ 2,408 $ 41,926
Liabilities (47,271) (32,809)
--------- ---------
Shareholders' equity (deficit) $(44,863) $ 9,117
========= =========
</TABLE>
See Note D for discussion of 1996 writedown of mining properties.
Silver Valley Resources, Inc.: On January 1, 1995, the Company entered
into an agreement with Asarco Incorporated and formed a new company named
Silver Valley Resources Corporation (Silver Valley). Both Coeur and Asarco
contributed to Silver Valley their respective interests in the Galena and Coeur
Mines as well as other assets and waived certain cash flow entitlements at the
Galena Mine in return for shares of capital stock of Silver Valley. The
transaction resulted in no gain or loss to the Company. Coeur's 50% investment
is included on the balance sheet as operational mining properties. On February
9, 1996, Silver Valley reopened the Coeur and Galena Mines with full production
at the Coeur Mine beginning in June 1996. The two mines had previously been on
standby status.
Fachinal Mine: The Fachinal Mine is a gold and silver open pit and
underground mine located in southern Chile which commenced pre-production in
October 1995 which continued until December 31, 1996. During the fourth quarter
of 1995 and for the year ended December 31, 1996, operating costs were
capitalized as start up costs. Revenue generated during the pre-production
period was credited against deferred start up costs. During 1996, the Company
incurred costs and expenses of $6.0 million in excess of revenues. This amount
has been added to the operational mining property and will be amortized using
the units of production method. Commencing in 1997, the property will be
accounted for as an operating property.
El Bronce Mine: The El Bronce Mine is a gold and silver underground
mine located in central Chile approximately 90 miles north of Santiago. On
September 4, 1996, the Company exercised its option to acquire 51% and
purchased the remaining 49% of the shares of Compania Minera CDE El Bronce,
resulting in ownership interest of 100%.
F-17
<PAGE> 69
DEVELOPMENTAL PROPERTIES
Kensington: On July 7, 1995, the Company became the 100% owner and
operator of the Kensington property near Juneau, Alaska, by acquiring the 50%
interest held by its former joint venture partner, for $32.5 million plus a
scaled net returns royalty on 1 million ounces of future gold production after
Coeur recoups the $32.5 million purchase price and its construction
expenditures incurred after July 7, 1995 in connection with placing the
property into commercial production. The royalty ranges from 1% at $400 gold
prices to a maximum of 2 1/2% at gold prices above $475, with a royalty to be
capped at 1 million ounces of production.
NOTE J--LONG-TERM DEBT
On December 19, 1995, the Company completed the underwritten call for
redemption of its approximately $75.0 million principal amount of 7%
Convertible Subordinated Debentures due 2002 with the entire debenture
indebtedness converted into equity. Debenture holders received approximately
64.6 shares of common stock for each one thousand dollar principal amount with
cash paid in lieu of any fractional shares. Coeur issued a total of
approximately 4.9 million shares of common stock in connection with the
debenture conversions, increasing its total shares of outstanding common stock
to approximately 21.5 million shares.
In 1996, the Company completed a refinancing of the project loan
agreement with a bank syndicate lead by N.M. Rothschild & Sons Ltd. which
substituted a general corporate loan financing for the limited recourse project
financing. The agreement provides for a borrowing of $24.0 million. The
interest rate on the facility is equal to LIBOR plus 1.5%. The borrowing is
repayable in sixteen equal quarterly installments commencing in the third
quarter of 1997.
On June 30, 1996, the Company secured a $50.0 million revolving line
of credit with Rothschild Australia Ltd., in connection with the acquisition of
the Company's investment in Gasgoyne Gold Mines Ltd. As of December 31, 1996,
current borrowings amounted to $18.9 million at an annual interest rate equal
to LIBOR plus 1.5%. The borrowing is repayable by April 30, 1999. On October
19, 1996, at the Company's discretion, $30.0 million of the total commitment
was canceled, leaving $1.1 million of undrawn commitments in place. The
Company's shareholdings of Gasgoyne Gold Mines Ltd. are mortgaged as collateral
against the loan.
The $50 million principal amount of 6% Convertible Subordinated
Debentures Due 2002 are convertible into shares of Common Stock prior to
maturity, unless previously redeemed, at a conversion rate of approximately 38
shares of Common Stock for each one thousand dollar of principal (equivalent to
a conversion price of $25.57 per share of Common Stock). The Company is
required to make an annual interest payment. The debentures are redeemable at
the option of the Company. The debentures mature June 10, 2002.
F-18
<PAGE> 70
The $100 million principal amount of 6 3/8% Convertible Subordinated
Debentures Due 2004 are convertible into shares of Common Stock on or before
January 31, 2004, unless previously redeemed, at a conversion price of $25.77
per share. The Company is required to make semi-annual interest payments. The
debentures are redeemable at the option of the Company on or after January 31,
1997. The debentures, which have no other funding requirements until maturity,
mature January 31, 2004.
The carrying amounts and fair values of long-term borrowings, which
are based on published values on December 31, 1996 and 1995, consisted of the
following:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Value Value
--------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
6% Convertible
Subordinated
Debentures
Due 2002 $ 49,840 $ 45,105 $50,000 $44,375
6.375% Convertible
Subordinated
Debentures
Due 2004 $100,000 $ 93,500 $100,000 $93,375
</TABLE>
Total interest accrued in 1996, 1995, and 1994 was $13.1 million,
$17.1 million, and $15.6 million, respectively, of which $9.5 million, $7.4
million, and $4.2 million, was capitalized as a cost of the mines under
development.
Interest paid was $12.1 million, $16.3 million, and $12.1 million in
1996, 1995, and 1994, respectively.
NOTE K--INCOME TAXES
The components of the provision (benefit) for income taxes in the
consolidated statements of operations are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
From Continuing Operations:
Current $ 203 $ 1,986 $ 364
Deferred (1,387) (1,786) (629)
-------- --------- ---------
PROVISION (BENEFIT) FOR
INCOME TAX $(1,184) $ 200 $ (265)
========= ========= =========
From Discontinued Operations:
Current
Deferred 1,608 528
--------- ---------
PROVISION FOR INCOME TAX $ 1,608 $ 528
========= =========
Total:
Current $ 203 $ 1,986 $ 364
Deferred (1,387) (178) (101)
-------- --------- --------
PROVISION (BENEFIT) FOR
INCOME TAX $(1,184) $ 1,808 $ 263
======== ========= =========
</TABLE>
F-19
<PAGE> 71
Deferred taxes arise due to temporary differences in deductions for
tax purposes and for financial statement accounting purposes. The tax effect
and sources of these differences are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Reserve for loss on
mine closure $ (971) $ 100 $ 123
Net mine exploration and
development costs (9,299) (2,715) 1,249
Net lease payments 591 498 470
Regular tax expense(benefit)
on utilization of net
operating losses (32,967) 3,673 (1,197)
Adjustments to net operating
loss and credit carryforwards 1,046 (2,083) (159)
Environmental costs (478) 87 430
Amortization of bond premium 689 (689)
Unrealized investment losses 3,087 (3,087)
Change in valuation
allowance 41,501 (2,420) 2,692
Change in deferred
state taxes (412) (40)
Other (810) (682) 107
-------- -------- ---------
Deferred income tax expense
(benefit) (1,387) (178) (101)
-------- -------- ---------
Less differences attributable to
discontinued operations 1,608 528
-------- -------- ---------
Deferred income tax expense
(benefit) from continuing
operations $(1,387) $(1,786) $ (629)
======== ======== =========
</TABLE>
F-20
<PAGE> 72
As of December 31, 1996 the significant components of the Company's net
deferred tax liability were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
PP&E, net $ 14,132 $ 15,599
State taxes 15
--------- ---------
Total deferred tax liabilities 14,132 15,614
Deferred tax assets:
Net operating loss carryforwards 80,977 20,690
AMT credit carryforwards 1,650 2,097
Business credit carryforward 542 542
--------- ---------
Total deferred tax assets 83,169 23,329
Valuation allowance for deferred
tax assets (69,037) (9,118)
--------- ---------
Net deferred tax assets 14,132 14,211
--------- ---------
Net deferred tax liabilities $ -0- $ 1,403
========= ==========
</TABLE>
Changes in the valuation allowance in 1996 relate primarily to losses
which are not currently recognized.
Coeur d'Alene Mines Corporation intends to reinvest the unremitted
earnings of its non-U.S. subsidiaries and postpone their remittance
indefinitely. Accordingly, no provision for U.S. income taxes was required on
such earnings during the three-year period ended December 31, 1996. It is not
practicable to estimate the tax liabilities which would result upon such
repatriation.
F-21
<PAGE> 73
A reconciliation of the Company's effective income tax rate with the
federal statutory tax rate for the periods indicated is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Tax benefit on continuing operations
computed at statutory rates (35.0%) (35.0%) (35.0%)
Percentage depletion (3.3%) (190.0%) (46.1%)
Dividend received deduction (15.4%) (5.2%)
Interest on foreign subsidiary debt 177.7% 37.8%
Equity in earnings of unconsolidated
subsidiaries 49.0%
State income tax provision (25.0%) 0.9%
Change in valuation allowance 38.1% 2.7% 43.4%
Utilization of net operating losses (73.4%) (4.4%)
Federal tax assessments and
withholding 116.7% 9.3%
Other (net) (1.9%) 11.6% (6.0%)
-------- ------- --------
EFFECTIVE TAX RATE ON CONTINUING
OPERATIONS (2.1%) 18.9% (5.3%)
======== ======= ========
</TABLE>
For tax purposes, as of December 31, 1996, the Company has an
operating loss carryforward as follows:
<TABLE>
<CAPTION>
U.S. New Zealand Chile Total
-------- ----------- -------- --------
<S> <C> <C> <C> <C>
Regular losses $129,003 $103,365 $11,436 $243,804
AMT losses 86,494 86,494
AMT credits 1,650 1,650
General business credits 542 542
</TABLE>
Regular and AMT tax losses expire through 2011.
As of December 31, 1996, Callahan Mining Corporation, a subsidiary, has a
net operating loss carryforward of approximately $17.0 million and an
alternative minimum tax loss carryforward of approximately $9.6 million which
expire through 2006. The utilization of Callahan Mining Corporation's net
operating losses is subject to limitations.
NOTE L--SHAREHOLDERS' EQUITY AND STOCK PLANS
On March 8, 1996, the Company completed a public preferred stock
offering of $140.0 million of Mandatory Adjustable Redeemable Convertible
Securities (MARCS). The Company issued 6,588,235 shares of MARCS which were
offered at a public offering price of $21.25 per share. Each share of MARCS is
mandatorily convertible four years after issuance into 1.111 shares of Common
Stock of the Company, subject to adjustment in certain events, unless earlier
converted by the holder into Common Stock or redeemed for Common Stock by the
Company. The annual dividend payable on
F-22
<PAGE> 74
the MARCS will be $1.488 per share, payable quarterly. The dividends are
deducted in computing net income attributable to Common Shareholders. On April
8, 1996, the Company sold an additional 489,598 shares of MARCS to the
underwriters as a result of their exercise of an overallotment option granted
to them in connection with the public offering. With the exercise of the
overallotment option, the Company sold a total of 7,077,833 shares of MARCS
for a total offering price of $150.4 million which resulted in net proceeds to
the Company of $144.6 million.
In June 1989, the shareholders adopted a shareholder rights plan which
entitles each holder of the Company's Common Stock to one right. Each right
entitles the holder to purchase one one-hundredth of a share of newly
authorized junior preferred stock. The exercise price is $100, making the
price per full preferred share ten thousand dollars. The rights will not be
distributed and become exercisable unless and until ten days after a person
acquires 20% of the outstanding common shares or commences an offer that would
result in the ownership of 30% or more of the shares. Each right also carries
the right to receive upon exercise that number of Coeur common shares which has
a market value equal to two times the exercise price. Each preferred share
issued is entitled to receive 100 times the dividend declared per share of
Common Stock and 100 votes for each share of Common Stock and is entitled to
100 times the liquidation payment made per common share. The Board may elect
to redeem the rights prior to their exercisability at a price of one cent
($.01) per right. Any preferred shares issued are not redeemable.
The Company has an Annual Incentive Plan (the "Annual Plan") and a
Long-Term Incentive Plan (the "Long-Term Plan"). Under the Annual Plan in 1996
and 1995, benefits were payable 50% in cash and 50% in shares of Common Stock.
Under the Long-Term Plan, benefits consist of (i) non-qualified and incentive
stock options that are exercisable at prices equal to the fair market value of
the shares on the date of grant and vest cumulatively at an annual rate of 25%
during the four-year period following the date of grant, and (ii) performance
units comprised of Common Stock and cash, the value of which is determined four
years after the award. The first award performance units were granted in 1994.
During 1996, options for 62,306 shares were issued under the plan.
As of December 31, 1996 and December 31, 1995, nonqualified stock
options to purchase 303,440 shares and 241,114 shares, respectively, were
outstanding under the Long-Term Plan. The options are exercisable at prices
ranging from $13.75 to $27.00 per share. The Company continues to account for
stock options in accordance with APB Opinion No. 25, "Accounting for Stock
Issued to Employees."
For the year ended December 31, 1995, the Company awarded 21,656
shares of Common Stock under the Annual Plan, representing additional
compensation of $.4 million based on the fair market value of the shares at the
date of the award. In 1996, there were no awards granted under the plan.
F-23
<PAGE> 75
The Company has a Non-Employee Directors' Stock Option Plan under
which 200,000 shares of Common Stock are authorized for issuance and which was
approved by the shareholders in May 1995. Under the Plan, options are granted
only in lieu of an optionee's foregone annual directors' fees. As of December
31, 1996, 23,497 options were granted in lieu of $.2 million of foregone
directors' fees.
Total compensation expense charged to operations under the Plans was
$.9 million, $1.1 million, and $1.4 million for 1996, 1995, and 1994,
respectively.
<TABLE>
<CAPTION>
Exercise
Shares Price
----------- --------
<S> <C> <C>
Stock options outstanding
at 1/1/95 153,600 $ 18.31
Issued 100,692 16.92
Exercised (3,425) 15.13
Canceled (9,753) 19.45
----------- ---------
Stock options outstanding
at 12/31/95 241,114 17.73
Issued 62,326 20.88
----------- --------
Stock options outstanding
at 12/31/96 303,440 $ 18.37
=========== =========
</TABLE>
As of December 31, 1996 and 1995, 447,696 shares and 427,443 shares,
respectively, were available for future grants under the Plans and 5,829,640
shares of Common Stock were reserved for potential conversion of Convertible
Subordinated Debentures.
NOTE M--EMPLOYEE BENEFIT PLANS
The Company provides a noncontributory defined contribution retirement
plan for all eligible employees. Total plan expense charged to operations was
$.6 million, $.5 million, and $.5 million for 1996, 1995, and 1994,
respectively, which is based on a percentage of salary of qualified employees.
Effective January 1, 1995, the Company has adopted a savings plan
(which qualifies under Section 401(k) of the U.S. Internal Revenue code)
covering all full-time U.S. employees. Under the plan, employees may elect to
contribute up to 10% of their cash compensation, subject to ERISA limitations.
The Company is required to make matching cash contributions equal to 50% of the
employee's contribution or up to 3% of the employee's compensation. Employees
have the option of investing in five different types of investment funds. Total
plan expenses charged to operations were $.4 million and $.3 million in 1996
and 1995, respectively.
F-24
<PAGE> 76
NOTE N--FINANCIAL INSTRUMENTS
Off-Balance Sheet Risks
The Company enters into forward foreign exchange contracts denominated
in foreign currencies to hedge certain firm commitments. The purpose of the
Company's foreign exchange hedging program is to protect the Company from risk
that the eventual dollar cash flows resulting from the firm commitments will be
adversely affected by changes in exchange rates. At December 31, 1996, 1995,
and 1994, the Company had forward foreign exchange contracts of $15.8 million,
$41.0 million, and $31.8 million, respectively.
The Company enters into forward metal sales contracts to manage a
portion of its cash flows against fluctuating gold and silver prices. As of
December 31, 1996, the Company had sold 146,670 ounces of gold for delivery on
various dates through 1999 at an average price of $421.51. On January 13, 1997,
the Company realized net profits of approximately $5.3 million from the sale of
gold purchased in the open market which was then delivered pursuant to fixed
price forward contracts for 146,670 ounces of gold.
During 1996, the Company entered into interest rate swap agreements to
reduce the impact of changes in interest rates on its Fachinal financing
facility. Coeur entered into an interest rate swap agreement, which expires on
July 3, 2000, that effectively converts $24.0 million of its floating rate
borrowing into a fixed-rate obligation. Coeur is currently paying a fixed rate
of 5.375%. The Company has no current plans to buy out these agreements.
Further discussions of other financial instruments held by the Company
are included in Note F and Note J.
