Document
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 September 30, 2017
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
____________________________________________ 
a021914coeurminingrpmshsma81.jpg
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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
Accelerated filer
 
¨   
 
 
 
 
Non-accelerated filer
 
¨   
Smaller reporting company
 
¨   
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 300,000,000 shares of common stock, par value of $0.01, authorized of which 185,640,359 shares were issued and outstanding as of October 23, 2017.


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 Statement 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 5. Other Information
 
 
 
 
Item 6. Exhibits
 
 
 
Signatures



2

PART I
Item 1.        Financial Statements

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Notes
In thousands, except share data
Revenue
3
$
175,963

 
$
176,247

 
$
555,455

 
$
506,641

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
118,924

 
105,408

 
377,257

 
307,428

Amortization
 
33,830

 
27,763

 
106,880

 
93,232

General and administrative
 
7,412

 
7,113

 
24,587

 
22,789

Exploration
 
9,814

 
3,706

 
22,879

 
7,669

Write-downs
 
—

 
—

 
—

 
4,446

Pre-development, reclamation, and other
 
7,961

 
4,491

 
16,908

 
13,059

Total costs and expenses
 
177,941

 
148,481


548,511

 
448,623

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Loss on debt extinguishment
17
—

 
(10,040
)
 
(9,342
)
 
(10,040
)
Fair value adjustments, net
10
—

 
(961
)
 
(864
)
 
(13,235
)
Interest expense, net of capitalized interest
17
(3,606
)
 
(8,068
)
 
(10,941
)
 
(30,063
)
Other, net
7
3,164

 
6,405

 
28,439

 
5,862

Total other income (expense), net
 
(442
)
 
(12,664
)

7,292

 
(47,476
)
Income (loss) before income and mining taxes
 
(2,420
)
 
15,102


14,236

 
10,542

Income and mining tax (expense) benefit
8
(14,232
)
 
54,455

 
(23,180
)
 
53,118

NET INCOME (LOSS)
 
$
(16,652
)
 
$
69,557


$
(8,944
)
 
$
63,660

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of $997 and ($1,177) for the three and nine months September 30, 2016, respectively
 
1,066

 
1,387

 
(1,134
)
 
4,533

Reclassification adjustments for impairment of equity securities
 
—

 
—

 
426

 
20

Reclassification adjustments for realized (gain) loss on sale of equity securities
 
32

 
(2,965
)
 
1,300

 
(2,691
)
Other comprehensive income (loss)
 
1,098

 
(1,578
)

592

 
1,862

COMPREHENSIVE INCOME (LOSS)
 
$
(15,554
)
 
$
67,979


$
(8,352
)
 
$
65,522

 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
9
 
 
 
 
 
 
 
Basic
 
$
(0.09
)
 
$
0.43

 
$
(0.05
)
 
$
0.41

 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.09
)
 
$
0.42

 
$
(0.05
)
 
$
0.40

(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 September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(16,652
)
 
$
69,557

 
(8,944
)
 
63,660

Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
33,830

 
27,763

 
106,880

 
93,232

Accretion
 
2,691

 
2,184

 
7,798

 
8,201

Deferred taxes
 
1,940

 
(49,463
)
 
(1,529
)
 
(66,738
)
Loss on debt extinguishment
 
—

 
10,040

 
9,342

 
10,040

Fair value adjustments, net

—

 
961

 
864

 
13,235

Stock-based compensation

2,585

 
2,312

 
8,127

 
7,534

Gain on sale of the Joaquin project
 
—

 
—

 
(21,138
)
 
—

Write-downs
 
—

 
—

 
—

 
4,446

Other
 
(3,157
)
 
(5,236
)
 
(8,979
)
 
(4,743
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
6,529

 
19,672

 
17,719

 
10,751

Prepaid expenses and other current assets
 
(3,195
)
 
(2,816
)
 
(3,882
)
 
(2,435
)
Inventory and ore on leach pads
 
(2,874
)
 
(8,900
)
 
10,421

 
(24,408
)
Accounts payable and accrued liabilities
 
7,735

 
(18,262
)
 
