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, 1997
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 __________
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
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(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]
<PAGE>
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 6, 1998.)
$248,382,555
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 6, 1998.
21,898,624 shares of Common Stock, Par Value $1.00
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>
PART I
ITEM 1. BUSINESS
Coeur d'Alene Mines Corporation is engaged through its subsidiaries in
the exploration, development, operation and/or ownership of silver and gold
mining properties and companies located primarily within the United States
(Nevada, Idaho and Alaska), Australasia (New Zealand and Western 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:
o 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;
o ownership of 50% of the capital stock of SILVER VALLEY RESOURCES
CORPORATION ("SILVER VALLEY"), which owns the COEUR and the GALENA
underground silver mines that resumed production in June 1996 and
May 1997, respectively, the CALADAY project and operating control
of several contiguous properties in the Coeur d'Alene Mining
District of Idaho;
o the FACHINAL MINE, an open pit and underground gold and silver
mining operation wholly-owned and operated by Coeur and located in
southern Chile, South America, which Coeur acquired in 1990, at
which initial production commenced in October 1995. Fachinal was
classified as an operating property for financial reporting
purposes on January 1, 1997;
o the EL BRONCE MINE, an underground Chilean gold and silver mine in
which the Company acquired a 51% operating interest in October
1994 and in which the Company acquired 100% ownership in September
1996;
o ownership of 50% of the capital stock of GASGOYNE GOLD MINES NL,
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;
o ownership of 100% of the KENSINGTON PROPERTY, located north of
Juneau, Alaska, which is being developed as an underground gold
mine by Coeur and where the Company currently is conducting an
optimization study and developmental program; and
o the GOLDEN CROSS MINE, an underground and surface gold mining
operation located near Waihi, New Zealand in which Coeur has an
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<PAGE>
80% operating interest acquired on May 3, 1993, and at which
mining activities were substantially discontinued in December
1997.
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.
BUSINESS STRATEGY
The Company's business strategy is to capitalize on its strong ore
reserve base and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) increase the Company's
low-cost silver production and reserves in order to remain the nation's
largest silver producer and one of the world's largest primary silver
producers; (ii) improve operating cost and production profiles at Coeur's
existing gold mining operations; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with
an interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production
costs and expanding its production and reserves; (v) continue to explore for
new silver and/or gold assets primarily in North and South America, Mexico,
and Australia as well as at existing mine sites; (vi) focus on opportunities
which provide strong future exploration potential and immediate or near-term
prospects for low-cost silver and/or gold production; and (vii) preserve the
Company's financial ability to weather the gold industry's lowest price level
in eighteen years.
SOURCES OF REVENUE
The Rochester Mine, Fachinal Mine and El Bronce Mine, which are operated
by the Company; the Golden Cross Mine, which was operated by the Company; and
the Company's interests in Silver Valley and Gasgoyne, constituted the
Company's principal sources of mining revenues in 1997. 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 during the past four years:
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<PAGE>
<TABLE>
<CAPTION>
Percentage of
Coeur
Mine/Company Ownership Percentage of Total Revenues in Year Ended December 31,
------------ --------- -------------------------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C> <C>
Rochester Mine 100% 57.0% 58.2% 38.5%
Golden Cross Mine 80 33.4 25.6 22.5
El Bronce Mine(1) 100 0.3 2.8 10.7
Fachinal Mine(2) 100 - - 9.3
Silver Valley 50 - 2.2 (3) 5.4
Gasgoyne(4) 50 - 0.9 5.4
Other - 9.3 10.3 8.2
----- ----- -----
100% 100% 100%
===== ===== =====
<FN>
(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 Fachinal Mine commenced pre-production activities in late October
1995 and was accounted for as a development stage property until
December 31, 1996 (i.e., operating costs were capitalized net of
revenues from pre-commercial production). Commencing January 1, 1997,
the mine was accounted for as an operating property for financial
reporting purposes.
(3) The Company's interest in Silver Valley accounted for approximately 3.0
% of total revenues for the approximately eight months subsequent to its
start-up by the Silver Valley Resources 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 reported percentages reflect
the fact that Coeur's interest in Gasgoyne revenue was 35% from May 1996
to February 1997, 36% from March 1997 to May 1997 and 50% after May
1997. The Company's interest in Gasgoyne was reported in accordance with
the equity method prior to May 1, 1997; therefore, revenues, net of
expenses are reported as other income for that period.
</FN>
</TABLE>
DEFINITIONS
The following sets forth definitions of certain important mining terms used in
this report.
"Dore" - A bullion produced by smelting, containing gold,
silver and minor amounts of impurities.
"Gold" - An alloy with minimum fineness of 999 parts per 1000
parts pure gold.
"Heap-Leaching
Process" - Heap leaching is a process of extracting gold and
silver by placing broken ore on an impermeable pad
and applying a dilute cyanide solution that
dissolves a portion of the contained gold, which is
then recovered in metallurgical processes.
"Mineralized
Material" - 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
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<PAGE>
and comprehensive economic, technical and legal
feasibility study based upon the test results is
concluded.
"Ore
Reserve" - That part of a mineral deposit which could be
economically and legally extracted or produced at
the time of the reserve determination.
"Probable
Reserves" - Ore 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.
"Proven
Reserves" - Ore 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 reserve are well-established.
"Ton" - 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) the risks and hazards inherent in
the mining business (including environmental hazards, industrial accidents,
weather or geologically related conditions), (ii) changes in the market prices
of gold and silver, (iii) the uncertainties inherent in the Company's
production, exploratory and developmental activities, including risks relating
to permitting and regulatory delays, (iv) the uncertainties inherent in the
estimation of gold and silver ore reserves, (v) changes that could result from
the Company's future acquisition of new mining properties or businesses, (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
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<PAGE>
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 541
unpatented contiguous mining claims and 54 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 up to 5% when the market price of silver equals or
exceeds $18.07 per ounce.
Based on the ore reserve-review report, dated February 1998, of
Independent Mining Consultants, Inc. ("IMC"), and accounting for production
through December 31, 1997, mineable, proven/probable ore reserves at the
Rochester Mine, as of January 1, 1998, totalled approximately 66.264 million
tons averaging 1.120 ounces per ton silver and 0.009 ounces per ton gold. The
reserve estimate is based on a 0.75 ounce per ton silver-equivalent cutoff
grade and silver and gold prices of $6.50 and $350.00, respectively. The
average grades do not reflect losses in the recovery process. The amount of
proven and probable reserves will vary depending on the price of silver and
gold. In addition, 10.752 million tons of mineralized material averaging 0.007
ounces per ton gold and 1.10 ounces per ton silver have been identified.
Based upon its experience and certain metallurgical testing, the Company
estimates recovery rates of 59% for silver and 90% 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,
----------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Ore processed
(tons) 7,247,553 7,759,637 8,243,609 8,127,691 8,738,471
Silver (ounces) 5,943,894 5,937,770 6,481,825 6,251,180 6,690,704
Gold (ounces) 66,412 56,886 59,307 74,293 90,019
</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 refining costs. To obtain
the silver equivalent, each ounce of gold produced is multiplied by the same
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<PAGE>
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,
---------------------------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Cash costs per ounce.... $ 3.62 $ 3.65 $ 3.79 $ 3.71 $ 4.36
Depreciation, depletion
and amortization
per ounce............ .54 .59 .61 .54 .67
-------- -------- -------- -------- --------
Total costs per ounce... $ 4.16 $ 4.24 $ 4.40 $ 4.25 $ 5.03
======== ======== ======== ======== ========
</TABLE>
In 1994, 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. The increase in unit costs for 1997 is
a result of a decrease in the mine's strip ratio in 1997 compared with 1996.
As a result, a portion of 1996's mining costs were capitalized in that year
and subsequently amortized in 1997.
The Company's capital expenditures at the Rochester Mine totaled
approximately $1.2 million in 1997. The Company plans approximately $6.2
million of capital expenditures at the mine during 1998 of which approximately
$5.85 million will be used to reacquire the existing processing facility which
is subject to a sale-leaseback agreement entered into in 1986.
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 property situated in the Coeur d'Alene Mining
District of Idaho. In July 1995, Coeur, Callahan Mining Corporation
("Callahan"), a wholly-owned subsidiary of Coeur, and ASARCO Inc. ("ASARCO")
transferred their interests in the Coeur and Galena Mines and Caladay property
to Silver Valley, an entity created for that sole purpose, as a result of
which Coeur and ASARCO each now own 50% of Silver Valley. During 1995, Silver
Valley conducted an underground development program that increased ore
reserves at the Galena Mine. 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. Underground development and exploration activities continued during
1996 and 1997.
Silver Valley recommenced operations at the Coeur mine in June 1996 and
plans to continue mining existing reserves there through the second quarter of
1998. Exploration at the Coeur mine is ongoing in an effort to increase silver
reserves and extend the mine's life beyond 1998. Silver Valley resumed
production at the Galena Mine in May 1997.
During 1996 and 1997, Silver Valley entered into agreements with
Sterling Mining Company, Placer Creek Mining Company, Silver Buckle Mines,
Inc. and American Silver Mining Company pursuant to which Silver Valley
obtained operating control of contiguous properties near the Coeur and Galena
Mines in the Coeur d'Alene Mining District in exchange for net profit royalty
interests. Silver Valley silver reserves attributable to Coeur's 50% ownership
8
<PAGE>
interest have been expanded, increasing 32% in 1995, 22% in 1996 and 13% in
1997. Rehabilitation of the mine shaft at the Caladay project is nearing
completion and Silver Valley plans to continue exploratory and developmental
activities at the Coeur, Galena and Caladay Mines as well as at contiguous
properties in the Coeur d'Alene Mining District with a view toward the
expansion of silver reserves there.
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
actions 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. Certain other specified
corporation actions require unanimous approval of the directors. 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.
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 resumed
production at the Galena Mine in May 1997.
Based on the ore-reserve estimate of Silver Valley, dated January 1998,
proven and probable ore reserves as of January 1, 1998 at the Galena Mine
totalled 1.705 million tons averaging 18.17 ounces per ton silver. Included in
the previously quoted reserves are 327,000 tons of ore containing 11.34% lead
and 1,517,200 tons of ore containing .57% copper. The Silver Valley reserve
estimate is based on a minimum mining width of 4 to 4.5 feet diluted to 5.0
feet minimum width for most silver-copper and silver-lead veins. Cutoff grade
is based on the cost of breaking and producing ore from a stope, but does 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 784,000 tons of
mineralized material which averages 8.33 ounces per ton silver. Included in
the mineralized material are 264,000 tons containing 0.42% copper and 541,000
tons containing 5.74% lead.
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<PAGE>
The following table sets forth information relating to total Galena Mine
production:
<TABLE>
<CAPTION>
Year Ended Seven Months Eight Months
December 31, Ended July 30, Ended December 31,
1991 1992 1997
------------ -------------- ------------------
<S> <C> <C> <C>
Ore milled (tons)..... 182,836 91,617 80,012
Silver (ounces)....... 3,278,650 1,572,501 1,456,201
Copper (pounds)....... 1,993,649 1,064,085 1,070,954
</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
currently has a 50% interest in operating profits from Galena Mine operations
by virtue of its 50% ownership of Silver Valley.
The following table sets forth the costs of production per ounce of
silver (net of credit for copper byproduct) at the Galena Mine. Cash costs
include mining, processing, direct administration costs and smelter charges,
but do not include financing costs, royalties and exploration costs.
<TABLE>
<CAPTION>
Year Ended Seven Months Eight Months
December 31, Ended July 30, Ended December 31,
1991 1992 1997
------------ -------------- ------------------
<S> <C> <C> <C>
Cash costs per
ounce ................ $3.94 $4.23 $4.74
Depreciation,
depletion and
amortization per
ounce................ $1.24
----- ----- -----
$3.94 $4.23 $5.98
===== ===== =====
</TABLE>
Activities at the Galena Mine during 1997 revealed a previously
undiscovered vein known as the 123 Vein. The vein has been intersected by both
drilling and underground workings on three levels over a vertical depth of 900
feet and along a maximum horizontal length of up to 230 feet. Approximately
112,000 tons of proven and probable reserves containing 22.55 ounces per ton
of silver and .83% copper were added to the 1998 reserve base.
Total capital expenditures by Silver Valley at the Galena Mine in 1997
approximated $3.7 million. Such expenditures were used to provide additional
mine development and miscellaneous equipment. Silver Valley plans
approximately $3.6 million of mine development and equipment expenditures at
the Galena Mine during 1998.
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. Effective December 31, 1991, Coeur increased its
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<PAGE>
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 Year Ended
December 31, Ended March 31, Ended December 31,
1990 1991 December 31, 1996 1997
--------- ------------ ----------------- --------------
<S> <C> <C> <C> <C>
Ore milled (tons)... 147,883 37,165 78,067 110,579
Silver (ounces)..... 2,113,341 379,856 1,666,534 1,978,513
Copper (pounds)..... 1,843,638 336,865 1,407,771 1,621,345
</TABLE>
The Company's ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan's 5% interest on
December 31, 1991, amounted to 45% prior to November 30, 1990 and 50%
thereafter.
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 smelter charges
but do not include financing costs, royalties and exploration costs.
<TABLE>
<CAPTION>
Year Ended Three Months Six Months Year Ended
December 31, Ended March 31, Ended December 31,
1990 1991 December 31, 1996 1997
--------- ------------ ----------------- --------------
<S> <C> <C> <C> <C>
Cash costs per ounce.. $4.68 $5.38 $3.18 $3.00
.
Depreciation,
depletion
and amortization
per ounce............ .79 .95
$4.68 $5.38 $3.97 $3.95
===== ===== ===== =====
</TABLE>
Based on a Silver Valley Resources ore reserve report dated January
1998, estimated proven and probable ore reserves as of January 1, 1998 at the
Coeur Mine totaled 228,000 tons averaging 15.31 ounces per ton silver and
0.73% 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. An additional 161,000 tons of mineralized material which averages 14.46
ounces per ton silver and 0.66% copper has also been identified.
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<PAGE>
CALADAY PROPERTY
The Caladay property adjoins the Galena Mine. Prior to its acquisition
by the Company in 1991, 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. Based on Silver
Valley's analysis of existing Galena Mine underground workings and drilling
results on the Galena Property, the Company believes that similar 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.
FACHINAL MINE
In January 1990, the Company acquired through its wholly-owned
subsidiary, CDE Chilean Mining Corporation, ownership of the Fachinal gold and
silver property. As discussed below, the Company completed the construction of
the Fachinal Mine on schedule and under budget in October 1995 when initial
mining operations commenced.
The Fachinal property covers about 90 square miles and is located south
of Coihaique, the capital of Region XI in southern Chile, and approximately 10
miles west of the town of Chile Chico. The project lies on the east side of
the Andes at an elevation ranging from 600 to 4,500 feet and is serviced by a
gravel road from Chile Chico. The Fachinal property is known to include
multiple epithermal veins containing gold and silver. 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 included both underground
and open pit operations, was 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 250 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.
Following its opening during 1996 and 1997, unexpected operational
problems and lower than anticipated ore grade in the open pit resulted in
decreased ore reserves and higher than expected cash costs of production that
exceeded current market prices. Production from higher-grade underground
mining at a second underground mining operation commenced in July 1996 and the
property was classified as an operating property for financial reporting
purposes on January 1, 1997. Production from the higher-grade underground
operations has been increased to compensate for the lower open pit ore grades.
Furthermore, with respect to the open pit, an improved ore reserve mine model,
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<PAGE>
an increase in the pit slope to decrease waste tons mined and a reduction in
manpower have contributed to operational efficiencies. With respect to the
underground mining, an improved mine plan, a manpower reduction, improved
ventilation and drainage, improved safety program and improvements in
contractor performance have favorably effected production and cost
performance. The amount of tonnage processed at the mill has been increased
without a decrease in metal recovery and equipment has been added in the
floatation plant to further improve metal recovery. While these actions have
favorably impacted the Fachinal Mine's operating performance, the cash costs
of production continue to exceed the current spot market price of gold. The
Company intends to continue its implementation of operating improvements and
to identify and implement additional cost-reduction steps in 1998. Additional
reserves must be found in order to achieve the economic criteria upon which
the decision to construct the mine was based. Such economic criteria
contemplated a mine plan that would provide (i) average silver and gold grades
of 3.54 and .077 ounces per ton, respectively; (ii) silver and gold
metallurgical recovery of 89% and 93%, respectively; and (iii) cash operating
costs of $21.65 per metric tonne. For the year ended December 31, 1997, silver
and gold ore grades averaged 4.183 ounces per ton and .057 ounces per ton,
respectively; silver and gold metallurgical recoveries averaged 90% and 90%,
respectively, and cash operating costs averaged $40.42 per ton.
The following table sets forth Fachinal Mine production data for the
period from October 19, 1995, on which date initial production activities
commenced, through December 31, 1995, and the years ended December 31, 1996
and 1997.
<TABLE>
<CAPTION>
October 19, 1995
through Year Ended December 31,
December 31, 1995 1996 1997
----------------- ---- ----
<S> <C> <C> <C>
Ore milled (tons)....... 96,212 591,074 592,976
Gold (ounces)........... 3,586 25,064 30,601
Silver (ounces)......... 334,816 2,154,347 2,243,761
</TABLE>
The following table sets forth the costs of production per ounce of gold
during 1997 at the Fachinal Mine. Cash costs include mining, processing and
direct administration costs, royalties, smelting and refining. Because the
Fachinal Mine had not yet reached commercial production levels prior to
January 1, 1997, results of the mine's operations were accounted for as a
development stage property (i.e., costs net of pre-production revenues were
capitalized). The property was classified as an operating property for
financial reporting purposes on January 1, 1997.
13
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
-----------------
<S> <C>
Total cash cost per ounce................... $339.46
Depreciation, depletion and
amortization per ounce..................... $172.86
-------
Total cost per ounce $512.32
=======
</TABLE>
Economic, precious metals bearing mineralization at the Fachinal Mine
occur in an extensive epithermal, quartz-veins system hosted in Jurassic
volcanic rocks. Based on ore reserve review reports dated January 1998, by
Micon International Limited and NCL Ingenieria and Construccion, S.A., the
total remaining, mineable, open-pit and underground proven and probable
reserves as of January 1, 1998 at the Fachinal Mine were approximately 2.051
million tons averaging 0.093 ounces per ton gold and 3.51 ounces per ton
silver. The Fachinal Mine's open-pit reserve base, which includes the NCL
reserve estimate for the OO and NE pits, totals 1.208 million tons averaging
0.062 ounces per ton gold and 2.24 ounces per ton silver. The estimate is
based on an internal cutoff grade of 0.041 to 0.088 ounces per ton equivalent
gold. The underground reserve which totals 844,000 tons at 0.139 ounces per
ton gold and 5.33 ounces per ton silver is based on internal cutoff grades
ranging from 0.102 to 0.146 ounces per ton equivalent gold. Both reserve
estimates are based on gold and silver prices of $373 per ounce and $5.59 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
88% - 91% for gold and 85% - 91% for silver. The open-pit reserve estimate has
also identified 1.642 million tons of mineralized material, averaging 0.06
ounces per ton gold and 1.64 ounces per ton silver. The underground resource
estimate has identified an additional .887 million tons of mineralized
material averaging 0.09 ounces per ton gold and 5.09 ounces per ton silver.
Numerous other attractive exploration targets with known precious-metals
mineralization remain to be evaluated.
Total capital expenditures by the Company at the Fachinal Mine in 1997
approximated $3.7 million. Such expenditures were used to expand mine
development and purchase miscellaneous equipment. The Company plans
approximately $4.9 million of capital expenditures at the Fachinal Mine during
1998 on mine development and miscellaneous capital equipment.
Drilling is underway at the Fachinal Mine's underground and open pit
mines in an effort to increase the existing reserve base. In addition,
developmental activities are being conducted at the Furioso property, located
approximately 40 miles southwest of the Fachinal Mine, where the Company has
estimated additional high grade gold reserves. An internal feasibility study
is being conducted by the Company to determine if Furioso ore reserves may be
processed at existing Fachinal Mine facilities. The Company has an option to
purchase 100% of the Furioso property at a price of $2.0 million on or prior
to June 30, 1999. No assurance can be given that the Company will exercise
that option. Emphasis is being directed at increasing underground higher grade
reserves to replace lower-grade open pit reserves in the production mix.
14
<PAGE>
Reference also is made to "Exploratory Mining Properties" below for additional
information relating to exploratory activities in the Fachinal Mine area.
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 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 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's obligation to pay CMEB a 3% net smelter return royalty, payable
quarterly, commenced on January 1, 1997.
Based on a resource report for five major veins dated January 1998 by
NCL Ingenieria and Construccion, S.A. and a reserve report prepared by CDE El
Bronce, proven and probable ore reserves as of January 1, 1998 at the El
Bronce Mine totalled .862 million tons averaging 0.220 ounces per ton gold. An
additional 1.598 million tons of mineralized material, averaging 0.280 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 84% 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 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
15
<PAGE>
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 and recorded an operating loss of $5.6 million in
1997. The following data sets forth 100% of the mine's production.
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended ---------------------------------------------------------
December 31, 1994 1995 1996 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Ore milled (tons)... 56,761 286,512 339,509 343,296
Gold (ounces)....... 9,712 43,204 52,917 48,181
Silver (ounces)..... 39,605 142,229 112,633 100,626
</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 smelting
and refining.
<TABLE>
<CAPTION>
Three Months Year Ended December 31,
Ended ---------------------------------------------------------
December 31, 1994 1995 1996 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Total cash
costs per ounce... $205.65 $330.37 $296.05 $348.24
Depreciation,
depletion and
amortization
per ounce......... 20.40 20.51 41.01 53.69
------- ------- ------- -------
Total cost per ounce $226.05 $350.88 $337.06 $401.93
======= ======= ======= =======
</TABLE>
The increase in cash costs of production in 1997 was primarily caused by
near drought conditions occurring in the first quarter of 1997, heavy rain
fall occurring in the second quarter of 1997 and a two-week closure of the
mine in August 1997 resulting from heavy rains and flooding. Those
circumstances contributed to increases in cash costs of production to levels
in excess of current market prices.
Ongoing exploration efforts are being conducted to identify, and, if
successful, develop wider veins in order to increase reserves as well as to
lower costs of production. In addition, cash costs of production in 1997
increased primarily because of lower ore grades due to narrow veins in the
area mined which were further complicated by ground support problems. The
Company expended approximately $3.0 million for developmental activities in
1997 and plans to expend approximately $3.8 million for developmental
activities in 1998. During 1998, the Company plans to spend $1.0 million to
modify the metallurgical process at the mine to enable it to produce a dore'
rather than a concentrate. This process is expected to reduce per ounce
operating costs by $25 - $30 per ounce.
In February 1997, Coeur acquired an option to purchase the Boton de Oro
operating gold mine adjacent to the El Bronce Mine, from which ore is
purchased and being processed through Coeur's mill. In addition, Coeur
anticipates additional underground exploration of mineralization believed to
be similar to El Bronce's vein systems. A feasibility study was prepared to
evaluate the possible incorporation of Boton de Oro's mineralization into El
Bronce operations. The option agreement, as amended in early February 1998,
entitles Coeur to purchase 100% of Boton de Oro on or prior to June 1998 at a
price of $2.5 million. In addition, the agreement required Coeur to spend
$500,000 to conduct exploratory activities on the property. No decision has
been made to exercise the option.
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, 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.
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, 1998 are estimated at 13.893
million tons at a grade of 0.136 ounces per ton gold, containing 1.896 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 95%, with 2.3% additional losses incurred during final
treatment off-site.
During 1997, activities at Kensington continued to be directed toward
completing the permitting process, project optimization studies and
feasibility study updates. The current mine optimization study is intended to
reduce the project's capital and operating costs, and a proposed developmental
drilling program is designed to increase the current 1.9 million ounce gold
17
<PAGE>
reserve. As of December 31, 1997, the Company had invested a total of $122.5
million (including capitalized interest of $26.6 million) in the Kensington
property.
