Edgar Filing: Coeur Mining, Inc.

CDE-03.31.14 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

___________________________________________

FORM 10-Q

___________________________________________



þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2014



¨	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 001-08641

____________________________________________

COEUR MINING, INC.

(Exact name of registrant as specified in its charter)

____________________________________________



Delaware		82-0109423
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

104 S. Michigan Ave., Suite 900 Chicago, Illinois		60603
(Address of principal executive offices)		(Zip Code)

(312) 489-5800

(Registrant’s telephone number, including area code)

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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The Company has 150,000,000 shares of common stock, par value of $0.01, authorized of which 103,524,301 shares were issued and outstanding as of May 6, 2014.

COEUR MINING, INC.

INDEX



		Page
Part I.	Financial Information

	Item 1. Financial Statements

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows (Unaudited)	4

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Stockholders' Equity	6

	Notes to Condensed Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	37

	Item 4. Controls and Procedures	39

Part II.	Other Information

	Item 1. Legal Proceedings	40

	Item 1A. Risk Factors	40

	Item 4. Mine Safety Disclosures	49

	Item 6. Exhibits	50

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)



		Three months ended March 31,
		2014			2013
	Notes	(In thousands, except share data)
Revenue	3	$	159,633		$	171,797
COSTS AND EXPENSES
Costs applicable to sales⁽¹⁾	3	106,896			88,059
Amortization		40,459			49,724
General and administrative		13,896			10,227
Exploration		4,217			6,841
Write-downs		—			119
Pre-development, reclamation, and other		6,984			5,197
Total costs and expenses		172,452			160,167
OTHER INCOME (EXPENSE), NET
Fair value adjustments, net	9	(11,436		)	17,796
Impairment of marketable securities	11	(2,588		)	(35		)
Interest income and other, net		(1,983		)	3,856
Interest expense, net of capitalized interest	16	(13,054		)	(9,732		)
Total other income (expense), net		(29,061		)	11,885
Income (loss) before income and mining taxes		(41,880		)	23,515
Income and mining tax (expense) benefit	7	4,689			(11,245		)
NET INCOME (LOSS)		$	(37,191	)	$	12,270
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Unrealized gain (loss) on marketable securities, net of tax of $(234) in 2014		371			(3,566		)
Reclassification adjustments for impairment of marketable securities, net of tax of $(1,001) in 2014		1,587			35
Other comprehensive income (loss)		1,958			(3,531		)
COMPREHENSIVE INCOME (LOSS)		$	(35,233	)	$	8,739

NET INCOME (LOSS) PER SHARE	8
Basic		$	(0.36	)	$	0.14

Diluted		$	(0.36	)	$	0.14

(1) Excludes amortization.

The accompanying notes are an integral part of these condensed consolidated financial statements.

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



		Three months ended March 31,
		2014			2013
	Notes	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(37,191	)	$	12,270
Adjustments:
Amortization		40,459			49,724
Accretion		4,560			4,904
Deferred income taxes		(11,781		)	7,425
Loss on termination of revolving credit facility		3,035			—
Fair value adjustments, net		10,557			(16,042		)
Gain on foreign currency transactions		(209		)	(465		)
Stock-based compensation	5	2,565			1,096
(Gain) loss on sale of assets		271			(868		)
Impairment of marketable securities	11	2,588			35
Write-downs		—			119
Other		—			526
Changes in operating assets and liabilities:
Receivables		5,622			3,968
Prepaid expenses and other current assets		(8,109		)	(2,240		)
Inventory and ore on leach pads	13	(13,912		)	(20,493		)
Accounts payable and accrued liabilities		(8,082		)	(27,025		)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(9,627		)	12,934
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(11,936		)	(12,827		)
Purchase of short-term investments and marketable securities		(46,220		)	(4,649		)
Sales and maturities of short-term investments		90			4,822
Other		(25		)	(10,610		)
CASH USED IN INVESTING ACTIVITIES		(58,091		)	(23,264		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes and bank borrowings	16	153,000			300,000
Payments on long-term debt, capital leases, and associated costs		(4,111		)	(55,340		)
Gold production royalty payments		(14,683		)	(15,448		)
Share repurchases		—			(12,557		)
Other		(246		)	(454		)
CASH PROVIDED BY FINANCING ACTIVITIES		133,960			216,201
INCREASE IN CASH AND CASH EQUIVALENTS		66,242			205,871
Cash and cash equivalents at beginning of period		206,690			125,440
Cash and cash equivalents at end of period		$	272,932		$	331,311

The accompanying notes are an integral part of these condensed consolidated financial statements.

