CDE-03.31.15 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, 2015
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 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 135,958,762 shares were issued and outstanding as of May 1, 2015.


COEUR MINING, INC.
INDEX
 
 
Page
Part I.
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
 
Condensed Consolidated Statements of Changes in Stockholders' Equity
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
Consolidated Financial Results
 
 
 
 
Results of Operations
 
 
 
 
Liquidity and Capital Resources
 
 
 
 
Non-GAAP Financial Performance Measures
 
 
 
 
 
 
 
 
 
 
 
Part II.
 
 
 
 
 
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
 
 
 
 
Item 6. Exhibits
 
 
 
Signatures





2

PART I. Financial Information
Item 1. Financial Statements

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended March 31,
 
 
2015
 
2014
 
Notes
In thousands, except share data
Revenue
3
$
152,956

 
$
159,633

COSTS AND EXPENSES
 
 
 
 
Costs applicable to sales(1)
3
115,062

 
106,896

Amortization
 
33,090

 
40,459

General and administrative
 
8,834

 
13,896

Exploration
 
4,266

 
4,217

Pre-development, reclamation, and other
 
6,763

 
6,984

Total costs and expenses
 
168,015

 
172,452

OTHER INCOME (EXPENSE), NET
 
 
 
 
Fair value adjustments, net
9
(4,884
)
 
(11,436
)
Impairment of equity securities
12
(1,514
)
 
(2,588
)
Interest income and other, net
 
(997
)
 
(1,983
)
Interest expense, net of capitalized interest
17
(10,765
)
 
(13,054
)
Total other income (expense), net
 
(18,160
)
 
(29,061
)
Income (loss) before income and mining taxes
 
(33,219
)
 
(41,880
)
Income and mining tax (expense) benefit
7
(68
)
 
4,689

NET INCOME (LOSS)
 
$
(33,287
)
 
$
(37,191
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of $578 and $(234) for the three months ended March 31, 2015 and 2014, respectively
 
(915
)
 
371

Reclassification adjustments for impairment of equity securities, net of tax of $(586) and $(1,001) for the three months ended March 31, 2015 and 2014, respectively
 
928

 
1,587

Other comprehensive income (loss)
 
13

 
1,958

COMPREHENSIVE INCOME (LOSS)
 
$
(33,274
)
 
$
(35,233
)
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
8
 
 
 
Basic
 
$
(0.32
)
 
$
(0.36
)
 
 
 
 
 
Diluted
 
$
(0.32
)
 
$
(0.36
)
(1) Excludes amortization.
The accompanying notes are an integral part of these condensed consolidated financial statements.


3

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three months ended March 31,
 
 
2015
 
2014
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income (loss)
 
$
(33,287
)
 
(37,191
)
Adjustments:
 
 
 
 
Amortization
 
33,090

 
40,459

Accretion
 
3,150

 
4,560

Deferred income taxes
 
(2,184
)
 
(11,781
)
Loss on termination of revolving credit facility
 
—

 
3,035

Fair value adjustments, net
 
4,884

 
11,436

Stock-based compensation
5
2,150

 
2,565

Impairment of equity securities
12
1,514

 
2,588

Other
 
1,079

 
(817
)
Changes in operating assets and liabilities:
 
 
 
 
Receivables
 
2,556

 
5,622

Prepaid expenses and other current assets
 
(1,327
)
 
(8,109
)
Inventory and ore on leach pads
 
684

 
(13,912
)
Accounts payable and accrued liabilities
 
(16,281
)
 
(8,082
)
CASH USED IN OPERATING ACTIVITIES
 
(3,972
)
 
(9,627
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Capital expenditures
 
(17,620
)
 
(11,936
)
Acquisitions, net of cash acquired
11
(102,018
)
 
—

Other
 
(1,730
)
 
(25
)
Purchase of short-term investments and equity securities
 
(278
)
 
(46,220
)
Sales and maturities of short-term investments
 
229

 
90

CASH USED IN INVESTING ACTIVITIES
 
(121,417
)
 
(58,091
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Issuance of notes and bank borrowings
17
53,500

 
153,000

Payments on long-term debt, capital leases, and associated costs
 
(8,594
)
 
(4,111
)
Gold production royalty payments
 
(10,368
)
 
(14,683
)
Other
 
(423
)
 
(246
)
CASH PROVIDED BY FINANCING ACTIVITIES
 
34,115

 
133,960

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(91,274
)
 
66,242

Cash and cash equivalents at beginning of period
 
270,861

 
206,690

Cash and cash equivalents at end of period
 
$
179,587

 
$
272,932


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

4

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
March 31, 2015
(Unaudited)
 