The table below summarizes, by contract, the contractual amounts of
the Company's forward exchange and forward metals contracts at December 31,
1996, 1995 and 1994.
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- ------------------------ ------------------------------
Forward Unrealized Forward Unrealized Forward Unrealized
Contracts Gain (Loss) Contracts Gain (Loss) Contracts Gain
------------- ------------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Currency:
New Zealand $ 15,845 $ (10) $ 23,269 $ (27) $ 6,218 $ 731
Chilean $ 17,699 $(1,993) $ 22,136 $ 569
Australian $ 3,418 $ 181
Forward Metal
Sales $ 61,823 $ 3,702 $ 29,535 $ 1,528 $ 31,288 $ 358
</TABLE>
Gains and losses related to contracts associated with firm commitments
are deferred and will be recognized as the related commitments mature. For the
years ended December 31, 1996, 1995, and 1994, the Company realized gains from
its foreign exchange hedging
F-25
<PAGE> 77
programs of $1.4 million, $1.9 million and $1.5 million, respectively. During
1996, the Company capitalized a $2.1 million loss in connection with
development projects.
For metal delivery contracts, the realized price pursuant to the
contract is recognized when physical gold or silver is delivered in
satisfaction of the contract. During 1995, the Company realized a gain of $4.4
million arising from the sale of silver and gold purchased on the open market
which was delivered pursuant to forward contracts.
The credit risk exposure related to all hedging activities is limited
to the unrealized gains on outstanding contracts based on current market
prices. To reduce counter-party credit exposure, the Company deals only with a
group of large credit-worthy financial institutions, and limits credit exposure
to each. In addition, to allow for situations where positions may need to be
reversed, the Company deals only in markets that it considers highly liquid.
The Company does not anticipate nonperformance by any of these counter parties.
NOTE O--LITIGATION
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States
against various defendants, including the Company, asserting claims under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
and the Clean Water Act for alleged damages to Federal natural resources in the
Coeur d'Alene River Basin of northern Idaho as a result of releases of
hazardous substances from mining activities conducted in the area since the
late 1800s. No specific monetary damages are identified in the complaint.
However, in July 1996, the government indicated damages may approximate $982
million. The United States asserts that the defendants are jointly and
separately liable for costs and expenses incurred by the United States in
investigation, removal, and remedial action and the restoration or replacement
of affected natural resources. In 1986 and 1992 the Company had settled similar
issues with the State of Idaho and the Coeur d'Alene Indian Tribe,
respectively, and believes that those prior settlements exonerate it of
further involvement with alleged natural resource damage in the Coeur d'Alene
River Basin. Accordingly, the Company intends to vigorously defend this matter
and at an appropriate stage will seek to be dismissed from this action. At this
initial stage of the proceedings, it is not possible to predict its ultimate
outcome.
The Company is also subject to other pending or threatened legal
actions that arise in the normal course of business. In the opinion of
management, liabilities arising from these claims, if any, will not have a
material effect on the financial position of the Company. Depending on the
timing of any future liabilities, the amount of which cannot now be reasonably
estimated, relating to these matters, such amounts could possibly have a
material impact on the results of operations for a given period.
F-26
<PAGE> 78
NOTE P--GEOGRAPHIC SEGMENT INFORMATION
The following table sets forth certain financial information relating
to international and domestic operations.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Revenues and Other Income:
-------------------------
United States $ 75,815 $ 65,903 $ 63,048
Australasia 27,285 32,967 27,450
South America 2,790 (127) 1,695
---------- ---------- ----------
Consolidated revenues $ 105,890 $ 98,743 $ 92,193
========== ========== ==========
Income (Loss) From Continuing
-----------------------------
Operations Before Income Taxes:
-------------------------------
United States $ 6,167 $ (3,558) $ (5,068)
Australasia (55,491) 5,773 (803)
South American Operations 531 311 921
South American Exploration (6,961) (3,584) (51)
---------- ---------- ----------
Consolidated loss from continuing
operations before taxes $ (55,754) $ (1,058) $ (5,001)
========== ========== =========
Depreciation, Depletion, and Amortization:
-----------------------------------------
United States $ 8,815 $ 9,657 $ 10,707
Australasia 3,182 6,699 6,632
South America 1,384 537 198
--------- --------- -----------
Total $ 13,381 $ 16,893 $ 17,537
========== ========== ==========
Property, Plant, and Equipment Additions
(Including Noncash Expenditures):
--------------------------------
United States $ 2,103 $ 1,512 $ 5,253
Australasia 133 1,975 303
South America 2,563 41,408 3,692
---------- ---------- ----------
Total $ 4,799 $ 44,895 $ 9,248
========== ========== ==========
Identifiable Assets:
-------------------
United States $ 379,635 $ 286,318 $ 318,590
Australasia 51,848 47,114 46,613
South America 148,847 112,214 47,158
---------- ---------- ----------
Consolidated assets $ 580,330 $ 445,646 $ 412,361
========== ========== ==========
</TABLE>
F-27
<PAGE> 79
NOTE Q--SUMMARY OF QUARTERLY FINANCIAL DATA
The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- ----------- ---------
(000's-Except Per Share Data)
<S> <C> <C> <C> <C>
1996
----
Net Sales $ 22,609 $ 18,752 $ 21,559 $ 29,811
Gross Margin 3,013 206 3,079 3,150
Net income (loss) 133 (56,881)(b) 1,878 300
Net income (loss) per share .01 (2.63) .09 .01
Net loss per share
attributable to common
shareholders (.02) (2.75) (.03) (.11)
Fully diluted income (loss)
per share (c) (c) .09 (c)
1995
----
Net Sales $ 17,891 $ 23,621 $ 24,803 $ 22,925
Gross Margin $ 1,851 $ 5,689 $ 5,651 $ 3,838
Net income (loss) from
continuing operations $ (3,367) $ 1,239 $ 2,039 $ (1,169)
Net income (loss) $ (3,175) $ 3,408(a) $ 2,039 $ (1,118)
Net Income (loss) per share $ (.20) $ .22(a) $ .13 $ (.07)
Fully diluted income (loss)
per share $ (c) $ .19 $ .12 $ (c)
</TABLE>
(a) Includes income from discontinued operations(net of tax), of
approximately $2.4 million ($.15 per share) related to the sale of
the Flexaust Company in May 1995.
(b) Includes writedown of mining properties of approximately $54.0
million.
(c) Effect of fully diluted earnings per share is antidilutive and is
therefore not presented.
F-28
<PAGE> 1
EXECUTION COPY EXHIBIT 10(kk)
LOAN AGREEMENT,
dated as of December 23, 1996,
among
COEUR D'ALENE MINES CORPORATION,
as the Borrower,
N M ROTHSCHILD & SONS LIMITED
and
BAYERISCHE VEREINSBANK AG
as the Banks,
and
N M ROTHSCHILD & SONS LIMITED,
as the Agent for the Banks.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4. Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2. COMMITMENTS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2. Banks not Permitted or Required to make Loans . . . . . . . . . . . . . . . . . 15
2.3. Nature of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4. Reduction of Total Commitment Amount . . . . . . . . . . . . . . . . . . . . . . 15
2.5. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3. LOANS; PROCEDURE AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1. Procedure for Making of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3. Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4. Interest Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4.1. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4.2. Post-Maturity Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4.4. Rate Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6. Payments, Computations, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.7. Proration of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.8. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 4. INTEREST PERIODS AND FUNDING, ETC. . . . . . . . . . . . . . . . . . . . . . . . 22
4.1. Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3. U.S. Dollars Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4. Increased Costs, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.7. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5. CONDITIONS PRECEDENT TO MAKING OF LOANS . . . . . . . . . . . . . . . . . . . . . 25
5.1. Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1.1. Resolutions, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.2. Solvency Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.3. Fachinal Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.4. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.5. Closing Fees, Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2. All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.2.1. Compliance with Warranties, No Default, etc . . . . . . . . . . . . . . . . . . 27
5.2.2. Absence of Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2.3. Borrowing Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2.4. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1. Organization, Power, Authority, etc . . . . . . . . . . . . . . . . . . . . . . 28
6.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3. Validity, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6. Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7. Regulation G, T, U, and X . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8. Government Approval, Regulation, etc . . . . . . . . . . . . . . . . . . . . . . 30
6.9. Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.13. Patents, Trademarks, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.14. Approvals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.15. Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.16. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.17. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.18. Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.19. Pari Passu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1. Certain Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1.1. Financial Information, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1.2. Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1.5. Notice of Default, Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . 35
7.1.6. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.7. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.8. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.9. Use of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2. Certain Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2.2. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2.3. Financial Condition, etc. of the Borrower . . . . . . . . . . . . . . . . . . . 38
7.2.4. Restricted Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2.5. Take or Pay Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2.6. Consolidation, Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2.7. Asset Dispositions, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2.8. Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
7.2.9. Capital Expenditures, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2.10. Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2.11. Modification of Certain Agreements . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.2. Breach of Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . 41
8.1.3. Non-Performance of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . 41
8.1.4. Non-Performance of Other Obligations . . . . . . . . . . . . . . . . . . . . . . 41
8.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.8. Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.9. Bankruptcy, Insolvency, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1.10. Materially Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1.11. Approvals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 9. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4. Loans by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5. Rothschild as the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7. Copies, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.9. Funding Reliance, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.10. Application of Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.1. Waivers, Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.8. Counterparts, Effectiveness, etc . . . . . . . . . . . . . . . . . . . . . . . . 49
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 49
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.11. Sale and Transfer of Loans; Participations in Loans . . . . . . . . . . . . . . 49
10.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
10.13. Change in Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . 51
10.14. Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . 52
10.15. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.16. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
SCHEDULE I - Disclosure Schedule
EXHIBIT A - Bank Assignment Agreement
EXHIBIT B - Borrowing Request
EXHIBIT C - Interest Period Selection Notice
EXHIBIT D - Compliance Certificate
EXHIBIT E - Solvency Certificate
EXHIBIT F - Opinion of William F. Boyd
EXHIBIT G - Fachinal Transfer Agreement
-iv-
<PAGE> 6
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of December 23, 1996, among (1) COEUR
D'ALENE MINES CORPORATION, an Idaho corporation (the "Borrower"), (2) the
various banking institutions referred to on the signature pages hereof as the
banks (collectively with their respective successors and permitted assigns, the
"Banks"), and (3) N M ROTHSCHILD & SONS LIMITED, a company organized and
existing under the laws of England ("Rothschild"), in both its individual
capacity as a Bank and its capacity as the Agent for the Banks,
W I T N E S E T H:
WHEREAS, the Borrower is engaged, directly and through its
Subsidiaries (including Compania Fachinal), in the business of the mining,
producing and selling of gold, silver and copper contained within various ore
deposits;
WHEREAS, pursuant to the Existing Loan Agreement, the Banks have
extended loans to Compania Fachinal, a wholly owned indirect Subsidiary of the
Borrower, for the purposes of financing a portion of the construction and
development costs of the Fachinal Project and its initial working capital
requirements and the Borrower has guaranteed the payment and other obligations
of Compania Fachinal thereunder;
WHEREAS, the Borrower has requested that the Bank Parties transfer all
of their respective rights and obligations under the Existing Loan Agreement to
Coeur Bullion and, in consideration thereof, the Borrower has agreed to pay the
Banks an amount equivalent to the Fachinal Outstanding Amount, in each case as
set forth in greater detail in the Fachinal Transfer Agreement;
WHEREAS, the Borrower desires to obtain Commitments from the Banks to
make Loans for the purposes of (a) initially, financing the payment of the
Fachinal Outstanding Principal Amount by the Borrower to the Banks pursuant to
the Fachinal Transfer Agreement and, as a direct result thereof, refinancing
the Indebtedness outstanding under the Existing Loan Agreement and, (b)
subsequently, financing general working capital requirements of the Borrower
and its Subsidiaries; and
WHEREAS, each Bank is willing, on the terms and conditions hereinafter
set forth (including Article 5), to extend its Commitment and to make Loans to
the Borrower;
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1. DEFINED TERMS. The following terms when used in this
Agreement, including its preamble and recitals, shall, except where the context
otherwise requires, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
<PAGE> 7
"Affected Bank" is defined in Section 4.3.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Pension Plan). A Person shall be deemed to be "controlled
by" any other Person if such other Person possesses, directly or indirectly,
power:
(a) to vote ten per cent (10%) or more of the securities
(on a fully diluted basis) having ordinary voting power for the
election of directors or managing general partners of such Person; or
(b) to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Agent" means:
(a) Rothschild; or
(b) such other Person as shall have subsequently been
appointed as the successor Agent pursuant to Section 9.3,
in either such case, in its capacity as agent for the Banks.
"Agreement" means, on any date, this Loan Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, restated, or otherwise modified and in effect on such date.
"Applicable Margin" means, at any time, one and one half of one per
cent (1.5%) per annum.
"Approval" means each and every approval, authorization, license,
permit, consent, filing and registration by or with any Federal, state, or
other U.S. or foreign regulatory authority or third party or other Person
necessary to authorize or permit the execution, delivery or performance of this
Agreement or any other Loan Document or for the validity or enforceability
hereof or thereof.
"Assignee Bank" is defined in Section 10.11.1.
"Assignor Bank" is defined in Section 10.11.1.
"Authorized Officer" means those of the officers of the Borrower whose
signatures and incumbency shall have been certified to the Agent pursuant to
clause (a)(ii) of Section 5.1.1.
-2-
<PAGE> 8
"Available Cash" means, at any date, the sum of the aggregate
principal amount of,
(a) freely and immediately available cash deposited at
such date in the name of the Borrower with any bank or financial
institution acceptable to the Agent,
plus
(b) Cash Equivalent Investments of the Borrower at such
date,
in each such case which are held by the Borrower free and clear of any Lien or
any other interest whatsoever owned or claimed by any other Person (including
set-off rights available to the holder of any such deposit pursuant to general
principles of applicable law or otherwise). For purposes of this Agreement,
Available Cash shall be calculated in U.S. Dollars and, in the case of any
amount denominated in any currency other than U.S. Dollars, shall be converted
into U.S. Dollars at the Agent's spot rate of exchange between such currency
and U.S. Dollars as quoted on the date of calculation of Available Cash.
"Banks" is defined in the preamble.
"Bank Assignment Agreement" means an agreement substantially in the
form of Exhibit A attached hereto.
"Bank Parties" means, collectively, each Bank and the Agent.
"Borrower" is defined in the preamble.
"Borrowing Request" means a borrowing request and certificate
substantially in the form of Exhibit B attached hereto duly executed by an
Authorized Officer of the Borrower.
"Business Day" means any day:
(a) on which dealings in U.S. Dollars are carried on in
the London interbank market; and
(b) which is neither a Saturday nor a Sunday nor a legal
holiday on which banks are authorized or required to be closed in
London, England or New York, New York.
"Capital Expenditure" means:
(a) any expenditure of the Borrower or any Subsidiary for
fixed or capital assets which, in accordance with GAAP, would be
classified as capital expenditures; and
(b) any Capitalized Lease Liability.
-3-
<PAGE> 9
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower or any Subsidiary under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as capitalized leases, and, for
purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of
a penalty.
"Cash Equivalent Investment" means, at any date:
(a) any evidence of Indebtedness issued or guaranteed by
the United States Government;
(b) commercial paper, maturing not more than nine months
from the date of issue, which is (i) rated at least A-l by Standard &
Poor's Rating Group, a division of McGraw Hill, Inc., and P-l by
Moody's Investors Service, Inc., (ii) issued by a corporation or
company (other than the Borrower or any Affiliate thereof) and (iii)
in certificated form (including master notes held by The Depository
Trust Company, a New York limited purpose trust company, or one or
more of its nominees or custodian banks);
(c) medium-term Indebtedness, maturing not more than
three years from the date of issue (or, in the case of any such
medium-term Indebtedness held by the Borrower on the Effective Date,
not more than three years from the Effective Date) which is (i) rated
at least A by Standard & Poor's Rating Group, a division of McGraw
Hill, Inc., and the equivalent thereof by Moody's Investors Services,
Inc., and (ii) issued by a corporation or company (other than the
Borrower or any Affiliate thereof; or
(d) any negotiable certificate of deposit or bankers'
acceptance (in either case, in certificated form and denominated in
U.S. Dollars), maturing not more than one year after such time, which
is issued by a commercial banking institution organized under the laws
of an OECD member country that has a combined capital and surplus and
undivided profits of not less than U.S.$500,000,000 (or the equivalent
thereof in any other currency).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, reformed or otherwise modified from time
to time.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of twenty five per cent (25%) or more of the outstanding
shares of voting stock of the Borrower.
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<PAGE> 10
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Coeur Bullion" means Coeur Bullion Corporation, an Idaho corporation.
"Commitment" means, with respect to each Bank, such Bank's obligation
to make and continue its Loans pursuant to the terms and subject to the
conditions of this Agreement.
