UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
-----------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number: 1-8641
COEUR D'ALENE MINES CORPORATION
(Exact name of Registrant as specified in its charter)
Idaho 82-0109423
--------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer Ident. No.)
of incorporation or organization)
P.O. Box I, Coeur d'Alene, Idaho 83816-0316
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (208) 667-3511
-----------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of Issuer's classes of common stock, as of the latest
practicable date: Common stock, par value $1.00, of which 38,109,279 shares
were issued and outstanding as of August 11, 2000.
<PAGE>
COEUR D'ALENE MINES CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
June 30, 2000 and December 31, 1999
Consolidated Statements of Operations -- 5
Three Months and Six Months Ended June 30, 2000
and 1999
Consolidated Statements of Cash Flows -- 6
Three Months and Six Months Ended June 30, 2000
and 1999
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 15
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of
Market Risk 23
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
</TABLE>
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
ASSETS (In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 63,290 $ 86,935
Short-term investments 18,309 22,978
Receivables 10,204 15,376
Inventories 56,723 53,769
---------- ----------
TOTAL CURRENT ASSETS 148,526 179,058
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 96,743 96,592
Less accumulated depreciation (57,634) (54,265)
---------- ----------
39,109 42,327
MINING PROPERTIES
Operational mining properties 109,541 106,455
Less accumulated depletion (66,698) (62,431)
---------- ----------
42,843 44,024
Developmental properties 52,922 50,781
---------- ----------
95,765 94,805
OTHER ASSETS
Investments in unconsolidated affiliates 28,389 29,008
Debt issuance costs, net of accumulated
amortization 4,765 5,378
Other 3,475 3,471
---------- ----------
36,629 37,857
---------- ----------
$ 320,029 $ 354,047
========== ==========
</TABLE>
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,097 $ 4,693
Accrued liabilities 7,320 6,411
Accrued interest payable 3,971 5,064
Accrued salaries and wages 4,505 5,005
---------- ----------
TOTAL CURRENT LIABILITIES 19,893 21,173
LONG-TERM LIABILITIES
6% subordinated convertible debentures
due 2002 28,333 35,582
6 3/8% subordinated convertible debentures
due 2004 93,372 93,372
7 1/4% subordinated convertible debentures
due 2005 107,277 107,277
Other long-term liabilities 27,550 28,478
---------- ----------
TOTAL LONG-TERM LIABILITIES 256,532 264,709
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share,(a class of preferred stock) -
authorized 7,500,000 shares, issued zero and
7,077,833 shares in 2000 and 1999. 0 7,078
Common Stock, par value $1.00 per share-
authorized 125,000,000 shares,
issued 38,109,279 and 30,240,428 shares
in 2000 and 1999 (including 1,059,211
shares held in treasury) 38,109 30,240
Capital surplus 387,625 391,031
Accumulated deficit (367,416) (347,119)
Repurchased and nonvested shares (13,190) (13,190)
Accumulated other comprehensive loss:
Unrealized gain (loss) on short-term
investments (1,524) 125
---------- ----------
43,604 68,165
---------- ----------
$ 320,029 $ 354,047
========== ==========
</TABLE>
4
<PAGE>
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three and Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
(In thousands except for per share data)
<S> <C> <C> <C> <C>
REVENUES
Product sales $ 28,021 $ 20,448 $ 42,862 $ 38,707
Interest and other 1,467 1,227 4,530 2,312
------------ ------------ ------------ -----------
Total Revenues 29,488 21,675 47,392 41,019
COSTS AND EXPENSES
Production 25,609 14,436 39,076 27,749
Depreciation and amortization 5,902 4,951 10,809 9,447
Administrative and general 2,095 2,333 5,216 4,801
Exploration 2,441 2,084 4,581 3,947
Interest 3,881 4,138 7,837 8,327
Other 1,028 631 1,163 845
------------ ------------ ------------ -----------
Total Costs and Expenses 40,956 28,573 68,682 55,116
------------ ------------ ------------ -----------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE TAXES AND
EXTRAORDINARY ITEM (11,468) (6,898) (21,290) (14,097)
Income tax provision 105 81 205 155
------------ ------------ ------------ -----------
NET LOSS BEFORE EXTRAORDIANARY ITEM (11,573) (6,979) (21,495) (14,252)
Extraordinary item - early
Retirement of debt
(net of taxes) 1,111 1,198
------------ ------------ ------------ -----------
NET LOSS $ (10,462) $ (6,979) $ (20,297) $ (14,252)
Unrealized holding gain (loss)
on securities (185) 4 (1,649) (4)
COMPREHENSIVE LOSS (10,647) (6,975) (21,946) (14,256)
============ ============ ============ ===========
NET LOSS (10,462) (6,979) (20,297) (14,252)
Preferred stock dividends 0 2,633 2,180 5,266
------------ ------------ ------------ -----------
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (10,462) $ (9,612) $ (22,477) $ (19,518)
============ ============ ============ ===========
BASIC AND DILUTED LOSS PER SHARE DATA
Weighted average number
of shares of Common Stock 37,050 21,900 33,810 21,899
============ ============ ============ ===========
Loss before extraordinary item $ (0.31) $ (0.44) $ (0.70) $ (0.89)
Extraordinary item - early
Retirement of debt(net of taxes) $ 0.03 $ (0.00) $ 0.04 $ (0.00)
------------ ------------ ------------ -----------
Net Loss per share attributable
to Common Shareholders $ (0.28) $ (0.44) $ (0.66) $ (0.89)
============ ============ ============ ===========
</TABLE>
5
<PAGE>
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three and Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
(In Thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (10,462) $ (6,979) $ (20,297) $ (14,252)
Add (deduct) noncash items:
Depreciation, depletion, and amortization 5,902 4,951 10,809 9,447
Gain on early retirement of debt (net of taxes) (1,113) (1,200)
Other 956 1,232 2,545 1,806
Undistributed (earnings) loss of investment
