e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|
|
|
þ |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-8641
COEUR DALENE MINES CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
Idaho
|
|
82-0109423 |
|
|
|
(State or other jurisdiction of
|
|
(I.R.S. Employer |
incorporation or organization)
|
|
Identification No.) |
|
|
|
505 Front Ave., P. O. Box I |
|
|
Coeur dAlene, Idaho
|
|
83816 |
|
|
|
(Address of principal Executive Offices)
|
|
(Zip Code) |
Registrants telephone number, including area code: (208) 667-3511
Securities Registered pursuant to Section 12(b) of the Act:
|
|
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered |
|
|
|
Common Stock, par value $1.00 per share
|
|
New York Stock Exchange/Toronto Stock
Exchange/Australian Stock Exchange |
1 1/4% Convertible Senior Notes due January 15, 2024
|
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes o No þ
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 o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
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 the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):
|
|
|
|
|
|
|
Large accelerated filer þ |
|
Accelerated filer o |
|
Non-accelerated filer o
(Do not check if a smaller reporting company) |
|
Smaller Reporting Company o |
Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
State the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was last sold as of
the last business day of the registrants most recently completed second fiscal quarter.
$994,560,367
Indicate the number of shares outstanding of each of the registrants classes of common stock,
as of February 27, 2008.
550,825,760 shares of Common Stock, Par Value $1.00
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of the Form 10-K is incorporated by reference from the
registrants definitive proxy statement which will be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
TABLE OF CONTENTS
|
|
|
PART I
|
|
|
Item 1. Business |
|
|
Item 1A. Risk Factors |
|
|
Item 1B. Unresolved Staff Comments |
|
|
Item 2. Properties |
|
|
Item 3. Legal Proceedings |
|
|
Item 4. Submission of Matters to a Vote of Security Holders |
|
|
Item 4A. Executive Officers of the Registrant |
|
|
PART II |
|
|
Item 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities |
|
|
Item 6. Selected Financial Data |
|
|
Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations |
|
|
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
|
|
Item 8. Financial Statements and Supplementary Data |
|
|
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
|
|
Item 9A. Controls and Procedures |
|
|
Item 9B. Other Information |
|
|
PART III |
|
|
Item 10. Directors, Executive Officers and Corporate Governance |
|
|
Item 11. Executive Compensation |
|
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters |
|
|
Item 13. Certain Relationships and Related Transactions, and Director Independence |
|
|
Item 14. Principal Accounting Fees and Services |
|
|
PART IV |
|
|
Item 15. Exhibits, Financial Statement Schedules |
|
|
SIGNATURES |
|
|
2
PART I
Item 1. Business
INTRODUCTION
Coeur dAlene Mines Corporation is a large primary silver producer located in North America
and is engaged, through its subsidiaries, in the operation and/or ownership, development and
exploration of silver and gold mining properties and companies located primarily within the United
States (Nevada and Alaska), South America (Chile, Argentina and Bolivia), Australia (New South
Wales), Mexico (Chihuahua) and Africa (Tanzania). Coeur dAlene Mines Corporation and its
subsidiaries are hereinafter referred to collectively as Coeur or the Company.
OVERVIEW OF MINING PROPERTIES AND INTERESTS
The Companys most significant operating and development-stage mining properties and interests
are:
|
|
|
The Rochester mine is a silver and gold surface mining operation located in northwestern
Nevada that has been 100% owned and operated by the Company since 1986. During 1999, the
Company acquired the mineral rights to the Nevada Packard property, which is located one
and one-half miles south of the Rochester mine, and commenced mining there in the first
quarter of 2003. The mining of ore at the mine was completed during 2007; however, silver
and gold production is expected to continue through 2011 as a result of heap leach
activities. The Company has announced it may consider the sale of this property during
2008. |
|
|
|
|
Coeur owns 100% of the Cerro Bayo mine in southern Chile, which comprises a high grade
gold and silver underground mine and processing facilities. The Cerro Bayo deposit was
discovered during 2000. Initial mining operations commenced in late 2001 and processing
started in April 2002. The Company carries on an active exploration program on its 176
square mile property package in southern Chile. |
|
|
|
|
Coeur owns 100% of the capital stock of Coeur Argentina S.R.L., which owns and operates
the underground high-grade silver Martha mine located in Santa Cruz, Argentina,
approximately 270 miles southeast of the Cerro Bayo mine. Mining operations commenced at
the Martha mine in June 2002. In 2007 the Company built a stand-alone mill to process ore
from the Martha mine which previously was transported to Cerro Bayo for processing. The
Company carries on an active exploration program at its Martha mine and on its other land
in Santa Cruz which totals over 560 square miles. |
|
|
|
|
The Company acquired, in May 2005, all of the silver production and reserves, up to 20.0
million payable ounces, contained at the Endeavor mine in Australia which is owned and
operated by Cobar Operations Pty. Limited (Cobar), a wholly-owned subsidiary of CBH
Resources Ltd. (CBH) for up to $43.8 million. The Endeavor mine is an underground
zinc/lead/silver mine located in New South Wales, Australia which has been in production
since 1983. |
|
|
|
|
The Company acquired, in September 2005, all of the silver production and reserves, up
to 17.2 million payable ounces, contained at the Broken Hill mine in Australia, which is
owned and operated by Perilya Broken Hill Ltd. (PBH), for $36.9 million. The Broken Hill
Mine is located in New South Wales, Australia and is an underground zinc/lead/silver mine. |
3
|
|
|
Coeur owns 100% of Empresa Minera Manquiri S.A. (Manquiri), a Bolivian company that
controls the mining rights for the San Bartolomé project, which is an open pit silver mine
in Bolivia where an updated feasibility study was completed in 2004 and construction
activities have commenced. The Company expects construction to be completed and commercial
production to commence from the San Bartolomé project in the first quarter of 2008. |
|
|
|
|
The Company owns 100% of the Kensington property, located north of Juneau, Alaska, which
is a development-stage gold property. An updated feasibility study was completed for the
property during 2004 and construction activities commenced in 2005. A lawsuit was filed in
2005 in Federal Court challenging a certain permit necessary for construction of the
tailings facility. During 2007, the Company continued all surface facility construction
activities not impacted by the legal challenge. The Company believes production could
commence in 2009, subject to successful and timely resolution of the pending litigation
more fully described under Part I, Item 3 (Legal Proceedings) below or upon modification
to permitting to allow for an alternate tailings facility. |
|
|
|
|
On December 21, 2007, the company acquired all of the outstanding stock of Bolnisi Gold
NL (Bolnisi), an Australian company listed on the Australian Stock Exchange, and
Palmarejo Silver and Gold Corporation (Palmarejo), a Canadian company listed on the TSX
Venture Exchange. The principal asset of Bolnisi was its 72.8% ownership of the common
shares of Palmarejo. Palmarejo is engaged in the exploration and development of silver and
gold properties located in the state of Chihuahua in northern Mexico. The principal silver
and gold properties are collectively referred to as the Palmarejo project. The Palmarejo
project is currently under development and is expected to commence commercial production in
the first half of 2009. Through the acquisition, the Company also controls other
exploration-stage properties in northern Mexico |
Coeur also has interests in other properties which are subject to silver or gold exploration
activities upon which no minable ore reserves have yet been delineated.