December 31,
2014
ASSETS
Notes
 
In thousands, except share data
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
179,587

 
$
270,861

Receivables
13
 
118,390

 
116,921

Inventory
14
 
115,337

 
114,931

Ore on leach pads
14
 
66,705

 
48,204

Deferred tax assets

 
7,255

 
7,364

Prepaid expenses and other
 
 
18,629

 
15,523

 
 
 
505,903

 
573,804

NON-CURRENT ASSETS
 
 
 
 
 
Property, plant and equipment, net
15
 
254,892

 
227,911

Mining properties, net
16
 
572,842

 
501,192

Ore on leach pads
14
 
34,425

 
37,889

Restricted assets
 
 
9,039

 
7,037

Equity securities
12
 
4,488

 
5,982

Receivables
13
 
18,933

 
21,686

Deferred tax assets

 
63,735

 
60,151

Other
 
 
11,561

 
9,915

TOTAL ASSETS
 
 
$
1,475,818

 
$
1,445,567

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable
 
 
$
45,387

 
$
49,052

Accrued liabilities and other
 
 
40,568

 
51,513

Debt
17
 
65,719

 
17,498

Royalty obligations
9
 
44,442

 
43,678

Reclamation
4
 
3,888

 
3,871

Deferred tax liabilities

 
8,078

 
8,078

 
 
 
208,082

 
173,690

NON-CURRENT LIABILITIES
 
 
 
 
 
Debt
17
 
447,779

 
451,048

Royalty obligations
9
 
21,219

 
27,651

Reclamation
4
 
85,899

 
66,943

Deferred tax liabilities

 
121,799

 
111,006

Other long-term liabilities
 
 
37,476

 
29,911

 
 
 
714,172

 
686,559

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 103,299,223 at March 31, 2015 and 103,384,408 at December 31, 2014
 
 
1,033

 
1,034

Additional paid-in capital
 
 
2,791,216

 
2,789,695

Accumulated other comprehensive income (loss)
 
 
(2,795
)
 
(2,808
)
Accumulated deficit
 
 
(2,235,890
)
 
(2,202,603
)
 
 
 
553,564

 
585,318

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
$
1,475,818

 
$
1,445,567


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


5

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
Income (Loss)
 
Total
Balances at December 31, 2014
103,384

 
$
1,034

 
$
2,789,695

 
$
(2,202,603
)
 
$
(2,808
)
 
$
585,318

Net income (loss)
—

 
—

 
—

 
(33,287
)
 
—

 
(33,287
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
13

 
13

Common stock issued under stock-based compensation plans, net
(85
)
 
(1
)
 
1,521

 
—

 
—

 
1,520

Balances at March 31, 2015 (Unaudited)
103,299

 
$
1,033

 
$
2,791,216

 
$
(2,235,890
)
 
$
(2,795
)
 
$
553,564

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

6
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. and its subsidiaries (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 which will be reported for the year ending December 31, 2015. The condensed consolidated December 31, 2014 balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which requires that debt issuance costs related to a recognized debt liability be presented as a reduction to the carrying amount of that debt liability, not as an asset. The updated guidance became effective under early adoption for the Company's fiscal year beginning January 1, 2015, and resulted in a reclassification of amounts from Other Non-current Assets to Debt in the current and prior periods.

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis," which amends the consolidation requirements in ASC 810. These changes become effective prospectively for the Company's fiscal year beginning January 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
    
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The updated guidance provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. These changes become effective prospectively for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.    

NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo, San Bartolomé, Rochester, Kensington, and Wharf mines, 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 La Preciosa project, Joaquin project, Martha mine, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.

7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Three months ended March 31, 2015
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
Wharf Mine
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
39,394

 
$
21,548

 
$
44,038

 
$
44,031

 
$
—

 
$
1,945

 
$
—

 
$
150,956

Royalties
—

 
—

 
—

 
—

 
—

 
1,492

 
508

 
2,000

 
39,394

 
21,548

 
44,038

 
44,031

 
—

 
3,437

 
508

 
152,956

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
34,491

 
19,127

 
29,419

 
31,392

 
—

 
633

 
—

 
115,062

Amortization
7,333

 
4,691

 
11,554

 
6,843

 
—

 
2,151

 
518

 
33,090

Exploration
1,123

 
36

 
1,662

 
722

 
—

 
75

 
648

 
4,266

Other operating expenses
314

 
244

 
235

 
1,141

 
165

 
17

 
13,481

 
15,597

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(1,103
)
 
452

 
(4
)
 
(41
)
 
17

 
(1,525
)
 
(307
)
 
(2,511
)
Interest expense, net
(1,340
)
 