in unconsolidated subsidiary (78) 91 (560) 562
Unrealized (gain)loss on written calls 511 (1,043)
Changes in Operating Assets and Liabilities:
Receivables (2,100) (1,334) 5,171 2,928
Inventories 4,683 (2,022) (2,954) (5,723)
Accounts payable and accrued liabilities (1,391) (3,172) (3,356) (4,914)
------------ ------------ ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (3,092) (7,233) (10,885) (10,146)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (4,187) (1,711) (8,463) (3,735)
Proceeds from sales of short-term investments 608 12,073 1,178
Purchases of property, plant and equipment (244) (453) (986) (640)
Proceeds from sale of assets 99 869 690 869
Expenditures on operational mining properties (2,520) (1,415) (4,437) (1,518)
Expenditures on developmental properties (1,642) (2,238) (2,930) (3,859)
Other (20) (1,139) 83 (1,622)
------------ ------------ ------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (8,514) (5,479) (3,970) (9,327)
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of long-term debt (5,841) (5,999)
Payment of cash dividends (2,633) (2,633) (5,266)
Other (118) (162) (158) (299)
------------ ------------ ------------ -----------
NET CASH USED IN FINANCING ACTIVITIES (5,959) (2,795) (8,790) (5,565)
------------ ------------ ------------ -----------
DECREASE IN CASH AND CASH EQUIVALENTS (17,565) (15,507) (23,645) (25,038)
Cash and cash equivalents at beginning
of period 80,855 117,804 86,935 127,335
------------ ------------ ------------ -----------
Cash and cash equivalents at June 30 $ 63,290 $ 102,297 $ 63,290 $ 102,297
============ ============ ============ ===========
</TABLE>
6
<PAGE>
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for
the three-month and six-month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date. The consolidated financial statements and
footnotes thereto included in the Coeur d'Alene Mines Corporation Annual
Report on Form 10-K for the year ended December 31, 1999 should be reviewed in
connection with these condensed consolidated financial statements.
NOTE B: Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
(In Thousands)
<S> <C> <C>
In process and on leach pads $ 43,455 $ 43,494
Concentrate and dore' inventory 8,398 5,594
Supplies 4,870 4,681
--------- ---------
$ 56,723 $ 53,769
========= =========
</TABLE>
Inventories of ore on leach pads and in the milling process are valued
based on actual costs incurred, less costs allocated to minerals recovered
through the leaching and milling processes. Inherent in this valuation is an
estimate of the percentage of the minerals on leach pads and in process that
will ultimately be recovered. All other inventories are stated at the
lower-of-cost or market, with cost being determined using first-in, first-out
and weighted-average-cost methods. Dore inventory includes product at the mine
site and product held by refineries.
The Handy and Harmon refinery, to which Rochester Mine sends
approximately 50% of its dore, filed for Chapter 11 Bankruptcy during the
first quarter of 2000. The Company has in inventory, at the refinery,
approximately 67,000 ounces of silver and approximately 5,000 ounces of gold,
being held pending resolution of the Bankruptcy proceeding. At this time, the
Company anticipates that litigation may be required and believes it has a
basis for recovery.
7
<PAGE>
NOTE C: Income Taxes
The Company has reviewed its net deferred tax asset for the six-month
period ended June 30, 2000, together with net operating loss carryforwards,
and has decided to forego recognition of potential tax benefits arising
therefrom. In making this determination, the Company has considered the
Company's history of tax losses incurred since 1989, the current level of gold
and silver prices and the ability of the Company to use accelerated depletion
and amortization methods in the determination of taxable income. As a result,
the Company's net deferred tax asset has been fully reserved.
NOTE D: Conversion of MARCS to Common Stock
On March 15, 2000, the Company mandatorily converted its 7,077,833
outstanding shares of Mandatory Adjustable Redeemable Convertible Securities
(MARCS) into 7,863,000 common shares. The final payment of dividends of
$2,633,000 on the MARCS was paid out as of that date.
NOTE E: Short-Term Investments
The Company, under the terms of its lease, self insurance, and bonding
agreements with the Banks, Lending Institutions and Regulator Agencies, is
required to collateralize certain portions of the company's obligations. The
Company has collaterized these obligations by assigning certificates of
deposit, that have maturity dates ranging from 3 months to a year, to the
respective institution or agency. At June 30, 2000 and December 31, 1999, the
Company had certificates of deposit under these agreements of $9.1 million and
$6.6 million, respectively, restricted for this purpose.
In the second quarter, the Company sold its royalty interest in the
Quiruvilca mine in northeren Peru to Pan American Silver Corporation ("Pan
American") for 140,000 shares of Pan American capital stock, warrants to
purchase an additional 100,000 shares of Pan American capital stock at $5 per
share and $50,000 cash.
During the first quarter of 2000, the Company sold 245,000 shares of Pan
American capital stock for approximately $1.2 million, and recorded a realized
loss of approximately $66,000. The Company continues to hold approximately one
million shares of Pan American capital stock.
NOTE F: Long-Term Debt
On June 14, 2000, the Company repurchased $7,001,000 principal amount of
its 6% Convertible Subordinated Debentures due 2002 (the "6% Debentures")
pursuant to a cash tender offer that commenced on May 9, 2000 and expired as
scheduled on June 8, 2000. The price paid by the Company for the repurchased
6% Debentures was $5,040,720 (or $720 per $1,000 principal amount) plus
accrued and unpaid interest of $3,500 (or $.50 per $1,000 principal amount)
from June 10, 2000 to, but not including, the date of payment on June 14,
2000.