The Company's capital expenditures at the Kensington Property totaled
approximately $9.1 million (excluding capitalized interest) in 1997. Such
capital expenditures were used to continue the permitting and optimization
activities. The Company plans approximately $9.7 million (excluding
capitalized interest) of capital expenditures at the mine during 1998 which
are planned to be used to complete the permitting, optimization activities,
and mine development.
Coeur does not intend to develop the Kensington Property unless the
optimization study and developmental program demonstrate the results required
to make Kensington an economically attractive project. Based on the current
mine design, Kensington requires an average realized price of $400 per ounce
of gold over the life of the project, whether achieved through spot sales or
forward sales contracts, in order to generate the necessary return on
investment. The Company expects to lower the required threshold price
necessary to develop the project based upon the preliminary results of the
optimization study.
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. Final permitting of the Kensington gold project is
nearing completion. The Final Supplemental Environmental Impact Statement has
been issued by the USFS, which is in the process of reviewing the Plan of
Operations for the mine. The CBJ has issued its Large Mine Permit. The State
of Alaska adopted a regulation which provides a site specific water quality
standard for the discharge of total dissolved solids, and has certified EPA's
NPDES permit. It is expected that EPA will issue its final NPDES permit within
the next few weeks. The Army Corps of Engineers has issued its section 404
permit, which is undergoing review by the State of Alaska for consistency with
Alaska regulatory requirements, after which the Corps' permit will be issued
in final form.
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.
18
<PAGE>
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 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 are 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. In May 1997, Coeur
acquired an additional 7,820,907 shares of Gasgoyne, constituting
approximately 14% of the outstanding shares of Gasgoyne, from Sons of Gwalia
for US$14.9 million, as a result of which Coeur's ownership interest in
Gasgoyne was increased to 50% of the outstanding shares.
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 220 miles east of
Perth, which started production in 1991. Gasgoyne also has a 45% interest in
the Awak Mas Gold Project ("Awak Mas") in Indonesia. Gasgoyne sold its
interest in Awak Mas in January 1998 for consideration of US$14.9 million
cash, 10 million shares of Lone Star Exploration NL and a royalty of $2 per
ounce of gold after 2 million ounces have been produced.
During the 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. As a result of entering into various
agreements in May 1997 with Sons of Gwalia and Gasgoyne in connection with the
increase of Coeur's ownership interest in Gasgoyne to 50%, Coeur began
accounting for its interest in Gasgoyne utilizing the proportionate
consolidation method.
19
<PAGE>
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, and during the year ended December 31, 1997. 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, and a
25% interest (i.e., 50% of one-half) after May 1997:
<TABLE>
<CAPTION>
Eight Months Ended Year Ended
December 31, 1996 December 31, 1997
------------------ -----------------
<S> <C> <C>
Ore milled (tons)..... 587,582 1,502,111
Gold (ounces)......... 85,591 174,848
</TABLE>
The following table sets forth the costs of production per ounce of gold
during the years ended December 31, 1996 and 1997. Cash costs include mining,
processing and direct administration costs, royalties and exploration
expenses.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1997
---- ----
<S> <C> <C>
Cash costs per ounce................ $ 217.91 $ 255.11
Depreciation, depletion and
amortization per ounce............. 99.39 161.35
-------- --------
$ 317.30 $ 416.46
======== ========
</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. The increase in per ounce costs in 1997
compared to 1996 relate to the planned transition of mining at the Yilgarn
Star Mine from an open-pit operation to an underground operation and mining of
the uppermost portion of the underground mine which temporarily resulted in a
lower grade of ore being delivered to the mill.
Yilgarn Star proven and probable reserves as of January 1, 1998
estimated by Gasgoyne Gold Mines totalled 5.858 million tons averaging 0.136
ounces per ton gold, or a total of 796,000 ounces of gold. An additional 2.302
million tons of mineralized material has been identified at a grade of 0.21
ounces gold per ton.
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.
The Golden Cross Mining License covers an area of approximately 961
acres of which 274 acres are occupied by the current Golden Cross Mine
20
<PAGE>
operation. The mine property includes 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. Open pit mining operations were discontinued in
December 1997 and limited mining of underground ores will continue until April
1998, at which time all mining operations will cease.
As disclosed in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, the Company announced on July 10, 1996 a $53 million
write-down of its interest in the Golden Cross Mine and the nearby Waihi East
property, which included accrual of the then estimated future closure and
remediation costs and a writedown of the carrying value of the Company's 80%
interest in the property. In the last quarter of 1996, it appeared that the
interim slide remedial measures were successful in stabilizing the extent of
the ground movement and the New Zealand Regulatory Authorities approved the
Company's application to permit the raising of the Golden Cross Mine tailings
impoundment crest. As a result of the completion of the crest raising in early
1997, the Company was able to implement a previously planned mill optimization
and to continue to operate the mine through the end of 1997. Although the
deep-seated ground movement below the Golden Cross Mine tailings impoundment
that necessitated the Company's 1996 write-down appeared to stabilize in late
1996 and during 1997, limited tailings disposal capacity required that open
pit mining activities at the mine be discontinued in December 1997. Limited
mining of underground ores will continue until April 1998, at which time all
mining operations will cease.
In the second quarter of 1997, the Company received its 80% share of a
$10 million insurance recovery relating to business interruption and property
damage at the mine. Since the recovery was not assured at the time of the
original writedown, it was not accrued as part of that writedown; therefore,
the $8 million of insurance proceeds were recorded as other income in 1997.
During 1997, the Company expended approximately $4.5 million in connection
with additional remediation activities at the mine and expects that additional
remediation costs at the mine during 1998 will approximate $1.4 million. In
addition, the Company estimates that the costs, net of salvage revenues, to be
incurred in 1998 in connection with the closure of the mine will approximate
$4.0 million.
The following table sets forth Golden Cross Mine production data
attributable to Coeur's 80% interest in the mine:
<TABLE>
<CAPTION>
Eight Months Year Ended December 31,
Ended ------------------------------------------------------
December 31, 1993 1994 1995 1996 1997
----------------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ore milled (tons)... 492,617 727,427 731,453 827,642 833,836
Gold (ounces)....... 56,898 67,400 83,058 64,365 83,110
Silver (ounces)..... 175,325 222,246 286,216 205,070 271,776
</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
21
<PAGE>
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 Year Ended December 31,
Ended ------------------------------------------------------
December 31, 1993 1994 1995 1996 1997
----------------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total cash
costs per ounce... $220.26 $276.96 $232.74 $369.56 $245.34
Depreciation,
depletion and
amortization
per ounce ........ 116.40 111.53 81.08 38.22 44.13
------- ------- ------- ------- -------
Total cost per ounce $336.66 $388.49 $313.82 $407.78 $289.47
======= ======= ======= ======= =======
</TABLE>
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.
SILVER AND GOLD PRICES
The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely. The volatility of such prices is
illustrated by the following table, which sets forth the high and low prices
of silver (as reported by Handy and Harman) and gold (London final) per ounce
during the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------------------
1994 1995 1996 1997
------------------- ------------------- ------------------- --------------------
High Low High Low High Low High Low
------- ------- ------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Silver $ 5.76 $ 4.63 $ 6.01 $ 4.36 $ 5.79 $ 4.67 $ 6.21 $ 4.21
Gold $396.25 $369.65 $395.55 $372.40 $414.80 $367.40 $366.55 $283.00
</TABLE>
MARKETING
Coeur has historically sold the gold and silver from its mines both
pursuant to forward contracts and at spot prices prevailing at the time of
sale. Entering into forward sale contracts is a strategy used to mitigate some
of the risks associated with fluctuating precious metals prices. The Company
continually evaluates the potential benefits of engaging in these strategies
based on the then current market conditions. At December 31, 1997, the Company
was not a party to any forward sale or purchase contracts other than through
Silver Valley Resources and Gasgoyne. At December 31, 1997, Silver Valley
Resources had purchased contracts in the open market requiring it to purchase
500,000 ounces of silver attributable to Coeur's interest in Silver Valley
Resources at an average cost of $5.70 per ounce. The Company marks these
contracts to market and, accordingly, records any gain or loss on these
contracts on a monthly basis. As of December 31, 1997, Gasgoyne had sold
forward 175,000 ounces of gold attributable to Coeur's interest in the Yilgarn
22
<PAGE>
Star Mine at an average minimum price of approximately A$601 per ounce (or
approximately US$388 per ounce based on currency exchange rates on December
31, 1997).
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 was recorded in 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 $4.9 million, $7.7 million and $8.7
million were incurred by the Company in connection with exploration activities
in 1995, 1996 and 1997, respectively.
Coeur is conducting extensive silver and gold exploratory activities at
or adjacent to its existing mining properties. In particular, exploratory
drilling is being conducted at the Rochester, Fachinal and El Bronce Mines and
nearby properties.
Silver Valley Resources is engaged in exploration projects at the Coeur
and Galena Mines and adjacent Caladay project, including the leased Sterling
Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc. and
American Silver Mining Company properties in the Coeur d'Alene Mining District
in northern Idaho, which historically has been one of the largest silver
producing regions in the world; and Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being
conducted in Guyana, Mexico and Chile. At the Groete Creek property, a
low-grade gold, potential bulk volume mining property located near Georgetown,
Guyana, Coeur has completed an internally generated resource calculation that
estimates 76.9 million tons of mineralized material averaging 0.02 ounces of
gold per ton based on a preliminary pit design using a 0.01 ounce per ton gold
cutoff grade. Coeur has an option to purchase 75% of the mineral rights at
Groete Creek on or prior to December 20, 1998 for $700,000. At the KM66
property in the state of Durango, Mexico, which has low-grade silver, bulk
tonnage open pit mining potential, Coeur's continuing drilling program has
indicated silver-zinc-lead mineralization. Coeur has internally estimated 5.3
million tons at 1.65 ounces per ton silver, 0.71% lead and 1.34% zinc at the
KM 66 property. Coeur has an option to purchase 100% of the mineral rights at
the KM 66 property on or before January 2000 for $4.0 million. Finally, Coeur
has several other exploration projects located throughout Chile. The Company
may elect to sell any of its exploration properties during 1998.
23
<PAGE>
GOVERNMENT REGULATION
GENERAL
The Company's activities are subject to extensive federal, state and
local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have
never required the Company to close any mine and the Company is not presently
subject to any material regulatory proceedings related to such matters, the
costs associated with compliance with such regulatory requirements are
substantial and possible future legislation and regulations could cause
additional expense, capital expenditures, restrictions and delays in the
development of the Company's properties, the extent of which cannot be
predicted. In the context of environmental permitting, including the approval
of reclamation plans, the Company must comply with known standards and
regulations which may entail significant costs and delays. Although Coeur has
been recognized for its commitment to environmental responsibility and
believes it is in substantial compliance with applicable laws and regulations,
amendments to current laws and regulations, the more stringent implementation
thereof through judicial review or administrative action or the adoption of
new laws, could have a materially adverse effect upon the Company.
For the years ended December 31, 1996 and 1997, the Company expended
$3.1 million and $5.0 million, respectively, in connection with routine
environmental compliance activities at its operating properties and expects to
expend approximately $7.5 million for that purpose in 1998. The Company
expended approximately $12.1 million and $4.5 million in connection with its
ground movement remediation activities at the Golden Cross Mine in 1996 and
1997, respectively. In addition, since the inception of the project through
December 31, 1997, the Company expended approximately $13.5 million on
environmental and permitting activities at the Kensington Property and expects
to spend approximately $1.7 million there for that purpose in 1998. 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 plans to develop a program to regulate mining waste
pursuant to its solid waste management authority under the Resource
Conservation and Recovery Act ("RCRA"). Certain processing and other wastes
are currently regulated as hazardous wastes by the EPA under RCRA. The EPA is
studying how mine wastes from extraction and benefication 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 a Superfund
site since the time of its contamination generally may be held liable and may
24
<PAGE>
be forced to undertake remedial cleanup action or to pay for the government's
cleanup efforts. Additional regulations or requirements may also be imposed
upon the Company's tailings and waste disposal in Idaho and Alaska under the
Federal Clean Water Act ("CWA") and in Nevada under the Nevada Water Pollution
Control Law which implements the CWA. Air emissions are subject to controls
under Nevada's, Idaho's and Alaska's air pollution statutes implementing the
Clean Air Act.
The Company's commitment to environmental responsibility has been
recognized in 14 awards received since 1987, which included the Dupont/Conoco
Environmental Leadership Award, awarded to the Company on October 1, 1991 by a
judging panel that included representatives from environmental organizations
and the federal government 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 defendants, including
the Company, asserting claims under CERCLA and the CWA 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.
PENDING MINING LEGISLATION
Legislation is presently being considered in the U.S. Congress to change
the Mining Law of 1872 (the "Mining Act") under which the Company holds mining
claims on public lands. It is possible that the Mining Act will be amended or
be replaced by more onerous legislation in the future. The legislation under
consideration, as well as regulations under development by the Bureau of Land
Management, contain new environmental standards and conditions, additional
reclamation requirements and extensive new procedural steps which would be
likely to result in delays in permitting. Among the bills under consideration
are bills calling for an 8% gross royalty, a 2.5% or 5% net smelter return
royalty or a 3.5% net proceeds royalty on the value of minerals mined on
public lands, payable to the U.S. government. The Company believes that if and
when any royalty is imposed, it will not be a gross royalty. A significant
portion of Coeur's U.S. mining properties are on public lands. Any reform of
the Mining Act or regulations thereunder based on these initiatives could
increase the costs of mining activities on unpatented mining claims, and as a
result could have an adverse effect on the Company and its results of
operations. Until such time, if any, as new reform legislation or regulations
25
<PAGE>
are enacted, the ultimate effects and costs of compliance on the Company
cannot be estimated.
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.
MAINTENANCE OF CLAIMS
At mining properties in the United States, including the Rochester,
Kensington, Coeur, Galena and Caladay mines, operations are conducted in part
upon unpatented mining claims, as well as patented mining claims. Pursuant to
applicable federal law it is necessary, in order to maintain the unpatented
claims, to pay to the Secretary of the Interior, on or before August 31 of
each year, a claim maintenance fee of $100 per claim. This claim maintenance
fee is in lieu of the assessment work requirement contained in the Mining Law
of 1872. In addition, in Nevada, holders of unpatented mining claims are
required to pay the county recorder of the county in which the claim is
situated an annual fee of $3.50 per claim. No maintenance fees are payable for
patented claims. Patented claims are similar to land held by an owner who is
entitled to the entire interest in the property with unconditional power of
disposition.
In Chile, operations are conducted upon mineral concessions granted by
the national government. For exploitation concessions (somewhat similar to a
U.S. patented claim), to maintain the concession, an annual tax is payable to
the government before March 31 of each year in the approximate amount of $1.14
per hectare. For exploration concessions, to maintain the right, the annual
tax is approximately $.30 per hectare. An exploration concession is valid for
a three year period. It may be renewed for new periods unless a third party
claims the right to explore upon the property, in which event the exploration
concession must be converted to an exploitation concession in order to
maintain the rights to the concession. It is anticipated that the total tax to
be paid before March 31, 1998 for El Bronce is $61,000, for Fachinal $140,000;
and for all other property in Chile $128,000.
In New Zealand, prospecting licenses and mining licenses are issued by a
national government agency. To maintain them the holder must comply with the
detailed provisions of the licenses, which include provisions for work
programs, health and safety, protection of the environment, reclamation,
liability insurance and performance bonds. An annual fee is required to be
paid for the prospecting and mining licenses associated with Golden Cross
which, for the year 1998, is anticipated to be approximately $26,000.
26
<PAGE>
EMPLOYEES
At March 1, 1998, the Company employed a total of 949 full-time
employees, of which 42 are located at the Company's executive offices in Coeur
d'Alene, Idaho, 266 are employed at the Rochester Mine, 32 are employed at the
Golden Cross Mine in New Zealand, 588 are employed at the Fachinal and El
Bronce Mines in Chile, and 21 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 Fachinal and El Bronce Mine labor agreements provide a base wage
with bi-annual cost of living adjustments but no annual escalator, and have
provisions for terms and conditions of work including vacations, holidays,
education, and in the case of the Fachinal Mine, housing. The agreements also
provide for health and pension benefits at the minimum country-mandated
levels. The Fachinal Mine agreement also provides for hours of work and shifts
to accommodate remote living conditions and provides a production bonus equal
to 35% of base pay when production exceeds 1,500 tons per day. 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 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. In September 1997, the
Company filed a motion for summary judgement raising the statute of
limitations. Both motions are pending decision. In March 1998, the EPA
announced its intent to perform a remedial investigation/feasibility study
(RI/FS) at all or parts of the Basin, and thereby, apparently focus upon
response costs rather than natural resource damages. At this stage of the
proceeding, it is not possible to predict the ultimate outcome thereof.
27
<PAGE>
On July 15, 1996, Coeur filed a complaint against Cyprus Amax Minerals
Company ("Cyprus") in the District Court of the State of Idaho, Kootenai
County alleging violations by Cyprus of the anti-fraud 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 recession and 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 mine site at the time of Coeur's
purchase of the property. In October 1997, 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. Coeur also
filed an action in federal court for the District of Idaho on July 15, 1996
against Cyprus which makes the same allegations as the Idaho State complaint,
but including violations of federal securities laws. The Company voluntarily
dismissed that action in January 1998.
On July 2, 1997 a suit was filed by a purchaser of the Company's Common
Stock in Federal District Court for the District of Colorado naming the
Company and certain of its officers and its independent auditor as defendants.
Plaintiff alleges that the Company violated the Securities Exchange Act of
1934 during the period January 1, 1995 to July 11, 1996, and seeks
certification of the law suit as a class action. The class members are alleged
to be those persons who purchased publicly traded debt and equity securities
of the Company during the time period stated. On September 22, 1997, an
amended complaint was filed in the proceeding adding other security holders as
additional plaintiffs. The action seeks unspecified compensatory damages,
pre-judgment and post-judgment interest, attorney's fees and costs of
litigation. The complaint asserts that the defendants knew material adverse
non-public information about the Company's financial results which was not
disclosed, and which related to the Golden Cross and Fachinal Mines; and that
the defendants intentionally and fraudulently disseminated false statements
which were misleading and failed to disclose material facts. The Company
believes the allegations are without merit and intends to vigorously defend
against them. On October 27, 1997, the Company, its auditors and the
individual defendants filed with the Court motions to dismiss the amended
complaint on the ground that it fails to state a valid claim. The motions were
argued on January 8, 1998 and are pending decision by the court. No assurances
can be given at this early stage of the action as to its ultimate outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
28
<PAGE>
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 55 Chairman of the Board 1992
President 1980
Chief Executive Officer 1986
James A. Sabala 43 Senior Vice President 1987
Chief Financial Officer
Robert Martinez 51 Vice President - Operations 1997
William F. Boyd 59 Vice President - 1990
Corporate Counsel & Secretary
Paul B. Valenti 49 Vice President - Engineering 1997
Thomas T. Angelos 42 Vice President - Controller 1987
James K. Duff 53 Vice President - Business 1996
Development
Robert T. Richins 50 Vice President 1989
Environmental Services and
Governmental Affairs
Kevin L. Packard 37 Treasurer 1996
Gary W. Banbury 45 Vice President - Human Resources 1998
</TABLE>
Messrs. Wheeler, Sabala, Boyd, Martinez, Angelos, Richins, Duff and
Packard have been principally employed by the Company for more than the past
five years. Prior to his appointment as Vice President - Operations, Mr.
Martinez was Vice President-Engineering, Operational Services and South
American Operations of the Company. Prior to his appointment to his current
position in September 1997, Mr. Valenti was Vice President of Operations and
Development for USMX, Inc. Prior to his appointment as Vice President -
Business Development, Mr. Duff held the position of Director of New Business
Development. From June 1993 until his appointment to Vice President - Human
Resources, Mr. Banbury held the position of Manager of Human Resources with
the Company. Prior to June 1993, he held the position of Director of Human
Resources with Northshore Mining Corporation, a division of Cyprus Minerals,
Inc.
29
<PAGE>
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>
1996: First Quarter $25.1250 $18.3750
Second Quarter 22.2500 18.3750
Third Quarter 19.3750 13.7500
Fourth Quarter 16.3750 13.8750
1997: First Quarter $18.2500 $13.8750
Second Quarter 16.0000 12.5000
Third Quarter 16.3125 12.6875
Fourth Quarter 16.2500 7.6250
</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, and
April 16, 1993. 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 6, 1998, there were 7,378 record holders of the Company's
outstanding Common Stock.
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.
30
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1993 1994 1995 1996 1997 (7)
---------- --------- --------- ---------- ---------
(Thousands Except Per Share Information)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Sale of concentrates
and dore' $ 67,990 $ 79,606 $ 89,239 $ 92,731 $139,037
Less cost of mine operations 59,804 67,802 72,210 $ 83,283 141,873
--------- --------- --------- --------- ---------
Gross profits 8,186 11,804 17,029 9,448 (2,836) (7)
Other income 5,388 12,587 9,504 $ 13,159 $ 20,945
--------- --------- --------- --------- ---------
Total income 13,574 24,391 26,533 22,607 18,109
Other expenses 31,548 29,392 27,591 23,946 32,434
Writedown of mining properties (4) 54,415
--------- --------- --------- --------- ---------
Total expenses 31,548 29,392 27,591 78,361 32,434
--------- --------- --------- --------- ---------
Net loss from continuing
operations before income
taxes (17,974) (5,001) (1,058) (55,754) (14,325)
Provision (benefit) for
income taxes (3,932) (265) 200 (1,184) (242)
--------- --------- --------- --------- ---------
Net loss from continuing
operations (14,042) (4,736) (1,258) (54,570) (14,083)
Income from discontinued
operations(net of taxes)(1) 752 793 2,412
--------- --------- --------- --------- ---------
Income(loss) before cumulative
effect of change in
accounting method (13,290) (3,943) 1,154 (54,570) (14,083)
Cumulative effect of
change in accounting
method(2) 5,181
--------- --------- --------- ---------
Net income (loss) $ (8,109) $ (3,943) $ 1,154 $(54,570) $(14,083)
========= ========= ========= ========= =========
Net income(loss) attributable
to Common Shareholders $ (8,109) $ (3,943) $ 1,154 $(62,967) $(24,614)
========= ========= ========= ========= =========
Basic and diluted earnings per share
data(3):
Net loss from continuing
operations $ (.92) $ (.31) $ (.08) $ (2.54) $ (.64)
Income from discontinued
operations(net of taxes) .05 .05 .15 .00 .00
--------- --------- --------- --------- ---------
Net income (loss) before
cumulative change in
accounting method (.87) (.26) .07 (2.54) (.64)
Cumulative effect of
change in accounting method .34
--------- --------- --------- --------- ---------
Net income (loss) $ (.53) $ (.26) $ .07 $ (2.54) $ (.64)
========= ========= ========= ========= =========
Net loss from continuing
operations $ (.92) $ (.31) $ (.08) $ (2.93) $ (1.12)
Income from discontinued
operations (net of taxes) .05 .05 .15
--------- --------- --------- ---------
Income (loss) before
cumulative change in
accounting method (.87) (.26) .07 (2.93) (1.12)
Cumulative effect of change
in accounting method .34
--------- --------- --------- ---------
Net income (loss) attributable
to Common Shareholders $ (.53) $ (.26) $ .07 $ (2.93) $ (1.12)
========= ========= ========= ========= =========
Cash dividends paid per
Common Share $ .15 $ .15 $ .15 $ .15
========= ========= ========= =========
Weighted average
number of shares of
Common Stock 15,308 15,371 15,879 21,465 21,890
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Total Assets $325,249 $412,361 $445,646 $580,330 $661,422
Working capital 104,883 170,087 105,597 179,626 221,610
Long-term liabilities 133,241 234,009 184,789 202,566 300,872
Shareholders' equity 170,849 160,292 239,832 346,198 332,089
<FN>
(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
31
<PAGE>
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) The earnings per share amounts prior to 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No.
128, "Earnings Per Share." For further discussion of earnings per share
and the impact of Statement No. 128, see notes to the consolidated
financial statements.
(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.