(281
)
 
(63
)
 
(225
)
 
—

 
—

 
(8,856
)
 
(10,765
)
Fair value adjustments, net
(1,545
)
 
—

 
—

 
(2,292
)
 
—

 
—

 
(1,047
)
 
(4,884
)
Income and mining tax (expense) benefit
(1,371
)
 
(1,407
)
 
—

 
(350
)
 
686

 
598

 
1,776

 
(68
)
Net income (loss)
$
(9,226
)
 
$
(3,786
)
 
$
1,101

 
$
1,025

 
$
538

 
$
(366
)
 
$
(22,573
)
 
$
(33,287
)
Segment assets(2)
$
346,250

 
$
179,638

 
$
205,208

 
$
188,419

 
$
142,527

 
$
57,930

 
$
80,181

 
$
1,200,153

Capital expenditures
$
9,184

 
$
949

 
$
4,144

 
$
3,255

 
$
51

 
$
—

 
$
37

 
$
17,620

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Three months ended March 31, 2014
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
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

 
1,702

 
481

 
40,459

Exploration
1,005

 
26

 
1,044

 
1,174

 
203

 
765

 
4,217

Other operating expenses
297

 
140

 
191

 
1,345

 
241

 
18,666

 
20,880

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(1,569
)
 
682

 
—

 
19

 
(2,548
)
 
(1,155
)
 
(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
)
 
—

 
—

 
(288
)
 
3,913

 
4,689

Net income (loss)
$
(6,349
)
 
$
1,928

 
$
(4,436
)
 
$
1,818

 
$
(2,288
)
 
$
(27,864
)
 
$
(37,191
)
Segment assets(2)
$
1,152,913

 
$
285,072

 
$
332,563

 
$
192,409

 
$
67,173

 
$
521,766

 
$
2,551,896

Capital expenditures
$
3,742

 
$
1,441

 
$
4,711

 
$
959

 
$
—

 
$
1,083

 
$
11,936

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests

Assets
March 31, 2015

December 31, 2014
Total assets for reportable segments
$
1,200,153

 
$
1,084,257

Cash and cash equivalents
179,587

 
270,861

Other assets
96,078

 
90,449

Total consolidated assets
$
1,475,818

 
$
1,445,567



8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Geographic Information
Long-Lived Assets
March 31, 2015

December 31, 2014
United States
$
376,966

 
$
275,594

Mexico
300,756

 
298,101

Bolivia
104,122

 
107,960

Australia
20,104

 
21,362

Argentina
10,944

 
10,970

Other
14,842

 
15,116

Total
$
827,734

 
$
729,103

 

Revenue
Three months ended March 31,
2015
 
2014
United States
$
88,069

 
$
60,215

Mexico
40,141

 
68,511

Bolivia
21,548

 
27,554

Australia
1,945

 
2,889

Other
$
1,253

 
$
464

Total
$
152,956

 
$
159,633


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. 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 for operating sites (included in Reclamation) are as follows: 
 
Three months ended March 31,
In thousands
2015
 
2014
Asset retirement obligation - Beginning
$
67,214

 
$
57,454

Accretion
1,412

 
1,317

Additions and changes in estimates
18,292

 
—

Settlements
(859
)
 
(311
)
Asset retirement obligation - Ending
$
86,059

 
$
58,460

The increase in asset retirement obligations in the three months ended March 31, 2015 is due to the acquisition of the Wharf gold mine. The Company has accrued $3.7 million and $3.6 million at March 31, 2015 and December 31, 2014, respectively, for reclamation liabilities related to former mining activities. These amounts are also included in Reclamation.

NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, restricted stock, and performance shares. Stock-based compensation expense for the three months ended March 31, 2015 and 2014 was $2.2 million and $2.6 million, respectively. At March 31, 2015, there was $7.0 million of unrecognized stock-based compensation cost expected to be recognized over a period of 1.5 years. During the three months ended March 31, 2015, the supplemental incentive accrual increased $0.4 million to $1.0 million.
    
The following options and stock appreciation rights were exercisable during the three months ended March 31, 2015:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Options
 
—

 
$
—

 
308,727

 
$
19.69

Stock Appreciation Rights
 
—

 
$
—

 
46,572

 
$
14.06


9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 6 – RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan that covers all eligible U.S. employees. Eligible employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations. The Company makes matching contributions equal to 100% of the employee’s contribution up to 4% of the employee's salary. The Company may also provide a voluntary, noncontributory defined contribution based on a percentage of eligible employee's salary. Total company contributions for the three months ended March 31, 2015 and 2014 were $1.6 million and $1.4 million, respectively.