8
<PAGE>
As a result of the cash tender offer, the Company reduced the
outstanding principal amount of 6% Debentures from $35,334,000 to $28,333,000,
thereby reducing the annual amount of its interest expense by $420,060. The
Company recorded extraordinary gain of $1,111,000, net of tender offer
expenses, in the quarter ended June 30, 2000.
During the first quarter 2000, the Company repurchased approximately
$248,000 principal amount of its outstanding 6% Subordinated Convertible
Debentures due 2002 for a total purchase price of approximately $159,000,
excluding purchased interest of approximately $12,000. Associated with this
transaction, the Company eliminated $2,000 of capitalized bond issuance costs.
As a result of the buyback of these debentures, the Company has recorded an
extraordinary gain of approximately $87,000, net of taxes of zero, during the
first quarter of 2000 on the reduction of its indebtedness.
NOTE G: Segment Reporting
Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. The Company's chief
operating decision making group is comprised of the Chief Executive Officer,
Chief Financial Officer and the Chief Operating Officer.
The operating segments are managed separately because each segment
represents a distinct use of Company resources and contribution to company
cash flows in its respective geographic area. The Company's reportable
operating segments include the Rochester, Coeur Silver Valley, Fachinal, and
Petorca (previously named El Bronce) mining properties, Coeur Australia (50%
owner of Gasgoyne Gold Mines NL), the Kensington development property, and the
Company's exploration program. All operating segments are engaged in the
discovery and/or mining of gold and silver and generate the majority of their
revenues from the sale of these precious metals. Intersegment revenues consist
of precious metal sales to the Company's metals marketing division and are
transferred at the market value of the respective metal on the date of the
transfer. The Other segment includes earnings (loss) from unconsolidated
subsidiaries accounted for by the equity method such as the Company's 50%
interest in Gasgoyne, the corporate headquarters, elimination of intersegment
transactions and other items necessary to reconcile to consolidated amounts.
Revenues in the Other segment are generated principally from interest received
from the Company's cash and investments that are not allocated to the
operating segments. The accounting policies of the operating segments are the
same as those described in the summary of significant accounting policies in
the Company's Annual Report on 10-K. The Company evaluates performance and
allocates resources based on profit or loss before interest, income taxes,
depreciation and amortization, unusual and infrequent items, and extraordinary
items.
9
<PAGE>
<TABLE>
<CAPTION>
Coeur d'Alene Mines Corporation
Segment Reporting
(In Thousands) Coeur Exploration &
Rochester Silver Valley Fachinal Petorca Australia Development Other Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 2000
Net sales and revenues to external
customers 6 7,815 4,157 2,703 4,898 (90) 27,901 47,392
Intersegment net sales and
revenues
25,279 - - - - - (25,279) -
--------------------------------------------------------------------------------------------
Total net sales and revenues 25,285 7,815 4,157 2,703 4,898 (90) 2,622 47,392
============================================================================================
Depreciation and amortization 7,372 1,289 2,550 108 1,093 44 729 13,185
Interest income - - 8 4 54 9 2,466 2,542
Interest expense - - 14 0 - - 7,824 7,837
Income tax (credit) expense - 1 - - 22 - 182 205
Earnings (losses) from non-
consolidated affiliates - - - - 561 - - 561
Gain on early retirement of
debt - - - - - - 1,198 1,198
Profit (loss) 6,800 (692) (3,367) (844) (312) (2,593) 742 (267)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Coeur d'Alene Mines Corporation
Segment Reporting
(In Thousands) Coeur Exploration &
Rochester Silver Valley Fachinal Petorca Australia Development Other Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in nonconsolidated
affiliates - - - - 28,389 - - 28,389
Segment assets 84,763 25,361 29,042 2,534 369 52,055 7,677 201,800
Expenditures for property 760 2,508 2,048 129 - 2,873 34 8,353
June 30, 1999
Net sales and revenues to external
customers (139) - 4,851 5,330 4,696 (1,124) 27,408 41,017
Intersegment net sales and
revenues 24,657 - - - - - (24,657) -
--------------------------------------------------------------------------------------------
Total net sales and revenues 24,518 - 4,851 5,330 4,696 (1,124) 2,749 41,019
============================================================================================
Depreciation and amortization 4,780 - 1,557 152 2,157 191 1,133 9,971
Interest income - - 38 14 19 7 2,860 2,938
Interest expense - - 14 2 - - 8,312 8,327
Income tax (credit) expense - - - - 6 - 148 155
Earnings (losses) from non-
consolidated affiliates - - - - (800) - 238 (562)
Gain on early retirement of - - - - - - - -
dept
Profit (loss) 9,578 - (2,357) 1,034 (437) (4,237) 487 4,068
Investments in nonconsolidated
affiliates - - - - 47,814 - 16,312 64,126
Segment assets 87,164 - 31,986 2,298 598 27,112 12,453 161,610
Expenditures for property 1,096 - 454 44 - 4,110 313 6,017
<FN>
Notes:
(A) Segment assets consist of receivables, prepaids, inventories,
property, plant and equipment, and mining properties.
