SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
COEUR D'ALENE MINES CORPORATION
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(Exact name of registrant as specified in its charter)
Idaho 82-0109423
------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 Front Ave., P. O. Box "I"
Coeur d'Alene, Idaho 83816
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(Address of principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (208) 667-3511
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Securities Registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00
6 3/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
MANDATORY ADJUSTABLE REDEEMABLE CONVERTIBLE SECURITIES
------------------------------------------------------
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. (The aggregate market value is computed by
reference to the last sale price of such stock, as of March 29, 1999.)
$86,583,508
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 29, 1999.
21,898,624 shares of Common Stock, Par Value $1.00
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of the Form 10-K is incorporated
by reference from the registrant's definitive proxy statement which will be
filed pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this report.
Pursuant to Rule 12b-25(e)(1), the following Items of this Form 10-K are
omitted:
Item 6 - Selected Financial Data
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 14(a)- Financial Statements
(c)- Exhibits 23 and 27
(d)- Auditors' report
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PART I
ITEM 1. BUSINESS
Coeur d'Alene Mines Corporation is engaged through its subsidiaries in
the operation and/or ownership, development and exploration of silver and gold
mining properties and companies located primarily within the United States
(Nevada, Idaho and Alaska), Australasia (New Zealand and Western Australia)
and South America (Chile). Coeur d'Alene Mines Corporation and its
subsidiaries are hereinafter referred to collectively as "Coeur" or the
"Company".
OVERVIEW OF MINING PROPERTIES AND INTERESTS
The Company's most significant mining properties and interests are:
o the ROCHESTER MINE, a silver and gold surface mining operation
located in northwestern Nevada, which is 100% owned and operated
by Coeur and which is one of the largest and lowest cost of
production primary silver mines in the United States and is a
significant gold producer as well;
o ownership of 50% of the capital stock of SILVER VALLEY RESOURCES
CORPORATION ("SILVER VALLEY"), which owns the GALENA underground
silver mine that resumed production in May 1997; the COEUR
underground silver mine that resumed production in June 1996 and
terminated operations on July 2, 1998; the CALADAY property that
adjoins the GALENA MINE; and operating control of several
contiguous properties in the Coeur d'Alene Mining District of
Idaho;
o the FACHINAL MINE, an open pit and underground gold and silver
mining operation wholly-owned and operated by Coeur and located in
southern Chile, South America, which Coeur acquired in 1990, at
which initial production commenced in October 1995, and which was
classified as an operating property for financial reporting
purposes on January 1, 1997;
o the CDE Petorca (or CDE El Bronce) Mine (the "PETORCA MINE"), an
underground Chilean gold and silver mine in which the Company
acquired a 51% operating interest in October 1994 and 100%
ownership in September 1996, and with respect to which the Company
recorded a $54.4 million impairment write-down in the first
quarter of 1998;
o ownership of 50% of the capital stock of GASGOYNE GOLD MINES NL,
an Australian gold mining company ("Gasgoyne"), which owns 50% of
the YILGARN STAR MINE, a gold mine in Western Australia, and
certain other exploration-stage properties;
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o ownership of 100% of the KENSINGTON PROPERTY, located north of
Juneau, Alaska, which is being developed as an underground gold
mine by Coeur and where the Company recently completed an
independently prepared optimization study; and
o the GOLDEN CROSS MINE, an underground and surface gold mining
operation located near Waihi, New Zealand in which Coeur has an
80% operating interest acquired on May 3, 1993, at which mining
and milling operations were discontinued on April 28, 1998, and at
which rehabilitation activities were conducted throughout 1998.
Coeur also has interests in other properties which are the subject of silver
or gold exploration activities at which no mineable ore reserves have yet been
delineated.
BUSINESS STRATEGY
The Company's business strategy is to capitalize on its ore
reserve/mineralized material bases and the expertise of its management to
become a leading precious metals company via long-term, profitable growth. The
principal elements of the Company's business strategy are as follows: (i)
increase the Company's low-cost silver production and reserves in order to
remain the nation's largest primary silver producer and one of the world's
largest primary silver producers; (ii) continue to improve operating cost and
production profiles at Coeur's existing gold mining operations; (iii) continue
increasing the Company's silver and gold production and reserves in order to
continue to provide its shareholders with an interest in both metals, while
lowering its cost of gold and silver production; (iv) 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 discoveries
primarily in North and South America 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) strengthen the Company's financial ability to weather
the gold industry's lowest price level in nineteen years.
SOURCES OF REVENUE
The Rochester Mine, Fachinal Mine and Petorca Mine, which are operated
by the Company; the Golden Cross Mine, which was operated by the Company; and
the Company's interests in Silver Valley and Gasgoyne, constituted the
Company's principal sources of mining revenues in 1998. The following table
sets forth information regarding the percentage contribution to the Company's
total revenues (i.e., revenues from the sale of concentrates and dore plus
other income) by the sources of those revenues during the past four years:
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<TABLE>
<CAPTION>
Percentage of
Coeur Percentage of Total Revenues
Mine/Company Ownership in Year Ended December 31,
------------ --------- -------------------------------------------------------
1995 1996 1997 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Rochester Mine 100% 57.0% 59.3% 40.5% 56.3%
Golden Cross Mine 80 33.4 26.0 23.7 .2
Petorca Mine(1) 100 0.3 2.8 11.3 8.4
Fachinal Mine(2) 100 - - 9.8 14.6
Silver Valley 50 - .5(3) .9 (.8)(5)
Gasgoyne(4) 50 - 0.9 5.2 12.1
Other - 9.3 10.5 8.6 9.2
------ ------ ------ ------
100% 100% 100% 100%
====== ====== ====== ======
--------------------
<FN>
(1) The reported percentages of total revenues reflect the fact that Coeur's
interest in the revenue of the mine was 51% until September 1996, when
it acquired a 100% ownership interest. Therefore, prior to September
1996, the Company's share of net profits was reported as other income.
(2) The Fachinal Mine commenced pre-production activities in late October
1995 and was accounted for as a development stage property until
December 31, 1996 (i.e., operating costs were capitalized net of
revenues from pre-commercial production). Commencing January 1, 1997,
the mine was accounted for as an operating property for financial
reporting purposes.
(3) The Company's interest in Silver Valley accounted for approximately 3.0
% of total revenues for the approximately eight months subsequent to its
start-up by the Silver Valley Resources in May 1996.
(4) The Company's interest in Gasgoyne accounted for approximately 1.2% of
total revenues for the approximately six months subsequent to its
acquisition by the Company in May 1996. The reported percentages reflect
the fact that Coeur's interest in Gasgoyne revenue was 35% from May 1996
to February 1997, 36% from March 1997 to May 1997 and 50% after May
1997. The Company's interest in Gasgoyne was reported in accordance with
the equity method prior to May 1, 1997; therefore, revenues, net of
expenses are reported as other income for that period.
(5) The company changed its method of accounting for silver valley resources
to the equity method of accounting and as such has included cost of
production and working capital costs.
</FN>
</TABLE>
DEFINITIONS
The following sets forth definitions of certain important mining terms used in
this report.
"Dore" - A bullion produced by smelting, containing gold, silver and
minor amounts of impurities.
"Gold" - An alloy with minimum fineness of 999 parts per 1000 parts
pure gold.
"Heap Leaching
Process" - Heap leaching is a process of extracting gold and silver by
placing broken ore on an impermeable pad and applying a
dilute cyanide solution that dissolves a portion of the
contained metals, which is then recovered in metallurgical
processes.
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"Mineralized
Material" - A mineralized underground body which has been intersected by
sufficient closely spaced drill holes and/or underground
sampling to support sufficient tonnage and average grade of
metal(s) to warrant further exploration-development work.
Such material does not qualify as an "ore reserve" until a
final and comprehensive economic, technical and legal
feasibility study based upon the test results is concluded.
"Ore
Reserve" - That part of a mineral deposit which could be economically
and legally extracted or produced at the time of the reserve
determination.
"Probable
Reserves" - Ore reserves for which quantity and grade and/or quality are
computed from information similar to that used for proven
reserves, but the sites for inspection, sampling and
measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower
than that for proven reserves, is high enough to assume
continuity between points of observation.
"Proven
Reserves" - Ore reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of
detailed sampling and (b) the sites for inspections,
sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape,
depth and mineral content of reserve are well-established.
"Ton" - References to a "ton" mean a short ton, which is 2,000
pounds.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
This report contains numerous forward-looking statements relating to the
Company's gold and silver mining business, including estimated production
data, expected operating schedules and other operating data and permit and
other regulatory approvals. Such forward-looking statements are identified by
the use of words such as "believes," "intends," "expects," "hopes," "may,"
"should," "plan," "projected," "contemplates," "anticipates" or similar words.
Actual production, operating schedules and results of operations could differ
materially from those projected in the forward-looking statements. The factors
that could cause actual results to differ materially from those projected in
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the forward-looking statements include (i) the risks and hazards inherent in
the mining business (including environmental hazards, industrial accidents,
weather or geologically related conditions), (ii) changes in the market prices
of gold and silver, (iii) the uncertainties inherent in the Company's
production, exploratory and developmental activities, including risks relating
to permitting and regulatory delays, (iv) the uncertainties inherent in the
estimation of gold and silver ore reserves, (v) changes that could result from
the Company's future acquisition of new mining properties or businesses, (vi)
the effects of environmental and other governmental regulations, and (vii) the
risks inherent in the ownership or operation of or investment in mining
properties or businesses in foreign countries.
ROCHESTER MINE
The Rochester Mine is a silver and gold surface mine located in Pershing
County, Nevada, approximately 25 road miles northeast of Lovelock. The mine
utilizes the heap leaching process to extract both silver and gold from ore
mined using open pit methods. The property consists of 16 patented and 541
unpatented contiguous mining claims and 54 mill-site claims totaling
approximately 11,000 acres. The Company owns 100% of the Rochester Mine by
virtue of its 100% ownership of its subsidiary, Coeur Rochester, Inc. ("Coeur
Rochester"). Asarco, Inc., the prior lessee, has a net smelter royalty
interest which varies up to 5% when the market price of silver equals or
exceeds $18.26 per ounce.
Based on the ore reserve review report, dated February 1999, of
Independent Mining Consultants, Inc. ("IMC"), and accounting for production
through December 31, 1998, mineable, proven/probable ore reserves at the
Rochester Mine, as of January 1, 1999, totalled approximately 54.856 million
tons averaging 1.08 ounces of silver per ton and 0.009 ounces of gold per ton.
The reserve estimate is based on a 0.75 ounce per ton silver-equivalent cutoff
grade and silver and gold prices of $5.80 and $300.00, respectively. The
average grades do not reflect losses in the recovery process. The amount of
estimated proven and probable reserves vary depending on the prices of silver
and gold. In addition, 26.789 million tons of mineralized material averaging
0.91 ounces of silver per ton and 0.007 ounces of gold per ton have been
identified by Coeur Rochester. The average strip ratio for the remaining life
of the mine will vary based primarily on future gold and silver prices.