"Commitment Termination Date" means the earliest to occur of:
(a) June 30, 2001; and
(b) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (b), the Commitments shall
terminate automatically and without any further action.
"Commitment Termination Event" means:
(a) the occurrence of any Default described in Section
8.1.9; or
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) in the absence of such declaration, the
giving of notice by the Agent, acting at the direction of the
Required Banks, to the Borrower that the Commitments have been
terminated.
"Compania Fachinal" means Compania Minera CDE Fachinal Limitada, a
limited liability company (sociedada de responsabilidad limitada) organized and
existing under the laws of Chile.
"Compliance Certificate" means a certificate duly executed by an
Authorized Officer of the Borrower in the form of Exhibit D attached hereto,
together with such changes as the Agent may from time to time reasonably
request for purposes of monitoring the Borrower's compliance herewith.
"Consolidated Current Assets" means, at any date, all amounts which
would be included as current assets on a consolidated balance sheet of the
Borrower and its Subsidiaries as at such date.
"Consolidated Current Liabilities" means, at any date, all amounts
which would be included as current liabilities on a consolidated balance sheet
of the Borrower and its Subsidiaries as at such date.
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<PAGE> 11
"Consolidated Current Ratio" means, at any date, the ratio of:
(a) Consolidated Current Assets as at such date;
to
(b) Consolidated Current Liabilities as at such date.
"Consolidated Qualifying Indebtedness" means, at any date, the amount
of Indebtedness of the Borrower and its Subsidiaries (excluding, however, (a)
Qualifying Subordinated Indebtedness and (b) Indebtedness in respect of the
undrawn face amount of letters of credit issued for the account of the Borrower
or any Subsidiary and issued by way of performance bonds required to be posted
in connection with the development and operation of any Mine) at such date.
"Consolidated Tangible Net Worth" means, at any date, the consolidated
net worth of the Borrower and its Subsidiaries after subtracting therefrom the
aggregate amount of any intangible assets of the Borrower and its Subsidiaries
including goodwill, franchises, licenses, patents, trademarks, trade names,
copyrights, service marks and brand names.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Contractual Obligation" means any provision of any security issued by
the Borrower or of any Instrument or undertaking to which the Borrower is a
party or by which it or any of its property is bound.
"Controlled Group" means all members of any controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of
the Code or Section 4001 of ERISA.
"Default" means any Event of Default or any condition or event which,
after notice or lapse of time or both, would constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I as the same may be amended, supplemented, or otherwise modified from
time to time by the Borrower with the consent of the Agent.
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<PAGE> 12
"Effective Date" is defined in Section 10.8.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment issued in the U.S. by any federal, state or
local authority or in any other jurisdiction by any similar governmental or
other authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, reformed or modified and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time
to time. References to sections of ERISA also refer to any successor sections.
"Event of Default" is defined in Section 8.1.
"Existing Loan Agreement" means the loan agreement, dated as of April
19, 1995 (as amended from time to time), among Compania Fachinal, the Borrower,
Coeur Bullion, the Banks and Rothschild, as the agent for the Banks thereunder.
"Fachinal Outstanding Amount" means the aggregate amount of principal
and accrued interest outstanding and unpaid in respect of loans made under the
Existing Loan Agreement as at the date of making of the initial Loans.
"Fachinal Outstanding Principal Amount" means the aggregate amount of
principal outstanding and unpaid in respect of loans made under the Existing
Loan Agreements as at the date of making of the initial Loans.
"Fachinal Project" has the meaning provided in the Existing Loan
Agreement.
"Fachinal Transfer Agreement" means the agreement among Compania
Fachinal, Coeur Bullion, the Borrower, CDE Chilean Mining Corporation and the
Bank Parties in the form of Exhibit G attached hereto.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (e.g. the "1995 Fiscal Year") refer to the Fiscal Year
ending on the December 31 occurring during such calendar year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Group" is defined in Section 9.5.
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<PAGE> 13
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended, reformed or otherwise
modified from time to time;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous
or toxic chemical, material or substance within the meaning of any
other applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders) or
equivalent in any other jurisdiction relating to or imposing liability
or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material, all as amended, reformed or otherwise
modified from time to time.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates or precious metals prices.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph, or provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of the Borrower, any qualification or exception to such opinion or
certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of
any item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for the purposes of this Agreement and
each other Loan Document, the parties hereto agree that the rule of ejusdem
generis shall not be applicable to limit a general statement, which is followed
by or referable to an enumeration of specific matters, to matters similar to
the matters specifically mentioned.
-8-
<PAGE> 14
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money,
precious metals or other commodities and all obligations of such
Person evidenced by bonds, debentures, notes, or other similar
instruments;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations of such Person which have been or
should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) all other items which, in accordance with GAAP, would
be included as liabilities on the liability side of the balance sheet
of such Person as of the date at which Indebtedness is to be
determined;
(e) net liabilities of such Person under all Hedging
Obligations;
(f) (i) all obligations of such Person to pay the
deferred purchase price of property or services, and (ii) all
liabilities (excluding prepaid interest thereon) secured by a Lien on
property owned or being purchased by such Person (including
liabilities arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed
by such Person or is limited in recourse; and
(g) all Contingent Liabilities of such Person in respect
of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person
shall include the amount of Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer and in respect of
which such Person is obligated to pay.
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Instrument" means any contract, agreement, indenture, mortgage,
document, or writing (whether by formal agreement, letter, or otherwise) under
which any obligation is evidenced, assumed, or undertaken, or any Lien (or
right or interest therein) is granted or perfected.
"Interest Period" means, relative to any Loan:
(a) initially, the period commencing on (and including)
the date such Loan is made and ending on (but excluding) the day which
numerically corresponds to such date which is:
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<PAGE> 15
(i) one, two, three or six months thereafter, as
the Borrower may irrevocably select in the Borrowing Request
for such Loan delivered pursuant to Section 3.1; or
(ii) such different period with respect to such
Loan as may be requested in writing to the Agent by the
Borrower not less than ten Business Days prior to the
commencement of such Interest Period and as to which the Agent
and the Banks may consent; and
(b) thereafter, each period commencing on (and including)
the last day of the immediately preceding Interest Period applicable
to such Loan and ending on (but excluding) the day which numerically
corresponds to such date which is:
(i) one, two, three or six months thereafter, as
the Borrower may irrevocably select in its relevant Interest
Period Selection Notice delivered pursuant to Section 4.1;or
(ii) such different period as may be requested in
writing to the Agent by the Borrower not less than ten
Business Days prior to the commencement of such Interest
Period and as to which the Agent and the Banks may consent;
provided, however, that:
(c) solely for purposes of making a payment on a
scheduled Maturity with respect to the outstanding Principal Amount of
any Loan, the Borrower may select an Interest Period of less than one
month's duration;
(d) if such Interest Period for any Loan would otherwise
end on a day which is not a Business Day, such Interest Period shall
end on the next following Business Day, unless such Business Day
occurs in the next following calendar month or would occur after June
30, 2001, in which case such Interest Period shall end on the
immediately preceding Business Day;
(e) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have expiration
dates occurring on more than five different dates;
(f) no Interest Period may end later than June 30, 2001;
(g) the Agent shall be able to select Interest Periods as
it may deem appropriate pursuant to the terms and conditions of
Section 4.1; and
(h) solely in the case of the initial Loans, the initial
Interest Period shall commence on (and include) the date on which such
Loans are made and end on (but exclude) the day which is the last day
of the interest period applicable to the loans outstanding under the
Existing Loan Agreement and which correspond to such initial Loans.
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<PAGE> 16
"Interest Period Selection Notice" means a notice of the selection of
an Interest Period and certificate duly executed by an Authorized Officer of
the Borrower, in the form of Exhibit C attached hereto.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel, relocation and similar advances
to officers and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person
in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof less all returns of principal or equity thereon (and
without adjustment by reason of the financial condition of such other Person)
and shall, if made by the transfer or exchange of property other than cash, be
deemed to have been made in an original principal or capital amount equal to
the fair market value of such property.
"Lending Office" means, (a) with respect to each Bank, the office of
such Bank designated as such below its signature hereto or such other office
maintained by or on behalf of such Bank (or any successor, Affiliate or
assignee of such Bank) as may be designated from time to time by notice from
such Bank to the Agent and the Borrower and (b) with respect to the Agent, the
office of the Agent designated as such from time to time by notice to the
Borrower and each Bank.
"LIBO Rate" means, relative to any Interest Period for any Loans, the
average (rounded upward, if necessary, to the nearest one sixteenth of one per
cent (1/16%)) of the quotes for "LIBOR", as such quotes appear on the Reuters
Screen LIBO Page as at or about 11:00 a.m., London time, for the number of
months (or different period) comprising such Interest Period, for an amount
comparable to such Loans, calculated at the date which is two Business Days
prior to the first day of such Interest Period; provided, however, that in the
event that less than two such quotes appear on such screen at such time, the
Agent will request the principal London office of the Reference Bank to provide
the Agent with its quotation for offers of U.S. Dollar deposits to leading
banks in the London interbank market for such period and in such comparable
amount, and the "LIBO Rate" shall equal such quoted rate.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in any property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" is defined in Section 2.1.
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<PAGE> 17
"Loan Document" means any of this Agreement and each other Instrument
executed by the Borrower and delivered to any Bank Party pursuant to this
Agreement.
"Maturity" means, relative to any Obligation, the date on which such
Obligation is stated to be due and payable, in whole or in part (in accordance
with this Agreement or otherwise), or such earlier date when such Obligation
(or any portion thereof) shall be or become due and payable, in whole or in
part, in accordance with the terms of this Agreement, whether by required
prepayment, declaration, or otherwise.
"Mine" means any gold or other metal mine or deposit, and related
plant sites, waste dumps, ore dumps, tailing disposal and ancillary and
beneficiation facilities which are required in connection with the operation
thereof, now or hereafter under development or operation by the Borrower or any
Subsidiary or in which the Borrower or any Subsidiary has an ownership interest
(including, for the avoidance of doubt, any interest pursuant to any lease or
joint venture agreement).
"Obligations" means all obligations of the Borrower with respect to
the repayment or performance of all obligations (monetary or otherwise) of the
Borrower arising under or in connection with this Agreement and each other Loan
Document.
"Organic Document" means, relative to any Person, its articles of
incorporation, its by-laws, and all shareholder agreements, voting trusts, and
similar arrangements applicable to any of its authorized shares of capital
stock or any similar document relating to any Person subsisting under the laws
of any jurisdiction other than any State of the United States.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Bank, the percentage set forth
opposite its signature hereto or set forth in the Bank Assignment Agreement
pursuant to which such Bank became a party hereto, and, in each such case, as
such percentage may be adjusted from time to time pursuant to Bank Assignment
Agreement(s) executed by such Bank and its Assignee Bank(s).
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
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<PAGE> 18
"Prime Rate" means, at any date, the rate of interest then most
recently announced by The Chase Manhattan Bank, N.A. at New York, New York as
its prime rate.
"Process Agent" is defined in Section 10.14.
"Project Indebtedness" means Indebtedness incurred by the Borrower or
any Subsidiary, in its capacity as the owner of any new or existing Mine, and
incurred for the purpose of developing such Mine on terms and conditions such
that the recourse of the lenders thereunder is limited to the assets
constituting the relevant Mine (and, prior to the completion of construction of
the relevant Mine, to a guarantee in respect of such Indebtedness issued by the
Borrower).
"Qualifying Subordinated Indebtedness" means, at any time,
Indebtedness of the Borrower to any other Person which is subordinated to the
repayment of the Loans and other Obligations of the Borrower on terms, and
pursuant to documentation, in form and substance satisfactory to the Agent and
the Banks in their absolute discretion.
"Reference Bank" means Bank of America NT & SA.
"Regulatory Change" means, relative to any Bank, any change occurring
after the date hereof in any (or the adoption or phase-in after the date hereof
of any):
(a) United States Federal or state law or law of any
other jurisdiction applicable to such Bank; or
(b) regulation, interpretation, directive, or request
(whether or not having the force of law) applicable to such Bank of
any court or governmental authority charged with the interpretation or
administration of any law referred to in clause (a) or of any fiscal,
monetary, or other authority having jurisdiction over such Bank.
"Release" means a "release", as such term is defined in CERCLA.
"Required Banks" means, at any time, Banks having, in the aggregate, a
Percentage of more than sixty per cent (60%).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended,
reformed or otherwise modified from time to time.
"Rothschild" is defined in the preamble.
"Royalties" is defined in Section 6.18.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
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<PAGE> 19
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person. Except as otherwise
indicated herein, references to Subsidiaries shall refer to Subsidiaries of the
Borrower.
"Tax Credit" is defined in Section 3.5.
"Tax Payment" is defined in Section 3.5.
"Taxes" is defined in Section 3.5.
"Total Commitment Amount" means, initially, the lesser of (a)
U.S.$24,000,000 and (b) the Fachinal Outstanding Principal Amount, and,
subsequently, as such amount may be reduced from time to time pursuant to
Section 2.4.
"United States" or "U.S." means the United States of America, its 50
States and the District of Columbia.
"U.S. Dollar" and the sign "US$" mean lawful money of the United
States.
"Welfare Plan" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule, the
Borrowing Request, the Fachinal Transfer Agreement and each Interest Period
Selection Notice, Compliance Certificate, notice, and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section 7.2.3) shall be made, and all
financial statements required to be delivered hereunder or thereunder shall be
prepared in accordance with, generally accepted accounting principles in the
United States (in either case, "GAAP") applied on a basis consistent with the
preparation of the financial statements referred to in clause (a) of Section
6.4.
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<PAGE> 20
ARTICLE 2. COMMITMENTS AND FEES
SECTION 2.1. COMMITMENTS. Subject to the terms and conditions of
this Agreement (including Article 5), each Bank severally and for itself alone
agrees that it will from time to time make loans denominated in U.S. Dollars to
the Borrower in a principal amount outstanding at any one time not in excess of
such Bank's Percentage of the Total Commitment Amount (each such loan of each
Bank, individually, a "Loan"). From time to time on any Business Day occurring
during the period commencing on the Effective Date and ending on (but not
including) the Commitment Termination Date, each Bank will, subject to the
terms and conditions of this Agreement (including Article 5), make a Loan to
the Borrower equal to such Bank's Percentage of the aggregate principal amount
of the Loans requested by the Borrower in the relevant Borrowing Request to be
made on such day.
SECTION 2.2. BANKS NOT PERMITTED OR REQUIRED TO MAKE LOANS. No
Bank shall be permitted or required to make any Loan if, after giving effect
thereto:
(a) the aggregate outstanding principal amount of all
Loans of all Banks then outstanding would exceed the Total Commitment
Amount; and
(b) the aggregate outstanding principal amount of all
Loans of such Bank then outstanding would exceed such Bank's
Percentage of the Total Commitment Amount.
SECTION 2.3. NATURE OF COMMITMENTS. On the terms and subject to
the conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow Loans.
SECTION 2.4. REDUCTION OF TOTAL COMMITMENT AMOUNT. The Total
Commitment Amount is subject to reduction from time to time pursuant to this
Section 2.4.
SECTION 2.4.1. OPTIONAL. The Borrower may, from time to time on any
Business Day which is the last day of any Interest Period with respect to any
Loans which might be required to be repaid pursuant to clause (c) of Section
3.3 as a result of any reduction to the Total Commitment Amount referred to
herein, voluntarily reduce the Total Commitment Amount in whole or in part;
provided, however, that (a) all such reductions shall require at least thirty
Business Days' prior notice from the Borrower to the Agent (and the Agent shall
promptly give notice thereof to the Banks), (b) all such reductions shall be
permanent, and (c) any partial reduction of the Total Commitment Amount shall
be in an integral multiple principal amount of US$1,000,000.
SECTION 2.4.2. MANDATORY. On each date set forth below the Total
Commitment Amount shall, without any further action, automatically and
permanently be reduced to the amount set forth opposite such date:
<TABLE>
<S> <C>
January 1, 1998 U.S.$21,000,000
January 1, 1999 U.S.$18,000,000
January 1, 2000 U.S.$15,000,000
January 1, 2001 U.S.$12,000,000.
</TABLE>
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<PAGE> 21
SECTION 2.5. FEES. (a) The Borrower agrees to pay to the Agent,
for the account of each Bank, a facility fee in the amount of U.S.$12,500 for
each Bank and payable on the date of deemed making of the initial Loans.
(b) The Borrower agrees to pay to the Agent for the account of
each Bank, for the period (including any portion thereof when its Commitment is
suspended by reason of the Borrower's inability to satisfy any condition of
Article 5) commencing on the Effective Date and continuing through the final
Commitment Termination Date, a commitment fee at the rate of three eighths of
1% per annum on such Bank's Percentage of the sum of the average daily unused
portion of the Total Commitment Amount. Such commitment fees shall be payable
by the Borrower in arrears on March 31, June 30, September 30 and December 31
in each calendar year, commencing with the first such day following the
Effective Date, and on the Commitment Termination Date.