(2,697
)
 
(12,407
)
CASH PROVIDED BY OPERATING ACTIVITIES
 
29,432


47,812


113,982

 
100,368

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(29,461
)
 
(25,627
)
 
(90,922
)
 
(71,087
)
Acquisitions, net
 
—

 
(1,427
)
 
—

 
(1,427
)
Proceeds from the sale of assets
 
1,083

 
4,802

 
16,538

 
16,104

Purchase of investments
 
(3,595
)
 
(21
)
 
(13,559
)
 
(120
)
Sale of investments
 
403

 
5,432

 
11,321

 
7,077

Other
 
(5,850
)
 
(1,299
)
 
(7,457
)
 
(4,218
)
CASH USED IN INVESTING ACTIVITIES
 
(37,420
)

(18,140
)
 
(84,079
)

(53,671
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of common stock
 
—

 
49,513

 
—

 
122,584

Issuance of notes and bank borrowings, net of issuance costs
17
(2,257
)
 
—

 
242,701

 
—

Payments on debt, capital leases, and associated costs
17
(3,344
)
 
(107,868
)
 
(195,501
)
 
(120,551
)
Gold production royalty payments
 
—

 
(7,563
)
 
—

 
(27,155
)
Other
 
(6
)
 
1,051

 
(3,726
)
 
323

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(5,607
)

(64,867
)

43,474

 
(24,799
)
Effect of exchange rate changes on cash and cash equivalents
 
(222
)
 
121

 
662

 
(95
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(13,817
)
 
(35,074
)

74,039

 
21,803

Cash and cash equivalents at beginning of period
 
250,038

 
257,591

 
162,182

 
200,714

Cash and cash equivalents at end of period
 
$
236,221

 
$
222,517


$
236,221

 
$
222,517


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

4

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
September 30, 2017 (Unaudited)
 
December 31, 2016
ASSETS
Notes
In thousands, except share data
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
236,221

 
$
162,182

Receivables
13
66,415

 
60,431

Inventory
14
72,329

 
106,026

Ore on leach pads
14
78,801

 
64,167

Prepaid expenses and other
 
20,360

 
17,981

 
 
474,126

 
410,787

NON-CURRENT ASSETS
 
 
 
 
Property, plant and equipment, net
15
235,058

 
216,796

Mining properties, net
16
536,201

 
558,455

Ore on leach pads
14
69,805

 
67,231

Restricted assets
12
20,953

 
17,597

Equity and debt securities
12
29,125

 
4,488

Receivables
13
13,461

 
30,951

Other
 
23,363

 
12,604

TOTAL ASSETS
 
$
1,402,092

 
$
1,318,909

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
60,188

 
$
53,335

Accrued liabilities and other
 
50,593

 
42,743

Debt
17
14,375

 
12,039

Royalty obligations
10
—

 
4,995

Reclamation
4
3,604

 
3,522

 
 
128,760

 
116,634

NON-CURRENT LIABILITIES
 
 
 
 
Debt
17
274,523

 
198,857

Royalty obligations
10
—

 
4,292

Reclamation
4
104,505

 
95,804

Deferred tax liabilities
 
77,190

 
74,798

Other long-term liabilities
 
52,577

 
60,037

 
 
508,795

 
433,788

STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 181,428,717 at September 30, 2017 and 180,933,287 at December 31, 2016
 
1,814

 
1,809

Additional paid-in capital
 
3,318,987

 
3,314,590

Accumulated other comprehensive income (loss)
 
(1,896
)
 
(2,488
)
Accumulated deficit
 
(2,554,368
)
 
(2,545,424
)
 
 
764,537

 
768,487

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,402,092

 
$
1,318,909


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, 2016
180,933

 
$
1,809

 
$
3,314,590

 
$
(2,545,424
)
 
$
(2,488
)
 
$
768,487

Net income (loss)
—

 
—

 
—

 
(8,944
)
 
—

 
(8,944
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
592

 
592

Common stock issued under stock-based compensation plans, net
496

 
5

 
4,397

 
—

 
—

 
4,402

Balances at September 30, 2017 (Unaudited)
181,429

 
$
1,814

 
$
3,318,987

 
$
(2,554,368
)
 
