UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
-----------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number: 1-8641
COEUR D'ALENE MINES CORPORATION
(Exact name of Registrant as specified in its charter)
Idaho 82-0109423
--------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer Ident. No.)
of incorporation or organization)
P.O. Box I, Coeur d'Alene, Idaho 83816-0316
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (208) 667-3511
- ------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X} NO [ ]
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of Issuer's classes of common stock, as of the latest
practicable date: Common stock, par value $1.00, of which 21,900,579 shares
were issued and outstanding as of August 9, 1999.
<PAGE>
COEUR D'ALENE MINES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
June 30, 1999 and December 31, 1998
Consolidated Statements of Operations -- 5
Six Months Ended June 30, 1999 and 1998
Consolidated Statements of Cash Flows -- 6
Six Months Ended June 30, 1999 and 1998
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 10
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of
Market Risk 24
PART II. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES
</TABLE>
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
ASSETS (In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 102,297 $ 127,335
Short-term investments 4,310 1,753
Receivables 9,919 11,647
Inventories 49,398 43,675
---------- ----------
TOTAL CURRENT ASSETS 165,924 184,410
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 78,883 79,173
Less accumulated depreciation 39,233 37,304
---------- ----------
39,650 41,869
MINING PROPERTIES
Operational mining properties 82,527 82,018
Less accumulated depletion 48,827 46,149
---------- ----------
33,700 35,869
Developmental properties 28,943 25,898
---------- ----------
62,643 61,767
OTHER ASSETS
Investments in unconsolidated affiliates 64,126 66,914
Notes receivable 312 1,627
Debt issuance costs, net of accumulated
amortization 6,043 6,625
Other 3,073 2,768
---------- ----------
73,554 77,934
---------- ----------
$ 341,771 $ 365,980
========== ==========
</TABLE>
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,729 $ 3,512
Accrued liabilities 11,284 12,700
Accrued interest payable 4,038 5,412
Accrued salaries and wages 4,400 5,642
Current portion of remediation costs 2,081 3,052
Current portion of obligations under
capital leases 222 255
---------- ----------
TOTAL CURRENT LIABILITIES 24,754 30,573
LONG-TERM LIABILITIES
6% subordinated convertible debentures
due 2002 45,753 45,803
6 3/8% subordinated convertible debentures
due 2004 93,372 93,372
7 1/4% subordinated convertible debentures
due 2005 107,277 107,277
Other long-term liabilities 13,020 11,888
---------- ----------
TOTAL LONG-TERM LIABILITIES 259,422 258,340
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock) -
authorized 7,500,000 shares, 7,077,833
issued and outstanding 7,078 7,078
Common Stock, par value $1.00 per share-
authorized 60,000,000 shares, issued 22,959,790
and 22,957,835 shares in 1998 and 1997
(including 1,059,211 shares held in treasury) 22,960 22,958
Capital surplus 373,962 379,180
Accumulated deficit (333,048) (318,796)
Repurchased and nonvested shares (13,190) (13,190)
Accumulated other comprehensive loss:
Unrealized losses on short-term
investments (167) (163)
---------- ----------
57,595 77,067
---------- ----------
$ 341,771 $ 365,980
========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three Months Ended June 30, 1999
and 1998 Six Months Ended June 30,
1999 and 1998
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ -----------
(In thousands except for per share data)
<S> <C> <C> <C> <C>
REVENUES
Product sales $ 20,448 $ 32,256 $ 38,707 $ 53,422
Interest and other 1,227 2,307 2,312 5,896
------------ ------------ ------------ -----------
Total Revenues 21,675 34,563 41,019 59,318
COSTS AND EXPENSES
Production 14,436 22,348 27,749 33,630
Depreciation and amortization 4,951 7,691 9,447 16,223
Administrative and general 2,333 2,971 4,801 5,667
Exploration 2,084 2,557 3,947 4,373
Interest 4,138 3,653 8,327 7,468
Write down of mining properties
and other 631 81 845 54,665
------------ ------------ ------------ -----------
Total Cost and Expenses 28,573 39,301 55,116 122,026
------------ ------------ ------------ -----------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE TAXES (6,898) (4,738) (14,097) (62,708)
Income tax (benefit) provision 81 428 155 418
------------ ------------ ------------ -----------
NET LOSS $ (6,979) $ (5,166) $ (14,252) $ (63,126)
============ ============ ============ ===========
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (9,612) $ (7,799) $ (19,518) $ (68,392)
============ ============ ============ ===========
BASIC AND DILUTED LOSS PER SHARE DATA
Weighted average number
of shares of Common Stock
and equivalents used in
calculation 21,900 21,899 21,899 21,899
============ ============ ============ ===========
Net Loss per share attributable
to Common Shareholders $ (0.44) $ (0.36) $ (0.89)$ (3.12)
============ ============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three and Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ -----------
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (6,979) $ (5,166) $ (14,252) $ (63,126)
Add (deduct) noncash items:
Depreciation, depletion, and amortization 4,951 7,691 9,447 16,223
Reclamation 246 183 525 505
Other charges 986 200 1,281 286
Writedown of mining properties 54,506
Undistributed (earnings) loss of investment
in unconsolidated subsidiary 91 1,526 562 680
Changes in Operating Assets and Liabilities:
Receivables (1,334) 1,479 2,928 2,038
Inventories (2,022) 2,279 (5,723) (8,830)
Accounts payable and accrued liabilities (3,172) (6,815) (4,914) (11,257)
------------ ------------ ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (7,233) 1,377 (10,146) (8,975)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (1,711) (6,633) (3,735) (17,203)
Proceeds from sales of short-term investments 608 25,329 1,178 74,623
Investment in unconsolidated subsidiaries (271) (836) (296) (3,143)
Purchases of property, plant and equipment (453) (1,449) (640) (2,365)
Proceeds from sale of assets 869 68 869 7,667
Expenditures on operational mining properties (1,415) (705) (1,518) (1,758)
Expenditures on developmental properties (2,238) (4,720) (3,859) (8,098)
Other (868) (311) (1,326) (645)
------------ ------------ ------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (5,479) 10,743 (9,327) 49,078
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of long-term debt (3,610) (3,610)
Payment of cash dividends (2,633) (2,633) (5,266) (5,266)
Other (162) (123) (299) (434)
------------ ------------ ------------ -----------
NET CASH USED IN FINANCING ACTIVITIES (2,795) (6,366) (5,565) (9,310)
------------ ------------ ------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,507) 5,754 (25,038) 30,793
Cash and cash equivalents at beginning
of year 117,804 139,243 127,335 114,204
------------ ------------ ------------ -----------
Cash and cash equivalents at June 30, 1999 $ 102,297 $ 144,997 $ 102,297 $ 144,997
============ ============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the
three-and six-month periods ended June 30, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in the Coeur
d'Alene Mines Corporation Annual Report on Form 10-K for the year ended
December 31, 1998.