Furthermore, the actual strip ratio may vary significantly from year-to-year
during the remaining life of the mine.
The above ore reserve and mineralized material data does not include
data relating to the Nevada Packard property located south of the Rochester
Mine, which the Company has an option to purchase and which is discussed
below.
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<PAGE>
Based upon its heap leaching experience and certain metallurgical
testing, the Company estimates recovery rates of 59% for silver and 90% for
gold. The leach cycle at the Rochester Mine requires approximately five years
from the point ore is placed on the leach pad until all recoverable metal is
recovered. However, a significant proportion of metal recovery occurs in the
early years. The realization of the Company's production estimates is subject
to actual rates of recovery, continuity of ore grades, mining rates, areas
being mined, projected operating costs, the levels of silver and gold prices,
and other uncertainties inherent in any mining and processing operation.
The following table sets forth information for the periods indicated
relating to Rochester Mine production. Rochester had record silver production
in 1998, 7,225,396 ounces, an 8% increase over 1997.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Ore processed
(tons) 7,759,637 8,243,609 8,127,691 8,738,471 8,529,263
Silver (ounces) 5,937,770 6,481,825 6,251,180 6,690,704 7,225,396
Gold (ounces) 56,886 59,307 74,293 90,019 88,615
</TABLE>
The following table sets forth the costs of production per ounce of
silver and gold on a silver equivalent basis during the periods indicated at
the Rochester Mine. Cash costs include mining, processing and direct
administration costs, financing costs, royalties and refining costs. Silver
equivalent gold production for the year is calculated by multiplying actual
gold ounces produced by the ratio of the yearly average gold price to the
yearly average silver price. This total is then added to actual silver
production for the year to determine total silver equivalent production.
Rochester reduced total costs per ounce by $.36, a 7% reduction from 1997.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Cash costs per ounce $ 3.65 $ 3.79 $ 3.71 $ 4.36 $ 4.07
Depreciation, depletion
and amortization
per ounce .59 .61 .54 .67 .60
-------- -------- -------- -------- -------
Total costs per ounce $ 4.24 $ 4.40 $ 4.25 $ 5.03 $ 4.67
======== ======== ======== ======== =======
</TABLE>
A total of three deep drill holes were completed during 1998 to test
multiple feeder structures that could have added ore resources to the
Rochester silver/gold deposit. Sulfide mineralization was encountered;
however, only weak precious metals mineralization was intercepted. Geologic
evaluation is continuing.
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<PAGE>
The metallurgical test program was completed during 1998 and confirmed
that finer crushing could enhance gold and silver recoveries. The Company
completed a basic engineering study to determine the capital and operating
requirements for fine crushing. The results of this study do not support
installation of a fine crushing plant with the current depressed metal
markets. The Company will continue to investigate potential fine crushing
alternatives and other remaining life-of-mine optimization opportunities.
During the second quarter of 1998, the Company began the third
consecutive year of drilling on the Nevada Packard property located south of
the Rochester Mine. The first two phases of exploratory drilling were directed
to test mineralization from surface to depths of 900 feet. The second phase of
drilling completed in August 1998 confirmed the near-surface mineralization,
allowing for a mineable reserve estimate. At the conclusion of the third phase
of drilling, the Company had completed 33,615 feet of drilling on the
property.
Preliminary economic evaluations support moving forward with mining the
ore reserves at the Nevada Packard property based on the Company's ore reserve
analysis. The Company estimates that mineable, proven and probable ore
reserves at the Nevada Packard property at January 1, 1999 totaled
approximately 3.919 million tons averaging 2.17 ounces of silver per ton and
0.004 ounces of gold per ton. The reserve estimate is based on a 1.05 ounce
per ton silver-equivalent cutoff grade and silver and gold prices $5.00 and
$300.00 per ounce, respectively. The amount of proven and probable reserves
vary depending on the prices of silver and gold. In addition, 3.039 million
tons of mineralized material averaging 0.95 ounces of silver per ton and 0.003
ounces of gold per ton have been identified by the Company. The Company has
the option to purchase 100% of the Nevada Packard property and is negotiating
with respective claim owners. No assurance can be given that the Company will
exercise that option. Permitting will commence if and when the option is
exercised. It is expected that any ore mined there would be processed at the
Rochester facility.
The Company's capital expenditures at the Rochester Mine totaled
approximately $7.1 million in 1998, of which approximately $6.2 million was
used to reacquire the existing processing facility which was subject to a
sale-leaseback agreement entered into in 1986. The Company plans approximately
$4.1 million of capital expenditures at the mine during 1999, most of which is
for an expansion of the Stage IV leach pad.
INTEREST IN SILVER VALLEY RESOURCES CORPORATION - THE COEUR D'ALENE MINING
DISTRICT
Silver Valley Resources Corporation ("Silver Valley") owns the Coeur and
Galena Mines and the Caladay property situated in the Coeur d'Alene Mining
District of Idaho. Effective January 1, 1995, Coeur, Callahan Mining
Corporation ("Callahan"), a wholly-owned subsidiary of Coeur, and ASARCO Inc.
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("ASARCO") transferred their interests in the Coeur and Galena Mines and
Caladay property to Silver Valley, an entity created for that sole purpose, as
a result of which Coeur and ASARCO each now own 50% of Silver Valley. During
1995, Silver Valley conducted a planned underground development program that
increased ore reserves at the Galena Mine. As a result of this program and
increased silver prices, a decision was made on February 8, 1996 by Silver
Valley to reopen the mines. Underground development and exploration activities
continued during 1997 and 1998.
Silver Valley recommenced operations at the Coeur mine portion of its
property in June 1996 and continued mining existing reserves there through
July 2, 1998, when operations were terminated as planned. Silver Valley
resumed production at the Galena Mine in May 1997 and operations continue.
Silver Valley silver reserves attributable to Coeur's 50% ownership
interest in both the Galena and Coeur Mines have been expanded, increasing 32%
in 1995, 22% in 1996 and 13% in 1997. In 1998, ore reserves at the Galena
increased 15%. Silver Valley plans to continue exploratory and developmental
activities at the Coeur, Galena and Caladay Mines as well as at several
contiguous properties in the Coeur d'Alene Mining District with a view toward
the development of new silver reserves and resources
During the second quarter of 1998, shipments of concentrate from the
Galena and Coeur mines were suspended, resulting in a build-up of inventories
pending negotiation of the placement of concentrates with three new suppliers
of smelting services. The shipment of concentrates resumed in July, 1998.
Concentrate inventories returned to normal levels prior to the end of 1998.
The Board of Directors of Silver Valley consists of six directors, three
of whom, including the Chairman of the Board, are appointed by Asarco and
three of whom, including the President, are appointed by Coeur. Pursuant to a
Shareholders' Agreement between the parties, certain specified corporate
actions requires a majority vote. If the voting results in a tie at any Board
Meeting, the Chairman of the Board of Silver Valley, who also is the Chairman
of the Board of Asarco, will decide the issue. Certain other specified
corporation actions require unanimous approval of the directors. The President
of Coeur also is the President of Silver Valley and serves on its Executive
Committee. Certain other officers of Silver Valley are officers of Coeur or
Asarco, which companies may provide management and other services to Silver
Valley upon the request of its Board of Directors. A summary of the properties
owned by Silver Valley is set forth below.
GALENA MINE
The Galena Mine property consists of approximately 1,100 acres lying
immediately west of the City of Wallace, Shoshone County, Idaho adjoining the
Coeur Mine's eastern boundary. The property consists of 52 patented mining
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claims and 25 unpatented mining claims. The Galena Mine is primarily an
underground silver-copper mine ,and is served by two vertical shafts.
In July 1992 Asarco, which was the Galena Mine operator, suspended
operations at the Galena Mine due to then prevailing silver prices ($4.31 per
ounce average for the month of July 1992) and placed the property on a care
and maintenance basis to conserve ore reserves. Silver Valley resumed
production at the Galena Mine in May 1997.
Based on the ore-reserve estimate of Silver Valley, dated January 1999,
proven and probable ore reserves as of January 1, 1999 at the Galena Mine
totalled 1.757 million tons averaging 18.54 ounces of silver per ton. Included
in the previously quoted reserves are 348,000 tons of ore containing 12.34%
lead and 1.569 million tons of ore containing 0.56% copper. The Silver Valley
reserve estimate is based on a minimum mining width of 4 to 4.5 feet diluted
to 5.0 feet minimum width for most silver-copper and silver-lead veins.
Cutoff grade is based on the cost of breaking and producing ore from a stope,
but does not include development costs and administrative overhead. The cutoff
grade varies from area-to-area within the mine due to changing silver-copper
ratios of the ore.
The reserve estimate has also identified an additional 782,000 tons of
mineralized material which averages 8.26 ounces of silver per ton. Included in
the mineralized material are 262,000 tons containing 0.43% copper and 541,000
tons containing 5.74% lead.
The following table sets forth information relating to total Galena Mine
production during the periods indicated.
<TABLE>
<CAPTION>
Eight Months Year Ended
Ended December 31, December 31,
1997 1998
------------------ ------------------
<S> <C> <C>
Ore milled (tons) 80,012 176,304
Silver (ounces) 1,456,201 3,260,363
Copper (pounds) 1,070,954 2,234,374
</TABLE>
The following table sets forth the costs of production per ounce of
silver (net of credit for copper byproduct) at the Galena Mine during the
periods indicated. Cash costs include mining, processing, direct
administration costs and smelter charges, but do not include exploration
costs. Coeur has a 50% interest in operating profits from Galena Mine
operations by virtue of its 50% ownership of Silver Valley. Silver Valley
reduced its full costs per ounce in 1998 by $.53, an 8.9% reduction from 1997.
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<TABLE>
<CAPTION>
Eight Months
Ended Year Ended
December 31, December 31,
1997 1998
------------------ ------------------
<S> <C> <C>
Cash costs per ounce $4.74 $4.39
Depreciation, depletion and
amortization per ounce 1.24 1.06
----- -----
Total costs per ounce $5.98 $5.45
===== =====
</TABLE>
Total capital expenditures by Silver Valley at the Galena Mine in 1998
approximated $3.6 million. Such expenditures were used to provide additional
mine development and miscellaneous equipment. Silver Valley plans
approximately $2.7 million of mine development and equipment expenditures at
the Galena Mine during 1999.
Activities at the Galena Mine during 1998 were concentrated on shaft
deepening and development activities, including exploration/development
drilling that tested both internal vein targets and several exploration
targets located on leased properties contiguous to the Silver Valley holdings.
Exploration results are being assessed and will require further follow up.