EXPLORATION STAGE MINING PROPERTIES
The Company, either directly or through wholly-owned subsidiaries, owns, leases and has
interests in certain exploration-stage mining properties located in the United States, Chile,
Argentina, Bolivia, Mexico and Tanzania. During 2008, the Company expects to invest approximately
$27.7 million in exploration and reserve development compared to $15.0 million spent on similar
activities in 2007.
BUSINESS STRATEGY
The Companys business strategy is to capitalize on the ore reserve/mineralized material bases
located at its operating mines and the expertise of its management team to become the worlds
leading primary silver production company. The principal elements of the Companys business
strategy are to: (i) increase the Companys silver production and reserves; (ii) decrease cash
costs and increase production at the Companys existing silver mining operations; (iii) transform
development-stage properties into producing mines; (iv) acquire operating mines, mineral interests,
exploration and/or development properties with a goal of reducing the Companys overall cash and
total costs per ounce of silver produced, providing immediate positive cash flow return and
expanding its silver production base and reserves; and (v) continue to explore for new silver and
gold discoveries and evaluate new opportunities to expand its production through acquisitions and
exploration.
4
SOURCES OF REVENUE
The Rochester mine, Cerro Bayo mine and Martha mine, each operated by the Company, and the
Endeavor and Broken Hill mines operated by others, constituted the Companys principal sources of
mining revenues in 2007. The following table sets forth information regarding the percentage
contribution to the Companys total revenues (i.e., revenues from the sale of concentrates and
doré) by the sources of those revenues during the past five years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coeur Percentage |
|
Percentage of Total Revenues (2) |
|
|
Ownership at |
|
for the Years Ended December 31, |
Mine/Company |
|
December 31, 2007 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
Rochester Mine |
|
|
100 |
% |
|
|
47 |
% |
|
|
47 |
% |
|
|
45 |
% |
|
|
59 |
% |
|
|
48 |
% |
Cerro Bayo Mine |
|
|
100 |
|
|
|
22 |
|
|
|
23 |
|
|
|
38 |
|
|
|
32 |
|
|
|
43 |
|
Martha Mine |
|
|
100 |
|
|
|
18 |
|
|
|
16 |
|
|
|
13 |
|
|
|
9 |
|
|
|
9 |
|
Endeavor Mine(1) |
|
|
100 |
|
|
|
4 |
|
|
|
3 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Broken Hill Mine(1) |
|
|
100 |
|
|
|
9 |
|
|
|
11 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ownership interest reflects the Companys ownership interest in the propertys
silver production. Other constituent metals are owned by another non-affiliated entity. |
|
(2) |
|
On June 1, 2006, the Company completed its sale of Coeur Silver Valley (Galena).
The Companys interest in the Galena mine was 100% prior to the sale. Revenues from the Galena
mine are reflected in Discontinued Operations. |
DEFINITIONS
The following sets forth definitions of certain important mining terms used in this report.
Ag is the abbreviation for silver.
Au is the abbreviation for gold.
Cash Costs are costs directly related to the physical activities of producing silver and gold,
and include mining, processing, transportation and other plant costs, third-party refining and
smelting costs, marketing expense, on-site general and administrative costs, royalties and in-mine
drilling expenditures that are related to production and other direct costs. Sales of by-product
metals, including gold, are deducted from the above in computing cash costs per ounce. Cash costs
exclude depreciation, depletion and amortization, corporate general and administrative expense,
exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are
calculated and presented using the Gold Institute Production Cost Standard applied consistently
for all periods presented.
Cash Costs per Ounce are calculated by dividing the cash costs computed for each of the Companys
mining properties for a specific period by the amount of gold ounces or silver ounces produced by
that property during that same period. Management uses cash costs per ounce produced as a key
indicator of the profitability of each of its mining properties. Gold and silver are sold and
priced in the world financial markets on a U.S. dollar per ounce basis. By calculating the cash
costs from each of the Companys mines on the same unit basis, management can easily determine the
gross margin that each ounce of gold and silver produced is generating. While this represents a
key indicator of the performance of the Companys mining properties you are cautioned not to place
undue reliance on this single measurement. To fully evaluate a mines performance, management also
monitors U.S. Generally Accepted Accounting Principles (GAAP) based profit/(loss), depreciation and
amortization expenses and capital expenditures for each mine as presented in Note R Segment
Information in the Notes to the Companys Consolidated Financial Statements. Total cash costs per
ounce is a non-GAAP measurement and investors are cautioned not to place undue reliance on it and
are urged to read all GAAP accounting disclosures presented in the consolidated financial
statements and accompanying footnotes.