NOTE B: Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(In Thousands)
<S> <C> <C>
In process and on leach pads $ 40,688 $ 36,166
Concentrate and dore' inventory 5,101 3,968
Supplies 3,609 3,541
---------- ----------
$ 49,398 $ 43,675
========== ==========
</TABLE>
Inventories of ore on leach pads and in the milling process are valued
based on actual costs incurred, less costs allocated to minerals recovered
through the leaching and milling processes. Inherent in this valuation is an
estimate of the percentage of the minerals on leach pads and in process that
will ultimately be recovered. All other inventories are stated at the
lower-of-cost or market, with cost being determined using first-in, first-out
and weighted-average-cost methods. Dore' inventory includes product at the
mine site and product held by refineries.
7
<PAGE>
NOTE C: Income Taxes
The Company has reviewed its net deferred tax asset for the six-month
period ended June 30, 1999, together with net operating loss carryforwards,
and has decided to forego recognition of potential tax benefits arising
therefrom. In making this determination, the Company has considered the
Company's history of tax losses incurred since 1989, the current level of gold
and silver prices and the ability of the Company to use accelerated depletion
and amortization methods in the determination of taxable income. As a result,
the Company's net deferred tax asset has been fully reserved.
NOTE D: Segment Reporting
In 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information."
This statement replaces Statement No. 14, "Financial Reporting for Segments of
a Business Enterprise," and establishes new standards for defining and
reporting the Company's operating segments and requires selected information
in interim financial reports. Operating segments are defined as components of
an enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance. The
Company's chief operating decision making group is comprised of the Chief
Executive Officer, Chief Financial Officer and the Chief Operating Officer.
The operating segments are managed separately because each segment
represents a distinct use of Company resources and contribution to company
cash flows in its respective geographic area. The Company's reportable
operating segments include the Rochester, Golden Cross, Fachinal, and Petorca
(previously named El Bronce) mining properties, Coeur Australia (50% owner of
Gasgoyne Gold Mines NL), the Kensington development property, and the
Company's exploration program. All operating segments are engaged in the
discovery and/or mining of gold and silver and generate the majority of their
revenues from the sale of these precious metals. Intersegment revenues consist
of precious metal sales to the Company's metals marketing division and are
transferred at the market value of the respective metal on the date of the
transfer. The Other segment includes earnings (loss) from unconsolidated
subsidiaries accounted for by the equity method such as the Company's 50%
interest in Silver Valley Resources Corporation, the corporate headquarters,
elimination of intersegment transactions and other items necessary to
reconcile to consolidated amounts. Revenues in the Other segment are generated
principally from interest received from the Company's cash and investments
8
<PAGE>
that are not allocated to the operating segments. The accounting policies of
the operating segments are the same as those described in the summary of
significant accounting policies above. The Company evaluates performance and
allocates resources based on profit or loss before interest, income taxes,
depreciation and amortization, unusual and infrequent items, and extraordinary
items.
<TABLE>
<CAPTION>
Coeur d'Alene Mines Corporation (In Thousands)
Segment Reporting
Rochester Golden Coeur
Cross Fachinal Petorca Australia Kensington Exploration Other Total
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1999
Net sales and revenues
to external customers $ (139) - $ 4,851 $ 5,330 $ 4,696 - $ (1,124) $ 27,406 $ 41,020
Intersegment net sales
and revenues 24,657 - - - - - - (24,657) -
------------------------------------------------------------------------------------------------------
Total net sales and
revenues
$ 24,518 - $ 4,851 $ 5,330 $ 4,696 - $ (1,124) $ 2,749 $ 41,020
======================================================================================================
Profit (loss) $ 9,578 - $ (2,357) $ 1,034 $ (437) $ - $ (4,237) $ 487 $ 4,068
Segment assets(A) $ 87,164 $ 4,945 $ 31,986 $ 2,298 $ 598 $ 25,864 $ 1,249 $ 7,508 $161,610
June 30, 1998
Net sales and revenues
to external customers $ 73 $ - $ 8,671 $ 6,382 $ 7,963 $ - $ (303) $ 36,532 $ 59,318
Intersegment net sales
and revenues 31,113 - - - - - - (31,113) -
------------------------------------------------------------------------------------------------------
Total net sales and
revenues $ 31,186 $ - $ 8,671 $ 6,382 $ 7,963 - $ (303) $ 5,418 $ 59,318
======================================================================================================
Profit (loss) $ 19,682 - $ (1,509) $(2,112) $ 697 - $ (3,645) $ 2,692 $ 15,805
Segment assets(A) $ 79,779 $ 9,229 $ 77,800 $ 2,582 $ 367 $ 134,435 $ 1,588 $ 8,531 $314,310
</TABLE>
(A) Segment assets consist of receivables, prepaids, inventories, property,
plant and equipment, and mining properties.