ARTICLE 3. LOANS; PROCEDURE AND PAYMENT
SECTION 3.1. PROCEDURE FOR MAKING OF LOANS. By delivering a
Borrowing Request to the Agent on or before 10:00 a.m., London time, on a
Business Day occurring during the period commencing on the Effective Date and
ending on (but not including) the Commitment Termination Date, the Borrower may
request, on not more than five, nor less than three, Business Days' notice
(counting the day on which such notice is given), that Loans be made to the
Borrower by all the Banks in (subject to the last paragraph of this Section) an
integral multiple principal amount of U.S.$1,000,000 or in the unused amount of
the Commitments. Upon receipt of such a Borrowing Request, the Agent shall
promptly (and in any event within one Business Day) notify each Bank of the
contents thereof. Any Borrowing Request once delivered shall not thereafter be
revocable by the Borrower. Subject to the terms and conditions of this
Agreement (including Article 5) the Loans shall be made on the Business Day
specified in the Borrowing Request.
Except in the case of the initial Loans, on the Business Day specified
in the relevant Borrowing Request for the making of the relevant Loans, each
Bank shall, on or before 11:00 a.m., New York City time, credit the account of
the Agent from time to time designated by the Agent at its Account Office with
an amount of U.S. Dollars equal to such Bank's Percentage of the aggregate
principal amount of the Loans requested in such Borrowing Request. To the
extent such amount of U.S. Dollars is received from the Banks (but subject to
Section 9.9), the Agent shall make such amount available to the Borrower by
transferring such amount to the Borrower's dollar account at the Account
Office of the Agent (or such other account as the Borrower may designate in the
relevant Borrowing Request, and the Agent may approve in its reasonable
discretion). No Bank's obligation to make any Loan shall be affected by
another Bank's failure to make any other Loan.
The initial Loans shall be made in an aggregate principal amount equal
to the Fachinal Outstanding Principal Amount. The Banks shall not be required
to advance funds to the Borrower representing the proceeds of the initial Loans
but such Loans shall be deemed to be made by the execution by each party
thereto of the Fachinal Transfer Agreement on or
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prior to the Business Day specified in the Borrowing Request for the making of
the initial Loans and the implementation of all arrangements in connection
therewith referred to in Section 5.1.3. The initial Loans shall be made in
amounts identical to the loans outstanding under the Existing Loan Agreement on
the date of making of such Loans. In the event that the initial Loans are not
deemed to be advanced on or prior to January 31, 1997 this Agreement shall
immediately and without further action be of no further force and effect.
SECTION 3.2. RECORDS. Each Bank's Loans shall be evidenced by a
dollar loan account maintained by such Bank. The Borrower hereby irrevocably
authorizes each Bank to make (or cause to be made) appropriate account entries,
which account entries, if made, shall evidence inter alia the date of, the
principal amount of, any repayments or prepayments of, the interest rate on and
the Interest Period applicable to, the Loans made by such Bank pursuant hereto.
Any such account entries indicating the outstanding principal amount of such
Bank's Loans shall be prima facie evidence of the principal amount of such
Loans owing and unpaid, but the failure to make any such entry shall not limit
or otherwise affect the obligations of the Borrower hereunder to make payments
of the principal amount of, or interest on, such Loans made to it when due.
SECTION 3.3. PRINCIPAL PAYMENTS. The Borrower will make payment
in full of the unpaid principal amount of all Loans made to it on June 30,
2001. Prior thereto, the Borrower:
(a) may, from time to time on any Business Day which is
the last day of any Interest Period with respect to the Loans to be
prepaid, make a voluntary prepayment, in whole or in part, of the then
outstanding principal amount of any Loans; provided, however, that:
(i) the Borrower shall give the Agent not less
than five (5) Business Days' prior written notice (counting
the day on which such notice is given) of any such voluntary
prepayment (and the Agent shall promptly provide each Bank
with details thereof);
(ii) all such partial voluntary prepayments of
Loans shall be in an integral multiple principal amount of
US$1,000,000; and
(iii) all such partial voluntary prepayments shall
be applied against those portions of the Loans required to be
repaid pursuant to clause (b) in the order of maturity
thereof; and
(b) shall, on each date on which any reduction in the
Total Commitment Amount becomes effective pursuant to Section 2.4 or
otherwise make a mandatory repayment of the principal amount of all
Loans in a principal amount equal to the excess, if any, of (i) the
sum of the outstanding principal amount of all Loans on such date,
less (ii) the Total Commitment Amount as so reduced.
Each prepayment or repayment of Loans made pursuant to this Section
shall be without premium or penalty, except as may be required by Section 4.5.
Any prepayment or
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repayment of the principal amount of any Loans shall include accrued interest
to the date of prepayment or repayment on the Principal Amount of such Loans
being prepaid or repaid. Any principal amount of any Loan prepaid or repaid
from time to time may be reborrowed.
SECTION 3.4. INTEREST PAYMENTS. The Borrower shall make payments
of interest on the outstanding principal amount of the Loans in accordance with
this Section.
SECTION 3.4.1. INTEREST RATE. The Borrower shall pay interest on
the principal amount of the Loans outstanding from time to time prior to and at
Maturity at a rate per annum during each Interest Period applicable thereto,
equal to the sum of (a) the LIBO Rate for such Interest Period, plus (b) the
Applicable Margin.
Each Loan shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such Loan.
SECTION 3.4.2. POST-MATURITY RATE. After the Maturity of all or any
portion of the principal amount of any Loan or after any other Obligations
shall have become due and payable, the Borrower shall pay interest (after as
well as before judgment) on:
(a) the principal amount of any Loan so matured at any
time when no circumstance of the nature referred to in Section 4.3
with respect to such Loan shall have occurred and be continuing, at a
rate per annum equal to the sum of (i) the LIBO Rate for each Interest
Period selected by the Agent from time to time pursuant to Section
4.1, plus (ii) the Applicable Margin, plus (iii) two per cent (2%);
and
(b) all other Obligations (including with respect to the
principal amount of any Loan at any time when a circumstance of the
nature referred to in Section 4.3 with respect to such Loan shall have
occurred and be continuing so matured) at a rate per annum equal to
the sum of the Prime Rate from time to time in effect plus two per
cent (2%).
SECTION 3.4.3. PAYMENT DATES. (a) Interest accrued on each Loan
shall be payable, without duplication, on:
(i) the last day of each Interest Period with
respect to such Loan (and, in addition to such day, if such
Interest Period shall exceed three months, on each date which
is the last day of each successive three monthly period
occurring during such Interest Period);
(ii) the Maturity of such Loan; and
(iii) with respect to any portion of any Loan
repaid or prepaid pursuant to Section 3.3, the date of such
repayment or prepayment, as the case may be.
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<PAGE> 24
In addition, and as set forth in the Fachinal Transfer Agreement with
respect to the payment by the Borrower of the Fachinal Outstanding Amount, on
the first payment date for interest in respect of each of the initial Loans,
the Borrower shall pay an amount equal to interest in respect of each loan
corresponding to such Loans under the Existing Loan Agreement which was accrued
and unpaid as at the date of making of the initial Loans.
(b) Interest accrued on each Loan after the Maturity
thereof and interest on other overdue Obligations, shall be payable
upon demand.
SECTION 3.4.4. RATE DETERMINATIONS. All determinations by the Agent
of the rate of interest applicable to any Loan or other Obligation shall be
conclusive absent manifest error.
SECTION 3.5. TAXES. All payments by the Borrower under this
Agreement or any other Loan Document shall be paid without deduction or
withholding for or on account of any present or future taxes, levies, imposts,
deductions, charges, withholdings, fees, duties, or other charges of any nature
whatsoever required to be deducted or withheld from such payments by any United
States Federal, state or local taxing authority or the taxing authority of any
other jurisdiction, excluding taxes imposed on, or measured by, any Bank
Party's net income or receipts and franchise taxes imposed on any Bank Party,
by the United States or any jurisdiction under the laws of which such Bank
Party is organized or any political subdivision thereof (such non-excluded
items hereinafter referred to as "Taxes"). In the event that such deduction or
withholding is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Borrower shall:
(a) promptly notify the Agent of such requirement;
(b) pay directly to the appropriate authority the full
amount required to be so deducted or withheld before penalties attach
thereto or interest accrues thereon;
(c) promptly forward to the Agent an official receipt or
other documentation reasonably satisfactory to the Agent evidencing
such payment to such authority; and
(d) pay to the Agent for the account of each affected
Bank Party such additional amount or amounts as is necessary to ensure
that the net amount actually received by such Bank Party will equal
the full amount such Bank Party would have received had no such
deduction or withholding been required.
Moreover, if any Taxes are directly asserted against any Bank Party with
respect to any payment received by such Bank Party hereunder, such Bank Party
may pay such Taxes, and the Borrower will promptly pay such additional amounts
(including any penalties, interest or expenses) as is necessary in order that
the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
Bank Party would have received had not such Taxes been asserted.
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<PAGE> 25
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
relevant Bank Party, the required receipts or other required documentary
evidence, the Borrower shall indemnify such Bank Party for any incremental
Taxes, interest or penalties that may become payable by any Bank as a result of
any such failure. For purposes of this Section, a distribution hereunder by
any Bank Party to or for the account of any other Bank Party shall be deemed a
payment by the Borrower.
If the Borrower pays any additional amount under clause (d) (a "Tax
Payment") and any Bank Party effectively obtains a refund of tax or credit
against tax by reason of the Tax Payment (a "Tax Credit") and such Bank Party
identifies the Tax Credit as being attributable to the Tax Payment, then such
Bank Party after actual receipt of such Tax Credit shall promptly reimburse the
Borrower for such amount as such Bank Party shall determine in its sole
discretion to be the proportion of the Tax Credit that will leave such Bank
Party (after that reimbursement) in no better or worse position than it would
have been in if the Tax Payment had not been required; provided, however, that
no Bank Party will be required to make any reimbursement hereunder to the
extent it reasonably believes the making of such reimbursement would cause it
to lose the benefit of the Tax Credit. Each Bank Party shall have absolute
discretion as to whether to claim any Tax Credit, and if it does so claim, the
extent, order and manner in which it does so and the manner in which it
allocates Tax Credits to its various assets. No Bank Party shall be obliged to
disclose information regarding its tax affairs or computations to the Borrower.
Upon the request of the Borrower or the Agent, each Bank Party that is
organized under the laws of a jurisdiction other than the United States shall
execute and deliver to the Borrower and the Agent, on or about the first
scheduled payment date of any principal amount of the Loans in each Fiscal
Year, one or more (as the Borrower or the Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents (or successor forms or documents), appropriately completed, as may be
applicable to establish the extent, if any, to which a payment to such Bank
Party is exempt from withholding or deduction of Taxes; provided, however, that
no Bank Party shall be under any obligation to execute and deliver any such
form if, in the opinion of such Bank Party, completion of any such form could
result in an adverse consequence with respect to the business or tax position
of such Bank Party.
SECTION 3.6. PAYMENTS, COMPUTATIONS, ETC. All payments by the
Borrower pursuant to this Agreement or any other Loan Document, whether in
respect of the principal amount of any Loan, interest thereon, or any other
amounts, shall be made by the Borrower to the Agent for the pro rata benefit of
the Bank Parties entitled to receive such payment, by delivery of U.S. Dollars
in immediately available funds to an account of the Agent at the Agent's
Account Office, which account shall be designated from time to time by notice
to the Borrower from the Agent. All such payments shall be made, without
setoff, deduction, or counterclaim, not later than 11:00 a.m., New York City
time. Any payments received hereunder after the time and date specified in
this Section shall be deemed to have been received by the Agent on the next
following Business Day. With respect to payments received by the Agent
hereunder, the Agent shall promptly remit to each Bank Party its
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<PAGE> 26
share, if any, of such payments to an account designated by such Bank Party to
the Agent from time to time and maintained at its Account Office.
All interest and fees shall be computed on the basis of the actual
number of days (including the first day but excluding the last day) occurring
during the period for which such interest or fee is payable over a year
comprised of 360 days.
Except as otherwise required as a result of the application of clause
(d) of the definition of the term "Interest Period", whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in computing interest and fees, if any, in connection with
such payment.
SECTION 3.7. PRORATION OF PAYMENTS. If any Bank Party shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff, or otherwise) on account of any Obligation (other than
pursuant to the terms of Section 3.5, 4.4, 4.5 or 4.6) in excess of its pro
rata share of payments then or therewith obtained by all relevant Bank Parties
in connection with such Obligation, such Bank Parties shall purchase from the
other Bank Parties such participation in such Obligation held by them as shall
be necessary to cause such purchasing Bank Party to share the excess payment or
other recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Bank Party, the purchase shall be rescinded and each Bank Party
which has sold a participation to the purchasing Bank shall repay to the
purchasing Bank Party the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Bank Party's ratable share
(according to the proportion of
(a) the amount of such selling Bank Party's required
repayment to the purchasing Bank Party
to
(b) the total amount so recovered from the purchasing
Bank Party)
of any interest or other amount paid or payable by the purchasing Bank Party
in respect of the total amount so recovered. Each Obligor agrees that any Bank
Party so purchasing a participation from another Bank Party pursuant to this
Section may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 3.8) with respect to such participation
as fully as if such Bank Party were the direct creditor of such Obligor in the
amount of such participation. If under any applicable bankruptcy, insolvency
or other similar law, any Bank Party receives a secured claim in lieu of a
setoff to which this Section applies, such Bank Party shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Bank Parties entitled under this Section to
share in the benefits of any recovery on such secured claim.
SECTION 3.8. SETOFF. In addition to and not in limitation of any
rights of any Bank Party under applicable law, each Bank Party (or any branch
thereof) shall, upon the
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occurrence of any Default described in Section 8.1.9 or any other Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due), and (as security for such
Obligations, but not to the exclusion of the other rights any Bank Party may
have) each Obligor hereby grants to each Bank Party a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of
such Obligor then or thereafter maintained with the Agent or such Bank, as the
case may be, in whatever currency or commodity (including gold, silver and
other precious metals) and agrees that for purposes of such application, such
balances, credits, deposits, accounts or moneys of such Obligor may be used to
purchase any necessary currency on the date, and to the extent, of the
application; provided, however, that any such appropriation and application
shall be subject to the provisions of Section 3.7. The rights of each Bank
Party under this Section are in addition to any other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Bank Party may have.
ARTICLE 4. INTEREST PERIODS AND FUNDING, ETC
SECTION 4.1. INTEREST PERIODS. Subject to the conditions set
forth in the definition of the term "Interest Period", the Borrower shall
designate the duration of the initial Interest Period for the Loans in the
Borrowing Request. Thereafter, the Borrower shall select the duration of the
succeeding Interest Periods for the Loans pursuant to Interest Period Selection
Notices delivered to the Agent (which will promptly provide details thereof to
each Bank) on or before 10:00 a.m., London time, from time to time not less
than three Business Days prior to the end of any current Interest Period
(counting the day on which such notice is given); provided, however, that if,
with respect to the Loans:
(a) the Borrower fails to deliver in a timely manner an
Interest Period Selection Notice to the Agent, the Borrower shall be
deemed to have elected an Interest Period having a duration equal to
the lesser of one month or the number of days until the next date on
which any principal amount of any Loan is scheduled to be repaid
pursuant to clause (b) of Section 3.3; or
(b) all or any portion of the principal amount thereof
has become due and payable, whether by acceleration pursuant to
Section 8.2 or 8.3 or otherwise, the Agent shall thereafter select
such Interest Period for such overdue amount as it shall, in its
absolute discretion (after consultation with the Banks), deem
appropriate.
On or before 10:00 a.m. (London time) on the Business Day prior to the
date of the commencement of any Interest Period the Agent shall notify the
Borrower and each Bank of the LIBO Rate with respect to the Loans to be
outstanding during such Interest Period.
SECTION 4.2. FUNDING. Each Bank may, if it so elects, fulfil its
obligation to make or maintain any portion of the principal amount of any Loan
by causing a foreign branch, Affiliate or international banking facility of
such Bank to make such Loan; provided, however, that in such event such Loan
shall be deemed to have been made by such Bank, and the obligation of the
Borrower to repay such Loan, and pay interest thereon, shall nevertheless be to
such Bank and shall be deemed to be held by it, to the extent of such
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<PAGE> 28
Loan, for the account of such foreign branch, Affiliate or international
banking facility. In addition, the Borrower hereby consents and agrees that,
for purposes of any determination to be made for purposes of Sections 4.3, 4.4,
4.5 or 4.7, it shall be conclusively assumed that each Bank elected to fund its
Loans by obtaining deposits in the London interbank market.