5
Concentrate is a product containing the valuable metal and from which most of the waste material
in the ore has been eliminated.
Cut-off Grade is the lowest grade of mineral resource considered economic; used in the
calculation of reserves in a given deposit.
Cyanidation is a method of extracting gold or silver by dissolving it in a weak solution of
sodium or potassium cyanide.
Dilution is an estimate of the amount of waste or low-grade mineralized rock which will be mined
with the ore as part of normal mining practices in extracting an ore body.
Doré is unrefined gold and silver bullion bars which contain gold, silver and minor amounts of
impurities which will be further refined to almost pure metal.
Gold is a metallic element with minimum fineness of 999 parts per 1000 parts pure gold.
Heap Leaching Process is a process of extracting gold and silver by placing broken ore on an
impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained
gold and silver, which are then recovered in metallurgical processes.
Mineralized Material is gold and silver bearing material that has been physically delineated by
one or more of a number of methods, including drilling, underground work, surface trenching and
other types of sampling. This material has been found to contain a sufficient amount of
mineralization of an average grade of metal or metals to have economic potential that warrants
further exploration evaluation. While this material is not currently or may never be classified as
ore reserves, it is reported as mineralized material only if the potential exists for
reclassification into the reserves category. This material cannot be classified in the reserves
category until final technical, economic and legal factors have been determined. Under the United
States Securities and Exchange Commissions standards, a mineral deposit does not qualify as a
reserve unless it can be economically and legally extracted at the time of reserve determination
and it constitutes a proven or probable reserve (as defined below).
Non-cash Costs are costs that are typically accounted for ratably over the life of an operation
and include depreciation, depletion and amortization of capital assets, accruals for the costs of
final reclamation and long-term monitoring and care that are usually incurred at the end of mine
life, and the amortization of the cost of property acquisitions.
Ore Reserve is the part of a mineral deposit which could be economically and legally extracted or
produced at the time of the reserve determination.
Probable Reserve is a part of a mineralized deposit which can be extracted or produced
economically and legally at the time of the reserve determination. The quantity and grade and/or
quality of a probable reserve is computed from information similar to that used for a proven
reserve, but the sites for inspection, sampling and measurement are farther apart or are otherwise
less adequately spaced. The degree of assurance, although lower than that for proven reserves, is
high enough to assume continuity between points of observation. Mining dilution, where
appropriate, has been factored into the estimation of probable reserves.
Proven Reserve is a portion of a mineral deposit which can be extracted or produced economically
and legally at the time of the reserve determination. The quantity of a proven reserve is computed
from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are
computed from the results of detailed sampling and the sites for inspections, sampling and
measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of a proven reserve is
well-established. Mining dilution, where appropriate, has been factored into the estimation of
proven reserves.
6
Run-of-mine Ore is mined ore which has not been subjected to any pretreatment, such as washing,
sorting or crushing prior to processing.
Silver is a metallic element with minimum fineness of 995 parts per 1000 parts pure silver.
Stripping Ratio is the ratio of the number of tons of waste material to the number of tons of ore
extracted at an open-pit mine.
Ton means a short ton which is equivalent to 2,000 pounds, unless otherwise specified.
Total costs are the sum of cash costs and non-cash costs.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
This report contains numerous forward-looking statements relating to the Companys gold and
silver mining business, including estimated production data, expected operating schedules, expected
capital costs and other operating data and permit and other regulatory approvals. Such
forward-looking statements are identified by the use of words such as believes, intends,
expects, hopes, may, should, plan, projected, contemplates, anticipates or similar
words. Actual production, operating schedules, results of operations, ore reserve and resource
estimates and other projections and estimates could differ materially from those projected in the
forward-looking statements. The factors that could cause actual results to differ materially from
those projected in the forward-looking statements include (i) the risk factors set forth below
under Item 1A, (ii) the risks and hazards inherent in the mining business (including environmental
hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the
market prices of gold and silver, (iv) the uncertainties inherent in the Companys production,
exploratory and developmental activities, including risks relating to permitting and regulatory
delays, (v) the uncertainties inherent in the estimation of gold and silver ore reserves, (vi)
changes that could result from the Companys future acquisition of new mining properties or
businesses, (vii) the effects of environmental and other governmental regulations, and (viii) the
risks inherent in the ownership or operation of or investment in mining properties or businesses in
foreign countries. Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these forward-looking statements,
whether as a result of new information, future events or otherwise.
Item 1A. Risk Factors
The following information sets forth information relating to important risks and uncertainties
that could materially adversely affect the Companys business, financial condition or operating
results. References to we, our and us in these risk factors refer to the Company. Additional
risks and uncertainties that we do not presently know or that we currently deem immaterial may also
impair our business operations.
The market prices of silver and gold are volatile. If we experience low silver and gold prices it
may result in decreased revenues and decreased net income or losses, and may negatively affect our
business.
Silver and gold are commodities. Their prices fluctuate, and are affected by many factors
beyond our control, including interest rates, expectations regarding inflation, speculation,
currency values, governmental decisions regarding the disposal of precious metals stockpiles,
global and regional demand and production, political and economic conditions and other factors.
Because we currently derive approximately 70% of our revenues from continuing operations from sales
of silver, our earnings are primarily related to the price of this metal.
7
The market prices of silver (Handy & Harman) and gold (London Final) on February 12, 2008 were
$17.32 and $917 per ounce, respectively. The prices of silver and gold may decline in the future.
Factors that are generally understood to contribute to a decline in the price of silver include
sales by private and government holders, and a general global economic slowdown.