$
(1,896
)
 
$
764,537

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


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, 2017. The condensed consolidated December 31, 2016 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 year ended December 31, 2016.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business,” which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated statement of cash flows.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on presentation and classification of certain cash receipts and payments in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amends several aspects of the accounting for share-based payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. These changes became effective for the Company’s fiscal year beginning January 1, 2017, and the Company’s adoption had no impact on the Company’s consolidated financial position, results of operations, and cash flows.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company’s fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the potential impact of implementing these changes on the Company’s consolidated financial position, results of operations, and cash flows.
In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory,” which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, which has subsequently been amended several times. The new standard 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 for the Company’s fiscal year beginning January 1, 2018. The Company has substantially completed its analysis of the new standard and reviewed potential impacts from timing of when control is transferred to customers, variable consideration on concentrate sales and classification of refining fees.  The Company does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.    
    


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

NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, and the Rochester, Kensington, Wharf, and San Bartolomé mines. All operating segments are engaged in the discovery, mining, and production of gold and/or silver. Other includes the La Preciosa project, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts. The Company eliminated Coeur Capital as a standalone reportable segment in the first quarter of 2017 and has classified the operating performance, segment assets, and capital expenditures of the Endeavor silver stream and other remaining non-core assets in Other. All prior period amounts have been adjusted to conform to the current presentation.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended September 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
60,677

 
$
31,156

 
$
36,603

 
$
31,334

 
$
16,043

 
$
150

 
$
175,963

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
33,255

 
23,275

 
27,658

 
17,330

 
17,365

 
41

 
118,924

Amortization
16,414

 
4,591

 
7,864

 
3,223

 
1,430

 
308

 
33,830

Exploration
4,517

 
531

 
2,966

 
207

 
23

 
1,570

 
9,814

Other operating expenses
319

 
846

 
356

 
648

 
2,998

 
10,206

 
15,373

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
(112
)
 
(136
)
 
(113
)
 
(16
)
 
(11
)
 
(3,218
)
 
(3,606
)
Other, net
(218
)
 
(73
)
 
(28
)
 
4

 
754

 
2,725

 
3,164

Income and mining tax (expense) benefit
(7,898
)
 
41

 
—

 
(963
)
 
(518
)
 
(4,894
)
 
(14,232
)
Net income (loss)
$
(2,056
)

$
1,745


$
(2,382
)

$
8,951


$
(5,548
)

$
(17,362
)

$
(16,652
)
Segment assets(2)
$
388,044

 
$
253,477

 
$
211,052

 
$
103,843

 
$
64,463

 
$
71,551

 
$
1,092,430

Capital expenditures
$
5,540

 
$
9,737

 
$
10,144

 
$
3,135

 
$
479

 
$
426

 
$
29,461

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

Three months ended September 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
30,663

 
$
37,946

 
$
40,164

 
$
39,316

 
$
27,485

 
$
812

 
$
176,386

Royalties
—

 
—

 
—

 
—

 
—

 
(139
)
 
(139
)
 
30,663


37,946


40,164


39,316


27,485


673


176,247

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
16,033

 
21,783

 
26,709

 
19,697

 
20,813

 
373

 
105,408

Amortization
5,761

 
5,244

 
8,046

 
6,461

 
1,723

 
528

 
27,763

Exploration
1,262

 
129

 
1,208

 
2

 
—

 
1,105

 
3,706

Other operating expenses
305

 
703

 
263

 
521

 
1,165

 
8,647

 
11,604

Other income (expense)
 
 
 
 
 
 
 
 
 
 


 


Loss on debt extinguishment
—

 
—

 
—

 
—

 
—

 
(10,040
)
 
(10,040
)
Fair value adjustments, net
(110
)
 
(851
)
 
—

 
—

 
—

 
—

 
(961
)
Interest expense, net
(184
)
 
(157
)
 
(30
)
 
(22
)
 
(8
)
 
(7,667
)
 
(8,068
)
Other, net
(2,223
)
 
