<PAGE> 1
<TABLE>
<S> <C> <C>
PROSPECTUS $143,750,000
LOGO LOGO
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2005
Interest payable April 30 and October 31
</TABLE>
------------------------
This Prospectus relates to $143,750,000 aggregate principal amount of
7 1/4% Convertible Subordinated Debentures due 2005 (the "Debentures") of Coeur
d'Alene Mines Corporation ("Coeur" or the "Company"), and the shares of common
stock, par value $1.00 per share (the "Common Stock"), of the Company which are
issuable from time to time upon conversion of the Debentures. Either the
Debentures or Common Stock issued upon conversion may be offered from time to
time for the account of holders of Debentures named herein (the "Selling
Debentureholders"). The Company will not receive any proceeds from this
offering. Prior to this offering, there has not been any public market for the
Debentures.
The Debentures are convertible into 8,237,822 shares of Common Stock on or
before October 31, 2005, unless previously redeemed, at a conversion price of
$17.45 per share (or approximately 57 shares per $1,000 principal amount of
Debentures), subject to adjustment in certain events. On March 31, 1998, the
last reported sale price of the Common Stock on the New York Stock Exchange
Composite Tape was $12.875 per share. The Common Stock is traded under the
symbol "CDE."
The Debentures are redeemable, in whole or in part, at any time on or after
October 31, 2000, at the redemption prices set forth herein plus accrued
interest. The Debentures are required to be repurchased at the option of the
holder if a Designated Event (as defined herein) occurs, at 100% of the
principal amount thereof plus accrued interest. No assurance can be given that
the Company will have the financial resources necessary to repurchase the
Debentures upon the occurrence of a Designated Event.
The Debentures are unsecured and subordinate in right of payment to all
existing or future Senior Debt (as defined herein) and rank pari passu with the
Company's other outstanding convertible debentures. The Debentures are also
effectively subordinated to liabilities of the Company's subsidiaries. The
Indenture relating to the Debentures does not restrict the incurrence of Senior
Debt or other indebtedness by the Company or any subsidiary. See "Description of
Debentures."
See "Risk Factors" for information that should be considered by prospective
investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Common Stock offered hereby from time to time on terms to be determined at the
time of sale. To the extent required, the principal amount of Debentures or the
number of shares of Common Stock to be sold, the names of the Selling
Debentureholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement. The aggregate
proceeds to the Selling Debentureholders from the sale of Debentures and Common
Stock offered by the Selling Debentureholders hereby will be the purchase price
of such Debentures or Common Stock less any commissions. See "Plan of
Distribution" herein for indemnification arrangements between the Company and
the Selling Debentureholders.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Debentures or shares of Common
Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Debentures were issued by the Company in October 1997 in connection
with an offering to "qualified institutional buyers" as defined in Rule 144A
under the Securities Act and to certain non-U.S. persons in reliance upon
Regulation S under the Securities Act.
The date of this Prospectus is March 31, 1998.
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the Commission's public reference facilities at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can be obtained by mail from the Commission's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
and such materials may be inspected and copied at the Commission's Web Site
(http://www.sec.gov). Such reports, proxy statements and other information also
can be inspected at the offices of the New York Stock Exchange, Inc. ("NYSE"),
20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8641) pursuant to Section 13 of the Exchange Act are hereby incorporated by
reference in this Prospectus:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1997, and amendments thereto filed on March 25 and 27, 1998.
2. Current Report on Form 8-K, as filed on April 30, 1996, and
amendments thereto filed on May 20, 1996, July 1, 1996 and February
24, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debentures hereby shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus and the Registration Statement of which it is a part to the
extent that a statement contained herein or in any other subsequently filed
document which is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person, including a
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to William F. Boyd, Esq.,
Secretary, Coeur d'Alene Mines Corporation, 400 Coeur d'Alene Mines Building,
505 Front Avenue, Coeur d'Alene, Idaho 83814, telephone number (208) 667-3511.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the detailed information and financial statements (including
the notes thereto) incorporated by reference in this Prospectus.
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production of any primary silver
producer located in the United States based on the Silver Survey 1997 published
by the CPM Group, an independent precious metals publishing and consulting
company. Furthermore, based on publicly available information as studied and
compiled by the Company, the Company has the highest amount of silver reserves
of any primary silver producer located in the United States and certain of the
silver mines in which it has an interest are the lowest cost of production
primary silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $661 million on December 31, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 11.0 million ounces of silver and 291,000 ounces of gold in 1997.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the year
ended December 31, 1997 were approximately $8.7 million, an increase of
approximately 13% over 1996.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL MINING PROPERTIES. The Company's most significant mining
properties are:
- The Rochester Mine ("Rochester"), a silver and gold surface mining
operation located in northwestern Nevada. Rochester is 100% owned and
operated by Coeur and is the largest primary silver mine in the United
States. Silver and gold production in 1997 were approximately 6.7 million
ounces and 90,000 ounces, respectively.
- A 50% interest in Silver Valley Resources Corporation ("Silver Valley
Resources"), which owns and operates several mining properties in the
Coeur d'Alene Mining District of northern Idaho, including the Coeur and
Galena underground silver mines, which are historically among the largest
and lowest cost of production silver mines in the United States.
Operations at the Coeur Mine and the Galena Mine, which were suspended in
April 1991 and July 1992, respectively, due to low silver prices,
3
<PAGE> 4
resumed in June 1996 and May 1997, respectively. Production attributable
to Coeur's 50% interest in Silver Valley Resources was approximately 1.7
million ounces of silver in 1997.
- The 100% owned Fachinal open pit and underground gold and silver mine
("Fachinal Mine") in Chile, which the Company developed and constructed
on schedule and under budget in October 1995, following its acquisition
of the property in 1990. The Fachinal Mine produced approximately 2.2
million ounces of silver and 31,000 ounces of gold in 1997.
- The El Bronce underground gold and silver mine in Chile ("El Bronce
Mine"), in which the Company acquired a 51% operating interest in October
1994 and increased to 100% ownership in September 1996. Coeur is
evaluating its option to purchase the Boton de Oro gold mine, which is
adjacent to the El Bronce Mine and where Coeur is engaged in limited gold
production and underground exploration. The El Bronce Mine produced
approximately 101,000 ounces of silver and 48,000 ounces of gold in 1997.
- A 25% interest in the Yilgarn Star Mine, a gold mine in Western
Australia, through a 50% ownership interest in Gasgoyne Gold Mines NL
("Gasgoyne") acquired in May 1996 and May 1997. The net gold production
attributable to Coeur's interest in the Yilgarn Star Mine was
approximately 39,000 ounces of gold in 1997.
- The Kensington property ("Kensington"), located north of Juneau, Alaska,
in which Coeur increased its participation from 50% to 100% in July 1995
and in which Coeur has invested a total of $122.5 million with a view to
developing the property into an underground gold mine. A production
decision at Kensington is subject to a realized price of gold through
spot or forward sales of at least $400 per ounce and the receipt of
required key permits. The U.S. Forest Service issued a supplemental
Environmental Impact Statement for Kensington on August 15, 1997, the
City and Borough of Juneau issued a Large Mine Permit for the project on
November 4, 1997, and the Company anticipates that it will receive the
remaining key permits by the end of the first quarter of 1998.
- The Golden Cross underground and surface gold mine in New Zealand, which
is 80% owned and operated by Coeur and where open pit mining activities
were discontinued in December 1997 and limited mining of underground ores
will continue until April 1998, at which time all operations at the mine
will cease. Production in 1997, which was the mine's final full year of
production, was approximately 83,000 ounces of gold and 272,000 ounces of
silver.
PRINCIPAL EXPLORATION PROJECTS. Coeur is conducting substantial silver and
gold exploratory activities. The Fachinal Mine reserve base and production is
expected to be enhanced by exploratory drilling in the Fachinal Mine area and at
the Furioso project in southern Chile. Exploratory activities to expand ore
reserves and production are underway at the El Bronce Mine and at the Boton de
Oro project in central Chile. Silver Valley Resources is engaged in silver
exploration projects at Vein 123 of the Galena Mine, at the Coeur Mine and
adjacent Caladay project and at the adjoining leased Sterling Mining Company,
Placer Creek Mining Company, Silver Buckle Mines, Inc. and American Silver
Mining Company properties in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Activities at the Galena Mine during 1997 revealed a previously undiscovered
vein known as the 123 Vein. Gasgoyne is conducting exploratory activities in
Western Australia.
Coeur's most significant other exploration activities are being conducted
at (i) the Groete Creek property, a low-grade gold, potential bulk volume mining
property located near Georgetown, Guyana, 75% of which Coeur has the option to
purchase; (ii) the KM 66 property in the State of Durango, Mexico, which has
low-grade silver, bulk tonnage open pit mining potential, and which Coeur has
the option to purchase in its entirety; and (iii) several other gold and silver
exploration projects located throughout Chile, the more important of which is
the Puchuldiza gold project in northern Chile. No assurance can be given that
the Company's exploration projects will yield mineable ore reserves.
4
<PAGE> 5
THE DEBENTURES
Securities Offered......... $143,750,000 principal amount of 7 1/4% Convertible
Subordinated Debentures due 2005.
Maturity Date.............. October 31, 2005.
Interest Payment Dates..... April 30 and October 31, commencing April 30, 1998.
Conversion................. Convertible into Common Stock on or before October
31, 2005, unless previously redeemed, at a
conversion price of $17.45 per share, subject to
adjustment in certain events.
Optional Redemption........ Redeemable at the option of the Company, in whole
or in part at any time on or after October 31, 2000
at the redemption prices set forth herein plus
accrued interest. See "Description of Debentures
-- Optional Redemption of Debentures."
Repurchase at Option of
Holder Upon Occurrence of a
Designated Event......... The Debentures are required to be repurchased at
100% of their principal amount at the option of the
holder, if a Designated Event (as defined herein)
occurs. See "Description of
Debentures -- Repurchase at Option of Holder Upon
Occurrence of a Designated Event."
Subordination.............. The Debentures are subordinated to all Senior Debt
(as defined herein), which was approximately $7.6
million at December 31, 1997. The Debentures are
also effectively subordinated to liabilities of the
Company's subsidiaries. The Indenture will not
restrict the incurrence of Senior Debt or other
indebtedness by the Company or any subsidiary.
5
<PAGE> 6
SUMMARY FINANCIAL, OPERATING AND RESERVE DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1993 1994 1995(6) 1996 1997(7)
-------- ------- ------- -------- --------
<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 profit (loss)......................... 8,186 11,804 17,029 9,448 (2,836)(8)
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(1)........... -- -- -- (54,415) --
Loss from continuing operations............. (14,042) (4,736) (1,258) (54,570) (14,083)
Income (loss) before cumulative effect of
change in accounting method(2)............ (13,290) (3,943) 1,154 (54,570) (14,083)
Cumulative effect of change in accounting
method(3)................................. 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:
Net income (loss) attributable to common
shareholders (4).......................... (0.53) (0.26) 0.07 (2.93) (1.12)
Ratio of earnings to fixed charges(5)....... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
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
Cash, equivalents and short-term
investments................................. 844,899 142,189 79,562 167,627 213,041
Long-term liabilities......................... 133,241 234,009 184,789 202,566 300,872
Shareholders' equity.......................... 170,849 160,292 239,832 346,198 322,089
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993 1994 1995 1996 1997
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
CASH FLOW DATA:
Net cash provided by (used in) operating
activities...................................... $ 4,202 $ 7,898 $ 20,312 $ 7,784 $17,223
Capital expenditures.............................. 16,015 34,745 108,432 62,297 32,087
</TABLE>
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<PAGE> 7
PRODUCTION DATA(9)
(In ounces)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
SILVER
Rochester Mine........................... 5,943,894 5,937,770 6,481,825 6,251,180 6,690,704
Golden Cross Mine........................ 175,325 222,246 286,216 205,070 271,776
El Bronce Mine........................... -- 20,199 72,537 76,145 100,626
Fachinal Mine(10)........................ -- -- 334,816 2,154,347 2,243,761
Coeur Mine(11)........................... -- -- -- 833,267 989,257
Galena Mine(11).......................... -- -- -- -- 728,101
--------- --------- --------- --------- ----------
6,119,219 6,180,215 7,175,394 9,520,009 11,024,225
GOLD
Rochester Mine........................... 66,412 56,886 59,307 74,293 90,019
Golden Cross Mine........................ 56,898 67,400 83,058 64,365 83,110
El Bronce Mine........................... -- 4,953 22,034 35,676 48,181
Fachinal Mine(10)........................ -- -- 3,586 25,064 30,601
Galena Mine(11).......................... -- -- -- -- --
Yilgarn Star Mine........................ -- -- -- 14,732 39,051
--------- --------- --------- --------- ----------
123,310 129,239 167,985 214,130 290,962
</TABLE>
OTHER PRODUCTION DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------------------------------
GOLD ORE GRADE
SILVER ORE (OZ/TON) METAL RECOVERY % OPERATING COST ($/OZ)
ORE PROCESSED/ GRADE ---------------------- ------------------ ---------------------
MILLED (OZ/TON) OPEN PIT UNDERGROUND SILVER GOLD CASH(12) FULL
-------------- ---------- -------- ----------- ------ ----- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rochester Mine....... 8,738,471 1.224 0.012 -- 62.53% 87.22% $ 4.36 $ 5.03
Golden Cross Mine.... 833,836 0.657 0.082 0.205 49.62 88.53 245.34 289.47
El Bronce Mine....... 343,296 0.347 -- 0.152 84.38 92.36 348.24 401.93
Fachinal Mine(10).... 592,976 4.183 0.057 -- 90.47 89.81 339.46 512.32
Silver Valley(11).... 95,296 18.55 -- -- 97.15 -- 3.74 4.81
Yilgarn Star Mine.... 388,401 -- -- 0.122 -- 94.16 255.11 416.46
</TABLE>
RESERVE DATA
(In ounces)
<TABLE>
<CAPTION>
PROPERTY GOLD SILVER
-------- ----- ------
<S> <C> <C>
Rochester Mine.............................................. 603 74,216
El Bronce Mine.............................................. 190 476
Fachinal Mine............................................... 191 7,206
Kensington Property......................................... 1,896 --
Coeur Mine.................................................. -- 1,747
Galena Mine................................................. -- 15,495
Yilgarn Star Mine........................................... 199 --
----- ------
Total................................................... 3,079 99,140
</TABLE>
- ---------------
(1) In July 1996, the Company recorded a charge of $53 million relative to its
interest in the Golden Cross Mine and the nearby Waihi East property in New
Zealand, which included accrual of the estimated future closure and
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<PAGE> 8
remediation costs and the entire carrying value of the Company's 80%
interest in the property, as well as $1.2 million relating to its Faride
property in Chile.