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



		March 31, 2014 (Unaudited)			December 31, 2013
ASSETS	Notes	(In thousands, except share data)
CURRENT ASSETS
Cash and cash equivalents		$	272,932		$	206,690
Investments	11	45,628			—
Receivables	12	75,806			81,074
Ore on leach pads		59,895			50,495
Inventory	13	133,578			132,023
Deferred tax assets	7	34,998			35,008
Prepaid expenses and other		30,835			25,940
		653,672			531,230
NON-CURRENT ASSETS
Property, plant and equipment, net	14	476,837			486,273
Mining properties, net	15	1,740,474			1,751,501
Ore on leach pads		34,485			31,528
Restricted assets		7,426			7,014
Marketable securities	11	15,646			14,521
Receivables	12	36,271			36,574
Debt issuance costs, net		11,356			10,812
Deferred tax assets	7	829			1,189
Other		9,989			15,336
TOTAL ASSETS		$	2,986,985		$	2,885,978
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	49,958		$	53,847
Accrued liabilities and other		29,861			38,266
Debt	16	8,095			2,505
Royalty obligations	9,10	50,250			48,019
Reclamation	4	762			913
Deferred tax liabilities	7	1,858			1,011
		140,784			144,561
NON-CURRENT LIABILITIES
Debt	16	456,152			306,130
Royalty obligations	9,10	62,390			65,142
Reclamation	4	58,630			57,515
Deferred tax liabilities	7	544,096			556,246
Other long-term liabilities		27,236			25,817
		1,148,504			1,010,850
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 103,584,671 at March 31, 2014 and 102,843,003 at December 31, 2013		1,035			1,028
Additional paid-in capital		2,783,520			2,781,164
Accumulated other comprehensive loss		(2,948		)	(4,906		)
Accumulated deficit		(1,083,910		)	(1,046,719		)
		1,697,697			1,730,567
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,986,985		$	2,885,978

The accompanying notes are an integral part of these condensed consolidated financial statements.

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY



(In thousands)	Common Stock Shares	Common Stock Par Value		Additional Paid- In Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
Balances at December 31, 2013	102,843	$	1,028	$	2,781,164	$	(1,046,719	)	$	(4,906	)	$	1,730,567
Net loss	—	—		—		(37,191		)	—			(37,191		)
Other comprehensive income	—	—		—		—			1,958			1,958
Common stock issued under stock-based compensation plans, net	742	7		2,356		—			—			2,363
Balances at March 31, 2014 (Unaudited)	103,585	$	1,035	$	2,783,520	$	(1,083,910	)	$	(2,948	)	$	1,697,697

The accompanying notes are an integral part of these condensed consolidated financial statements.

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 1 -	BASIS OF PRESENTATION

The interim condensed consolidated financial statements of Coeur Mining, Inc. (collectively "Coeur" or "the Company") are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results reported for the year ending December 31, 2014. The condensed consolidated December 31, 2013 balance sheet data was derived from the audited consolidated financial statements. Accordingly, these unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the "2013 10-K").

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Standards

On January 1, 2014, the Company adopted ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The updated guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforwards, a similar tax loss, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax provision. The Company's adoption had no impact on the Company's consolidated financial position, results of operations, or cash flows.

NOTE 3 – SEGMENT REPORTING

The Company’s operating segments include the Palmarejo, San Bartolomé, Rochester, and Kensington mines, the La Preciosa project, and Coeur Capital. All operating segments are engaged in the discovery and mining of gold and silver and generate the majority of their revenues from the sale of these precious metals with the exception of Coeur Capital, which holds the Endeavor silver stream and other precious metals royalties. Other includes the Joaquin project, Martha mine, corporate headquarters, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.