COEUR MINE
The Coeur Mine is an underground silver mine located adjacent to the
Galena Mine in the Coeur d'Alene Mining District in Idaho, and consists of
approximately 868 acres comprised of 38 patented mining claims and four
unpatented mining claims. Effective December 31, 1991, Coeur increased its
non-operating joint venture interest in the mine to 50% as a result of Coeur's
acquisition of Callahan, which had acquired a 5% interest in the mine in
March, 1968. Effective January 1, 1995, Coeur and Asarco transferred their
interests in the Coeur Mine to Silver Valley.
Asarco, the operator under the previous joint venture, suspended
operations at the Coeur Mine on April 3, 1991 due to then prevailing silver
prices ($3.90 per ounce average for April 1991) and placed the property on a
care and maintenance basis to conserve ore reserves. Silver Valley resumed
production activities at the Coeur Mine in June 1996 and, as planned,
terminated operations there on July 2, 1998.
The following table sets forth information, for the periods indicated,
relating to total Coeur Mine production.
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<TABLE>
<CAPTION>
Six Months Year Ended Six Months
Ended December 31, Ended
December 31, 1996 1997 June 30, 1998
----------------- -------------- -----------------
<S> <C> <C> <C>
Ore milled (tons) 78,067 110,579 21,968
Silver (ounces) 1,666,534 1,978,513 261,266
Copper (pounds) 1,407,771 1,621,345 174,414
</TABLE>
The following table sets forth the costs of production per ounce of
silver (net of credit for copper by-product) at the Coeur Mine during the
periods indicated. Cash costs include mining, processing, direct
administration costs and smelter charges but do not include exploration costs.
The Company has a 50% interest in operating profits from Coeur Mine operations
by virtue of its 50% ownership of Silver Valley.
<TABLE>
<CAPTION>
Six Months Year Ended Seven Months
Ended December 31, Ended
December 31, 1996 1997 July 31, 1998
----------------- -------------- -----------------
<S> <C> <C> <C>
Cash costs per ounce $3.18 $3.00 $5.34
Depreciation, depletion
and amortization
per ounce .79 .95 1.03
----- ----- -----
Total costs per ounce $3.97 $3.95 $6.37
===== ===== =====
</TABLE>
The increase in cash cost per ounce in the 1998 period was primarily due to
the fact that, as planned, operations at the Coeur Mine were winding down and
terminated on July 2, 1998.
Based on a Silver Valley Resources ore reserve report dated January
1999, Coeur estimates the mineralized material as of January 1, 1999 at the
Coeur Mine totaled 370,000 tons averaging 14.53 ounces of silver per ton and
0.69% copper. Approximately 2,288 feet of exploration drilling was completed
at the Coeur in 1998, the results are undergoing interpretation.
CALADAY PROPERTY
The Caladay property adjoins the Galena Mine. Prior to its acquisition
by the Company in 1991, approximately $32.5 million was expended on the
property to construct surface facilities, a 5,101 ft. deep shaft and
associated underground workings to explore the property. Based on Silver
Valley's analysis of existing Galena Mine underground workings and drilling
results on the Galena Property, the Company believes that similar geologic
conditions which exist at the Galena extend into the Caladay below the level
of the current Caladay workings. In addition, the Caladay facilities may be
used to benefit the Galena Mine operations.
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FACHINAL MINE
In January 1990, the Company acquired through its wholly-owned
subsidiary, CDE Chilean Mining Corporation, ownership of the Fachinal gold and
silver property. As discussed below, the Company completed the construction of
the Fachinal Mine on schedule and under budget in October 1995 when initial
mining operations commenced.
The Fachinal property covers about 90 square miles and is located south
of Coihaique, the capital of Region XI in southern Chile, and approximately 10
miles west of the town of Chile Chico. The project lies on the east side of
the Andes at an elevation ranging from 600 to 4,500 feet and is serviced by a
gravel road from Chile Chico. The Fachinal property is known to include
multiple epithermal veins containing gold and silver. The Company has been
granted exploitation concessions (the Chilean equivalent to an unpatented
claim except that the owner does not have title to the surface which must be
separately acquired from the surface owner) covering the mineralized areas of
the Fachinal property as well as the necessary surface rights to permit mining
there.
During the first two years of commercial production (i.e. 1997 and
1998), the Fachinal Mine experienced operational ore reserve problems that
resulted in significantly higher than expected cash operating costs of
production. The Fachinal ore distribution is much more structurally controlled
than originally interpreted. An effort to transition from open pit mining to
profitable underground mining continued through 1997 and 1998. The remote and
secluded location of the Fachinal Mine made it difficult to attract
experienced miners and the Company decided to train local residents,
supplemented with contract underground miners. After two years of mining and
development, the Company now has a group of experienced underground miners.
Additionally, the Company has implemented significant improvements in the open
pit mining techniques specifically designed to improve the results of mining
the structurally controlled Fachinal deposits. The efforts over the last two
years are beginning to provide positive results. These efforts will continue
during 1999.
The following table sets forth Fachinal Mine production data for the
period from October 19, 1995, on which date initial production activities
commenced, through December 31, 1995, and the years ended December 31, 1996,
1997 and 1998.
<TABLE>
<CAPTION>
October 19, 1995
through Year Ended December 31,
December 31, 1995 1996 1997 1998
----------------- ---- ---- ----
<S> <C> <C> <C> <C>
Ore milled (tons) 96,212 591,074 592,976 568,051
Gold (ounces) 3,586 25,064 30,601 28,358
Silver (ounces) 334,816 2,154,347 2,243,761 1,596,676
</TABLE>
14
<PAGE>
The gold production shortfall in 1998 was due to ton and grades being
slightly below budget. The silver shortfall was due to lower than model
predicted grades at the Condor and Guanaco Mines. The Condor problem was one
of model prediction error. Guanaco was at the end of its mine life and was not
totally mined out because of the metal price decline of the last quarter. This
of course resulted in a tonnage and grade shortfall for Guanaco.
The following table sets forth the costs of production per ounce of gold
during 1997 and 1998 at the Fachinal Mine. Cash costs include mining,
processing and direct administration costs, royalties, smelting and refining.
Because the Fachinal Mine had not yet reached commercial production levels
prior to January 1, 1997, results of the mine's operations were accounted for
as a development stage property (i.e., costs net of pre-production revenues
were capitalized). The property was classified as an operating property for
financial reporting purposes on January 1, 1997. YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998
---- ----
<S> <C> <C>
Cash costs per ounce................. $339.46 $313.84
Depreciation, depletion and
amortization per ounce.............. 172.86 205.96
------- -------
Total costs per ounce................ $512.32 $519.80
======= =======
</TABLE>
The decrease of cash cost of production in 1998 was primarily
attributable to fourth quarter cost improvements. The cash costs for the
fourth quarter were $279 per gold equivalent ounce. During this period,
important productivity enhancements were achieved; less diesel consumption;
renegotiated contracts in transportation, explosives and diesel; and personnel
reduction by 40% as a first step in implementing an aggressive optimization
plan designed to achieve positive cash flow from the operation.
Economic, precious metals ores at the Fachinal Mine occur in multiple
epithermal, quartz-sulfide veins system hosted in Jurassic volcanic rocks.
During the third quarter of 1998, the Company identified additional
underground reserves. Based on an ore reserve review report dated February
1999, by Micon International Limited ("Micon"), the total remaining, mineable,
open-pit and underground proven and probable reserves as of January 1, 1999 at
the Fachinal Mine were approximately 1.475 million tons averaging 0.07 ounces
of gold per ton and 2.70 ounces of silver per ton. The Fachinal Mine's
open-pit reserve base totals 1.028 million tons averaging 0.06 ounces of gold
per ton and 1.76 ounces of silver per ton. The estimate is based on an
internal cutoff grade of 0.04 to 0.06 gold equivalent ounces per ton. The
underground reserve, which totals 448,000 tons at 0.10 ounces of gold per ton
and 4.86 ounces of silver per ton, is based on internal cutoff grades ranging
from 0.12 to 0.18 ounces per ton equivalent gold. Both reserve estimates are
based on gold and silver prices ranging from $300 to $344 per ounce and $5.00
15
<PAGE>
to $6.16 per ounce, respectively from 1999 to 2003. Average grades reflect
extractive dilution, but not losses during the recovery process. The Company
estimates, based upon metallurgical testing and operating experience, recovery
rates between 88.7% for gold and 87.8% for silver. The open-pit reserve
estimate has also identified 2.754 million tons of mineralized material,
averaging 0.06 ounces of gold per ton and 1.23 ounces of silver per ton. The
underground resource estimate has identified an additional 1.199 million tons
of mineralized material averaging 0.11 ounces of gold per ton and 4.28 ounces
of silver per ton. Numerous other exploration targets with known
precious-metals mineralization remain to be evaluated. The above ore reserve
and mineralized material data does not include data relating to the Furioso
property near the Fachinal property, which the Company has an option to
purchase and which is discussed below.
Total capital expenditures by the Company at the Fachinal Mine in 1998
approximated $2.8 million. Such expenditures were used to expand mine
development and purchase miscellaneous equipment. The Company plans
approximately $.3 million of capital expenditures at the Fachinal Mine during
1999 on mine development and miscellaneous capital equipment.
Drilling is underway at the Fachinal Mine's underground and open pit
mines in an effort to increase the existing reserve base. In addition,
developmental activities are being conducted at the Furioso property, located
approximately 40 miles southwest of the Fachinal Mine, where the Company has
estimated additional high grade gold reserves. An internal feasibility study
has been conducted by the Company and determined that Furioso ore reserves can
be economically processed at existing Fachinal Mine facilities. The Company
has an option to purchase 100% of the Furioso property at a price of $500,000
on or prior to April 30, 1999. No assurance can be given that the Company will
exercise that option. Emphasis is being directed at increasing underground
higher grade reserves. The ore reserve review report of Micon, dated February
1999 estimated that mineable proven and probable ore reserves as of January 1,
1999 at the Furioso property were approximately 51,000 tons averaging 0.54
ounces of gold per ton and 15.36 ounces of silver per ton. Those estimates are
based on an internal cutoff grade of 0.23 to 0.26 gold equivalent ounces per
ton and gold and silver prices of $300 per ounce and $5.00 per ounce,
respectively. Mineralized material at Furioso has been estimated at 54,000
tons with an average gold grade of 0.31 ounces per ton and 6.06 ounces per ton
silver. Reference also is made to "Exploratory Mining Properties" below for
additional information relating to exploratory activities in the Fachinal Mine
area.
Although the government and economy of Chile has been stable in recent
years, the ownership of property in a foreign country is always subject to the
risk of expropriation or nationalization with inadequate compensation. Any
foreign operation or investment may also be adversely affected by exchange
16
<PAGE>
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.