(2) In May 1995, the Company sold the non-mining assets of Callahan Mining
Company which consisted primarily of its flexible hose and tubing division,
The Flexaust Company, and shares of a related subsidiary for approximately
$10.0 million payable in cash, of which approximately $4 million was paid
at the time of closing with the balance payable over the following five
years. The results of operations and the gain on sale of the Flexaust
manufacturing segment are not reflected in the results from continuing
operations. The Company recorded income from discontinued operations of
$2.4 million in 1995.
(3) See note (3) of the notes to the "Selected Consolidated Financial Data."
(4) Earnings per share are calculated based on the weighted average number of
common shares outstanding and those Common Stock equivalents that are
deemed to be dilutive. The 6% Convertible Subordinated Debentures due 2002
are considered to be Common Stock equivalents. Accordingly, such debentures
are assumed to be converted, and interest expense on such debentures, net
of tax expense, has been considered in the computation of earnings per
share, except in those instances where the effects of conversion would be
antidilutive.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes
and fixed charges, and fixed charges consist of interest and that portion
of rent deemed representative of interest. Earnings were insufficient to
cover fixed charges in the following amounts: $21.9 million in 1993, $9.2
million in 1994, $8.3 million in 1995, $64.1 million in 1996, and $18.0
million in 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for the year ended December 31, 1997
are (i) the receipt of $8.0 million of insurance proceeds for business
interruption and property damage at the Golden Cross Mine and (ii) a gain
of $5.3 million arising from the sale of gold purchased in the open market
which was delivered pursuant to fixed price forward contracts in the first
quarter of 1997.
(8) The gross loss from mining operations for the year ended December 31, 1997
amounted to approximately $2.8 million compared to a gross profit from
mining operations for the prior year of $9.4 million. The decrease
primarily is attributable to (i) substantially lower silver and gold prices
in 1997, during which year the average silver and gold prices were $4.89
and $331.10 per 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 of 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,
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 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.
(9) Production figures are those attributable to the Company's ownership
interest. Production data includes (i) production for the Golden Cross Mine
since April 1993 when the Company acquired an 80% interest in that mine;
(ii) 51% of production for the El Bronce Mine from October 1994 through
August 1996 and 100% of production in and subsequent to September 1996;
(iii) production for the Fachinal Mine since October 1995 when initial
production commenced on a limited basis; (iv) 50% of production for the
Coeur Mine since June 1996 when production was resumed at that mine; (v)
50% of production for the Galena Mine since May 1997 when production was
resumed at that mine; and (vi) 17.5% (i.e., 35% of one-half) from May 1996
to May 1997 and 25% (i.e., 50% of one-half) in June 1997 of production for
the Yilgarn Star Mine.
(10) The Fachinal Mine was classified as a development stage property during
1995 and 1996. Operating costs, net of production revenues, were
capitalized. The property was classified as an operating property for
financial reporting purposes on January 1, 1997.
(11) Operations at the Coeur and Galena Mines were suspended in April 1991 and
July 1992, respectively, due to then prevailing silver prices and those
mines were placed on a care and maintenance basis to conserve ore reserves.
Silver Valley Resources resumed operations at the Coeur Mine in June 1996
and plans to continue to mine existing ore
8
<PAGE> 9
reserves there until early 1999. Silver Valley Resources is exploring the Coeur
Mine in an attempt to discover additional ore reserves in order to lengthen the
mine life. Operations at the Galena Mine resumed in May 1997.
(12) Excludes smelting and refining costs.
(13) Estimated reserve figures are for proven and probable reserves which do not
reflect loss of metal in the metallurgical process. The Company's net share
of silver and gold ounces reflect its interest in each mine or property.
Estimates are as of December 31, 1997. In the case of the Rochester Mine,
Fachinal Mine and the Kensington Property, the reserve estimates were
verified by independent consulting geologists or mining engineers. The El
Bronce Mine reserve figures are based on estimates by CDE El Bronce, with a
resource report for five major veins prepared by NCL S.A. The Galena Mine
and Coeur Mine reserve figures are based on the estimates of Silver Valley
Resources, of which the Company owns 50%. The Yilgarn Star ore reserve data
is based on the estimates of the operator. Based on experience and certain
metallurgical testing, the Company estimates recovery rates are 50% of the
silver and 90% of the gold contained within the ore mined at the Rochester
Mine, 84% of the silver and 93% of the gold at the El Bronce Mine and 90%
of the gold and 89% of the silver at the Fachinal Mine, 97% of the silver
at the Coeur and Galena Mines and 95% of the gold at the Yilgarn Star Mine;
and based on metallurgical testing, the estimated recovery rate at the
Company's Kensington development property is 96% of the gold. The prices
used in preparing the above estimated ore reserves range from $5.00 to
$6.50 per ounce for silver and from $350 to $410 per ounce for gold. The
market prices of silver (as reported by Handy & Harmon) and gold (London
final) on March 31, 1998 were $6.30 and $301.00, respectively. Use of
significantly lower silver and gold prices in the ore reserve estimation
could materially reduce such reserve estimates. The above ore reserve data
does not include Coeur's share (based on its current ownership interest) of
the following additional mineralized material at December 31, 1997, which
material does not qualify as ore reserves:
<TABLE>
<CAPTION>
GOLD SILVER
TONS GRADE GRADE
(IN THOUSANDS) (OZ/TON) (OZ/TON)
-------------- -------- --------
<S> <C> <C> <C>
Rochester..................................... 10,752 0.007 1.10
El Bronce Mine................................ 1,598 0.28 0.7
Fachinal Mine................................. 2,530 0.07 2.85
Kensington Property........................... 9,050 0.12 --
Coeur Mine.................................... 81 -- 14.46
Galena Mine................................... 392 -- 8.33
Yilgarn Star Mine............................. 576 0.21 --
</TABLE>
9
<PAGE> 10
RISK FACTORS
Investors should carefully review the factors set forth below as well as
the other information included or incorporated by reference in this Prospectus.
The forward-looking statements dealing with future mining production and
operations, ore reserves and capital expenditure and exploration expense levels
contained or incorporated by reference in this Prospectus, and particularly
those involving estimates of 1998 silver and gold production, are expressly
qualified by the following cautionary statements. Each of the important factors
summarized below could cause actual production and operating results to
materially differ from those presented in the forward-looking statements.
PAST LOSSES AND ABSENCE OF EARNINGS TO SATISFY FIXED CHARGES
For the year ended December 31, 1997, two of the Company's principal
operating properties did not operate profitably. The Company reported net losses
for 1996 and 1997 and each of the five years prior to 1995. In addition to
depressed silver and gold market prices, significantly contributing to those net
losses were (i) the Company's deliberate pursuit of a corporate policy of growth
through the acquisition of mining companies and properties and the financing of
such growth to a significant extent by incurring indebtedness and (ii) the
Company's write-off of $53.0 million relating to its interests in the Golden
Cross Mine and nearby Waihi East property in New Zealand in July 1996. Annual
interest expense, which prior to 1993 was less than $2 million, rose to $5.4
million in 1993, $11.4 million in 1994 and $9.7 million in 1995. As a result of
the Company's call for redemption of its 7% Convertible Subordinated Debentures
due 2002 in December 1995, the Company's interest expenses in 1996 was reduced
to $3.6 million. Interest expense in 1997 increased to approximately $10.3
million primarily as a result of the reclassification of the Fachinal Mine from
a development-stage property to an operating property on January 1, 1997 and the
Company's issuance of $143.75 million of the Debentures in October 1997.
As a result of the losses discussed above, the Company has not achieved
earnings adequate to satisfy fixed charges (i.e., interest, preferred stock
dividends plus that portion of rent deemed representative of interest) in each
of the last five years. The amounts by which earnings were inadequate to cover
fixed charges were approximately $21.9 million in 1993, $9.2 million in 1994,
$8.3 million in 1995, $64.1 million in 1996 and $18.0 million in 1997. Interest
payable to holders of Debentures through their maturity on October 31, 2005
approximate $10.4 million per year, subject to reduction to the extent that
Debentures are earlier converted or redeemed. Other outstanding securities
requiring the payment of fixed charges include (i) 7,077,833 shares of Mandatory
Adjustable Redeemable Convertible Securities (the "MARCS") requiring the
quarterly payment of approximately $10.5 million of annual dividends per year
through March 15, 2000, when those shares mandatorily convert into Common Stock;
(ii) $49.8 million principal amount of the Company's 6% Convertible Debentures
due 2002 (the "6% Debentures") requiring the semi-annual payment of
approximately $3.0 million of interest per year; and (iii) $95 million principal
amount of the Company's 6 3/8% Convertible Subordinated Debentures due 2004 (the
"6 3/8% Debentures") requiring the semi-annual payment of approximately $6.1
million of interest per year. Prior to the mandatory conversion of the MARCS on
March 15, 2000, the MARCS are convertible at the option of the holder into
Common Stock at a conversion price of $25.713 per share. The 6% Debentures and
6 3/8% Debentures are convertible prior to their maturity at conversion prices
of $25.57 and $25.77 per share, respectively.
The Company expects to satisfy its fixed charges, dividends on shares of
MARCS and other expense obligations in the future from cash flow from operations
and, in the event that cash flow from operations is insufficient, from working
capital, which amounted to approximately $221.6 million at December 31, 1997
and, if necessary, the sale of assets. The Company's net cash provided by
operating activities for the years ended December 31, 1995, 1996 and 1997 was
approximately $20.9 million, $7.8 million and $17.2 million, respectively. The
availability of future cash flow from operations or working capital to fund the
payment of interest on the Debentures and other fixed charges will be dependent
upon numerous factors, including the Company's results of operations, silver and
gold prices, levels of production and costs of production at the Company's
mining properties, the amount of the Company's capital expenditures and
expenditures for acquisitions, developmental and exploratory activities, and the
extent to which the Debentures, the shares of MARCS or the Company's outstanding
6 3/8% Debentures and 6% Debentures are converted or redeemed.
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<PAGE> 11
CASH FLOW; HOLDING COMPANY STRUCTURE
The Company does not currently generate sufficient cash flow from operating
activities to cover its interest obligations under presently outstanding debt
instruments. Assuming a continuation of the current low levels of precious
metals prices, the Company anticipates that it will not generate sufficient cash
flow to cover the interest obligation on outstanding debt instruments in the
future, including the Debentures. In the future, the ability of the Company to
pay interest accruing on and the principal amount of the Debentures will be
dependent upon the success of the Company's operations and the operations of
properties or businesses which may hereafter be acquired by the Company, as to
which there can be no assurance. In the event the Company's cash flow from
operating activities is not sufficient to fund its interest obligations, the
Company will rely upon working capital or the sale of assets to cover such
payments. In addition, the Company's operating assets are presently in
subsidiaries and it is expected that any businesses acquired will be operated
through subsidiaries. The payment of interest on and principal amount of the
Debentures will be effectively subordinated to all liabilities of the Company's
subsidiaries. The Debentures are also expressly subordinated in the right of
payment to all Senior Debt (as defined herein) of the Company.
MARKET PRICES OF SILVER AND GOLD
The market price of gold has declined to levels that are the lowest since
1985. Although the market price of silver has increased to date in 1998, the
average market price of silver in 1997 was lower than the annual average market
prices experienced since 1993. The market prices of silver (London final) and
gold (as reported by Handy & Harmon) on March 31, 1998 were $6.30 per ounce and
$301.00 per ounce, respectively. The average market price of silver declined
from $5.19 per ounce in 1995 and $5.18 per ounce in 1996 to $4.89 per ounce in
1997. The average market price of gold declined from $384.16 per ounce in 1995
and $387.70 per ounce in 1996 to $331.10 per ounce in 1997. No assurance can be
given that the currently higher silver market price level will continue or that
such market price will not decline in the future. Overall world stability and
declining inflation has resulted in a decrease in the market price of gold.
Furthermore, in recent years the central banks of several countries and such
multilateral organizations as the European Monetary Institute and the
International Monetary Fund have sold portions of gold held by them as reserves
and may sell additional amounts of gold in the future, which could result in
further declines in the market price of gold. If the currently depressed levels
of gold prices continue, the Company will need to reduce production costs and/or
expand minable ore reserves at the Fachinal and El Bronce Mines to operate the
mines profitably. Furthermore, in the event of the continuation of such
depressed price levels, the Company may elect to place such mines on temporary
standby and halt production there to conserve ore reserves until gold prices
increase. Furthermore, under certain circumstances asset write-downs could be
required. See "Possible Write-Downs Pursuant to Statement of Financial
Accounting Standards No. 121" below.