Financial information relating to the Company’s segments is as follows (in thousands):



Three months ended March 31, 2014	Palmarejo Mine			San Bartolomé Mine			Kensington Mine			Rochester Mine			La Preciosa			Coeur Capital			Other			Total
Revenue
Metal sales	$	67,988		$	27,554		$	36,061		$	24,154		$	—		$	2,890		$	—		$	158,647
Royalties	—			—			—			—			—			986			—			986
	67,988			27,554			36,061			24,154			—			3,876			—			159,633
Costs and Expenses
Costs applicable to sales⁽¹⁾	43,574			18,901			28,531			14,708			—			1,182			—			106,896
Amortization	18,659			4,457			10,709			4,451			17			1,702			464			40,459
Exploration	1,005			26			1,044			1,174			184			203			581			4,217
Other operating expenses	297			140			191			1,345			4,971			241			13,695			20,880
Other income (expense)
Interest income and other, net	(1,569		)	682			—			19			(16		)	(2,548		)	(1,139		)	(4,571		)
Interest expense, net	(2,824		)	(20		)	(22		)	(4		)	—			—			(10,184		)	(13,054		)
Fair value adjustments, net	(10,237		)	—			—			(673		)	—			—			(526		)	(11,436		)
Income and mining tax (expense) benefit	3,828			(2,764		)	—			—			(107		)	(288		)	4,020			4,689
Net income (loss)	$	(6,349	)	$	1,928		$	(4,436	)	$	1,818		$	(5,295	)	$	(2,288	)	$	(22,569	)	$	(37,191	)
Segment assets⁽²⁾	$	1,152,913		$	285,072		$	332,563		$	192,409		$	410,998		$	67,173		$	110,768		$	2,551,896
Capital expenditures	$	3,742		$	1,441		$	4,711		$	959		$	138		$	—		$	945		$	11,936

(1) Excludes amortization

(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



Three months ended March 31, 2013	Palmarejo Mine			San Bartolomé Mine			Kensington Mine			Rochester Mine			La Preciosa		Coeur Capital			Other			Total
Revenue
Metal sales	$	57,426		$	33,141		$	39,274		$	39,474		$	—	$	2,983		$	(501	)	$	171,797
Royalties	—			—			—			—			—		—			—			—
	$	57,426		$	33,141		$	39,274		$	39,474		$	—	$	2,983		$	(501	)	$	171,797
Costs and Expenses
Costs applicable to sales⁽¹⁾	26,718			15,678			23,565			20,777			—		1,321			—			88,059
Amortization	28,782			4,640			13,286			1,852			—		828			336			49,724
Exploration	1,980			53			672			484			—		308			3,344			6,841
Write-downs	—			—			—			—			—		—			119			119
Other operating expenses	168			3,837			176			473			—		(54		)	10,824			15,424
Other income (expense)
Interest income and other, net	1,941			605			130			57			—		11			1,077			3,821
Interest expense, net	(3,738		)	(32		)	(259		)	(5		)	—		—			(5,698		)	(9,732		)
Fair value adjustments, net	14,429			—			4,227			—			—		—			(860		)	17,796
Income and mining tax (expense) benefit	(3,534		)	(4,328		)	—			(725		)	—		(54		)	(2,604		)	(11,245		)
Net income (loss)	$	8,876		$	5,178		$	5,673		$	15,215		$	—	$	537		$	(23,209	)	$	12,270
Segment assets⁽²⁾	$	1,900,071		$	303,761		$	498,762		$	114,381		$	—	$	32,311		$	114,378		$	2,963,664
Capital expenditures	$	5,314		$	457		$	3,330		$	3,299		$	—	$	—		$	427		$	12,827

(1) Excludes amortization

(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests



(in thousands)	March 31, 2014		December 31, 2013
Assets
Total assets for reportable segments	$	2,551,896	$	2,558,819
Cash and cash equivalents	272,932		206,690
Short term investments	45,628		—
Other assets	116,529		120,469
Total consolidated assets	$	2,986,985	$	2,885,978

Geographic Information



(in thousands)	March 31, 2014		December 31, 2013
Long Lived Assets
United States	$	378,459	$	384,626
Australia	24,715		25,668
Argentina	94,558		94,705
Bolivia	231,336		235,085
Mexico	1,472,092		1,487,228
Other Foreign Countries	16,151		10,462
Total	$	2,217,311	$	2,237,774

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



	Three months ended March 31,
(in thousands)	2014		2013
Revenue
United States	$	60,215	$	78,748
Mexico	68,511		57,426
Bolivia	27,554		33,141
Australia	2,889		2,983
Other	464		(501		)
Total	$	159,633	$	171,797

NOTE 4 – RECLAMATION

Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, mineral prices, mineral processing recovery rates, production levels, capital costs and reclamation costs. On an ongoing basis, management evaluates its estimates and assumptions and future expenditures could differ from current estimates.