CDE PETORCA (CDE EL BRONCE) MINE
The Petorca Mine (also previously referred to as the El Bronce Mine) is
an underground, gold-silver mine located on approximately 34,000 acres in the
Andean foothills approximately 90 miles north of Santiago, Chile. In July
1994, the Company entered into an agreement with Compania Minera El Bronce de
Petorca, a Chilean corporation ("CMEB"), pursuant to which the Company
acquired operating control and a 51% interest in any operating profits and an
option exercisable through July 1997 to also purchase from CMEB a 51% equity
interest in Compania Minera CDE El Bronce, a Chilean corporation ("CDE El
Bronce") that owns the producing El Bronce Mine. On September 4, 1996, the
Company exercised its option to purchase 51% of the shares of CDE El Bronce
and also purchased the remaining 49% of the shares of CDE El Bronce from CMEB,
as a result of which Coeur increased its ownership interest of CDE El Bronce
to 100%. The property consists of 64 exploitation concessions and 10
exploration concessions. Surface rights to permit mining on the property have
been granted by the private owners. Ore is produced from a complex system of
precious-metals bearing, epithermal, quartz-veins hosted in Cretaceous
volcanic rocks. Coeur expended a total of $30.6 million in connection with its
original acquisition of operating control of the El Bronce Mine, exercise of
the option to acquire 51% ownership of CDE El Bronce and acquisition of the
remaining 49% of the shares of CDE El Bronce. In addition, Coeur's obligation
to pay CMEB a 3% net smelter return royalty, payable quarterly, commenced on
January 1, 1997. However, from July 1998 to June 1999, CMEB has agreed to a
2.4% net smelter return royalty.
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Asset and Long-Lived Assets to be
Disposed Of" ("SFAS 121"), the Company reviews the carrying value of its
assets whenever events or changes in circumstances indicate that the carrying
amount of its assets may not be recoverable. Generally, SFAS 121 provides that
an asset impairment exists if the total amount of the estimated future
undiscounted cash flows of the asset is less than the carrying value of the
asset. If it is determined that impairment exists, the amount of the
impairment loss that should be recorded, if any, is the amount by which the
carrying value of the asset exceeds its fair value.
During the first quarter of 1998, the Petorca Mine continued to operate
at a loss in spite of on-going efforts to improve ore grades and reduce
operating costs. During April 1998, a SAFS 121 analysis of Petorca was
completed to determine whether mine plans could be modified to improve
operations. As a result of this evaluation, the Company's management became
aware that facts and circumstances fundamental to the long-term economic
performance of the mine had changed during the first quarter of 1998. Those
17
<PAGE>
changes primarily related to (i) management's determination that wider veins
located through the Company's exploration efforts were unlikely to yield
commercial production and did not warrant the additional capital investment;
and (ii) management's decision to not exercise the Company's option to
purchase the Boton de Oro property adjacent to the Petorca Mine, which
decision was based on the completion in April 1998 of an internal feasibility
study to evaluate the possible incorporation of Boton de Oro's mineralization
into Petorca operations. A complete evaluation of operations at Petorca was
presented to the Company's Board of Directors for consideration at its regular
meeting held on May 12, 1998. As a result of this evaluation, the Company
determined that a write-down was required to properly reflect the estimated
realizable value of Petorca's mining properties and assets in accordance with
the standards set forth in SFAS 121. Consequently, the Company recorded a
charge in the first quarter of 1998 totaling $54.5 million relating to its
investment in the Petorca Mine. The charge included approximately $8.3 million
to satisfy the estimated remediation and reclamation liabilities at El Bronce
and to provide for estimated termination costs.
Subsequent to the write-down, sufficient exploration success was
achieved to allow the mine to continue operations.
Based on an ore reserve report, dated February 1999, prepared by CDE
Petorca, proven and probable ore reserves as of January 1, 1999 at the Petorca
Mine totalled 424,000 tons averaging 0.22 ounces of gold per ton. The reserve
estimate is based on a gold price of $300.00 per ounce. An additional 858,000
tons of mineralized material, averaging 0.33 ounces of gold per ton, has been
identified. The reserve is based on an internal cutoff of 0.18 ounces of gold
per ton. The Company estimates, based on past experience and metallurgical
testing, mill recovery rates are 93% for gold and 84% for silver. Certain
mineralized veins remain geologically open both vertically and horizontally.
The following table sets forth Petorca Mine production data subsequent
to its acquisition by Coeur on October 3, 1994. As stated above, prior to
September 4, 1996, the Company had a 51% interest in any operating profits
from the mine. The Company's 5l% interest in the mine's operating profits from
October 3, 1994 through December 31, 1994 amounted to $1,023,537 and for the
year ended December 31, 1995 amounted to $763,166. Subsequent to September 4,
1996, the Company has had a 100% interest in any operating profits or losses
from the mine. Giving effect to the Company's 51% interest through September
4, 1996 and its 100% interest thereafter, the Company received operating
profits from the mine of $522,151 in 1996 and recorded an operating loss of
$5.6 million in 1997 and $58.1 million in 1998. The following data sets forth
100% of the mine's production during the periods indicated.
18
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
December 31, ------------------------------------------------------------------------
1994 1995 1996 1997 1998
----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ore milled (tons). 56,761 286,512 339,509 343,296 236,016
Gold (ounces). . . 9,712 43,204 52,917 48,181 37,746
Silver (ounces). . 39,605 142,229 112,633 100,626 70,755
</TABLE>
The following table sets forth the costs of production per ounce of gold
during the periods set forth below at the Petorca Mine. Cash costs include
mining, processing and direct administration costs, royalties, and smelting
and refining.
<TABLE>
<CAPTION>
Three Months
Ended Year Ended December 31,
December 31, ------------------------------------------------------------------------
1994 1995 1996 1997 1998
----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash costs per
ounce.................... $205.65 $330.37 $296.05 $348.24 $336.26
Depreciation,
depletion and
amortization
per ounce................. 20.40 20.51 41.01 53.69 43.99
------- ------- ------- ------- -------
Total costs per
ounce..................... $226.05 $350.88 $337.06 $401.93 $380.25
======= ======= ======= ======= =======
</TABLE>
During the last five months of 1998, substantial operating improvements
were achieved resulting in reduced cash costs. The cash costs for this period
were $231 per ounce. These improvements are expected to continue in 1999.
During the third quarter of 1998, the Company commenced a revised mining
program and Petorca achieved positive cash flow with production during the
third and fourth quarters totaling 16,105 ounces of gold and 27,105 ounces of
silver at a cash equivalent cost of $245 per equivalent ounce of gold. The
Company expects that the first quarter of 1999 will continue to achieve
similar operating improvements. Based on proven and probable reserves, the
Company estimates that operations should continue for an estimated twelve
months with similar production and operating costs.
Ongoing exploration efforts are being conducted to identify, and, if
successful, develop wider veins in order to increase reserves as well as to
lower costs of production. The Company expended approximately $.9 million for
developmental activities in 1998 and plans to expend approximately $.5 million
for developmental activities in 1999.
19
<PAGE>
KENSINGTON PROPERTY
On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur
Alaska, Inc. ("Coeur Alaska"), acquired the 50% ownership interest of Echo Bay
Exploration Inc. ("Echo Bay") in the Kensington property from Echo Bay and
Echo Bay Alaska, Inc. (collectively the "Sellers"), giving Coeur 100%
ownership of the Kensington property. The property is located on the east bank
of Lynn Canal between Juneau and Haines, Alaska. As a result of that
transaction, Coeur assumed full ownership and operating control of the
project. Pursuant to the Venture Termination and Asset Purchase Agreement
among Coeur Alaska and the Sellers, dated as of June 30, 1995, Coeur Alaska
paid to the Sellers a total of $32.5 million and, pursuant to the Royalty Deed
set forth as an exhibit to the Venture Termination and Asset Purchase
Agreement, Coeur Alaska agreed to pay Echo Bay a scaled net smelter return
royalty on 1 million ounces of future gold production after Coeur Alaska
recoups the $32.5 million purchase price and its construction expenditures
incurred after July 7, 1995 in connection with placing the property into
commercial production. The royalty ranges from 1% at $400 gold prices to a
maximum of 2 1/2% at gold prices above $475, with the royalty to be capped at
1 million ounces of production.
The Kensington ore deposit consists of multiple, precious metals
bearing, mesothermal, quartz, carbonate, pyrite vein swarms and discrete
quartz-pyrite veins hosted in the Cretaceous Jualin diorite. The
gold-telluride-mineral calaverite is associated with the pyrite
mineralization. Based on an ore reserve endorsement dated February 1997 by
Steffen, Robertson & Kirsten, independent mining consultants, Kensington
proven and probable ore reserves as of January 1, 1999 are estimated at 13.893
million tons at a grade of 0.136 ounces of gold per ton, containing 1.896
million ounces of gold. The reserve estimate is based on an average
life-of-mine breakeven price of $410 per ounce of gold. The reserve estimate
reflects the effects of extractive dilution during the mining process, but not
losses during the recovery process. An additional 10.51 million tons of
mineralized material averaging 0.130 ounces of gold per ton has been
identified, including results from 1998 exploration. Not all Kensington ore
zones have been fully delineated at depth and several peripheral zones and
veins remain to be explored. During 1998, six in-mine exploration targets were
drill tested by 76 core holes totaling 57,033 feet. Company geologic
evaluations of the drill results indicate the presence of a mineralized
material inventory of 1.644 million tons with a gold grade of 0.143 ounce per
ton. The tons and grades were estimated using a cut-off grade of 0.07 ounce of
gold per ton. The Company possesses the right to develop the Jualin property,
an exploratory property located adjacent to the Kensington Property. The
Jualin property consists of approximately 9,400 acres, of which approximately
345 acres are patented claims.
Based upon metallurgical testing, gold recovery associated with
producing a flotation concentrate is 95%, with 2.3% additional losses incurred
during final treatment off-site. The Company intends by the third quarter of
20
<PAGE>
1999 to complete an updated ore reserve analysis that reflects a mine plan
based on the recently completed optimization study.
During 1998, the Company's efforts at Kensington continued to be
directed toward the permitting process and project optimization study. The
Company announced in April 1998 that it had obtained all significant permits
required to proceed with development of the mine. However, in view of
continuing low gold prices, the Company proceeded with an independently
prepared optimization study of the permitted mine plan intended to improve the
economic viability of the project. In December 1998, the Company announced the
completion of the independently prepared optimization study, which resulted in
a new mine plan that will require extensive permit modifications. Based on the
results of the optimization study, the Company estimates that the project's
operating cash costs per ounce should be reduced to approximately $195 and
total capital costs to develop the mine should be reduced to approximately
$192 million.
The new mine plan recommended by the optimization study calls for
changes relating to the tailings management system, on-site gold recovery,
facility relocation and increased mill throughput. The new tailings management
system involves placing a portion of the Kensington tailings on the floor of
the Lynn Canal via an engineered system called Underwater Tailings Placement
("UTP"). In the UTP process, only inert (non-reactive) tailings will be piped
directly to the sea floor at a depth of approximately 750 feet. The new mine
plan also calls for recovering gold on-site with sodium cyanide gold
processing in a separate, fully contained system. The system will recycle and
reuse process waters with no marine discharge and all the tailings produced
will be treated, mixed with cement and placed underground in areas previously
mined. Other changes in the new mine plan involve relocating surface
facilities such as the ore grinding facilities to an underground location and
increasing the mine production rate from an estimated 4,600 tons per day.