DEPENDENCE UPON SILVER AND GOLD PRICES
The results of the Company's operations and the market price of its Common
Stock are significantly affected by the market prices of silver and gold. Those
prices historically have fluctuated widely and are affected by many factors
beyond the Company's control, including interest rates, expectations regarding
inflation, currency values, global and regional political and economic
conditions and other factors. The suspension of mining operations at the Coeur
and Galena Mines in April 1991 and July 1992, respectively, during which months
the average price of silver was $3.97 and $3.95 per ounce, respectively, was
attributable to declining silver prices. The Company's decision to place its
Kensington Property into commercial production will be subject, among other
things, to there being a price of gold realized (through spot or forward sales)
of at least $400 per ounce. As stated above, the market prices of silver and
gold on March 31, 1998 were $6.30 per ounce and $301.00 per ounce, respectively.
No assurance can be given regarding market prices of silver and gold in the
future.
UNCERTAINTY OF ORE RESERVE ESTIMATES
Although the Company has established criteria for reporting ore reserves in
conformity with standards of the Commission, there are numerous uncertainties
inherent in the estimation of ore reserves, including many
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<PAGE> 12
geological and economic factors beyond the Company's control. Reserve estimation
is a necessarily imprecise and subjective process and the accuracy of such
estimates is a function of the quality of available data and of engineering and
geological interpretation, judgment and experience. Assumptions about silver and
gold market prices are subject to great uncertainty and such prices have
fluctuated widely in the past. Declines in the market prices of silver or gold
may render reserves containing relatively lower grades of ore uneconomic to
exploit. Should the Company encounter mineralization or geologic formations at
any of its mines or projects different from those predicted by drilling,
sampling and similar examinations, reserve estimates may be adjusted and mining
plans may be altered. Such adjustments and alterations might adversely affect
the Company's actual production and operating results. Furthermore, if the
prices realized by the Company for the silver and gold it produces were to
decline substantially below the prices at which ore reserves were calculated for
a sustained period of time, the Company could experience reductions in reserves
and asset write-downs. Under such circumstances, the Company could discontinue
the development of a project or mining at one or more of its properties. Ore
reserves at mining properties operated by the Company are the subject of
verification by independent consulting geologists or mining engineers. Ore
reserves at mining properties operated by other companies in which Coeur has an
ownership interest are prepared by such other companies, reviewed by the Company
and may not be subject to such independent verification.
Silver and gold reserves at mining properties owned by the Company or in
which it has an ownership interest were calculated at December 31, 1997. Ore
reserve determinations are based upon varying prices ranging from $5.00 to $6.50
per ounce for silver and from $350 to $410 per ounce of gold. Recently, silver
and gold prices have been significantly below those levels and prolonged
declines in such market prices could render ore reserves containing relatively
lower grades of silver and gold mineralization uneconomic to exploit and could
materially reduce the Company's mineable reserves. Should such reduction occur,
material write-downs of the Company's investment in mining properties might be
required, and there could be material delays in the development of new projects,
increased net losses and reduced cash flow.
POSSIBLE WRITE-DOWNS PURSUANT TO STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO.
121
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121") entitled "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." SFAS No. 121 was effective for periods beginning after December 15, 1995,
and established new accounting standards for, among other things, the impairment
of the value of tangible long-lived assets. SFAS No. 121 requires a company to
review the recoverability of its assets by estimating the future undiscounted
cash flow expected to result from the use and eventual disposition of the asset.
In July 1996, as a result of deep-seated ground movement under the Golden
Cross Mine tailings impoundment area, the Company determined that its Golden
Cross Mine asset had been impaired and that because the undiscounted cash flow
from the project was estimated to be less than the project's carrying value, it
would be necessary under SFAS No. 121 to effect a $53 million charge relative to
the asset.
While the Company does not believe that any of its other properties
presently requires a write-down pursuant to SFAS No. 121, a continuation of the
currently depressed levels of silver and gold market prices for a period of time
and/or a failure to reduce production costs or expand mineable ore reserves at
the Company's mining properties, particularly in the case of the Fachinal and El
Bronce Mines and the Kensington Property, could result in the need for the
Company to effect further asset write-downs pursuant to SFAS No. 121.
RISKS ASSOCIATED WITH POSSIBLE ACQUISITIONS
An important element of the Company's business strategy is the Company's
opportunistic acquisition of silver and gold mines, properties and businesses.
There can be no assurance that mining properties acquired by the Company can be
developed profitably, or if profitable when acquired, that profitability can be
sustained. See "Past Losses and Absence of Earnings to Satisfy Fixed Charges"
above. In connection with future acquisitions, the Company may incur
indebtedness or issue equity securities, resulting in dilution of the
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<PAGE> 13
percentage ownership of existing shareholders. The Company intends to seek
shareholder approval for any such acquisitions only to the extent required by
applicable law, regulations or stock exchange rules.
RISKS AND COSTS ASSOCIATED WITH THE COMPANY'S EXPLORATION AND DEVELOPMENT
ACTIVITIES
Mineral exploration, particularly for silver and gold, involves many risks
and frequently is nonproductive. Once mineralization is discovered, it may take
a number of years until production is possible, during which time the economic
viability of any project may change. Substantial developmental expenditures are
required to establish ore reserves, extract the metals from the ore and, in the
case of new properties, to construct mining and processing facilities.
The Company expended approximately $32.0 million and $15.5 million
(excluding capitalized interest) in the years ended December 31, 1996 and 1997,
respectively, in connection with the exploration and development of its mining
properties. Furthermore, the Company plans to expend approximately $18.3 million
(excluding capitalized interest) in connection with exploration and other
developmental activities during 1998. In the event the Kensington Property is
placed into commercial production, the Company estimates that approximately $182
million of capital expenditures would be required over an approximate 18-month
period to construct the mine facilities.
RISKS ASSOCIATED WITH THE COMPANY'S MINING ACTIVITIES
Following the commencement of production, the mining business continues to
be subject to risks and hazards, including quantity of production, quality of
the ore, environmental hazards, industrial accidents, encountering unusual or
unexpected formations, cave-ins, flooding and periodic interruptions due to
inclement or hazardous weather conditions. Examples of such risks include the
ground movement discovered at the Golden Cross Mine tailings impoundment area,
requiring a $53.0 million charge in 1996 and earlier-than-planned closure of
that mine, and the recent flooding that required the two-week closure of the El
Bronce Mine. Moreover, remedial environmental activity at the Golden Cross Mine
required payments of $12.1 million and $4.5 million in 1996 and 1997,
respectively, and are estimated to require an additional $1.4 million in 1998,
and additional estimated costs associated with the closure of the mine are
expected to approximate $4.0 million (net of salvage revenues), all of which
have been accrued. The occurrence of events caused by the above risks and
hazards could result in damage to, or destruction of, mineral properties or
producing facilities, personal injury, environmental damage, reduced production
and delays in mining, asset write-downs, monetary losses and possible legal
liability. Insurance fully covering certain environmental risks (including
potential liability for pollution or other hazards as a result of disposal of
waste products occurring from exploration and production) is not generally
available to the Company or to other companies within the industry. The Company
has been recognized in recent years for its commitment to environmental
responsibility.
POSSIBLE DECLINES IN FUTURE PRODUCTION
The Company expects that future silver and gold production derived from the
mining of existing reserves at existing mines will decline as a result of the
exhaustion of reserves and possible closure of mines. The Company expects that
production from its existing mines will be less in 1998 than in 1997. It has
been and will continue to be the Company's business strategy to conduct silver
and gold exploratory activities at its existing mining and exploratory
properties as well as at new exploratory projects, and to acquire silver and
gold mining properties and/or businesses that possess mineable ore reserves and
are expected to become operational in the near future. No assurance, however,
can be given that the Company's silver and gold production will not decline in
the future.
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATION
General. The Company's mining activities are subject to extensive federal,
state and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have never
required the Company to close any mine and the Company is not presently subject
to any material
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<PAGE> 14
administrative proceedings relating to such matters, the costs associated with
compliance with such regulatory requirements are substantial and possible future
legislation and regulations could cause additional expense, capital
expenditures, restrictions and delays in the development of the Company's
properties, the extent of which cannot be predicted. In the context of
environmental permitting, including the approval of reclamation plans, the
Company must comply with known standards and regulations which may entail
significant costs and delays. Although Coeur has been recognized for its
commitment to environmental responsibility and believes it is in substantial
compliance with applicable laws and regulations, amendments to current laws and
regulations, the more stringent implementation thereof through judicial review
or administrative action or the adoption of new laws could have a materially
adverse effect upon the Company. The Company expended approximately $3.1 million
and $5.0 million in connection with routine compliance activities at its
operating properties in 1996 and 1997, respectively, and expects to expend a
total of 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 remediation activities at the Golden Cross Mine in 1996 and 1997,
respectively. Although the Company believes that estimated additional costs
associated with the closure of the Golden Cross Mine will approximate $4.0
million, net of salvage revenues, approval by the appropriate New Zealand
regulatory authorities of the proposed plan of closure has not been obtained and
no assurance can be given that actual costs required to be incurred in
connection with the closure will not exceed that amount. The Company had
expended a total of approximately $13.5 million on environmental and permitting
activities at the Kensington Property through December 31, 1997, and expects to
expend a total of approximately $1.7 million for that purpose in 1998.
EPA Regulations. Mining wastes are currently exempt to a limited extent
from the extensive set of Environmental Protection Agency ("EPA") regulations
governing hazardous waste. The EPA plans to develop a program to regulate mining
waste pursuant to its solid waste management authority under the Resource
Conservation and Recovery Act ("RCRA"). Certain processing and other wastes are
currently regulated as hazardous wastes by the EPA under RCRA. The EPA is
studying how mine wastes from extraction and beneficiation should be managed and
regulated. If the Company's mine wastes were treated as hazardous waste or such
wastes resulted in the mine facility being designated as a "Superfund" site
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund") for cleanup, material expenditures would be required
for the construction of additional waste disposal facilities or for other
remediation expenditures. Under CERCLA, any owner or operator of a Superfund
site since the time of its contamination generally may be held liable and may be
forced to undertake remedial cleanup action or to pay for the government's
cleanup efforts. Additional regulations or requirements may also be imposed upon
the Company's tailings and waste disposal in Idaho and Alaska under the federal
Clean Water Act ("CWA") and in Nevada under the Nevada Water Pollution Control
Law which implements the CWA. Air emissions are subject to controls under
Nevada's, Idaho's and Alaska's air pollution statutes implementing the Clean Air
Act.
Natural Resources Laws. The Company is subject to federal and state laws
designed to protect natural resources. In March 1996, an action was filed in the
United States District Court for the District of Idaho by the United States
against various defendants, including the Company, asserting claims under CERCLA
and the CWA 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. The Company intends to
vigorously defend this matter and, in March 1997, filed a motion for summary
judgment which is pending decision by the court. At this initial stage of the
action, it is not possible to predict its ultimate outcome.
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<PAGE> 15
Proposed Mining Legislation and Regulations. Legislation is presently
being considered in the U.S. Congress to change the Mining Law of 1872 (the
"Mining Act") under which the Company holds mining claims on public lands. It is
possible that the Mining Act will be amended or be replaced by more onerous
legislation in the future. The legislation under consideration, as well as
regulations under development by the Bureau of Land Management, contain new
environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would likely result in delays in
permitting. Among the bills under consideration are bills calling for an 8%
gross royalty, a 2.5% or 5% net smelter return royalty or a 3.5% net proceeds
royalty on the value of minerals mined on public lands, payable to the U.S.
Government. The Company believes that if and when any royalty is imposed, it
will not be a gross royalty. A significant portion of the Company's U.S. mining
properties are on public lands. Any reform of the Mining Act or regulations
thereunder based on these initiatives could increase the costs of mining
activities on unpatented mining claims, and as a result could have an adverse
effect on the Company and its results of operations. Until such time, if any, as
new reform legislation or regulations are enacted, the ultimate effects and
costs of compliance on the Company cannot be estimated.
FOREIGN ACTIVITIES
Reserves outside of the United States currently account for approximately
14% of the Company's total reserve base and foreign operations contributed
approximately 53% of total 1997 production. New Zealand, Australia and Chile are
the most significant foreign countries in which the Company directly or
indirectly owns or operates mining properties. In the Company's operations the
currency of New Zealand dollars and Australian dollars is used in New Zealand
and Australia, respectively, and the currency of Chilean pesos is used in Chile.
The Company also conducts exploratory projects in Chile, Guyana and Mexico.
Although the governments and economies of these countries have been relatively
stable in recent years, the ownership of property in a foreign country generally
is subject to the possible risk of expropriation or nationalization with
inadequate compensation. Any foreign operation or investment may also be
adversely affected by exchange controls, currency fluctuations, taxation and
laws or policies of particular countries as well as laws and policies of the
United States affecting foreign trade, investment and taxation.