17

 
(7
)
 
45

 
549

 
8,024

 
6,405

Income and mining tax (expense) benefit
35,671

 
7,844

 
—

 
30,208

 
5,905

 
(25,173
)
 
54,455

Net income (loss)
$
40,456


$
16,940


$
3,901


$
42,866


$
10,230


$
(44,836
)

$
69,557

Segment assets(2)
$
430,716

 
$
212,477

 
$
192,204

 
$
105,456

 
$
81,704

 
$
87,353

 
$
1,109,910

Capital expenditures
$
10,012

 
$
3,383

 
$
8,602

 
$
567

 
$
3,001

 
$
62

 
$
25,627

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

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

Nine months ended September 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
191,616

 
$
102,926

 
$
110,134

 
$
88,598

 
$
60,441

 
$
1,740

 
$
555,455

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 


Costs applicable to sales(1)
110,150

 
73,875

 
84,089

 
49,418

 
58,979

 
746

 
377,257

Amortization
50,995

 
15,345

 
25,389

 
8,883

 
5,053

 
1,215

 
106,880

Exploration
9,272

 
990

 
5,785

 
210

 
23

 
6,599

 
22,879

Other operating expenses
930

 
2,487

 
1,051

 
1,899

 
4,048

 
31,080

 
41,495

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on debt extinguishment
—

 
—

 
—

 
—

 
—

 
(9,342
)
 
(9,342
)
Fair value adjustments, net
—

 
(864
)
 
—

 
—

 
—

 
—

 
(864
)
Interest expense, net
(339
)
 
(386
)
 
(266
)
 
(52
)
 
(23
)
 
(9,875
)
 
(10,941
)
Other, net
(345
)
 
2,239

 
(893
)
 
429

 
1,125

 
25,884

 
28,439

Income and mining tax (expense) benefit
(22,313
)
 
(413
)
 
—

 
(2,980
)
 
(304
)
 
2,830

 
(23,180
)
Net income (loss)
$
(2,728
)

$
10,805


$
(7,339
)

$
25,585


$
(6,864
)

$
(28,403
)

$
(8,944
)
Segment assets(2)
$
388,044

 
$
253,477

 
$
211,052

 
$
103,843

 
$
64,463

 
$
71,551

 
$
1,092,430

Capital expenditures
$
22,972

 
$
34,121

 
$
24,314

 
$
5,493

 
$
1,242

 
$
2,780

 
$
90,922

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

Nine months ended September 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
108,748

 
$
103,689

 
$
112,376

 
$
101,250

 
$
73,948

 
$
3,208

 
$
503,219

Royalties


 


 


 


 


 
3,422

 
3,422

 
108,748


103,689


112,376


101,250


73,948


6,630

 
506,641

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
59,936

 
65,989

 
73,738

 
49,500

 
56,955

 
1,310

 
307,428

Amortization
27,815

 
15,994

 
26,203

 
15,640

 
5,330

 
2,250

 
93,232

Exploration
2,625

 
426

 
2,138

 
2

 
—

 
2,478

 
7,669

Write-downs
—

 
—

 
—

 
—

 
—

 
4,446

 
4,446

Other operating expenses
898

 
2,084

 
772

 
1,702

 
2,532

 
27,860

 
35,848

Other income (expense)
 
 
 
 
 
 
 
 
 
 


 
 
Loss on debt extinguishment
—

 
—

 
—

 
—

 
—

 
(10,040
)
 
(10,040
)
Fair value adjustments, net
(5,814
)
 
(5,787
)
 
—

 
—

 
—

 
(1,634
)
 
(13,235
)
Interest expense, net
(1,343
)
 
(509
)
 
(107
)
 
(49
)
 
(18
)
 
(28,037
)
 
(30,063
)
Other, net
(7,818
)
 
(3,840
)
 
(26
)
 
259

 
1,275

 
16,012

 
5,862

Income and mining tax (expense) benefit
38,922

 
7,429

 
—

 
29,972

 
5,182

 
(28,387
)
 