<TABLE>
<CAPTION>
Coeur d'Alene Mines Corporation
Segment Reporting Six Months Ended June 30,
(In Thousands) 1999 1998
------------------------
<S> <C> <C>
PROFIT (LOSS)
Total profit or loss for reportable
segments $ 4,068 15,805
Depreciation expense (9,838) (16,539)
Interest expense (8,327) (7,468)
Writedown of mining properties - (54,506)
------------------------
Loss before income taxes $ (14,097) $ (62,708)
========================
June 30, June 30,
ASSETS 1999 1998
------------------------
Total assets for reportable segments $ 161,610 $ 314,310
Cash and cash equivalents 102,297 145,397
Short-term investments 4,310 41,025
Other assets 73,554 82,169
------------------------
Total consolidated assets $ 341,771 582,901
========================
</TABLE>
9
<PAGE>
NOTE E: New Accounting Standard
In June 1998, the Financial Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133) which establishes accounting and reporting
standards for derivative instruments and hedging activities. Effective for all
fiscal quarters in years beginning after June 15, 1999, SFAS 133 requires the
Company to recognize all derivative instruments as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value on an on-going basis. The Company is currently
assessing the effect of adopting SFAS No. 133 on its financial statements and
plans to adopt the statement on January 1, 2000.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of
Start-up Activities." The SOP is effective beginning on January 1, 1999, and
requires that start-up costs capitalized prior to January 1, 1999 be
written-off and any future start-up costs to be expensed as incurred. The
Company has adopted SOP 98-5 and has determined that this has no effect on the
Company's financial condition or results of operations.
NOTE F: Reclassification
Certain reclassifications of prior-year balances have been made to
conform to current year classifications.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The results of the Company's operations are significantly affected by
the market prices of gold and silver which may fluctuate widely and are
affected by many factors beyond the Company's control, including, without
limitation, interest rates, expectations regarding inflation, currency values,
governmental decisions regarding the disposal of precious metals stockpiles,
global and regional political and economic conditions, and other factors.
The Company's currently operating mines are the Rochester mine in Nevada
and the Fachinal and Petorca (or El Bronce) mines in Chile, all of which are
wholly-owned and operated by the Company.
The Company also has significant interests in other companies that
operate gold and silver mines. The Company owns 50% of Silver Valley Resources
Corporation ("Silver Valley"), which owns and operates the Coeur Mine (where
10
<PAGE>
operations resumed in June 1996 and continued until April 1998) and the Galena
Mine (where operations resumed in May 1997) in the Coeur d'Alene Mining
District of Idaho. The Company also owns 50% of Gasgoyne Gold Mines NL, an
Australian gold mining company, ("Gasgoyne") that owns 50% of the Yilgarn Star
gold mine in Australia.
The market price of gold has declined to levels that are the lowest
since 1985. The average price of gold in the second quarter of 1999 was
$273.46 per ounce. The market price of silver (Handy & Harman) and gold
(London Final) on August 9, 1999 were $5.38 per ounce and $256.50 per ounce,
respectively. If the current gold price continues, the Company will need to
reduce production costs and/or expand minable ore reserves at its Fachinal
Mine in Chile to operate the mine profitably. Alternatively, if such prices
continue, the Company may elect to place the mine on temporary standby to
conserve ore reserves until gold prices increase.
The Company is required by Financial Accounting Standards Statement No.
121, "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of", to review the valuations of its mining properties.
Such a review was recently completed with respect to all of the Company's
properties. In 1998, the Company had writedowns totaling $219 million with
respect to its Petorca and Fachinal Mines and its Kensington development
property.
Should current gold prices continue for an extended period of time
and/or if the Company is unable to reduce production costs or expand
commercial ore reserves at the Company's mining properties, the Company may
need to effect additional asset writedowns.
In December 1998, the Company announced the completion of an
optimization study relating to the Kensington property, a wholly-owned
developmental gold property in Alaska, designed to improve the economic
viability of the project. A new mine plan was formulated as a result of the
optimization study, which will require extensive permit modifications. Based
on the results of the study, the Company estimates that the project's cash
operating costs per ounce should be reduced to approximately $190 and total
capital costs to develop the mine should be reduced to approximately $192
million. The Company does not intend to develop Kensington unless the
optimization study and development program demonstrate results required to
make Kensington an economically viable project. Based on current mine design
and market price of gold, there can be no assurances at this time that the
Company will proceed to place the Kensington project into commercial
production.
11
<PAGE>
The Company's business plan is to continue to acquire competitive,
low-cost mining properties and/or businesses that are operational or expected
to become operational in the near future so that they can reasonably be
expected to contribute to the Company's near-term cash flow from operations
and expand the Company's silver production.
This document contains numerous forward-looking statements relating to
the Company's gold and silver mining business. The United States Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward looking statements. Operating, exploration and financial data, and
other statements in this document are based on information the company
believes reasonable, but involve significant uncertainties as to future gold
and silver prices, costs, ore grades, estimation of gold and silver reserves,
mining and processing conditions, changes that could result from the Company's
future acquisition of new mining properties or businesses, the risks and
hazards inherent in the mining business (including environmental hazards,
industrial accidents, weather or geologically related conditions), regulatory
and permitting matters, and risks inherent in the ownership and operation of,
or investment in, mining properties or businesses in foreign countries. Actual
results and timetables could vary significantly from the estimates presented.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
As announced by the Company on August 2, 1999, the firm of Ernst & Young
ceased to serve as the Company's independent accountants on July 27, 1999. The
Company expects to engage a new independent accounting firm in the near
future.