Changes to the Company’s asset retirement obligations are as follows (in thousands):




	March 31, 2014			December 31, 2013
Asset retirement obligation - Beginning	$	57,454		$	34,457
Accretion	1,317			3,442
Additions and changes in estimates	—			20,236
Settlements	(311		)	(681		)
Asset retirement obligation - Ending	$	58,460		$	57,454

The Company has accrued $0.9 million and $1.0 million at March 31, 2014 and December 31, 2013, respectively, for reclamation liabilities related to former mining activities. These amounts are also included in Reclamation in the Condensed Consolidated Balance Sheets.

NOTE 5 – STOCK-BASED COMPENSATION

The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance share units. Stock-based compensation expense for the three months ended March 31, 2014 and 2013 was $2.6 million and $1.1 million, respectively. At March 31, 2014, there was $14.1 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.9 years.

The following table summarizes the grants awarded during the three months ended March 31, 2014:



Grant date	Restricted stock	Grant date fair value of restricted stock		Stock options	Grant date fair value of stock options		Performance shares	Grant date fair value of performance shares
January 17, 2014	243,351	$	11.12	32,417	$	4.39	345,833	$	12.65
March 26, 2014	435,208	$	9.31	382,755	$	3.74	—	$	—

The following options and stock appreciation rights were exercised during the three months ended March 31, 2014:



Award Type	Number of Exercised Units	Weighted Average Exercised Price		Number of Exercisable Units	Weighted Average Exercisable Price
Options	—	$	—	233,473	$	30.01
Stock Appreciation Rights	—	$	—	50,209	$	14.15

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6 – RETIREMENT SAVINGS PLAN

The Company maintains a retirement savings plan (which qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all eligible U.S. employees. Under the plan, employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. The Company maintains a Safe Harbor Match and is required to make matching contributions equal to 100% of the employee’s contribution up to 4% of each employee’s salary. In addition, the Company provides a noncontributory defined contribution based on a percentage of each eligible employee's salary. Total plan expenses recognized for the three months ended March 31, 2014 and 2013 were $1.4 million and $1.3 million, respectively.

NOTE 7 – INCOME AND MINING TAXES

For the three months ended March 31, 2014 and 2013, the Company reported an income and mining tax benefit of $4.7 million and an income and mining tax expense of $11.2 million, respectively.

The following table summarizes the components of the Company's income and mining (expense) benefit:



	Three months ended March 31,
(in thousands)	2014			2013
United States	$	(146	)	$	(3,212	)
Argentina	4,432			73
Australia	(303		)	(105		)
Mexico	3,721			(3,673		)
Bolivia	(2,764		)	(4,328		)
Canada	(251		)	—
Income tax (expense) benefit	$	4,689		$	(11,245	)

The income tax provision for the three months ended March 31, 2014 varies from the statutory rate primarily due to full valuation allowance positions in certain jurisdictions, foreign exchange rate differences, and differences in tax rates for the for Company’s foreign operations.

The Company has U.S. net operating loss carryforwards which expire in 2019 through 2033. Net operating losses in foreign countries have an indefinite carryforward period, except in Mexico where net operating loss carryforwards are limited to ten years.

NOTE 8 – NET INCOME (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three months ended March 31, 2014, 2,071,279 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation due to the net loss incurred. For the three months ended March 31, 2013, 780,421 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive. The 3.25% Convertible Senior Notes were not included in the computation of diluted earnings per share for the three months ended March 31, 2014 and 2013 because there is no excess value upon conversion over the principal amount of the Notes.