COMPETITION FOR MINERAL PROPERTIES
Mining companies are continually seeking to replace and expand their ore
reserves. The Company encounters strong competition from other mining companies
in connection with the acquisition of properties producing or capable of
producing silver and gold. Because some of those companies have greater
financial resources than the Company, the Company may be unable to acquire
attractive mining properties on terms it considers acceptable. As a result,
there can be no assurance that the Company will be able to replace and expand
current reserves through the acquisition of new properties.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold silver and gold produced by its mines pursuant
to forward contracts and at spot prices prevailing at the time of sale. Entering
into forward sale contracts is a strategy used to mitigate some of the risks
associated with fluctuating precious metals prices. The Company continually
evaluates the potential benefits of engaging in these strategies based on the
then current market conditions. At March 20, 1998, the Company had sold forward
approximately 1.6 million ounces of silver at an average price of $6.49 per
ounce for delivery in 1998. At March 20, 1998, Gasgoyne had sold forward 171,100
ounces of gold attributable to Coeur's interest in the Yilgarn Star Mine at an
average minimum price of approximately $A 606 per ounce (or approximately $US
403 per ounce based on currency exchange rates on March 20, 1998). The Company's
future revenues will be adversely affected in connection with the sale of its
silver and gold production in the future to the extent that is not covered by
forward sale contracts and silver and gold market prices decline.
During the first quarter of 1997, the Company recorded a $5.3 million gain
arising from the sale of gold purchased in the open market which was delivered
pursuant to fixed-price forward contracts. However, no assurance can be given
that the use of forward sale and purchase contract strategies in the future will
always
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<PAGE> 16
benefit the Company. For example, the Company could lock in forward deliveries
at prices lower than the market price at the time of delivery. The Company also
could be subject to margin calls if the market price were to significantly rise
above the contracted forward delivery price. Furthermore, the Company could fail
to produce enough silver or gold to satisfy a forward delivery obligation,
possibly requiring the Company to purchase silver or gold in the spot market at
a higher price to fulfill its delivery obligation.
CURRENCY FLUCTUATIONS
The Company may enter into agreements which will require it to purchase
currencies of foreign countries in which it does business to ensure fixed
exchange rates. In the event that actual exchange rates vary from those set
forth in the hedge contracts, the Company will experience U.S. dollar
denominated operating costs that are either higher or lower than those that
would have been experienced had it not entered into the foreign exchange
contracts. To the extent the Company were to purchase foreign currency in excess
of its estimated requirements, it may experience foreign currency gains or
losses when the excess is converted into U.S. dollars.
DIVIDENDS
Although the Company paid an annual cash dividend to the holders of its
Common Stock in April of each of the years from 1989 through 1996, it
subsequently has not paid a dividend. No assurance can be given as to whether
the Company will resume the payment of cash dividends on its Common Stock in the
future.
CLASS ACTION LAWSUIT
On July 2, 1997 a suit was filed by a purchaser of the Company's common
stock in Federal District Court for the District of Colorado naming the Company
and certain of its officers and its independent auditor as defendants. Plaintiff
alleges that the Company violated the Securities Exchange Act of 1934 during the
period January 1, 1995 to July 11, 1996, and seeks certification of the law suit
as a class action. The class members are alleged to be those persons who
purchased publicly traded debt and equity securities of the Company during the
time period stated. On September 22, 1997 an amended complaint was filed in the
proceeding adding other security holders as additional plaintiffs. The action
seeks unspecified compensatory damages, pre-judgment and post-judgment interest,
attorney's fees and costs of litigation. The complaint asserts that the
defendants knew material adverse non-public information about the Company's
financial results which was not disclosed, and which related to the Golden Cross
and Fachinal Mines; and that the defendants intentionally and fraudulently
disseminated false statements which were misleading and failed to disclose
material facts. The Company believes the allegations are without merit and
intends to vigorously defend against them. On October 27, 1997, the Company, its
auditors and the individual defendants filed with the Court motions to dismiss
the amended complaint on the ground that it fails to state a valid claim. No
assurances can be given at this early stage of the action as to its ultimate
outcome.
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<PAGE> 17
THE COMPANY
OVERVIEW. Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is an
international silver and gold producer engaged in the exploration, development
and operation of silver and gold mining properties and businesses primarily
located in the western United States, New Zealand, Chile and Western Australia.
Coeur has the highest amounts of silver production and silver reserves of any
primary silver producer located in the United States and certain of the silver
mines in which it has an interest are the lowest cost of production primary
silver mines in the United States.
Coeur has grown from a small domestic silver producer into an international
silver and gold producer through a focused strategy of acquiring and developing
producing or near-producing silver and gold properties as well as exploration
properties. Coeur's total assets have grown from $100.7 million at the end of
1986 to $661 million on December 31, 1997. Total production has increased from
approximately 6.3 million ounces of silver and 57,000 ounces of gold in 1992 to
approximately 11.0 million ounces of silver and 291,000 ounces of gold in 1997.
The Company actively explores for silver and gold on its existing
properties and elsewhere in the world. Mining exploration expenses for the year
ended December 31, 1997 were approximately $8.7 million, an increase of
approximately 13% over 1996. Total exploration expenses for 1998 are expected to
approximate $7.0 million.
The Company is an Idaho corporation organized in 1928. Its executive
offices are located at 505 Front Avenue, Coeur d'Alene, Idaho 83814. The
telephone number is (208) 667-3511.
BUSINESS STRATEGY. The Company's business strategy is to capitalize on its
strong reserves and the expertise of its management to become a leading precious
metals company via long-term, profitable growth. The principal elements of the
Company's business strategy are as follows: (i) improve operating cost and
production profiles at Coeur's existing silver and gold mining operations; (ii)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest silver producer and one of the world's largest
primary silver producers; (iii) continue increasing the Company's gold
production and reserves in order to continue to provide its shareholders with an
interest in both metals, while lowering its cost of gold production; (iv)
opportunistically acquire operating mines and exploration and development
properties with a view to reducing the Company's operating and production costs
and expanding its production and reserves; (v) continue to explore for new
silver and/or gold assets primarily in North and South America, Mexico, and
Australia as well as at existing mine sites; (vi) focus on opportunities which
provide strong future exploration potential and immediate or near-term prospects
for low-cost silver and/or gold production; and (vii) preserve the Company's
financial ability to weather the industry's intrinsic cyclical nature and to
execute its strategic objectives.
PRINCIPAL PROPERTIES
The Company's most significant properties are: (i) the Rochester Mine, a
silver and gold surface mining operation located in northwestern Nevada, which
is 100% owned and operated by Coeur, is the largest primary silver mine in the
United States and has significant gold production; (ii) a 50% interest in Silver
Valley Resources, which was formed in late 1994 and owns and operates the Coeur
and Galena underground silver mines in the Coeur d'Alene Mining District of
northern Idaho, historically among the largest and lowest cost of production
silver mines in the United States, and in which District Silver Valley Resources
is conducting extensive developmental and exploratory activities; (iii) the 100%
owned and operated Fachinal Mine, an open pit and underground gold and silver
mine located in southern Chile, which the Company developed and constructed on
schedule and under budget in October 1995 following its acquisition of the
property in 1990 and classified as an operating property for financial reporting
purposes on January 1, 1997; (iv) the 100% owned and operated El Bronce Mine, an
underground gold and silver mine located in northern Chile, in which the Company
acquired a 51% operating interest in October 1994 and 100% ownership in
September 1996; (v) a 25% interest in the Yilgarn Star Mine, a gold mine in
Western Australia, which interest results from the Company's ownership of 50% of
the outstanding capital stock of Gasgoyne acquired in May 1996 and May 1997;
(vi) the Kensington Property, located northwest of Juneau, Alaska, in which
Coeur increased its
17
<PAGE> 18
ownership interest from 50% to 100% in July 1995, is the subject of optimization
and development activities with a view to its ultimate construction as an
underground gold mine; and (vii) the Golden Cross Mine, an underground and
surface gold mining operation located near Waihi, New Zealand, which is 80%
owned and operated by Coeur and where mining activities were substantially
discontinued in December 1997. The Fachinal and El Bronce Mines are not
currently profitable.
Coeur has a number of current projects which may result in increased future
production and ore reserve expansion. The Company also is implementing steps to
reduce its production costs at its mining properties. The following sets forth
information regarding the Company's pursuit of these strategies.
ROCHESTER MINE
The Rochester Mine, which commenced operations in August 1986, is a silver
and gold surface mine located approximately 25 miles northeast of Lovelock,
Nevada. The mine utilizes the heap-leaching process to extract both silver and
gold from ore mined using open-pit methods. Rochester is the largest primary
silver mine in the U.S. and is one of the largest in the world. The Rochester
Mine, which Coeur has operated since 1986, increased its gold production by
approximately 21% to 90,019 ounces in 1997 over the 74,293 ounces of gold
produced in 1996. Silver production in 1997 was approximately 6.69 million
ounces compared to 6.25 million ounces in 1996.
Cash costs and full costs of production per ounce of silver equivalent at
the Rochester Mine in the year ended December 31, 1997 were $4.36 per ounce and
$5.03 per ounce, respectively, compared to $3.71 per ounce and $4.25 per ounce,
respectively, in the prior year. Historically low strip ratios are expected
through the remainder of the mine life, which should favorably impact costs and
cash flow.
In July 1995, the Company implemented an employee incentive program at the
Rochester Mine that rewards employees for operating improvements reflected in
cost savings and production increases. The program has resulted in the
achievement of leach pad, crusher and other operating improvements and
efficiencies that are estimated to have resulted in approximately $350,000 of
cost savings under budget and approximately $7.5 million of revenue from
production gains over budget during 1997.
SILVER VALLEY RESOURCES
Formation of Silver Valley Resources completed Coeur's six-year strategy to
expand the Company's interests in the Coeur d'Alene Mining District, which
historically has been one of the largest silver producing regions in the world.
Operations at the Coeur Mine and the Galena Mine were suspended in April 1991
and July 1992, respectively, due to low silver prices and the properties were
placed on a care and maintenance basis to conserve ore reserves. In July 1995,
Coeur, Callahan Mining Corporation, and Asarco, Inc. transferred their interests
in the Coeur and Galena Mines and Caladay project to Silver Valley Resources, an
entity created for that sole purpose, as a result of which Coeur and Asarco each
now own 50% of Silver Valley Resources.
Silver Valley Resources reopened the Coeur Mine in June 1996 and plans to
continue mining existing reserves through the third quarter of 1998. Exploration
at the Coeur Mine is ongoing in an effort to increase silver reserves and extend
the mine's life beyond 1999. Silver Valley Resources also resumed production at
the Galena Mine in May 1997.
Silver Valley Resource's cash costs and full costs of production per ounce
of silver for the year ended December 31, 1997 amounted to $3.74 and $4.81 per
ounce, respectively. Those costs include start-up costs at the Galena Mine and
are expected to decrease during 1998.
Activities at the Galena Mine during 1997 revealed a previously
undiscovered vein known as the 123 Vein. The vein and associated structures have
been drilled on numerous levels over a vertical depth of 600 feet and are
believed to continue into lower levels of the mine. The vein has been
intersected by underground workings on two levels along a maximum horizontal
length of up to 230 feet. Although a mineable ore reserve has not yet been
identified, based on the limited work done to date, the vein is believed by the
Company to be amenable to extraction due to its grade and width.
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<PAGE> 19
During 1996 and 1997, Silver Valley Resources entered into agreements with
Sterling Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc.
and American Silver Mining Company pursuant to which Silver Valley Resources
obtained operating control of contiguous properties near the Coeur and Galena
Mines in the Coeur d'Alene Mining District in exchange for net profit royalty
interests. Silver Valley Resources silver reserves attributable to Coeur's 50%
ownership interest have been expanded, increasing 32% in 1995 and 22% in 1996.
Rehabilitation of the mine shaft at the Caladay project is nearing completion
and Silver Valley Resources plans to conduct extensive exploratory and
developmental activities at the Coeur, Galena and Caladay Mines as well as at
contiguous properties in the Coeur d'Alene Mining District with a view toward
the expansion of silver reserves there. Production for 1997 attributable to
Coeur's 50% interest in Silver Valley Resources amounted to approximately 1.7
million ounces of silver.
FACHINAL MINE
The Fachinal Mine, which commenced initial production in October 1995 and
has both open pit and underground mining operations, completed its first full
year of pre-commercial operations in 1996. Following its opening and during
1996, unexpected operational problems were encountered and a lower than
anticipated ore grade in the open pit resulted in decreased ore reserves and
higher than expected cash costs of production that exceeded current market
prices. Production from higher-grade underground mining commenced in July 1996
and the property was classified as an operating property for financial reporting
purposes on January 1, 1997. Production from the higher-grade underground
operations has been increased to compensate for the lower open pit ore grades.
Furthermore, with respect to the open pit, an improved ore reserve mine model,
an increase in the pit slope to decrease waste tons mined and a reduction in
manpower have contributed to operational efficiencies. With respect to the
underground mining, an improved mine plan, a manpower reduction, improved
ventilation and drainage, improved safety program and improvements in contractor
performance have favorably affected production and cost performance. The amount
of tonnage processed at the mill has been increased without a decrease in metal
recovery and equipment has been added in the flotation plant to improve metal
recovery. While these actions have favorably impacted the Fachinal Mine's
operating performance, the cash costs of production continue to exceed the
current spot market price of gold. The Company intends to continue its
implementation of the operating improvements and to identify and implement
additional cost-reduction steps. Cash costs and full costs of production in the
year ended December 31, 1997 were $339.46 and $512.32 per ounce of gold, which
were higher than cost levels experienced in the first half of 1997. Additional
reserves must be found at Fachinal in order to achieve the economic criteria
upon which the decision to construct the mine was based. 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 recoveries 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 4.2 ounces per ton and 0.057 ounces per ton,
respectively; silver and gold metallurgical recoveries averaged 90.5% and 89.8%,
respectively; and cash operating costs averaged $40.23 per metric tonne.