(5) Included in the results of operations for the year ended December 31,
1995 are (i) a gain of $4.4 million (included in other income) from the
sale of gold and silver purchased in the open market which was in turn
delivered pursuant to fixed price forward contracts during the year; and
(ii) $2.4 million of income from discontinued operations (including the
$2.2 million after-tax gain from the related sale of certain non-mining
assets in May 1995) during the year.
(6) Included in the results of operations for 1997 are (i) the receipt of
$8.0 million of insurance proceeds for business interruption and
property damage at the Golden Cross Mine and (ii) a gain of $5.3 million
arising from the sale of gold purchased in the open market which was
delivered pursuant to fixed price forward contracts in the first quarter
of 1997.
(7) The gross loss from mining operations for 1997 amounted to approximately
$2.8 million compared to a gross profit from mining operations for the
prior year's comparable period of $9.4 million. The decrease primarily
is attributable to (i) substantially lower silver and gold prices in
1997, during which period the average silver and gold prices were $4.89
and $331.10 pr ounce, respectively, compared to $5.18 and $387.70 per
ounce, respectively, in 1996; (ii) the unprofitable operations of the El
Bronce Mine and the fact that the Company increased its ownership of
that mine from 50% to 100% in the third quarter of 1996, which resulted
in a proportionate increase in the cost of mine operations during 1997;
and (iii) the unprofitable operation at the Fachinal Mine and the fact
that the Company classified that mine as an operating property for
accounting purposes as of January 1, 1997, and therefore began recording
cost of mine operation at that mine on that date. Of the approximately
$58.6 million increase in the cost of mine operations in 1997 over the
prior year's comparable period, approximately $19.6 million, or 33.4%,
were non-cash expenses attributable to the 86.4% increase in
depreciation, depletion and amortization expense recorded in the year
ended December 31, 1997. Such increase in non-cash expenses primarily
resulted from the Company's increased El Bronce interest and the fact
that no such expenses were being recorded by Fachinal during 1996.
</FN>
</TABLE>
32
<PAGE>
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 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-silver mine
wholly-owned by the Company at which initial production commenced in late
October 1995 and which was classified as an operating property for financial
reporting purposes on January 1, 1997. In April 1998, the Company will
substantially discontinue mining operations at the Golden Cross Mine in New
Zealand, in which the Company has an 80% operating interest.
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 early 1998) and the Galena Mine (where operations
resumed in May 1997) in the Coeur d'Alene Mining District of Idaho. In May
1997, the Company increased to 50% its ownership of Gasgoyne, which owns 50%
of the Yilgarn Star Gold Mine in Australia.
The Company's total production in 1997 was approximately 291,000
ounces of gold and 11.0 million ounces of silver, which was the highest in the
Company's history. Coeur estimates that 1998 gold and silver production will
approximate 219,000 ounces and 10.7 million ounces, respectively. Total
estimated reserves at December 31, 1997 amounted to approximately 3.079
million ounces of gold and 99.140 million ounces of silver, compared to
estimated gold and silver reserves at December 31, 1996 of approximately 3.396
million ounces and 109.045 million ounces, respectively.
A production decision at the Kensington property, a wholly-owned
developmental gold property in Alaska, is subject to the receipt of certain
required permits and the completion of the optimization study and development
programs under way demonstrating the economic viability of the project. Based
on the current mine design, the project requires a realized price of gold
through spot or forward sales of at least $400 per ounce. The market price of
gold (London final) on March 6, 1998 was $294.90 per ounce. The Company is
unable to control the timing of the issuance of the remaining required
permits, which are expected to be issued in the first quarter of 1998. There
can be no assurances that the Company will proceed to place the Kensington
project into commercial production.
The Company's business plan is to continue to acquire competitive,
low-cost 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, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996.
SALES AND GROSS PROFITS
Sales of concentrates and dore' increased by $46,306,000, or 50%, for
the year ended December 31, 1997 over the same period of 1996 and is primarily
attributable to increased sales of metals produced at the Fachinal and El
Bronce Mines. Those increases are primarily due to (i) the classification of
the Fachinal Mine as an operating property for accounting purposes as of
January 1, 1997, and (ii) the Company's increased ownership of the El Bronce
Mine from 50% to 100% commencing in the third quarter of 1996. During 1997,
the Company produced a total of 11,024,225 ounces of silver and 290,962 ounces
of gold compared to 9,520,009 ounces of silver and 214,130 ounces of gold in
1996.
Silver and gold prices averaged $4.89 and $331.10 per ounce,
respectively, in 1997 compared to $5.18 and $387.70 per ounce, respectively,
in 1996. During 1997, the Company realized average silver and gold prices of
$4.89 and $334.99, respectively, compared with realized average market prices
of $5.18 and $397.80, respectively, in 1996.
The cost of mine operations in 1997 increased by $58,590,000, or 70%,
over 1996. The increase is primarily attributable to the fact that i) the
Company increased its ownership in the El Bronce Mine from 50% to 100%
commencing late in the third quarter of 1996, which resulted in a
proportionate increase in the cost of mine operations during the year ended
December 31, 1997; and ii) the Company classified the Fachinal Mine as an
operating property for accounting purposes as of January 1, 1997, and began
recording cost of mine operations at the Fachinal Mine on that date. Of the
approximately $58.6 million increase in the cost of mine operations, $19.6
million, or 33.4%, were noncash expenses attributable to the 86.4% increase in
depreciation, depletion and amortization expense recorded in the year ended
December 31, 1997 over the prior year. The increase in these noncash expenses
primarily resulted from the Company's increased El Bronce ownership interest
and the fact that no such expenses were being recorded by Fachinal during
1996.
In 1997, based upon operating experience and metallurgical testing at
the Rochester property, the Company determined that the metallurgical recovery
rates were underestimating the amount of silver and gold that will ultimately
be extracted in the heap leach process. Prior to the fourth quarter, the
Company estimated it would recover 55% of the silver and 85% of the gold
mined. Effective with the fourth quarter of 1997, the Company revised its
estimated recovery rates to 59% of the silver and 90% of the gold. The Company
has accounted for the effect of the change prospectively as a change in
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accounting estimate. The impact of the estimate change resulted in a reduction
of cost of goods sold in 1997 of $7.0 million.
The cash cost per ounce of silver on a silver equivalent basis at the
Rochester Mine amounted to $4.36 compared to $3.71 per ounce in 1996. The
increase is due to a lower mine strip ratio in 1997 which resulted in an
amortization of deferred stripping costs. Cash costs at Silver Valley amounted
to $3.74 per silver ounce in 1997 compared to $3.18 in 1996 and is the result
of the startup in 1997 of the Galena Mine. Cash costs at the Golden Cross Mine
in 1997 averaged $245.34 per ounce of gold produced versus $369.56 in 1996.
The higher cost in 1996 was primarily attributable to the land slide issue
which delayed a planned expansion of the existing facilities. Cash costs at
the El Bronce Mine averaged $348.24 per ounce of gold produced versus $296.05
in 1996. The increase was primarily caused by near drought conditions
occurring in the first quarter of 1997, heavy rainfall occurring in the second
quarter of 1997 and a two-week closure of the mine in August 1997 resulting
from heavy rain and flooding.
The gross loss from mining operations in 1997 amounted to $2.8 million
compared to a gross profit from mining operations of $9.4 million in the same
period of 1996. The $12.3 million decrease in gross profits is due to the
above mentioned increase in the cost of mine operations coupled with
substantially lower gold and silver prices realized in the year ended December
31, 1997.
OTHER INCOME
Interest and other income increased by $7.8 million, or 59%, in 1997
compared to 1996. The increase is primarily the result of (i) the receipt of
$8 million of insurance proceeds for business interruption and property damage
at the Golden Cross Mine in the second quarter of 1997, and (ii) a gain of
$5.3 million arising from the sale of gold purchased on the open market which
was delivered pursuant to fixed-price forward contracts in the first quarter
of 1997. The increase is partially offset by a loss of $1.5 million related to
the sale of the common shares of an Australian mining company in the fourth
quarter of 1997 and lower interest income related to lower average cash and
short-term investment balances in 1997 compared to 1996.
EXPENSES
For the year ended December 31, 1997, total expenses decreased by $45.9
million. The decrease is primarily attributable to the $54.4 million writedown
of mining properties recorded in the second quarter of 1996. In 1997, interest
expense increased by $6.7 million, primarily as a result of the
reclassification of the Fachinal Mine from a development-stage property to an
operating property and the issuance of $143.7 million principal amount of 7
1/4% Convertible Subordinated Debentures due 2005 in the fourth quarter of
1997. Effective January 1, 1997, interest expense on the Fachinal construction
loan, which was previously capitalized during the pre-production stage, was
charged to operating expense. Mining exploration expense for 1997 increased by
$1,027,000, or 13%, over 1996.
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NET LOSS
As a result of the above, the Company's loss before income taxes
amounted to $14,325,000 in 1997 compared to a loss of $55,754,000 in 1996. The
Company reported an income tax benefit of $242,000 for 1997, compared to an
income tax benefit of $1,184,000 in 1996. As a result, the Company reported a
net loss of $14,083,000, or $.64 per share, and a net loss attributable to
common shareholders of $24,614,000, or $1.12 per share, in 1997, compared to a
net loss of $54,570,000, or $2.54 per share, and a net loss attributable to
common shareholders of $62,967,000, or $2.93 per share, in 1996.
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.
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
and higher operating costs from the Company's Golden Cross Mine and start-up
costs at Silver Valley's Coeur Mine.
The total cash costs per ounce of gold at the Golden Cross Mine amounted
to $369.56 per ounce in 1996, compared to $232.74 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 total cash costs per ounce of silver on a
silver equivalent basis at the Rochester Mine amounted to $3.71 per ounce in
1996, compared to $3.79 per ounce in 1995. Total cash costs at the El Bronce
Mine averaged $296.05 per ounce of gold in 1996 compared with $330.37 during
its first full year of operation in 1995. Cash costs at Silver Valley amounted
to $3.18 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
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average balance 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 $907,487 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.
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
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.
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.
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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 the Flexaust manufacturing segment are presented as
"Discontinued Operations." The Company reports income from discontinued
operations of $2,412,000, or $.15 per share.
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.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL; CASH AND CASH EQUIVALENTS
The Company's working capital at December 31, 1997 was approximately
$221.6 million compared to $179.6 million at December 31, 1996. The ratio of
current assets to current liabilities was 6.8 to one at December 31, 1997
compared to 6.7 to one at December 31, 1996.
Net cash provided by operating activities in 1997 was $17,223,000
compared with $7,784,000 provided by operating activities in 1996. The most
important non-cash items offsetting the net loss from continuing operations in
1997 were (i) $32,898,000 of depreciation, depletion and amortization, and
(ii) $2,732,000 of accrued reclamation expense. A total of $ 23,792,000 of
cash was used in investing activities in 1997 compared to $131,297,000 in
1996. The most important factors accounting for the cash used in investing
activities in 1997 were (i) $180,511,000 used to purchase short-term
investments, offset by $204,981,000 received in connection with sales of
short-term investments, (ii) $14,643,000 used for the purchase of an
additional 14% interest in Gasgoyne Gold Mines NL, (iii) $14,351,000 of
expenditures on developmental properties, and (iv) $14,838,000 of expenditures
on operational mining properties. The Company's financing activities provided
$77,318,000 of cash during 1997 compared to $150,483,000 in 1996. The most
important factor accounting for the net cash provided by financing activities
in 1997 was the receipt of $138,090,000 of long-term debt which was offset in
part by $49,513,000 used to retire long-term debt. As a result of the above,
the Company's net cash increase in 1997 was $70,749,000 compared with a net
cash increase of $26,970,000 in 1996.
For the years ended December 31, 1997 and 1996, the Company expended
$5.0 million and $3.1 million, respectively, in connection with environmental
compliance activities at its operating properties. In addition, since the
inception of the project through December 31, 1997, the Company had expended a
total of $13.5 million on environmental and permitting activities at the
Kensington Property, which expenditures have been capitalized as part of its
development cost.
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SALE OF 7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
In October 1997, the Company sold $143,750,000 aggregate principal
amount of 7 1/4% Convertible Subordinated Debentures due 2005 (the
"Debentures") to Lazard Freres & Co. LLC (the "Purchaser") pursuant to
exemptions from registration under the Securities Act of 1933 (the "Act"). The
Debentures are convertible into shares of the Company's Common Stock on or
before October 31, 2005, unless previously redeemed, at a conversion price of
$17.45 per share, subject to adjustment in certain events. The Debentures are
redeemable, in whole or in part, at any time on or after October 31, 2000.
Pursuant to a Registration Rights Agreement, dated as of October 15, 1997,
between the Company and Purchaser, the Company is obligated to file with the
Securities and Exchange Commission and use its best efforts to cause to become
effective a shelf registration statement to cover resales of the Debentures
and shares of Common Stock issuable upon conversion thereof and to maintain
the effectiveness of such registration statement until October 31, 1999,
subject to adjustment in certain circumstances. The Company received
approximately $138 million of net proceeds from the sale of the Debentures. Of
that amount, approximately $42.9 million was used to repay bank debt (as
discussed below) and the balance will be used for other corporate purposes,
including the possible acquisition of or investment in additional silver and
gold mining properties or businesses.
REPAYMENT OF BANK INDEBTEDNESS
On October 31, 1997, the Company used approximately $42.9 million of the
net proceeds of the sale of Debentures to repay (i) approximately $24 million
borrowed under a project loan facility agreement with a bank syndicate lead by
N.M. Rothschild & Sons Ltd. relating to the Company's construction of the
Fachinal Mine and (ii) approximately $18.9 million borrowed under the
Company's $20.0 million line of credit agreement with Rothschild Australia
Ltd. in connection with the Company's investment in Gasgoyne.
FEDERAL NATURAL RESOURCES ACTION
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States
against various defendants, including the Company, asserting claims under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
and the Clean Water Act for alleged damages to Federal natural resources in
the Coeur d'Alene River Basin of northern Idaho as a result of releases of
hazardous substances from mining activities conducted in the area since the
late 1800s. No specific monetary damages are identified in the complaint.
However, in July 1996, the government indicated damages may approximate $982
million. The United States asserts that the defendants are jointly and
severally liable for costs and expenses incurred by the United States in
investigation, removal and remedial action and the restoration or replacement
of affected natural resources. In 1986 and 1992 the Company had settled
similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe,
respectively, and believes that those prior settlements exonerate it of
further involvement with alleged natural resource damage in the Coeur d'Alene
River Basin. Accordingly, the Company intends to vigorously defend this matter
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and, in March 1997 and September 1997, filed motions for summary judgment
which are pending decision by the court. At this initial stage of the action,
it is not possible to predict its ultimate outcome.
YEAR 2000 CONSEQUENCES
During 1997, the Company reviewed all significant computer systems for
compatibility with the change to the year 2000. As a result of that review, a
program is now underway to ensure that all of the Company's significant
computer systems are year 2000 compliant by the end of 1998 by installing
commercially available software packages without significant modification. The
Company's management has carefully evaluated its year 2000 compliance program,
as well as the extent to which it will be affected by non-year 2000 compliant
computer systems of suppliers and other third parties, and anticipates no
material impact on the Company's ability to continue normal business
operations. The Company estimates that the costs associated with
implementation of its year 2000 program will amount to less than $130,000.
ENVIRONMENTAL COMPLIANCE EXPENDITURES
For the years ended December 31, 1995, 1996 and 1997, the Company
expended $2.9 million, $3.1 million and $5.0 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, since the inception of the project
through December 31, 1997, the Company had expended a total of $13.5 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 $12.1 million in 1996 and $4.5 million in 1997
in connection with its ground movement remediation activities at the Golden
Cross Mine in New Zealand, where mining activities were discontinued in
December 1997. The Company estimates that costs, net of salvage revenues, to
be incurred in 1998 in connection with the closure of the mine will
approximate $4.0 million.
The Company estimates that environmental compliance expenditures at its
Kensington developmental property during 1998 will approximate $1.7 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 1997, the Company expended $8.5 million (excluding capitalized
interest) for developmental costs at the Kensington property, $.2 million at
the Rochester Mine, $3.8 million (excluding capitalized interest) for the
development of the Fachinal Mine and $3.0 million at the El Bronce Mine.
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During 1998, the Company presently plans to expend $9.5 million (excluding
capitalized interest) at the Kensington property, $4.3 million for the
Fachinal Mine, and $4.5 million for developmental and exploration activities
at the El Bronce Mine. If the Company were to decide to construct a Kensington
mining facility, the Company currently estimates that it would be required to
expend approximately $182 million over an eighteen-month period in connection
with the construction of the Kensington mining facilities. The cost of such
construction would be financed by the Company's existing capital resources as
well as project financing, working capital and/or operating cash flow sources.
REALIZATION OF NET OPERATING LOSS CARRYFORWARDS
The Company has reviewed its net deferred tax asset, together with net
operating loss carryforwards, and has elected to forego recognition of
potential tax benefits arising therefrom on the view that it is more likely
than not that the deferred deductions and losses will not be realized in
future years. In making this determination, the Company has considered the
Company's history of tax losses incurred since 1989, the current level of gold
and silver prices and the ability of the Company to use accelerated depletion
and amortization methods in the determination of taxable income.
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.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
(1) The following consolidated financial statements of Coeur d'Alene
Mines Corporation and subsidiaries are included in Item 8.
Consolidated Balance Sheets-December 31, 1996 and 1997.
Consolidated Statements of Operations--Years Ended December 31,
1995, 1996 and 1997.
Consolidated Statements of Changes in Shareholders' Equity--Years
Ended December 31, 1995, 1996 and 1997.
Consolidated Statements of Cash Flows--Years Ended December 31,
1995, 1996 and 1997.
Notes to Consolidated Financial Statements.
(b) REPORTS ON FORM 8-K: The Company filed a report on Form 8-K on October
16, 1997.
(c) EXHIBITS: The following listed documents are filed as Exhibits to this
report:
<TABLE>
<S> <C>
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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4(a) - 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).)
4(b) Form of Indenture, dated as of October 15, 1997,
between the Registrant and Bankers Trust Company, as
Trustee. (Incorporated herein by reference to Exhibit
No. 4 to the Registrant's Current Report on Form 8-K
filed on October 16, 1997.)
10(a) - 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(b) - 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(c) - 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(d) - 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(e) - 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(f) - 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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10(g) - 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(h) - 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(i) - 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(j) - 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(k) - 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(l) - Amended and Restated Profit Sharing Retirement Plan of
the Registrant. (Incorporated herein by reference to
Exhibit 10(ff) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.) *
10(m) - 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.)
- -------------
* Management contract or
compensatory plan
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10(n) - 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(o) - 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(p) - 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(q) - 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(r) - 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(s) - Agreement, dated January 1, 1994, between Coeur Gold
New Zealand Limited and Johnson Matthey (Aust.) Ltd.
(Incorporated herein by reference to Exhibit 10(mm) to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
10(t) - 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.) *
- -------------
* Management contract or
compensatory plan
44
<PAGE>
10(u) - 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(v) - 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(w) - 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(x) - 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(y) - 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(z) - Asset and Stock Purchase Agreement, dates as of April
28, 1995, among Schauemburg International, Inc., The
Flexaust Company, Inc. and Callahan Mining Corporation.
(Incorporated herein by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K dated May 2,
1995.)
10(aa) - 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.)
- -------------
* Management contract or
compensatory plan
45
<PAGE>
10(bb) - 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(cc) - 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(dd) - 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(ee) - 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(ff) - 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(gg) - 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).)
10(hh) - 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).)
46
<PAGE>
10(ii) - 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). (Incorporated herein by reference to Exhibit
10(kk) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.)
10(jj) - Purchase Agreement, dated as of October 7, 1997,
between the Registrant and Lazard Freres & Co. LLC.
(Incorporated herein by reference to Exhibit 10(a) to
the Registrant's Current Report on Form 8-K filed on
October 16, 1997.)
10(kk) - Registration Rights Agreement, dated as of October 15,
1997, between the Registrant and Lazard Freres & Co.
LLC. (Incorporated herein by reference to Exhibit 10(b)
to the Registrant's Current Report on Form 8-K filed on
October 16, 1997.)
10(ll) - Mining Lease, effective as of June 1, 1997, between
Silver Valley Resources and American Silver Mining
Company. (Incorporated herein by reference to Exhibit
10(a) to the Registrant's Registration Statement on
Form S-3 (File No. 333-40513).)
10(mm) - Mining Lease, effective as of April 23, 1996, between
Silver Valley Resources Corporation and Sterling Mining
Company. (Incorporated herein by reference to Exhibit
10(b) to the Registrant's Registration Statement on
Form S-3 (File No. 333-40513).)
10(nn) - Mining Lease, effective as of March 21, 1997, between
Silver Valley Resources Corporation and Silver Buckle
Mines, Inc. (Incorporated herein by reference to
Exhibit 10(c) to the Registrant's Registration
Statement on Form S-3 (File No. 333-40513).)
10(00) - Mining Lease, effective as of March 21, 1997, between
Silver Valley Resources Corporation and Placer Creek
Mining Company. Incorporated herein by reference to
Exhibit 10(d) to the Registrant's Registration
Statement on Form S-3 (File No. 333-40513).)
10(pp) - Agreement for Sale and Issuance of Shares, dated May 7,
1997, among Sons of Gwalia Ltd, Burmine Investments Pty
Limited, Orion Resources NL and Coeur Australia Pty
Ltd. (Filed herewith.)
10(qq) - Letter agreement, dated May 7, 1997, between the
Registrant and Sons of Gwalia Ltd. (Filed herewith.)
47
<PAGE>
10(rr) - Shareholders Agreement, dated May 7, 1997, among Sons
of Gwalia Ltd., Burmine Investments Pty Ltd., Orion
Resources NL, Coeur Australia Pty Ltd. And Gasgoyne
Gold Mines NL. (Filed herewith.)
10(ss) - Management Services Agreement, dated May 7, 1997, among
Sons of Gwalia Ltd., Coeur Australia Pty Ltd. And
Gasgoyne Gold Mines NL. (Filed herewith.)
21 - List of subsidiaries of the Registrant.
(Filed herewith.)
23 - Consent of Ernst & Young LLP. (Filed herewith.)
27 - Financial Data Schedule. (Filed herewith.)
</TABLE>
(d) Independent auditors' reports are included herein as follows:
Coeur d'Alene Mines Corporation
Report of Ernst & Young LLP at December 31, 1996, and 1997, and for each
of the three years in the period ended December 31, 1997.
48
<PAGE>
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 16, 1998 By:/s/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.