	Three months ended March 31,
In thousands except per share amounts	2014			2013
Net income (loss) available to common stockholders	$	(37,191	)	$	12,270
Weighted average shares
Basic	102,365			89,948
Effect of share based compensation plans	—			88
Diluted	102,365			90,036
Income (loss) per share:
Basic	$	(0.36	)	$	0.14
Diluted	$	(0.36	)	$	0.14

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 9 – FAIR VALUE MEASUREMENTS

The following table presents the components of Fair value adjustments, net in the Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands):



	Three months ended March 31,
	2014			2013
Palmarejo royalty obligation embedded derivative	$	(4,019	)	$	23,534
Palmarejo gold production royalty obligation	(6,218		)	(9,105		)
Rochester net smelter royalty obligation	(673		)	—
Gold and silver put options	(1,494		)	4,227
Foreign exchange contracts	968			(860		)
	$	(11,436	)	$	17,796

Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


Level 2	Quoted market prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and


Level 3	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):



	Fair Value at March 31, 2014
	Total		Level 1		Level 2		Level 3
Assets:
Short-term investments	$	45,628	$	45,628	$	—	$	—
Marketable equity securities	15,646		15,646		—		—
Gold and silver put options	992		—		992		—
Other derivative instruments, net	258		—		258		—
	$	62,524	$	61,274	$	1,250	$	—
Liabilities:
Palmarejo royalty obligation embedded derivative	$	44,357	$	—	$	—	$	44,357
Rochester net smelter royalty obligation	22,303		—		—		22,303
Gold and silver put options	226		—		226		—
	$	66,886	$	—	$	226	$	66,660

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



	Fair Value at December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets:
Marketable equity securities	$	14,521	$	14,521	$	—	$	—
Gold and silver put options	135		—		135		—
	$	14,656	$	14,521	$	135	$	—
Liabilities:
Palmarejo royalty obligation embedded derivative	$	40,338	$	—	$	—	$	40,338
Rochester net smelter royalty obligation	21,630		—		—		21,630
Other derivative instruments, net	1,590		—		1,590		—
	$	63,558	$	—	$	1,590	$	61,968

The Company’s short-term investments are readily convertible to cash. The Company’s investments in marketable equity securities are recorded at fair market value in the financial statements based on quoted market prices, which are accessible at the measurement date for identical assets. Such instruments are classified within Level 1 of the fair value hierarchy.

The Company’s gold and silver put and call options and other derivative instruments, net, which relate to the concentrate sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves and credit spreads. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.

The estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation was estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads. The Company’s current mine plans are a significant input used in the estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation and is considered company specific and unobservable. Therefore, the Company has classified the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation as Level 3 financial liabilities. Based on the current mine plans, an expected royalty duration of 2.3 years and 4.9 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation, respectively, at March 31, 2014.

No assets or liabilities were transferred between fair value levels in the three months ended March 31, 2014.

The following table presents the changes in the fair value of the Company's Level 3 financial liabilities for the three months ended March 31, 2014:



	Balance at the beginning of the period		Revaluation		Balance at the end of the period
Palmarejo royalty obligation embedded derivative	$	40,338	$	4,019	$	44,357
Rochester net smelter royalty obligation	21,630		673		22,303

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value of financial assets and liabilities measured at book value in the financial statements at March 31, 2014 and December 31, 2013 are presented in the following table (in thousands):



	March 31, 2014
	Book Value		Fair Value		Level 1		Level 2		Level 3
Liabilities:
3.25% Convertible Senior Notes due 2028	$	5,334	$	5,281	$	—	$	5,281	$	—
7.875% Senior Notes due 2021	452,964		454,127		—		454,127		—
Palmarejo Gold Production Royalty Obligation	45,980		57,377		—		—		57,377



	December 31, 2013
	Book Value		Fair Value		Level 1		Level 2		Level 3
Liabilities:
3.25% Convertible Senior Notes due 2028	$	5,334	$	5,067	$	5,067	$	—	$	—
7.875% Senior Notes due 2021	300,000		307,314		307,314		—		—
Palmarejo Gold Production Royalty Obligation	51,193		65,212		—		—		65,212

The fair value at March 31, 2014 and December 31, 2013 of the 3.25% Convertible Senior Notes and 7.875% Senior Notes outstanding were estimated using quoted market prices. The fair value of debt was transferred to Level 2 from Level 1 of the fair value hierarchy at March 31, 2014 due to a change in observability of quoted market prices.

The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads. The Company’s current mine plan is a significant input used in the estimated fair value of the Palmarejo gold production royalty obligation and is considered company specific and unobservable. Therefore, the Company has classified the Palmarejo gold production royalty obligation as Level 3 financial liabilities. Based on the current mine plan, an expected royalty duration of 2.3 years was used to estimate the fair value of the Palmarejo gold production royalty obligation as of March 31, 2014.