The Fachinal Mine produced approximately 2.2 million ounces of silver and
31,000 ounces of gold in 1997, increases of 4% and 26% over 1996 levels,
respectively. Drilling is underway at Fachinal's underground and open pit mines
in an effort to replace the reserve base decreases. Additional developmental
activities are being conducted at the Furioso property, located approximately 60
kilometers southwest of the Fachinal Mine, where the Company believes additional
high grade gold reserves may exist. An internal feasibility study is being
conducted by the Company to determine if the Furioso ore reserves may be
processed at existing Fachinal facilities. The Company has an option to purchase
100% of the Furioso property at a price of $2.0 million on or prior to June 30,
1999. No assurance can be given that the Company will exercise that option.
Emphasis is being directed at increasing underground higher-grade reserves to
replace lower-grade open pit reserves in the production mix. See "Principal
Exploration Projects" below for additional information relating to exploratory
activities in the Fachinal Mine area.
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<PAGE> 20
EL BRONCE MINE
The El Bronce Mine is an underground gold and silver mine in Chile of which
the Company owns 100%. In 1997, cash costs of production increased primarily
because of lower ore grades due to narrower veins in the area mined. Cash costs
and full costs of production per ounce of gold were $348.24 and $401.93 per
ounce, respectively, in 1997, compared to $296.05 and $337.06 per ounce in the
prior year. In addition, near drought conditions occurred in the first quarter
of 1997 and heavy rainfall occurred in the second quarter of 1997. Heavy rains
and flooding resulted in a two-week closure of the mine in August 1997 and have
contributed to increases in cash costs of production to levels in excess of
current market prices. El Bronce Mine 1997 production was approximately 101,000
ounces of silver and 48,000 ounces of gold, increases of approximately 32% and
35%, respectively, over 1996 production levels, due in large part to the
increase in the Company's ownership interest from 51% to 100% in September 1996.
Ongoing exploration efforts are being conducted to identify and, if successful,
develop wider veins in order to increase reserves as well as to lower costs.
In February 1997, Coeur acquired an option to purchase the Boton de Oro
operating gold mine adjacent to the El Bronce Mine, from which ore is already
being processed through Coeur's mill at El Bronce and where Coeur is engaged in
underground exploration of mineralization believed to be similar to El Bronce's
vein systems. A feasibility study is being prepared to evaluate the possible
incorporation of Boton de Oro's mineralization into El Bronce operations. The
option agreement entitles Coeur to purchase 100% of Boton de Oro on or prior to
June 7, 1998 at a price of $2.5 million. There can be no assurance that the
Company will exercise the purchase option. In addition, the agreement requires
Coeur to spend $500,000 to conduct exploratory activities on the property.
AUSTRALIAN INTERESTS
Through its wholly-owned subsidiary, Coeur Australia Limited ("Coeur
Australia"), Coeur owns 50% of the outstanding shares of Gasgoyne which in turn
holds a 50% interest in the Yilgarn Star Mine, which produced a total of 39,000
ounces of gold attributable to Coeur's 25% interest in the mine in 1997. By
contract with the other 50% shareholder of Gasgoyne, Coeur has the right to
acquire its 25% share of gold production from this mine at a price equivalent to
the Yilgarn Star Mine's cost of production. Cash costs and full costs of
production per ounce of gold at the Yilgarn Star Mine amounted to $255.11 and
$416.46 per ounce, respectively, for the year ended December 31, 1997, compared
to $217.91 and $317.30 per ounce for the prior year. The $317.30 and $416.46
full costs of production per ounce of gold for 1996 and 1997, respectively,
included $66.29 and $125.82, respectively, of non-cash amortized goodwill.
In addition to its 50% interest in the Yilgarn Star Mine, Gasgoyne is a
participant in a joint venture conducting exploratory activities in Western
Australia.
The Company currently is exploring a possible combination of Coeur
Australia with another Australian gold mining company. The proposed transaction
is in its preliminary stages and no assurance can be given that it will be
consummated.
KENSINGTON PROPERTY
A production decision at the Kensington Property, in which Coeur had
invested a total of $122.5 million (including $26.6 million of capitalized
interest) at December 31, 1997, is subject to a realized price of gold through
spot or forward sales of at least $400 per ounce and the receipt of required key
permits, satisfactory completion of a project optimization study and approval by
the Company's Board of Directors. The U.S. Forest Service issued a decision
approving the Supplemental Environmental Impact Statement for the Kensington
Project on August 15, 1997. On October 2, 1997, a coalition of environmental
organizations filed an administrative appeal with the Forest Service challenging
the decision. On November 13, 1997, the appeal was denied. On November 4, 1997,
the Company received the City and Borough of Juneau Large Mine Permit for the
Kensington project. The Company anticipates that it will receive the remaining
key permits by the end of the first quarter of 1998. Currently, Coeur is working
on a mine optimization study intended to reduce the project's capital and
operating costs, and a development program designed to increase the current 1.9
million ounce gold reserve. Coeur does not intend to develop Kensington unless
the optimization study and
20
<PAGE> 21
developmental program demonstrate the results required for the Company to
achieve the necessary return on investment. In that regard, based on the current
mine design, Kensington requires an average realized price of $400 per ounce
over the life of the project.
After an approximate 18-month construction phase, Kensington, at currently
estimated mineable reserve levels of approximately 1.9 million ounces of gold,
could be expected to produce an average of approximately 200,000 ounces of gold
per year over the initial 10-year life of the mine. Coeur has not completed its
exploration of all of the identified veins on the Kensington Property or on the
adjacent Jualin exploratory property, and the Company plans to conduct a
development program at Kensington with a goal of expanding the current 1.9
million ounces of gold reserves.
GOLDEN CROSS MINE
Production costs at the Golden Cross Mine significantly declined in 1997.
Cash costs and full costs of production per ounce of gold in 1997 amounted to
$245.34 and $289.47 per ounce, respectively, compared to $369.56 and $407.78 per
ounce in 1996, when costs and production were most unfavorably impacted by
remediation work.
Although the deep-seated ground movement below the Golden Cross Mine
tailings impoundment that necessitated the Company's 1996 write-off of the mine
appears to have stabilized, the limited tailings disposal capability 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 operations at the mine will cease. In the second quarter of 1997, Coeur
received its 80% share of a $10 million insurance recovery relating to business
interruption and property damage at the mine. The Company expended approximately
$12.1 million and 4.5 million in connection with additional remediation
activities at the mine in 1996 and 1997, respectively, and expects additional
remediation costs at the mine will approximate $1.4 million in 1998. In
addition, the Company estimates that costs associated with the closure of the
mine, net of salvage revenues, will approximate $4.0 million.
FORWARD SALE AND PURCHASE CONTRACT ACTIVITIES
Coeur historically has sold a portion of its silver and gold production
pursuant to forward contracts and at spot prices prevailing in the open market
at the time of sale. Entering into forward sale contracts is a strategy used to
mitigate some of the risks associated with fluctuating precious metals prices.
For example, based on market prices prevailing on March 24, 1998, the average
price of gold that could be realized three years from that date was
approximately $332.41 per ounce compared to the spot market price of gold of
$300.30 per ounce. The Company continually evaluates the potential benefits of
engaging in these strategies based on the then current market conditions. At
March 20, 1998, the Company had sold forward approximately 1.6 million ounces of
silver at an average price of $6.49 per ounce for delivery in 1998. At March 20,
1998, Gasgoyne had sold forward 171,100 ounces of gold attributable to Coeur's
interest in the Yilgarn Star Mine at an average minimum price of approximately
$A606 per ounce (or approximately $US403 per ounce based on currency exchange
rates on March 20, 1998).
ACQUISITIONS
The Company plans to continue its practice of acquiring silver and gold
mining properties and/or businesses that are operational or expected to become
operational in the near future. In addition to contributing to the Company's
reserve and production expansion potential, such properties and businesses must
be able to demonstrate a low cost of production.
PRINCIPAL EXPLORATION PROJECTS
Coeur is conducting extensive silver and gold exploratory activities at or
adjacent to its existing mining properties. Drilling on the Laguna Vein at the
Furioso project in southern Chile indicates an estimated 129,180 tons of
mineralized material averaging 0.62 ounces of gold and 6.64 ounces of silver per
ton and an internal feasibility study is currently focusing upon the
transportability of such mineralization to the Fachinal
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<PAGE> 22
Mine mill. Furthermore, exploratory activities at the Boton de Oro project close
to the El Bronce Mine in central Chile has indicated an internally calculated
resource of 1,598,000 tons averaging 0.28 ounces of gold and 0.7 ounces of
silver per ton that has the potential of expanding the El Bronce Mine resource
base and production. An internal feasibility study is analyzing the
transportation of Boton de Oro mineralization to the El Bronce Mine mill above
the approximately 3,000 tons per month currently being delivered.
Silver Valley Resources is engaged in exploration projects at the Coeur and
Galena Mines and adjacent Caladay project as well as on the leased Sterling
Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc. and
American Silver Mining Company properties in the Coeur d'Alene Mining District
in northern Idaho, which historically has been one of the largest silver
producing regions in the world; and Gasgoyne is conducting exploratory
activities in Western Australia.
Coeur's most significant other exploration activities are being conducted
in Guyana, Mexico and Chile. At the Groete Creek property, a low-grade gold,
potential bulk volume mining property located near Georgetown, Guyana, Coeur has
completed an internally generated resource calculation that estimates 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 a resource of 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.
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<PAGE> 23
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is listed on the NYSE Composite Tape and the
Pacific Stock Exchange. The following table sets forth, for the periods
indicated, the high and low closing sales prices of the Common Stock as reported
by the NYSE:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C>
1995: First Quarter............................................... $18.500 $14.750
Second Quarter.............................................. 21.500 17.500
Third Quarter............................................... 20.875 17.250
Fourth Quarter.............................................. 20.875 16.625
1996: First Quarter............................................... 25.125 18.375
Second Quarter.............................................. 22.250 18.375
Third Quarter............................................... 19.375 13.750
Fourth Quarter.............................................. 16.375 13.875
1997: First Quarter............................................... 18.250 13.875
Second Quarter.............................................. 16.000 12.500
Third Quarter............................................... 16.3125 12.6875
Fourth Quarter.............................................. 16.250 7.625
1998: First Quarter............................................... 13.00 8.00
</TABLE>
No dividend on the Common Stock was paid in 1997. The Company paid per
share cash distributions and dividends of $.15 on its Common Stock on each of
April 19, 1996, April 21, 1995, April 15, 1994, April 16, 1993 and April 15,
1992; $.12 on April 12, 1991; and $.11 on each of April 20, 1990 and April 21,
1989.
On March 23, 1998, there were 7,367 record holders of the Company's
outstanding Common Stock.
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<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and was derived from the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, which
report is incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995(6) 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 profit (loss).............................. 8,186 11,804 17,029 9,448 (2,836)(8)
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(1).................... 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)(2).......................................... 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(3).......................................... 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(4):
Net income (loss) attributable to Common
Shareholders:
Net loss from continuing operations.............. $ (0.92) $ (0.31) $ (0.08) $ (2.93) $ (1.12)
Income from discontinued operations (net of
taxes)......................................... 0.05 0.05 0.15 -- --
------- ------- ------- -------- --------
Income (loss) before cumulative change in
accounting method.............................. (0.87) (0.26) 0.07 (2.93) (1.12)
Cumulative effect of change in accounting
method......................................... 0.34 -- -- -- --
------- ------- ------- -------- --------
Net income (loss)................................ $ (0.53) $ (0.26) $ 0.07 $ (2.93) $ (1.12)
======= ======= ======= ======== ========
Cash dividends paid per Common Share................. $ 0.15 $ 0.15 $ 0.15 $ 0.15 --
======= ======= ======= ======== ========
Ratio of earnings to fixed charges(5)................ -- -- -- -- --
Weighted average number of shares of Common Stock and
equivalents used in calculation.................... 15,308 15,371 15,879 21,465 21,890
======= ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................................ $325,249 $412,361 $445,646 $580,330 $661,442
Working capital......................................... 104,883 170,087 105,597 179,626 221,610
Cash, equivalents and short-term investments............ 844,899 142,189 79,562 167,627 213,041
Long-term liabilities................................... 133,241 234,009 184,789 202,566 300,872
Shareholders' equity.................................... 170,849 160,292 239,832 346,198 322,089
</TABLE>
- ---------------
(1) During July 1996, the Company determined that certain adjustments were
required to properly reflect the estimated net realizable values of certain
mining properties in accordance with FASB statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." A charge relative to the Golden Cross Mine and the nearby Waihi East
property of approximately $53 million was effected due to increased
expenditure requirements related to remediation of ground movement which
impacts the tailings impoundment area and the ultimate viability of the
mine. The charge includes amounts necessary to increase the Company's
recorded remediation and reclamation liabilities at Golden Cross to
approximately $7.02 million, net of salvage values, as of December 31, 1996.
In addition, the Faride property in Chile was written down by $1.2 million
in July 1996 due to management's decision not to exercise its final option
payment on the project.
(2) On May 2, 1995, the Company sold the assets of its flexible hose and tubing
division, The Flexaust Company, and shares of a related subsidiary for
approximately $10.0 million, of which approximately $4 million was paid at
the time of closing and the balance is payable over the next five years. The
results of operations and the gain on sale of Flexaust
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<PAGE> 25
manufacturing segment are presented as "Discontinued Operations." The
Company recorded a pre-tax gain on the sale of approximately $3.9 million
($2.2 million net of income taxes) during the second quarter of 1995.