Coeur may also suffer from declines in mineral prices. Since 1999, Coeur has not engaged in
any silver hedging activities and is currently not engaged in any gold hedging activities.
Accordingly, Coeur has no protection from declines in mineral prices or currency fluctuations.
If the prices of silver and gold are depressed for a sustained period and our net losses
resume, we may be forced to suspend mining at one or more of our properties until the prices
increase, and to record additional asset impairment write-downs. Any lost revenues, continued or
increased net losses or additional asset impairment write-downs would adversely affect our results
of operations.
We may be required to incur additional indebtedness to fund our capital expenditures.
We have historically financed our operations through the issuance of common stock and
convertible debt, and may be required to incur additional indebtedness in the future. During 2008,
we will have construction activities at the San Bartolomé, Palmarejo and Kensington projects as
well as sustaining capital projects at our operating properties. Construction of all of these
projects could require a total capital investment of approximately $398.5 million during 2008. Our
cash, cash equivalents and short-term investments combined with cash flow generated from operations
will not be sufficient for us to make this level of capital investment and no assurance can be
given that additional capital investments will not be required to be made at these or other
projects. If we are unable to generate enough cash to finance such additional capital expenditures
through operating cash flow and the issuance of common stock, we may be required to issue
additional indebtedness or secure other forms of financing or delay the capital projects. Any
additional indebtedness would increase our debt payment obligations, and may negatively impact our
results of operations.
Prior to 2005, we did not have sufficient earnings to cover fixed charges, which deficiency could
occur in future periods.
As a result of our net losses prior to 2005, our earnings were not adequate to satisfy fixed
charges (i.e., interest, preferred stock dividends and that portion of rent deemed representative
of interest) in each of those periods prior to 2005. The amounts by which earnings were inadequate
to cover fixed charges were approximately $80.8 million in 2002, $63.9 million in 2003 and $22.7
million in 2004. Earnings have been sufficient to cover fixed charges subsequent to 2004. We are
required to make fixed payments on the $180 million principal amount of our 11/4% Senior Convertible
Notes due 2024, requiring annual interest payments of approximately $2.25 million until their
maturity.
We expect to satisfy our fixed charges and other expense obligations in the future from cash
flow from operations and, if cash flow from operations is insufficient, from working capital, which
amounted to approximately $152.4 million at December 31, 2007. Prior to 2005, we experienced
negative cash flow from operating activities. The amount of net cash used in our operating
activities amounted to approximately $8.5 million in 2002, $5.1 million in 2003 and $18.6 million
in 2004. During the years ended December 31, 2007 and 2006, we generated $40.1 million and $91.2
million, respectively, of operating cash flow. The availability of future cash flow from
operations or working capital to fund the payment of interest on the notes and other fixed charges
will be dependent upon numerous factors, including our results of operations, silver and gold
prices, levels and costs of production at our mining properties and the amount of our capital
expenditures and expenditures for acquisitions, developmental and exploratory activities.
8
We may have to record write-downs, which could negatively impact our results of operations.
Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets (SFAS 144) established accounting standards for impairment of the value of
long-lived assets such as mining properties. SFAS 144 requires a company to review the
recoverability of the cost of its assets by estimating the future undiscounted cash flows expected
to result from the use and eventual disposition of the asset. Impairment, measured by comparing an
assets carrying value to its fair value, must be recognized when the carrying value of the asset
exceeds these cash flows, and recognizing impairment write-downs could negatively impact our
results of operations.
If silver or gold prices decline or we fail to control production costs or realize the minable
ore reserves at our mining properties, we may be required to recognize asset write-downs. We also
may record other types of additional mining property charges in the future to the extent a property
is sold by us for a price less than the carrying value of the property, or if reclamation
liabilities have to be increased in connection with the closure and reclamation of a property.
Additional write-downs of mining properties could negatively impact our results of operations.
The Kensington property has been the subject of litigation involving a permit required to
complete construction of a required tailings facility. On September 12, 2005 three environmental
groups (Plaintiffs) filed a lawsuit in Federal District Court in Alaska against the U.S. Army
Corps of Engineers (Corps of Engineers) and the U.S. Forest Service (USFS) seeking to
invalidate the permit issued to Coeur Alaska, Inc. for the Companys Kensington mine. The
Plaintiffs claim the Clean Water Act (CWA) Section 404 permit issued by the Corps of Engineers
authorizing the deposition of mine tailings into Lower Slate Lake conflicts with the CWA. They
additionally claim the USFSs approval of the Amended Plan of Operations is arbitrary and
capricious because it relies on the 404 permit issued by the Corps of Engineers. Following the
District Courts remand of the Section 404 permit to the Corps of Engineers for further review, the
Corps reinstated the Companys permit on March 29, 2006. The lawsuit challenging the permit was
re-opened on April 6, 2006; Coeur Alaska filed its answer to the Amended Complaint; and Coeur
Alaska, the State of Alaska, and Goldbelt, Inc., a local native corporation, were granted
Defendant-Intervenor status to join the agencies in their defense of the permit.
On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge
and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of
the decision to the Ninth Circuit Court of Appeals (Ninth Circuit Court) and on August 9, 2006
the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Ninth Circuit
Court. The Ninth Circuit Court granted a temporary injunction pending appeal on August 24, 2006,
enjoining certain activities relating to the lake tailings facility.
On May 22, 2007 the Ninth Circuit Court reversed the District Courts August 4, 2006 decision
which had upheld the Companys 404 permit and issued its opinion that remanded the case to the
District Court with instructions to vacate the Companys 404 permit as well as the USFS Record of
Decision approving the general tailings disposal plan as well as the Goldbelt 404 permit to
construct the Cascade Point Marine Facility. On August 20, 2007, Coeur Alaska filed a Petition for
Rehearing En Banc with the Ninth Circuit Court, as did the State of Alaska and Goldbelt, Inc. The
Department of Justice, on behalf of the Corps of Engineers, and USFS additionally filed a limited Petition for
Rehearing with the Ninth Circuit panel seeking reconsideration of the mandate of the May 22, 2007
panel decision. On October 29, 2007, the Ninth Circuit denied the Petitions for Rehearing En Banc.