53,118

Net income (loss)
$
41,421


$
16,489


$
9,392


$
64,588


$
15,570


$
(83,800
)
 
$
63,660

Segment assets(2)
$
430,716

 
$
212,477

 
$
192,204

 
$
105,456

 
$
81,704

 
$
87,353

 
$
1,109,910

Capital expenditures
$
27,690

 
$
10,557

 
$
24,228

 
$
3,488

 
$
4,839

 
$
285

 
$
71,087

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

Assets
September 30, 2017

December 31, 2016
Total assets for reportable segments
$
1,092,430

 
$
1,122,038

Cash and cash equivalents
236,221

 
162,182

Other assets
73,441


34,689

Total consolidated assets
$
1,402,092


$
1,318,909



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

Geographic Information
Long-Lived Assets
September 30, 2017

December 31, 2016
Mexico
$
366,960

 
$
397,697

United States
375,728

 
338,897

Bolivia
27,662

 
31,539

Australia
—

 
2,983

Argentina
228

 
10,228

Other
681

 
5,564

Total
$
771,259


$
786,908

 
Revenue
Three months ended September 30,
 
Nine months ended September 30,
2017
 
2016
 
2017
 
2016
United States
$
99,093

 
$
117,425

 
$
301,658

 
$
317,315

Mexico
60,677

 
30,663

 
191,616

 
109,674

Bolivia
16,043

 
27,485

 
60,441

 
73,948

Australia
150

 
812

 
1,740

 
3,207

Other
—


(138
)
 
—


2,497

Total
$
175,963

 
$
176,247

 
$
555,455


$
506,641

        
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. 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 are as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Asset retirement obligation - Beginning
$
101,127

 
$
85,545

 
$
97,380

 
$
82,072

Accretion
2,455

 
2,059

 
7,190

 
6,027

Additions and changes in estimates
3,116

 
(239
)
 
3,116

 
(118
)
Settlements
(656
)
 
(183
)
 
(1,644
)
 
(799
)
Asset retirement obligation - Ending
$
106,042


$
87,182

 
$
106,042

 
$
87,182

The Company has accrued $2.1 million and $1.9 million at September 30, 2017 and December 31, 2016, respectively, for reclamation liabilities related to former mining activities, which are included in Reclamation.
The Company increased the reclamation liability at Rochester by $3.1 million at September 30, 2017 due to leach pad expansion.


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

NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include performance shares, restricted stock and stock options. Stock-based compensation expense for the three and nine months ended September 30, 2017 was $2.6 million and $8.1 million, respectively, compared to $2.3 million and $7.5 million for the three and nine months ended September 30, 2016, respectively. At September 30, 2017, there was $7.4 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.5 years.
The following table summarizes the grants awarded during the nine months ended September 30, 2017:
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 18, 2017
 
236,581

 
$
11.47

 
—

 
$
—

 
316,213

 
$
11.58

March 7, 2017
 
542,621

 
$
7.60

 
14,820

 
$
3.91

 
—

 
$
—


The following options and stock appreciation rights were exercisable during the nine months ended September 30, 2017:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 
26,966

 
$
3.28

 
427,730

 
$
13.62

Stock appreciation rights
 
—

 
$
—

 
42,152

 
$
14.14


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. The Company generally makes matching contributions equal to the employee’s contribution up to 4% of the employee’s salary. The Company may also provide an additional contribution based on an eligible employee’s salary. Total plan expenses recognized for the three and nine months ended September 30, 2017 were $1.8 million and $5.7 million, respectively, compared to $2.3 million and $4.2 million for the three and nine months ended September 30, 2016, respectively. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations.