SECTION 4.3. U.S. DOLLARS UNAVAILABLE. If the Agent shall have
determined or shall have been notified by any Bank (an "Affected Bank") that:
(a) U.S. Dollar certificates of deposit or U.S. Dollar
deposits, as the case may be, in the relevant amount and for the
relevant Interest Period are not available to such Bank in the London
interbank market; or
(b) by reason of circumstances affecting such Bank in the
London interbank market, adequate means do not exist for ascertaining
the interest rate applicable hereunder to its Loans,
then the Agent shall promptly give telephonic notice of such determination
confirmed in writing to the Borrower (which determination shall, in the absence
of manifest error, be conclusive and binding on the Borrower), and the
obligations of the Affected Bank to make or maintain its Loans shall, upon such
notification, forthwith terminate and the principal amount of, and interest on,
the then outstanding Loans made by such Affected Bank shall be immediately
repaid in full.
If circumstances subsequently change so that any Affected Bank shall
no longer be so affected, the Agent shall promptly give telephonic notice
thereof confirmed in writing to the Borrower and the Banks, and the obligations
of such Affected Bank to make or maintain its Loans shall be reinstated, and
the Agent shall, by notice to the Borrower and each Bank, declare that such
obligations have been so reinstated.
SECTION 4.4. INCREASED COSTS, ETC. Subject to the terms and
conditions of this Section, the Borrower agrees to reimburse each Bank Party
for any increase in the cost to such Bank Party of making or maintaining (or of
its obligation to make or maintain) any Loan and for any reduction in the
amount of any sum receivable by such Bank hereunder in respect of making or
maintaining any portion of the principal amount of its Loan from time to time
by reason of:
(a) any reserve, special deposit, or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, such Bank Party, under or pursuant to any Regulatory
Change (including any such Regulatory Change imposed under F.R.S.
Board Regulation D); or
(b) without duplication of any costs, expenses or other
amounts covered pursuant to Section 3.5, any Regulatory Change which
shall subject such Bank Party to any tax, levy, impost, charge, fee,
duty, deduction, or withholding of any kind whatsoever, or to any
change in the taxation of any such Loan and the interest thereon
(other than any Regulatory Change which affects the taxation of net
income).
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In any such event, such Bank shall promptly notify the Agent and the Borrower
thereof stating the reasons therefor and the additional amount required fully
to compensate such Bank Party for such increased cost or reduced amount.
Within thirty days of its receipt of such notice from any Bank relating to the
Loans maintained by it or to its Commitment, the Borrower may elect by notice
to the Agent and such Bank to terminate the obligations of such Bank hereunder
and, upon any such election, the Commitment of such Bank shall terminate or, as
the case may be, the principal amount of and interest on the Loans then
maintained by such Bank shall be immediately paid in full. In the event that
the Borrower shall not have elected to terminate the Commitment of such Bank as
aforesaid then the additional amounts referred to in the notice delivered
pursuant to the first sentence of this paragraph shall be payable by the
Borrower to the Agent for the account of such Bank on the date which is thirty
five days after its receipt of such notice (and, if such additional amounts
shall continue to be incurred by such Bank, at the end of each consecutive
monthly period occurring thereafter with respect to any such additional amount
incurred during such period). Any notice as to any such increased cost or
reduced amount or any change therein shall include calculations thereof in
reasonable detail and shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.5. FUNDING LOSSES. In the event any Bank shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of any U.S. Dollar deposits acquired by such Bank
to make, continue, or maintain any portion of the principal amount of any Loan)
as a result of:
(a) any repayment or prepayment of the principal amount
of any Loan on, in either such case, a date other than the scheduled
last day of the Interest Period applicable thereto, whether pursuant
to Section 3.3 or otherwise; or
(b) any action of the Borrower resulting in any Loans not
being made or maintained in accordance with the Borrowing Request or
the Interest Period Selection Notice, as the case may be, given
therefor;
then, upon the written notice of such Bank to the Borrower (with a copy to the
Agent), the Borrower shall pay to the Agent for the account of such Bank such
amount as will (in the reasonable determination of such Bank) reimburse such
Bank for such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
SECTION 4.6. INCREASED CAPITAL COSTS. In the event that any Bank
Party shall have determined that any Regulatory Change regarding capital
adequacy affecting such Bank Party or any corporation controlling such Bank
Party does or shall have the effect of reducing the rate of return on such Bank
Party's or such corporation's capital as a consequence of its Commitments or
obligations hereunder to a level below that which such Bank Party or such
corporation would have achieved but for such Regulatory Change (taking into
consideration such Bank Party's or such corporation's policies with respect to
capital adequacy), then, from time to time, after submission by such Bank Party
to the Borrower (with a copy to the Agent) of a written request therefor, the
Borrower shall, subject to the terms and conditions of the final paragraph of
this Section, pay to the Agent for the account
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of such Bank Party such additional amount or amounts as will (without
duplication) compensate such Bank Party or such corporation for:
(a) such reduction in such rate of return; or
(b) the increased cost to such Bank Party or such
corporation as a result of increasing its capital in order to
compensate it in connection with such reduction in such rate of
return.
In determining such additional amounts, each Bank Party may use any
method of averaging and attribution that it (in its reasonable discretion)
shall deem applicable. A statement of such Bank Party as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be final and conclusive and
binding on all the parties hereto. Each Bank Party shall notify the Borrower
of the occurrence of any such Regulatory Change applicable to such Bank Party
and no amount shall be payable to any Bank Party hereunder which is calculated
by reference to a period which has elapsed prior to the giving of such notice.
Within thirty days of its receipt of any written request from any Bank
for any payment under this Section with respect to the Loans maintained by it
or to its Commitment the Borrower may elect by notice to the Agent and such
Bank to terminate the obligations of such Bank hereunder, and upon any such
election, the principal amount of and interest on the Loans then maintained by
such Bank shall be immediately paid in full. In the event that the Borrower
shall not have elected to terminate the obligations of such Bank hereunder as
aforesaid then the additional amounts referred to in the written request for
payment thereof delivered pursuant to this Section shall be payable as set
forth above on the date which is thirty five days after the Borrower's receipt
of such notice.
SECTION 4.7. ILLEGALITY. If, as the result of any Regulatory
Change, any Bank shall determine (which determination, in the absence of
manifest error, shall be conclusive and binding on the Borrower) that it is
unlawful for such Bank to make or maintain its Loans, the obligations of such
Bank to make or maintain any portion of the principal amount of its Loan shall,
upon such determination (and telephonic notice thereof confirmed in writing to
the Agent and the Borrower), forthwith terminate, and the Agent shall, by
notice to the Borrower and each Bank, declare that the relevant such
obligations have so terminated, and, in the case of any such illegality
relating to such Bank's obligations to make and maintain its Loan hereunder,
the principal amount of and interest on the Loans then maintained by such Bank
shall be repaid in full not later than the tenth day following the day on which
the Agent shall have given such notice or such earlier date as may be required
by the applicable law.
ARTICLE 5. CONDITIONS PRECEDENT TO MAKING OF LOANS
SECTION 5.1. INITIAL LOANS. The obligations of the Banks to make
available the initial Loans shall be subject to the prior or concurrent
satisfaction of each of the conditions precedent set forth in this Article 5.
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<PAGE> 31
SECTION 5.1.1. RESOLUTIONS, ETC. The Agent shall have received:
(a) from the Borrower, a certificate, dated the date of
the making of the initial Loans, of its Secretary or an Assistant
Secretary as to:
(i) resolutions of its Board of Directors then in
full force and effect authorizing the execution, delivery, and
performance of this Agreement and each other Loan Document to
be executed by it; and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to this Agreement and
each other Loan Document to be executed by it,
upon which certificates each Bank may conclusively rely until it shall
have received a further certificate of the Secretary or an Assistant
Secretary of the Borrower cancelling or amending such prior
certificate; and
(b) such other documents (certified if requested) as the
Agent may reasonably request with respect to any Organic Document,
Contractual Obligation or Approval.
SECTION 5.1.2. SOLVENCY CERTIFICATE. The Agent shall have received
certificates, dated each of the Effective Date and the date of the making of
the initial Loans in the form of Exhibit E attached hereto, from a senior
financial Authorized Officer of the Borrower.
SECTION 5.1.3. FACHINAL TRANSFER AGREEMENT. The Agent shall have
received counterparts of the Fachinal Transfer Agreement duly executed by each
party thereto together with such documentary or other evidence as the Agent
shall require in connection with the implementation of the arrangements
contemplated by the Fachinal Transfer Agreement (including evidence relating to
the release of all obligations of the Bank Parties pursuant to the Existing
Loan Agreement).
SECTION 5.1.4. OPINIONS OF COUNSEL. The Agent shall have received
opinions, dated the date of the making of the initial Loans and addressed to
the Agent and all the Banks, from:
(a) William F. Boyd, General Counsel to the Borrower,
substantially in the form of Exhibit F attached hereto; and
(b) Mayer, Brown & Platt, counsel to the Agent, in form
satisfactory to the Agent.
SECTION 5.1.5. CLOSING FEES, EXPENSES, ETC. The Agent shall have
received (including, to the extent necessary, from the proceeds of the initial
Loans) for its own account, or for the account of each Bank, as the case may
be, all fees due and payable on or prior to the date of the making of the
initial Loans pursuant to Section 2.5 and all fees and expenses payable
pursuant to Section 9.8 or 10.3 to the extent then invoiced.
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SECTION 5.2. ALL LOANS. The obligations of the Banks to make
available any Loans (including the initial Loans) shall be subject to the
satisfaction of each of the additional conditions precedent set forth in this
Section.
SECTION 5.2.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. The
representations and warranties set forth in Article 6 shall have been true and
correct as of the date initially made, and both before and after the making of
the Loans (but, if any Default of the nature referred to in Section 8.1.5 shall
have occurred with respect to any other Indebtedness, without giving effect to
the application, directly or indirectly, of the proceeds of the Loans to such
other Indebtedness):
(a) such representations and warranties (excluding
Section 6.6) shall be true and correct with the same effect as if then
made (unless stated to relate solely to an earlier date, in which case
such representations and warranties shall be true and correct as of
such earlier date);
(b) no Default shall have then occurred and be
continuing; and
(c) no Default (as defined in the Existing Loan
Agreement) shall have occurred and be continuing.
SECTION 5.2.2. ABSENCE OF LITIGATION, ETC. Except as disclosed in
Item 2 ("Litigation") of the Disclosure Schedule:
(a) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending against or,
to the knowledge of the Borrower, threatened against, the Borrower or
any Subsidiary which would, if adversely determined, materially
adversely affect the financial condition, operations, assets,
business, properties or prospects of the Borrower and its
Subsidiaries, or which purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document; and
(b) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation or
proceeding so disclosed which would, if adversely determined,
materially adversely affect the financial condition, operations,
assets, business, properties or prospects of the Borrower and its
Subsidiaries.
SECTION 5.2.3. BORROWING REQUEST. The Agent shall have received the
Borrowing Request for the Loans. Each of the delivery of the Borrowing Request
and the acceptance by the Borrower of the proceeds of the Loans shall
constitute a representation and warranty by the Borrower that on the date of
the making of the Loans (both immediately before and after giving effect to the
making of the Loans and the application of the proceeds thereof) the statements
made in Sections 5.2.1 and 5.2.2 are true and correct.
SECTION 5.2.4. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any Subsidiary
shall be satisfactory in
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form and substance to the Agent and its counsel; the Agent and its counsel
shall have received all information, and such counterpart originals or such
certified or other copies of such Instruments, as the Agent or its counsel may
reasonably request; and all legal matters incident to the transactions
contemplated by this Agreement shall be satisfactory to counsel to the Agent.
SECTION 5.3. WAIVER OF CONDITIONS. The conditions specified in
the foregoing provisions of this Article 5 are inserted solely for the benefit
of the Bank Parties.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank Parties to enter into this Agreement and
to make Loans hereunder, the Borrower represents and warrants unto each Bank
Party as set forth in this Article 6.
SECTION 6.1. ORGANIZATION, POWER, AUTHORITY, ETC. The Borrower
and each Subsidiary is a corporation validly organized and existing and in good
standing under the laws of the state of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such qualification
necessary, and has full power and authority, and holds all requisite Approvals,
to own and hold under lease its property and to conduct its business
substantially as currently conducted by it. The Borrower has full power and
authority to enter into and perform its obligations under this Agreement and
the other Loan Documents executed or to be executed by it and to obtain the
Loans hereunder.
SECTION 6.2. DUE AUTHORIZATION. The execution and delivery by the
Borrower of this Agreement and each other Loan Document executed or to be
executed by it and the performance by the Borrower of its Obligations hereunder
and thereunder, and the receipt of the proceeds of the Loans hereunder by the
Borrower have been or, as the case may be, will be duly authorized by all
necessary corporate action, do not require any Approval, do not and will not
conflict with, result in any violation of, or constitute any default under, any
provision of any Organic Document or Contractual Obligation of the Borrower, or
any Approval, law or governmental regulation or court decree or order
applicable to the Borrower, and will not result in or require the creation or
imposition of any Lien on any property of the Borrower pursuant to the
provisions of any Contractual Obligation (other than pursuant to this
Agreement).
SECTION 6.3. VALIDITY, ETC. This Agreement is the legal, valid
and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, and each other Loan Document executed or to be
executed by the Borrower will, on the due execution by each party thereto and
delivery thereof, constitute the legal, valid and binding obligation of such
Borrower enforceable against the Borrower in accordance with its terms.
SECTION 6.4. FINANCIAL INFORMATION. All balance sheets, all
statements of operations, changes in stockholders' equity and cash flow, and
all other financial information of the Borrower and any Subsidiary which have
been or shall hereafter be furnished by or
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on behalf of the Borrower to the Agent for the purposes of or in connection
with this Agreement or any transaction contemplated hereby, including:
(a) the consolidated balance sheet at December 31, 1995,
and the related consolidated statements of operations, changes in
stockholders' equity and cash flow for the Fiscal Year then ended of
the Borrower and its Subsidiaries, certified by Ernst & Young LLP; and
(b) the consolidated balance sheet at September 30, 1996,
and the consolidated statements of operations and cash flow for the
Fiscal Quarter then ended of the Borrower and its Subsidiaries,
certified by the principal accounting or financial Authorized Officer
of the Borrower,
(together with, in each such case, any notes or footnotes thereto) have been or
will be prepared in accordance with GAAP consistently applied throughout the
periods involved (except as disclosed therein) and do or will present fairly
the consolidated financial position of the corporations covered thereby (on a
consolidated basis) as at the dates thereof and the results of their operations
for the periods then ended. Neither of the Borrower nor any Subsidiary has on
the date hereof any material contingent liability or liabilities for taxes,
long-term leases or unusual forward or long-term commitments which are not
reflected in the financial statements described in clauses (a) and (b) or in
the notes thereto.
Since December 31, 1995, and except as disclosed in any public filings
made by the Borrower with the Securities and Exchange Commission and copied to
the Banks prior to the Effective Date, there has been no material adverse
change in the financial condition, operations, assets, business or properties
of the Borrower and its Subsidiaries.
SECTION 6.5. ABSENCE OF DEFAULT. Neither the Borrower nor any
Subsidiary is in default in the payment of (or in the performance of any
material obligation applicable to) any Indebtedness having a principal amount,
individually or in the aggregate for the Borrower and Subsidiaries, in excess
of US$5,000,000 or in material default under any law or governmental regulation
or court decree or order or under any material term or condition upon which any
Approval has been granted.
SECTION 6.6. LITIGATION, ETC. Except as disclosed in Item 2
("Litigation") of the Disclosure Schedule, there is no pending or, to the
knowledge of the Borrower, threatened litigation, arbitration, labor
controversy or governmental investigation or proceeding against the Borrower or
any Subsidiary or to which any of the properties, assets or revenues of any
thereof is subject which, if adversely determined, would materially adversely
affect the financial condition, operations, assets, business, properties or
prospects of the Borrower and its Subsidiaries, or which purports to affect the
legality, validity or enforceability of this Agreement or any other Loan
Document.
SECTION 6.7. REGULATION G, T, U, AND X. Neither the Borrower nor
any Subsidiary is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and less than 25% of the assets of the Borrower consists of
margin stock. The use of the proceeds of all Loans
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made hereunder will comply in all respects with F.R.S. Board Regulations G, T,
U and X. Terms for which meanings are provided in F.R.S. Board Regulations G,
T, U or X or any regulations substituted therefor, as from time to time in
effect, are used in this Section with such meanings.
SECTION 6.8. GOVERNMENT APPROVAL, REGULATION, ETC. No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or other Person is required for
the due execution, delivery or performance by the Borrower of this Agreement or
any other Loan Document. Neither the Borrower nor any Subsidiary is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
SECTION 6.9. BURDENSOME AGREEMENTS. Neither the Borrower nor any
Subsidiary is a party or subject to any Contractual Obligation or Organic
Document which has a material adverse effect upon the financial condition,
operations, assets, business, properties or prospects of the Borrower and its
Subsidiaries.