NOTE 7 – INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three months ended March 31, 2015 and 2014 by significant location:
 
Three months ended March 31,
 
2015
 
2014
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(20,707
)
$
1,886

 
$
(28,686
)
$
(146
)
Argentina
(696
)
(1
)
 
(2,204
)
4,432

Mexico
(9,672
)
(1,264
)
 
(16,006
)
3,721

Bolivia
(2,379
)
(1,407
)
 
4,692

(2,764
)
Other jurisdictions
235

718

 
324

(554
)

$
(33,219
)
$
(68
)
 
$
(41,880
)
$
4,689


The income tax provision for the three months ended March 31, 2015 differs from the statutory rate primarily due to (i) a full valuation allowance against the deferred tax assets relating to losses incurred in the United States and certain foreign locations, (ii) the impact of foreign exchange adjustments on deferred tax account balances, reserves for uncertain tax positions, and foreign earnings not considered as permanently reinvested with respect to certain foreign locations, and (iii) differences in foreign tax rates in the Company's foreign locations. In conjunction with these items, the Company's consolidated effective income tax rate is a function of the combined effective tax rates in the jurisdictions in which it operates. Variations in the relative proportions of jurisdictional income and loss result in significant fluctuations in its consolidated effective tax rate.

The Company has U.S. net operating loss carryforwards which expire in 2019 through 2034. Net operating losses in foreign countries have an indefinite carryforward period, except in Mexico where net operating loss carryforwards are limited to ten years.

10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 8 – NET INCOME (LOSS) PER SHARE
Basic net 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, 2015 and 2014, 1,302,777 and 2,071,279 shares, respectively, 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 net income (loss) per share for the three months ended March 31, 2015 and 2014 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
2015
 
2014
Net income (loss) available to common stockholders
$
(33,287
)
 
$
(37,191
)
Weighted average shares:
 
 
 
Basic
102,580

 
102,365

Diluted
102,580

 
102,365

Income (loss) per share:
 
 
 
Basic
$
(0.32
)
 
$
(0.36
)
Diluted
$
(0.32
)
 
$
(0.36
)

NOTE 9 – FAIR VALUE MEASUREMENTS
The following table presents the components of Fair value adjustments, net:
 
 
Three months ended March 31,
In thousands
 
2015
 
2014
Palmarejo royalty obligation embedded derivative
 
$
(1,545
)
 
$
(10,237
)
Rochester net smelter royalty (NSR) royalty obligation
 
(2,292
)
 
(673
)
Silver and gold options
 
(1,046
)
 
(1,494
)
Foreign exchange contracts
 
—

 
968

Fair value adjustments, net
 
$
(4,884
)
 
$
(11,436
)
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), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
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:
 
Fair Value at March 31, 2015
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
4,488

 
$
3,109

 
$
—

 
$
1,379

Silver and gold options
2,066

 
—

 
2,066

 
—

Other derivative instruments, net
110

 
—

 
110

 
—

 
$
6,664

 
$
3,109

 
$
2,176

 
$
1,379

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
19,250

 
$
—

 
$
—

 
$
19,250

Rochester NSR royalty obligation
16,522

 
—

 
—

 
16,522

Silver and gold options
529

 
—

 
529

 
—

 
$
36,301

 
$
—

 
$
529

 
$
35,772

 

11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
Fair Value at December 31, 2014
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
5,982

 
$
4,603

 
$
—

 
$
1,379

Silver and gold options
3,882

 
—

 
3,882

 
—

 
$
9,864

 
$
4,603

 
$
3,882

 
$
1,379

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
21,912

 
$
—

 
$
—

 
$
21,912

Rochester NSR royalty obligation
15,370

 
—

 
—

 
15,370

Silver and gold options
1,039

 
—

 
1,039

 
—

Other derivative instruments, net
805

 
—

 
805

 
—

 
$
39,126

 
$
—

 
$
1,844

 
$
37,282

The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. For certain of the equity securities quoted market prices are not available. These securities are valued using pricing models which require the use of observable and unobservable inputs. These securities are classified within Level 3 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to 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, credit spreads, and other unobservable inputs. 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 fair values of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation were estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company has classified these obligations as Level 3 financial liabilities. Based on current mine plans, expected royalty durations of 1.4 years and 3.0 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation, respectively, at March 31, 2015.
No assets or liabilities were transferred between fair value levels in the three months ended March 31, 2015.
The following tables present the changes in the fair value of the Company's Level 3 financial liabilities for the three months ended March 31, 2015:
 
Three months ended March 31, 2015
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Palmarejo royalty obligation embedded derivative
$
21,912

 
$
1,545

 
$
(4,207
)
 