NOTE 7 - OTHER, NET
Other, net consists of the following:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Foreign exchange gain (loss)
$
229

 
$
(1,466
)
 
$
2,578

 
$
(7,286
)
Gain (loss) on sale of assets and investments
945

 
7,463

 
(607
)
 
11,674

Gain on sale of the Joaquin project
—

 
—

 
21,138

 
—

Gain on repurchase of the Rochester royalty obligation
—

 
—

 
2,332

 
—

Gain on sale of Endeavor stream and other royalties
1,172

 
—

 
1,172

 
—

Impairment of equity securities
—

 
—

 
(426
)
 
(20
)
Other
818


408


2,252

 
1,494

Other, net
$
3,164

 
$
6,405

 
$
28,439

 
$
5,862



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

NOTE 8 - INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and nine months ended September 30, 2017 and 2016 by significant jurisdiction:

 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(6,008
)
$
(2,362
)
 
$
3,286

$
10,712

 
$
8,213

$
(2,739
)
 
$
(5,956
)
$
8,370

Argentina
738

(366
)
 
(301
)
67

 
281

1,704

 
3,137

(183
)
Mexico
3,210

(9,057
)
 
3,020

37,821

 
9,665

(23,745
)
 
(1,136
)
42,155

Bolivia
(5,029
)
(518
)
 
4,325

5,904

 
(6,559
)
(304
)
 
10,388

5,182

Other jurisdictions
4,669

(1,929
)

4,772

(49
)

2,636

1,904


4,109

(2,406
)
 
$
(2,420
)
$
(14,232
)
 
$
15,102

$
54,455

 
$
14,236

$
(23,180
)
 
$
10,542

$
53,118

    
The Company’s effective income and mining tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in the consolidated effective tax rate, along with mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. Fluctuations in foreign exchange rates on deferred tax balances decreased income and mining tax expense by $1.4 million and increased by $7.2 million for the three and nine months ended September 30, 2017, predominately due to the Mexican Peso. Also, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The three and nine months ended September 30, 2016 benefited from a legal entity reorganization to integrate acquisitions that resulted in a valuation allowance release of $40.8 million and a $15.0 million deferred tax benefit related to unremitted earnings.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the sections titled “Risk Factors” set forth in the 2016 10-K.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The statute of limitations remains open from 2013 forward for the U.S. federal jurisdiction and from 2009 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next twelve months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $1.5 million and $2.5 million in the next twelve months.
At September 30, 2017 and December 31, 2016, the Company had $17.5 million and $19.6 million of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At September 30, 2017 and December 31, 2016, the amount of accrued income-tax-related interest and penalties was $8.7 million and $8.7 million, respectively.


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

NOTE 9 – 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 and nine months ended September 30, 2017, 633,391 and 851,254 common stock equivalents, respectively, related to equity-based awards were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly, 215,298 and 404,543 common stock equivalents were excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2016, respectively.
The 3.25% Convertible Senior Notes (“Convertible Notes”) were not included in the computation of diluted net income (loss) per share for the three and nine months ended September 30, 2016 because there is no excess value upon conversion over the principal amount of the Convertible Notes. The outstanding Convertible Notes were redeemed in the third quarter of 2016.
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2017
 
2016
 
2017
 
2016
Net income (loss) available to common stockholders
$
(16,652
)
 
$
69,557

 
$
(8,944
)
 
$
63,660

Weighted average shares:
 
 
 
 
 
 
 
Basic
179,278

 
161,039

 
179,141

 
155,108

Effect of stock-based compensation plans
—

 
4,789

 
—

 
3,284

Diluted
179,278


165,828


179,141


158,392

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.09
)
 
$
0.43

 
$
(0.05
)

$
0.41

Diluted
$
(0.09
)
 
$
0.42

 
$
(0.05
)

$
0.40


NOTE 10 – FAIR VALUE MEASUREMENTS
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2017
 
2016
 
2017
 
2016
Rochester royalty obligation
$
—

 
$
(851
)
 
$
(864
)
 
$
(5,787
)
Palmarejo royalty obligation embedded derivative
—

 
(110
)
 
—

 
(5,866
)
Silver and gold options
—


—

 
—

 
(1,582
)
Fair value adjustments, net
$
—

 
$
(961
)
 
$
(864
)
 
$
(13,235
)
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 September 30, 2017
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity and debt securities
$
29,125

 
$
22,194

 
$
—

 
$
6,931

Other derivative instruments, net
44

 
—

 
44

 
—

 
$
29,169

 
$
22,194

 
$
44

 
$
6,931

Liabilities:
 