The proposed use of UTP will require the Company to obtain from the EPA
a site specific exemption from its rules regulating gold mining. In addition,
modification to the Environmental Protection Agency ("EPA") National Pollution
Discharge Elimination System ("NPDES") permit will be required, which in turn
will most likely require the EPA to prepare a Supplemental Environmental
Impact Statement. Modifications also will be required to the US Forest Service
approval of the Plan of Operations, the Army Corps of Engineers Section 404
permit for tailings facility construction, and the City and Borough of Juneau
Large Mine Permit. Additional required authorizations of federal, state and
local jurisdictions will be required to reflect the new mine plan changes,
particularly the changes associated with UTP and on-site gold recovery. The
Company hopes to secure the required rulemaking, permit modifications and
other necessary regulatory approvals in the first quarter of 2000 so that a
construction decision can then be made. No assurance can be given as to
whether or when the required regulatory approvals will be obtained or as to
21
<PAGE>
whether the Company will place the Kensington project into commercial
production.
The Company's capital expenditures at the Kensington Property totaled
approximately $11.4 million (excluding capitalized interest) in 1998. Such
capital expenditures were used to continue the permitting and optimization
activities. The Company plans approximately $7.2 million (excluding
capitalized interest) of capital expenditures at the project during 1999,
which are planned to be used for technical support and engineering studies
required to complete the permitting activities. As of December 31, 1998, the
Company had invested a total of $141.9 million (including capitalized interest
of $33.4 million) on the Kensington Property. If mine operations commence, the
Company will conduct additional developmental drilling designed to increase
the current 1.9 million ounce gold reserve.
INTEREST IN GASGOYNE GOLD MINES NL
In May 1996, Coeur acquired approximately 35% of the outstanding shares
of capital stock of Gasgoyne, an Australian gold mining company, in exchange
for a total of 1,419,832 shares of Coeur common stock and cash totaling
approximately $15.4 million. Sons of Gwalia Limited, an Australian gold mining
company, ("Sons of Gwalia") conducted a competing offer for outstanding
Gasgoyne shares in connection with which it acquired approximately 61% of
Gasgoyne's outstanding shares. As a result of a selective reduction of capital
effected by Gasgoyne in February 1997 by purchasing its publicly held shares
from the shareholders other than Coeur and Sons of Gwalia, Coeur's ownership
interest increased to 36% of Gasgoyne's outstanding shares. In May 1997, Coeur
acquired an additional 7,820,907 shares of Gasgoyne, constituting
approximately 14% of the outstanding shares of Gasgoyne, from Sons of Gwalia
for US$14.9 million, as a result of which Coeur's ownership interest in
Gasgoyne was increased to 50% of the outstanding shares. Coeur's interest in
Gasgoyne is being accounted for under the equity method.
Gasgoyne is principally engaged in the exploration, development and
ownership of gold properties located in Western Australia. Headquartered in
Perth, Australia, Gasgoyne's principal asset is its 50% interest in the
Yilgarn Star Gold Mine in Marvel Loch, located approximately 220 miles east of
Perth, which started production in 1991. Gasgoyne also had a 45% interest in
the Awak Mas Gold Project ("Awak Mas") in Indonesia. Gasgoyne sold its
interest in Awak Mas in January 1998 for consideration of US$14.9 million
cash, 10 million shares of Lone Star Exploration NL and a royalty of $2 per
ounce of gold after 2 million ounces have been produced.
The following table sets forth information relating to total Yilgarn
Star Gold Mine production during the period from May 1, 1996 to December 31,
1996, and during the years ended December 31, 1997 and 1998. Coeur had a 17.5%
interest in such production (i.e., 35% of one-half) for the approximately
22
<PAGE>
seven months subsequent to the acquisition of its interest in Gasgoyne in May
1996, and a 25% interest (i.e., 50% of one-half) after May 1997:
<TABLE>
<CAPTION>
Year Ended December 31,
Eight Months Ended -----------------------
December 31, 1996 1997 1998
------------------ ---- ----
<S> <C> <C> <C>
Ore milled (tons)................ 587,582 1,502,111 1,345,841
Gold (ounces).................... 85,591 174,848 157,526
</TABLE>
The following table sets forth the costs of production per ounce of gold
during the years ended December 31, 1996, 1997 and 1998. Cash costs include
mining, processing and direct administration costs, and smelting and refining
costs.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash costs per ounce............................. $ 217.91 $ 255.11 $ 215.24
Depreciation, depletion and
amortization per ounce......................... 99.39 161.35 201.07
-------- -------- --------
Total costs per ounce............................ $ 317.30 $ 416.46 $ 416.31
======== ======== ========
</TABLE>
The Yilgarn Star Gold Mine operated as an open pit surface mine from
1991 through September 1995 and an underground mine commenced operations there
on a limited basis in October 1995. The increase in per ounce costs in 1997
compared to 1996 relate to the planned transition of mining at the Yilgarn
Star Mine from an open-pit operation to an underground operation and mining of
the uppermost portion of the underground mine which temporarily resulted in a
lower grade of ore being delivered to the mill. The increase in depreciation,
depletion and amortization per ounce in 1998 over 1997 is primarily due to an
increase in the basis resulting from the fact that in May 1997, the Company
increased its ownership of Gasgoyne to 50%.
Yilgarn Star proven and probable reserves as of December 27, 1998
estimated by Gasgoyne Gold Mines totalled 4.074 million tons averaging 0.17
ounces of gold per ton, or a total of 684,000 ounces of gold. The reserve
estimate is based on a gold price of $300.00 per ounce. An additional 6.155
million tons of mineralized material has been identified at a grade of 0.14
ounces of gold per ton.
The Nevoria Mill, which processed ore from the Yilgarn Star Mine's open
pit, ceased operations in July 1998 and was placed on a care and maintenance
basis following the depletion of reserves at the open pit. The Joint Venture
is presently carrying out planned localized and regional exploration programs
designed to increase reserves at the Yilgarn Star Mine.
23
<PAGE>
GOLDEN CROSS MINE
Effective April 30, 1993, a wholly-owned subsidiary of the Company
acquired from a wholly-owned subsidiary of Cyprus Minerals Company all of the
outstanding capital stock of Cyprus Gold New Zealand Limited ("Cyprus NZ"),
the name of which was changed by the Company to Coeur Gold New Zealand Limited
("Coeur NZ"). The principal asset of Coeur NZ is its undivided 80%
participating joint venture interest in the Golden Cross Mine located near
Waihi on the North Island of New Zealand, approximately 100 miles southeast of
Auckland, and certain other exploration properties in New Zealand. The
remaining undivided 20% joint venture interest is owned by a subsidiary of The
Todd Company Limited, a New Zealand corporation.
The Golden Cross Mining License covers an area of approximately 961
acres of which 274 acres are occupied by the current Golden Cross Mine
operation. The mine property includes open-pit and underground mine
facilities, process plant, tailings pond, water treatment plant and mine
offices which are all accessible by road from the town of Waihi. Construction
of the Golden Cross Mine began in April 1990, and commercial production
commenced in December 1991. Open pit mining operations were discontinued in
December 1997 and limited mining of underground ore continued until April 28,
1998, at which time all mining and milling operations were discontinued.
Due to ground movement and instability which threatened the integrity of
the mine site (see Item 3, GOLDEN CROSS LAWSUIT), the Company effected a $53
million write-down during the second quarter of 1996 of its interest in the
Golden Cross Mine and the nearby Waihi East property, which included accrual
of the then estimated future closure and remediation costs and a write-down of
the carrying value of the Company's 80% interest in the property. In the last
quarter of 1996, it appeared that the interim slide remedial measures were
successful in stabilizing the extent of the ground movement and the New
Zealand Regulatory Authorities approved the Company's application to permit
the raising of the Golden Cross Mine tailings impoundment crest. As a result
of the completion of the crest raising in early 1997, the Company was able to
implement a previously planned mill optimization and to continue to operate
the mine through the end of 1997. Although the deep-seated ground movement
below the Golden Cross Mine tailings impoundment that necessitated the
Company's 1996 write-down appeared to stabilize in late 1996 and during 1997,
limited tailings disposal capacity required that open pit mining activities at
the mine be discontinued in December 1997. As stated above, limited mining of
underground ores continued until April 28, 1998, at which time all mining and
milling operations were discontinued.
In the second quarter of 1997, the Company received its 80% share of a
$10 million insurance recovery relating to business interruption and property
damage at the mine. Since the recovery was not assured at the time of the
24
<PAGE>
original write-down, it was not accrued as part of that write-down; therefore,
the $8 million of insurance proceeds were recorded as other income in 1997.
During 1998, the Company expended approximately $1.1 million in connection
with remediation activities at the mine and expects that additional
remediation costs at the mine during 1999 will approximate $.4 million. In
addition, the Company estimates that the costs to be incurred in 1999 in
connection with the closure of the mine will approximate $3.1 million.
In December, the Company performed an analysis of the closure accrual
for the Golden Cross Mine. As a result, the Company determined that there was
a shortfall in the closure accrual, and recorded an additional write-down of
$4.2 million in the fourth quarter of 1998. The shortfall was due to changes
in estimates from the initial write-down related to the fair value of the
remaining assets of $9.5 million, offset in part by the reduced estimate of
closure and remediation costs of $5.3 million.
The following table sets forth for the periods indicated Golden Cross
Mine production data attributable to Coeur's 80% interest in the mine:
<TABLE>
<CAPTION>
Four
Months
Ended
Year Ended December 31, April 30,
---------------------------------------- ---------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ore milled (tons)............. 727,427 731,453 827,642 833,836 86,663
Gold (ounces)................. 67,400 83,058 64,365 83,110 15,858
Silver (ounces)............... 222,246 286,216 205,070 271,776 49,536
</TABLE>
The following table sets forth the costs of production per ounce of gold
during the periods indicated at the Golden Cross Mine. Cash costs include
mining, processing and direct administration costs, royalties and exploration
expenses, but do not include financing costs associated with the term loan
owed by Coeur Gold NZ to the Company. The production costs per ounce of gold
for any period is computed net of by-product credits.
<TABLE>
<CAPTION>
Four
Months
Ended
Year Ended December 31, April 30,
---------------------------------------- ---------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash costs per
ounce.......................... $276.96 $232.74 $369.56 $245.34 $210.51
Depreciation,
depletion and
amortization
per ounce...................... 111.53 81.08 38.22 44.13
------- ------- ------- ------- -------
Total costs per
ounce.......................... $388.49 $313.82 $407.78 $289.47 $210.51
======= ======= ======= ======== =======
</TABLE>
25
<PAGE>
No depreciation, depletion and amortization costs were recorded in the
four months ended April 30, 1998, in view of the cessation of mining
activities on April 28, 1998.