</FN>
</TABLE>
11
<PAGE>
Coeur d'Alene Mines Corporation
Segment Reporting
<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION (In Thousands)
Long-Lived
2000: Revenues Assets
----------------------------------
<S> <C> <C>
United States $ 35,720 $ 93,186
Chile 6,774 22,175
Australia 4,898 -
Bolivia - 18,853
Other Foreign Countries (0) 660
----------------------------------
Consolidated Total $ 47,392 $ 134,874
==================================
Long-Lived
1999: Revenues Assets
----------------------------------
United States $ 27,267 $ 73,433
Chile 9,056 24,487
Australia 4,696 -
Other Foreign Countries 1 4,374
----------------------------------
Consolidated Total $ 41,019 $ 102,294
==================================
<FN>
Revenues are geographically seperated based upon the country in which
operations and the underlying assets generating those revenues reside.
</FN>
</TABLE>
NOTE H: Hedging
For the six months ending June 30, 2000 the Company recorded a $1.1
million gain in connection with the hedge program. The Company also added
54,000 ounces in forward sales to its gold protection program (2000-30,000
ounces, 2001-12,000 ounces, 2002-12,000 ounces), whereby over the next three
years the Company will receive an average price of $311.44.
The following table summarizes the information at June 30, 2000
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. The fair values were derived
from dealer quotes. For gold put and call options and amortizing forward
sales, the table presents ounces expected to be delivered and the related
average price per ounce in Australian dollars. For foreign currency exchange
contracts, the table presents the notional amount in New Zealand dollars to be
purchased along with the average foreign exchange rate.
12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Fair
Value
(dollars in thousands) 2000 2001 2002 2003 2004 Thereafter Total 3/31/99
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long Term Debt $111,254
Fixed Rate $ - $ - $28,333 $ - $93,372 $107,277 $228,982
Average Interest Rate 6.739% 6.739% 6.793% 6.843% 7.190% 7.250%
DERIVATIVE FINANCIAL INSTRUMENTS
Gold Forward Sales - AUD $ 602
Ounces 7,800 - - - - - 7,800
Price Per Ounce $612.10 $ - $ - $ - $ - $ -
Gold Put Options Purchased - AUD(1) $ 6,623
Ounces 7,200 30,000 30,000 30,000 - - 97,200
Price Per Ounce $597.00 $597.00 $597.00 $597.00 $ - $ -
Gold Forward Sales - USD $ 1,118
Ounces 15,000 12,000 12,000 - - - 39,000
Price Per Ounce $301.68 $316.51 $331.84 $ - $ - $ -
Gold Call Options Sold - USD(2) $ -
Ounces - - - - - 56,000 56,000
Price Per Ounce $ - $ - $ - $ - $ - $345.00
Amortizing Forward Sales - USD(2) $ 504
Ounces 10,000 22,560 22,560 22,560 22,560 78,960 179,200
Price Per Ounce $338.58 $348.50 $348.50 $348.50 $348.50 $348.50
Foreign Currency Contracts $ 1
New Zealand Dollar $ 1,800 $ - $ - $ - $ - $ - $ 1,800
Exchange Rate (NZ$ to US$) 2.124 - - - - -
----------------------------------------------------------------------------------------------------------------------------------
Calculation of Avg Int Rate
6% Due 2002 $ 28,333 $ 28,333 $ 28,333 - - -
Days of Interest 365 365 161 - - -
6.000% 6.000% 6.000% 6.000% 6.000% 6.000%
$ 1,700 $ 1,700 $ 750 - - -
6.375% Due 2004 $ 93,372 $ 93,372 $ 93,372 $ 93,372 $ 93,372 -
Days of Interest 365 365 365 365 31 -
6.375% 6.375% 6.375% 6.375% 6.375% 6.375%
$ 5,952 $ 5,952 $ 5,952 $ 5,952 $ 506 -
7.25% Due 2005 $107,277 $107,277 $107,277 $107,277 $107,277 $107,277
Days of Interest 365 365 365 365 365 304
7.250% 7.250% 7.250% 7.250% 7.250% 7.250%
$ 7,778 $ 7,778 $ 7,778 $ 7,778 $ 7,778 $ 6,478
Total Interest 15,430 15,430 14,480 13,730 8,284 6,478
Weighted Debt 228,982 228,982 213,147 200,649 115,207 89,349
Average Interest 6.739% 6.739% 6.793% 6.843% 7.191% 7.250%
13
<PAGE>
<FN>
(1) Of the put options purchased, 97,200 ounces have a knock-out provision
whereby the options will terminate if gold trades above $350 per ounce
prior to the exercise date.
(2) The majority of the call options sold have a knock-out provision whereby
calls for 56,000 ounces will terminate if gold trades below $300 per
ounce after March 31, 2001, and calls for 169,200 ounces will terminate
if gold trades below $310 per ounce at any time after March 31, 2001.
</FN>
</TABLE>
NOTE I: New Accounting Standard
In June 1998, the Financial Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133),and was amended by FAS 138 "Accounting for
Hedging Activities" which establishes accounting and reporting standards for
derivative instruments and hedging activities. Effective for all fiscal
quarters in years beginning after June 15, 2000, SFAS 133 requires the Company
to recognize all derivative instruments as either assets or liabilities in the
statement of financial position and measure those instruments at fair value on
an on-going basis. The Company is currently assessing the effect of adopting
SFAS No. 133 on its financial statements and plans to adopt the statement on
January 1, 2001.
NOTE J: Litigation
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho by the United States against various
defendants, including the Company, asserting claims under CERCLA and the 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 and as a result of pretrial discovery, it appears the United
States believes it can prove damages over $1 billion. 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.
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
14
<PAGE>
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.
The United States appealed this decision to the United States Court of Appeals
for the 9th Circuit. The Appeal has been argued but not decided. 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, and 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. The court denied
this motion on the grounds that further facts must be developed at trial
before the issue can be decided.