On November 14, 2007 the Ninth Circuit granted a stay of the mandate pending further appeal to the
Supreme Court, subject to the development of a reclamation plan for the lake area. The Company, and
the State of Alaska, filed Petitions for Certiorari to the Supreme Court of the United States on
January 28, 2008. The Company cannot now predict the potential for obtaining further appeal or if
it will prevail upon appeal if one is granted.
9
This litigation has contributed to an increase in capital costs. While the Company cannot now
predict with certainty the outcome of this litigation, it believes it should ultimately prevail. In
the event that the Company does not prevail, it could be necessary to seek an alternate site for the tailings disposal
facility. The Company has identified an alternate site which it believes can be permitted and has
submitted a modified plan to the USFS. Based upon the Companys current estimates, an impairment
writedown could be necessary should the expectation of the long-term price for gold decrease below
approximately $606 per ounce. As of December 31, 2007, the carrying value of the Kensington
projects long-lived assets was $298.2 million.
Additionally, the value allocated to Palmarejos long-lived assets will be subject to
assessments of recoverability under SFAS 144 and these assessments could result in writedowns of
carrying values in future periods.
Coeur may not realize the cost savings and other benefits it currently anticipates due to
challenges associated with integrating operations, personnel and other aspects of the companies and
due to liabilities that may exist at Bolnisi and Palmarejo.
Coeurs acquisition of Bolnisi and Palmarejo reflected its expectation that the acquisitions
will result in increased metal production, earnings and cash flow for the combined company. These
anticipated increases will depend in part on whether Coeurs, Bolnisis and Palmarejos operations
can be integrated in an efficient and effective manner, and whether the project development in fact
produces the benefits anticipated. Most operational and strategic decisions, and certain staffing
decisions, with respect to the combined company have not yet been made and may not have been fully
identified. These decisions and the integration of the three companies will present significant
challenges to management, including the integration of systems and personnel of the three
companies, and special risks, including possible unanticipated liabilities, significant one-time
write-offs or restructuring charges, unanticipated costs, and the loss of key employees. There can
be no assurance that there will be operational or other synergies realized by the combined company,
or that the integration of the three companies operations, management and cultures will be timely
or effectively accomplished, or ultimately will be successful in increasing earnings and reducing
costs. In addition, the integration of Bolnisi and Palmarejo may subject Coeur to liabilities
existing at one or both of Bolnisi and Palmarejo, some of which may be unknown. While Coeur has
conducted due diligence on the operations of Bolnisi and Palmarejo, there can be no guarantee that
Coeur is aware of any and all liabilities of Bolnisi and Palmarejo. These liabilities, and any
additional risks and uncertainties related to the acquisitions not currently known to Coeur or that
Coeur may currently deem immaterial, could negatively impact Coeurs business, financial condition
and results of operations.
The Palmarejo project is a development-stage project and involves significant risks associated with
development and commencement of commercial production.
There can be no assurance that significant losses will not occur at the Palmarejo project in
the near future or that the Palmarejo project will be profitable in the future. Coeurs operating
expenses and capital expenditures may increase in subsequent years as needed consultants, personnel
and equipment associated with advancing exploration, development and commercial production of the
Palmarejo project and any other properties Coeur may acquire are added. The amounts and timing of
expenditures will depend on the progress of ongoing exploration and development and the results of
consultants analyses and recommendations, which are beyond Coeurs control. While Coeur expects
production at the Palmarejo project to commence in 2009, there can be no assurance that this
timetable will be met. The development of the Palmarejo project and any other properties Coeur may
acquire will require the commitment of substantial resources to conduct the time-consuming
exploration and development of properties. There can be no assurance that Coeur will generate any
revenues or achieve profitability at the Palmarejo project and any other properties Coeur may
acquire.
10
Recently discovered settlement and subsidence issues at the Palmarejo project may increase
development costs and delay the start of production.
In early August 2007, Coeur representatives observed previously unnoticed ground settlement
and subsidence in three main areas: the lower plant site, the upper plant site, and the site where
the power plant is to be located. The initial engineering review conducted by Coeur technical
personnel as well as third party engineering consultants concluded that the settlement and
subsidence was occurring primarily due to issues with the original compaction and placement of fill
material. This settlement became visible once heavy rainfall was experienced. Since that time,
Coeurs third party engineering consultants have conducted more extensive on-site analysis and have
provided Coeur with a detailed report based on its review, which recommends specific remedial
actions that should be initiated which includes the relocation of a substantial section of the
process plant facilities to an identified alternate site. Coeur estimates that these remedial
actions may cost up to $15 million, which is an estimate endorsed by Coeurs third party
engineering consultants. Coeur anticipates production from the Palmarejo project to commence in
the first quarter of 2009, which takes into account the estimated time to complete these remedial
activities. There can be no assurance that these preliminary estimates will prove accurate, and
any inaccuracy in such estimates could materially adversely impact the development of the Palmarejo
project and Coeurs financial condition and results of operations.
Our revenues and income (or loss) from our interest in the Endeavor and Broken Hill mines are
dependent in part upon the performance of the operators of the mine.
In May and September 2005, we acquired silver production and reserves at the Endeavor and
Broken Hill mines in Australia, respectively. These mines are owned and operated by other mining
companies. The Companys revenues and income (or loss) from its interest in the silver production
at these mines are dependent in part upon the performance of those operators and such mines.