As discussed below under Item 3 ("Legal Proceedings"), Coeur has
asserted legal claims against Cyprus Amax Minerals Company based on alleged
misrepresentations by that company as well as its failure to make certain
required disclosures relating to ground movement and instability when Coeur
purchased the property in 1993.
SILVER AND GOLD PRICES
The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely. The volatility of such prices is
illustrated by the following table, which sets forth the high and low prices
of silver (as reported by Handy and Harman) and gold (London final) per ounce
during the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1995 1996 1997 1998
------------------- ------------------- ------------------- -------------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Silver - $ 6.01 $ 4.36 $ 5.79 $ 4.67 $ 6.21 $ 4.21 $ 7.31 $ 4.72
Gold - $395.55 $372.40 $414.80 $367.40 $366.55 $283.00 $313.15 $273.40
</TABLE>
MARKETING
Coeur has historically sold the gold and silver from its mines both
pursuant to forward contracts and at spot prices prevailing at the time of
sale. Entering into forward sale contracts is a strategy used to mitigate some
of the risks associated with fluctuating precious metals prices. The Company
continually evaluates the potential benefits of engaging in these strategies
based on the then current market conditions. At December 31, 1998, the Company
had forward commitments of 135,000 ounces of gold at an average price of $371
per ounce. These commitments mature evenly over the next five years.
EXPLORATORY AND DEVELOPMENTAL MINING PROPERTIES
Coeur, either directly or through its wholly-owned subsidiaries, owns,
leases and has interests in certain exploration-stage mining properties
located in the United States, Chile, Australia and New Zealand. Exploration
expenses of approximately $7.7 million, $8.7 million and $9.4 million were
incurred by the Company in connection with exploration activities in 1996,
1997 and 1998, respectively.
Coeur is conducting extensive exploration programs for silver and gold
at or adjacent to its existing mining properties in the United States and
Chile. In particular, the Company significantly expanded its exploration
efforts at the Rochester mine and adjacent Nevada Packard property during
26
<PAGE>
1998. Exploration activities also continue at the Fachinal and Petorca (El
Bronce) mines and adjacent properties in Chile.
An extensive developmental drilling program was completed during 1998 at
the Company's Kensington gold project, located north of Juneau, Alaska.
Approximately 1.644 million tons averaging 0.14 ounce per ton gold have been
added to the mineralized-material inventory as a result of this program.
Silver Valley Resources is engaged in continuing exploration projects on
its extensive land holdings in the Coeur d'Alene Mining District in northern
Idaho, which historically has been one of the largest silver producing regions
in the world. On-going exploration for silver is being conducted at the Coeur
and Galena mines, Caladay project and adjacent land leased from the Sterling
Mining Company, Placer Creek Mining Company, Silver Buckle Mines, Inc. and
American Silver Mining Company.
Gasgoyne Gold Mines NL (50% owned by Coeur) is conducting exploration
programs at the Yilgarn Star Gold Mine and adjacent properties in Western
Australia. Coeur is also in the process of opening an exploration office in
Perth, which will allow a more direct involvement in exploration for gold
deposits in Australia.
Both the KM66 project in Mexico and the Groete Creek project in Guyana
were terminated during 1998. Coeur has ceased all exploration activities in
Guyana, but will continue to actively seek advanced-staged, precious-metals
exploration properties elsewhere in South America and in North America.
GOVERNMENT REGULATION
GENERAL
The Company's activities are subject to extensive federal, state and
local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Although such regulations have
never required the Company to close any mine and the Company is not presently
subject to any material regulatory proceedings related to such matters, the
costs associated with compliance with such regulatory requirements are
substantial and possible future legislation and regulations could cause
additional expense, capital expenditures, restrictions and delays in the
development of the Company's properties, the extent of which cannot be
predicted. In the context of environmental permitting, including the approval
of reclamation plans, the Company must comply with known standards and
regulations which may entail significant costs and delays. Although Coeur has
been recognized for its commitment to environmental responsibility and
believes it is in substantial compliance with applicable laws and regulations,
amendments to current laws and regulations, the more stringent implementation
27
<PAGE>
thereof through judicial review or administrative action or the adoption of
new laws, could have a materially adverse effect upon the Company.
For the years ended December 31, 1997 and 1998, the Company expended
$5.0 million and $8.0 million, respectively, in connection with routine
environmental compliance activities at its operating properties and expects to
expend approximately $5.3 million for that purpose in 1999. The Company
expended approximately $4.5 million and $1.1 million in connection with its
ground movement remediation activities at the Golden Cross Mine in 1997 and
1998, respectively. In addition, since the inception of the project through
December 31, 1998, the Company expended approximately $16.0 million on
environmental and permitting activities at the Kensington Property and expects
to spend approximately $3.0 million there for that purpose in 1999. The
expenditures at Kensington have been capitalized as part of its development
cost. Future environmental expenditures will be determined by governmental
regulations and the overall scope of the Company's operating and development
activities.
FEDERAL ENVIRONMENTAL LAWS
Mining wastes are currently exempt to a limited extent from the
extensive set of Environmental Protection Agency ("EPA") regulations governing
hazardous waste, although such wastes may be subject to regulation under state
law as a solid or hazardous waste. The EPA plans to develop a program to
regulate mining waste pursuant to its solid waste management authority under
the Resource Conservation and Recovery Act ("RCRA"). Certain processing and
other wastes are currently regulated as hazardous wastes by the EPA under
RCRA. The EPA is studying how mine wastes from extraction and benefication
should be managed and regulated. If the Company's mine wastes were treated as
hazardous waste or such wastes resulted in operations being designated as a
"Superfund" site under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA" or "Superfund") for cleanup, material expenditures
would be required for the construction of additional waste disposal facilities
or for other remediation expenditures. Under CERCLA, any present owner or
operator of a Superfund site or an owner or operator at 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 state law counterparts, and in Nevada under the Nevada Water
Pollution Control Law which implements the CWA. Air emissions are subject to
controls under Nevada's, Idaho's and Alaska's air pollution statutes
implementing the Clean Air Act.
The Company's commitment to environmental responsibility has been
recognized in 19 awards received since 1987, which included the Dupont/Conoco
Environmental Leadership Award, awarded to the Company on October 1, 1991 by a
28
<PAGE>
judging panel that included representatives from environmental organizations
and the federal government and the "Star" award granted on June 23, 1993 by
the National Environmental Development Association, and the Environmental
Waikato Regional Council award for Golden Cross environmental initiative
granted on May 15, 1995. In 1994, the Company's Chairman and Chief Executive
Officer, and in 1997, the Company's Vice President of Environmental and
Governmental Affairs, were awarded the American Institute of Mining,
Metallurgical and Petroleum Engineers' Environmental Conservation
Distinguished Service Award. The receipt of such awards does not relieve the
Company of its obligations to comply with all applicable environmental laws.
NATURAL RESOURCES LAWS
The Company is subject to federal and state laws designed to protect
natural resources. In March 1996, as discussed under Item 3 below, the United
States government commenced a lawsuit against various defendants, including
the Company, asserting claims under CERCLA and the CWA for alleged damages to
federal natural resources in the Coeur d'Alene River Basin of northern Idaho
as a result of alleged releases of hazardous substances from mining activities
conducted in the area since the late 1800s.
PROPOSED MINING LEGISLATION
Legislation is presently being considered in the U.S. Congress to change
the Mining Law of 1872 (the "Mining Act") under which the Company holds mining
claims on public lands. It is possible that the Mining Act will be amended or
be replaced by more onerous legislation in the future. The legislation under
consideration, as well as regulations under development by the Bureau of Land
Management, contain new environmental standards and conditions, additional
reclamation requirements and extensive new procedural steps which would be
likely to result in delays in permitting.
During the last several Congressional sessions, bills have been
introduced which would supplant or materially alter the Mining Act. If
enacted, such legislation may materially impair the ability of the Company to
develop or continue operations which derive ore from federal lands. No such
bills have been passed and the extent of the changes, if any, which may be
enacted by Congress is not presently known. A significant portion of Coeur's
U.S. mining properties are on public lands. Any reform of the Mining Act or
regulations thereunder based on these initiatives could increase the costs of
mining activities on unpatented mining claims, and as a result could have an
adverse effect on the Company and its results of operations. Until such time,
if any, as new reform legislation or regulations are enacted, the ultimate
effects and costs of compliance on the Company cannot be estimated.
29
<PAGE>
FOREIGN GOVERNMENT REGULATIONS
The mining properties of the Company that are located in New Zealand and
Chile are subject to various government laws and regulations pertaining to the
protection of the air, surface water, ground water and the environment in
general, as well as the health of the work force, labor standards and the
socioeconomic impacts of mining facilities upon the communities. The Company
believes it is in substantial compliance with all applicable laws and
regulations to which it is subject in both Chile and New Zealand.
MAINTENANCE OF CLAIMS
At mining properties in the United States, including the Rochester,
Kensington, Coeur, Galena and Caladay mines, operations are conducted in part
upon unpatented mining claims, as well as patented mining claims. Pursuant to
applicable federal law it is necessary, in order to maintain the unpatented
claims, to pay to the Secretary of the Interior, on or before August 31 of
each year, a claim maintenance fee of $100 per claim. This claim maintenance
fee is in lieu of the assessment work requirement contained in the Mining Law
of 1872. In addition, in Nevada, holders of unpatented mining claims are
required to pay the county recorder of the county in which the claim is
situated an annual fee of $3.50 per claim. No maintenance fees are payable for
patented claims. Patented claims are similar to land held by an owner who is
entitled to the entire interest in the property with unconditional power of
disposition.
In Chile, operations are conducted upon mineral concessions granted by
the national government. For exploitation concessions (somewhat similar to a
U.S. patented claim), to maintain the concession, an annual tax is payable to
the government before March 31 of each year in the approximate amount of $1.14
per hectare. For exploration concessions, to maintain the right, the annual
tax is approximately $.30 per hectare. An exploration concession is valid for
a three year period. It may be renewed for new periods unless a third party
claims the right to explore upon the property, in which event the exploration
concession must be converted to an exploitation concession in order to
maintain the rights to the concession. The total tax paid in 1998 in Chile was
approximately $329,000.
In New Zealand, prospecting licenses and mining licenses are issued by a
national government agency. To maintain them the holder must comply with the
detailed provisions of the licenses, which include provisions for work
programs, health and safety, protection of the environment, reclamation,
liability insurance and performance bonds. An annual fee is required to be
paid for the prospecting and mining licenses associated with Golden Cross
which, for the year 1998, amounted to $26,000.