12
<PAGE>
The following table sets forth the amounts of gold and silver produced
by the mining properties owned by the Company or in which the Company has an
interest, based on the amounts attributable to the Company's ownership
interest, and the cash and full costs of such production during the three- and
six-month periods ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- --------------------------
1999 1998 1999 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ROCHESTER MINE
Gold ozs. 16,518 20,453 32,824 45,647
Silver ozs. 1,355,955 1,658,257 3,020,018 3,241,216
Cash Costs per oz./silver $4.02 $4.26 $4.26 $4.37
Full Costs per oz./silver $4.94 $4.86 $5.15 $4.38
GALENA MINE
Silver ozs. 411,542 385,313 871,007 764,923
Cash Costs per oz./silver $5.07 $4.45 $4.77 $4.45
Full Costs per oz./silver $6.26 $5.52 $5.90 $5.52
COEUR MINE
Silver ozs. N/A 51,298 N/A 130,633
Cash Costs per oz./silver N/A $6.13 N/A $5.34
Full Costs per oz./silver N/A $7.19 $6.37
YILGARN STAR MINE
Gold ozs. 7,377 11,175 13,554 23,744
Cash Costs per oz./gold $314.46 $242.66 $301.75 $222.29
Full Costs per oz./gold $536.59 $437.97 $494.20 $415.42
FACHINAL MINE
Gold ozs. 6,911 6,837 13,584 13,804
Silver ozs. 314,618 389,494 601,783 857,914
Cash Costs per oz./gold $266.35 $306.82 $299.61 $316.71
Full Costs per oz./gold $320.14 $517.77 $362.36 $514.12
PETORCA MINE
Gold ozs. 7,790 10,862 15,395 23,582
Silver ozs. 15,478 23,481 26,617 47,309
Cash Costs per oz./gold $263.63 $428.57 $264.83 $346.89
Full Costs per oz./gold $263.63 $491.96 $264.83 $409.06
GOLDEN CROSS MINE
Gold ozs. N/A 6,945 N/A 38,682
Silver ozs. N/A 22,124 N/A 144,123
Cash Costs per oz./gold N/A $195.14 N/A $271.22
Full Costs per oz./gold N/A $195.14 N/A $319.80
CONSOLIDATED TOTALS
Gold ozs. 38,596 56,272 75,357 134,016
Silver ozs. 2,097,593 2,529,967 4,519,425 5,258,855
</TABLE>
13
<PAGE>
NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA
ROCHESTER MINE
For the quarter ended June 30, 1999, the mine produced 1,355,955 ounces
of silver and 16,518 ounces of gold compared to 1,658,257 ounces of silver and
20,453 ounces of gold produced in the second quarter of 1998. The decrease in
the gold production was primarily a result of lower gold grade. In the second
quarter of 1999, cash costs were $4.02 per silver equivalent ounce compared to
$4.26 per silver equivalent ounce in the second quarter of 1998. Depreciation
and depletion was $.72 and the reclamation reserve was $.20 per ounce for a
total cost of $4.94 per ounce.
Coeur Rochester has purchased the mineral rights of the Nevada Packard
property adjacent to the Rochester Mine, in Nevada, for a sum of $2,070,800,
consisting of $1.4 million in cash and 155,638 shares of common stock of Coeur
equal in value to $670,800. The total acquisition will add 6.5 million tons of
ore containing 8.5 million ounces of silver and 17,000 ounces of gold. This
results in an acquisition cost of approximately $.22 per equivalent contained
ounce. The estimated production cost estimated to mine the Nevada Packard area
is approximately $3.47 per equivalent silver ounce. Acquisition of the Nevada
Packard property is expected to enhance Rochester's production by
approximately 5.4 million equivalent ounces over the period 2001-2004.
SILVER VALLEY RESOURCES
Silver Valley Resources is the operator of the Coeur unit and Galena
mines. Silver Valley Resources discontinued operations at the Coeur unit in
July 1998 and has concentrated its efforts on the Galena mine. Silver Valley
Resources produced 411,542 ounces of silver in the second quarter of 1999
compared to 436,611 ounces of silver produced in the second quarter of 1998.
The second quarter consolidated cash cost of production per ounce of silver
produced at Silver Valley Resources was $5.07 compared to $4.65 in the prior
year's second quarter. Depreciation and reclamation in the second quarter of
1999 was $.99 per ounce for a full cost of $6.26 per ounce compared to $5.71
per ounce for the second quarter of 1998.
YILGARN STAR MINE
Coeur's share of production for the second quarter of 1999 from the
Yilgarn Star Mine amounted to 7,377 ounces of gold compared to 11,175 ounces
of gold for the second quarter of 1998. Cash cost of production amounted to
$314.46 per ounce compared to $242.66 per ounce during the same period of
14
<PAGE>
1998. Noncash costs were $222.13 per ounce for a full cost of $536.59 per
ounce in the second quarter of 1999 compared to $437.97 per ounce reported in
the same period of 1998. The increase is primarily due to ground control
problems and flooding that occurred due to heavy rainfall, forcing the
operation to mine ore that had lower grade than anticipated.
FACHINAL MINE
Fachinal produced 314,618 ounces of silver and 6,911 ounces of gold in
the second quarter of 1999 compared with 389,494 ounces of silver and 6,837
ounces of gold in the second quarter of 1998. Cash costs, including smelting
and refining, were $266.35 per gold equivalent ounce compared to $306.82 in
the second quarter of 1998. Depreciation was $46 per equivalent gold ounce and
the reserve for reclamation was $7.79 per equivalent gold ounce for a full
cost of $320.14 per equivalent gold ounce in the second quarter of 1999. This
compares with a full cost for the second quarter of 1998 of $517.77 per
equivalent gold ounce. The lower full cost was due to the reduction of the
carrying amount associated with the write-down taken in the fourth quarter of
1998.
PETORCA
In the second quarter of 1999, the mine produced 7,790 ounces of gold
compared to 10,862 ounces reported in the second quarter of 1998. Cash costs
in the second quarter of 1999 were $428.57 per ounce compared to $263.63 per
ounce in the second quarter of 1998. The decreased costs were primarily due to
operating efficiencies and improvements gained in the mining process during
1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30,
1998.