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS

Palmarejo Gold Production Royalty

On January 21, 2009, the Company entered into a gold production royalty transaction with Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties. The royalty transaction includes a minimum obligation of 4,167 ounces per month that ends when payments have been made on a total of 400,000 ounces of gold. At March 31, 2014, a total of 124,103 ounces of gold remain outstanding under the minimum royalty obligation.

The price volatility associated with the minimum royalty obligation is considered an embedded derivative. The Company is required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. Unrealized gains are recognized in periods when the gold price has decreased from the previous period and unrealized losses are recognized in periods when the gold price increases. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was 6.1% and 4.2% at March 31, 2014 and 2013, respectively. The fair value of the embedded derivative at March 31, 2014 and December 31, 2013 was a liability of $44.4 million and $40.3 million, respectively. During the three months ended March 31, 2014 and 2013, the mark-to-market adjustments for this embedded derivative amounted to losses of $4.0 million and gains of $23.5 million, respectively.

Payments on the royalty obligation decrease the carrying amount of the minimum obligation and the derivative liability. Each monthly payment is an amount equal to the greater of the minimum of 4,167 ounces of gold or 50% of the actual gold production per month multiplied by the excess of the monthly average market price of gold above $408 per ounce, subject to a 1% annual inflation adjustment. For the three months ended March 31, 2014 and 2013, realized losses on settlement of the liabilities were $6.2 million and $9.1 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Foreign Exchange Hedges

The Company periodically enters into foreign currency derivative contracts to reduce the foreign exchange risk associated with Mexican peso (“MXN”) operating costs at its Palmarejo mine. At March 31, 2014, the Company had outstanding call and put option contracts, or collars, on $35.0 million with a weighted-average strike price of 12.56 MXN for the floor and 14.98 MXN

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

for the ceiling. The fair value of these contracts was $0.1 million at March 31, 2014. At December 31, 2013, the Company had MXN foreign exchange forward contracts on $12.0 million in U.S. dollars. These contracts required the Company to exchange U.S. dollars for MXN at a weighted average exchange rate of 12.21 MXN to each U.S. dollar and the fair value of those contracts was a liability of $0.9 million at December 31, 2013. In addition, at December 31, 2013, the Company had outstanding collars on $45.0 million with a weighted-average strike price of 12.60 MXN for the floor and 14.80 MXN for the ceiling. The fair value of these contracts was nil at December 31, 2013.

The Company recorded mark-to-market gains of $1.0 million and gains of $0.7 million for the three months ended March 31, 2014 and 2013, respectively, on the MXN forward contracts and collars. These mark-to-market adjustments are reflected in Fair value adjustments, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). The Company recorded realized losses of $0.9 million and realized gains of $0.6 million in Costs applicable to sales during the three months ended March 31, 2014 and 2013, respectively.

Concentrate Sales Contracts

The Company's concentrate sales to third-party smelters, in general, provide for a provisional payment based upon preliminary assays and forward metal prices. The provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. At March 31, 2014, the Company had outstanding provisionally priced sales of 0.1 million ounces of silver and 18,471 ounces of gold at prices of $20.47 and $1,310, respectively. At December 31, 2013, the Company had outstanding provisionally priced sales consisting of 0.2 million ounces of silver and 30,780 ounces of gold at prices of $20.98 and $1,259, respectively.

Commodity Derivatives

At March 31, 2014, the Company purchased outstanding put options allowing it to net cash settle 50,000 ounces of gold and 2,500,000 ounces of silver at weighted average strike prices of $1,200 per ounce and $18.00 per ounce, respectively, if the market price of gold or silver were to average less than the strike price during the contract period. In addition, the Company sold outstanding put options requiring it to net cash settle 50,000 ounces of gold and 2,500,000 ounces of silver at weighted average strike prices of $1,050 and $16.00 per ounce, respectively, if the market price of gold or silver were to average less than the strike price during the contract period. These contracts expire during the second and third quarters of 2014. At March 31, 2014, the fair market value of these contracts was a net asset of $0.8 million.

At December 31, 2013, the Company had outstanding put options allowing it to net settle 25,000 ounces of gold and 1,250,000 ounces of silver at weighted average prices of $1,150 per ounce and $17.00 per ounce, respectively, if the market price of gold or silver were to average less than the strike price during the contract period. At December 31, 2013, the fair market value of these contracts was a net asset of $0.1 million.