(3) Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting Statement of Financial Accounting Standards 109,
"Accounting for Income Taxes ("FAS 109")." FAS 109 requires an asset and
liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related
to federal and certain state net operating loss carryforwards. FAS 109 also
contained requirements regarding balance sheet classification and prior
business combinations. Hence, the Company adjusted the carrying values of an
incremental interest in the Rochester Property acquired in 1988 and CDE
Chilean Mining Corp. acquired in 1990 to reflect the gross purchase value
previously reported net-of-tax. The cumulative effect of the accounting
change on prior years at January 1, 1993 was a nonrecurring gain of
$5,181,188, or $.34 per share, and was included in the Consolidated
Statement of Operations for the year ended December 31, 1993. Other than the
cumulative effect, the accounting change had no material effect on the
results of operations for the year ended December 31, 1993.
(4) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Standards No. 128, "Earnings Per
Share."
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and fixed
charges. Fixed charges consist of interest and that portion of rent deemed
representative of interest. Earnings were insufficient to cover fixed
charges in the following amounts: $21.9 million in 1993, $9.2 million in
1994, $8.3 million in 1995, $64.1 million in 1996 and $18.0 million in 1997.
(6) Included in the results of operations for the year ended December 31, 1995
are (i) a gain of $4.4 million (included in other income) from the sale of
gold and silver purchased in the open market which was in turn delivered
pursuant to fixed price forward contracts during the year; and (ii) $2.4
million of income from discontinued operations (including the $2.2 million
after-tax gain from the related sale of certain non-mining assets in May
1995) during the year.
(7) Included in the results of operations for 1997 are (i) the receipt of $8.0
million of insurance proceeds for business interruption and property damage
at the Golden Cross Mine and (ii) a gain of $5.3 million arising from the
sale of gold purchased in the open market which was delivered pursuant to
fixed price forward contracts in the first quarter of 1997.
(8) The gross loss from mining operations for the year ended December 31, 1997
amounted to approximately $2.8 million compared to a gross profit from
mining operations for the prior year of $9.4 million. The decrease primarily
is attributable to (i) substantially lower silver and gold prices in 1997,
during which year the average silver and gold prices were $4.89 and $331.10
per 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 of 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, 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 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.
25
<PAGE> 26
RATIO OF EARNINGS TO FIXED CHARGES
The Company's earnings were inadequate to cover fixed charges for each of
the last five years. The amounts by which earnings were inadequate to cover
fixed charges for such periods were approximately $21.9 million in 1993, $9.2
million in 1994, $8.3 million in 1995, $64.1 million in 1996, and $18.0 million
in 1997. The Company's net cash provided by operating activities during the year
ended December 31, 1997 was approximately $17.2 million. The availability in the
future of cash flow from operations or working capital to fund the payment of
interest on the Debentures and repayment of the principal amount of Debentures
upon maturity will be dependent upon numerous factors that cannot now be
predicted, including gold and silver prices and production levels, the amount of
the Company's expenditures for acquisitions as well as mining property
developmental and exploratory activities, the results of the Company's
operations and the extent to which the Debentures are converted or redeemed.
SELLING DEBENTUREHOLDERS
The Debentures being offered hereby were originally issued by the Company
to Lazard Freres & Co. LLC in October 1997 in connection with an offering of the
Debentures effected in accordance with Rule 144A and Regulation S under the
Securities Act. The following table sets forth information concerning the
principal amount of Debentures beneficially owned by each Selling
Debentureholder. Other than as a result of the ownership of Debentures or Common
Stock, none of the Selling Debentureholders has had any material relationship
with the Company within the past three years, except as noted herein. The
Debentures and shares of Common Stock offered by this Prospectus may be offered
from time to time by the Selling Debentureholders named below:
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT PRINCIPAL $143,750,000
OF DEBENTURES AMOUNT OF PRINCIPAL AMOUNT
BENEFICIALLY DEBENTURES OF OUTSTANDING
NAME OWNED BEING OFFERED DEBENTURES
---- ---------------- ------------- ----------------
<S> <C> <C> <C>
MainStay Convertible Fund................ $ 14,800,000 $ 14,800,000 10.30%
President and Fellows of Harvard
College................................ 14,000,000 14,000,000 9.74
Societe Generale Secs CP................. 12,300,000 12,300,000 8.56
Argent Classic Convertible Arbitrage Fund
(Bermuda) L.P.......................... 8,500,000 8,500,000 5.91
Triton Capital Investments, LTD.......... 7,550,000 7,550,000 5.25
Lipper Convertibles, L.P................. 6,000,000 6,000,000 4.17
Phoenix Convertible Fund................. 6,000,000 6,000,000 4.17
JMG Convertible Investments, L.P. ....... 5,750,000 5,750,000 4.00
Forest Fulcrum Fund LP................... 5,150,000 5,150,000 3.58
Forest Global Convertible Fund Series
A-5.................................... 4,400,000 4,400,000 3.06
Pacific Horizon Capital Income Fund...... 4,400,000 4,400,000 3.06
GLG Global Convertible Fund PLC.......... 3,750,000 3,750,000 2.61
Bank of America Pension Plan............. 3,500,000 3,500,000 2.43
Highbridge International LDC............. 3,500,000 3,500,000 2.43
St. Clair Investments, L.P............... 3,500,000 3,500,000 2.43
Swiss Bank Corporation -- London
Branch................................. 3,000,000 3,000,000 2.09
Lipper Offshore Convertibles L.P......... 2,500,000 2,500,000 1.74
New York Life Separate Account #7........ 2,500,000 2,500,000 1.74
D.E. Shaw Securities, L.P................ 2,250,000 2,250,000 1.57
TQA Vantage Fund, L.P.................... 1,200,000 1,200,000 *
Credit Suisse First Boston Corporation... 1,125,000 1,125,000 *
K.A. Trading L.P......................... 1,010,500 1,010,500 *
Argent Classic Convertible Arbitrage Fund
LP..................................... 1,000,000 1,000,000 *
</TABLE>
26
<PAGE> 27
<TABLE>
<CAPTION>
PERCENT OF
PRINCIPAL AMOUNT PRINCIPAL $143,750,000
OF DEBENTURES AMOUNT OF PRINCIPAL AMOUNT
BENEFICIALLY DEBENTURES OF OUTSTANDING
NAME OWNED BEING OFFERED DEBENTURES
---- ---------------- ------------- ----------------
<S> <C> <C> <C>
Fortis Services Fund, Inc. -- Growth &
Income Series.......................... 1,000,000 1,000,000 *
Merrill Lynch Convertible Fund, Inc...... 1,000,000 1,000,000 *
Merrill Lynch World Income Fund, Inc..... 1,000,000 1,000,000 *
Pacific Life Insurance Company........... 1,000,000 1,000,000 *
Ramius Fund, Ltd......................... 1,000,000 1,000,000 *
Security Insurance Company of Hartford... 1,000,000 1,000,000 *
Susquehanna Capital Group................ 1,000,000 1,000,000 *
TQA Arbitrage Fund, L.P.................. 950,000 950,000 *
D.E. Shaw Investments, L.P. ............. 750,000 750,000 *
Phoenix Home Life Convertible Fund....... 750,000 750,000 *
SoundShore Partners L.P.................. 750,000 750,000 *
MainStay VP Convertible Fund............. 700,000 700,000 *
TQA Leverage Fund, L.P................... 675,000 675,000 *
TQA Vantage Plus Fund, Ltd............... 675,000 675,000 *
Reserve Convertible Securities Fund...... 550,000 550,000 *
Diversified Trading Investments.......... 500,000 500,000 *
Donaldson, Lufkin & Jenrette Securities
Corp. ................................. 500,000 500,000 *
Silverton International Fund Limited..... 500,000 500,000 *
Zazove Convertible Fund, L.P............. 500,000 500,000 *
LLT Limited.............................. 400,000 400,000 *
Michael Angelo, L.P...................... 400,000 400,000 *
Raphael, L.P............................. 400,000 400,000 *
McMahan Securities Company, L.P. ........ 350,000 350,00 *
Bank of America Convertible Securities
Fund................................... 260,000 260,000 *
Fortis Equity Portfolio, Inc. -- Fortis
Growth & Income Portfolio.............. 250,000 250,000 *
LDG Limited.............................. 250,000 250,000 *
Medici Partners L.P...................... 200,000 200,000 *
Worldwide Transactions Ltd............... 170,000 170,000 *
Pacific Innovation Trust Capital Income
Fund................................... 140,000 140,000 *
Employee Benefit Convertible Fund........ 130,000 130,000 *
Forest Global Convertible Fund Series
A...................................... 50,000 50,000 *
Salomon Brothers Inc..................... 50,000 50,000 *
------------ ------------ -----
Total.......................... $135,535,000 $135,535,000 94.29%
============ ============ =====
</TABLE>
- ---------------
* Less than 1%
Because the Selling Debentureholders may offer all or some of the
Debentures which they hold and/or shares of Common Stock issued upon conversion
thereof pursuant to the offering contemplated by this Prospectus, and because
there are currently no agreements, arrangements or understandings with respect
to the sale of any of the Debentures or shares of Common Stock that will be held
by the Selling Debentureholders after completion of this offering, no estimate
can be given as to the principal amount of Debentures or shares of Common Stock
that will be held by the Selling Debentureholders after completion of this
offering. See "Plan of Distribution."
The Company and the Selling Debentureholders are obligated to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay the costs and expenses incurred in connection with the
preparation and filing under the Securities Act of the Registration Statement of
which this Prospectus forms a part.
27
<PAGE> 28
DESCRIPTION OF DEBENTURES
Debentures in the total principal amount of $143,750,000 were issued in
October 1997 pursuant to an Indenture (the "Indenture") between the Company and
Bankers Trust Company, as trustee (the "Trustee"). The terms of the Debentures
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act") as in
effect on the date of the Indenture. The Debentures are subject to all such
terms, and holders of the Debentures are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below.
GENERAL
The Debentures are general unsecured obligations of the Company limited to
$143,750,000 in aggregate principal amount. The Debentures bear interest at
7 1/4% per annum, payable semiannually on April 30 and October 31 in each year
to holders of record of Debentures at the close of business on the April 15 or
October 15 next preceding the interest payment date. The first interest payment
date will be April 30, 1998. Interest is computed on the basis of a 360-day year
of twelve 30-day months. The Debentures mature on October 31, 2005.
Holders must surrender the Debentures to a Paying Agent to collect
principal payments. The Company may pay principal and interest by its check and
may mail interest checks to a holder's registered address. The Trustee will act
as Conversion Agent, Paying Agent and Registrar. The Company may change the
Conversion Agent, Paying Agent or Registrar without prior notice to
Debentureholders. The Company or any of its subsidiaries may act as Conversion
Agent, Paying Agent or Registrar.
CONVERSION OF DEBENTURES
The holder of any Debenture is entitled at any time prior to the close of
business on October 31, 2005, subject to prior redemption, to convert such
Debenture (or portions thereof which are in denominations of $1,000 or integral
multiples thereof) at the principal amount thereof, into shares of Common Stock,
at the conversion price set forth on the cover page of this Prospectus, subject
to adjustment as described below. No payment or adjustment will be made on
conversion of any Debenture for interest accrued thereon or dividends on any
Common Stock issued and the holder will lose any right to payment of interest on
the Debentures surrendered for conversion; provided, however, that upon a call
for redemption by the Company, accrued and unpaid interest to the redemption
date shall be payable with respect to Debentures that are converted after a
notice of redemption has been mailed and on or prior to the redemption date.
Debentures surrendered for conversion during the period from the regular record
date for an interest payment to the corresponding interest payment date (except
Debentures called for redemption as described in the preceding sentence) must be
accompanied by payment of an amount equal to the interest thereon which the
holder is to receive on such interest payment date. The Company is not required
to issue fractional shares of Common Stock upon conversion of Debentures and, in
lieu thereof, will pay a cash adjustment based upon the market price of the
Common Stock on the last business day prior to the date of conversion. In the
case of Debentures called for redemption, conversion rights will expire at the
close of business on the business day prior to the redemption date.
The conversion price will be subject to adjustment in certain events,
including (i) the issuance of dividends (and other distributions) payable in
Common Stock on any class of capital stock of the Company, (ii) the issuance to
all holders of Common Stock of rights or warrants entitling them to subscribe
for or purchase Common Stock at less than the current market price (as defined
in the Indenture), (iii) subdivisions, combinations and reclassifications of
Common Stock, and (iv) distributions to all holders of Common Stock of evidences
of indebtedness of the Company or assets (including securities, but excluding
those rights, warrants, dividends and distributions referred to above and
dividends and distributions paid in cash out of the earned surplus of the
Company). No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% of the conversion price then in
effect; provided,
28
<PAGE> 29
however, that any adjustment that would otherwise be required to be made will be
carried forward and taken into account in any subsequent adjustment. In addition
to the foregoing adjustments, the Company will be permitted to make such
reductions in the conversion price as it considers to be advisable in order that
any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the holders of the Common Stock. In case of
certain consolidations or mergers to which the Company is a party or the sale or
transfer of all or substantially all of the assets of the Company, each
Debenture then outstanding would, without the consent of any Holders of
Debentures, become convertible only into the kind and amount of securities, cash
and other property receivable upon the consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock of the Company into which
such Debenture might have been converted immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon the consolidation, merger,
sale or transfer (provided that if the kind or amount so receivable is not the
same for each non-electing share, then the kind and amount so receivable by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares).
If the Company consolidates or merges into or sells, leases, conveys or
otherwise disposes of all or substantially all of its assets to any person, the
Debentures will become convertible into the kind and amount of securities, cash
or other assets which the holders of the Debentures would have owned immediately
after the transaction if the holders had converted the Debentures immediately
before the effective date of the transaction at the conversion price in effect
immediately prior to such effective date.