Signature
---------
/s/DENNIS E. WHEELER Chairman, President, March 16, 1998
-------------------- Chief Executive Officer
Dennis E. Wheeler and Director
/s/JAMES A. SABALA Senior Vice President, March 12, 1998
------------------ Chief Financial Officer
James A. Sabala and Director
/s/CECIL D. ANDRUS Director March 12, 1998
-------------------
Cecil D. Andrus
/s/JOSEPH C. BENNETT Director March 13, 1998
--------------------
Joseph C. Bennett
/s/JAMES J. CURRAN Director March 16, 1998
------------------
James J. Curran
/s/DUANE B. HAGADONE Director March 12, 1998
--------------------
Duane B. Hagadone
/s/JAMES A. MCCLURE Director March 13, 1998
-------------------
James A. McClure
/s/JEFFREY T. GRADE Director March 12, 1998
-------------------
Jeffery T. Grade
49
<PAGE>
ANNUAL REPORT ON FORM 10-K
Item 8, Item 14(a), and Item 14(d)
CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1997
COEUR D'ALENE MINES CORPORATION
COEUR D'ALENE, IDAHO
<PAGE>
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, 1997 and 1996, 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, 1997. 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, 1997 and
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Seattle, Washington /s/ERNST & YOUNG LLP
February 20, 1998
F-1
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1997 1996
--------- ---------
ASSETS (In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $114,204 $ 43,455
Funds held in escrow 400
Short-term investments 98,437 124,172
Receivables 11,103 11,573
Inventories 35,927 31,992
--------- ---------
TOTAL CURRENT ASSETS 260,071 211,192
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment 119,808 118,993
Less accumulated depreciation 58,097 50,743
--------- ---------
61,711 68,250
MINING PROPERTIES
Operational mining properties 245,979 171,517
Less accumulated depletion 61,477 38,264
--------- ---------
184,502 133,253
Developmental properties 134,236 110,985
--------- ---------
318,738 244,238
OTHER ASSETS
Investment in unconsolidated affiliate 48,231
Notes receivable 8,498 4,000
Debt issuance costs, net of accumulated
amortization 8,809 4,081
Other 3,595 338
--------- ---------
20,902 56,650
--------- ---------
$661,422 $580,330
========= =========
</TABLE>
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
1997 1996
---------- ---------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,983 $ 4,327
Accrued liabilities 6,345 4,976
Accrued interest payable 6,631 4,968
Accrued salaries and wages 7,553 5,242
Bank loans 4,406 8,021
Current portion of remediation costs 7,300 3,500
Current portion of obligations under
capital leases 243 532
--------- ---------
TOTAL CURRENT LIABILITIES 38,461 31,566
LONG-TERM LIABILITIES
6% subordinated convertible debentures due 2002 49,840 49,840
6 3/8% subordinated convertible debentures due 2004 95,000 100,000
7 1/4% subordinated convertible debentures due 2005 143,750
Long-term borrowings 1,159 39,900
Other long-term liabilities 8,403 12,826
Deferred income taxes 2,720
--------- ---------
TOTAL LONG-TERM LIABILITIES 300,872 202,566
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock) -
authorized 7,500,000 shares, 7,077,833
issued and outstanding 7,078 7,078
Common Stock, par value $1.00 per share-
authorized 60,000,000 shares, issued 22,949,779
and 22,950,182 shares in 1997 and 1996
(including 1,059,211 shares held in treasury) 22,950 22,950
Capital surplus 389,648 400,187
Accumulated deficit (84,542) (70,459)
Unrealized gains (losses) on short-term
investments 145 (352)
Repurchased and nonvested shares (13,190) (13,206)
--------- ---------
322,089 346,198
--------- ---------
$661,422 $580,330
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
INCOME
Sale of concentrates and dore' $139,037 $ 92,731 $ 89,239
Less cost of mine operations 141,873 83,283 72,210
--------- --------- ---------
GROSS PROFITS (LOSS) (2,836) 9,448 17,029
OTHER INCOME--interest, dividends, and other 20,945 13,159 9,504
TOTAL INCOME 18,109 22,607 26,533
EXPENSES
Administration 4,430 3,716 3,677
Accounting and legal 2,230 1,753 1,626
General corporate 6,732 7,147 6,207
Mining exploration 8,722 7,695 4,854
Interest 10,320 3,635 9,746
Writedown of mining properties 54,415
Idle facilities 1,481
--------- --------- ---------
TOTAL EXPENSES 32,434 78,361 27,591
--------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (14,325) (55,754) (1,058)
Provision (benefit) for income taxes (242) (1,184) 200
NET LOSS FROM CONTINUING OPERATIONS (14,083) (54,570) (1,258)
Income from discontinued operations
(net of taxes) 2,412
--------- --------- ---------
NET INCOME (LOSS) $(14,083) $(54,570) $ 1,154
========= ========= =========
NET INCOME(LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS $(24,614) $(62,967) $ 1,154
========= ========= =========
BASIC AND DILUTED EARNINGS PER SHARE DATA
Weighted average number of shares
of Common Stock (in thousands) 21,890 21,465 15,879
========= ========= =========
Net loss from continuing operations $ (.64) $ (2.54) $ (.08)
Income from discontinued operations .15
--------- --------- ---------
Net income (loss) per share $ (.64) $ (2.54) $ .07
========= ========= =========
Net loss attributable to Common Shareholders:
Net loss from continuing operations $ (1.12) $ (2.93) $ (.08)
Income from discontinued operations .15
--------- --------- ---------
Net income (loss) per share $ (1.12) $ (2.93) $ .07
========= ========= =========
CASH DIVIDENDS PER COMMON SHARE $ .15 $ .15
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY For Years Ended
December 31, 1997, 1996, and 1995
(In Thousands)
<TABLE>
<CAPTION>
Preferred Stock Unrealized
(MARCS) Common Stock Gains Repurchased and
------------------- ------------------ (Losses) on Non-Vested Shares
Par Par Capital Accumulated Short-Term ------------------
Shares Value Shares Value Surplus Deficit Investments Shares Amount Total
-------- -------- -------- --------- --------- --------- ------------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 16,633 $16,633 $182,881 $(17,043) $(8,820) (1,059) $(13,358) $160,293
1, 1995
Net Income 1,154 1,154
Cash Dividends (2,339) (2,339)
Issuance of Shares Under
Stock Compensation Plan
(net)
24 24 384 94 502
Unrealized Gains on 9,181 9,181
Marketable Securities
Conversion of 7%
Debentures
4,867 4,867 66,174 71,041
------ ------- --------- ---------
Balance at December 31,
1995
21,524 21,524 247,100 (15,889) 361 (1,059) (13,264) 239,832
Net Loss (54,570) (54,570)
Issuance of MARCS 7,078 $7,078 137,548 144,626
Cash Dividends (11,028) (11,028)
Issuance of Shares
Under Stock
Compensation Plan (net) 58 58
Shares Issued on
Acquisition of 1,420 1,420 26,467 27,887
Unconsolidated
Affiliate
Unrealized Loss on
Marketable Securities (713) (713)
Conversion of 6% 6 6 150 156
Debentures
Other (50) (50)
--------- ---------
Balance at December 7,078 7,078 22,950 22,950 400,187 (70,459) (352) (1,059) (13,206) 346,198
31, 1996
Net Loss (14,083) (14,083)
Cash Dividends (10,532) (10,532)
Issuance of Shares
Under Stock
Compensation Plan (net) 16 16
Unrealized Gains
on
Marketable Securities 497 497
Other (7) (7)
--------- ---------
Balance at December 31,
1997 7,078 $7,078 22,950 $22,950 $389,648 $(84,542) $ 145 (1,059) $(13,190) $322,089
===== ====== ====== ======= ========= ========= ======= ======= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-5 / F-6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (14,083) $ (54,570) $ (1,258)
Add (deduct) noncash items:
Depreciation, depletion, and
amortization 35,631 13,381 16,893
Deferred income taxes (594) (1,402) (1,786)
(Gain) loss on disposition of property,
plant and equipment (102) (985) 458
Loss on foreign currency
transactions 985 155 597
(Gain) loss on disposition of
marketable securities 947 (1,262) 885
Writedown of mining property 54,415
Undistributed (earnings) loss of investment
in unconsolidated subsidiary 214 (1,905)
Changes in Operating Assets and Liabilities:
Receivables 1,907 3,493 (1,239)
Inventories (3,256) 1,824 3,234
Accounts payable and
accrued liabilities (4,426) (5,360) 2,528
----------- ----------- -----------
Net cash provided by continuing operations 17,223 7,784 20,312
Income from discontinued operations 2,412
Add (deduct) noncash items:
Depreciation, depletion and amortization 85
Gain on disposition of
discontinued operations (3,964)
Deferred income taxes 1,608
Change in operating assets and liabilities
Receivables 601
Inventories (30)
Accounts payable and accrued liabilities (109)
----------- ----------- -----------
Net cash provided by discontinued operations 603
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 17,223 7,784 20,915
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of short-term investments (180,511) (148,952) (2,424)
Proceeds from sales of short-term investments
and marketable securities 204,981 92,167 70,112
Acquisition of Gasgoyne Gold Mines NL (14,643) (19,301)
Purchases of property, plant and
equipment (2,898) (4,799) (44,895)
Proceeds from sale of assets 505 2,372 1,177
Proceeds from collection of notes receivable 1,363 2,566
Proceeds from sale of discontinued operations 3,133
Expenditures on operational mining properties (14,838) (44,432) (21,027)
Expenditures on developmental properties (14,351) (13,066) (42,510)
Other (3,400) 2,148 (1,418)
----------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (23,792) (131,297) (37,852)
</TABLE>
F-7
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS,
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(continued)
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of obligations under capital leases (501) (2,041) (2,041)
Payment of cash dividends (10,532) (11,028) (2,339)
Proceeds from MARCS issuance 144,626
Proceeds from 71/4% debentures issuance 138,090
Proceeds from bank borrowings 19,186 24,000
Payment of debenture costs (1,346)
Retirement of long-term debt (49,513)
Retirement of other long-term liabilities (226) (260)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 77,318 150,483 18,274
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 70,749 26,970 1,337
Cash and cash equivalents at beginning
of year:
Related to continuing operations 43,455 16,485 14,707
Related to discontinued operations 441
----------- ----------- -----------
43,455 16,485 15,148
----------- ----------- -----------
Cash and cash equivalents at end
of year related to continuing operations $ 114,204 $ 43,455 $ 16,485
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
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
and/or liabilities. Intercompany balances and transactions have been
eliminated in consolidation. Investments in joint ventures, and/or companies
where the company can take its share of production in physical product and
fund its proportionate share of expenses, are accounted for on a proportionate
consolidation basis, the most significant of which are the Golden Cross Mine
(80%), Silver Valley Resources Corporation(50%) and Gasgoyne Gold Mines NL
(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.
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, 1997 and 1996, cash and cash equivalents
included $15.6 million and $15.9 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.
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, which are 7 to 31 years for
buildings and improvements, 3 to 13 years for machinery and equipment and 3 to
F-9
<PAGE>
7 years for furniture and fixtures. Certain mining equipment is depreciated
using the units-of-production method based upon estimated total reserves.
Maintenance and repairs are charged to operations as incurred.
MINING PROPERTIES: Values for mining properties represent acquisition
costs and/or the fair value of consideration paid 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. The Company utilizes the
methodology set forth pursuant to Financial Standards Board Statement No. 121
- - Accounting for the Impairment of Long Lived Assets to be Disposed Of ("FAS
121") to evaluate the recoverability of capitalized mineral property costs.
Since FAS 121 requires the use of forward-looking projections, the Company
must use estimates to generate a life-of-mine cash flow statement which may
forecast several years into the future. These estimates may be based on
projected mineable resources and mine life and/or reports of the Company's
engineers and geologists, projected operating and capital costs necessary to
process the estimated resources, each project's mine plan including the type,
quantity and ore grade expected to be mined, estimated metallurgical recovery
and all other factors which may have an impact upon a project's cash flow. In
addition, the Company is required to estimate the selling price of metal
produced which is based upon historical averages which are updated annually to
give effect to changing markets over time.
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, 1997 and 1996, the
Company has recorded accrued reclamation costs of $7.8 million and $6.0
million, net of salvage values, as of December 31, 1997 and 1996,
respectively. These amounts are included as other long-term liabilities.
EXPLORATION AND DEVELOPMENT: The carrying value of exploration
properties acquired is capitalized at the fair market value of the
consideration paid. After it is determined that proven and probable reserves
exist on a particular property, the property is classified as a
development-stage property and all costs incident to the further development
of the property are capitalized. Prior to the establishment of proven and
probable reserves, all costs relative to exploration and evaluation of a
property are expensed as incurred. In order to classify a reserve as economic,
the Company must complete an evaluation of an ore body to determine that it
may be mined profitably. The determination is made based upon geologic and
engineering studies which analyze the nature of the ore body, the appropriate
mining and metallurgical process, estimates of operating costs, metallurgical
recoveries and forecast metal prices over the estimated mine life. 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. In the event the Company determines
that the value of any capitalized property cannot be recovered by either the
mining of commercial reserves or by sale pursuant to prevailing market prices,
an evaluation of whether an impairment of value under the provisions of FAS
121 has occurred is undertaken. If such an impairment is determined to exist,
a writedown would be effected.
F-10
<PAGE>
SHORT-TERM INVESTMENTS: The Company invests in debt and equity
securities which are classified as available-for-sale, according to provisions
of Financial Accounting Standard No. 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.
FOREIGN CURRENCIES: Monetary assets and liabilities of the Company's
foreign operations are translated into U.S. dollars at year-end exchange rates
and revenue and expenses are translated at average exchange rates. The
Company's foreign subsidiaries have the U.S. dollar as their functional
currency, and therefore, translation gains and losses are reflected in income.
Non-monetary assets and liabilities are converted at historical rates.
Realized gains and losses from foreign currency transactions are reflected in
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: In 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share." Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement 128 requirements.
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.
RECLASSIFICATION: Certain reclassifications of prior year balances have
been made to conform to current year presentation.
NOTE C--INVESTMENT IN MINING COMPANIES
EL BRONCE: In July 1994, the Company had 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
F-11
<PAGE>
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.
GASGOYNE: In May 1996, Coeur acquired approximately 35% of the
outstanding shares of Gasgoyne Gold Mines NL ("Gasgoyne"), an Australian gold
mining company, by issuing a total of 1,419,832 shares of the Company's Common
Stock and paying cash totaling approximately $15.4 million to Gasgoyne
shareholders. 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. In May 1997, the Company
acquired, for approximately US$14.6 million in cash, an additional 14%
interest in Gasgoyne, increasing its total ownership to 50%. The acquisition
has been accounted for as a purchase. Concurrent with the increase in
ownership in 1997, the Company entered into several agreements with the other
50% owner which entitled the Company to take a 50% share of Gasgoyne gold
production in kind and which requires the Company to pay 50% of Gasgoyne's
liabilities. The Company reports its share of Gasgoyne earnings pursuant to
the equity method.
The following table sets forth a condensed summary of the results of
operations of Gasgoyne for the twelve-month period ended December 31, 1997 and
1996.
<TABLE>
<CAPTION>
For the Twelve Months Ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Total Revenues $30,385 $35,098
Operating Profit $ 3,021 $13,191
Net Income $ 1,129 $12,087
</TABLE>
F-12
<PAGE>
The following pro forma information reflects the Company's results of
operations as if the acquisition of the additional 14% of Gasgoyne, increasing
its total ownership interest to 50%, that occurred in May 1997, had occurred
at the beginning of the periods presented.
<TABLE>
<CAPTION>
For the Twelve Months Ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Total income $ 17,994 $ 21,532
Net loss $(14,014) $(55,159)
Basic and diluted net
loss per share $ (.64) $ (2.57)
</TABLE>
NOTE D--WRITE-DOWN OF MINING PROPERTIES
On April 30, 1993, the Company acquired an 80% operating interest in the
Golden Cross Mine and at which mining activities were substantially
discontinued in December 1997. The mine is a gold and silver surface and
underground mining operation located near Waihi, New Zealand. During the
second quarter of 1996, the Company determined that certain adjustments were
required to properly reflect the estimated net realizable value of certain
mining properties in accordance with the standards set forth in FASB Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("FAS No. 121"). The impetus for this
determination began in late July 1995 when physical evidence indicated that
the land adjacent to the tailings impoundment appeared to have sustained some
movement. An investigation to determine the significance of this movement was
undertaken promptly. By September, 1995, consultants advised Coeur Gold New
Zealand Ltd. that the adjacent land had moved and that it may have affected
the tailings dam. However, they advised that certain data would have to be
collected before they could confirm that assessment. That investigation
included the drilling of holes in the land with measurement devices inserted
in the holes (these devices are called "inclinometers"). Further additional
measurement devices called "piezometers" were inserted in still different
holes drilled in the land and the data collected from those and other sources
was sufficient to lead the consultants to conclude by February, 1996 that
significant remedial measures would have to be taken. Based on those
recommendations Coeur Gold estimated the cost of implementation would be
approximately $4 million. That estimate was made in February 1996 and
presented to the Company's Board of Directors at its regular March 1996
meeting.
Continuing evaluation after March 1996 revealed that the geographical
extent of the land movement was larger, wider, longer and more complex than
identified in the February 1996 estimate. By May 1996, as the planned remedial
measures were implemented, the Company determined that the measures, upon
which its previous cost estimates had been based, were not wholly effective.
Additional data was needed, which required more hole drillings and more work
on the ground. It was not until late May 1996 that the Golden Cross managers
and the Company engineers concluded that the cost of remediation would exceed
the initial February 1996 estimate. The estimate was revised to approximately
$11 million in July to account for the more extensive remediation efforts. In
addition, because of the significance of the ground movement, the Company
determined 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 tailings dam had not been stabilized, and,
consequently, it was believed the government would not likely consent to a
F-13
<PAGE>
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.
As a result of the foregoing factors, there was an indication of
potential impairment requiring assessment under FAS No. 121. Consequently, the
Company recorded a charge in the second quarter of 1996 totaling $53 million
relating to its investment in the Golden Cross mine and in the nearby Waihi
East property. The charge included amounts necessary to increase the Company's
recorded remediation and reclamation liabilities at Golden Cross to
approximately $7 million, net of salvage values, 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.
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,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Sales of dore' $ 28,525 $ 26,293
Cost of mine operations (25,585) (28,069)
Insurance proceeds 8,000
Writedown of mining property (52,036)
Net income (loss) before
income taxes $ 10,940 $ (53,812)
========== ==========
</TABLE>
In 1997, $8 million of the reported income was related to the Golden
Cross insurance recovery not measurable or anticipated at the time of the
original writedown. The remaining $2.9 million is related to residual
mining activities which benefited from lower depletion.
<TABLE>
<S> <C> <C>
Assets $ 6,152 $ 2,408
Liabilities (37,933) (47,271)
---------- ----------
Shareholders' deficit $ (31,781) $ (44,863)
========== ==========
</TABLE>
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 the
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-14
<PAGE>
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, 1997 and 1996.
<TABLE>
<CAPTION>
Available-For-Sale Securities
----------------------------------------------------------------------------------
(in thousands) Gross Gross Estimated
Unrealized Unrealized Fair
1997 Cost Losses Gains Value
----------------- ------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
U.S. Corporate $ 49,127 $ 3 $ $ 49,124
U.S. Government 47,570 273 47,843
--------- --------- --------- ---------
Total Debt Securities 96,697 3 273 96,967
Equity Securities 2,373 135 10 2,248
--------- --------- --------- ---------
$ 99,070 $ 138 $ 283 $ 99,215
========= ========= ========= =========
1996
-----------------
U.S. Corporate $ 83,236 $ 40 $ 2 $ 83,198
U.S. Government 39,658 25 97 39,730
--------- --------- --------- ---------
Total Debt 122,894 65 99 122,928
Securities
Equity Securities 1,672 389 3 1,286
--------- --------- --------- ---------
$ 124,566 $ 454 $ 102 $ 124,214
========= ========= ========= =========
</TABLE>
The gross realized gains on sales of available-for-sale securities
totaled $0 and $1.3 million during 1997 and 1996, respectively. The gross
realized losses totaled $1.6 million and $.05 million during 1997 and 1996,
respectively. The gross realized gains and losses are based on a carrying
value (cost net of discount or premium) of $206.5 million and $90.9 million of
short-term investments sold during 1997 and 1996, respectively. Short-term
investments mature at various dates through November 1998.
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 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,
-----------------------
1997 1996
---- ----
<S> <C> <C>
In process and on leach pads $ 24,617 $ 19,948
Concentrate and dore' inventory 5,839 5,735
Supplies 5,471 6,309
-------- --------
$ 35,927 $ 31,992
======== ========
</TABLE>
F-15
<PAGE>
During the fourth quarter of 1997, based on detailed metallurgical
evaluations, the Company changed its estimates of the percentage of minerals
recovered through the leaching process at its Rochester Mine. The change
resulted in increased recovery rates from 55% for silver and 85% for gold to
59% for silver and 90% for gold. Management evaluates this estimate on an
ongoing basis. Adjustments to the recovery rates are accounted for
prospectively. The effects of the change during the fourth quarter decreased
the cost of mine operations by approximately $7 million.
NOTE H--PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
Property, plant, and equipment consists of the following:
<CAPTION>
December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Land $ 1,814 $ 1,350
Buildings and improvements 53,740 60,851
Machinery and equipment 55,159 47,697
Capital leases of buildings
and equipment 9,095 9,095
-------- --------
$119,808 $118,993
======== ========
</TABLE>
<TABLE>
Assets subject to capital leases consist of the following:
<CAPTION>
December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Buildings $ 5,105 $ 5,105
Equipment 3,990 3,990
-------- --------
TOTAL BUILDINGS AND EQUIPMENT 9,095 9,095
Rochester operational mining
property 7,871 7,871
-------- --------
16,966 16,966
Less allowance for accumulated
amortization and depletion 10,648 9,863
-------- --------
NET ASSETS SUBJECT TO CAPITAL
LEASES $ 6,318 $ 7,103
======== ========
</TABLE>
Lease amortization is included in depreciation and depletion expense.
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. Total rent expense charged to
operations under these agreements was $4.5 million, $4.6 million and $4.4
million for 1997, 1996, and 1995, respectively.
F-16
<PAGE>
Minimum lease payments under leases are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Capital Operating
----------- --------- ---------
<S> <C> <C>
1998 $ 361 $ 4,648
1999 92 2,436
2000 1,212
2001 1,075
2002-2003 2,647
------- -------
TOTAL MINIMUM PAYMENTS DUE 453 $12,018
=======
Less amount representing
interest 31
-------
PRESENT VALUE OF NET
MINIMUM LEASE PAYMENTS 422
Less current maturities 243
-------
$ 179
=======
</TABLE>
NOTE I - MINING PROPERTIES
<TABLE>
<CAPTION>
Capitalized costs for mining properties December 31,
consist of the following: 1997 1996
---- ----
<S> <C> <C>
Operational mining properties:
Rochester Mine, less accumulated
depletion of $41,727
and $36,904 $ 34,585 $ 42,372
Silver Valley Resources, less accumulated
depletion of $1,080 and $224 16,620 13,207
El Bronce Mine less accumulated
depletion of $2,844 and $350 38,577 36,222
Fachinal Mine, less accumulated depletion
of $7,760 in 1997 42,811 41,452
Gasgoyne Gold Mines NL, less accumulated
depletion of $6,401 51,909
-------- --------
TOTAL OPERATIONAL MINING PROPERTIES 184,502 133,253
Developmental mining properties:
Kensington 122,457 108,100
Other 11,779 2,885
-------- --------
TOTAL DEVELOPMENTAL MINING PROPERTIES 134,236 110,985
-------- --------
TOTAL MINING PROPERTIES $318,738 $244,238
======== ========
</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. The mine utilizes the heap-leaching
process to extract both silver and gold from ore mined using open pit methods.
Rochester 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
$18.07 per ounce.
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
F-17
<PAGE>
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. In June
1996, Silver Valley reopened the Coeur Mine and plans to continue mining
existing reserves through the second quarter of 1998. Exploration at the Coeur
Mine is ongoing in an effort to increase silver reserves and extend the mine's
life beyond 1998. Silver Valley also resumed production at the Galena Mine in
1997, which has ore reserves sufficient to sustain approximately 10 years of
operation. The two mines had previously been on standby basis.
FACHINAL MINE: The Fachinal Mine is a gold and silver open pit and
underground mine located in southern Chile which operated in pre-production
from October 1995 to 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 based on total reserves. The property was classified as
an operating property for financial reporting purposes on January 1, 1997.
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 an ownership interest of 100%.
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. The interest was acquired
for $32.5 million plus a scaled net returns royalty on 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
In October 1997, the Company completed an offering of $143,750,000
principal amount of 7.25% Convertible Subordinated Debentures due 2005 which
are convertible into shares of common stock on or before October 31, 2005,
unless previously redeemed, at a conversion price of $17.45 per share, subject
to adjustment in certain events. The Company is required to make semi-annual
interest payments. The debentures are redeemable at the option of the Company
on or after October 31, 2000, have no other funding requirements until
maturity, and mature October 31, 2005.
The $49.8 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 dollars of principal (equivalent
F-18
<PAGE>
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 and mature June 10, 2002.
The $95 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.
On October 31, 1997, the Company paid $24 million to retire the existing
loan balance 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 up to $24.0
million. The interest rate on the facility is equal to LIBOR plus 1.5%. The
borrowing was 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 NL. As of December 31, 1996,
borrowings amounted to $18.9 million at an annual interest rate equal to LIBOR
plus 1.5%. In late 1997, all outstanding amounts under the operating line were
repaid in full and the line discontinued.