REVENUES
Product sales in the second quarter of 1999 decreased by $11.8 million,
or 36.6%, from the second quarter of 1998. The decrease in sales is primarily
attributable to lower gold and silver prices and decreased production at the
company's operations. In the second quarter of 1999, the Company produced a
total of 2,097,593 ounces of silver and 38,596 ounces of gold compared to
2,529,967 ounces of silver and 56,272 ounces of gold in the second quarter of
1998. In the second quarter of 1999, the Company realized average silver and
gold prices of $5.14 and $321.65, respectively, compared with realized average
15
<PAGE>
prices of $5.84 and $315.61, respectively, in the prior year's second quarter.
The decreases in the ounces of silver and gold produced during the second
quarter of 1999 are primarily attributable to (i) a reduction in the gold
grade at the Rochester Mine, (ii) the discontinuation of operations at the
Coeur Mine in July 1998, (iii) the mining of lower-than-anticipated grade of
gold at the Yilgarn Star Mine due to ground control problems and flooding
resulting from heavy rainfall, (iv) the discontinuation of operations at the
Golden Cross Mine in April 1998 and (v) a planned reduction in production at
the Petorca Mine.
COSTS AND EXPENSES
Production costs in the second quarter of 1999 decreased by $7.9
million, or 35.4%, from the second quarter of 1998. The decrease in production
costs is primarily a result of the lower production discussed above.
Depreciation and amortization decreased in the second quarter of 1999 by
$2.7 million, or 35.6%, from the prior year's second quarter, primarily due to
the decreased depreciation and depletion from the Petorca Mine after it was
written off in the first quarter of 1998.
Administrative and general expenses decreased $638,000 in the second
quarter of 1999 compared to 1998, due to cost savings plans initiated at the
corporate office.
Writedown of mining properties and other costs and expenses increased in
the second quarter of 1999 by $550,000 from the second quarter of 1998 due to
company-wide severance payouts for reduction in workforce and due to increased
legal expenses incurred in the Company's lawsuit against Cyprus Amax Minerals
Company.
Interest and other income in the second quarter of 1999 decreased by
$1.1 million, or 46.8%, compared with the second quarter of 1998. The decrease
is due primarily to a $1.2 million decrease in interest and dividend income
due to a substantially lower short-term investment balance.
NET LOSS
As a result of the above mentioned factors, the Company's net loss
amounted to $7.0 million in the second quarter of 1999 compared to a net loss
of $5.2 million in the second quarter of 1998. In the second quarter of 1999,
the Company paid dividends of $2.6 million on its Manditorily Adjustable
Redeemable Convertible Securities (MARCS). As a result, the loss attributable
to common shareholders was $9.6 million, or $.44 per share, for the second
16
<PAGE>
quarter 1999, compared to a loss of $7.8 million, or $.36 per share, for the
second quarter of 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30,
1998
REVENUES
Product sales for the six months ended June 30, 1999 decreased by $14.7
million, or 27.5%, from the second quarter of 1998. The decrease in sales is
primarily attributable to lower gold and silver prices and decreased
production at the company's operations. For the six months ended June 30,
1999, the Company produced a total of 4,519,425 ounces of silver and 75,357
ounces of gold compared to 5,258,855 ounces of silver and 134,016 ounces of
gold in the six months ended June 30, 1998. For the six months ended June 30,
1999, the Company realized average silver and gold prices of $5.16 and
$317.40, respectively, compared with realized average prices of $5.97 and
$320.47, respectively, in the prior year.
Interest and other income for the six months ended June 30, 1999
decreased by $3.6 million, or 60.8%, compared with the second quarter of 1998.
The decrease is due primarily to a $2.6 million decrease in interest and
dividend income due to a substantially lower short-term investment balance,
and $1.2 million of income recorded in 1998 due to early closure of forward
sale contracts.
The decreases in the ounces of silver and gold produced during the six
months ended June 30, 1999 are primarily attributable to (i) a reduction in
the gold grade at the Rochester Mine, (ii) the discontinuation of operations
at the Coeur Mine in July 1998, (iii) the mining of lower-than-anticipated
grade of gold at the Yilgarn Star Mine due to ground control problems and
flooding resulting from heavy rainfall, (iv) the discontinuation of operations
at the Golden Cross Mine in April 1998 and (v) a planned reduction in
production at the Petorca Mine.
COSTS AND EXPENSES
Production costs decreased in the six months ended June 30, 1999 by $5.9
million, or 17.5%, from the six months ended June 30, 1998. The decrease was
primarily due to the decrease in production at several of the operations as
discussed above.
Depreciation and amortization decreased in the six months ended June 30,
1999 by $6.8 million, or 41.8%, from the prior six months ended June 30, 1998,
17
<PAGE>
primarily due to the decreased depreciation and depletion from the Petorca
mine after it was written off in the first quarter of 1998.
Administrative and general expenses decreased $866,000 in the six months
ended June 30, 1999 compared to the same period in 1998 due to a cost savings
plan initiated at the corporate office.
Writedown of mining properties and other costs and expenses decreased in
the six months ended June 30, 1999 due to the writedown of the Petorca Mine of
$54.5 million during the first quarter of 1998, offset by a Company-wide
severance payout for reduction in workforce of $.3 million and due to
increased legal expenses incurred in the Company's lawsuit against Cyprus of
$.2 million in the first half of 1999.
NET LOSS
As a result of the above mentioned factors, the Company's net loss
amounted to $14.3 million for the six months ended June 30, 1999 compared to a
net loss of $63.1 million for the six months ended June 30, 1998. For the six
months ended June 30, 1999, the Company paid dividends of $5.3 million on its
Manditorily Adjustable Redeemable Convertible Securities (MARCS). As a result,
the loss attributable to common shareholders was $19.5 million, or $.89 per
share, for the six months ended June 30, 1999, compared to a loss of $68.4
million, or $3.12 per share, for the six months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL; CASH AND CASH EQUIVALENTS
The Company's working capital at June 30, 1999 was approximately $141.2
million compared to $153.8 million at December 31, 1998. The ratio of current
assets to current liabilities was 6.7 to 1.0 at June 30, 1999 compared to 6.0
to 1.0 at December 31, 1998.