$
19,250

Rochester NSR royalty obligation
15,370

 
2,292

 
(1,140
)
 
16,522


12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value of financial assets and liabilities carried at book value in the financial statements at March 31, 2015 and December 31, 2014 is presented in the following table:
 
March 31, 2015
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
712

 
$
688

 
$
—

 
$
688

 
$
—

7.875% Senior Notes due 2021
425,935

 
371,489

 
—

 
371,489

 
—

Short-term Credit Agreement
50,000

 
50,000

 
—

 
50,000

 
—

San Bartolomé Line of Credit
18,213

 
18,213

 
—

 
18,213

 
—

Palmarejo gold production royalty obligation
29,889

 
33,916

 
—

 
—

 
33,916

 
December 31, 2014
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
5,334

 
$
4,979

 
$
—

 
$
4,979

 
$
—

7.875% Senior Notes due 2021
437,454

 
343,305

 
—

 
343,305

 
—

San Bartolomé Line of Credit
14,785

 
14,785

 
—

 
14,785

 
—

Palmarejo gold production royalty obligation
34,047

 
38,290

 
—

 
—

 
38,290

The fair values of the 3.25% Convertible Senior Notes and 7.875% Senior Notes outstanding were estimated using quoted market prices. The Short-term Credit Agreement was originated by a third party at March 31, 2015 and, as a result, book value is assumed to be fair value. The fair value of the San Bartolomé line of credit approximates book value due to the short-term nature of the liability and absence of significant interest rate or credit concerns. 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, as well as the Company’s current mine plan which is considered a significant unobservable input.

NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS
Palmarejo Gold Production Royalty
On January 21, 2009, the Company's subsidiary, Coeur Mexicana S.A. de C.V. ("Coeur Mexicana"), entered into a gold production royalty agreement with a subsidiary of 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 gold ounces per month and terminates when payments of 400,000 gold ounces have been made. At March 31, 2015, a total of 72,414 gold ounces remain outstanding under the 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 7.6% and 11.8% at March 31, 2015 and December 31, 2014, respectively. The fair value of the embedded derivative at March 31, 2015 and December 31, 2014 was a liability of $19.3 million and $21.9 million, respectively. For the three months ended March 31, 2015 and 2014, the mark-to-market adjustments were losses of $1.5 million and $10.2 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 actual gold production multiplied by the excess of the monthly average market price of gold above $412 per ounce, subject to a 1% annual inflation adjustment. For the three months ended March 31, 2015 and 2014, realized losses on settlement of the liabilities were $4.2 million and $6.2 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.

13
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

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. Changes in silver and gold prices resulted in provisional pricing mark-to-market gains of $0.9 million and $0.9 million in the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015, the Company had outstanding provisionally priced sales of 0.5 million ounces of silver and 33,084 ounces of gold at prices of $16.67 and $1,224, respectively.
Silver and Gold Options
At March 31, 2015, the Company has outstanding put spread contracts on 2.7 million ounces of silver. The weighted average high and low strike prices on the silver put spreads are $17.00 per ounce and $15.50 per ounce, respectively.
If the market price of silver and gold were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver and gold were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period.
The put spread contracts are generally net cash settled and expire during the second quarter of 2015. At March 31, 2015, the fair market value of the put spreads was a net asset of $1.5 million.
At December 31, 2014, the Company had outstanding put spread contracts on 1.3 million ounces of silver and 24,000 ounces of gold. The weighted average high and low strike prices on the silver put spreads were $18.00 per ounce and $16.00 per ounce, respectively. The weighted average high and low strike prices on the gold put spreads were $1,200 and $1,050, respectively.
During the three months ended March 31, 2015 and 2014, the Company recorded unrealized losses of $0.2 million and $1.5 million, respectively, related to outstanding options which were included in Fair value adjustments, net. The Company also recognized realized losses of $0.8 million and realized gains of $0.3 million resulting from expiring and terminated contracts during the three months ended March 31, 2015 and 2014, respectively.
At March 31, 2015, the Company had the following derivative instruments that settle in each of the years indicated:
In thousands except average prices and notional ounces
2015
 
2016
 
Thereafter
Palmarejo gold production royalty
$
39,043

 
$
23,712

 
$
—

Average gold price in excess of minimum contractual deduction
$
781

 
$
771

 
$
—

Notional ounces
50,004

 
30,744

 
—

 
 
 
 
 
 
Silver concentrate sales contracts
$
9,129

 
$
—

 
$
—

Average silver price
$
16.67

 
$
—

 
$
—

Notional ounces
547,611

 
—

 
—

 
 
 
 
 
 