The carrying amounts and fair values of long-term borrowings, as of
December 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-------------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Value Value
--------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
6% Convertible
Subordinated
Debentures
Due 2002 $ 49,840 $ 36,750 $ 49,840 $ 45,105
6.375% Convertible
Subordinated
Debentures
Due 2004 $ 95,000 $ 74,338 $100,000 $ 93,500
7.25% Convertible
Subordinated
Debentures
Due 2005 $143,750 $108,902
</TABLE>
Total interest accrued in 1997, 1996, and 1995 was $16.2 million, $13.1
million, and $17.1 million, respectively, of which $5.7 million, $9.5 million,
and $7.4 million, respectively, was capitalized as a cost of the mines under
development.
Interest paid was $13.7 million, $12.1 million, and $16.3 million in
1997, 1996, and 1995, respectively.
NOTE K--INCOME TAXES
The components of the provision (benefit) for income taxes in the
consolidated statements of operations are as follows:
F-19
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
From Continuing Operations:
Current $ (242) $ 203 $ 1,986
Deferred (1,387) (1,786)
-------- -------- --------
PROVISION (BENEFIT) FOR
INCOME TAX $ (242) $(1,184) $ 200
======== ======== ========
From Discontinued Operations:
Current
Deferred $ 1,608
--------
PROVISION FOR INCOME TAX $ 1,608
========
Total:
Current $ (242) $ 203 $ 1,986
Deferred (1,387) (1,786)
-------- -------- --------
PROVISION (BENEFIT) FOR
INCOME TAX $ (242) $(1,184) $ 1,808
======== ======== ========
</TABLE>
Deferred taxes arise due to temporary differences in deductions
for tax purposes and for financial statement accounting purposes.
The tax effect and sources of these differences are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Reserve for loss on
mine closure $ (1,175) $ (971) $ 100
Net mine exploration and
development costs 1,671 (9,299) (2,715)
Net lease payments 60 591 498
Regular tax expense (benefit)
on utilization of net
operating losses (6,142) (32,967) 3,673
Adjustments to net operating
loss and credit carryforwards (8,660) 1,046 (2,083)
Environmental costs (478) 87
Amortization of bond premium 689
Unrealized investment losses 3,087
Change in valuation
allowance 14,701 1,501 (2,420)
Change in deferred
state taxes (412)
Other (455) (810) (682)
--------- --------- ---------
Deferred income tax expense
(benefit) 0 (1,387) (178)
Less differences attributable
to discontinued operations 1,608
--------- --------- ---------
Deferred income tax expense
(benefit) from continuing
operations $ 0 $ (1,387) $ (1,786)
========= ========= =========
</TABLE>
F-20
<PAGE>
As of December 31, 1997 the significant components of the Company's net
deferred tax liability were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Deferred tax liabilities:
PP&E, net $ 8,527 $ 14,132
--------- ---------
Total deferred tax liabilities 8,527 14,132
Deferred tax assets:
Net operating loss carryforwards 90,319 80,977
AMT credit carryforwards 1,404 1,650
Business credit carryforwards 542 542
--------- ---------
Total deferred tax assets 92,265 83,169
Valuation allowance for deferred
tax assets (83,738) (69,037)
--------- ---------
Net deferred tax assets 8,527 14,132
--------- ---------
Net deferred tax liabilities $ -0- $ -0-
========= =========
</TABLE>
Changes in the valuation allowance relate primarily to losses which are
not currently recognized. The Company has reviewed its net deferred tax
assets, together with net operating loss carryforwards, and has decided to
forego recognition of potential tax benefits arising therefrom. In making this
determination, the Company has considered the Company's history of tax losses
incurred since 1989, the current level of gold and silver prices and the
ability of the Company to use accelerated depletion and amortization methods
in the determination of taxable income.
The Company 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, 1997. It is not practicable to estimate
the tax liabilities which would result upon such repatriation.
A reconciliation of the Company's effective income tax rate with the
federal statutory tax rate for the periods indicated is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Tax benefit on continuing operations
computed at statutory rates (35.0%) (35.0%) (35.0%)
Tax effect of foreign affiliates'
statutory rates 17.6%
Percentage depletion (12.3%) (3.3%) (190.0%)
Dividend received deduction (15.4%)
Interest on foreign subsidiary debt 177.7%
Equity in earnings of unconsolidated
subsidiaries .6% 49.0%
State income tax provision (25.0%)
Change in valuation allowance 27.4% 38.1% 2.7%
Utilization of net operating losses (73.4%)
Federal tax assessments and
withholding .2% 116.7%
Other (net) (.2%) (1.9%) 11.6%
-------- -------- --------
EFFECTIVE TAX RATE ON CONTINUING
OPERATIONS (1.7%) (2.1%) 18.9%
======== ======== ========
</TABLE>
For tax purposes, as of December 31, 1997, the Company has operating
loss carryforwards as follows:
<TABLE>
<CAPTION>
U.S. New Zealand Australia Chile Total
-------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Regular losses $133,350 $ 85,582 $ 716 $100,838 $320,486
AMT losses 91,366 91,366
AMT credits 1,404 1,404
General business credits 542 542
</TABLE>
The operating loss carryforwards by year of expiration are as follows:
<TABLE>
<CAPTION>
Year of
Expiration Regular Tax Amt Tax
---------- ----------- ---------
<S> <C> <C>
2004 $ 8,262
2005 6,349 $ 4,888
2006 11,041 4,352
2007 10,702
2008 10,417 1,084
2009 8,994 9,632
2010
2011 72,146 70,549
2012 5,439 861
---------- ---------
Total $ 133,350 $ 91,366
========== =========
</TABLE>
New Zealand, Australian and Chilean laws provide for indefinite carryforwards
of net operating losses. Utilization of U.S. net operating losses may be
subject to limitations due to potential changes in ownership.
As of December 31, 1997, Callahan Mining Corporation, a subsidiary, has
net operating loss carryforwards of approximately $17.4 million and
alternative minimum tax loss carryforwards of approximately $9.2 million which
expire through 2006. The utilization of Callahan Mining Corporation's net
operating losses are 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
converted earlier 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. 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
F-22
<PAGE>
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. At December
31, 1997 and 1996, there were a total of 21,890,971 outstanding rights which
was equal to the number of outstanding shares of common stock.
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
1995, benefits were payable in cash and in shares of Common Stock. Under the
Annual Plan in 1997 and 1996, benefits are payable in cash only. 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.
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 1997, options for 365,381 shares were
issued under the plan. As of December 31, 1997 and December 31, 1996,
nonqualified and incentive stock options to purchase 612,447 shares and
314,727 shares, respectively, were outstanding under the Long-Term and
Directors' Plans. The options are exercisable at prices ranging from $13.125
to $27.00 per share.
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, 1997, December 31, 1996 and December 31, 1995, a total of 16,600, 12,210
and 11,287 options, respectively, had been granted in lieu of $.1 million, $.1
million and $.1 million, respectively, of foregone directors' fees.
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" which establishes
accounting and reporting standards for stock-based employee compensation
plans. This statement defines a fair value based method of accounting for
these equity instruments. The method measures compensation expense based on
the estimated fair value of the award and recognizes that cost over the
vesting period. The Company has adopted the disclosure-only provision of
F-23
<PAGE>
Statement No. 123 and therefore continues to account for stock options in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, because options are granted at fair market value, no
compensation expense has been recognized for options issued under the
Company's stock option plans. Had compensation cost been recognized based on
the fair value at the date of the grant for the options awarded under the
plans, pro-forma amounts of the Company's net income (loss) and net income
(loss) per share would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Net income (loss) as reported $(14,083) $(54,570) $ 1,154
Net income (loss) pro forma $(14,482) $(54,772) $ 1,067
Basic and diluted net income
(loss) per share as reported $ (.64) $ (2.54) $ .07
Basic and diluted net income
(loss) per share pro forma $ (.66) $ (2.55) $ .07
</TABLE>
The fair value of each option grant was estimated using the Black
Scholes option pricing model with the following weighted average assumptions:
risk free interest rate of 5.75% to 7.95%; expected option life of 4 years for
officers and directors; expected volatility of .385 to .399; and no expected
dividends. The weighted average value of options granted during the years
ended December 31, 1997, 1996 and 1995 were $5.67, $8.19 and $6.65,
respectively. The effect of applying Statement No. 123 for providing pro forma
disclosures for fiscal years 1997, 1996 and 1995 is not likely to be
representative of the effects in future years because options vest over a
4-year period and additional awards generally are made each year.
Total compensation expense charged to operations under the Plans was
$1.5 million, $.9 million, and $1.1 million for 1997, 1996, and 1995,
respectively. A summary of the Company's stock option activity and related
information for the years ended December 31 follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
----------- --------------
<S> <C> <C>
Stock options outstanding
at 1/1/96 252,401 $ 17.64
Issued 62,326 20.88
-------- --------
Stock options outstanding
at 12/31/96 314,727 18.28
Issued 365,381 14.52
Canceled (67,661) 18.22
-------- --------
Stock options outstanding
at 12/31/97 612,447 $ 16.05
======== ========
</TABLE>
Stock options exercisable at December 31, 1997 and 1996 were 236,761 and
257,493, respectively.
F-24
<PAGE>
The following table summarizes information for options currently outstanding
at December 31, 1997:
<TABLE>
Options Outstanding Options Exercisable
---------------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life (Yrs.) Price Exercisable Price
----------------- ----------- ----------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$13.125 to $14.99 254,627 9.1 $13.16 13,500 $ 13.75
$15.000 to $17.99 200,159 7.3 $16.53 114,064 $ 15.95
$18.000 to $27.00 157,661 6.2 $20.09 109,197 $ 20.35
------- ---------
612,447 7.8 $16.05 236,761 $ 17.86
======= =========
</TABLE>
As of December 31, 1997 and 1996, 243,244 shares and 447,696 shares,
respectively, were available for future grants under the Plans and 13,873,438
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 U.S. employees. Total plan expense charged to operations
was $.8 million, $.6 million, and $.5 million for 1997, 1996, and 1995,
respectively, which is based on a percentage of salary of qualified employees.
Effective January 1, 1995, the Company 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, $.4 million and $.3 million
in 1997, 1996 and 1995, respectively.
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, 1997,
1996, and 1995, the Company had forward foreign exchange contracts of $3.0
million, $15.8 million, and $41.0 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, 1997, the Company had sold 175,000 ounces of gold for delivery on
various dates through 2003 at an average price of $387.86. 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. The
Company realized gains of $5.3 million and $4.4 million arising from the sale
F-25
<PAGE>
of silver and gold purchased on the open market which was then delivered
pursuant to fixed-price forward contracts during 1997 and 1995, respectively.
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, 1997,
1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------- ------------------------- -------------------------
Forward Unrealized Forward Unrealized Forward Unrealized
Contracts Gain (Loss) Contracts Gain (Loss) Contracts Gain (Loss)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Currency:
New Zealand $ 3,024 $ (7) $ 15,845 $ (10) $ 23,269 $ (27)
Chilean $ 17,699 $ (1,993)
Forward Metal Sales $ 67,875 $ 7,404 $ 61,823 $ 3,702 $ 29,535 $ 1,528
</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, 1997, 1996, and 1995, the Company realized gains
(losses) from its foreign exchange hedging programs of $(.9) million, $1.4
million and $1.9 million, respectively.
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 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 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. In September 1997, the
Company filed a motion for summary judgement raising the statute of
limitations. Both motions are pending decision. In March 1998, the EPA
F-26
<PAGE>
announced its intent to perform a remedial investigation/feasibility study
(RI/FS) at all or parts of the Basin, and thereby, apparently focus upon
response costs rather than natural resource damages. At this stage of the
proceeding, it is not possible to predict the ultimate outcome thereof.
On July 15, 1996, Coeur filed a complaint against Cyprus Amax Minerals
Company ("Cyprus") in the District Court of the State of Idaho, Kootenai
County, alleging violations by Cyprus of the anti-fraud 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 recession and 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 mine site at the time of Coeur's
purchase of the property. In October 1997, 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. Coeur also
filed an action in federal court for the District of Idaho on July 15, 1996
against Cyprus which makes the same allegations as the Idaho State complaint,
but including violations of federal securities laws. The Company voluntarily
dismissed that action in January 1998.
On July 2, 1997, a suit was filed by a shareholder of the Company's
Common Stock in Federal District Court for the District of Colorado naming the
Company and certain of its officers and its independent auditor as defendants.
Plaintiff alleges that the Company violated the Securities Exchange Act of
1934 during the period January 1, 1995 to July 11, 1996, and seeks
certification of the law suit as a class action. The class members are alleged
to be those persons who purchased publicly traded debt and equity securities
of the Company during the time period stated. On September 22, 1997, an
amended complaint was filed in the proceeding adding other purchasers as
additional plaintiffs. The action seeks unspecified compensatory damages,
pre-judgment and post-judgment interest, attorney's fees and costs of
litigation. The complaint asserts that the defendants knew material adverse
non-public information about the Company's financial results which was not
disclosed, and which related to the Golden Cross and Fachinal Mines; and that
the defendants intentionally and fraudulently disseminated false statements
which were misleading and failed to disclose material facts. The Company
believes the allegations are without merit and intends to vigorously defend
against them. On October 27, 1997, the Company, its auditors and the
individual defendants filed with the Court motions to dismiss the amended
complaint on the ground that it fails to state a valid claim. The motions were
argued on January 8, 1998 and are pending decision by the court. No assurances
can be given at this early stage of the action as to 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 relating to these matters, the amount of which cannot now
be reasonably estimated, such amounts could possibly have a material impact on
the results of operations for a given period.
F-27
<PAGE>
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,
--------------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
REVENUES AND OTHER INCOME:
United States $ 83,125 $ 75,815 $ 65,903
Australasia 44,923 27,285 32,967
South America 31,934 2,790 (127)
---------- ---------- ----------
Consolidated revenues $ 159,982 $ 105,890 $ 98,743
========== ========== ==========
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES:
United States $ 6,684 $ 6,167 $ (3,558)
Australasia 4,882 (55,491) 5,773
South American Operations (20,705) 531 311
South American Exploration (5,186) (6,961) (3,584)
---------- ---------- ----------
Consolidated net loss from
continuing operations before
income taxes $ (14,325) $ (55,754) $ (1,058)
========== ========== ==========
IDENTIFIABLE ASSETS:
United States $ 437,582 $ 379,635 $ 286,318
Australasia 85,223 51,848 47,114
South America 138,617 148,847 112,214
---------- ---------- ----------
Consolidated assets $ 661,422 $ 580,330 $ 445,646
========== ========== ==========
</TABLE>
F-28
<PAGE>
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, 1997 and 1996:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(000's-Except Per Share Data)
<S> <C> <C> <C> <C>
1997
Net Sales $ 24,670 $ 33,659 $ 38,628 $ 42,280
Gross profit (loss) $ (2,492) $ (1,849) $ (2,056) $ 3,561(d)
Net loss $ (1,721) $ (275)(c) $ (6,268) $ (5,819)
Net loss attributable to
common shareholders $ (4,353) $ (2,908)(c) $ (8,903) $ (8,450)
Basic and diluted net loss
per share (b) $ (.08) $ (.01) $ (.29) $ (.27)
Basic and diluted net loss
per share attributable
to common shareholders (b) $ (.20) $ (.13) $ (.41) $ (.39)
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)(a) $ 1,878 $ 300
Net loss attributable
to common shareholders $ (365) $(59,514) $ (755) $ (2,333)
Basic and diluted net income
(loss) per share (b) $ .01 $ (2.63) $ .09 $ .01
Basic and diluted net loss
per share attributable to
common shareholders (b) $ (.02) $ (2.75) $ (.03) $ (.11)
<FN>
(a) Includes writedown of mining properties of approximately $54.0 million.
(b) The 1996 and first three quarters of 1997 earnings per share amounts
have been restated to comply with Statement of Financial Accounting
Standard No. 128, "Earnings Per Share."
(c) Includes the receipt of $8 million of insurance proceeds for business
interruption and property damage at the Golden Cross Mine.
(d) Includes the effects of the change in recovery rates at the Rochester
Mine, whereby costs of mine operations decreased by approximately $7
million.
</FN>
</TABLE>
EXHIBIT 10(pp)
DATED 7 MAY 1997
AGREEMENT FOR SALE AND
ISSUE OF SHARES
SONS OF GWALIA LIMITED
("SGW")
Burmine Investments Pty Limited
Orion Resources NL
("Vendors")
Coeur Australia Pty Limited
("Purchaser")
Mallesons Stephen Jaques
Solicitors
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone (61 2) 9296 2000
Fax (61 2) 9296 3999
DX 113 Sydney
Ref: JJW:AGB
<PAGE>
1
<TABLE>
CONTENTS AGREEMENT FOR SALE OF SHARES
----------------------------------------------
<S> <C>
1 INTERPRETATION 1
2 SALE AND PURCHASE OF SHARES 3
3 PURCHASE PRICE 3
4 ISSUE OF SHARES 3
5 CONDITIONS PRECEDENT 3
6 COMPLETION 4
7 WARRANTIES 5
8 COSTS AND STAMP DUTY 5
9 NOTICES 5
10 ASSIGNMENT 6
11 MISCELLANEOUS 6
Exercise of rights 6
Waiver and variation 7
Approvals and consent 7
Remedies cumulative 7
No merger 7
Survival of indemnities 7
Enforcement of indemnities 7
Further assurances 7
Publicity 7
Counterparts 7
Sons of Gwalia as Vendor 7
12 GOVERNING LAW, JURISDICTION AND SERVICE OF
PROCESS 8
APPENDIX WARRANTIES 9
The Shares 9
Business 9
Changes in financial state 9
Schedule Vendors and Shareholdings 11
</TABLE>
<PAGE>
1
AGREEMENT FOR SALE AND ISSUE OF SHARES
DATE: 7 May 1997
PARTIES: THE PERSONS WHOSE names and addresses are set out in column 1 of
the schedule (collectively "Vendors" and individually "VENDOR")
SONS OF GWALIA LIMITED (ACN 008994287) of 16 Parliament Place,
West Perth, Western Australia ("SGW")
COEUR AUSTRALIA PTY LIMITED (ACN 077674974) of Level 53, Governor
Phillip Tower, 1 Farrer Place, Sydney ("PURCHASER")
RECITALS:
A. Gasgoyne Gold Mines NL (ACN 009 212 382) is a company incorporated
in Western Australia and has its registered office at 16
Parliament Place, West Perth, Western Australia ("COMPANY").
B. The Company has an issued share capital of $11,245,839.40 divided
into 56,229,197 shares of $0.20 each fully paid.
C. The Vendors are wholly owned subsidiaries of SGW and are, or are
entitled to become, the registered holders and beneficial owners
of the issued ordinary shares in the capital of the Company as set
out in column 2 of the schedule opposite the name of each Vendor.
D. The Purchaser is a wholly owned subsidiary of Coeur d'Alene Mines
Corporation ("COEUR").
E. Coeur has agreed to transfer to the Purchaser 20,293,691 issued
ordinary shares in the capital of the Company, of which Coeur is
the registered holder and beneficial owner.
F. The Vendors have agreed to sell, and the Purchaser has agreed to
purchase, the Shares and the parties have agreed to procure the
issue by the Company to the Purchaser of one fully paid ordinary
share in the capital of the Company on the following terms.
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 The following words have these meanings in this agreement unless
the contrary intention appears.
$ means the lawful currency of Australia.
ACCOUNTS means the audited balance sheet of the Company and its
subsidiaries as at 30 June 1996 and the audited profit and loss
account of the Company and its subsidiaries for the period ending
on that date.
COMPANY means Gasgoyne Gold Mines NL.
<PAGE>
2
COMPLETION means settlement of the sale and purchase of the Shares
and the issue contemplated by clause 4 in accordance with clause 6
and Complete has a corresponding meaning.
COMPLETION DATE means the date which is seven days following the
day on which the condition in clause 5.1 is satisfied, or such
earlier date as agreed by the parties
PURCHASE PRICE means the aggregate consideration payable for the
Shares calculated in accordance with clause 3.
SHAREHOLDERS AGREEMENT means the agreement so entitled dated on or
about the date of this agreement between SGW, the Vendors, the
Purchaser and the Company.
SHARES means 7,820,907 issued ordinary fully paid shares in the
capital of the Company agreed to be sold under this agreement and
Share means any one of those shares.
WARRANTIES means the warranties, representations and indemnities
in this agreement, including clause 7.
YILGARN STAR PRODUCTION JOINT VENTURE means the joint venture
between Gasgoyne, Orion and Bredelle Pty Limited pursuant to a
joint venture agreement between those parties dated 7 January 1991
as amended. 1.2 In this agreement unless the contrary intention
appears:
(a) a reference to a clause, schedule, annexure or appendix is a
reference to a clause of or schedule, annexure or appendix
to this agreement and references to this agreement include
any recital, schedule, annexure or appendix;
(b) a reference to this agreement or another instrument includes
any variation or replacement of either of them;
(c) a reference to a statute, ordinance, code or other law
includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of
any of them;
(d) the singular includes the plural and vice versa;
(e) the word person includes a firm, a body corporate, an
unincorporated association or an authority;
(f) a reference to a person includes a reference to the person's
executors, administrators, successors, substitutes
(including, but not limited to, persons taking by novation)
and assigns;
(g) an agreement, representation or warranty in favour of two or
more persons is for the benefit of them jointly and
severally;
(h) an agreement, representation or warranty on the part of two
or more persons binds them jointly and severally;
<PAGE>
3
(i) if a period of time is specified and dates from a given day
or the day of an act or event, it is to be calculated
exclusive of that day; and
(j) a reference to a day is to be interpreted as the period of
time commencing at midnight and ending 24 hours later.
1.3 Headings are inserted for convenience and do not affect the
interpretation of this agreement.
2 SALE AND PURCHASE OF SHARES
2.1 Each Vendor agrees to sell and transfer to the Purchaser and the
Purchaser agrees to purchase from that Vendor, on the terms and
conditions of this agreement, the number of the Shares held by
that Vendor set out in column 2 of the schedule.
2.2 The Shares must be transferred free from any mortgage, charge,
lien, pledge or other encumbrance and with all rights, including
dividend rights, attached or accruing to them on and from the date
of this agreement.
2.3 The Purchaser is not obliged to Complete unless each Vendor is
ready, willing and able to Complete simultaneously.
2.4 Each Vendor waives in favour of the Purchaser any pre-emptive or
other rights which that Vendor has now or might otherwise have in
respect of any of the Shares held by each other Vendor.
3 PURCHASE PRICE
The consideration payable for each Share is $2.90.
4 ISSUE OF SHARES
The parties agree to procure that in connection and concurrent
with Completion the Company issues to the Purchaser one fully paid
ordinary share in the capital of the Company for an issue price of
$1.00.
5 CONDITIONS PRECEDENT
5.1 Completion is conditional on:
(a) the Treasurer of the Commonwealth of Australia consenting,
under the Foreign Acquisitions and Takeovers Act 1975, to
the proposed acquisition by the Purchaser of the Shares and
the Treasurer is to be deemed to have so consented:
(i) if the Purchaser receives written advice from the
Treasurer or on his behalf, to the effect that the
<PAGE>
4
acquisition of the Shares is not objected to under the
Foreign Acquisitions and Takeovers Act 1975; or (ii)
if ten days have elapsed from the day the Treasurer
ceased to be empowered to make any order under Part II
of the Foreign Acquisitions and Takeovers Act in
relation to the proposed acquisition because of lapse
of time, notice of the proposed acquisition of the
Shares having been given to the Treasurer under the
Foreign Acquisitions and Takeovers Act 1975; and
(b) simultaneous execution of the Shareholders Agreement by the
parties to it.
5.2 Each of the parties must use all reasonable endeavours to obtain
the fulfilment of the conditions in clause 5.1,
5.3 If the condition in clause 5.1 is not fulfilled by 15 June 1997 or
a later date agreed on by the parties then, if the party who seeks
to avoid the agreement has complied with clause 5.2, this
agreement may be terminated at any time before Completion by
notice given by the Purchaser or SGW to the other of them.
5.4 if this agreement is terminated under clause 5.3 then, in addition
to any other rights, powers or remedies provided by law:
(a) each party is released from its obligations to further
perform the agreement except those imposing on it
obligations of confidentiality; and
(b) each party retains the rights it has against any other party
in respect of any past breach.