Net cash used in operating activities in the six months ended June 30,
1999 was $10.1 million compared to $9.0 million in the six months ended June
30, 1998. The decrease is due to lower metal prices received and lower
production in the first half of 1999 compared to the same period in 1998. Net
cash used in investing activities in the 1999 period was $9.3 million compared
to net cash provided by investing activities of $49.1 million in the prior
year's comparable period. The cash provided in the 1998 period was
attributable to proceeds received from sales of short-term investments and
marketable securities in the first half of 1998. Net cash used in financing
18
<PAGE>
activities was $5.6 million in the first half of 1999 and $9.3 million in the
first half of 1998. As a result of the above, cash and cash equivalents
decreased by $25.0 million in the first half of 1999 compared to a $30.8
million increase for the comparable period in 1998.
PROPOSED ACQUISITION OF SILVER PROPERTIES FROM ASARCO INCORPORATED
On May 13, 1999, the Company and ASARCO Incorporated ("ASARCO") entered
into an agreement providing for the Company's acquisition of most of ASARCO's
silver mining assets in exchange for the issuance of 7.125 million shares of
the Company's Common Stock. Consummation of the transaction is subject to
approval by the Company's shareholders and certain other conditions. The
silver mining assets involved include ASARCO's 50% interest in Silver Valley
Resources Corporation; ASARCO's wholly-owned subsidiary, Empress Minera
Manquiri S.R.L., an early stage silver development property in Bolivia; 1.5
million shares, representing an approximate 5% interest in Pan American Silver
Corporation of Vancouver, British Columbia and warrants for an additional
500,000 shares; and a 100% interest in NPMC, Inc., which owns a 20% net
profits interest in the Quiruvilca Silver Mine in Peru operated by Pan
American Silver Corporation. If the Company's acquisition of ASARCO's silver
mining assets is consummated, ASARCO will be entitled to nominate two
directors to the Company's Board of Directors. The Company's shareholders will
vote on the proposed acquisition at the annual meeting to be held on September
8, 1999.
FEDERAL NATURAL RESOURCES ACTION
On March 22, 1996, an action was filed in the United States District for
the District of Idaho by the United States against various defendants,
including the Company, asserting claims under CERCLA and the Clean Water Act
for alleged damages to federal natural resources in the Coeur d'Alene River
Basin of Northern Idaho as a result of alleged releases of hazardous
substances from mining activities conducted in the area since the late 1800s.
No specific monetary damages were identified in the complaint. However, in
July 1996, the government indicated that damages may approximate $982 million.
The United States asserts that the defendants are jointly and severally liable
for costs and expenses incurred by the United States in connection with the
investigation, removal and remedial action and the restoration or replacement
of affected natural resources. In 1986 and 1992, the Company had settled
similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe,
respectively, and believes that those prior settlements exonerate it of
further involvement with alleged natural resource damage in the Coeur d'Alene
19
<PAGE>
River Basin. Accordingly, the Company intends to vigorously defend this
matter.
In March 1997, the Company filed a motion for partial summary judgement
relating to the issue of trusteeship, essentially arguing that the United
States does not have authority to sue for damages to state natural resources
and that the 1986 settlement with the state bars the federal claims. That
motion remains pending. In September 1997, the Company filed an additional
motion for partial summary judgement raising the statute of limitations as to
natural resource damages. That motion was granted by the Court on September
30, 1998. The Court's granting of that motion limits the United States'
natural resource damage claims to the 21 square mile Bunker Hill Superfund
site area rather than the entire Coeur d'Alene Basin. Although that ruling
limits the geographic coverage of the United States' action, the ruling does
not prohibit the EPA from attempting to utilize its hazard ranking system
which could potentially broaden the scope of the United States' allegations.
On March 31, 1998, the Court entered an order denying the plaintiffs' motion
to allow the United States to prove a portion of its case pursuant to an
administrative record, requiring the parties to submit further facts as to the
issue of trusteeship. Furthermore, in March 1998, the EPA announced its intent
to perform a remedial investigation/feasibility study upon all or parts of the
Coeur d'Alene Basin and, thereby, to apparently focus upon response costs
rather than natural resource damages. In September 1998, the Company filed an
additional motion for partial summary judgment asserting that CERCLA as
applied to the Company in the action is not constitutional under the takings
and due process provisions of the United States Constitution. At this stage of
the proceeding, it is not possible to predict its ultimate outcome.
GOLDEN CROSS LAWSUIT
On July 15, 1996, the Company filed a complaint against Cyprus Amax
Minerals Company ("Cyprus") in the District Court of the State of Idaho,
Kootenai County alleging violations by Cyprus of the anti-fraud provisions of
the Idaho and Colorado Securities Acts as well as common law fraud in
connection with Cyprus' sale in April 1993 to the Company of Cyprus
Exploration and Development Corporation, which owned all the shares of Cyprus
Gold New Zealand Limited, which, in turn, owned an 80% interest in the Golden
Cross Mine in New Zealand. The Company's lawsuit seeks recession and an
unspecified amount of damages arising from alleged misrepresentations and
failure to disclose material facts alleged to have been known by Cyprus
officials regarding ground movement and instability, threatening the integrity
of the mine site at the time of Coeur's purchase of the property. In October
1997, Cyprus filed a counterclaim alleging libel by the Company in its press
20
<PAGE>
release announcing the write-off of the Golden Cross Mine and seeking an
unspecified amount of damages. Trial has been scheduled for October 18, 1999
in Coeur d'Alene, Idaho. On February 3, 1999, the Company filed a second
amended complaint which specifies damages in the amount of approximately $54
million together with pre-judgement and post-judgement interest as well as
unspecified costs incurred resulting from the violations of law alleged.