SECTION 6.10. TAXES. The Borrower and each Subsidiary has filed
all tax returns (including all property tax returns and other similar tax
returns applicable to gold or silver deposits and mines) and reports required
by law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 6.11. PENSION AND WELFARE PLANS. During the twelve
consecutive month period prior to the date of the execution and delivery of
this Agreement and prior to the date of the making of the Loans hereunder, no
steps have been taken to terminate any Pension Plan sufficient to give rise to
a Lien of any nature, and no contribution failure has occurred with respect to
any Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA. No condition exists or event or transaction has occurred with respect
to any Pension Plan which might result in the incurrence by the Borrower or any
member of any Controlled Group of any material liability, fine or penalty.
Except as disclosed in Item 3 ("Employee Benefit Plans") of the Disclosure
Schedule, neither the Borrower nor any member of any Controlled Group has any
contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than liability for continuation coverage described in Part
6 of Title I of ERISA.
SECTION 6.12. SUBSIDIARIES. The Borrower has no Subsidiaries,
except those Subsidiaries which are identified in Item 4 ("Subsidiaries") of
the Disclosure Schedule.
SECTION 6.13. PATENTS, TRADEMARKS, ETC. The Borrower and each
Subsidiary owns and possesses all such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights and copyrights as the Borrower or such Subsidiary considers necessary
for the conduct of its business as now conducted
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without, individually or in the aggregate, any infringement upon rights of
other Persons which might have a material adverse affect upon the financial
condition, operations, assets, business, properties or prospects of the
Borrower and its Subsidiaries, and there is no individual patent or patent
license the loss of which would have such a material adverse affect, except as
may be disclosed in Item 5 ("Material Patents and Trademarks") of the
Disclosure Schedule.
SECTION 6.14. APPROVALS, ETC. The Borrower and each Subsidiary has
entered into or obtained, and maintained in full force and effect, all
Instruments and Approvals required or advisable in connection with its
business, except for Instruments and Approvals the lack of which does not, in
the aggregate, have a material adverse effect upon the financial condition,
operations, assets, business, properties or prospects of the Borrower and its
Subsidiaries. There are no defaults under such Instruments or Approvals which,
taken in the aggregate, might have such a material adverse effect.
SECTION 6.15. OWNERSHIP OF ASSETS. The Borrower and each
Subsidiary has sufficient title to each of its assets in order to conduct its
respective business as presently conducted and as contemplated to be conducted;
all of the leases, subleases, licenses, claims, rights, concessions and
agreements material to the business of the Borrower or any Subsidiary, and
under which the Borrower or any Subsidiary holds any properties, are in full
force and effect and neither the Borrower nor any Subsidiary has any notice of
any material claim of any sort that has been asserted by anyone adverse to the
rights of the Borrower or any Subsidiary under any such lease, sublease,
license, claim, concession or agreement, or affecting or questioning the rights
of the Borrower or such Subsidiary to the continued possession of the premises
under any such lease, sublease, license, claim, concession or agreement.
SECTION 6.16. ACCURACY OF INFORMATION. All factual information
heretofore or hereafter furnished by or on behalf of the Borrower to any Bank
Party pursuant to this Agreement is or, as the case may be, will be, true and
accurate in every material respect (subject, in the case of any forecast, to
any assumption referred to therein) on the date as of which such information is
dated or certified, and such information is not, or, as the case may be, shall
not be incomplete on such date or dates by omitting to state any material fact
necessary to make such information not misleading.
SECTION 6.17. ENVIRONMENTAL WARRANTIES. Except (in the case of
clauses (b), (e) and (i) only) as set forth in Item 6 ("Environmental Matters")
or (in the case of clause (b) only) as set forth in Item 2 ("Litigation") of
the Disclosure Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any Subsidiary have
been, and continue to be, owned or leased by the Borrower or such
Subsidiary in material compliance with all Environmental Laws;
(b) there are no pending or threatened:
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(i) claims, complaints, notices or requests for
information received by the Borrower or any Subsidiary with
respect to any alleged violation of any Environmental Law; or
(ii) complaints, notices or inquiries to the
Borrower or any Subsidiary regarding potential liability under
any Environmental Law;
(c) there have been no Releases of Hazardous Materials
(or any similar occurrence in any jurisdiction other than the U.S.)
at, on or under any property or facilities now or previously owned or
leased by the Borrower or any Subsidiary (or in any other location
with respect to Hazardous Materials generated by the Borrower or any
Subsidiary) that, singly or in the aggregate, have, or may reasonably
be expected to have, a material adverse effect on the financial
condition, operations, assets, business, properties or prospects of
the Borrower and its Subsidiaries;
(d) the Borrower and each Subsidiary has been issued and
is in material compliance, with all permits, certificates, approvals,
licenses and other authorizations relating to environmental matters
which are necessary or desirable for its businesses (after taking into
account whether or not any such permit, etc. is required in connection
with any property or business owned by the Borrower or any Subsidiary
and which has yet to be placed into operation);
(e) no property now or previously owned or leased by the
Borrower or any Subsidiary is listed or proposed for listing (with
respect to owned property only) on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any similar list of sites
maintained by any state or foreign jurisdiction requiring
investigation or clean-up;
(f) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any property
now or previously owned or leased by the Borrower or any Subsidiary
that, singly or in the aggregate, have, or may reasonably be expected
to have, a material adverse effect on the financial condition,
operations, assets, business, properties or prospects of the Borrower
and its Subsidiaries;
(g) neither the Borrower nor any Subsidiary has directly
or indirectly disposed or directly or indirectly arranged for the
disposal of any Hazardous Material to any location which is listed or
which has been the subject of publication as being proposed for
listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar list maintained by any state or foreign
jurisdiction or which is the subject of U.S. or other Federal, state,
provincial or local enforcement actions or other investigations which
may lead to material claims against the Borrower or Subsidiary for any
remedial work, damage to natural resources or personal injury,
including claims under CERCLA;
(h) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or leased by
the Borrower or any Subsidiary that,
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singly or in the aggregate, have, or may reasonably be expected to
have, a material adverse effect on the financial condition,
operations, assets, business, properties or prospects of the Borrower
and its Subsidiaries; and
(i) no conditions exist at, on or under any property now
or previously owned or leased by the Borrower or any Subsidiary which,
with the passage of time, or the giving of notice or both, would give
rise to any liability under any Environmental Law and which could or
might have a materially adverse effect on the financial condition,
operation, assets, business or properties of the Borrower and its
Subsidiaries.
Each Bank Party shall be entitled to rely upon the Borrower's
representations and warranties contained in this Section notwithstanding any
independent investigations by any Bank Party or any of their respective
consultants. The Borrower shall take reasonable actions to determine for
itself, and to remain aware of, the environmental condition of any property now
or previously owned or leased by it or any Subsidiary and shall have no right
to rely upon any environmental investigations or findings made by any Bank
Party or any of their respective consultants.
SECTION 6.18. ROYALTIES. The operations of the Borrower and its
Subsidiaries are not subject to any material royalties, net profit interests or
similar rights (including delay rentals, advance royalties, minimum royalties,
bonuses and other forms of compensation given to landowners in the ordinary
course of business of the metal mining industry) (collectively, "Royalties")
other than as set forth in the agreements described in Item 7 ("Material
Royalty Agreements") of the Disclosure Schedule.
SECTION 6.19. PARI PASSU. All Obligations, including the
Obligations to pay principal of and interest on the Loans, will rank at least
pari passu with all Indebtedness (other than, to the extent of any Lien
permitted to be granted pursuant to Section 7.2.3, Indebtedness secured by such
Lien) of each Obligor.
ARTICLE 7. COVENANTS
SECTION 7.1. CERTAIN AFFIRMATIVE COVENANTS. The Borrower agrees
with each Bank Party that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower will perform its
obligations set forth in this Section 7.1.
SECTION 7.1.1. FINANCIAL INFORMATION, ETC. The Borrower will
furnish, or will cause to be furnished, to the Agent copies of the following
financial statements, reports and information:
(a) promptly when available, and in any event not less
than ninety (90) days after the close of each Fiscal Year, a
consolidated balance sheet at the close of such Fiscal Year, and
related consolidated statements of operations, changes in
stockholders' equity and cash flow for such Fiscal Year, of the
Borrower and its Subsidiaries (with comparable information at the
close of and for the prior Fiscal
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Year), certified without Impermissible Qualification by Ernst & Young
LLP or other independent public accountants acceptable to the Agent
and the Required Banks, together with a certificate from such
accountants containing a computation of, and showing compliance with,
each of the financial ratios and restrictions contained in Section
7.2.4 and to the effect that, in making the examination necessary for
the signing of such annual report by such accountants, they have not
become aware of any Default that has occurred and is continuing, or,
if they have become aware of such Default, describing such Default and
the steps, if any, being taken to cure it;
(b) promptly when available, and in any event not less
than sixty (60) days after the close of each of the first three Fiscal
Quarters of each Fiscal Year, a consolidated balance sheet at the
close of such Fiscal Quarter, and consolidated statements of
operations and cash flow for such Fiscal Quarter and for the period
commencing at the close of the previous Fiscal Year and ending with
the close of such Fiscal Quarter, of the Borrower and its Subsidiaries
(with comparable information at the close of and for the corresponding
Fiscal Quarter of the prior Fiscal Year and for the corresponding
portion of such prior Fiscal Year), certified by the principal
accounting or financial Authorized Officer of the Borrower;
(c) within thirty (30) days after March 31, June 30,
September 30 and December 31 occurring in each calendar year, a
Compliance Certificate calculated as of such date;
(d) promptly after the sending or filing thereof, copies
of all reports which the Borrower or any Subsidiary sends to any of
its security holders, and all reports and registration statements
which the Borrower or any Subsidiary files with the Securities and
Exchange Commission or any national securities exchange; and
(e) such other information with respect to the financial
condition, business, property, assets, revenues, and operations of the
Borrower or any Subsidiary as the Agent may from time to time
reasonably request.
SECTION 7.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with
all applicable laws, rules, regulations and orders, such compliance to include:
(a) the maintenance and preservation of its corporate
existence and qualification and good standing status as a foreign
corporation in each jurisdiction where the nature of its business
makes such qualification necessary;
(b) the payment, before the same become delinquent, of
all taxes, assessments and other governmental charges or levies
imposed upon it or upon its property, as well as claims of any kind or
character (including claims for sums due for labor, material,
supplies, personal property and services) which, if unpaid, might
become a material Lien upon any one of its properties; provided,
however, that the foregoing shall not require the Borrower or any
Subsidiary to pay or discharge any such tax, assessment, charge, levy
or Lien so long as it shall be diligently contesting
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the validity or amount thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves in
accordance with GAAP with respect thereto; and
(c) the acquisition and maintenance of all Approvals
material to the conduct of its business.
SECTION 7.1.3. MAINTENANCE OF PROPERTIES. The Borrower will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep
its properties in good repair, working order and condition, and make necessary
and proper repairs, renewals and replacements so that its business carried on
in connection therewith may be properly conducted at all times unless the
Borrower or applicable Subsidiary determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
SECTION 7.1.4. INSURANCE. The Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies satisfactory to the Agent in its reasonable discretion
insurance with respect to its properties and business against such casualties
and contingencies and of such types and in such amounts as is customary in the
case of similar businesses similarly situated (including business interruption
insurance), and the Borrower will, upon request of the Agent, furnish to the
Agent at reasonable intervals a certificate of an Authorized Officer of the
Borrower setting forth the nature and extent of all insurance maintained by the
Borrower and each Subsidiary in accordance with this Section. The Borrower
will immediately notify the Agent of any proposed change of any insurance
company providing insurance coverage of the nature referred to in this Section.
SECTION 7.1.5. NOTICE OF DEFAULT, LITIGATION, ETC. The Borrower
shall give prompt notice (with a description in reasonable detail and, in the
case of clause (d), copies of all documentation relating to the notified event)
to the Agent of:
(a) upon becoming aware of the same, the occurrence of
any Default;
(b) upon becoming aware of the same, the commencement of
any litigation, action, proceeding or labor controversy of the type
described in Section 6.6, together with copies of all documentation
relating thereto requested by the Agent in connection with the
performance by the Borrower of its obligations under this Agreement or
any other Loan Document;
(c) upon becoming aware of the same, the occurrence of
any material adverse development with respect to any litigation,
action, proceeding or labor controversy described in Section 6.6; and
(d) upon becoming aware of the same, the institution of
any steps by the Borrower or any Subsidiary or any other Person to
terminate any Pension Plan, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under Section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that the
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Borrower or any Subsidiary furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect
to any Pension Plan which could result in the incurrence by the
Borrower or any Subsidiary of any material liability, fine or penalty,
or any material increase in the contingent liability of the Borrower
or any Subsidiary with respect to any post-retirement Welfare Plan
benefit.
SECTION 7.1.6. BOOKS AND RECORDS. The Borrower will keep, and will
cause each of its Subsidiaries to keep, books and records reflecting all of its
business affairs and transactions in accordance with GAAP and permit each Bank
Party or its representatives, at reasonable times and intervals, to inspect any
and all of the properties and operations of the Borrower or such Subsidiary, to
visit all of its offices or any other location where relevant personnel or
records are located, to discuss its financial matters with its officers and
independent public accountants, and to examine (and, at the expense of the
Borrower or relevant Subsidiary, photocopy extracts from) any of its books or
other corporate records. The Borrower shall pay any fees of its independent
public accountants incurred in connection with any Bank Party's exercise of its
rights pursuant to this Section.
SECTION 7.1.7. PERMITS. The Borrower will, and will cause each of
its Subsidiaries to, obtain and maintain all Approvals material to the conduct
of its respective business.
SECTION 7.1.8. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to:
(a) use and operate all of its facilities and properties
in material compliance with all Environmental Laws, keep all necessary
permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in material
compliance therewith, and handle all Hazardous Materials in material
compliance with all applicable Environmental Laws;
(b) immediately notify the Agent and provide copies upon
receipt of all written material claims, complaints, notices or
inquiries relating to the condition of its facilities and properties
or compliance with Environmental Laws; and
(c) provide such information and certifications which the
Agent may reasonably request from time to time to evidence compliance
with this Section.
SECTION 7.1.9. USE OF LOAN PROCEEDS. The Borrower shall apply the
proceeds of all Loans for the purposes set forth in the fourth recital.
SECTION 7.2. CERTAIN NEGATIVE COVENANTS. The Borrower agrees with
each Bank Party that, until all Commitments have terminated and all Obligations
have been paid and performed in full, the Borrower will perform its obligations
set forth in this Section 7.2.
SECTION 7.2.1. BUSINESS ACTIVITIES. Neither the Borrower nor any
Subsidiary will engage in any business if, as a result, the nature of the
business, taken on a consolidated
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basis, which would then be engaged in by the Borrower and its Subsidiaries
would be other than the mining, producing and selling of gold, silver and
copper contained within various ore deposits.
SECTION 7.2.2. LIENS. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens in favour of the Agent or the Banks granted
pursuant to any Loan Document;
(b) Liens for taxes, assessments or other governmental
charges to the extent that payment thereof shall not at the time be
required to be made in accordance with the provisions of Section
7.1.2;
(c) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of business
for sums not overdue or being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(d) Liens in respect of any Project Indebtedness and
covering assets constituting the Mine to be financed with the proceeds
of such Permitted Project Indebtedness;
(e) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds;
(f) judgment liens in existence less than 15 days after
the entry thereof or with respect to which execution has been stayed
or the payment of which is covered in full (subject to a customary
deductible) by insurance with responsible insurance companies;
(g) Liens on movable plant or equipment held by the
Borrower or any Subsidiary under lease with an aggregate book value
not in excess of US$10,000,000 for all such plant and equipment at any
time subject to such Liens and incurred to secure Indebtedness of the
Borrower or such Subsidiary, respectively, which is incurred as a
Capitalized Lease Liability in respect of movable plant or equipment;
(h) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-of-way,
utilities and other similar purposes, or zoning or other restrictions
as to the use of real properties, which are necessary for the conduct
of the activities of the Borrower or any Subsidiary or which
customarily exist on properties of corporations engaged in similar
activities and
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similarly situated and which do not in any event materially impair
their use in the operation of the business of the Borrower or any
Subsidiary; and
(i) Liens covering CGNZ's (i) interest in the Golden
Cross Joint Venture (including its interest in any real estate and
licences relating to the Golden Cross Mine), (ii) share of any
production of the Golden Cross Mine, and (iii) interest in any
contracts which may exist from time to time for the sale of its share
of any production of the Golden Cross Mine and in any proceeds from
the sale thereof, in each such case granted to Viking Mining Company
Limited in order to secure the obligations of CGNZ under any document
relating to the Golden Cross Joint Venture.