With respect to the natural resource damage litigation referred to
above, in June 2000 Governor Kempthorne of the State of Idaho asked the
defendants to give him a proposal for settlement which he could take to the
plaintiffs in the suit. The defendants outlined such a proposal. The
defendants would contribute a total of $250 million over 30 years, of which
$154 million would be in fixed annual payments, without interest. The
remaining $96 million would be paid from royalties based on the price of
silver, copper, gold and zinc as provided in an index and schedule to be
agreed upon. Coeur advised the Governor, defendants and the U.S. that its
share of this proposal would be, without admission of liability and with
appropriate release, the sum of $3,750,000 in annual installments over 25
years without interest and an additional $1,250,000 in years 26-30 based on
the royalty concept described above. It is not known whether the proposal put
forth by the Governor to the plaintiffs will be accepted, although the Coeur
d'Alene Tribe, one of the plaintiffs with whom the Company has already settled
(in 1992), indicated it viewed the proposal "optimistically".
NOTE K: Reclassification
Certain reclassifications of prior-year balances have been made to
conform to current year classifications.
15
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The results of the Company's operations are significantly affected by
the market prices of gold and silver which may fluctuate widely and are
affected by many factors beyond the Company's control, including, without
limitation, interest rates, expectations regarding inflation, currency values,
governmental decisions regarding the disposal of precious metals stockpiles,
global and regional political and economic conditions, and other factors.
This document contains numerous forward-looking statements relating to
the Company's gold and silver mining business. The United States Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward looking statements. Operating, exploration and financial data, and
other statements in this document are based on information the company
believes reasonable, but involve significant uncertainties as to future gold
and silver prices, costs, ore grades, estimation of gold and silver reserves,
mining and processing conditions, changes that could result from the Company's
future acquisition of new mining properties or businesses, the risks and
hazards inherent in the mining business (including environmental hazards,
industrial accidents, weather or geologically related conditions), regulatory
and permitting matters, and risks inherent in the ownership and operation of,
or investment in, mining properties or businesses in foreign countries. Actual
results and timetables could vary significantly from the estimates presented.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
The Company's currently operating mines are the Rochester mine in
Nevada, the Galena mine in the Coeur d'Alene Mining District of Idaho (in
which the Company increased its ownership by 50% to 100% in September of 1999)
and the Fachinal and Petorca mines in Chile, all of which are wholly-owned and
operated by the Company. The Company also owns 50% of Gasgoyne Gold Mines NL
("Gasgoyne"), an Australian gold mining company, that owns 50% of the Yilgarn
Star gold mine in Australia.
The average price of silver and gold in the second quarter of 2000 was
$5.21 and $290 per ounce, respectively. The market price of silver (Handy &
Harman) and gold (London Final) on August 9, 2000 were $____ per ounce and
$___ per ounce, respectively.
The following table sets forth the amounts of gold and silver produced
by the mining properties owned by the Company or in which the Company has an
interest, based on the amounts attributable to the Company's ownership
interest, and the cash and full costs of such production during the
three-month and six-month periods ended June 30, 2000 and 1999:
16
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ROCHESTER MINE
Gold ozs. 18,903 16,518 34,360 32,824
Silver ozs. 1,760,212 1,355,955 3,298,472 3,020,018
Cash Costs per oz./silver $3.78 $4.02 $4.00 $4.26
Full Costs per oz./silver $4.91 $4.94 $5.16 $5.15
GALENA MINE
Silver ozs. 906,593 411,542 1,697,355 871,007
Cash Costs per oz./silver $4.79 $5.07 $5.27 $4.77
Full Costs per oz./silver $5.57 $6.26 $6.02 $5.90
COEUR MINE
Silver ozs. N/A N/A N/A N/A
Cash Costs per oz./silver N/A N/A N/A N/A
Full Costs per oz./silver N/A N/A N/A N/A
YILGARN STAR MINE
Gold ozs. 6,474 7,377 12,593 13,554
Cash Costs per oz./gold $201 $314 $234 $302
Full Costs per oz./gold $326 $537 $352 $494
FACHINAL MINE
Gold ozs. 4,004 6,911 9,419 13,584
Silver ozs. 295,703 314,618 559,429 601,783
Cash Costs per oz./gold $379 $266 $358 $300
Full Costs per oz./gold $517 $320 $489 $362
PETORCA MINE
Gold ozs. 6,468 7,790 11,640 15,395
Silver ozs. 17,297 15,478 27,939 26,617
Cash Costs per oz./gold $339 $264 $359 $265
Full Costs per oz./gold $348 $264 $369 $265
CONSOLIDATED TOTALS
Gold ozs. 35,849 38,596 68,012 75,357
Silver ozs. 2,979,805 2,097,593 5,583,195 4,519,425
</TABLE>
NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA
ROCHESTER MINE
Coeur's Rochester mine produced 1.8 million ounces of silver and 18,900
ounces of gold during the second quarter of 2000 compared to 1.4 million
ounces of silver and 16,500 ounces of gold in the previous year. Cash costs
for the period declined to $3.78 per silver equivalent ounce from $4.02 in
1999 despite the mining of lower-grade ore as part of the planned mining
sequence. Operations are benefiting from a number of improvements carried out
in the first quarter of this year. The conveyor and crushing circuits have
been upgraded to increase capacity and the solution flow on the leach pad was
increased by approximately 15 percent. At Rochester, the first phase of a
comprehensive in-pit and near-pit ore definition and exploration program
consisting of 114 reverse circulation drill holes totaling more than 40,000
feet has been completed. Assays and analysis of data are underway. The second
phase of the program will begin shortly and a separate program for the nearby
Nevada Packard property will commence in late August or early September.