The estimation of ore reserves is imprecise and depends upon subjective factors. Estimated ore
reserves may not be realized in actual production. Our operating results may be negatively affected
by inaccurate estimates.
The ore reserve figures presented in our public filings are estimates made by our technical
personnel. Reserve estimates are a function of geological and engineering analyses that require us
to make assumptions about production costs and silver and gold market prices. Reserve estimation is
an imprecise and subjective process and the accuracy of such estimates is a function of the quality
of available data and of engineering and geological interpretation, judgment and experience.
Assumptions about silver and gold market prices are subject to great uncertainty as those prices
have fluctuated widely in the past. Declines in the market prices of silver or gold may render
reserves containing relatively lower grades of ore uneconomic to exploit, and we may be required to
reduce reserve estimates, discontinue development or mining at one or more of our properties, or
write down assets as impaired. Should we encounter mineralization or geologic formations at any of
our mines or projects different from those we predicted, we may adjust our reserve estimates and
alter our mining plans. Either of these alternatives may adversely affect our actual production and
operating results.
We based our ore reserve determinations as of December 31, 2007 on a long-term silver price
average of $11 per ounce, with the exception of the Endeavor mine which uses $15 per ounce and the
Broken Hill mine which uses $13.50 per ounce of silver, and a long-term gold price average of $600
per ounce for all properties with the exception of the Kensington property which used a gold price
of $550 per ounce. On February 12, 2008 silver and gold prices were $17.32 per ounce and $917 per
ounce, respectively.
The estimation of the ultimate recovery of metals contained within the Rochester heap leach pad
inventory is inherently inaccurate and subjective and requires the use of estimation techniques.
Actual recoveries can be expected to vary from estimations.
The Rochester mine utilizes the heap leach process to extract silver and gold from ore. The
heap leach process is a process of extracting silver and gold by placing ore on an impermeable pad
and applying a diluted cyanide solution that dissolves a portion of the contained silver and gold,
which are then recovered in metallurgical processes.
11
The key stages in the conversion of ore into silver and gold are (i) the blasting process in
which the ore is broken into large pieces; (ii) the processing of the ore through a crushing
facility that breaks it into smaller pieces; (iii) the transportation of the crushed ore to the
leach pad where the leaching solution is applied; (iv) the collection of the leach solution; (v)
subjecting the leach solution to the precipitation process, in which gold and silver is converted
back to a fine solid; (vi) the conversion of the precipitate into doré; and (vii) the conversion by
a third party refinery of the doré into refined silver and gold bullion.
We use several integrated steps to scientifically measure the metal content of ore placed on
the leach pads during the key stages. As the ore body is drilled in preparation for the blasting
process, samples of the drill residue are assayed to determine estimated quantities of contained
metal. We estimate the quantity of ore by utilizing global positioning satellite survey techniques.
We then process the ore through a crushing facility where the output is again weighed and sampled
for assaying. A metallurgical reconciliation with the data collected from the mining operation is
completed with appropriate adjustments made to previous estimates. We then transport the crushed
ore to the leach pad for application of the leaching solution. As the leach solution is collected
from the leach pads, we continuously sample for assaying. We measure the quantity of leach solution
with flow meters throughout the leaching and precipitation process. After precipitation, the
product is converted to doré, which is the final product produced by the mine. We again weigh,
sample and assay the doré. Finally, a third party smelter converts the doré and determines final
ounces of silver and gold available for sale. We then review this end result and reconcile it to
the estimates we developed and used throughout the production process. Based on this review, we
adjust our estimation procedures when appropriate.
Our reported inventories include metals estimated to be contained in the ore on leach pad of
$50.9 million as of December 31, 2007. Of this amount, $25.9 million is reported as a current asset
and $25.0 million is reported as a noncurrent asset. The distinction between current and noncurrent
is based upon the expected length of time necessary for the leaching process to remove the metals
from the crushed ore. The historical cost of the metal that is expected to be extracted within
twelve months is classified as current and the historical cost of metals contained within the
crushed ore that will be extracted beyond twelve months is classified as noncurrent. The ore on
leach pad inventory is stated at actual production costs incurred to produce and place ore on the
leach pad during the current period, adjusted for the effects on monthly production costs of
abnormal production levels.
The estimate of both the ultimate recovery expected over time, and the quantity of metal that
may be extracted relative to such twelve month period, requires the use of estimates which are
inherently inaccurate since they rely upon laboratory test work. Test work consists of 60 day leach
columns from which we project metal recoveries into the future. The quantities of metal contained
in the ore are based upon actual weights and assay analysis. The rate at which the leach process
extracts gold and silver from the crushed ore is based upon laboratory column tests and actual
experience occurring over approximately nineteen years of leach pad operation at the Rochester
mine. The assumptions we use to measure metal content during each stage of the inventory conversion
process includes estimated recovery rates based on laboratory testing and assaying. We periodically
review our estimates compared to actual experience and revise our estimates when appropriate. The
length of time necessary to achieve our currently estimated ultimate recoveries of between 59% and
61.5% for silver, depending on the area being leached, and 93% for gold is estimated to be between
5 and 10 years. In August 2007, the Company terminated mining and crushing operations as ore
reserves were fully mined. Residual heap leach activities are expected to continue through 2011.
When we began leach operations in 1986, based solely on laboratory testing, we estimated the
ultimate recovery of silver and gold at 50% and 80%, respectively. Since 1986, we have adjusted the
expected ultimate recovery three times (once in each of 1989, 1997 and 2003) based upon actual
experience gained from leach operations. In 2003, we increased our estimated recoveries for silver
and gold, respectively, to between 59% and 61.5% for silver, depending on the area being leached,
and 93% for gold. The leach cycle at the Rochester Mine requires leaching to approximately the year 2011 for all recoverable metal to be recovered.