OPTIONAL REDEMPTION OF DEBENTURES
The Debentures are redeemable at the option of the Company, in whole or in
part, on or after October 31, 2000, at the redemption prices (expressed as
percentages of the principal amount) set forth below plus accrued interest to
the redemption date, if redeemed during the 12 month period beginning October 31
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- --------------
<S> <C>
2000........................................................ 103.62500%
2001........................................................ 102.71875%
2002........................................................ 101.81250%
2003........................................................ 100.90625%
2004 and thereafter......................................... 100.00000%
</TABLE>
In the event of redemption of less than all of the Debentures, the
Debentures will be chosen by lot for redemption by the Trustee as provided in
the Indenture. Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Debentures to be
redeemed at its registered address. On and after the redemption date interest
ceases to accrue on Debentures or portions thereof called for redemption.
REPURCHASE AT OPTION OF HOLDER UPON OCCURRENCE OF A DESIGNATED EVENT
If at any time there occurs any Designated Event (as defined below) with
respect to the Company, each holder of Debentures shall have the right, at the
holder's option, to require the Company to repurchase all of such holder's
Debentures, or a portion thereof which is $1,000 or any integral multiple
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined below), at 100% of their principal amount,
together with accrued interest to the date fixed for repurchase.
Within 30 days after the occurrence of a Designated Event, the Company is
obligated to mail to all holders of record of the Debentures a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company shall deliver a copy
of the Company Notice to the Trustee and shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise the repurchase right, holders of Debentures must
deliver on or before the 30th day after the date of the Company Notice
irrevocable
29
<PAGE> 30
written notice to the Company (or an agent designated by the Company for such
purpose) of the holder's exercise of such right, together with the Debentures
with respect to which the right is being exercised, duly endorsed for transfer.
A Designated Event shall be deemed to have occurred upon the consummation
of a purchase, merger or acquisition constituting a "Change in Control." As used
herein, a "Change in Control" of the Company shall be deemed to have occurred
when: (i) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons; (ii) there shall be
consummated any consolidation or merger of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation or
merger with a wholly owned subsidiary of the Company in which all shares of
Common Stock outstanding immediately prior to the effectiveness thereof are
changed into or exchanged for the same consideration) or (B) pursuant to which
the Common Stock would be converted into cash, securities or other property, in
each case, other than a consolidation or merger of the Company in which the
holders of the Common Stock immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger, or (iii) any person, or any persons acting together which would
constitute a "group" for purposes of Section 13(d) of the Exchange Act (other
than the Company, any Subsidiary, any employee stock purchase plan, stock option
plan or other stock incentive plan or program, retirement plan or automatic
dividend reinvestment plan or any substantially similar plan of the Company or
any Subsidiary or any person holding securities of the Company for or pursuant
to the terms of any such employee benefit plan), together with any affiliates
thereof, shall beneficially own (as defined in Rule 13d-3 under the Exchange
Act) at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company.
Notwithstanding the foregoing, a Change in Control as described above shall
not be deemed to have occurred if (i) the Current Market Price (as defined in
the Indenture) of the Common Stock is at least equal to 105% of the conversion
price of the Debentures in effect immediately preceding the time of such Change
in Control, or (ii) all of the consideration (excluding cash payments for
fractional shares) in the transaction giving rise to such Change in Control to
the holders of Common Stock consists of shares of common stock that are, or
immediately upon issuance will be, listed on a national securities exchange or
quoted in the National Association of Securities Dealers, Inc. National Market
System ("NASDAQ-NMS"), and as a result of such transaction the Debentures become
convertible solely into such common stock, or (iii) the consideration in the
transaction giving rise to such Change in Control to the holders of Common Stock
consists of cash, securities that are, or immediately upon issuance will be,
listed on a national securities exchange or quoted in the NASDAQ-NMS, or a
combination of cash and such securities, and the aggregate fair market value of
such consideration (which, in the case of such securities, shall be equal to the
average of the daily closing prices of such securities during the ten
consecutive trading days commencing with the sixth trading day following
consummation of such transaction) is at least 105% of the conversion price of
the Debentures in effect on the date immediately preceding the closing date of
such transaction.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Change in Control could create an event of default under
Senior Debt of the Company, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Debentures. See
"Subordination." Failure by the Company to repurchase the Debentures when
required will result in an Event of Default with respect to the Debentures
whether or not such repurchase is permitted by the subordination provisions. The
Company's ability to pay cash to the holders of Debentures upon a repurchase may
be limited by certain financial covenants contained in the Company's Senior
Debt.
If any repurchase pursuant to the foregoing provisions constitutes an
"issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, such
transaction would be subject to the requirements of Rule 13e-4, including the
filing of an Issuer Tender Offer Statement on Schedule 13D-4 with the Commission
and the furnishing of certain information contained therein to the
Debentureholders. The holders' repurchase right upon the occurrence of a
Designated Event could discourage the acquisition of the Company by a potential
acquiror.
30
<PAGE> 31
SUBORDINATION
The Debentures are subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Debt. Senior Debt is defined to include all indebtedness, whether now
outstanding or hereafter created, incurred, assumed or guaranteed by the Company
for money borrowed from others (including obligations under capitalized leases
or purchase money mortgages) or in connection with the acquisition by it or a
Subsidiary of any other business or entity, and, in each case, renewals,
extensions and funding thereof, other than (i) any such indebtedness as to
which, in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the Debentures, (ii)
indebtedness of the Company to any Affiliate, (iii) the Company's 6% Convertible
Subordinated Debentures Due 2002 and the Company's 6 3/8% Convertible
Subordinated Debentures Due 2004 and (iv) the Debentures.
As of December 31, 1997, the Company had approximately $7.6 million of
Senior Debt outstanding. The Company's 6% Convertible Subordinated Debentures
Due 2002, of which $49.84 million principal amount is outstanding, and 6 3/8%
Convertible Subordinated Debentures Due 2004, of which $95 million principal
amount is outstanding, rank pari passu with the Debentures. The Company conducts
significant operations through its subsidiaries. The rights of the Company's
creditors, including the holders of the Debentures, to participate in the assets
of any subsidiary will be subject to prior claims of such subsidiary's
creditors. The Indenture will not restrict the incurrence of Senior Debt or
other indebtedness, secured or unsecured, by the Company or any subsidiary.
No payment of principal, if any, or interest on the Debentures may be made
and no Debentures may be purchased if the Company is then in default in the
payment of any Senior Debt or if at the time any other event of default under
the terms of any Senior Debt exists permitting acceleration thereof.
Furthermore, no Debentures may be purchased by the Company without the prior
approval of the syndicate of banks with whom the Company has its revolving
credit agreement. Upon any payment or distribution of assets of the Company in
the event of any insolvency, reorganization, liquidation or similar proceeding,
all Senior Debt must be repaid in full (including any interest thereon accruing
after the commencement of any proceeding) before the Holders of the Debentures
will be entitled to receive or retain any payment. If the Debentures are
declared due and payable before their stated maturity because of any Event of
Default, no payment may be made in respect of the Debentures unless and until
all Senior Debt shall have been paid in full.
By reason of such subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Debt may recover more, ratably, than
Holders of Debentures, and creditors of the Company who are neither holders of
Senior Debt nor Holders of Debentures may recover less, ratably, than holders of
Senior Debt.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate or merge with or into, or sell, lease,
convey or otherwise dispose of all or substantially all of its assets to,
another corporation, person or entity unless (i) the Company is the surviving
person or the successor or transferee is a corporation organized under the laws
of the United States, any state thereof or the District of Columbia, (ii) the
successor assumes all the obligations of the Company under the Debentures and
the Indenture and (iii) after such transaction no Event of Default exists.
COVENANTS
The Company shall not adopt any plan of liquidation which provides for,
contemplates or the effectuation of which is preceded by (i) the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company otherwise than substantially as an entirety and (ii) the distribution of
all the proceeds of such sale, lease, conveyance or other disposition unless the
Company makes provisions for satisfaction of the Company's obligation to pay
principal and interest on the Debentures.
31
<PAGE> 32
EVENTS OF DEFAULT AND REMEDIES
An Event of Default includes: (i) default in the payment of any interest,
continued for 30 days; (ii) default in the payment of principal or premium, if
any, when due; (iii) default in the payment of the repurchase price in respect
of any Debenture on the Repurchase Date in accordance with the Indenture; (iv)
default in the performance of any other covenant continued for 60 days after
written notice as provided in the Indenture; (v) default in respect of
indebtedness of the Company for money borrowed which results in acceleration of
the maturity of $1,000,000 or more of indebtedness, if such acceleration is not
rescinded or indebtedness discharged within 10 days after written notice to the
Company as provided in the Indenture; and (vi) certain events in bankruptcy,
insolvency or reorganization. If any Event of Default shall happen and be
continuing, the Trustee or the holders of 25% in principal amount of the
outstanding Debentures may declare the Debentures due and payable. At any time
after a declaration of acceleration with respect to the Debentures has been
made, but before a judgment or decree based on acceleration has been obtained,
the holders of a majority in principal amount of the outstanding Debentures may,
under certain circumstances, rescind and annul such acceleration.
The Indenture provides that the Trustee will be under no obligation,
subject to the duty of the Trustee during any Default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture at
the request or direction of any of the holders, unless such holders shall have
offered to the Trustee reasonable indemnification. Subject to such provisions
for indemnification of the Trustee, the holders of a majority in principal
amount of the outstanding Debentures have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee.
The holders of a majority in principal amount of the outstanding Debentures
may on behalf of the holders of all Debentures waive compliance by the Company
with certain restrictive provisions of the Indenture. The holders of a majority
in principal amount of the outstanding Debentures may on behalf of the holders
of all Debentures waive certain past defaults except a default in payment of the
principal of (or premium, if any) or interest on, any Debenture or in respect of
a provision which under the Indenture cannot be modified or amended without the
consent of the holder of each outstanding Debenture affected thereby.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon becoming aware of any Default
or Event of Default, a statement specifying such Default or Event of Default.
A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Debentures
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of the Debentures by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Debentures.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company may terminate its obligations under the Indenture at any time
by delivering all outstanding Debentures to the Trustee for cancellation. After
all the Debentures have been called for redemption, the Company may terminate
all of its obligations under the Indenture, other than its obligations to pay
the principal of and interest on the Debentures and certain other obligations,
at any time, by depositing with the Trustee money or non-callable U.S.
Government obligations sufficient to pay all remaining indebtedness on the
Debentures.
REGISTRATION AND TRANSFER OF DEBENTURES
Global Debenture; Book-Entry Procedures. The Debentures are represented by
a single global debenture (the "Global Debenture") issued to the Depository
Trust Company ("DTC") for its book-entry settlement system and are registered in
the name of Cede & Co., as nominee of DTC. Bankers Trust Company, as custodian
(the "Custodian"), acts as custodian of the Global Debenture for DTC. Because
32
<PAGE> 33
Cede & Co. is the holder of record of the Global Debenture, each person owning a
beneficial interest in the Global Debenture must rely upon the procedures of the
institutions having accounts with DTC to exercise or be entitled to any of the
rights of a holder of a Debenture.
DTC has advised the Company that it is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. DTC's participants include
securities brokers and dealers (including the Purchaser), banks, trust
companies, clearing corporations and certain other organizations, some of whom
(and/or their representatives) own DTC. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants may beneficially
own securities held by DTC only through participants.
Upon the original issuance by the Company of the Debentures represented by
the Global Debenture, DTC credited, on its book-entry registration and transfer
system, the respective principal amounts of the Debentures represented by the
Global Debenture to the accounts of participants. Ownership of beneficial
interests in the Global Debenture is limited to participants or persons that
hold interests through participants. Ownership of beneficial interests in the
Debentures represented by the Global Debenture is shown on, and the transfer of
that ownership may be effected only through, records maintained by DTC (with
respect to interests of participants in DTC), or by participants in DTC or
persons that may hold interests through such participants (with respect to
persons other than participants in DTC). A copy of the Notice of Transfer
Pursuant to Registration Statement, which must be delivered to the Trustee by
any Selling Debentureholder upon any sale of Debentures pursuant to this
Prospectus, is set forth as Appendix A to the Prospectus. The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in the Global Debenture.
So long as DTC, or its nominee, is the registered owner of the Global
Debenture, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Debentures represented by such Global Debenture for all
purposes under the Indenture. Owners of beneficial interests in Debentures
represented by the Global Debenture will be entitled to receive physical
delivery of Debenture in definitive form as provided below under "Definitive
Debentures."
Payments of principal of and interest and premium, if any, on the
Debentures represented by the Global Debentures registered in the name of DTC or
its nominee will be made by the Company through the Trustee to DTC or its
nominee, as the case may be, as the registered owner of the Global Debenture.
None of the Company, the Trustee, the Paying Agent, the Conversion Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Debenture or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. The Company expects
that DTC, upon receipt of any payment of principal, premium or interest in
respect of the Global Debenture, will immediately credit the accounts of the
related participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Debenture as
shown on the records of DTC. The Company also expects that payments by
participants to owners of beneficial interests in the Global Debenture will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
participants.