Neither the Borrower nor any Subsidiary will at any time create,
incur, assume or suffer to exist any Lien upon any of the certificates of
insurance maintained by any of them with respect to any Mine. Nothing in this
Section shall be deemed to restrict the ability of the Borrower or Subsidiary
to agree (in consideration of obtaining leases or other rights and interests to
explore for and extract metals) to pay Royalties; provided, however, that any
Royalty that is a material Royalty payable by the Borrower or any of its
Subsidiaries shall arise under an agreement described in Item 7 ("Material
Royalty Agreements") of the Disclosure Schedule.
SECTION 7.2.3. FINANCIAL CONDITION, ETC. OF THE BORROWER. The
Borrower will not permit:
(a) at any date, the ratio, expressed as a percentage, of
(i) Consolidated Qualifying Indebtedness at such
date,
to
(ii) Consolidated Tangible Net Worth at such date
to be more than 50%;
(b) Consolidated Tangible Net Worth to be, at any date,
less than US$250,000,000;
(c) the Consolidated Current Ratio to be, at any date,
less than 2:1; and
(d) at any date, Available Cash to be less than
US$25,000,000.
SECTION 7.2.4. RESTRICTED PAYMENTS, ETC.
(a) The Borrower will not declare, pay or make any
dividend or distribution (in cash, property or obligations) on any
shares of any class of capital stock (now or hereafter outstanding) of
the Borrower or on any warrants, options or other rights with respect
to any shares of any class of capital stock (now or hereafter
outstanding) of the Borrower (other than dividends or distributions
payable in its
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stock, or warrants to purchase its stock, or splitups or
reclassifications of its stock into additional or other shares of its
stock) or apply, or permit any of its Subsidiaries to apply, any of
its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of, or agree to permit any of its
Subsidiaries to purchase or redeem, any shares of any class of capital
stock (now or hereafter outstanding) of the Borrower, or warrants,
options or other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Borrower;
(b) the Borrower will not:
(i) make any payment or prepayment of principal
of, or make any payment of interest on, any Qualifying
Subordinated Indebtedness on any day other than the stated,
scheduled date for such payment or prepayment set forth in the
documents and instruments memorializing such Qualifying
Subordinated Indebtedness, or which would violate the
subordination provisions of such Qualifying Subordinated
Indebtedness; or
(ii) redeem, purchase or defease, any Qualifying
Subordinated Debt; and
(c) the Borrower will not, and will not permit any
Subsidiary to, make any deposit for any of the foregoing purposes or
otherwise discharge any Indebtedness incurred by any Affiliate of the
Borrower;
provided, however, that the Borrower may declare, pay or make any dividend or
distribution on any shares of its capital stock as aforesaid or any warrants,
etc. as aforesaid at any time when no Default shall have occurred and be
continuing (or would occur as result of any such declaration, etc.).
SECTION 7.2.5. TAKE OR PAY CONTRACTS. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into, suffer to exist or be a
party to any material arrangement for the purchase of materials, supplies,
other property or services if such arrangement by its express terms requires
that payment be made by the Borrower or relevant Subsidiary regardless of
whether or not such materials, supplies, other property or services are
delivered or furnished to it.
SECTION 7.2.6. CONSOLIDATION, MERGER, ETC. The Borrower will not,
and will not permit any of its Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, except that any
Subsidiary all of the capital stock of which is owned, directly or indirectly,
by the Borrower may merge with or liquidate or dissolve voluntarily into, the
Borrower or any other Subsidiary (including any Person which would, as a result
of such merger, etc., become a Subsidiary); provided, however, that (i) in
connection with any such transaction the surviving entity shall deliver such
certificates and opinions as the Agent shall request, (ii) no such transaction
shall be effected if (x) any Default has occurred and is continuing or would
occur as a result of any such transaction, or (y) the Agent shall not have
received at least twenty (20) Business Days' notice of such transaction. At
any time when any Default has occurred and is continuing or would occur
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as a result of any transaction referred to in this sentence, the Borrower will
not, and the Borrower will not permit any of its Subsidiaries to, purchase or
otherwise acquire (a) any Person, which would, following such acquisition,
become a Subsidiary, or (b) all or substantially all of the assets of any
Person (or of any division thereof).
SECTION 7.2.7. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, transfer, lease, contribute
or otherwise convey, or grant options, warrants or other rights with respect
to, any of its assets (including accounts receivable or the capital stock of
any of its Subsidiaries) to any Person, except dispositions of assets made in
the ordinary course of its business and for fair value; provided, however, that
the Borrower or any Subsidiary may make any such sale, etc. which is not in the
ordinary course of its business (a) at any time when no Default has occurred
and is continuing, (b) if such sales etc is for fair value and (c) if the
proceeds thereof, when aggregated with the proceeds of any such prior sale,
etc. entered into after the Effective Date are not in excess of US$5,000,000.
SECTION 7.2.8. RESTRICTIVE AGREEMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement (excluding
this Agreement) prohibiting:
(a) the creation or assumption of any Lien upon its
properties, revenues, or assets, whether now owned or hereafter
acquired, or the ability of the Borrower to amend or otherwise modify
this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and
other intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower;
provided, however, that nothing in this Section shall prohibit the Borrower or
any Subsidiary entering into any Instrument relating to any Project
Indebtedness where the terms and conditions of such Instrument either (i)
prohibit the creation or assumption of any Lien in respect of any asset
constituting the Mine to be financed with the proceeds of such Project
Indebtedness or (ii) prohibit the ability of any Subsidiary owning the assets
constituting such Mine to make any payment of the nature referred to in clause
(b).
SECTION 7.2.9. CAPITAL EXPENDITURES, ETC. The Borrower will not,
and will not permit any of its Subsidiaries to, make or commit to make any
Capital Expenditure at any time when any Default has occurred and is continuing
(or may occur as a result of such Capital Expenditure).
SECTION 7.2.10. INCONSISTENT AGREEMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement containing
any provision which would be violated or breached by the making of any Loan
hereunder or by the performance by the Borrower of its obligations hereunder or
under any other Loan Document.
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SECTION 7.2.11. MODIFICATION OF CERTAIN AGREEMENTS. The Borrower
will not consent to any amendment, supplement or other modification of any of
the terms or provisions relating to the subordination of any Qualifying
Subordinated Indebtedness or to any other material terms or provisions
contained in, or applicable to, any document or instrument evidencing or
applicable to any Qualifying Subordinated Indebtedness, other than any
amendment, supplement or other modification which extends the date or reduces
the amount of any required repayment or redemption.
ARTICLE 8. EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. The term "Event of Default" shall
mean any of the events set forth in this Section 8.1.
SECTION 8.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall
default in the payment or prepayment when due of any principal amount of or
interest on any Loan, or the Borrower shall default (and such default shall
continue unremedied for a period of five (5) Business Days) in the payment when
due of any fee or other Obligation.
SECTION 8.1.2. BREACH OF REPRESENTATION OR WARRANTY. Any
representation or warranty of the Borrower hereunder or in any other Loan
Document executed by it is or shall be incorrect in any material respect when
made.
SECTION 8.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS. The Borrower
shall default in the due performance and observance of any of its obligations
under Section 7.1.5, 7.1.8 or 7.2.
SECTION 8.1.4. NON-PERFORMANCE OF OTHER OBLIGATIONS. The Borrower
shall default in the due performance or observance of any other term,
condition, covenant or agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of ten
(10) days after notice thereof shall have been given to the Borrower by the
Agent.
SECTION 8.1.5. DEFAULT ON OTHER INDEBTEDNESS. Any default shall
occur in the payment when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any Subsidiary having a
principal amount, individually or in the aggregate for the Borrower and all
such Subsidiaries, in excess of US$5,000,000, or the maturity of any such
Indebtedness shall be accelerated or a default shall occur in the performance
or observance of any obligation or condition with respect to such Indebtedness
and the effect of such default is to permit the acceleration of the maturity of
any such Indebtedness or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity.
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<PAGE> 47
SECTION 8.1.6. JUDGMENTS. Any judgment or order for the payment of
money in excess of US$5,000,000 shall be rendered against the Borrower or any
Subsidiary and either:
(a) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order; or
(b) there shall be any period of ten (10) consecutive
days during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect.
SECTION 8.1.7. PENSION PLANS. Any of the following events shall
occur with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any
member of its Controlled Group or any other Person to terminate a
Pension Plan if, as a result of such termination, the Borrower or any
such member could be required to make a contribution to such Pension
Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of US$250,000; or
(b) a contribution failure sufficient to give rise to a
Lien under Section 302(f) of ERISA.
SECTION 8.1.8. CHANGE IN CONTROL. Any Change in Control shall occur.
SECTION 8.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any
Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit
in writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or any Subsidiary or any property of any thereof, or
make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any
Subsidiary or for a substantial part of the property of any thereof,
and such trustee, receiver, sequestrator or other custodian shall not
be discharged within thirty (30) days, provided that the Borrower and
each Subsidiary hereby expressly authorizes each Bank Party to appear
in any court conducting any relevant proceeding during such thirty
(30) day period to preserve, protect and defend their rights under
this Agreement and each other Loan Document;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in
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respect of the Borrower or any Subsidiary, and, if such case or
proceeding is not commenced by the Borrower or such Subsidiary, such
case or proceeding shall be consented to or acquiesced in by the
Borrower or such Subsidiary or shall result in the entry of an order
for relief or shall remain for thirty (30) days undismissed, provided
that the Borrower and each Subsidiary hereby expressly authorizes each
Bank Party to appear in any court conducting any relevant proceeding
during such thirty (30) day period to preserve, protect and defend
their rights under this Agreement and each other Loan Document; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.10. MATERIALLY ADVERSE CHANGE. There shall, in the
reasonable opinion of the Required Banks, be a materially adverse change in the
financial condition, operations, assets, business, properties or prospects of
the Borrower and its Subsidiaries.
SECTION 8.1.11. APPROVALS, ETC. Any Approval or Instrument which is
material to the conduct of the business of the Borrower shall (in the case of
any such Approval) be withdrawn or shall (in the case of any such Approval or
Instrument) cease to remain in full force and effect.
SECTION 8.2. ACTION IF BANKRUPTCY. If any Event of Default
described in Section 8.1.9 shall occur, the Commitments (if not previously
terminated) shall automatically terminate and the outstanding principal amount
of all outstanding Loans and all other Obligations shall automatically be and
become immediately due and payable, without notice or demand.
SECTION 8.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of
Default (other than any Event of Default described in Section 8.1.9) shall
occur for any reason, whether voluntary or involuntary, and be continuing, the
Agent may, and upon the direction of the Required Banks, shall, by notice to
the Borrower, declare all or any portion of the outstanding principal amount of
the Loans and any or all other Obligations to be due and payable and/or the
Commitments (if not previously terminated) to be terminated, whereupon the full
unpaid principal amount of such Loans and any and all other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable, without further notice, demand, or presentment, and/or, as the case
may be, the Commitments shall terminate.
ARTICLE 9. THE AGENT
SECTION 9.1. ACTIONS. Each Bank authorizes the Agent to act on
behalf of such Bank under this Agreement and any other Loan Document in the
various capacities set forth herein and in the other Loan Documents and, in the
absence of other written instructions from the Required Banks received from
time to time by the Agent (with respect to which the Agent agrees that it will,
subject to the last two sentences of this Section, comply in good faith except
as otherwise advised by counsel to the effect that any such compliance might
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subject the Agent to any liability of whatsoever nature as to which the Agent
is not acceptably indemnified pursuant to the provisions of this Agreement), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of it by the terms hereof and thereof, together with such powers as
may be reasonably incidental thereto. Each Bank agrees (which agreement shall
survive any termination of this Agreement) to indemnify the Agent, pro rata
according to such Bank's Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any
time be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any other Loan Document,
including the reimbursement of the Agent for all reasonable out-of-pocket
expenses (including reasonable attorneys' fees (inclusive of Value Added Tax in
the United Kingdom or any similar tax in any other jurisdiction)) incurred by
the Agent hereunder or in connection herewith or in enforcing the Obligations
under this Agreement and each other Loan Document, in all cases as to which the
Agent is not reimbursed by the Borrower; provided, however, that no Bank shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements determined by a court of competent jurisdiction in a final
proceeding to have resulted from the Agent's gross negligence or wilful
misconduct. The Agent shall not be required to take any action hereunder or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement or any other Loan Document, unless it is indemnified to its
satisfaction by the Banks against loss, costs, liability and expense. If any
indemnity in favour of the Agent shall become impaired, the Agent may call for
additional indemnity and cease to do the acts indemnified against until such
additional indemnity is given.
SECTION 9.2. EXCULPATION. Neither the Agent, nor any of its
directors, officers, employees or agents, shall be liable to any Bank for any
action taken or omitted to be taken by it under this Agreement or any other
Loan Document, or in connection herewith or therewith, except for its own
wilful misconduct or gross negligence, nor responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor to
make any inquiry respecting the performance by the Borrower of its obligations
hereunder or thereunder, nor the validity, genuineness, creation, perfection or
priority of any Liens created by any of the Loan Documents, nor the validity,
genuineness, enforceability, existence, value or sufficiency of any collateral
security. The Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate, statement,
or writing which it believes to be genuine and to have been presented by a
proper Person.
SECTION 9.3. SUCCESSOR. The Agent may resign as such at any time
upon at least thirty (30) days' prior notice to the Borrower and all the Banks.
If the Agent at any time shall resign, the Required Banks may appoint another
Bank as a successor Agent which shall thereupon become the Agent hereunder. If
no successor Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be one of the Banks or a
commercial banking institution organized under the laws of the United States or
England and having a combined capital and surplus of at least US$500,000,000
(or equivalent in another currency).
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Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall be entitled to receive from the retiring Agent such
documents of transfer and assignment as such successor Agent may reasonably
request, and shall thereupon succeed to and become vested with all rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations under this Agreement and
the other Loan Documents. After any retiring Agent's resignation hereunder as
the Agent, the provisions of:
(a) this Article 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was the Agent
under this Agreement; and
(b) Sections 10.3 and 10.4 shall continue to inure to its
benefit.
SECTION 9.4. LOANS BY THE AGENT. The Agent shall have the same
rights and powers with respect to the Loans made by it or any of its Affiliates
as any Bank and may exercise the same as if it were not the Agent.
SECTION 9.5. ROTHSCHILD AS THE AGENT. In acting as the Agent for
the Banks, the Credits and/or Treasury Division(s) of Rothschild shall be
treated as a separate entity from any other of its divisions (or similar units
of Rothschild in any subsequent reorganization) and, without detracting from
the generality of the foregoing, in the event that any of its divisions (or
similar units) should act for the Borrower, any Subsidiary of any thereof or
any of their Affiliates (the "Group") in an advisory capacity in relation to
any other matter, any information given by any member of the Group to such
divisions (or similar units) for the purpose of obtaining advice shall be
treated as confidential and shall not be available to the Banks without the
consent of the Borrower; and notwithstanding anything to the contrary expressed
or implied herein and without prejudice to the generality of the foregoing,
Rothschild shall not as between itself and the Banks be bound to disclose to
any Bank or other Person any information supplied by any member of the Group to
Rothschild in its capacity as the Agent which is identified by such member of
the Group at the time of supply as being unpublished price sensitive
information relating to a proposed transaction by a member of the Group and
supplied solely for the purpose of evaluating in consultation with Rothschild
whether such transaction might require a waiver or amendment to any of the
provisions contained herein.
SECTION 9.6. CREDIT DECISIONS. Each Bank acknowledges that it
has, independently of the Agent and each other Bank, and based on the financial
and other information referred to in Sections 6.4 and 6.16 and such other
documents, information and investigations as it has deemed appropriate, made
its own credit decision to extend its Commitment. Each Bank also acknowledges
that it will, independently of the Agent and each other Bank, and based on such
other documents, information and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.
SECTION 9.7. COPIES, ETC. Subject to the other terms and
conditions of this Agreement (including Section 9.5), the Agent shall give
prompt notice to each Bank of each
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notice or request required or permitted to be given to the Agent by the
Borrower pursuant to the terms of this Agreement. Subject as aforesaid, the
Agent will promptly distribute to each Bank each Instrument received for its
account (including any item of documentation delivered by the Borrower pursuant
to Article 5) and copies of all other communications received by the Agent from
the Borrower for distribution to the Banks by the Agent in accordance with the
terms of this Agreement.
SECTION 9.8. FEES. The Borrower hereby confirms and agrees that
it will pay to the Agent, for the Agent's individual account, all fees, costs,
expenses and all other amounts agreed upon by the Borrower and the Agent in
accordance with the terms of the letter, dated November 19, 1996, from the
Agent to the Borrower. None of the Banks (other than Rothschild in its
capacity as the Agent) shall have any interest in any amounts or payments
described in this Section.