12
If our estimate of ultimate recovery requires adjustment, the impact upon our inventory
valuation and upon our income statement would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive/Negative |
|
Positive/Negative |
|
|
Change in Silver Recovery |
|
Change in Gold Recovery |
|
|
1% |
|
2% |
|
3% |
|
1% |
|
2% |
|
3% |
Quantity of recoverable
ounces |
|
1.7 million |
|
3.5 million |
|
5.2 million |
|
|
13,240 |
|
|
|
26,480 |
|
|
|
39,720 |
|
Positive impact on
future cost of
production per silver
equivalent ounce for
increases in recovery
rates |
|
$ |
1.68 |
|
|
$ |
2.78 |
|
|
$ |
3.55 |
|
|
$ |
0.82 |
|
|
$ |
1.49 |
|
|
$ |
2.04 |
|
Negative impact on
future cost of
production per silver
equivalent ounce for
decreases in recovery
rates |
|
$ |
(2.93 |
) |
|
$ |
(9.30 |
) |
|
$ |
(33.77 |
) |
|
$ |
(1.04 |
) |
|
$ |
(2.38 |
) |
|
$ |
(4.21 |
) |
Inventories of ore on leach pads are valued based upon actual production costs incurred to
produce and place such ore on the leach pad during the current period, adjusted for the effects on
monthly production costs of abnormal production levels, less costs allocated to minerals recovered
through the leach process. The costs consist of those production activities occurring at the mine
site and include the costs, including depreciation, associated with mining, crushing and
precipitation circuits. In addition, refining is provided by a third party refiner to place the
metal extracted from the leach pad in a saleable form. These additional costs are considered in the
valuation of inventory. Negative changes in our inventory valuations and correspondingly on our
income statement would have an adverse impact on our results of operations, financial position and
cash flows.
Our estimates of current and non-current inventories may not be realized in actual production and
operating results, which may negatively affect our business.
We use estimates, based on prior production results and experiences, to determine whether heap
leach inventory will be recovered more than one year in the future, and is non-current inventory,
or will be recovered within one year, and is current inventory. The estimates involve assumptions
that may not prove to be consistent with our actual production and operating results. We cannot
determine the amount ultimately recoverable until leaching is completed. If our estimates prove
inaccurate, our operating results may be less than anticipated.
Silver mining involves significant production and operational risks. Coeur may suffer from the
failure to efficiently operate its mining projects.
Silver mining involves significant degrees of risk, including those related to mineral
exploration success, unexpected geological or mining conditions, the development of new deposits,
climatic conditions, equipment and/or service failures, compliance with current or new governmental
requirements, current availability of or delays in installing and commissioning plant and
equipment, import or customs delays and other general operating risks. Problems may also arise due
to the quality or failure of locally obtained equipment or interruptions to services (such as
power, water, fuel or transport or processing capacity) or technical support, which results in the
failure to achieve expected target dates for exploration or production activities and/or result in
a requirement for greater expenditure. The right to export silver and gold may depend on obtaining
certain licenses and quotas, the granting of which may be at the discretion of the relevant
regulatory authorities. There may be delays in obtaining such licenses and quotas leading to the
financial result of Coeur being adversely affected, and it is possible that from time to time
export licenses may be refused. Many of these risks are outside of the ability of Coeurs
management to control and may result in a materially adverse effect on Coeurs operations,
financial position and cash flows.
13
Mineral exploration and development inherently involves significant and irreducible financial
risks. Coeur may suffer from the failure to find and develop profitable mines.
The exploration for and development of mineral deposits involves significant financial risks,
which even a combination of careful evaluation, experience and knowledge may not eliminate.
Unprofitable efforts may result from the failure to discover mineral deposits. Even if mineral
deposits are found, such deposits may be insufficient in quantity and quality to return a profit
from production, or it may take a number of years until production is possible, during which time
the economic viability of the project may change. Few properties which are explored are ultimately
developed into producing mines. Mining companies rely on consultants and others for exploration,
development, construction and operating expertise.
Substantial expenditures are required to establish ore reserves, extract metals from ores and,
in the case of new properties, to construct mining and processing facilities. The economic
feasibility of any development project is based upon, among other things, estimates of the size and
grade of ore reserves, proximity to infrastructures and other resources (such as water and power),
metallurgical recoveries, production rates and capital and operating costs of such development
projects, and metals prices. Development projects are also subject to the completion of favorable
feasibility studies, issuance and maintenance of necessary permits and receipt of adequate
financing.
Once a mineral deposit is developed, whether it will be commercially viable depends on a
number of factors, including: the particular attributes of the deposit, such as size, grade and
proximity to infrastructure; government regulations including taxes, royalties and land tenure;
land use, importing and exporting of minerals and environmental protection; and mineral prices.
Factors that affect adequacy of infrastructure include: reliability of roads, bridges, power
sources and water supply; unusual or infrequent weather phenomena; sabotage; and government or
other interference in the maintenance or provision of such infrastructure. All of these factors
are highly cyclical. The exact effect of these factors cannot be accurately predicted, but the
combination may result in not receiving an adequate return on invested capital.
Significant investment risks and operational costs are associated with our exploration, development
and mining activities, such as San Bartolomé, Kensington and Palmarejo. These risks and costs may
result in lower economic returns and may adversely affect our business.
Our ability to sustain or increase our present production levels depends in part on successful
exploration and development of new ore bodies and/or expansion of existing mining operations.
Mineral exploration, particularly for silver and gold, involves many risks and is frequently
unproductive. If mineralization is discovered, it may take a number of years until production is
possible, during which time the economic viability of the project may change. Substantial
expenditures are required to establish ore reserves, extract metals from ores and, in the case of
new properties, to construct mining and processing facilities. The economic feasibility of any
development project is based upon, among other things, estimates of the size and grade of ore
reserves, proximity to infrastructures and other resources (such as water and power), metallurgical
recoveries, production rates and capital and operating costs of such development projects, and
metals prices. Development projects are also subject to the completion of favorable feasibility
studies, issuance and maintenance of necessary permits and receipt of adequate financing.