 
 
 
 
 
 
Other derivative instruments, net
$
255

 
$
—

 
$
255

 
$
—

 

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

 
Fair Value at December 31, 2016
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
4,488

 
$
4,209

 
$
—

 
$
279

 
$
4,488

 
$
4,209

 
$
—

 
$
279

Liabilities:
 
 
 
 
 
 
 
Rochester royalty obligation
9,287

 
—

 
—

 
9,287

Other derivative instruments, net
762

 
—

 
762

 
—

 
$
10,049

 
$
—

 
$
762

 
$
9,287

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. Quoted market prices are not available for certain debt and equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s other derivative instruments, net, relate to concentrate and certain doré sales contracts 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.
In May 2017, the Company repurchased the Rochester royalty obligation for $5.0 million, resulting in a pre-tax gain of $2.3 million, which is included in Other, net. The fair value of the Rochester royalty obligation was 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 historically classified this obligation as a Level 3 financial liability.
In July 2017, the Company sold the Endeavor silver stream and remaining non-core royalties to Metalla Royalty & Streaming Ltd. (“Metalla”) for total consideration of $13.0 million, including a $6.7 million convertible debenture. The convertible debenture matures June 30, 2027, bears interest at a rate of 5% payable semi-annually, and is convertible into Metalla shares in connection with future equity financings or asset acquisitions by Metalla at the then-current price to maintain the Company’s approximate 19.9% ownership. The fair value of the convertible debenture is estimated based on observable market data including yield curves and credit spreads. Therefore, the Company classifies the convertible debenture in Level 3 of the fair value hierarchy.
No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2017.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the nine months ended September 30, 2017:
 
Three Months Ended September 30, 2017
In thousands
Balance at the beginning of the period
 
Additions
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
 
 
Equity and debt securities
$
258

 
$
6,677

 
$
(4
)
 
$
—

 
$
6,931

 
Nine Months Ended September 30, 2017
In thousands
Balance at the beginning of the period
 
Additions
 
Revaluation
 
Settlements
 
Gain on settlement
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
 
 
 
 
Equity and debt securities
$
279

 
$
6,677

 
$
(25
)
 
$
—

 
$
—

 
$
6,931

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Rochester royalty obligation
$
9,287

 
—

 
$
864

 
$
(7,819
)
 
(2,332
)
 
$
—


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

The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2017 and December 31, 2016 is presented in the following table:
 
September 30, 2017
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
5.875% Senior Notes due 2024(1)
$
244,934

 
$
247,161

 
$
—

 
$
247,161

 
$
—

(1)
Net of unamortized debt issuance costs of $5.1 million.

 
December 31, 2016
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
7.875% Senior Notes due 2021(1)
$
175,991

 
$
184,373

 
—

 
$
184,373

 
—

(1)
Net of unamortized debt issuance costs and premium received of $2.0 million.
The fair value of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) and the 7.875% Senior Notes due 2021 (the “2021 Senior Notes”) were estimated using quoted market prices.

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS
Palmarejo Gold Production Royalty
In January 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 that covered 50% of the life of mine production from the Palmarejo mine and legacy adjacent properties. The royalty transaction included a minimum obligation of 4,167 gold ounces per month and terminated upon delivery of 400,000 gold ounces, which occurred in July 2016.
    The price volatility associated with the minimum royalty obligation was considered an embedded derivative. The Company was required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. For the three and nine months ended September 30, 2016, the mark-to-market adjustment associated with the change were losses of $0.1 million and $5.9 million, respectively. Payments on the royalty obligation decreased the carrying amount of the minimum obligation and the derivative liability. For the three and nine months ended September 30, 2016, realized losses on settlement of the liabilities were $0.1 million and $5.9 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded 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 losses of $0.1 million and gains of $0.6 million in the three and nine months ended September 30, 2017, respectively, compared to losses of $0.8 million and gains of $0.4 million in the three and nine months ended September 30, 2016, respectively.

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

At September 30, 2017, the Company had the following provisionally priced sales that settle as follows:
In thousands except average prices and notional ounces
2017