6 COMPLETION
6.1 Completion of the sale and purchase of the Shares will take place
at 12.00 pm (Perth time) on the Completion Date at the offices of
Mallesons Stephen Jaques, Central Park, 152 St George's Terrace,
Perth, Western Australia or any other time and place agreed by the
parties.
6.2 SGW and the Vendors agree to do the following on Completion:
(a) deliver to the Purchaser or its solicitors executed
transfers in favour of the Purchaser of all the Shares
together with the share certificates for the Shares and any
consents which the Purchaser reasonably requires to obtain
registration of those transfers;
(b) cause the board of directors of the Company to:
(i) direct that, subject to the payment of stamp duty, the
Shares are registered; and
<PAGE>
5
(ii) issue one fully paid ordinary share in the capital of
the Company to the Purchaser in accordance with clause
4:
6.3 The Purchaser agrees;
(a) to pay to the Vendors at Completion the Purchase Price for
the Shares (to be apportioned between them as they direct);
(b) to pay to Gasgoyne the issue price for the share to be
issued pursuant to clause 4,
6.4 Each payment referred to in this clause 6 must be made by bank
cheque or by telegraphic transfer of funds in accordance with
instructions provided by the Vendors.
7 WARRANTIES
7.1 SGW and each of the Vendors represents and warrants to the
Purchaser that each of the statements set out in the appendix to
this agreement is accurate. Each of the statements is to be
treated as a separate representation and warranty and the
interpretation of any statement made may not be restricted by
reference to or inference from any other statement.
7.2 SGW and each of the Vendors represents, warrants and undertakes to
the Purchaser that each of the Warranties is true and correct on
the date of this agreement and will be true and correct as at
Completion.
7.3 SGW and the Vendors indemnify the Purchaser against all liability
or loss arising directly or indirectly from, and any costs,
charges and expenses incurred in connection with, any inaccuracy
in or breach of any of the Warranties.
7.4 If a payment is made for a breach of any Warranty, the payment is
to be treated as an equal reduction in the Purchase Price of each
Share.
8 COSTS AND STAMP DUTY
8.1 SGW, the Vendors and the Purchaser agree to bear their own legal
and other costs and expenses in connection with, the preparation,
execution and completion of this agreement and of other related
documentation, except for stamp duty.
8.2 The Purchaser agrees to bear all stamp duty payable or assessed in
connection with this agreement and the transfer of the Shares to
the Purchaser.
9 NOTICES
9.1 A notice, approval, consent or other communication in connection
with this agreement:
<PAGE>
6
(a) must be in writing;
(b) must be marked for the attention of the person named below;
and
(c) must be left at the address of the addressee, or sent by
prepaid ordinary post (airmail if posted to or from a place
outside Australia) to the address of the addressee or sent
by facsimile to the facsimile number of the addressee which
is specified in this clause or if the addressee notifies
another address or facsimile number then to that address or
facsimile number.
The address, and facsimile number of each party is :
SGW AND THE VENDORS
Address: 16 Parliament Place West
Perth WA 6005
Facsimile: (09) 4811271
Attention: Mr Peter Lalor
PURCHASER
Address: C/- Coeur d'Alene Mines Corporation
505 Front Avenue
Coeur d'Alene
Idaho 83814 USA
Facsimile: (208) 667 2213
Attention: Mr Dennis Wheeler
9.2 A notice, approval, consent or other communication takes effect
from the time it is received unless a later time is specified in
it.
9.3 A letter or facsimile is taken to be received:
(a) in the case of a posted letter, on the third (seventh, if posted
to or from a place outside Australia) day after posting; and
(b) in the case of facsimile, on production of a transmission report
by the machine from which the facsimile was sent which indicates
that the facsimile was sent in its entirety to the facsimile
number of the recipient.
10 ASSIGNMENT
A party may not assign its rights under this agreement without the
consent of the other party.
11 MISCELLANEOUS
EXERCISE OF RIGHTS
11.1 A party may exercise a right, power or remedy at its discretion,
and separately or concurrently with another right, power or
remedy. A single or partial exercise of a right, power or remedy
by a party does not prevent a further exercise of that or of any
other right, power or
<PAGE>
7
remedy. Failure by a party to exercise or delay in exercising a
right, power or remedy does not prevent its exercise.
WAIVER AND VARIATION
11.2 A provision of or a right created under this agreement may not be:
(a) waived except in writing signed by the party granting the
waiver; or
(b) varied except in writing signed by the parties.
APPROVALS AND CONSENT
11.3 A party may give conditionally or unconditionally or withhold its
approval or consent in its absolute discretion unless this
agreement expressly provides otherwise.
REMEDIES CUMULATIVE
11.4 The rights, powers and remedies provided in this agreement are
cumulative with and not exclusive of the rights, powers or
remedies provided by law independently of this agreement
NO MERGER
11.5 The Warranties in this agreement do not merge on Completion.
SURVIVAL OF INDEMNITIES
11.6 Each indemnity in this agreement is a continuing obligation,
separate and independent from the other obligations of the parties
and survives termination of this agreement.
ENFORCEMENT OF INDEMNITIES
11.7 It is not necessary for a party to incur expense or make payment
before enforcing a right of indemnity conferred by this agreement
FURTHER ASSURANCES
11.8 Each party agrees, at its own expense, on the request of any other
party, to do everything reasonably necessary to give effect to
this agreement and the transactions contemplated by it (including
the execution of documents) and to use all reasonable endeavours
to cause relevant third parties to do likewise.
PUBLICITY
11.9 A party may not make press or other announcements or releases
relating to this agreement and the transactions the subject of
this agreement without the approval of the other parties to the
form and manner of the announcement or release unless that
announcement or release is required to be made by law or by a
stock exchange.
COUNTERPARTS
11.10 This agreement may be signed in any number of counterparts. All
such counterparts taken together constitute one and the same
instrument
SONS OF GWALIA AS VENDOR
11.11 If, on Completion, either of the Vendors is unable to assign the
Shares held by them for any reason, SGW may satisfy the
obligations of the
<PAGE>
8
relevant Vendor by assigning the necessary amount of Shares held
by SGW.
12 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
12.1 This agreement and the transactions contemplated by this agreement
are governed by the law in force in Perth.
12.2 Each party irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the courts of Perth and courts of
appeal from them for determining any dispute concerning this
agreement or the transactions contemplated by this agreement. Each
party waives any right it has to object to an action being brought
in those courts, to claim that the action has been brought in an
inconvenient forum, or to claim that those courts do not have
jurisdiction.
12.3 Without preventing any other mode of service, any document in an
action (including, but not limited to, any writ of summons or
other originating process or any third or other party notice) may
be served on any party by being delivered to or left for that
party at its address for service of notices under clause 9.
EXECUTED as an agreement
<PAGE>
9
APPENDIX WARRANTIES
VENDORS' QUALIFICATIONS
1 The Vendors are, or are entitled to become, the registered holders
and beneficial owners of the Shares as set out in the schedule.
2 On Completion, there will be no mortgages, charges, pledges,
liens, encumbrances or other security interests over or affecting
the Shares.
3 SGW and each of the Vendors has the power to enter into and
perform this agreement and has obtained all necessary consents to
enable it to do so.
4 The entry into and performance of this agreement by SGW and each
of the Vendors does not constitute a breach of any obligation
(including any statutory, contractual or fiduciary obligation), or
default under any agreement or undertaking, by which any of SGW or
the Vendors is bound:
5 No meeting has been convened or resolution proposed, or petition
presented, and no order has been made, for the winding-up of SGW
or any Vendor. No voluntary arrangement has been proposed or
reached with any creditors of SGW or any Vendor. SGW and each
Vendor is able to pay its debts as and when they fall due.
THE SHARES
6 Neither SGW nor the Vendors:
(a) has committed the Company or any of its subsidiaries; and
(b) is aware of any commitments being in place under which the
Company or any of its subsidiaries is obliged at any time,
to issue any shares or other securities of the company.
7 On Completion, there will be no restriction on the sale or
transfer of the Shares to the Purchaser except for the consent of
the directors of the Company to the registration of the transfers
of the Shares.
BUSINESS
8 Since the close of the offers for ordinary shares in the Company
dated 18 March 1996 made by SGW pursuant to Chapter 6 of the
Corporations Law the assets of the Company and each of its
subsidiaries (including those of the Yilgarn Star Production Joint
Venture) have, so far as SGW is aware, been properly maintained in
good repair and condition, fair wear and tear excepted.
CHANGES IN FINANCIAL STATE
9 Except as disclosed to the Purchaser or its related body
corporates or any of their nominee directors on the board of
directors of the Company, since 30 June 1996:
<PAGE>
10
(a) no contracts or commitment differing from those ordinarily
necessitated by the nature of the business of the Company
and its subsidiaries have been entered into or incurred by
the Company or any of its subsidiaries; and
(b) the business or financial position of the Company and each
of its subsidiaries has not been materially and adversely
affected by any matter, either financial or otherwise of
which SGW or the Vendors is aware and whether covered by
insurance or not.
<PAGE>
11
SCHEDULE VENDORS AND SHAREHOLDINGS
<TABLE>
<CAPTION>
Column 1 Column 2
Name, place of incorporation and address of each Vendor Number of Shares held
<S> <C>
Orion Resources NL 220,000
(ACN 009 182 825)
Western Australia
16 Parliament Place
West Perth WA 6005
Burmine Investments Pty Limited 7,600,907
(ACN 006750 205)
16 Parliament Place
West Perth WA 6005
</TABLE>
<PAGE>
12
THE COMMON SEAL OF SONS OF )
GWALIA LIMITED is affixed in accordance )
with its articles of association in the )
presence of )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
THE COMMON SEAL OF BURMINE )
INVESTMENTS PTY LIMITED is )
affixed in accordance with its )
articles of association in the )
presence of; )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
THE COMMON SEAL of ORION )
RESOURCES NL is affixed in accordance )
with its articles of association in the )
presence of: )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
SIGNED for and on behalf of COEUR )
AUSTRALIA PLY LIMITED: )
------------------------------
EXHIBIT 10(qq)
SONS OF GWALIA LTD [SONS OF GWALIA LTD LOGO]
ACN 008 994 287
PKL:IF:256
7 May 1997
BY FACSIMILE TO: 1 208 664 4202
Dennis E Wheeler
Chairman, President and
Chief Executive Officer
Coeur d'Alene Mines Corporation
505 Front Avenue, P0 Box I
Coeur d'Alene
IDAHO 83816-0316
USA
Dear Dennis
GASGOYNE GOLD MINES N.L.
I refer to the arrangements we have entered into today pursuant to a
shareholders agreement in relation to Gasgoyne. The purpose of this letter is
to confirm our understanding in relation to dealing with Gasgoyne's gold
production and the gold forward sales contract which Gasgoyne has entered into
with Bankers Trust Australia Limited and Citibank Ltd.
1. Gasgoyne's Gold Production
I confirm that it is our understanding that Sons of Gwalia and Coeur
will procure the sale by Gasgoyne to Sons of Gwalia and Coeur (or their
nominees) in equal shares (on the basis that their shareholdings in
Gasgoyne are equal) all of its gold production at a price equivalent to
the cost of production of that gold as identified in the financial
statements of the Yilgarn Star Joint Venture.
2. Forward Sales Contracts
I also confirm our understanding that as soon as practicable Sons of
Gwalia and Coeur will endeavour to negotiate and enter into forward gold
sales contracts with Bankers Trust and Citibank in respect of the gold
purchased by them from Gasgoyne on the same terms and conditions as the
existing gold forward sales contracts between Gasgoyne, Bankers Trust
and Citibank.
6 Parliament Place, PMB l6. West Perth, Western Australia 6872
Tel: (61-9) 263 5555 Fax: (6l-9)4 8l l27l Telex AA 95797
E-Mail: [email protected]
<PAGE>
2
The forward gold sale contracts to be entered into by Sons of Gwalia and
Coeur will contain undertakings by Sons of Gwalia and Coeur to the
effect that they will procure that Gasgoyne does not exercise its rights
under the gold forward contracts for so long as their proposed contracts
with Bankers Trust and Citibank remain in force.
In the event that we are unable to negotiate and enter into these
arrangements with Bankers Trust and Citibank, Sons of Gwalia and Coeur
will enter into forward gold sale contracts with Gasgoyne to sell to
Gasgoyne the gold purchased by them from Gasgoyne on equivalent terms
and for the same price as provided for under the existing gold forward
contracts between Gasgoyne, Bankers Trust and Citibank.
Please confirm your agreement to these matters by signing this letter below
and returning a copy to me.
Yours sincerely,
/s/PETER K LALOR
----------------
PETER K LALOR
Managing Director
Coeur d'Alene Mines Corporation agrees that the matters set out above reflect
the understanding of the parties.
/s/DENNIS WHEELER
-----------------
DENNIS WHEELER
Chairman
Coeur d'Alene Mines Corporation
EXHIBIT 10(rr)
DATED 7 MAY 1997
SHAREHOLDERS AGREEMENT
SONS OF GWALIA LIMITED
("SGW")
BURMINE INVESTMENTS PTY LIMITED
("BURMINE")
ORION RESOURCES NL
("ORION")
COEUR AUSTRALIA PTY LIMITED
("COEUR AUSTRALIA")
GASGOYNE GOLD MINES NL
("GASGOYNE")
Mallesons Stephen Jaques
Solicitors
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone (61 2) 9296 2000
Fax (61 2) 9296 3999
DX 113 Sydney
Ref: JJW:AGB
<PAGE>
1
<TABLE>
CONTENTS SHAREHOLDERS AGREEMENT
----------------------------------------------
<S> <C>
1 INTERPRETATION 1
2 TERM 4
3 OBJECTS 4
4 TRANSFER OF SHARES 5
Transfer 5
Transfer notice 5
First right of refusal 5
No purchaser found 6
Transfers to related parties 6
Transferees bound 6
5 ACQUISITION WITHIN AREA OF INTEREST 7
6 CASH CALLS 8
7 BOARD OF DIRECTORS OF GASGOYNE 9
8 CERTAIN CORPORATE ACTIONS 10
9 DIVIDEND POLICY 12
10 ACCOUNTS AND RECORDS 12
11 SHAREHOLDER COMMITMENT 13
12 TERMINATION 13
SHAREHOLDER DEFAULT 13
13 COSTS 15
14 INCONSISTENCY WITH MEMORANDUM OR ARTICLES 15
15 NOTICES 16
16 MISCELLANEOUS 17
Exercise of rights 17
Waiver and variation 17
Approvals and consents 17
Remedies cumulative 17
Further assurances 17
No partnership 17
Injunctive relief 17
Confidentiality 18
Counterparts 18
17 ENTIRE AGREEMENT 18
18 GOVERNING LAW, JURISDICTION AND SERVICE OF
PROCESS 18
</TABLE>
<PAGE>
2
SHAREHOLDERS AGREEMENT
DATE: 7 May 1997
PARTIES: SONS OF GWALIA LIMITED (ACN 008994287) of 16 Parliament Place,
West Perth, Western Australia ("SGW")
BURMINE INVESTMENTS PTY LIMITED (ACN 006750205) of 16 Parliament
Place, West Perth, Western Australia ("Burmine")
ORION RESOURCES NL (ACN 009 182 825) of 16 Parliament Place, West
Perth, Western Australia ("ORION")
COEUR AUSTRALIA PTY LIMITED (ACN 077674974) of LEVEL 53, Governor
Phillip TOWER, 1 FARRER PLACE, SYDNEY ("COEUR AUSTRALIA")
GASGOYNE GOLD MINES NL (ACN 009212382) of 16 Parliament Place,
West Perth, Western Australia ("GASGOYNE")
RECITALS:
A. As at the Effective Date, SGW (together with its Wholly-owned
Subsidiaries) and Coeur Australia (together with its Parent) are
(or are entitled to become) the registered and beneficial owners
of 28,114,599 Shares each.
B. Burmine and Orion are Wholly-owned Subsidiaries of SGW.
C. SGW and Coeur Australia have agreed to make certain arrangements
in respect of the Shares owned by them (or their Parents or
Wholly-owned Subsidiaries) and with respect to the direction of
the business of Gasgoyne.
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 The following words have these meanings in this agreement unless
the contrary intention appears.
$ means the lawful currency of Australia.
ACCOUNTS means the consolidated profit and loss accounts and
consolidated balance sheets for Gasgoyne and its subsidiaries
required to be prepared from time to time under the Corporations
Law.
ADVANCE means a contribution by a non-defaulting Shareholder, on
behalf of a defaulting Shareholder, to satisfy the defaulting
Shareholder's proportionate share of a Cash Call.
AREA OF INTEREST means any "area of interest" or "area of
influence" as defined and provided for in any existing joint
venture agreements to which Gasgoyne is a party including any
areas of influence provided for in:
(a) the Marvel Loch Joint Venture Agreement between Gasgoyne and
Orion dated 18 MAY 1993; and
<PAGE>
2
(b) the Yilgarn Star Exploration Joint Venture Agreement dated
13 February 1991 between Gasgoyne, Orion and Bredelle Pty
Limited, as amended.
ARTICLES means the articles of association of Gasgoyne as altered
or added to from time to time.
BOARD means all or some of the Directors acting as a board.
BUSINESS means the current business of Gasgoyne and its
subsidiaries described in clause 3.1.
BUSINESS DAY means a day on which trading banks are open for
general banking business in Perth.
CASH CALL means a demand for cash contributions from the
Shareholders issued by Gasgoyne in accordance with clause 6.
CHAIRMAN means the Chairman of the board of directors of Gasgoyne.
CLEARANCES means all necessary governmental and regulatory
approvals and clearances.
COEUR means Coeur d'Alene Mines Corporation.
DIRECTOR means a director of Gasgoyne.
EFFECTIVE DATE means the date on which completion occurs under the
Equalisation Agreement.
EQUALISATION AGREEMENT means the agreement entitled Agreement for
the Sale and Issue of Shares dated on or about the date of this
agreement between the parties to this agreement.
MAJORITY APPROVAL OF THE BOARD means either:
(c) the written consent of the Board duly signed by a simple
majority of the Directors; or
(d) a resolution of the Board duly passed by a simple majority
of the Directors present and voting at the relevant meeting
of the Board.
MANAGEMENT SERVICES AGREEMENT means the agreement so entitled
dated on or about the date of this agreement between SGW, Coeur
Australia and Gasgoyne.
MEMORANDUM means the memorandum of association of Gasgoyne as
altered or added to from time to time.
PARENT means a holding company of another company where none of
that other company's shares are held by a person other than that
holding company or a nominee of that holding company.
RELATED BODY CORPORATE HAS the same meaning as in the Corporations
Law.
<PAGE>
3
SHAREHOLDER means each of SGW, Burmine and Coeur Australia and any
other person who, after the date of this agreement, acquires
Shares by way of transfer permitted by this agreement.
SHARES means ordinary shares of $0.20 each in the capital of
Gasgoyne.
SPECIAL APPROVAL OF THE BOARD means:
(a) the written consent of the Board duly signed by all
Directors; or
(b) a resolution of the Board duly passed by an 80% majority of
the Directors present and voting at the relevant meeting of
the Board.
WHOLLY-OWNED SUBSIDIARY has the same meaning as in the
Corporations Law.
YILGARN STAR PRODUCTION JOINT VENTURE means the joint venture
between Gasgoyne, Orion Resources NL and Bredelle Pty Limited
pursuant to a joint venture agreement between those parties dated
7 January 1991 as amended.
1.2 In this agreement unless the contrary intention appears:
(a) a reference to a clause, schedule, annexure or appendix is a
reference to a clause of or schedule, annexure or appendix
to this agreement and references to this agreement include
any recital, schedule, annexure or appendix;
(b) a reference to this agreement or another instrument includes
any variation or replacement of either of them;
(c) a reference to a statute, ordinance, code or other law
includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of
any of them;
(d) the singular includes the plural and vice versa;
(e) the word person includes a firm, a body corporate, an
unincorporated association or an authority;
(f) a reference to a person includes a reference to the person's
executors, administrators, successors, substitutes
(including, but not limited to, persons taking by novation)
and assigns;
(g) an agreement, representation or warranty in favour of two or
more persons is for the benefit of them jointly and
severally;
(h) an agreement, representation or warranty on the part of two
or more persons binds them jointly and severally;
<PAGE>
4
(i) if a period of time is specified and dates from a given day
or the day of an act or event, it is to be calculated
exclusive of that day;
(j) a reference to a day is to be interpreted as the period of
time commencing at midnight and ending 24 hours later; and
(k) if an event must occur on a stipulated day which is not a
Business Day then the stipulated day will be taken to be the
next Business Day.
1.3 The parties acknowledge and agree that for the purposes of clauses
6 and 7, "SGW" shall mean Sons of Gwalia Limited, Burmine
Investments Pty Limited and Orion Resources NL and that SGW,
Burmine and Orion shall be construed as one Shareholder and one
party.
1.4 Headings are inserted for convenience and do not affect the
interpretation of this agreement.
2 TERM
This agreement shall take effect on and from the Effective Date
and shall continue until terminated pursuant to clause 12 or
otherwise.
3 OBJECTS
3.1 Notwithstanding the generality of the corporate objectives
enumerated in the Memorandum and the Articles, the current
business of Gasgoyne is limited to being an Australian based gold
producer with exploration and producing assets located in Western
Australia and Indonesia including:
(a) a 50% interest in the Yilgarn Star Production Joint Venture
at Marvel Loch, located approximately 370 kilometres east of
Perth;
(h) a 45% interest in the Awak Mas gold project, located in the
South Sulawesi province of Indonesia; and
(c) gold exploration tenements in the Laverton, Norseman and
Marvel Loch districts in Western Australia,
and all other activities and business incidental thereto and
otherwise most of which are conducted pursuant to the joint
venture agreements to which Gasgoyne is a party.
3.2 The nature and the scope of the Business may from time to time be
expanded, reduced or otherwise altered in accordance with clause
8.2(b)(xii).
3.3 The parties are free to pursue, and this agreement is not to be
construed otherwise, all their separate business interests outside
the Area of
<PAGE>
5
Interest, and this agreement is not to be construed as creating
any fiduciary relationship between the parties in this regard.
3.4 Each of SGW and Coeur Australia agrees and declares that it, and
will procure that its Wholly-owned Subsidiaries, will at all times
act in good faith in relation to the other parties with respect to
all matters relating to this agreement, Gasgoyne and its business
including being just and faithful in all activities with each
other.
3.5 SGW represents and warrants to Coeur Australia that as at the date
of this agreement Burmine and Orion are Wholly-owned Subsidiaries
of SGW.
4 TRANSFER OF SHARES
TRANSFER
4.1 A Shareholder must not transfer Shares other than in accordance
with this clause 4.
4.2 In this clause 4, "transfer" in relation to shares means any
assignment, sale, transfer, gift or disposal of' or any agreement
offer or option to assign, sell, transfer, give or otherwise
dispose of, shares or rights in respect of shares or of any legal,
equitable or beneficial interest in the shares.
TRANSFER NOTICE
4.3 If a Shareholder ("PROPOSING TRANSFEROR") wishes to transfer any
Shares it must first give to Gasgoyne and the other Shareholders
notice in writing of such wish ("TRANSFER NOTICE").
4.4 A Transfer Notice:
(a) may be given in respect of some or all of the Proposing
Transferor's shares ("SALE SHARES");
(b) must specify the Sale Shares and state that the Sale Shares
are offered for sale at the price stated in the notice
("OFFER PRICE"); and
(c) must specify any other terms and conditions upon which the
Proposing Transferor wishes to transfer the Sale Shares.
Where the consideration offered for the Shares is shares in
another company, the Transfer Notice must also provide a cash
equivalent consideration. In this case, if any of the other
Shareholders disagree with the cash equivalent calculation, the
provisions of clauses 12.3 and 12.4 will apply to determine the
cash equivalent consideration.