Gold concentrate sales contracts
$
40,495

 
$
—

 
$
—

Average gold price
$
1,224

 
$
—

 
$
—

Notional ounces
33,084

 
—

 
—

 
 
 
 
 
 
Silver put options purchased
$
45,900

 
$
—

 
$
—

Average silver strike price
$
17.00

 
$
—

 
$
—

Notional ounces
2,700,000

 
—

 
—

 
 
 
 
 
 
Silver put options sold
$
(41,850
)
 
$
—

 
$
—

Average silver strike price
$
15.50

 
$
—

 
$
—

Notional ounces
2,700,000

 
—

 
—



14
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

The following summarizes the classification of the fair value of the derivative instruments:
 
March 31, 2015
In thousands
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Palmarejo gold production royalty
—

 
—

 
14,541

 
4,709

Silver and gold options
2,066

 
529

 
—

 
—

Concentrate sales contracts
541

 
431

 
—

 
—

 
$
2,607

 
$
960

 
$
14,541

 
$
4,709

 
December 31, 2014
 
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Palmarejo gold production royalty
—

 
—

 
14,405

 
7,507

Silver and gold options
3,882

 
1,039

 
—

 
—

Concentrate sales contracts
43

 
848

 
—

 
—

 
$
3,925

 
$
1,887

 
$
14,405

 
$
7,507

The following represent mark-to-market gains (losses) on derivative instruments for the three months ended March 31, 2015, and 2014 (in thousands):
 
 
 
Three months ended March 31,
Financial statement line
Derivative
 
2015
 
2014
Revenue
Concentrate sales contracts
 
$
914

 
$
879

Costs applicable to sales
Foreign exchange contracts
 
—

 
(924
)
Fair value adjustments, net
Foreign exchange contracts
 
—

 
968

Fair value adjustments, net
Palmarejo gold royalty
 
(1,545
)
 
(10,237
)
Fair value adjustments, net
Silver and gold options
 
(1,046
)
 
(1,494
)
 
 
 
$
(1,677
)
 
$
(10,808
)
Credit Risk
The credit risk exposure related to any derivative instrument 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 institution. 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 transacts only in markets that management considers highly liquid.

NOTE 11 – ACQUISITIONS
On February 20, 2015, the Company completed its acquisition of the Wharf gold mine located near Lead, South Dakota, from a subsidiary of Goldcorp in exchange for $103.0 million in cash. The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their respective fair values at the acquisition date.  At March 31, 2015, the purchase price allocation remains preliminary as the Company completes its assessment of property, certain legal and tax matters, obligations, deferred taxes, and acquired working capital. The Company incurred $2.0 million of acquisition costs, which are included in Pre-development, reclamation, and other on the Condensed Consolidated Statements of Comprehensive Income (Loss).

15
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed at the date of acquisition (in thousands):
Cash
$
103,000

Liabilities assumed:
 
Accounts payable and accrued liabilities
5,412

Reclamation
18,270

Deferred income taxes
9,503

Other non-current liabilities
3,750

Total liabilities assumed
36,935

Total consideration
$
139,935

Assets acquired:
 
Cash
$
982

Receivables
3,125

Inventory
2,807

Ore on leach pads
12,710

Other current assets
2,924

Property, plant, and equipment
30,054

Mining properties, net
83,367

Other non-current assets
3,966

Total assets acquired
$
139,935

The following table presents the unaudited pro forma summary of the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2015 and 2014, as if the acquisition had occurred on January 1, 2015. The following unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations as they would have been had the transaction occurred on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, potential synergies, and cost savings from operating efficiencies.
 
 
Three months ended March 31,
In thousands
 
2015
 
2014
Revenue
 
$
170,956

 
$
178,917

Income (loss) before income and mining taxes
 
(33,271
)
 
(36,673
)
Net income (loss)
 
(33,340
)
 
(31,957
)

NOTE 12 – INVESTMENTS
The Company invests in 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, 2015
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Equity securities
4,173

 
(9
)
 
324

 
4,488


 
At December 31, 2014
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Equity securities
$
5,687

 
$
(8
)
 
$
303

 
$
5,982



16
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes the gross unrealized losses on equity 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, 2015:
 
Less than twelve months
 
Twelve months or more
 
Total
In thousands
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
Equity securities
$
(9
)
$
38

 
$
—

$
—

 
$
(9
)
$
38


The Company performs a quarterly assessment on each of its equity securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded pre-tax other-than-temporary impairment losses of $1.5 million and $2.6 million in the three months ended March 31, 2015 and 2014, respectively.