17
<PAGE>
SILVER VALLEY RESOURCES - GALENA MINE
The Company increased its ownership interest in Coeur Silver Valley to
100 percent from 50 percent effective as of September 8, 1999. As a result of
this, together with higher mill throughput, silver production from the Galena
mine attributable to Coeur increased to 906,600 ounces during the latest
quarter compared to 411,500 ounces in the comparable quarter of the preceding
year. Total cash costs for the second quarter were $4.79 per ounce compared to
$5.07 per ounce for the second quarter of 1999. The improved results are
expected to continue as underground development work provides greater access
to higher-grade areas of the mine. The first hole of a planned 9,000-foot
exploration drill program to test the West Argentine area of the Galena mine
is well underway and results are currently being analyzed. This is the initial
phase of a program designed to increase the capacity at Coeur Silver Valley to
approximately 5,000,000 ounces of silver annually.
FACHINAL MINE
Production at the Fachinal mine during this year's second quarter was
295,700 ounces of silver and 4,000 ounces of gold compared to 314,600 ounces
of silver and 6,900 ounces of gold in the prior year's comparable quarter.
Total cash costs for the quarter were $379 per equivalent ounce of gold
compared to $266 per ounce in the second quarter of 1999. The production
shortfall and increased costs were partially the result of lower gold grades
but mostly due to severe winter conditions that affected much of Southern
Chile. These conditions restricted access to the most productive areas of the
mine, resulted in a shortfall in tons mined and at one point led to a
temporary suspension of operations altogether. Despite the weather conditions,
construction of the road connecting Fachinal to the high-grade Furioso deposit
is continuing and initial production is expected to commence late in the
fourth quarter of 2000, as scheduled. The recent exploration program to
convert resources to reserves proceeded as planned and the mining plan is
being revised to incorporate the latest results. Production is expected to
improve as slot-cut mining of the recently defined higher grade Lucero vein
commenced in July.
PETORCA
At Petorca, gold production in the second quarter of 2000 declined to
6,500 ounces compared to 7,800 ounces in last year's comparable quarter.
Silver output was up marginally to 17,300 ounces from 15,500 ounces in 1999.
Total cash costs per equivalent ounce of gold were $339 per ounce compared to
$264 per ounce in the second quarter of 1999, although down considerably from
the $384 per ounce recorded in the first quarter of 2000. Production is
returning to normal after a severe accident restricted access to high-grade
areas of the mine during the first quarter. The gold grade was still below
18
<PAGE>
projections but this was offset somewhat by higher tons mined and increased
mill throughput. The exploration and engineering staff at Petorca has
evaluated the recently discovered San Lorenzo gold-copper satellite deposit
and surface mining is scheduled to start in the third quarter.
YILGARN STAR MINE
Coeur's 25 percent share of gold production from the Yilgarn Star mine
was 6,500 ounces, down from 7,400 ounces in the second quarter of 1999. Total
cash costs for the latest period declined sharply to $201 per ounce compared
to $314 per ounce in the prior year's comparable quarter despite lower
production and a planned decrease in the gold grade. This was due in large
measure to the extensive underground development program carried out in 1999
as well as to several other operating improvements initiated late last year.
The Yilgarn Star area is one of the few locations where Coeur is carrying out
any grassroots exploration. At present, a preliminary resource model is being
calculated at the recently discovered Cheritons Find/Redwing prospect located
20 miles to the south of the minesite. Additional drilling is also planned for
later in the year.
SAN BARTOLOME
In 1999, Coeur acquired the San Bartolome silver prospect located near
the historic silver producing area of the Cerro Rico mountain next to the town
of Potosi in southern Bolivia. Silver mineralization at San Bartolome is
contained in a series of gravel-like paleochannels referred to locally as
"sucus" and "pallacos". Deposits of this nature are often difficult to
evaluate and the Company designed and completed a very detailed drilling and
bulk sampling program to confirm the initial resource estimate of 34.4 million
tons at an average grade of 3.1 ounces of silver per ton or 106 million
contained ounces. All of the data collected to date is being evaluated to
develop a three-dimensional mineral model under the direction of a third party
geological/geostatistical firm. Recent metallurgical work has indicated that
the ores tested are amenable to conventional cyanide leaching after the silver
minerals have been liberated from the host rock and that the finer the ore is
crushed, the better the silver extraction. Alternative flowsheets are
currently being developed that also include processing by conventional
milling.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to Three Months
Ended June 30, 1999.
REVENUES
Product sales in the second quarter of 2000 increased by $7.6 million,
or 37%, from the second quarter of 1999 to $28 million. The increase in sales
is primarily attributable to the acquisition of 50% additional ownership of
the Galena Mine in the third quarter of 1999, and increases in the sale of
19
<PAGE>
gold and silver shipped from the Rochester Mine and an increase in the sale of
silver at the Petorca Mine in the second quarter of 2000. In the second
quarter of 2000, the Company produced a total of 2,979,805 ounces of silver
and 35,849 ounces of gold compared to 2,097,593 ounces of silver and 38,596
ounces of gold in the second quarter of 1999. In the second quarter of 2000,
the Company realized average silver and gold prices of $5.04 and $310,
respectively, compared with realized average prices of $5.14 and $322,
respectively, in the prior year's second quarter. The increase in the produced
ounces of silver in the second quarter ended June 30, 2000 over the same
period last year was primarily due to the increase in ownership of the Galena
mine from 50% to 100% in September 1999 and increased production at the
Rochester mine. The decrease in the ounces of gold produced during the second
quarter of 2000 is primarily attributable to reduced gold grades at the
Fachinal and Petorca Mines.
Interest and other income in the second quarter of 2000 increased by
$240,000, or 20%, compared with the second quarter of 1999.