Cyprus filed, on February 17, 1999, a motion to vacate the trial date and a
motion to dismiss the second amended complaint. On July 12, 1999, the Court
entered an order denying the motion to dismiss and the motion to vacate the
trial date. No assurances can be given at this stage of the action as to its
ultimate outcome.
CLASS ACTION SECURITIES LAWSUIT
On July 2, 1997, a suit was filed by purchasers 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.
On April 16, 1998, the Court entered an order dismissing the auditors
from the suit and denying the Company's and the individual defendants' motions
to dismiss. On October 9, 1998, the Court heard arguments on the question on
whether a class should be certified and on December 14, 1998, the Court
entered an order certifying a class. In December 1998, the parties to the suit
determined that the further conduct of the case would be protracted and
expensive and commenced discussions with a view toward settlement of the
action. Although the Company continued to deny each of the plaintiffs' claims
and allegations, the Company determined it would be in the best interests of
21
<PAGE>
the Company to settle the suit and agreed to enter into a Stipulation of
Settlement which was filed by the parties with the Court on March 1, 1999. The
terms of the proposed settlement provide that (i) the Company's directors and
officers liability insurance carrier will pay $7 million to a settlement fund
for the benefit of the plaintiffs; and (ii) the plaintiffs will be entitled to
50% of the net proceeds, up to a maximum of $6 million, (after the Company has
first recouped its costs and expenses incurred in litigating its
above-described lawsuit against Cyprus relating to Golden Cross and after
deducting an $8 million reserve against the asserted subrogation claim of the
Company's flood insurance carrier) actually received by the Company from its
Golden Cross lawsuit against Cyprus. The Stipulation of Settlement contains
strong denials of liability by the defendants as well as acknowledgments by
the plaintiffs that they were unable to identify significant evidence to
support a large portion of their claims. Final consummation of the settlement
is subject to Court approval and to dismissal with prejudice of the derivative
action described below. On July 15, 1999, the Court gave final approval to the
settlement and authorized the submission of the settlement terms to the class
action shareholders.
DERIVATIVE ACTION
On or about August 17, 1998, a purported derivative action was filed on
behalf of the Company against Dennis E. Wheeler, James A. Sabala, James J.
Curran, Joseph C. Bennett, James A. McClure, Cecil D. Andrus and Duane B.
Hagadone in Federal District Court for the District of Idaho. The complaint
alleged that the defendant officers and directors breached their fiduciary
duties by authorizing the Company to purchase the Golden Cross Mine in New
Zealand in 1993 and by allegedly causing or permitting the Company to make
statements that the plaintiffs in the class action securities lawsuit
described above claim were false or misleading during the period from January
1, 1995 through July 11, 1996. The plaintiff sought unspecified damages on
behalf of the Company. On September 9, 1998, the plaintiff voluntarily
dismissed the lawsuit without prejudice in light of Idaho Code Sec. 30-1-742,
which requires a demand to be served on a company at least 90 days prior to
the filing of a derivative action. On September 25, 1998, the plaintiff sent a
letter to the Company's Board of Directors demanding that the Company, among
other things, commence all reasonable steps to settle the class action
securities lawsuit described above, and pursue claims against any officers,
directors or third-party professionals who may have known about the potential
problems with the Golden Cross Mine before the Company purchased an interest
in it. The Board appointed a Special Committee of directors to respond to that
demand. On March 9, 1999, the Special Committee recommended that the demand be
rejected. The action previously dismissed without prejudice has been dismissed
with prejudice.
22
<PAGE>
YEAR 2000 ISSUE
Management of the Company believes it has an effective program in place
to resolve the Year 2000 issue in a timely manner. Actual costs associated
with implementation of the Company's Year 2000 program are expected to be
insignificant to the Company's operations and financial condition. As of June
30, 1999, the Company has incurred approximately $190,000 of costs related to
the Y2K issue. The Company presently estimates that the remaining projected
costs, primarily for professional consulting services, will be less than
$100,000.
The Company currently has a program underway to ensure that all
significant computer systems are substantially Year 2000 compliant by the year
ended December 31, 1999. The program is divided into three major components:
(1) identification of all information technology systems ("IT Systems") and
non-information technology systems ("Non-IT Systems") that are not Year 2000
compliant; (2) repair or replacement of the identified non-compliant systems;
and (3) testing of the repaired or replaced systems. The Company has no "in
house" developed or proprietary IT Systems. The Company uses
commercially-developed software, the majority of which is regularly upgraded
through existing maintenance contracts. Parts (1), (2) and (3) of the Year
2000 program are currently underway. Part (1), identification and review of
non-compliant accounting and financial reporting systems is finished and the
Company is continuing to review Non-IT Systems that have embedded
microprocessors in various types of equipment. Part (2), repairing and
replacing, currently continues. Software vendors have made Year 2000 compliant
software revisions available, which the Company is installing under
maintenance agreements. The Company estimates that approximately 65% of its IT
systems and approximately 3% of its non-IT systems have completed Part (2).
Parts (1) and (2) of the process are scheduled to be completed in the
Company's third quarter ended September 30, 1999. Part (3), testing currently
continues and is scheduled to finish in October 1999.
The Company began contacting key suppliers and business partners about
the Year 2000 issue during the third quarter of 1998 and continues to survey
these parties. While no assurance can be given that key suppliers and business
partners will remedy their own Year 2000 issues, the Company, to date, has not
identified any material impact on its ability to continue normal business
operations with suppliers or other third parties who fail to address the
issue.
23
<PAGE>
The Company will continue to monitor and evaluate the impact of the Year
2000 issue on its operations. Until the Company is into the final testing
stages of its program, the risks from potential Year 2000 failures cannot be
fully assessed. Due to this situation, the Company cannot at this stage begin
final contingency plans. These plans will be developed as potential Year 2000
failures are identified in the final testing stages.