30
<PAGE>
EMPLOYEES
At March 1, 1999, the Company employed a total of 831 full-time
employees, of which 45 are located at the Company's executive offices in Coeur
d'Alene, Idaho, 253 are employed at the Rochester Mine, 14 are employed at the
Golden Cross Mine in New Zealand, 508 are employed at the Fachinal and Petorca
Mines in Chile, and 11 are employed at the Kensington property in Alaska. The
Company maintains labor agreements under country statutes in Chile at the
Fachinal Mine. The Fachinal Mine labor agreement provides a base wage with
bi-annual cost of living adjustments but no annual escalator, and have
provisions for terms and conditions of work including vacations, holidays,
education, and in the case of the Fachinal Mine, housing. The agreements also
provide for health and pension benefits at the minimum country-mandated
levels. The Fachinal Mine agreement also provides for hours of work and shifts
to accommodate remote living conditions and provides a production bonus equal
to 35% of base pay when production exceeds 1,500 tons per day. The agreement
at the Fachinal Mine expires in August 1999. In the opinion of the Company,
its labor relations have been satisfactory. The employees of Silver Valley
Resources and Gasgoyne are employees of those companies.
ITEM 2. PROPERTIES.
Information regarding the Company's properties is set forth under Item 1
above.
ITEM 3. LEGAL PROCEEDINGS.
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
River Basin. Accordingly, the Company intends to vigorously defend this
matter.
31
<PAGE>
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
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. No assurances can be given at this stage of the
action as to its ultimate outcome.
32
<PAGE>
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
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.
33
<PAGE>
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 Company anticipates, based on communication with counsel for the
derivative plaintiff, that the action previously dismissed without prejudice
will be dismissed with prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the
Company's current executive officers:
<TABLE>
<CAPTION>
Office with Appointed
Name Age the Company to Office
---- --- ----------- ---------
<S> <C> <C> <C>
Dennis E. Wheeler 56 Chairman of the Board 1992
President 1980
Chief Executive Officer 1986
Robert Martinez 52 Senior Vice President, 1998
Chief Operating Officer
Geoffrey A. Burns 39 Vice President
Chief Financial Officer 1999
34
<PAGE>
Gary W. Banbury 46 Vice President - Human Resources 1998
James K. Duff 54 Vice President 1996
Business Development
Dieter Krewedl 55 Vice President - Exploration 1998
Robert T. Richins 51 Vice President 1989
Environmental Services and
Governmental Affairs
Paul B. Valenti 50 Vice President - Operations 1998
Wayne L. Vincent 37 Controller 1998
Chief Accounting Officer 1999
James N. Meek 47 Treasurer 1999
</TABLE>
Messrs. Wheeler, Martinez, Richins, Duff, Banbury and Vincent have been
principally employed by the Company for more than the past five years. Prior
to his appointment as Senior Vice President and Chief Operating Officer on May
15, 1998, Mr. Martinez had served as Vice President - Operations since April,
1997 and previously was Vice President - Engineering, Operational Services and
South American Operations of the Company. Prior to his appointment as Vice
President and Chief Financial Officer in March 1999, Mr. Burns was Chief
Financial Officer and Controller for Prime Resources Group, Inc and Homestake
Canada, Inc. From June 1993 until his appointment to Vice President - Human
Resources, Mr. Banbury held the position of Manager of Human Resources with
the Company. Prior to his appointment as Vice President - Business
Development, Mr. Duff held the position of Director of New Business
Development. Prior to his appointment as Vice President-Exploration on October
8, 1998, Mr. Krewedl was Vice President of Exploration for Echo Bay Mines,
LTD. Prior to his appointment to his current position in May 1998, Mr. Valenti
was Vice President of Engineering Services with the Company. He was previously
Vice President of Operations and Development for USMX, Inc. Prior to his
appointment as Controller and Chief Accounting Officer, Mr. Vincent held the
position of Manager of Financial Accounting with the Company for the past
eight years. Prior to his appointment as Treasurer, Mr. Meek held the position
of Assistant Treasurer and Manager of Budget and Forecasting.
35
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Pacific Coast Exchange. The following table sets forth, for
the periods indicated, the high and low closing sales prices of the Common
Stock as reported by the NYSE:
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
1997: First Quarter $18.2500 $13.8750
Second Quarter 16.0000 12.5000
Third Quarter 16.3125 12.6875
Fourth Quarter 16.2500 7.6250
1998: First Quarter $13.0000 $ 8.0000
Second Quarter 13.5000 6.3750
Third Quarter 7.8750 4.0625
Fourth Quarter 7.4375 4.1250
</TABLE>
The Company paid per share cash distributions or dividends on its Common
Stock of $.15 on each of April 19, 1996, April 21, 1995, April 15, 1994, and
April 16, 1993. In March 1997, the Company announced the Board's decision not
to pay a dividend on its Common Stock in April 1997. Future distributions or
dividends on the Common Stock, if any, will be determined by the Company's
Board of Directors and will depend upon the Company's results of operations,
financial conditions, capital requirements and other factors.
At March 17, 1999, there were 6,904 record holders of the Company's
outstanding Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
(To be furnished)
36
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(To be furnished)
ITEM 7A. 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.
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 December 31, 1998 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 December 31, 1998
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,
the table presents ounces expected to be delivered and the related average
37
<PAGE>
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.
<TABLE>
<CAPTION>
Fair
Value
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 12/31/98
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long Term Debt $144,290
Fixed Rate $ - $ - $ - $45,803 $ - $200,649 $246,452
Average Interest Rate 6.686% 6.686% 6.686% 6.766% 6.843% 7.190%
DERIVATIVE FINANCIAL
INSTRUMENTS
Gold Put Options
Sold - AUD $ 11,950
Ounces 30,000 30,000 30,000 30,000 30,000 - 150,000
Price Per Ounce $604.85 $604.85 $597.00 $597.00 $597.00 $ -
Gold Call Options
Purchased - AUD $ 689
Ounces - 15,000 - - - - 15,000
Price Per Ounce $ - $545.00 $ - $ - $ - $ -
Foreign Currency
Contracts $ 391
New Zealand Dollar $6,000 $3,600 $ - $ - $ - $ - $ 9,600
Exchange Rate
( NZ$ to US$) 2.069 2.124 - - - -
</TABLE>
38
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements required hereunder and contained
herein are listed under Item 14(a) below.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item regarding directors is hereby incorporated by
reference from the Company's definitive proxy statement to be filed pursuant
to Regulation 14A not later than 120 days after the end of the fiscal year
covered by this report. Information regarding the Company's executive officers
is set forth above under Item 4A of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information
called for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(To be furnished)
(b) REPORTS ON FORM 8-K: The Company filed no report on Form 8-K during the
quarter ended December 31, 1998.
(c) EXHIBITS: The following listed documents are filed as Exhibits to this
report:
3(a) - Articles of Incorporation of the Registrant and amendments
thereto. (Incorporated herein by reference to Exhibit 3(a)
to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988.)
3(b) - Bylaws of the Registrant and amendments thereto.
(Incorporated herein by reference to Exhibit 3(b) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
3(c) - Certificate of Designations, Powers and Preferences of the
Series A Junior Preferred Stock of the Registrant, as filed
with Idaho Secretary of State on May 25, 1989 (Incorporated
by reference to Exhibit 4(a) of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1989.)
4(a) - Specimen certificate of the Registrant's stock.
(Incorporated herein by reference to Exhibit 4 to the
Registrant's Registration Statement on Form S-2 (File No.
2-84174).)
4(b) - Form of Indenture, dated as of October 15, 1997, between the
Registrant and Bankers Trust Company, as Trustee.
(Incorporated herein by reference to Exhibit No. 4 to the
Registrant's Current Report on Form 8-K filed on October 16,
1997.)
10(a) - Executive Compensation Program. (Incorporated herein by
reference to Exhibit 10(e) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1989.) *
10(b) - Lease agreement, dated as of October 10, 1986, between
Manufacturers Hanover Commercial Corporation and
Coeur-Rochester, Inc. (Incorporated herein by reference to
Exhibit 10(a) to Registrant's Current Report on Form 8-K,
dated October 10, 1986.)
10(c) - Indenture, dated as of June 10, 1987, between the Registrant
and Citibank, N.A., as Trustee, relating to the Registrant's
6% Convertible Subordinated Debentures Due 2002.
(Incorporated herein by reference to Exhibit 4 to the
-----------------
* Management contract or compensatory plan
40
<PAGE>
Registrant's Current Report on Form 8-K dated June 10,
1987.)
10(d) - Agreement, dated January 1, 1994, between Coeur-Rochester,
Inc. and Johnson Matthey Inc. (Incorporated herein by
reference to Exhibit 10(m) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.)
10(e) - Refining Agreement, dated January 24, 1994, between the
Registrant and Handy & Harman. (Incorporated herein by
reference to Exhibit 10(n) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.)
10(f) - Master Equipment Lease No. 099-03566-01, dated as of
December 28, 1988, between Idaho First National Bank and the
Registrant. (Incorporated herein by reference to Exhibit
10(w) of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988.)
-----------------
* Management contract or compensatory plan
41
<PAGE>
10(g) - Master Equipment Lease No. 01893, dated as of December 28,
1988, between Cargill Leasing Corporation and the
Registrant. (Incorporated herein by reference to Exhibit
10(x) of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988.)
10(h) - Rights Agreement, dated as of May 24, 1989, between the
Registrant and First Interstate Bank of Oregon, N.A., as
Rights Agent. (Incorporated herein by reference to Exhibit 2
to the Registrant's Form 8-A relating to the registration of
the Rights on the American and Spokane Stock Exchanges.)
10(i) - Agreement and Plan of Merger, dated as of September 16,
1991, by and among the Registrant, CMC Acquisition
Corporation and Callahan Mining Corporation. (Incorporated
herein by reference to Exhibit A to the Prospectus, dated
November 22, 1991, contained in the Registrant's
Registration Statement on Form S-4 (File No. 33-44096).
10(j) - Agreement, dated June 11, 1992, between Callahan Mining
Corporation and Hecla Mining Company (Incorporated herein by
reference to Exhibit 10(z) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.)
10(k) - Stock Purchase Agreement, dated as of April 30, 1993, among
Coeur New Zealand, Inc., the Registrant, Cyprus gold New
Zealand Limited, Cyprus Exploration and Development
Corporation and Cyprus Minerals Company. (Incorporated
herein by reference to Exhibit 2 to the Registrant's Current
Report on Form 8K dated April 30, 1993.)
10(l) - Amended and Restated Profit Sharing Retirement Plan of the
Registrant. (Incorporated herein by reference to Exhibit
10(ff) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.) *
-----------------
* Management contract or compensatory plan
42
<PAGE>
10(m) - Indenture, dated as of January 26, 1994, between the
Registrant and Bankers Trust Company relating to the
Registrant's 6 3/8% Convertible Subordinated Debentures Due
2004. (Incorporated herein by reference to Exhibit 10(gg) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.)
10(n) - Purchase Agreement, dated January 18, 1994, between the
Registrant and Kidder, Peabody & Co. Incorporated relating
to the 6 3/8% Convertible Subordinated Debentures Due 2004.