COSTS AND EXPENSES
Production costs in the second quarter of 2000 increased by $11.2
million, or 77%, from the second quarter of 1999 to $25.6 million. The
increase in production costs is primarily a result of the increase in
ownership of the Galena Mine and increased production costs at the Fachinal
and Petorca mines.
Depreciation and amortization increased in the second quarter of 2000 by
$1.0 million, or 19%, from the prior year's second quarter, primarily due to
decreased ore reserve estimates at the Fachinal Mine, as of December 31, 1999.
Administrative and general expenses decreased $238,000 in the second
quarter of 2000 compared to 1999, due to cost reduction programs initiated in
1999.
EXTRAORDINARY ITEM
During the quarter ended June 30, 2000, the Company recorded an
extraordinary gain of $1,111,000, net of tender offer expenses, as a result of
its repurchase of $7,001,000 principal amount of 6% Convertible Subordinated
Debentures due 2002 in a cash tender offer for a purchase price of $5,040,720
plus accrued and unpaid interest of $3,500 from June 10, 2000 to, but not
including, the date of payment on June 14, 2000.
NET LOSS
As a result of the above mentioned factors, the Company's net loss
amounted to $10.5 million in the second quarter of 2000 compared to a net loss
of $7 million in the second quarter of 1999. In the second quarter of 2000,
the loss attributable to common shareholders was $10.5 million, or $.28 per
20
<PAGE>
share, for the second quarter 2000, compared to a loss attributable to common
shareholders of $9.6 million, or $ .44 per share, for the second quarter of
1999. The decrease in the net loss per share was attributed to the higher
weighted average number of shares in the second quarter of 2000.
Six Months Ended June 30, 2000 Compared to Six Months
Ended June 30, 1999.
REVENUES
Product sales in the six months ended June 30, 2000, increased by $4.2
million, or 11%, from the six months ended June 30, 1999 to $42.9 million. The
increase in sales is primarily attributable to the acquisition of 50%
additional ownership of the Galena Mine in the third quarter of 1999 and
increases in the sale of gold and silver shipped from the Rochester Mine. In
the six months ended June 30, 2000, the Company produced a total of 5,583,195
ounces of silver and 68,012 ounces of gold compared to 4,519,425 ounces of
silver and 75,357 ounces of gold in the six months ended June 30, 1999. In the
second quarter of 2000, the Company realized average silver and gold prices of
$5.09 and $319, respectively, compared with realized average prices of $5.16
and $317, respectively, in the prior year's second quarter. The increase in
the produced ounces of silver in the six months ended June 30, 2000 over the
same period last year was primarily due to the increase in ownership of the
Galena mine from 50% to 100% in September 1999. The increase in silver
production was partially offset by lower silver production from the Company's
Fachinal mine. The decrease in the ounces of gold produced during the six
months ended June 30, 2000 is primarily attributable to reduced gold grades at
the Yilgarn, Fachinal and Petorca Mines.
Interest and other income in the first quarter of 2000 increased by $2.2
million, or 96%, compared with the second quarter of 1999. The increase is
primarily due to the $1.1 million gain on the mark to market adjustment on the
call option portion of the Company's hedge program.
COSTS AND EXPENSES
Production costs in the six months ended June 30, 2000 increased by
$11.3 million, or 41%, from the six-months ended June 30,1999 to $39.1
million. The increase in production costs is primarily a result of the
increase in ownership of the Galena Mine and increased production costs at the
Fachinal and Petorca mines.
Depreciation and amortization increased in the six month period ended
June 30, 2000 by $1.4 million, or 14%, from the prior year's comparable
period, primarily due to decreased ore reserve estimates at the Fachinal Mine
as of December 31, 1999.
Administrative and general expenses increased $.4 million in the six
months ended June 30, 2000 compared to 1999, due to increased annual incentive
awards relating to 1999 that were paid in the first quarter of 2000.
21
<PAGE>
EXTRAORDINARY ITEM
During the six months ended June 30, 2000, the Company recorded an
extraordinary gain of $1,111,111 as a result of its repurchase during the
three months ended June 30, 2000 of 6% Convertible Subordinated Debentures due
2000 that is discussed above. The Company also recorded an additional
extraordinary gain of approximately $87,000, as a result of its repurchase
during the first quarter of 2000 of approximately $248,000 principal amount of
outstanding 6% Subordinated Convertible Debentures due 2002 for a purchase
price of approximately $159,000, excluding purchased interest of approximately
$12,000.
NET LOSS
As a result of the above mentioned factors, the Company's net loss
amounted to $20.3 million for the six month period ended June 30, 2000
compared to a net loss of $14.3 million in the comparable period ended June
30, 1999. For the six-months ended June 30, 2000, the loss attributable to
common shareholders was $22.5 million, or $.66 per share, compared to a loss
attributable to common shareholders of $19.5 million, or $.89 per share, for
the six months ended June 30, 1999. The decease in the net loss per share was
attributed to the higher weighted average number of shares outstanding in the
six months ended June 30, 2000
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL; CASH AND CASH EQUIVALENTS
The Company's working capital at June 30, 2000 was approximately $128.6
million compared to $157.9 million at December 31, 1999. The ratio of current
assets to current liabilities was 7.5 to 1.0 at June 30, 2000 compared to 8.5
to 1.0 at December 31, 1999.
Net cash used in operating activities in the six months ended June 30,
2000 was $10.9 million compared to $10.2 million in the six months ended June
30, 1999. Net cash used in investing activities in the 2000 period was $4.0
million compared to net cash used in investing activities of $9.3 million in
the prior year's comparable period. Net cash used in financing activities was
$8.8 million in the six months ending June 30, 2000, as compared to $5.6 for
the six months ending June 30, 1999. As a result of the above, cash and cash
equivalents decreased by $23.6 million in the six months ending June 30, 2000
compared to a $25.0 million decrease for the comparable period in 1999.