As noted above, the Company has not yet completed all necessary phases
of the Year 2000 program. In the event that the Company does not complete any
additional phases, sales functions and other processes could be impacted. In
addition, disruptions in the economy generally resulting from Year 2000 issues
could also materially adversely affect the Company. The Company could be
subject to litigation for computer systems' failure to properly date business
records. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks as a part of its
operations. As an effort to mitigate losses associated with these risks, the
Company may , at times, enter into derivative financial instruments. These may
take the form of forward sales contracts, foreign currency exchange contracts
and interest rate swaps. The Company does not actively engage in the practice
of trading derivative securities for profit. This discussion of the Company's
market risk assessments contains "forward looking statements" that contain
risks and uncertainties. Actual results and actions could differ materially
from those discussed below.
The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely and are affected by numerous
factors, such as supply and demand and investor sentiment. In order to
mitigate some of the risk associated with these fluctuations, the Company will
at times, enter into forward sale contracts. The Company continually evaluates
the potential benefits of engaging in these strategies based on the then
current market conditions. The Company may be exposed to nonperformance by
counterparties as a result of its hedging activities. This exposure would be
limited to the amount that the spot price of the metal falls short of the
contract price.
24
<PAGE>
The Company operates in several foreign countries, specifically
Australia, New Zealand and Chile, which exposes it to risks associated with
fluctuations in the exchange rates of the currencies involved. As part of its
program to manage foreign currency risk, the Company will enter into foreign
currency forward exchange contracts. These contracts enable the Company to
purchase a fixed amount of foreign currencies. Gains and losses on foreign
exchange contracts that are related to firm commitments are designated and
effective as hedges and are deferred and recognized in the same period as the
related transaction. All other contracts that do not qualify as hedges are
marked to market and the resulting gains or losses are recorded in income. The
Company continually evaluates the potential benefits of entering into these
contracts to mitigate foreign currency risk and proceeds when it believes that
the exchange rates are most beneficial.
All of the Company's long term debt at June 30, 1999 is fixed-rate
based. The Company's exposure to interest rate risk, therefore, is limited to
the amount it could pay at current market rates. The Company currently does
not have any derivative financial instruments to offset the fluctuations in
the market interest rate. It may choose to use instruments, such as interest
rate swaps, in the future to manage the risk associated with interest rate
changes.
The following table summarizes the information at June 30, 1999
associated with the Company's financial and derivative financial instruments
that are sensitive to changes in interest rates, commodity prices and foreign
exchange rates. For long term debt obligations, the table presents principal
cash flows and related average interest rates. For gold put and call options
and amortizing forward sales, the table presents ounces expected to be
delivered and the related average price per ounce in Australian dollars. For
foreign currency exchange contracts, the table presents the notional amount in
New Zealand dollars to be purchased along with the average foreign exchange
rate.
25
<PAGE>
<TABLE>
<CAPTION>
Fair
Value
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 3/31/99
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long Term Debt $151,897
Fixed Rate $ - $ - $ - $45,753 $ - $200,649 $ 246,402
Average Interest Rate 6.686% 6.686% 6.686% 6.766% 6.843% 7.190%
DERIVATIVE FINANCIAL
INSTRUMENTS
Gold Put Options
Sold - AUD $ 18,798
Ounces 15,000 30,000 30,000 30,000 30,000 - 135,500
Price Per Ounce $ 604.85 $604.85 $597.00 $597.00 $597.00 $ -
Gold Call Options
Purchased - AUD $ 224
Ounces 20,000 36,000 - - - - 56,000
Price Per Ounce $ 265.00 $265.00 $ - $ - $ - $ -
Amortizing Forward Gold
Sales $ 5,255
Ounces 20,000 40,000 - - - - 60,000
Price Per Ounce $ 348.58 $348.58 - - - -
Foreign Currency
Contracts $ 371
New Zealand Dollar $ 3,000 $ 3,600 $ - $ - $ - $ - $ 6,600
Exchange Rate
(NZ$ to US$) 2.095 2.124 - - - -
Chilean Pesos $4,723,573 - - - - - 4,723,573 (174)
Exchange Rate
(Peso to US$) 509.006 - - - - -
</TABLE>
26
<PAGE>
PART II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
No. 27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
On May 14, 1999, the Company filed a Form 8-K relating to its
proposed acquisition of certain ASARCO Inc.'s silver mining
assets.
On August 2, 1999, the Company filed a Form 8-K reporting that the
firm of Ernst & Young ceased to serve as the Company's independent
accountants on July 27, 1999.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
(Registrant)
Dated August 13, 1999 /s/DENNIS E. WHEELER
---------------------
Dennis E. Wheeler
Chairman, President and
Chief Executive Officer
Dated August 13, 1999 /s/GEOFFREY A. BURNS
--------------------
Geoffrey A. Burns
Vice President and
Chief Financial Officer
28
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000215466
<NAME> COEUR D'ALENE MINES CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 102,297
<SECURITIES> 4,310
<RECEIVABLES> 9,919
<ALLOWANCES> 0
<INVENTORY> 49,398
<CURRENT-ASSETS> 165,924
<PP&E> 263,907
<DEPRECIATION> 88,060
<TOTAL-ASSETS> 341,771
<CURRENT-LIABILITIES> 24,754
<BONDS> 246,402
7,078
0
<COMMON> 22,960
<OTHER-SE> 373,962
<TOTAL-LIABILITY-AND-EQUITY> 341,771
<SALES> 38,707
<TOTAL-REVENUES> 41,019
<CGS> 27,749
<TOTAL-COSTS> 37,196
<OTHER-EXPENSES> 9,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,327
<INCOME-PRETAX> (14,097)
<INCOME-TAX> 155
<INCOME-CONTINUING> (14,252)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,252)
<EPS-BASIC> (0.89)
<EPS-DILUTED> (0.89)
</TABLE>