FIRST RIGHT OF REFUSAL
4.5 The Transfer Notice will be deemed to be an offer by the Proposing
Transferor to sell the Sale Shares to each other Shareholder as
nearly as may be in proportion to its existing shareholding at the
price, and on such other terms and conditions, as are specified in
the Transfer Notice
<PAGE>
6
(or otherwise determined in accordance with clause 4.4). For the
purpose of this clause 4.5:
(a) SGW and its Wholly-owned Subsidiaries shall be each
construed as one Shareholder having a shareholding equal to
their aggregate shareholding in Gasgoyne; and
(b) Coeur Australia and its Parent or Wholly-owned Subsidiaries
shall be each cons trued as one Shareholder having a
shareholding equal to their aggregate shareholding in
Gasgoyne.
4.6 If any Sale Shares are not accepted by Shareholders within 15 days
of receipt of the Transfer Notice) the Proposing Transferor shall
be free for a period of 90 days thereafter to sell such unaccepted
Sale Shares to persons who are not Shareholders on terms no more
favourable to the purchaser than those set out in the Transfer
Notice and at a price per share not lower than that offered to the
Sale Shares to the Shareholders and the Proposing Transferor is
bound upon payment of that price to transfer the Sale Shares to
the purchaser.
NO PURCHASER FOUND
4.7 If a purchaser is not found for any of the unaccepted Sale Shares
during the 90 day period specified in clause 4.6, those Sale
Shares will again be subject to the provisions of this clause 4.
TRANSFERS TO RELATED PARTIES
4.8 A Shareholder may at any time transfer to a Parent or a
Wholly-owned Subsidiary of the Shareholder all or any of its
Shares without complying with clauses 4.3 to 4.7
4.9 If a Parent or a Wholly-owned Subsidiary of a Shareholder to whom
Shares are transferred pursuant to clause 4.8 ceases to have the
characteristics which qualify it as a Parent or a Wholly-owned
Subsidiary of the Shareholder, then the member must procure that
the Parent or a Wholly-owned Subsidiary transfers all of its
Shares to a person who then qualifies as a Parent or a
Wholly-owned Subsidiary of the Shareholder or to the Shareholder
itself, and articles 4.3 to 4.7 do not apply to such transfer.
TRANSFEREES BOUND
4.10 Any transfer of any Shares or any issue of securities in the
capital of Gasgoyne shall be conditional upon:
(a) compliance with the Articles;
(b) in the case of any transfer to a person who is not a party
to this agreement, such transferee first entering into an
agreement with Gasgoyne and those remaining of the
Shareholders, pursuant to which such transferee agrees to be
bound by this agreement and undertakes to perform, observe
and enjoy all the transferring person's obligations and
rights under this agreement so far as the same remained to
be performed and observed; and
<PAGE>
7
(c) in the case of any issue of securities the allottee of such
securities first entering into a binding agreement with
Gasgoyne and those remaining of the Shareholders in a form
acceptable to those persons and substantially similar to
this agreement.
5 ACQUISITION WITHIN AREA OF INTEREST
5.1 Subject to clause 5.2, any interest or option to acquire any
interest held by a Shareholder or any Related Body Corporate of
such party in any mining tenements within the Area of Interest is
subject to the provisions of this clause 5.
5.2 The provisions of this clause 5 do not apply to:
(a) the acquisition of a business (whether by purchase of a
controlling interest of voting shares, purchase of all or
substantially all of the assets, merger consolidation or
otherwise) which holds an interest or a right to acquire an
interest in any mining tenements within the Area of
Interest; or
(b) any mining tenements which are, as at the date of this
agreement, owned or leased, or which are the subject of
joint venture agreements, options or tribute agreements
entered into, by a party to this agreement or any Related
Body Corporate of such party.
5.3 A Shareholder must notify Gasgoyne within 30 days of the
acquisition of any interest or the option to acquire any mining
tenements wholly or partially within the Area of Interest (the
"ACQUIRED INTEREST"). The Shareholder's notice must describe in
detail.
(a) the acquisition;
(b) the lands and minerals covered thereby;
(c) the costs of the acquisition; and
(d) the reasons why the Shareholder believes the acquisition of
the acquired interest is, or is not, in the best interests
of Gasgoyne.
The Shareholder must also make any and all information concerning
the acquired interest available for inspection by Gasgoyne
5.4 Gasgoyne may, within 30 days of receipt of a notice under clause
5.3, elect to accept all of the acquired interest and:
(a) the acquiring Shareholder must convey, or procure the
conveyance of, the acquired interest to Gasgoyne; and
(b) Gasgoyne must promptly pay to the acquiring Shareholder its
actual out-of-pocket acquisition costs for the acquired
interest.
<PAGE>
8
5.5 If Gasgoyne does not elect to accept all of the acquired interest
pursuant to clause 5.4, it shall have no interest in the acquired
interest.
5.6 The parties acknowledge that the definition of "Area of Interest"
in clause 1.1 of this agreement will be the subject of review as
to its scope and for this purpose agree to meet and negotiate in
good faith to review that definition as soon as is reasonably
practicable following the date of this agreement.
6 CASH CALLS
6.1 Gasgoyne must make monthly determinations by the twentieth of each
month of the excess or deficit of cash as at the end of the
previous month compared to the minimum cash reserve or other
reserves as established from time to time by the Board and must
issue Cash Calls to each Shareholder for any deficit in proportion
to its shareholding interest in Gasgoyne
6.2 If a Shareholder defaults in responding to a Cash Call, and fails
to cure such default within 5 days of notice of such default, the
non-defaulting Shareholder has the following options:
(a) to contribute the defaulting Shareholder's proportional
share of the Cash Call, in which case clause 6.3 will apply;
(b) to contribute the defaulting Shareholder's proportional
share of the Cash Call, identifying such contribution as an
Advance to the defaulting Shareholder to be repaid according
to agreed upon terms; or
(c) not to contribute the defaulting Shareholder's proportional
share of the Cash Call.
Any contribution by the non-defaulting Shareholder is at its sole
discretion.
6.3 If the non-defaulting Shareholder makes an election under clause
6.2(A), then the Cash Calls made by the Shareholders (including,
in respect of the non-defaulting Shareholder, the contribution
made under clause 6.2(A)) must be capitalised by issuing to the
Shareholders that number of Shares necessary to procure that each
Shareholder's shareholding interest is a percentage equal to the
following ratio expressed as a percentage:
Shareholder's Contribution
----------------------------
Total Contributions
Where:
SHAREHOLDER'S CONTRIBUTION means, in respect of a Shareholder, the
aggregate dollar amount of:
(a) $8l,500,000, being the amount agreed upon as representing
the initial contribution of each Shareholder; and
<PAGE>
9
(b) the aggregate dollar amount of all Cash Calls paid to
Gasgoyne by the Shareholder.
TOTAL CONTRIBUTIONS means the aggregate of each Shareholder's
Contributions.
6.4 The parties agree to take all steps necessary to give effect to
clause 6.3 including using all reasonable endeavours to obtain all
necessary Clearances for any issue of Shares pursuant to clause
6.3.
7 Board of Directors of Gasgoyne
7.1 The board of directors of Gasgoyne will, from the date of this
agreement, consist of six persons, or such other number as SGW and
Coeur Australia may agree from time to time.
7.2 Subject to clause 7.4, SGW and Coeur Australia are each entitled
to appoint three Directors, to remove any Director appointed by
it, and to replace a Director appointed by it who dies, resigns or
is removed from or otherwise vacates office (other than as a
result of the operation of clause 7.4).
7.3 The parties must, promptly after signing this agreement, cause the
Board to be comprised of the following persons:
SGW APPOINTEES: Messrs Peter Lalor, Chris Lalor
and David Paull
COEUR AUSTRALIA APPOINTEES: Messrs Dennis Wheeler, James Sabala
and Robert Martinez
7.4 Entitlement to representation on the Board is based on the
proportional shareholding interests of the Shareholders. If the
Shareholders proportionate shareholding interests change from the
50%/50% ratio existing as at the date of this agreement,
entitlement to representation on the Board must be adjusted by
increasing the entitlement of the Shareholder increasing its
shareholding interest and decreasing the entitlement of the
Shareholder reducing its shareholding interest by:
(a) one Director when the shareholding interests of the
Shareholders reaches a 55%/45% ratio;
(b) a second Director when the shareholding interests of the
Shareholders reaches a 65%/35% ratio;
(c) a third Director when the shareholding interests of the
Shareholders reaches a 75%/25% ratio;
and the Shareholder whose entitlement decreases must cause the
relevant number of Directors appointed by it to resign.
7.5 For so long as SGW is entitled to not less than 50% of the Shares
or is the largest individual shareholder in Gasgoyne, SGW is
entitled to nominate one of its appointed Directors as Chairman
and one as
<PAGE>
10
Managing Director (or one director as both Chairman and Managing
Director). For so long as Coeur Australia is entitled to not less
than 50% of the Shares, Coeur Australia is entitled to nominate
one of its appointed Directors as Deputy Chairman.
7.6 An appointment or removal of a Director must be in writing served
on Gasgoyne and signed by or on behalf of the Shareholder entitled
to appoint or remove the Director. An appointment or removal is
effective on delivery of that written instrument to the registered
office of Gasgoyne.
7.7 Each Director may appoint an alternate director or a proxy or
both, in accordance with the Articles.
7.8 The quorum for meetings of Directors is the presence in person
(including, but not limited to, presence by telephone or other
instantaneous means of communication) or by alternate or proxy of
one Director appointed by each Shareholder:
7.9 Subject to clause 8, decisions of the Board are to be made by a
majority vote. Except as provided by clause 8.3, the Chairman is
not entitled to a casting vote.
7.10 At any meeting of the Board, the Directors present in person
(including, but not limited to, presence by telephone or other
instantaneous means of communication) or by alternate or proxy
appointed by a Shareholder are collectively entitled to exercise a
number of votes equal to the total number of Directors appointed
by that Shareholder, whether or not all the Directors appointed by
that Shareholder are so present.
8 CERTAIN CORPORATE ACTIONS
8.1 Subject to this agreement and the Management Services Agreement,
the Board is to be responsible for managing the business and
affairs of Gasgoyne, including:
(a) establishing Gasgoyne's general policies and objectives;
(b) determining matters of a major or unusual nature which are
outside the ordinary course of Gasgoyne's business; and
(c) adopting by 1 June of each year a business plan and budget
for Gasgoyne for the. ensuing financial year.
8.2 Notwithstanding any other provision of this agreement or the
Articles Gasgoyne must not
(a) take any of the following actions without Majority Approval
of the Board:
(i) approval of the general compensation policy and
benefits plans of the employees of Gasgoyne or its
subsidiaries;
<PAGE>
11
(ii) approval of Gasgoyne's financial and operating
results (including approval of the Accounts);
(iii) approval of any financial institution, terms and
conditions and amounts with respect to any standard
lines of credit or borrowings to be utilised or
secured by Gasgoyne or any of its subsidiaries not
exceeding $2,000,000;
(iv) the direction of any litigation involving Gasgoyne or
any of its subsidiaries and the retention of outside
counsel;
(v) determination of the cash investment policy of
Gasgoyne;
(b) take any of the following actions without Special Approval
of the Board:
(i) any project requiring capital expenditures in excess
of $2,000,000;
(ii) the sale or lease of assets of Gasgoyne or any of its
subsidiaries having a sales price or current
appraised value in excess of $2,000,000;
(iii) the commencement of operations at any property owned
or controlled by Gasgoyne or any of its subsidiaries
including the approval of the initial operating plan
and budget;
(iv) the amounts of any lines of credit and/or borrowings
exceeding $2,000,000;
(v) the creation of any liens or encumbrances on Gasgoyne
assets, except minor liens incurred in the ordinary
course of business;
(vi) the settlement of litigation involving an amount
exceeding $500,000;
(vii) the establishment from time to time of minimum cash
reserve or other reserves to be used for determining
the level of cash distributions or capital
contributions;
(viii) the change of auditors in connection with the
auditing of Gasgoyne's books, records and/or
financial statements;
(ix) approval of forward sales or hedging programmes;
(x) Except as otherwise agreed between SGW and Coeur, the
sales of gold bullion produced by Gasgoyne to either
SGW or Coeur Australia and the sale of any other
materials produced by Gasgoyne;
<PAGE>
12
(xi) the liquidation, dissolution or general winding up of
Gasgoyne or the filing on behalf of Gasgoyne or the
appointment to Gasgoyne of an administrator, receiver
or manager or other like official;
(xii) any variation in the nature or scope of the Business;
(xiii) any issue by Gasgoyne of any shares or other
securities; or
(xiv) any modification or amendment of the Management
Services Agreement.
8.3 In the case of a fled vote on any of the matters set out in clause
8.2(a), the Chairman will be entitled to a casting vote.
8.4 The Shareholders hereby delegate to the Board the authority to
adjust, by unanimous approval, the figures contained in section
8.2(a)(iii), (b)(i), (ii), (iv) and (vi).
8.5 SGW and Coeur Australia agree to take such steps as are necessary
to ensure that Coeur Australia is represented on the Yilgarn Star
Production Joint Venture operating committee.
8.6 The parties must enter into, and cause Gasgoyne to enter into, the
Management Services Agreement.
9 DIVIDEND POLICY
9.1 The parties agree that as and when profits are made by Gasgoyne,
after making provision for tax and reserves for working capital,
the balance will be available for quarterly distribution by way of
dividend or other lawful manner agreed upon by the parties.
9.2 The Shareholders must procure that each of their appointees to the
Board give effect to the dividend policy under this clause 9.
10 ACCOUNTS AND RECORDS
10.1 Each Shareholder is entitled at any time to have its accountants
or other representatives review the annual reports of Gasgoyne
produced by Gasgoyne's auditors as well as all accounting records
and books of account of Gasgoyne.
10.2 Each Shareholder is entitled at any time to have its
representatives review documents, including maps and data, with
respect to all aspects of Gasgoyne's business, and shall have the
right to inspect, at all reasonable times, Gasgoyne's operations
and property.
<PAGE>
13
11 SHAREHOLDER COMMITMENT
11.1 Each party, acknowledging its commitment to the success of
Gasgoyne, agrees to take any steps which for the time being are
within its power and are necessary to procure that:
(a) its voting rights (including the voting rights of any
Wholly-owned Subsidiary) as a shareholder in Gasgoyne; and
(b) the voting rights of Directors nominated by it (and of their
alternate directors) at Board meetings;
are exercised in a manner, and that it and they otherwise act, so
as to ensure that:
(c) Gasgoyne acts in conformity with this agreement;
(d) full information on the activities of Gasgoyne and its
finances is available to all Directors at all times;
(e) clause 6 is complied with; and
(f) no Director commits any breach of duty under the Memorandum,
the Articles or the Corporations Law.
11.2 Each party agrees to take any steps which for the time being are
within its power and are necessary to procure that, except in
accordance with this agreement or with the prior consent of the
parties:
(a) effect is given the provisions of this agreement at all
times;
(b) no alteration is made to the Memorandum, the Articles or the
name of Gasgoyne;
(c) no shares or debentures of Gasgoyne are issued or agreed to
be issued or put under option; (d) no alteration is made to
the capital structure of Gasgoyne; (e) no alteration is made
to the rights attached to any Shares.
12 TERMINATION
SHAREHOLDER DEFAULT
12.1 If in respect of SGW or Coeur Australia or a Wholly-owned
Subsidiary of SGW or Coeur Australia that holds Shares
("RELEVANT SHAREHOLDER"):
(a) an order is made or an effective resolution is passed
for the winding up or dissolution without winding up
(otherwise than for the purposes of reconstruction or
amalgamation) and remains in effect for a continuous
period of 30 days;
(b) a receiver, receiver and manager, judicial manager,
liquidator, administrator or like official is
appointed over the whole or a
<PAGE>
14
substantial part of the undertaking or property of the
relevant shareholder and the appointment remains in
effect for a continuous period of 30 days;
(c) a holder of an encumbrance takes possession of the
whole or any substantial part of the undertaking and
property of the relevant shareholder and remains in
possession for a continuous period of 30 days;
(d) the relevant shareholder ceases to be a Parent or
Wholly-owned Subsidiary of SGW or Coeur Australia, and
fails to transfer its Shares in accordance with clause
4.9 within 30 days of ceasing to be a Parent or
Wholly-owned Subsidiary;
(e) the relevant shareholder or a Related Body Corporate
of the relevant shareholder has committed a breach of
commercial significance of any of its obligations
under or in connection with this agreement which
remains unremedied for 30 days after notice of the
breach has been given by the other of SGW or Coeur
Australia to the relevant shareholder;
(f) the relevant shareholder has defaulted in responding
to a Cash Call and fails to cure such default within 5
days of notice of such default, and the Cash Call
remains unpaid by the relevant shareholder 5 days
after the non-defaulting shareholder elects under
clause 6:2(c) not to contribute the defaulting
Shareholder's proportional share of the Cash Call; or
(g) the relevant shareholder or a related body corporate
of the relevant shareholder breaches the Management
Services Agreement,
the other of SGW or Coeur Australia (as the case requires) has the
option to purchase or nominate a purchaser of all (but not less
than all) of the Shares which the relevant shareholder and every
Related Body Corporate of the relevant shareholder hold (THE
RELEVANT SHARES).
12.2 The option is exercisable by the other of SGW or Coeur Australia
delivering a notice to the relevant shareholder within 60 days of
knowledge of the occurrence of the event giving rise to the
option, stating that it wishes to purchase or nominate the
purchaser of the relevant shares and, in the latter case, stating
the name and address of the nominee.
12.3 The parties agree to attempt to reach agreement on a price for the
relevant shares within 30 days of the date of receipt of the
notice referred to in clause 12.2. If agreement is not reached
within that period, each of SGW or Coeur Australia must within
seven days of the end of the 30 day period appoint a member of the
Institute of Chartered Accountants in Australia of at least five
years' standing as a valuer. The valuers are to attempt to reach
agreement on the value of the relevant shares and their agreed
valuation is conclusive and binding on the Parties in the absence
of manifest error. The parties agree that a value so determined
will constitute the price for the relevant shares.
<PAGE>
15
12.4 If agreement is not reached by the valuers within 30 days after
the end of the seven day period, the two valuers are to select
promptly a third valuer (being a member of at least five years'
standing of the Institute of Chartered Accountants in Australia)
to value the relevant shares. The third valuer is to complete the
valuation process within 60 days after the end of the seven day
period and the third valuer's valuation is conclusive and binding
on the parties in the absence of manifest error. The parties agree
that a value so determined will constitute the price for the
relevant shares. All valuers under this agreement are appointed as
experts and not as arbitrators and their procedures for
determination are to be decided by them in their absolute
discretion.
12.5 A valuer appointed or selected under this clause 12 may, before
arriving at the value of the relevant shares, deduct any amount
which the valuer considers fair having regard to any financial
assistance given by the other of SGW or Coeur Australia to
Gasgoyne after the option mentioned in clause 12.1 arises.
12.6 The completion of a sale and transfer of the relevant shares under
clauses 12.1 to 12.5 is to take place on or before the later of
the 30th day after agreement is reached by the parties on a price
for the relevant shares or a determination is made by the valuers
or valuer.
12.7 At the time of completion of a sale and transfer of Shares under
this clause 12:
(a) the transferor is to hand to the transferee:
(i) transfers in favour of the transferee of all Shares
sold executed by the holders of those Shares;
(ii) share certificates for those Shares; and
(iii) written resignations of appointees of those
shareholders to the Board; and
(b) the transferee is to hand to the transferor a bank cheque
for the sale price of the Shares.
12.8 On completion of a sale and transfer of Shares under this clause
12 then, without derogating from the rights of a party accrued
prior to completion, the provisions of this agreement (other than
clauses imposing obligations of confidentiality) terminate.
13 COSTS
Each party agrees to bear its own legal and other costs and
expenses in connection with the preparation and execution of this
agreement and of other related documentation.
14 INCONSISTENCY WITH MEMORANDUM OR ARTICLES
The parties intend that if an inconsistency arises between:
<PAGE>
16
(a) the Memorandum or Articles; and
(b) this agreement,
this agreement should prevail to the extent of the inconsistency
and each party agrees to take any steps which for the time being
are within its power and are necessary to procure that the
Memorandum or Articles or both are altered to eliminate the
inconsistency.
15 NOTICES
15.1 A notice, approval, consent, or other communication in connection
with this agreement:
(a) must be in writing;
(b) must be marked for the attention of the person named below;
and
(c) must be left at the address of the addressee or, except
where it is required to be delivered, sent by prepaid
ordinary post (airmail if posted to or from a place outside
Australia) to the address of the addressee or sent by
facsimile to the facsimile number of the addressee which is
specified in this clause or if the addressee notifies
another address or facsimile number then to that address or
facsimile number.
The address and facsimile number of the parties is:
SGW, BURMINE AND ORION
Address: 16 Parliament Place West Perth WA 6005
Facsimile: (619) 481 1271
Attention: Peter Lalor
COEUR AUSTRALIA
Address: C/- Coeur d'Alene Mines Corporation
505 Front Avenue
Coeur d'Alene
Idaho 83814 USA
Facsimile: (208) 667 2213
Attention: Dennis Wheeler
GASGOYNE
Address: 16 Parliament Place West Perth WA 6005
Facsimile: (619) 481 1271
Attention: Chris Lalor
15.2 A notice, approval, consent or other communication takes effect
from the time it is received unless a later time is specified in
it.
15.3 A letter or facsimile is taken to be received:
<PAGE>
17
(a) in the case of a posted letter, on the third (seventh, if
posted to or from a place outside Australia) day after
posting; and
(b) in the case of facsimile, on production of a transmission
report by the machine from which the facsimile was sent
which indicates that the facsimile was sent in its entirety
to the facsimile number of the recipient.
16 MISCELLANEOUS
EXERCISE OF RIGHTS
16.1 A party may exercise a right, power or remedy at its discretion,
and separately or concurrently with another right, power or
remedy. A single or partial exercise of a right, power or remedy
by a party does not prevent a further exercise of that or of any
other right, power or remedy. Failure by a party to exercise or
delay in exercising a right, power or remedy does not prevent its
exercise.
WAIVER AND VARIATION
16.2 A provision of or a right created under this agreement may not be:
(a) waived except in writing signed by the party granting the
waiver; or
(b) varied except in writing signed by the Parties.
APPROVALS AND CONSENTS
16.3 A party may give conditionally or unconditionally or withhold its
approval or consent in its absolute discretion unless this
agreement expressly provides otherwise.
REMEDIES CUMULATIVE
16.4 The rights, powers and remedies provided in this agreement are
cumulative with and not exclusive of the rights, powers or
remedies provided by law independently of this agreement.
FURTHER ASSURANCES
16.5 Each party agrees, at its own expense, on the request of another
party, to do everything reasonably necessary to give effect to
this agreement and the transactions contemplated by it, including,
but not limited to, the execution of documents, amendment of the
Articles, and to use all reasonable endeavours to cause relevant
third parties to do likewise.
NO PARTNERSHIP
16.6 Nothing contained or implied in this agreement constitutes a party
the partner, agent or legal representative of another party or for
any purpose or creates any partnership, agency or trust, and no
party has any authority to bind another party in any way.
INJUNCTIVE RELIEF
16.7 The parties acknowledge that damages may be inadequate
compensation for a breach of this agreement. As a result, the
parties agree that, in addition to any other remedies available at
law or in
<PAGE>
18
equity, each party is entitled to injunctive relief and specific
performance to enforce the obligations under this agreement.
CONFIDENTIALITY
16.8 All information exchanged between the parties under this agreement
or during the negotiations preceding this agreement is
confidential to them and may not be disclosed to any person
except:
(a) to employees, legal advisers, auditors and other consultants
of the party or its related bodies corporate requiring the
information for the purposes of this agreement; or
(b) with the consent of the party who supplied the information;
or
(c) if the information is, at the date this agreement is entered
into, lawfully in the possession of the recipient of the
information through sources other than the party who
supplied the information; or
(d) if required by law or a stock exchange; or
(e) if strictly and necessarily required in connection with
legal proceedings relating to this agreement; or
(f) if the information is generally and publicly available other
than as a result of breach of confidence by the person
receiving the information.
COUNTERPARTS
16.9 This agreement may be signed in any number of counterparts. All
such counterparts taken together constitute one and the same
instrument.