CONVERSION OF MARCS TO COMMON SHARES
On March 15, 2000, the Company mandatorily converted its 7,077,833
outstanding shares of MARCS into 7,863,000 shares of common stock, and the
final dividend payment of $2.6 million on the MARCS was made as of that date.
22
<PAGE>
FEDERAL NATURAL RESOURCES ACTION
On March 22, 1996, an action was filed in the United States District
Court for the District of Idaho by the United States against various
defendants, including the Company, asserting claims under CERCLA and the 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 and as a result of pretrial discovery, it appears the United
States believes it can prove damages over $1 billion. 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.
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.
The United States appealed this decision to the United States Court of Appeals
for the 9th Circuit. The Appeal has been argued but not decided. 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, and 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. The court denied
23
<PAGE>
this motion on the grounds that further facts must be developed at trial
before the issue can be decided.
With respect to the natural resource damage litigation referred to
above, in June 2000 Governor Kempthorne of the State of Idaho asked the
defendants to give him a proposal for settlement which he could take to the
plaintiffs in the suit. The defendants outlined such a proposal. The
defendants would contribute a total of $250 million over 30 years, of which
$154 million would be in fixed annual payments, without interest. The
remaining $96 million would be paid from royalties based on the price of
silver, copper, gold and zinc as provided in an index and schedule to be
agreed upon. Coeur advised the Governor, defendants and the U.S. that its
share of this proposal would be, without admission of liability and with
appropriate release, the sum of $3,750,000 in annual installments over 25
years without interest and an additional $1,250,000 in years 26-30 based on
the royalty concept described above. It is not known whether the proposal put
forth by the Governor to the plaintiffs will be accepted, although the Coeur
d'Alene Tribe, one of the plaintiffs with whom the Company has already settled
(in 1992), indicated it viewed the proposal "optimistically".
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks as a part of its
operations. As an effort to mitigate losses associated with these risks, the
Company may , at times, enter into derivative financial instruments. These may
take the form of forward sales contracts, foreign currency exchange contracts
and interest rate swaps. The Company does not actively engage in the practice
of trading derivative securities for profit. This discussion of the Company's
market risk assessments contains "forward looking statements" that contain
risks and uncertainties. Actual results and actions could differ materially
from those discussed below.
The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely and are affected by numerous
factors, such as supply and demand and investor sentiment. In order to
mitigate some of the risk associated with these fluctuations, the Company
will, at times, enter into forward sale contracts. The Company continually
evaluates the potential benefits of engaging in these strategies based on the
then current market conditions. The Company may be exposed to nonperformance
by counterparties as a result of its hedging activities. This exposure would
be limited to the amount that the spot price of the metal falls short of the
contract price.
24
<PAGE>
The Company operates in several foreign countries, specifically
Australia, Bolivia, New Zealand and Chile, which exposes it to risks
associated with fluctuations in the exchange rates of the currencies involved.
As part of its program to manage foreign currency risk, the Company will enter
into foreign currency forward exchange contracts. These contracts enable the
Company to purchase a fixed amount of foreign currencies. Gains and losses on
foreign exchange contracts that are related to firm commitments are designated
and effective as hedges and are deferred and recognized in the same period as
the related transaction. All other contracts that do not qualify as hedges are
marked-to-market and the resulting gains or losses are recorded in income. The
Company continually evaluates the potential benefits of entering into these
contracts to mitigate foreign currency risk and proceeds when it believes that
the exchange rates are most beneficial.
All of the Company's long term debt at June 30, 2000 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.
See Note G - Hedging, to the consolidated financial statements for a
table which summarizes the Company's gold and foreign exchange hedging
activities at June 30, 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 9, 2000. A
total of 37,050,068 shares of Common Stock were outstanding and entitled to
vote at the Annual Meeting.
The first proposal was the election of directors. The following persons
were nominated and elected to serve as members of the Board of Directors for
one year or until their successors are elected and qualified by the votes
indicated: Cecil D Andrus 29,563,210 for and 530,888 withheld, Joseph C.
Bennett 29,565,407 for and 528,631 withheld, James J. Curran 29,590,116 for
and 503,982 withheld, James A. McClure 29,569,959 for and 524,139 withheld,
Robert E. Mellor 29,551,530 for and 542,568 withheld, John H. Robinson
29,559,900 for and 534,198 withheld, Timothy R. Winterer 29,568,467 for and
525,631 withheld, Daniel Tellechea Salido 29,545,246 for and 548,852 withheld,
Xavier Garcia de Quevedo Topete 29,543,775 for and 550,323 withheld and Dennis
E. Wheeler 29,568,699 for and 525,399 withheld.
The second proposal was the proposed ratification of the Board of
Directors' selection of Arthur Andersen LLP as the Company's independent
accounting firm for the year ended December 31, 2000. The proposal was
approved by the holders of more than the required majority of the shares of
Common Stock voting at the meeting. The proposal was approved by a vote of
29,774,354 shares for (representing 80.36% of the shares voting), 207,474
shares against with 112,270 shares abstaining.
25
<PAGE>
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed herewith:
EXHIBIT NO. DOCUMENT
27 Financial Data Schedule
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
(Registrant)
Dated August 11, 2000 /s/DENNIS E. WHEELER
---------------------
Dennis E. Wheeler
Chairman, President and
Chief Executive Officer
Dated August 11, 2000 /s/GEOFFREY A. BURNS
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Geoffrey A. Burns
Vice President and
Chief Financial Officer
27