NOTE 13 – RECEIVABLES
Receivables consist of the following:
In thousands
March 31, 2015
 
December 31, 2014
Current receivables:
 
 
 
Trade receivables
$
18,735

 
$
20,448

Income tax receivable
30,372

 
30,045

Value added tax receivable
63,583

 
63,805

Other
5,700

 
2,623

 
$
118,390

 
$
116,921

Non-current receivables:
 
 
 
Value added tax receivable
$
18,933

 
$
21,686

Total receivables
$
137,323

 
$
138,607


NOTE 14 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following: 
In thousands
March 31, 2015
 
December 31, 2014
Inventory:
 
 
 
Concentrate
$
18,783

 
$
23,563

Precious metals
42,972

 
40,870

Supplies
53,582

 
50,498

 
$
115,337

 
$
114,931

Ore on leach pads:
 
 
 
Current
$
66,705

 
$
48,204

Non-current
34,425

 
37,889

 
$
101,130

 
$
86,093

Total inventory and ore on leach pads
$
216,467

 
$
201,024


17
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 15 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following: 
In thousands
March 31, 2015
 
December 31, 2014
Land
$
8,225

 
$
1,752

Facilities and equipment
676,858

 
647,181

Capital leases
27,556

 
28,680

 
712,639

 
677,613

Accumulated amortization
(477,851
)
 
(464,852
)
 
234,788

 
212,761

Construction in progress
20,104

 
15,150

Property, plant and equipment, net
$
254,892

 
$
227,911

NOTE 16 – MINING PROPERTIES
Mining properties consist of the following (in thousands):
March 31, 2015
Palmarejo
 
San
Bartolomé
 
Kensington
 
Rochester
 
Wharf
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
143,012

 
$
49,379

 
$
220,957

 
$
153,613

 
$
31,618

 
$
—

 
$
—

 
$
—

 
$
598,579

Accumulated amortization
(124,306
)
 
(27,411
)
 
(113,005
)
 
(117,414
)
 
(331
)
 
—

 
—

 
—

 
(382,467
)
 
18,706

 
21,968

 
107,952

 
36,199

 
31,287

 
—

 
—

 
—

 
216,112

Mineral interests
521,349

 
17,560

 
—

 
—

 
51,779

 
49,085

 
10,000

 
81,461

 
731,234

Accumulated amortization
(335,791
)
 
(10,435
)
 
—

 
—

 
(676
)
 
—

 
—

 
(27,602
)
 
(374,504
)
 
185,558

 
7,125

 
—

 
—

 
51,103

 
49,085

 
10,000

 
53,859

 
356,730

Mining properties, net
$
204,264

 
$
29,093

 
$
107,952

 
$
36,199

 
$
82,390

 
$
49,085

 
$
10,000

 
$
53,859

 
$
572,842

December 31, 2014
Palmarejo
 
San
Bartolomé
 
Kensington
 
Rochester
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
137,821

 
$
49,305

 
$
217,138

 
$
153,535

 
$
—

 
$
—

 
$
—

 
$
557,799

Accumulated amortization
(121,906
)
 
(26,106
)
 
(106,865
)
 
(113,533
)
 
—

 
—

 
—

 
(368,410
)
 
15,915

 
23,199

 
110,273

 
40,002

 
—

 
—

 
—

 
189,389

Mineral interests
521,349

 
17,560

 
—

 
—

 
49,059

 
10,000

 
81,461

 
679,429

Accumulated amortization
(332,032
)
 
(10,143
)
 
—

 
—

 
—

 
—

 
(25,451
)
 
(367,626
)
 
189,317

 
7,417

 
—

 
—

 
49,059

 
10,000

 
56,010

 
311,803

Mining properties, net
$
205,232

 
$
30,616

 
$
110,273

 
$
40,002

 
$
49,059

 
$
10,000

 
$
56,010

 
$
501,192


18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 17 – DEBT
Long-term debt and capital lease obligations at March 31, 2015 and December 31, 2014 are as follows:
 
March 31, 2015
 
December 31, 2014
In thousands
Current
 
Non-Current
 
Current
 
Non-Current
3.25% Convertible Senior Notes due 2028
$
—

 
$
712

 
$
5,334

 
$
—

7.875% Senior Notes due 2021, net(1)
—

 
425,935

 
—

 
427,603

Short-term Credit Agreement, net(2)
49,753

 
—

 
—

 
—

San Bartolomé Letter of Credit
8,321

 
9,892

 
4,481

 
10,304

Capital lease obligations
7,645

 
11,240

 
7,683

 
13,141

 
$
65,719

 
$
447,779

 
$
17,498

 
$
451,048

(1) Net of unamortized debt issuance costs and premium received of $7.0 million and $7.3 million as of March 31, 2015 and December 31, 2014, respectively.
(2) Net of unamortized debt issuance costs of $0.2 million as of March 31, 2015.
7.875% Senior Notes due 2021
During the three months ended March 31, 2015, the Company repurchased $2.0 million in aggregate principal amount of its 7.875% Senior Notes due 2021 (the "Senior Notes"), resulting in a balance of $432.9 million at March 31, 2015.