During the three months ended March 31, 2014 and 2013, the Company recorded unrealized losses of $1.5 million and unrealized gains of $4.8 million, respectively, related to outstanding options which was included in Fair value adjustments, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). The Company also recognized a realized gain of $0.3 million and a realized loss of $0.5 million resulting from expiring contracts during the three months ended March 31, 2014 and 2013, respectively.

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

At March 31, 2014, the Company had the following derivative instruments that settle in each of the years indicated (in thousands except average prices and notional ounces):



	2014			2015		2016		Thereafter
Palmarejo gold production royalty	$	21,708		$	24,764	$	14,860	$	—
Average gold price in excess of minimum contractual deduction	$	498		$	494	$	490	$	—
Notional ounces	43,602			50,153		30,348		—

Mexican peso put options purchased	$	35,000		$	—	$	—	$	—
Average rate (MXN/$)	14.98			—		—		—
Mexican peso notional amount	524,300			—		—		—

Mexican peso call options sold	$	35,000		$	—	$	—	$	—
Average rate (MXN/$)	12.56			—		—		—
Mexican peso notional amount	439,600			—		—		—

Silver concentrate sales agreements	$	3,041		$	—	$	—	$	—
Average silver price	$	20.47		$	—	$	—	$	—
Notional ounces	148,594			—		—		—

Gold concentrate sales agreements	$	24,204		$	—	$	—	$	—
Average gold price	$	1,310		$	—	$	—	$	—
Notional ounces	18,471			—		—		—

Gold put options purchased	$	60,000		$	—	$	—	$	—
Average gold strike price	$	1,200		$	—	$	—	$	—
Notional ounces	50,000			—		—		—

Silver put options purchased	$	45,000		$	—	$	—	$	—
Average silver strike price	$	18.00		$	—	$	—	$	—
Notional ounces	2,500,000			—		—		—

Gold put options sold	$	(52,500	)	$	—	$	—	$	—
Average gold strike price	$	1,050		$	—	$	—	$	—
Notional ounces	50,000			—		—		—

Silver put options sold	$	(40,000	)	$	—	$	—	$	—
Average silver strike price	$	16.00		$	—	$	—	$	—
Notional ounces	2,500,000			—		—		—

The following summarizes the classification of the fair value of the derivative instruments (in thousands):



	March 31, 2014
	Prepaid expenses and other		Accrued liabilities and other		Current portion of royalty obligation		Non-current portion of royalty obligation
Foreign exchange contracts, peso	$	67	$	7	$	—	$	—
Palmarejo gold production royalty	—		—		20,747		23,610
Gold and silver put options	992		226		—		—
Concentrate sales contracts	533		335		—		—
	$	1,592	$	568	$	20,747	$	23,610

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)



	December 31, 2013
	Prepaid expenses and other		Accrued liabilities and other		Current portion of royalty obligation		Non-current portion of royalty obligation
Foreign exchange contracts, peso	$	38	$	947	$	—	$	—
Palmarejo gold production royalty	—		—		17,650		22,688
Gold and silver put options, net	135		—		—		—
Concentrate sales contracts	11		693		—		—
	$	184	$	1,640	$	17,650	$	22,688

The following represent mark-to-market gains (losses) on derivative instruments for the three months ended March 31, 2014, and 2013 (in thousands):



		Three months ended March 31,
Financial statement line	Derivative	2014			2013
Sales of metal	Concentrate sales contracts	$	879		$	(1,755	)
Costs applicable to sales	Foreign exchange contracts	(924		)	627
Fair value adjustments, net	Foreign exchange contracts (MXN)	968			738
Fair value adjustments, net	Foreign exchange contracts (CDN)	—			(1,598		)
Fair value adjustments, net	Palmarejo gold royalty	(10,237		)	14,429
Fair value adjustments, net	Put and call options	(1,494		)	4,228
		$	(10,808	)	$	16,669

Credit Risk

The credit risk exposure related to any derivative instruments is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with financial institutions management deems credit worthy and limits credit exposure to each. The Company does not anticipate non-performance by any of its counterparties. In addition, to allow for situations where derivative positions may need to be revised, the Company deals only in markets that management considers highly liquid.