17 ENTIRE AGREEMENT
This agreement and the agreements contemplated by this agreement
constitute the entire agreement of the parties with reference to
their subject matter and any previous agreements, understandings
and negotiations on that subject matter cease to have any effect.
18 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
18.1 This agreement and the transactions contemplated by this agreement
are governed by the law in force in Perth.
18.2 Each party irrevocably and unconditionally submits and agrees to
procure that its Related Bodies Corporate submit to the
non-exclusive jurisdiction of the courts of Perth, courts
exercising Federal jurisdiction in Perth and courts of appeal from
them for determining any dispute concerning this agreement, or the
transactions contemplated by this agreement. Each party waives and
agrees to procure that its Related Bodies Corporate waive any
right they have to object to an action being brought in those
courts including, but not limited to, claiming that the
<PAGE>
19
action has been brought in an inconvenient forum or that those
courts do not have jurisdiction.
18.3 Without preventing any other mode of service, my document in an
action (including, but riot limited to, any writ of summons or
other originating process or any third or other party notice) may
be served on any party by being delivered to or left for that
party at its address for service of notices under clause 15.
EXECUTED as an agreement
<PAGE>
20
EXECUTION PAGE
THE COMMON SEAL OF SONS OF )
GWALIA LIMITED is affixed in accordance )
with its articles of association in the )
presence of )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
THE COMMON SEAL OF BURMINE )
INVESTMENTS PTY LIMITED is )
affixed in accordance with its )
articles of association in the )
presence of; )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
THE COMMON SEAL of ORION )
RESOURCES NL is affixed in accordance )
with its articles of association in the )
presence of: )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
<PAGE>
21
THE COMMON SEAL of COEUR )
AUSTRALIA PTY LIMITED is affixed )
in accordance with its articles )
of association in the presence of: )
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
------------------------------ ------------------------------
Office held Office held
------------------------------ ------------------------------
Name of authorised person Name of authorised person
THE COMMON SEAL of GASGOYNE GOLD MINES NL is affixed in accordance with its
articles of association in the presence of:
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
EXHIBIT 10(ss)
DATED 7 MAY 1997
MANAGEMENT SERVICES
AGREEMENT
Sons of Gwalia Limited
("SGW")
Coeur Australia Pty Limited
("Coeur")
Gasgoyne Gold Mines NL
("Gasgoyne")
Mallesons Stephen Jaques
Solicitors
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone (61 2) 9296 2000
Fax (61 2) 9296 3999
DX 113 Sydney
Ref: JJW:AGB
<PAGE>
1
<TABLE>
CONTENTS MANAGEMENT SERVICES AGREEMENT
----------------------------------------------
<S> <C>
1 INTERPRETATION 1
2 TERM 3
3 APPOINTMENT OF MANAGER 3
Duties 3
4 PERFORMANCE OF THE SERVICES 4
Standard of performance 4
Approval of key issues 4
Force majeure 5
5 FEES AND REIMBURSEMENT OF COSTS 6
Fees 6
Reimbursement of costs 6
6 RELATIONSHIP OF THE PARTIES 7
7 REMOVAL OF SGW AS MANAGER 7
8 TERMINATION 7
9 COSTS 8
10 NOTICES 8
11 ENTIRE AGREEMENT 9
12 ASSIGNMENT 9
13 MISCELLANEOUS 9
Exercise of rights 9
Waiver and variation 9
Approvals and consents 9
Remedies cumulative 9
Further assurances 9
Counterparts 10
14 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 10
</TABLE>
<PAGE>
1
MANAGEMENT SERVICES AGREEMENT
DATE: 7 May 1997
PARTIES: SONS OF GWALIA LIMITED (ACN 008 994 287) of 16 Parliament Place,
West Perth, Western Australia ("SGW")
COEUR AUSTRALIA PTY LIMITED (ACN 077674974) of LEVEL 53, Governor
Phillip TOWER, 1 Farrer Place, Sydney ("COEUR")
GASGOYNE GOLD MINES NL (ACN 009212382) of 16 Parliament Place,
West Perth, Western Australia "GASGOYNE")
RECITALS:
A. SGW and Coeur will be equal shareholders in Gasgoyne as at the
Effective Date and have entered into the Shareholders Agreement
with respect to their shareholdings in Gasgoyne.
B. Gasgoyne wishes to appoint SGW as the manager and operator of its
assets and business on the terms and conditions of this agreement.
OPERATIVE PROVISIONS:
1 INTERPRETATION
1.1 The following words have these meanings in this agreement unless
the contrary intention appears.
$ means the lawful currency of Australia.
BOARD means the board of directors of Gasgoyne.
EFFECTIVE DATE has the same meaning as in the Shareholders
Agreement.
EXPENSES means all costs and expenses reasonably incurred by SGW
in the provision of the Services including, but not limited to,
wages, customary fringe benefits costs and out-of-pocket expenses.
FORCE MAJEURE means any act, event or cause which is beyond the
reasonable control of the party concerned (other than lack of or
unavailability of its funds) including:
(a) act of God, war (whether declared or not), sabotage,
insurrection, national emergency, martial law, fire,
lightening, flood, earthquake, landslide, storm or other
severe adverse weather conditions, explosion, power
shortage, strike or other labour difficulty (whether or not
involving employees of the party affected), epidemic,
quarantine, radiation or radioactive contamination;
(b) action or inaction of any government, governmental body or
court, including expropriation, intervention, direction or
injunction, by legislation, regulation or otherwise;
<PAGE>
2
(c) breakdown of plant or equipment, or shortages of labour,
transportation, fuel, power, plant, equipment or materials;
and
(d) any other cause which despite the exercise of foresight or
due diligence. the parties are unable to prevent or
overcome.
JOINT VENTURE AGREEMENTS means:
(a) the Yilgarn Star Joint Venture Agreements;
(b) the Marvel Loch Joint Venture Agreement between Gasgoyne and
Orion dated 18 May 1993;
(c) the Marvel Loch 2 Exploration Joint Venture Agreement
between Gasgoyne, Orion, Mount Edon Gold Mines (Aust)
Limited and Scanfire Exploration Pty Limited dated June
1996; and
(d) the Star Mill Joint Venture Agreement between Orion and
Gasgoyne dated 9 March 1994.
ORION means Orion Resources NL.
SHAREHOLDERS AGREEMENT means the agreement so entitled dated on or
about the date of this agreement between SGW, Orion Resources NL,
Burmine Investments Pty Limited, Coeur and Gasgoyne.
YILGARN STAR PRODUCTION JOINT VENTURE means the joint venture
carried on pursuant to the Yilgarn Star Production Joint Venture
Agreement.
YILGARN STAR JOINT VENTURE AGREEMENTS means:
(a) the Yilgarn Star Production Joint Venture Agreement; and
(b) the Yilgarn Star Exploration Joint Venture Agreement dated
13 February 1991 between Gasgoyne, Orion and Bredelle Pty
Limited.
YILGARN STAR PRODUCTION JOINT VENTURE AGREEMENT means the Yilgarn
Star Production Joint Venture Agreement dated 7 January 1991 as
amended between Gasgoyne, Orion and Bredelle Pty Limited
1.2 In this agreement unless the contrary intention appears:
(a) a reference to a clause, schedule, annexure or appendix is a
reference to a clause of or schedule, annexure or appendix
to this agreement and references to this agreement include
any recital, schedule, annexure or appendix;
(b) a reference to this agreement or another instrument includes
any variation or replacement of either of them;
(c) a reference to a statute, ordinance, code or other law
includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of
any of them;
<PAGE>
3
(d) the singular includes the plural and vice versa;
(e) the word person includes a firm, a body corporate, an
unincorporated association or an authority;
(f) a reference to a person includes a reference to the person's
executors, administrators, successors, substitutes
(including, but not limited to, persons taking by novation)
and assigns;
(g) if a period of time is specified and dates from a given day
or the day of an act or event, it is to be calculated
exclusive of that day; and
(h) a reference to a day is to be interpreted as the period of
time commencing at midnight and ending 24 hours later.
1.3 A reference to approval by the Board means approval by the Board
in accordance with the provisions of the Shareholders Agreement
relating to Board approvals.
1.4 Headings are inserted for convenience and do not affect the
interpretation of this agreement.
2 TERM
2.1 This agreement will commence on and from the Effective Date and
continue until such time as it is terminated with respect to any
or all of the Services in accordance with clause 8 of this
agreement.
3 APPOINTMENT OF MANAGER
3.1 In accordance with and, subject to the terms and conditions of,
the Shareholders Agreement, Gasgoyne appoints, on and from the
Effective Date, SGW to conduct, manage and operate the business
and assets of Gasgoyne on the terms and conditions of this
agreement and in accordance with the instructions that SGW as
manager may from time to time receive from the Board and SGW
accepts that appointment.
DUTIES
3.2 The duties of SGW as manager will be to manage and conduct the
business and operations of Gasgoyne in accordance with the
Shareholders Agreement and the terms and conditions of this
agreement. In furtherance of its duties SGW must, subject to
clause 4, cause to be undertaken on behalf of Gasgoyne all things
necessary for the conduct of Gasgoyne's business and operations
including, but not limited to:
(a) financial services including taxation, business analysis,
accounting, finance and information technology;
(b) administrative services including legal, statutory
reporting. accounts payable, invoices and payroll,
administration;
<PAGE>
4
(c) mining services including exploration and geology, project
engineering, mining engineering, systems and planning;
(d) administration of all real property related activities;
(e) business development and technical services including
business planning, environmental services and maintenance
systems and support;
(f) marketing services including technical services and
operations, promotions and sales;
(g) such services as are necessary to enable Gasgoyne to comply
with its obligations under the Joint Venture Agreements; and
(h) any other services agreed to by the parties to this
agreement.
4 PERFORMANCE OF THE SERVICES
STANDARD OF PERFORMANCE
4.1 SGW must carry out its obligations under this agreement in
accordance with the standards of a reasonable and prudent manager
and operator carrying on similar services.
APPROVAL OF KEY ISSUES
4.2 The parties acknowledge that SGW effectively manages the Yilgarn
Star Production Joint Venture through its wholly owned subsidiary,
Orion.
4.3 Subject to clause 4.4, SGW must procure that decisions on each of
the following matters ("KEY ISSUES") with respect to the business
and operations of Gasgoyne (including the Yilgarn Star Production
Joint Venture) are not implemented without the prior approval of
both SGW and Coeur:
(a) approval and implementation of annual operating plans and
budgets;
(b) approval of annual capital expenditure budgets;
(c) approval of material contracts;
(d) any shutdown or substantial curtailment of operations. For
the purposes of this paragraph, the phrase "substantial
curtailment of operations" means a 25% annual reduction in
current annual mine production compared to the prior year's
actual mine production;
(e) any changes in the existing mining plans or any adoption of
a new mining plan which could materially affect mine life or
grade of ore;
<PAGE>
5
(f) approval of operating plans and budgets which would increase
operating expenses by 10% or more over the prior year's
operating expenses.
4.4 For the purpose of approving the key issues, SGW and Coeur will be
deemed to have voting rights in relation to the decision equal to
their proportionate shareholdings (which shall be deemed to
include the shareholdings of any Wholly owned Subsidiary or Parent
as those terms are defined in the Shareholders Agreement) in
Gasgoyne. In the case of a tied vote in relation to the key issues
in clause 4.3(a), (b) or (c) above, the decision of SGW will
prevail.
4.5 SGW must procure that, in relation to the Yilgarn Star Production
Joint Venture (and any other of Gasgoyne's joint ventures or
assets which are managed by Orion), Orion is bound by, and acts
(including by voting through its representative on the operating
committee of the Yilgarn Star Production Joint Venture) in
accordance with, decisions by SGW and Coeur as to the key issues.
4.6 SGW and Coeur must procure that Gasgoyne's representatives on the
operating committee of the Yilgarn Star Production Joint Venture
vote in accordance with the parties decisions on key issues.
4.7 On matters concerning the Joint Venture Agreements other than the
key issues, Gasgoyne's representatives on the operating committees
under those Joint Venture Agreements must vote in accordance with
the directions of SGW.
4.8 Subject to clause 4.3, SGW must procure that the business of
Gasgoyne (including the Yilgarn Star Production Joint Venture) is
managed and operated in accordance with the relevant joint venture
agreements to which Gasgoyne is a party.
FORCE MAJEURE
4.9 If, as a direct result of force majeure SGW becomes unable to
perform, wholly or in part, any of its obligations under this
agreement, SGW:
(a) is to give the other parties prompt notice of the force
majeure with reasonably full particulars and, insofar as
known to it, the probable extent to which it will be unable
to perform, or be delayed in performing its obligations; and
(b) is to use all possible diligence to overcome or remove the
force majeure concerned.
4.10 Clause 4.9 does not require SGW to:
(a) settle any strike or other labour difficulty on terms
contrary to its wishes; or
(b) contest to the validity or enforceability of any law,
regulation or order by way of legal proceedings.
<PAGE>
6
4.11 The liability of SGW to comply with its obligations resumes as
soon as it is no longer affected by the force majeure.
4.12 If at any time SGW is prevented from performance by an event of
force majeure, Gasgoyne is free to cause those services to be
performed itself or by a third party.
5 FEES AND REIMBURSEMENT OF COSTS
FEES
5.1 In consideration of SGW agreeing to accept the appointment as
manager of Gasgoyne and providing the services contemplated by
this agreement ("Services") , Gasgoyne must pay to SGW monthly:
(a) a management services fee of $$ 175,000 per annum; and (b) an
additional management fee of $3,000 per month which is payable
until the settlement of the sale of Gasgoyne's Awak Mas interests
to Lone Star Exploration NL pursuant to a letter agreement dated 5
May 1997 signed by Lone Star Exploration NL, Gasgoyne and others.
The parties acknowledge that the additional fee payable under
clause 5.1 (b) is in consideration of SGW's managing role in
reviewing the Awak Mas work programme, monitoring the Contract of
Works extension negotiations (and assisting where necessary) and
ensuring that settlement of the sale of Gasgoyne's Awak Mas
interests progresses in accordance with the letter agreement
described above.
The monthly management services fee will be reviewed annually by
the parties and will be adjusted (upwards only) for movements in
the Consumer Price Index All Groups Perth.
REIMBURSEMENT OF COSTS
5.2 Subject to this clause 5, Gasgoyne must reimburse SGW for all
Expenses properly incurred by SGW in providing the Services.
5.3 Gasgoyne is only obliged to reimburse SGW for Expenses under
clause 5.2 where the Expenses have been estimated in advance of
the performance of the relevant Services and included in any
Gasgoyne budgets which are prepared in accordance with clause 5
or, if not previously budgeted, otherwise approved by the Board.
5.4 SGW must invoice Gasgoyne periodically, but at least quarterly.
5.5 The invoices submitted pursuant to clause 5.4 must:
(a) contain full particulars of all Expenses;
(b) contain a reasonably detailed itemisation of the Services
performed; and
(c) be related to the estimate of the Expenses provided in
accordance with clause 5.3.
<PAGE>
7
5.6 The parties each have the right to audit all records of Gasgoyne
or SGW directly related to the provision of the Services and upon
which any invoice is based at reasonable times and upon reasonable
notice and must allow each other access to such records for this
purpose.
6 RELATIONSHIP OF THE PARTIES
6.1 In providing the Services, SGW shall at all times be independent
contractor and, except to the extent that by mutual agreement
between the parties, any person made available by SGW to Gasgoyne
is to be employed by Gasgoyne, neither SGW nor any person made
available by it will be an employee of Gasgoyne.
6.2 SGW will be solely responsible for all matters relating to the
payment of its own employees, and of any person made available by
it to Gasgoyne.
7 REMOVAL OF SGW AS MANAGER
7.1 SGW is entitled to remain as manager pursuant to the appointment
in clause 3.1 for only so long as it holds 50% or more of the
issued shares of Gasgoyne or is the largest individual shareholder
in Gasgoyne.
7.2 Where SGW loses its entitlement to remain as manager under clause
7.1, the Gasgoyne shareholder then having the largest shareholding
in Gasgoyne will be entitled to appoint the manager of the
business and operations of Gasgoyne and the parties must do
everything necessary to enter into a management services agreement
with that shareholder on substantially the same terms as, and in
lieu of, this agreement.
8 TERMINATION
8.1 In addition to any right of termination a party may have under
general law, this agreement and the provision of the Services will
terminate immediately:
(a) upon the appointment of another person as manager pursuant
to clause 7.2; or
(b) upon termination of the Shareholders Agreement.
8.2 The termination of this agreement however caused:
(a) will be without prejudice to any obligation which has
accrued prior to that termination and which remains
unsatisfied; and
(b) will not affect any provision of this agreement which is
expressed to come into effect on or to continue in effect
after, that termination.
<PAGE>
8
9 COSTS
Each party agrees to bear its own legal and other costs and
expenses in connection with the preparation and execution of this
agreement.
10 NOTICES
10.1 A notice, approval, consent, or other communication in connection
with this agreement:
(a) must be in writing;
(b) must be marked for the attention of the person named below;
and
(c) must be left at the address of the addressee or, except
where it is required to be delivered, sent by prepaid
ordinary post (airmail if posted to or from a place outside
Australia) to the address of the addressee or sent by
facsimile to the facsimile number of the addressee which is
specified in this clause or if the addressee notifies
another address or facsimile number then to that address or
facsimile number.
The address and facsimile number of the parties is;
SGW
Address: 16 Parliament Place
West Perth WA 6005
Facsimile: (619) 481 1271
Attention: Peter Lalor
COEUR
Address: 505 Front Avenue
Coeur d'Alene
Idaho 83814 USA
Facsimile: (208) 667 2213
Attention: Mr Dennis Wheeler
GASGOYNE
Address: 16 Parliament Place
West Perth WA 6005
Facsimile: (619) 481 1271
Attention: Chris Lalor
10.2 A notice, approval, consent or other communication takes effect
from the time it is received unless a later time is specified in
it.
10.3 A letter or facsimile is taken to be received:
(a) in the case of a posted letter, on the third (seventh, if
posted to or from a place outside Australia) day after
posting; and
(b) in the case of facsimile, on production of a transmission
report by the machine from which the facsimile was sent
which
<PAGE>
9
indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient.
11 ENTIRE AGREEMENT
This agreement contains the entire agreement of the parties with
respect to the subject matter. IT sets out the only conduct relied
on by the parties and supersedes all earlier conduct by the
parties with respect to its subject matter.
12 ASSIGNMENT
12.1 The rights and obligations of each party under this agreement are
personal and cannot be assigned, charged or otherwise dealt with,
and no parties shall attempt or purport to do so without the prior
written consent of all the parties.
12.2 SGW may not sub-contract any part or parts of its obligations
under this agreement to any person other than a wholly owned
subsidiary without the prior consent of Gasgoyne and Coeur.
13 MISCELLANEOUS
EXERCISE OF RIGHTS
13.1 A party may exercise a right, power or remedy at its discretion,
and separately or concurrently with another right, power or
remedy. A single or partial exercise of a right, power or remedy
by a party does not prevent a further exercise of that or of any
other right, power or remedy. Failure by a party to exercise or
delay in exercising a right, power or remedy does not prevent its
exercise.
WAIVER AND VARIATION
13.2 A provision of or a right created under this agreement may not be:
(a) waived except in writing signed by the party granting the
waiver; or
(b) varied except in writing signed by the Parties.
APPROVALS AND CONSENTS
13.3 A party may give conditionally or unconditionally or withhold its
approval or consent in its absolute discretion unless this
agreement expressly provides otherwise.
REMEDIES CUMULATIVE
13.4 The rights, powers and remedies provided in this agreement are
cumulative with and not exclusive of the rights, powers or
remedies provided by law independently of this agreement.
FURTHER ASSURANCES
13.5 Each party agrees, at its own expense, on the request of another
party, to do everything reasonably necessary to give effect to
this agreement
<PAGE>
10
and the transactions contemplated by it, including, but not
limited to, the execution of documents, and to use all reasonable
endeavours to cause relevant third parties to do likewise.
COUNTERPARTS
13.6 This agreement may be signed in any number of counterparts. All
such counterparts taken together constitute one and the same
instrument.
14 GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
14.1 This agreement and the transactions contemplated by this agreement
are governed by the law in force in Perth.
14.2 Each party irrevocably and unconditionally submits and agrees to
procure that its Related Bodies Corporate submit to the
non-exclusive jurisdiction of the courts of Perth, courts
exercising Federal jurisdiction in Perth and courts of appeal from
them for determining any dispute concerning this agreement, or the
transactions contemplated by this agreement. Each party waives and
agrees to procure that its Related Bodies Corporate waive any
right they have to object to an action being brought in those
courts including, but not limited to, claiming that the action has
been brought in an inconvenient forum or that those courts do not
have jurisdiction.
14.3 Without preventing any other mode of service, any document in an
action (including, but not limited to, any writ of summons or
other originating process or any third or other party notice) may
be served on any party by being delivered to or left for that
party at its address for service of notices under clause 9.
EXECUTED as an agreement
<PAGE>
11
EXECUTION PAGE
THE COMMON SEAL OF SONS OF )
GWALIA LIMITED is affixed in accordance )
with its articles of association in the )
presence of )
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor Eardley M. Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
SIGNED for and on behalf of COEUR )
AUSTRALIA PLY LIMITED: )
------------------------------
THE COMMON SEAL of GASGOYNE GOLD MINES NL is affixed in accordance with its
articles of association in the presence of:
/s/CHRIS LALOR /s/EARDLEY M. ROSS-ADJIE
------------------------------ ------------------------------
Signature of authorised person Signature of authorised person
Executive Director Executive Director
------------------------------ ------------------------------
Office held Office held
Chris Lalor E M Ross-Adjie
------------------------------ ------------------------------
Name of authorised person Name of authorised person
EXHIBIT 21
LIST OF SUBSIDIARIES OF COEUR D'ALENE MINES CORPORATION
The following subsidiaries of Coeur d' Alene Mines Corporation as of
December 31, 1997 are wholly owned unless otherwise stated.
<TABLE>
<CAPTION>
Name Of Subsidiary State/Country of Incorp.
------------------ ------------------------
<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, Inc. Australia (36% owned)
Silver Valley Resources Corp. Delaware (50%) owned
Compania Minera CDE Fachinal Limitada Chile
Compania Minera CDE Petorca Chile
Coeur Australia Pty Limited Australia
</TABLE>
The following is a list of the subsidiaries of Callahan Mining
Corporation:
<TABLE>
<CAPTION>
Name Of Subsidiary State/Country of Incorp.
------------------ ------------------------
<S> <C>
Coeur New Zealand, Inc. Delaware
</TABLE>
The following is a list of the subsidiaries of Coeur New Zealand, Inc.
<TABLE>
<CAPTION>
Name Of Subsidiary State/Country of Incorp.
------------------ ------------------------
<S> <C>
Coeur Gold New Zealand Limited New Zealand
</TABLE>
The following is list of the subsidiaries of Coeur Explorations, Inc.
<TABLE>
<CAPTION>
Name Of Subsidiary State/Country of Incorp.
------------------ ------------------------
<S> <C>
Carribean Basic Industries Guyana
</TABLE>
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 20, 1998 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, 1997.
/s/Ernst & Young LLP
Seattle, Washington
March 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215466
<NAME> COEUR D'ALENE MINES CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 114,604
<SECURITIES> 98,437
<RECEIVABLES> 11,103
<ALLOWANCES> 0
<INVENTORY> 35,927
<CURRENT-ASSETS> 260,071
<PP&E> 500,023
<DEPRECIATION> 119,574
<TOTAL-ASSETS> 661,422
<CURRENT-LIABILITIES> 38,461
<BONDS> 288,590
7,078
0
<COMMON> 22,950
<OTHER-SE> 292,061
<TOTAL-LIABILITY-AND-EQUITY> 661,422
<SALES> 139,037
<TOTAL-REVENUES> 159,982
<CGS> 141,873
<TOTAL-COSTS> 141,873
<OTHER-EXPENSES> 22,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,320
<INCOME-PRETAX> (14,325)
<INCOME-TAX> (242)
<INCOME-CONTINUING> (14,083)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,083)
<EPS-PRIMARY> (0.64)
<EPS-DILUTED> (1.12)
</TABLE>