If DTC is at any time unwilling or unable to continue as depository of the
Global Debenture and a successor depository is not appointed by the Company
within 90 days, the Company will issue Debentures in fully registered,
certificated form ("Definitive Debentures") in exchange for the Debentures
represented by
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the Global Debenture. In addition, the Company may at any time and in its sole
discretion determine not to have a Global Debenture, and, in such event, will
issue Definitive Debentures in exchange for the Debentures represented by the
Global Debenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Debentures may be
amended or supplemented with the consent of the holders of at least a majority
in principal amount of such then outstanding Debentures, and any existing
default or compliance with any provision may be waived with the consent of the
holders of a majority in principal amount of the then outstanding Debentures.
Without the consent of any holder of the Debentures, the Company and the Trustee
may amend or supplement the Indenture or the Debentures to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Debentures in addition to
or in place of certificated Debentures, to provide for the assumption of the
Company's obligations to holders of the Debentures in the case of a merger or
acquisition, or to make any change that does not materially adversely affect the
legal rights of any holder of the Debentures. Without the consent of each holder
affected, the Company may not reduce the principal amount of Debentures the
holders of which must consent to an amendment of the Indenture; reduce the rate
or change the interest payment time of any Debenture; reduce the principal of or
change the fixed maturity of any Debenture or alter the redemption provision
with respect thereto; make any Debenture payable in money other than that stated
in the Debenture; make any change in the provisions concerning waiver of
Defaults or Events of Default by holders of the Debentures or rights of holders
to receive payment of principal or interest; make any change that adversely
affects the right to convert any Debenture; or make any change in the
subordination provisions that adversely affects the rights of any holder.
CONCERNING THE TRUSTEE
Bankers Trust Company is the Trustee under the Indenture. The Trustee is
trustee under an indenture in respect of $100 million principal amount of 6 3/8%
Convertible Subordinated Debentures Due 2002 issued by the Company in February
1994, which ranks pari passu with the Debentures.
The holders of a majority in principal amount of the then outstanding
Debentures have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee. The Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the holders of the
Debentures, unless they shall have offered to the Trustee security and indemnity
satisfactory to it.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 60,000,000 shares of Common Stock,
par value $1.00 per share, of which, at March 24, 1998, 21,898,624 shares were
outstanding and 1,059,211 shares were held as treasury stock, up to 7,500,000
shares were reserved for issuance upon the conversion of the MARCS, 8,237,822
shares were reserved for issuance upon the conversion of the $143.75 million
principal amount of outstanding Debentures, 3,686,457 shares were reserved for
possible issuance upon the conversion of the Company's $95 million principal
amount of outstanding 6 3/8% Convertible Subordinated Debentures due 2004,
1,949,159 shares were reserved for issuance upon conversion of the Company's
$49.8 million principal amount of outstanding 6 3/8% Convertible Subordinated
Debentures due 2002, 857,000 shares were reserved for issuance under the
Company's Executive Compensation Program and 200,000 shares were reserved for
issuance under the Company's Non-Employee Directors Stock Option Plan.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders, and upon giving
notice required by law, may cumulate their votes in elections of directors.
Subject to preferences that may be applicable to any shares of Preferred Stock
of the Company outstanding at the time, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor and, in the event of the liquidation,
dissolution or winding up of the Company, are entitled to share ratably in all
assets remaining after payment of liabilities. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other security. The outstanding Common Stock is fully-paid and non-assessable.
The Company's Articles of Incorporation include a "fair price" provision
applicable to certain business combination transactions in which the Company may
be involved. The provision requires that an Interested Shareholder (the holder
of 10% or more of the Company's outstanding shares of Common Stock) not engage
in certain specified transactions (e.g., mergers, sales of assets, dissolution
and liquidation) unless one of three conditions is met: (i) a majority of the
directors who are unaffiliated with the Interested Shareholder and were
directors before the Interested Shareholder became an Interested Shareholder
approve the transaction; (ii) holders of 80% or more of the outstanding shares
of Common Stock approve the transaction; or (iii) the shareholders are all paid
a "fair price," i.e., generally the higher of the fair market value of the
shares or the same price as the price paid to shareholders in the transaction in
which the Interested Shareholder acquired its block. By discouraging certain
types of hostile takeover bids, the fair price provision may tend to insulate
current management against the possibility of removal. The Company is not aware
of any person or entity proposing or contemplating such a transaction.
The transfer agent and registrar for the Company's Common Stock, which is
listed on the New York Stock Exchange, is First Interstate Bank of Oregon, N.A.,
Portland, Oregon.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock, par value $1.00 per share, of which 7,077,833 shares of MARCS were issued
in March 1996. The Board of Directors has the authority to determine the
dividend rights, dividend rates, conversion rights, voting rights, rights and
terms of redemption and liquidation preferences, redemption prices, sinking fund
terms on any series of Preferred Stock, the number of shares constituting any
such series and the designation thereof. Holders of Preferred Stock have no
preemptive rights and have no rights to convert their Preferred Stock into any
other securities. While series may be designated and Preferred Stock may be
issued from time to time in the future, except upon exercise of the Rights (as
described below), the Company has no present plans to issue any such shares of
Preferred Stock.
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES (MARCS)
Holders of the 7,077,833 outstanding shares of MARCS, who have no
preemptive rights, are entitled to receive an annual cumulative cash dividend of
$1.488 per share, payable quarterly. The shares of MARCS
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<PAGE> 36
rank prior to the Common Stock as to payment of dividends and distribution of
assets upon liquidation. The liquidation preference applicable to each share of
MARCS is equal to the sum of $21.25, which was the per share price received by
the Company upon the issuance thereof on March 13, 1996, plus the amount of
accrued and unpaid dividends thereon.
On March 15, 2000 (the "Mandatory Conversion Date"), unless either
previously converted at the option of the holder or redeemed by the Company,
each outstanding share of MARCS will mandatorily convert into (i) 1.111 shares
of Common Stock, subject to adjustment in certain events, and (ii) the right to
receive an amount in cash equal to all accrued and unpaid dividends thereon.
Shares of MARCS are not redeemable prior to March 15, 1999. At any time and
from time to time on and after March 15, 1999 until immediately prior to the
Mandatory Conversion Date, the Company may redeem any or all of the outstanding
shares of MARCS. Upon any such redemption, each holder will receive, in exchange
for each share of MARCS, the greater of: (a) the number of shares of Common
Stock equal to the sum of (i) $21.622, declining after March 15, 1999 to $21.25
until the Mandatory Conversion Date and (ii) all accrued and unpaid dividends
thereon, divided by the current market price of the Common Stock (determined in
accordance with the Certificate of Designations, Rights, Preferences and
Limitations relating to the MARCS) on the applicable date of determination, or
(b) .826 of a share of Common Stock.
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each of the shares of MARCS is convertible at the option of the holder
thereof into .826 of a share of Common Stock (equivalent to a conversion price
of $25.713 per share of Common Stock), subject to adjustment in certain events.
The number of shares of Common Stock a holder will receive upon redemption, and
the value of the shares received upon conversion will vary depending on the
market price of the Common Stock from time to time.
The holders of shares of MARCS, which are listed on the New York Stock
Exchange, have the right with the holders of Common Stock to vote in the
election of directors and upon each other matter coming before any meeting of
the holders of Common Stock on the basis of one vote for each share of MARCS
held. The holders of shares of MARCS and the holders of Common Stock vote
together as one class on such matters except as otherwise provided by law or by
the Company's Articles of Incorporation.
In the event that dividends on the shares of MARCS or any other series of
Preferred Stock are in arrears and unpaid for six quarterly dividend periods, or
if any other series of Preferred Stock is entitled for any other reason to
exercise voting rights, separate from the Common Stock, to elect any directors
of the Company ("Preferred Stock Directors"), the holders of the shares of MARCS
(voting separately as a class with holders of all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable),
with each share of MARCS entitled to one vote on this and other matters in which
holders of Preferred Stock vote as a group, will be entitled to vote for the
election of two directors, such directors to be in addition to the number of
directors constituting the Board of Directors immediately before the accrual of
such right. Such right, when vested, will continue until all dividends in
arrears and payable on the shares of MARCS and such other series of Preferred
Stock have been paid in full and the right of any other series of Preferred
Stock to exercise voting rights, separate from the Common Stock, to elect
Preferred Stock Directors of the Company terminates or has terminated, and, when
so paid and any such termination occurs or has occurred, such right of the
holders of the shares of MARCS will cease. The term of office of any director
elected by the holders of the shares of MARCS and such other series of Preferred
Stock will terminate on the earlier of (i) the next annual meeting of
shareholders at which a successor has been elected and qualified or (ii) the
termination of the right of holders of the shares of MARCS and such other series
of Preferred Stock to elect Preferred Stock Directors.
SERIES A JUNIOR PREFERRED STOCK
On May 24, 1989, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of the Company's Common
Stock to shareholders of record at the close of business on June 16, 1989. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Preferred Stock at a purchase price of $100
in cash ("Purchase Price"), subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement, dated as of May 24,
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<PAGE> 37
1989 (the "Rights Agreement"), between the Company and First Interstate Bank of
Oregon, N.A., as Rights Agent. The Rights are not exercisable or detachable from
the Common Stock until ten days after any person or group acquires 20% or more
(or commences a tender offer for 30% or more) of the Company's Common Stock. If
any person or group acquires 30% or more of the Company's Common Stock or
acquires the Company in a merger or other business combination, each Right
(other than those held by the acquiring person) will entitle the holder to
purchase Preferred Stock of the Company or common stock of the acquiring company
having a market value of approximately two times the $100 exercise price. The
Rights expire on May 24, 1999, and can be redeemed by the Company at any time
prior to their becoming exercisable. Shares of Common Stock issued prior to the
expiration date of the Rights upon conversion of the Debentures will be
accompanied by Rights.
PLAN OF DISTRIBUTION
The Company, which received the proceeds from the original sale of the
Debentures in October 1997, will not receive any of the proceeds from this
offering. The Company has been advised by the Selling Debentureholders that the
Selling Debentureholders may sell all or a portion of the Debentures or shares
of Common Stock offered hereby from time to time directly by the Selling
Debentureholders or, alternatively, through underwriters, broker-dealers or
agents. Such Debentures may be sold in one or more transactions at fixed prices,
at prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales maybe effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Debentures may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or services or in the
over-the-market, or (iv) through the writing of options. In connection with
sales of the Debentures or otherwise, the Selling Debentureholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the Debentures in the course of hedging the positions they assume. The
Selling Debentureholders may also sell Debentures short and deliver Debentures
to close out such short positions, or loan or pledge Debentures to
broker-dealers that in turn may sell such Debentures. To the extent required,
the aggregate principal amount of Debentures and/or number of shares of Common
Stock to be sold, the names of the Selling Debentureholders, the purchase price,
the name of any such agent, dealer or underwriter and any applicable commissions
with respect to a particular offer will be set forth in an accompanying
Prospectus Supplement. The aggregate proceeds to the Selling Debentureholders
from the sale of the Debentures and Common Stock offered by the Selling
Debentureholders hereby will be the purchase price of such Debentures and shares
of Common Stock less any broker's commissions.
There is no assurance that the Selling Debentureholders will sell any or
all of the Debentures or shares of Common Stock offered hereby.
The Company has been advised by Lazard Freres & Co. LLC that it is
presently making, and intends to continue making, a market in the Debentures;
however, it is not obligated to do so and any such market making may be
discontinued at any time. The Debentures have been designated as "PORTAL"
securities eligible for quotation in the National Association of Securities
Dealers PORTAL system. However, there can be no assurance that an active market
for the Debentures will develop.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Common Stock will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
The Selling Debentureholders and any broker-dealers, agents or underwriters
that participate with the Selling Debentureholders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act, in which event any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
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Pursuant to certain rules under the Exchange Act, any person who
participates in the offering of Debentures or shares of Common Stock made hereby
in one or more transactions that are distinguished from ordinary trading
transactions by the presence of special selling efforts and selling methods, may
not simultaneously engage in market making activities with respect to either the
Debentures or the Common Stock for a period of nine business days (two business
days in the case of Common Stock) prior to the commencement of such offering. In
addition, and without limiting the foregoing, each Selling Debentureholder will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Debentures or
shares of Common Stock by the Selling Debentureholders.
The Company will pay all expenses incident to the offering and sale of the
Debentures and Common Stock to the public other than underwriting discounts and
selling commissions and fees. See "Selling Debentureholders."
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Freedman, Levy, Kroll & Simonds, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 have
been audited by Ernst & Young LLP, independent auditors as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Bankers Trust Company
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: Coeur d'Alene Mines Corporation (the "Company") 7 1/4% Convertible
Subordinated Debentures due 2005 (the "Securities")
Dear Sirs:
Please be advised that has transferred $ aggregate
principal amount of the above-referenced Securities pursuant to an effective
Registration Statement on Form S-3 (File No. 333-40513) filed by the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Securities is named as a "Selling Securityholder" in the
Prospectus dated March 31, 1998 or in supplements thereto, and that the
aggregate principal amount of the Securities transferred are the Securities
listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
[NAME]
By:
(Authorized Signature)
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ANY SELLING DEBENTUREHOLDER OR ANY OTHER PERSON. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Company........................... 17
Price Range of Common Stock and
Dividends........................... 23
Selected Consolidated Financial
Data................................ 24
Ratio of Earnings to Fixed Charges.... 26
Selling Debentureholders.............. 26
Description of Debentures............. 28
Description of Capital Stock.......... 35
Plan of Distribution.................. 37
Legal Matters......................... 38
Experts............................... 38
Appendix A............................ 39
</TABLE>
$143,750,000
COEUR D'ALENE MINES LOGO
COEUR D'ALENE MINES CORP
7 1/4% CONVERTIBLE
SUBORDINATED DEBENTURES
DUE 2005
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PROSPECTUS
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March 31, 1998
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