NOTE 11 – INVESTMENTS

The Company invests part of its cash balances in a managed portfolio of liquid investments including highly-rated corporate bonds which are classified as short-term investments. The Company also invests in marketable equity securities of silver and gold exploration and development companies. These investments are classified as available-for-sale and are measured at fair value in the financial statements with unrealized gains and losses recorded in Other comprehensive income (loss).



	At March 31, 2014
	Cost		Gross Unrealized Losses			Gross Unrealized Gains		Estimated Fair Value
Short-term investments	$	45,724	$	(96	)	$	—	$	45,628
Marketable equity securities	15,484		(724		)	886		15,646



	At December 31, 2013
	Cost		Gross Unrealized Losses			Gross Unrealized Gains		Estimated Fair Value
Marketable equity securities	$	17,649	$	(3,300	)	$	172	$	14,521

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the gross unrealized losses on investment securities for which other-than-temporary impairments have not been recognized and the fair values of those securities, aggregated by the length of time the individual securities have been in a continuous unrealized loss position, at March 31, 2014 (in thousands):



	Less than twelve months					Twelve months or more					Total
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value
Short-term investments	$	(96	)	$	45,628	$	—		$	—	$	(96	)	$	45,628
Marketable equity securities	$	—		$	—	$	(724	)	$	1,320	$	(724	)	$	1,320

In the three months ended March 31, 2014 and 2013, the Company recognized a net unrealized gain of $0.6 million and a net unrealized loss of $3.6 million, respectively, in Other comprehensive income (loss). The Company performs a quarterly assessment on each of its marketable securities with unrealized losses to determine if the security is other than temporarily impaired. The company recorded other-than-temporary impairment losses of $2.6 million and $35 thousand for the three months ended March 31, 2014 and 2013, respectively.

NOTE 12 – RECEIVABLES

Receivables consist of the following (in thousands):



	March 31, 2014		December 31, 2013
Receivables - current
Trade receivables	$	10,679	$	17,303
Income tax receivable	7,856		6,240
Value added tax receivable	51,540		49,168
Other	5,731		8,363
	$	75,806	$	81,074
Receivables - non-current
Value added tax receivable	$	36,271	$	36,574

NOTE 13 – INVENTORY AND ORE ON LEACH PADS

Inventory consists of the following (in thousands):



Inventory:	March 31, 2014		December 31, 2013
Concentrate	$	12,788	$	14,855
Precious metals	54,622		52,250
Supplies	66,168		64,918
	$	133,578	$	132,023
Ore on Leach Pads:
Current	$	59,895	$	50,495
Non-Current	34,485		31,528
	$	94,380	$	82,023

Total Inventory and Ore on Leach Pads	$	227,958	$	214,046

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 14 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):



	March 31, 2014			December 31, 2013
Land	$	1,764		$	1,764
Facilities and equipment	870,251			855,318
Capital leases	9,015			16,133
	881,030			873,215
Accumulated amortization	(411,446		)	(395,520		)
	469,584			477,695
Construction in progress	7,253			8,578
	$	476,837		$	486,273

NOTE 15 – MINING PROPERTIES

Mining properties consist of the following (in thousands):



March 31, 2014	Palmarejo			San Bartolomé			Kensington			Rochester			La Preciosa		Joaquin		Coeur Capital			Total
Mine development	$	155,262		$	70,764		$	271,834		$	150,280		$	—	$	—	$	—		$	648,140
Accumulated amortization	(112,989		)	(23,114		)	(85,823		)	(105,767		)	—		—		—			(327,693		)
	42,273			47,650			186,011			44,513			—		—		—			320,447
Mineral interests	1,146,572			26,643			—			—			408,352		93,429		83,871			1,758,867
Accumulated amortization	(309,615		)	(9,080		)	—			—			—		—		(20,145		)	(338,840		)
	836,957			17,563			—			—			408,352		93,429		63,726			1,420,027
Mining properties, net	$	879,230		$	65,213		$	186,011		$	44,513		$	408,352	$	93,429	$	63,726		$	1,740,474



December 31, 2013	Palmarejo			San Bartolomé			Kensington			Rochester			La Preciosa		Joaquin		Coeur Capital		Total
Mine development	$	151,845		$	70,761		$	268,351		$	150,348		$	—	$	—	$	—	$	641,305
Accumulated amortization	(110,143		)	(22,236		)	(80,032		)	(103,130		)	—		—		—		(315,541		)
	41,702