(Incorporated herein by reference to Exhibit 10(hh) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(o) - Registration Rights Agreement, dated January 26, 1994,
between the Registrant and Kidder, Peabody & Co.,
Incorporated relating to the 6 3/8% Convertible Subordinated
Debentures Due 2004. (Incorporated herein by reference to
Exhibit 10(ii) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.)
10(p) - 1993 Annual Incentive Plan and Long-Term Performance Share
Plan of the Registrant. (Incorporated herein by reference to
Exhibit 10(jj) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.) *
10(q) - Supplemental Retirement and Deferred Compensation Plan,
dated January 1, 1993, of the Registrant. (Incorporated
herein by reference to Exhibit 10(kk) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1993.) *
10(r) - Lease Agreement, dated January 12, 1994, between First
Security Bank of Idaho and Coeur Rochester, Inc.
(Incorporated herein by reference to Exhibit 10(mm) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
-----------------
* Management contract or compensatory plan
43
<PAGE>
10(s) - Agreement, dated January 1, 1994, between Coeur Gold New
Zealand Limited and Johnson Matthey (Aust.) Ltd.
(Incorporated herein by reference to Exhibit 10(mm) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(t) - Non-employee Directors' Retirement Plan effective as of
March 19, 1993, of the Registrant. (Incorporated herein by
reference to Exhibit 10(oo) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.) *
10(u) - Extension of Employment and Severance Agreement between the
Registrant and Dennis E. Wheeler, dated June 28, 1994.
(Incorporated by reference to Exhibit 10 (nn) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.)*
10(v) - Form of letter extending the terms of the Severance
Agreements between the Registrant and James Sabala, Tom
Angelos, Michael Clark, Al Wilder, William Boyd, Robert
Martinez, Kevin Packard, James Duff and Michael Tippett.
(Incorporated by reference to Exhibit 10(oo) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.)*
10(w) - 401k Plan of the Registrant. (Incorporated by reference to
Exhibit 10 (pp) to the Registrants Annual Report on Form
10-K for the year ended December 31, 1994.)*
10(x) - Option Agreement of October 24, 1994 between Compania Minera
El Bronce and CDE Chilean Mining Corporation. (Incorporated
by reference to Exhibit 10(qq) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.)
10(y) - Asset Contribution Agreement, effective as of January 1,
1995, among the Registrant, ASARCO Incorporated, Callahan
Mining Company and Silver Valley Resource Corporation.
(Incorporated herein by reference to Exhibit 10(ff) to the
Company's Annual Report of Form 10-K for the year ended
December 31, 1995.)
-----------------
* Management contract or compensatory plan
44
<PAGE>
10(z) - Asset and Stock Purchase Agreement, dates as of April 28,
1995, among Schauemburg International, Inc., The Flexaust
Company, Inc. and Callahan Mining Corporation. (Incorporated
herein by reference to Exhibit 2 to the Registrant's Current
Report on Form 8-K dated May 2, 1995.)
10(aa) - Limited Recourse Project Financing Agreement, dated April
19, 1995, between the Registrant and N.M. Rothschild & Sons,
Ltd. (Incorporated herein by reference to Exhibit 10(b) to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.)
10(bb) - Venture Termination and Asset Purchase Agreement, dated as
of June 30, 1995, among Coeur Alaska, Inc., Echo Bay Alaska,
Inc. and Echo Bay Exploration, Inc. (Incorporated herein by
reference to Exhibit 10 to the Company's Current Report on
Form 8-K dated July 7, 1995.)
10(cc) - Form of Standby Agreement, dated November 15, 1995, between
the Registrant and UBS Securities Inc. (Incorporated herein
by reference to Exhibit 1 to the Registrant's Registration
Statement on Form S-3 (File No. 33-64255).)
10(dd) - Form of Offer, dated January 29, 1996, by the Registrant to
acquire all the ordinary shares of Gasgoyne Gold Mines NL.
(Incorporated herein by reference to Exhibit 10(a) to the
Registrant's Current Report on Form 8-K filed January 31,
1996 (date of earliest event reported - December 21, 1995).)
10(ee) - Part A Statement of the Registrant relating to its offer to
acquire all the ordinary shares of Gasgoyne Gold Mines NL.
(Incorporated herein by reference to Exhibit 10(b) to the
Registrant's Current Report on Form 8-K filed January 31,
1996 (date of earliest event reported - December 21, 1995).)
10(ff) - Call Option Agreement Over Shares, dated December 20, 1995,
between the Registrant and Ioma Pty Ltd. (Incorporated
herein by reference to Exhibit 10(c) to the Registrant's
Current Report on Form 8-K filed January 31, 1996 (date of
earliest event reported - December 21, 1995).)
45
<PAGE>
10(gg) - Agreement for the Purchase and Sale of Shares, dated August
30, 1996, by Compania Minera El Bronce to CDE Chilean Mining
Corporation and Coeur d'Alene Mines Corporation.
(Incorporated herein by reference to Exhibit 10(a) of the
Registrant's Current Report on Form 8-K filed November 5,
1996 (date of earliest event reported - September 4, 1996).)
10(hh) - Amendment, dated August 30, 1996, to Purchase and Sale,
Cancellation and Receipt of Payment of Purchase Sale
Installments and Release of Mortgage, Chattel Mortgages and
Prohibitions between Compania Minera El Bronce and Compania
Minera CDE El Bronce. (Incorporated herein by reference to
Exhibit 10(b) of the Registrant's Current Report on Form 8-K
filed November 5, 1996 (date of earliest event reported -
September 4, 1996).)
10(ii) - Loan Agreement, dated as of December 23, 1996, among the
Registrant (as the Borrower), NM Rothschild & Sons Limited
and Bayerische Vereinsbank AG (as the Banks) and NM
Rothschild & Sons Limited (as the Agent for the Banks).
(Incorporated herein by reference to Exhibit 10(kk) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996.)
10(jj) - Purchase Agreement, dated as of October 7, 1997, between the
Registrant and Lazard Freres & Co. LLC. (Incorporated herein
by reference to Exhibit 10(a) to the Registrant's Current
Report on Form 8-K filed on October 16, 1997.)
10(kk) - Registration Rights Agreement, dated as of October 15, 1997,
between the Registrant and Lazard Freres & Co. LLC.
(Incorporated herein by reference to Exhibit 10(b) to the
Registrant's Current Report on Form 8-K filed on October 16,
1997.)
10(ll) - Mining Lease, effective as of June 1, 1997, between Silver
Valley Resources and American Silver Mining Company.
(Incorporated herein by reference to Exhibit 10(a) to the
Registrant's Registration Statement on Form S-3 (File No.
333-40513).)
10(mm) - Mining Lease, effective as of April 23, 1996, between Silver
Valley Resources Corporation and Sterling Mining Company.
(Incorporated herein by reference to Exhibit 10(b) to the
Registrant's Registration Statement on Form S-3 (File No.
333-40513).)
46
<PAGE>
10(nn) - Mining Lease, effective as of March 21, 1997, between Silver
Valley Resources Corporation and Silver Buckle Mines, Inc.
(Incorporated herein by reference to Exhibit 10(c) to the
Registrant's Registration Statement on Form S-3 (File No.
333-40513).)
10(00) - Mining Lease, effective as of March 21, 1997, between Silver
Valley Resources Corporation and Placer Creek Mining
Company. (Incorporated herein by reference to Exhibit 10(d)
to the Registrant's Registration Statement on Form S-3 (File
No. 333-40513).)
10(pp) - Agreement for Sale and Issuance of Shares, dated May 7,
1997, among Sons of Gwalia Ltd, Burmine Investments Pty
Limited, Orion Resources NL and Coeur Australia Pty Ltd.
(Incorporated herein by reference to Exhibit 10(pp) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.)
10(qq) - Letter agreement, dated May 7, 1997, between the Registrant
and Sons of Gwalia Ltd. (Incorporated herein by reference to
Exhibit 10(qq) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997.)
10(rr) - Shareholders Agreement, dated May 7, 1997, among Sons of
Gwalia Ltd., Burmine Investments Pty Ltd., Orion Resources
NL, Coeur Australia Pty Ltd. And Gasgoyne Gold Mines NL.
(Incorporated herein by reference to Exhibit 10(rr) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.)
10(ss) - Management Services Agreement, dated May 7, 1997, among Sons
of Gwalia Ltd., Coeur Australia Pty Ltd. And Gasgoyne Gold
Mines NL. (Incorporated herein by reference to Exhibit
10(ss) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997.)
47
<PAGE>
21 - List of subsidiaries of the Registrant. (Filed herewith.)
23 - Consent of Ernst & Young LLP. (To be furnished)
27 - Financial Data Schedule. (To be furnished)
(d) Independent auditors' reports are included herein as follows:
(To be furnished)
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Coeur d'Alene Mines Corporation
(Registrant)
Date: March 24, 1999 By: /s/DENNIS E. WHEELER
--------------------
Dennis E. Wheeler
(Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
-----------
/s/DENNIS E. WHEELER Chairman, President, March 24, 1999
-------------------- Chief Executive Officer
Dennis E. Wheeler and Director
/s/WAYNE L. VINCENT Controller March 24, 1999
------------------- Chief Accounting Officer
Wayne L. Vincent
/s/CECIL D. ANDRUS Director March 24, 1999
------------------
Cecil D. Andrus
/s/JOSEPH C. BENNETT Director March 24, 1999
--------------------
Joseph C. Bennett
/s/JAMES J. CURRAN Director March 24, 1999
------------------
James J. Curran
/s/JAMES A. MCCLURE Director March 24, 1999
-------------------
James A. McClure
/s/ROBERT E. MELLOR Director March 24, 1999
-------------------
Robert E. Mellor
/s/JOHN H. ROBINSON Director March 24, 1999
-------------------
John H. Robinson
/s/TIMOTHY R. WINTERER Director March 24, 1999
----------------------
Timothy R. Winterer
49
EXHIBIT 21
LIST OF SUBSIDIARIES OF COEUR D'ALENE MINES CORPORATION
The following subsidiaries of Coeur d'Alene Mines Corporation as of
December 31, 1998 are wholly owned unless otherwise stated.
<TABLE>
<CAPTION>
Name of Subsidiary State/Country of Incorporation
------------------ ------------------------------
<S> <C>
Coeur Australia, Inc. Australia
Coeur Rochester, Inc. Delaware
Coeur Bullion Corporation Idaho
Coeur Explorations, inc. Idaho
Coeur Alaska, Inc. Delaware
CDE Chilean Mining Corporation Delaware
Callahan Mining Corporation Arizona
Gasgoyne Gold Mines NL Australia (50% owned)
Silver Valley Resources Corporation Delaware (50% owned)
Compania Minera CDE Fachinal Limitada Chile
Compania Minera CDE Petorca Chile
</TABLE>
The following is a list of the subsidiaries of Callahan Mining
Corporation:
State of Percentage of
Name of Subsidiary Incorporation Ownership
------------------ ------------- -------------
Coeur New Zealand, Inc. Delaware 100%