3.25% Convertible Senior Notes due 2028
Per the indenture governing the 3.25% Convertible Senior Notes due 2028 (the “Convertible Notes”), the Company announced on February 12, 2015 that it was offering to repurchase all of the Convertible Notes. During the three months ended March 31, 2015, the Company repurchased $4.6 million in aggregate principal amount, leaving a balance of $0.7 million at March 31, 2015. The Convertible Notes are classified as non-current liabilities at March 31, 2015 as a result of the expiration of the holders' option to require the Company to repurchase the notes on March 15, 2015.
Short-term Credit Agreement
On March 31, 2015, the Company entered into a Credit Agreement (the "Credit Agreement") with The Bank of Nova Scotia. The Credit Agreement provides for a $50.0 million loan (the “Loan”) to the Company, the proceeds of which are expected to be used to finance working capital and general corporate purposes of the Company and its subsidiaries, and which has a term of one year. The Loan currently bears interest at a rate equal to an adjusted Eurocurrency rate plus a margin of 2.50% (which increases incrementally on the first day of each fiscal quarter commencing July 1, 2015 up to a maximum of 4.50%). Voluntary prepayments of the Loan under the Credit Agreement are permitted without prepayment premium or penalty, subject to notice requirements and payment of accrued interest. The Credit Agreement requires net cash proceeds of debt or equity issuances, bank facilities, asset sales and casualty insurance recoveries (in each case, subject to certain exceptions) to be applied as a mandatory prepayment of the Loan. Amounts repaid on the Loan may not be re-borrowed. The Loan is secured by a pledge of the Company’s stock in Wharf Resources (U.S.A.), Inc. and by the grant of security in substantially all of the assets of Wharf and its subsidiaries. If the Loan has not been repaid in full by January 1, 2016, the Company will be required to pledge its equity interests in certain of its other subsidiaries as additional collateral for the Loan. There was an outstanding balance of $50.0 million under the Credit Agreement at March 31, 2015.
The Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants. The Credit Agreement also contains financial covenants that require (i) the Company’s ratio of consolidated debt (net of cash) to adjusted EBITDA to be not greater than 3.50 to 1.00 at any time, and (ii) that the Company maintain cash and cash equivalents of at least $100.0 million at all times. For purposes of the Credit Agreement, the adjusted EBITDA covenant is determined using actual 2015 results on an annualized basis and has been calculated on a pro forma basis to include the impact of the Wharf acquisition for the three months ended March 31, 2015. The Company was in compliance with the covenants under the Credit Agreement at March 31, 2015.
Lines of Credit
At March 31, 2015, San Bartolomé had two outstanding lines of credit. The first line of credit is for $12.0 million bearing interest at 6.0% per annum, maturing in 270 days. The second line of credit is for $15.0 million bearing interest at 6.0% per annum, maturing in three years. Both lines of credit are secured with machinery and equipment. There was an aggregate outstanding balance of $18.2 million on both lines of credit at March 31, 2015.

19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Palmarejo Gold Production Royalty Obligation
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation under which the subsidiary of Franco-Nevada Corporation purchased a royalty covering 50% of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico.
The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight year period. Each monthly payment is an amount equal to the greater of 4,167 ounces of gold or 50% of actual gold production multiplied by the excess of the monthly average market price of gold above $412 per ounce, subject to a 1% annual inflation compounding adjustment. Payments under the royalty agreement are made in cash or gold bullion. During the three months ended March 31, 2015 and 2014, the Company paid $10.4 million and $14.7 million, respectively. At March 31, 2015, payments had been made on a total of 327,586 ounces of gold with further payments to be made on an additional 72,414 ounces of gold.     
The Company used an implicit interest rate of 30.5% to discount the original royalty obligation, based on the fair value of the consideration received projected over the expected future cash flows at inception of the obligation. The discounted obligation is accreted to its expected future value over the expected minimum payment period based on the implicit interest rate. The Company recognized accretion expense of $2.0 million and $3.2 million for the three months ended March 31, 2015 and 2014, respectively. At March 31, 2015 and December 31, 2014, the remaining minimum obligation under the royalty agreement was $29.9 million and $34.0 million, respectively.
Interest Expense
Interest expense consists of the following:
 
 
Three months ended March 31,
In thousands
 
2015