SECTION 9.9. FUNDING RELIANCE, ETC. Unless the Agent shall have
been notified by telephone, confirmed in writing, by any Bank by 5:00 p.m.,
London time, on the day prior to the making of any Loans that such Bank will
not make available the amount which would constitute its Percentage of such
Loans on the date specified therefor, the Agent may assume that such Bank has
made such amount available to the Agent and, in reliance upon such assumption,
make available to the Borrower a corresponding amount. If and to the extent
that such Bank shall not have made such amount available to the Agent, such
Bank and the Borrower severally agree to repay the Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date the Agent made such amount available to the Borrower to the date such
amount is repaid to the Agent, at the interest rate applicable at the time to
the relevant Loans.
SECTION 9.10. APPLICATION OF ARTICLE 9. Except for the provisions
of Sections 9.3, 9.5 and 9.8, this Article 9 shall only apply to the
relationships among the Banks and the Agent.
ARTICLE 10. MISCELLANEOUS
SECTION 10.1. WAIVERS, AMENDMENTS, ETC. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower, the Agent and the Required Banks; provided,
however, that no such amendment, modification or waiver:
(a) which would modify any requirement hereunder that any
particular action be taken by all the Banks or by the Required Banks
shall be effective unless consented to by each Bank;
(b) which would modify this Section 10.1, change the
definition of "Required Banks," increase the Total Commitment Amount
or the Percentage of any Bank, reduce any fees described in Section
2.5, extend the Commitment Termination Date shall be made without the
consent of each Bank;
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(c) which would extend the due date for, or reduce the
amount of, any repayment or prepayment of principal of or interest on
any Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of each Bank; or
(d) which would affect adversely the interests, rights or
obligations of the Agent shall be made without the consent of the
Agent.
No failure or delay on the part of any Bank Party in exercising any power or
right under this Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on the Borrower in any case shall
entitle it to any notice or demand in similar or other circumstances. No
waiver or approval by any Bank Party under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
SECTION 10.2. NOTICES. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
it at its address set forth below its signature hereto and designated as its
"Address for Notices" or at such other address as may be designated by such
party in a notice to the other parties. Any notice, if mailed and properly
addressed with postage prepaid, shall be deemed given when received; any
notice, if transmitted by telex or facsimile, shall be deemed received when
transmitted (answerback confirmed in the case of telexes and transmission
confirmed by the sending facsimile machine in the case of facsimiles).
SECTION 10.3. COSTS AND EXPENSES.
(a) The Borrower agrees to pay on demand all expenses
(inclusive of Value Added Tax in the United Kingdom or any similar tax
in any other jurisdiction) of the Agent for the negotiation,
preparation, execution and delivery of this Agreement and each other
Loan Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to this
Agreement or any other Loan Document as may from time to time
hereafter be required (including the reasonable fees and expenses of
counsel for the Agent from time to time incurred in connection
therewith), whether or not the transactions contemplated hereby are
consummated, and all expenses (inclusive as aforesaid) of the Agent
(including reasonable fees and expenses of counsel to the Agent)
incurred in connection with the preparation and review of the form of
any Instrument relevant to this Agreement or any other Loan Document,
the consideration of legal questions relevant hereto and thereto and
the filing, recording, refiling or re-recording of any Loan Document
and all amendments or supplements to any thereof and any and all other
documents or Instruments of further assurance required to be filed or
recorded or refiled or re-recorded by the terms hereof or of any other
Loan Document; and
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(b) The Borrower agrees to reimburse each Bank Party upon
demand for all reasonable out-of-pocket expenses (inclusive of Value
Added Tax in the United Kingdom or any similar tax in any other
jurisdiction and including attorneys' fees and legal expenses)
incurred by such Bank Party in connection with (i) the negotiation of
any restructuring or "work-out", whether or not consummated, of any
Obligations and (ii) the enforcement of any Obligations.
SECTION 10.4. INDEMNIFICATION. In consideration of the execution
and delivery of this Agreement by each Bank Party and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds each Bank
Party and each of its officers, directors, employees and agents (the
"Indemnified Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages and expenses
actually incurred in connection therewith, including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), by the Indemnified Parties
or any of them as a result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement
and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the
result of any determination by the Required Banks not to fund the
making of any Loan as a result of the failure of the Borrower or any
Subsidiary to satisfy any term or condition of Article 5);
(c) any investigation, litigation or proceeding related
to any environmental cleanup, audit, compliance or other matter
relating to the protection of the environment or the Release by the
Borrower or any Subsidiary of any Hazardous Material; or
(d) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases or
threatened releases from, any real property owned or operated by the
Borrower or any Subsidiary of any Hazardous Material (including any
losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law), regardless of
whether caused by, or within the control of, the Borrower or such
Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
negligence or wilful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 10.5. SURVIVAL. The obligations of the Borrower under
Sections 3.5, 4.4, 4.5, 4.6, 10.3, and 10.4, and the obligations of the Banks
under Section 9.1, shall, in each case, survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the
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<PAGE> 54
Borrower in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each other such Loan Document.
SECTION 10.6. SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
of this Agreement or such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. HEADINGS. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may
be executed by the parties hereto in several counterparts, each of which shall
be deemed to be an original and all of which shall constitute together but one
and the same agreement. This Agreement shall become effective on the date (the
"Effective Date") when counterparts hereof executed on behalf of the Borrower
and each Bank (or notice thereof satisfactory to the Agent) shall have been
received by the Agent.
SECTION 10.9. GOVERNING LAW; ENTIRE AGREEMENT.
(a) THIS AGREEMENT AND, UNLESS OTHERWISE SPECIFIED
THEREIN, EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
(b) This Agreement and the other Loan Documents
constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and thereof and supersede any
prior agreements, written or oral, with respect thereto (except, for
the purpose of 9.8, the letter referred to therein).
SECTION 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent
and all the Banks; and
(b) the rights of sale, assignment and transfer of the
Banks are subject to Section 10.11.
SECTION 10.11. SALE AND TRANSFER OF LOANS; PARTICIPATIONS IN LOANS.
Each Bank may assign, or sell participations in, its Loans and Commitment to
one or more other Persons in accordance with this Section.
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<PAGE> 55
SECTION 10.11.1. ASSIGNMENTS. Any Bank:
(a) with the written consents of the Borrower and the
Agent (which consents shall not be unreasonably delayed or withheld
and which consent, in the case of the Borrower, shall be deemed to
have been given in the absence of a written notice delivered by the
Borrower to the Agent, on or before the fifth Business Day after
receipt by the Borrower of such Bank's request for consent, stating,
in reasonable detail, the reasons why the Borrower proposes to
withhold such consent) may at any time assign and delegate to one or
more commercial banks or other financial institutions; and
(b) with notice to the Borrower and the Agent, but
without the consent of the Borrower or the Agent, may assign and
delegate to any of its Affiliates or to any other Bank
(each Person described in either of the foregoing clauses as being the Person
from or to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignor Bank" or "Assignee Bank", respectively), all or any
fraction of such Bank's total Loans and Commitment (which assignment and
delegation shall be of a constant, and not a varying, percentage of all the
Assignor Bank's Loans and Commitment) in a minimum aggregate Commitment Amount
of US$1,000,000; provided, however, that, the Borrower and the Agent shall be
entitled to continue to deal solely and directly with the Assignor Bank in
connection with the interests so assigned and delegated to an Assignee Bank
until
(c) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Bank, shall have been given to the
Borrower and the Agent by such Assignor Bank and such Assignee Bank,
(d) such Assignee Bank shall have executed and delivered
to the Borrower and the Agent a Bank Assignment Agreement, accepted by
the Agent, and
(e) the processing fees described below shall have been
paid.
From and after the date that the Agent accepts such Bank Assignment Agreement,
(x) the Assignee Bank thereunder shall be deemed automatically to have become a
party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Bank in connection with such Bank
Assignment Agreement, shall have the rights and obligations of a Bank hereunder
and under the other Loan Documents, and (y) the Assignor Bank, to the extent
that rights and obligations hereunder have been assigned and delegated by it in
connection with such Bank Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents. Accrued interest on
that part of the Loans assigned to the Assignee Bank, and accrued fees in
respect thereof, shall be paid as provided in the Bank Assignment Agreement.
Such Assignor Bank or such Assignee Bank shall also pay a processing fee to the
Agent upon delivery of any Bank Assignment Agreement in the amount of US$2,000.
Any attempted assignment and delegation not made in accordance with this
Section shall be null and void.
-50-
<PAGE> 56
SECTION 10.11.2. PARTICIPATIONS. Any Bank may at any time
sell to one or more commercial banks or other Persons (each of such commercial
banks and other Persons being herein called a "Participant") participating
interests in any of the Loans, Commitment, or other interests of such Bank
hereunder; provided, however, that:
(a) no participation contemplated in this Section shall
relieve such Bank from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Bank shall remain solely responsible for the
performance of its Commitment and such other obligations;
(c) the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement and each of the other Loan
Documents;
(d) no Participant, unless such Participant is an
Affiliate of such Bank, or is itself a Bank, shall be entitled to
require such Bank to take or refrain from taking any action hereunder
or under any other Loan Document, except that such Bank may agree with
any Participant that such Bank will not, without such Participant's
consent, take any actions of the type described in clause (b) or (c)
of Section 10.1; and
(e) the Borrower shall not be required to pay any amount
under Section 3.5 that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 3.5, 3.7, 3.8, 4.4, 4.5, 4.6, 10.3 and 10.4, shall be considered a
Bank.
SECTION 10.12. OTHER TRANSACTIONS. Nothing contained herein shall
preclude any Bank Party from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Affiliates in which the Borrower or such Affiliate is not restricted
hereby from engaging with any other Person.
SECTION 10.13. CHANGE IN ACCOUNTING PRINCIPLES. If, after the
Effective Date, there shall be any change to the Borrower's Fiscal Year, or in
the application of the accounting principles used in the preparation of the
financial statements referred to in Section 6.4 as a result of the promulgation
of rules, regulations, pronouncements, or opinions by the American Institute of
Certified Public Accountants (or successors thereto or agencies in the U.S. or
any other jurisdiction with similar functions) which changes result in a change
in the method of calculation of financial covenants, standards, or terms found
in this Agreement, the parties hereto agree promptly to enter into negotiations
in order to amend such financial covenants, standards, or terms so as to
reflect equitably such changes with the desired result that the evaluations of
the Borrower's financial condition shall be the same after such changes as if
such changes had not been made; provided, however, that until the parties
hereto have reached a definitive agreement on such amendments, the Borrower's
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<PAGE> 57
financial condition shall continue to be evaluated on the same principles as
those used in the preparation of the financial statements referred to in
Section 6.4.
SECTION 10.14. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR (UNLESS OTHERWISE SPECIFIED THEREIN) ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE BANK PARTIES OR THE OBLIGORS SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IDAHO OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE
DISTRICT OF IDAHO; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY
AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF
ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER
HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM WITH OFFICES ON THE DATE
HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS AGENT FOR SERVICE OF
PROCESS IN NEW YORK (THE "PROCESS AGENT"). SERVICE OF PROCESS IN NEW YORK MAY
BE MADE UPON THE BORROWER BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO IT
IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ADDRESS AND THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING IN NEW YORK OR IDAHO ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT BY THE MAILING OF COPIES OF SUCH PROCESS AT ITS ADDRESS FOR NOTICES
SET FORTH BELOW ITS SIGNATURE HERETO. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.15. WAIVER OF JURY TRIAL. THE BANK PARTIES AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
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<PAGE> 58
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BANK PARTIES
OR THE BORROWER. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE OTHER PARTIES HERETO ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.16. CONFIDENTIALITY. Information provided by the Borrower
hereunder or under any other Loan Document shall not be disclosed by the Agent
or any Bank or used by the Agent or any Bank for any purpose other than
evaluation, monitoring and review pursuant to this Agreement; provided,
however, that such information may be disclosed:
(a) as contemplated by Section 10.11 if the relevant Assignee
Bank or Participant is advised such information is confidential;
(b) to any director, officer or employee of the Agent or such
Bank; provided, however, that same is treated in the same manner as
other confidential information held by the Agent or such Bank;
(c) to legal counsel, accountants and other consultants and
professional advisors determined by the Agent or such Bank to require
such information for the purpose of assisting in or advising upon such
evaluation, monitoring and review, if such persons are advised that
such information is confidential to the Borrower;
(d) pursuant to Applicable Law;
(e) to the extent that such information is public; or
(f) to the extent that such information was previously known
to the Agent or such Bank through means other than the Borrower, or
was acquired from a third party not known to the Agent or such Bank to
be under a duty of confidentiality to the Borrower.
-53-
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
THE BORROWER
COEUR D'ALENE MINES CORPORATION
By:
--------------------------------
Name Printed:
-------------------
Title:
--------------------------
Address for Notices:
505 Front Avenue
P.O. Box I
Coeur d'Alene
Idaho 83814
Facsimile No.: (208) 667-2213
Attention: James A. Sabala
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<PAGE> 60
THE AGENT AND THE BANKS
Percentage
50%
N M ROTHSCHILD &
SONS LIMITED, individually as a Bank
and as the Agent
By:
--------------------------------
Name Printed:
-------------------
Title:
--------------------------
By:
--------------------------------
Name Printed:
-------------------
Title:
--------------------------
Address for Notices:
New Court
St. Swithin's Lane
London EC4P 4DU
England
Facsimile No.: 44-171-280-5139
Telex No.: 888031
Attention: Michael Price/Nick Wood
Lending Office:
The Chase Manhattan Bank N.A.
1 Chase Manhattan Plaza
New York, New York
U.S.A.
For the account of
N M Rothschild & Sons Limited
(Account No: 001-1-948262)
Facsimile No.: 44-171-280-5679
Telex No.: 888031
Attention: Muriel Bond
-55-
<PAGE> 61
50%
BAYERISCHE VEREINSBANK AG, as a Bank
By:
--------------------------------
Name Printed:
-------------------
Title:
--------------------------
By:
--------------------------------
Name Printed:
-------------------
Title:
--------------------------
Address for Notices and Lending
Office:
335 Madison Avenue
19th Floor
New York, N.Y. 10017
U.S.A.
Facsimile No.: (212) 210-0345
Telex No.: 62850 UBB
Attention: Claire Simonelli/
Andrew Matthews
With a copy, in the case of notices
relating to the funding of Loans and
payments, to:
Bayerische Vereinsbank AG
1 Royal Exchange Buildings
London EC3V 3LD
England
Attention: Jane Jellicoe
-56-
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF COEUR D'ALENE MINES CORPORATION
The following subsidiaries of Coeur d'Alene Mines Corporation as of
March 31, 1997 are wholly owned unless otherwise stated.
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE/COUNTRY OF INCORPORATION
- ------------------ -------------------------------
<S> <C>
Coeur Rochester, Inc. Delaware
Coeur Bullion Corporation Idaho
Coeur Explorations, inc. Idaho
Coeur Alaska, Inc. Delaware
CDE Chilean Mining Corporation Delaware
Callahan Mining Corporation Arizona
Gasgoyne Gold Mines NL Australia (36% owned)
Silver Valley Resources Corporation Delaware (50% owned)
Compania Minera CDE Fachinal Limitada Chile
Compania Minera CDE El Bronce Chile
</TABLE>
The following is a list of the subsidiaries of Callahan Mining
Corporation:
<TABLE>
<CAPTION>
STATE OF PERCENTAGE OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- ------------------ ------------- -------------
<S> <C> <C>
Coeur New Zealand, Inc. Delaware 100%
Pinna cle Explorati on, Inc. Colorado 87.2%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Long-Term Incentive Plan of Coeur
d'Alene Mines Corporation, of our report dated February 5, 1997 with respect to
the consolidated financial statements of Coeur d'Alene Mines Corporation
included in the Annual Report (Form 10-K) for the year ended December 31, 1996.
Seattle, Washington
March 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 43,455,000
<SECURITIES> 124,172,000
<RECEIVABLES> 11,573,000
<ALLOWANCES> 0
<INVENTORY> 31,992,000
<CURRENT-ASSETS> 211,192,000
<PP&E> 401,495,000
<DEPRECIATION> 89,007,000
<TOTAL-ASSETS> 580,330,000
<CURRENT-LIABILITIES> 31,566,000
<BONDS> 189,740,000
7,078,000
0
<COMMON> 22,950,000
<OTHER-SE> 316,170,000
<TOTAL-LIABILITY-AND-EQUITY> 346,198,000
<SALES> 92,731,000
<TOTAL-REVENUES> 105,890,000
<CGS> 83,283,000
<TOTAL-COSTS> 83,283,000
<OTHER-EXPENSES> 78,361,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,635,000
<INCOME-PRETAX> (55,754,000)
<INCOME-TAX> (1,184,000)
<INCOME-CONTINUING> (54,570,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,570)
<EPS-PRIMARY> (2.54)
<EPS-DILUTED> 0
</TABLE>