Development projects, such as San Bartolomé, Kensington and Palmarejo, may have no operating
history upon which to base estimates of future operating costs and capital requirements.
Development project items such as estimates of reserves, metal recoveries and cash operating costs
are to a large extent based upon the interpretation of geologic data obtained from a limited number
of drill holes and other sampling techniques and feasibility studies. Estimates of cash operating
costs are then derived based upon anticipated tonnage and grades of ore to be mined and processed,
the configuration of the orebody, expected recovery rates of metals from the ore, comparable
facility and equipment costs, anticipated climate conditions and
other factors. As a result, actual cash operating costs and economic returns of any and all development projects may materially
differ from the costs and returns estimated, and accordingly, our business results of operations
may be negatively affected.
14
The Companys marketing of metals concentrates could be adversely affected if there were to be a
significant delay or disruption of purchases by its third party smelter customers. In particular,
a significant delay or disruption in our sales of concentrates as a result of the unexpected
discontinuation of purchases by our smelter customers could have a material adverse effect on our
operations.
The Company currently markets its silver and gold concentrates to third party smelters in
Mexico, Japan and Australia. The loss of any one smelter customer could have a material adverse
effect on us in the event of the possible unavailability of alternative smelters. No assurance can
be given that alternative smelters would be timely available if the need for them were to arise, or
that delays or disruptions in sales could not be experienced that would result in a materially
adverse effect on our operations and our financial results.
Our silver and gold production may decline, reducing our revenues and negatively impacting our
business.
Our future silver and gold production may decline as a result of an exhaustion of reserves and
possible closure of mines. It is our business strategy to conduct silver and gold exploratory
activities at our existing mining and exploratory properties as well as at new exploratory
projects, and to acquire silver and gold mining properties and businesses or reserves that possess
minable ore reserves and are expected to become operational in the near future. We can provide no
assurance that our silver and gold production in the future will not decline. Accordingly, our
revenues from the sale of silver and gold may decline, negatively affecting our results of
operations.
There are significant hazards associated with our mining activities, some of which may not be fully
covered by insurance. To the extent we must pay the costs associated with such risks, our business
may be negatively affected.
The mining business is subject to risks and hazards, including environmental hazards,
industrial accidents, the encountering of unusual or unexpected geological formations, cave-ins,
flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions.
These occurrences could result in damage to, or destruction of, mineral properties or production
facilities, personal injury or death, environmental damage, reduced production and delays in
mining, asset write-downs, monetary losses and possible legal liability. Although we maintain
insurance in an amount that we consider to be adequate, liabilities might exceed policy limits, in
which event we could incur significant costs that could adversely affect our results of operation.
Insurance fully covering many environmental risks (including potential liability for pollution or
other hazards as a result of disposal of waste products occurring from exploration and production)
is not generally available to us or to other companies in the industry. The realization of any
significant liabilities in connection with our mining activities as described above could
negatively affect our results of operations.
We are subject to significant governmental regulations, and their related costs and delays may
negatively affect our business.
Coeurs mining activities are subject to extensive federal, state, local and foreign laws and
regulations governing environmental protection, natural resources, prospecting, development,
production, post-closure reclamation, taxes, labor standards and occupational health and safety
laws and regulations including mine safety, toxic substances and other matters related to Coeurs
business. Although these laws and regulations have never required Coeur to close any mine, the
costs associated with compliance with such laws and regulations are substantial. Possible future
laws and regulations, or more restrictive interpretations of current laws and regulations by
governmental authorities could cause additional expense, capital expenditures, restrictions on or
suspensions of Coeurs operations and delays in the development of its properties.
15
In addition, government approvals, approval of aboriginal people and permits are currently and
may in the future be required in connection with the Palmarejo project. To the extent such
approvals are required and not obtained, Coeur may be curtailed or prohibited from planned mining
operations or continuing its planned exploration or development of mineral properties at the
Palmarejo project.
Failure to comply with applicable laws, regulations and permitting requirements may result in
enforcement actions thereunder, including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining
operations or in the exploration or development of mineral properties may be required to compensate
those suffering loss or damage by reason of the mining activities and may have civil or criminal
fines or penalties imposed for violations of applicable laws or regulations.
Compliance with environmental regulations and litigation based on environmental regulations could
require significant expenditures.
Environmental regulations mandate, among other things, the maintenance of air and water
quality standards and land reclamation. They also set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous waste. Environmental legislation is
evolving in a manner which will require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of proposed projects, and a
heightened degree of responsibility for companies and their officers, directors and employees.
To the extent Coeur is subject to environmental liabilities, the payment of such liabilities
or the costs that it may incur to remedy environmental pollution would reduce funds otherwise
available to it and could have a material adverse effect on the combined company. If Coeur is
unable to fully remedy an environmental problem, it might be required to suspend operations or
enter into interim compliance measures pending completion of the required remedy. The potential
exposure may be significant and could have a material adverse effect.
Moreover, governmental authorities and private parties may bring lawsuits based upon damage to
property and injury to persons resulting from the environmental, health and safety impacts of
Coeurs past and current operations, which could lead to the imposition of substantial fines,
remediation costs, penalties and other civil and criminal sanctions. Substantial costs and
liabilities, including for restoring the environment after the closure of mines, are inherent in
Coeurs operations. Although Coeur believes that it is in substantial compliance with applicable
laws and regulations, Coeur cannot assure you that any such law, regulation, enforcement or private
claim will not have a negative effect on its business, financial condition or results of
operations.
Some of Coeurs mining wastes are currently exempt to a limited extent from the extensive set
of federal Environmental Protection Agency (EPA) regulations governing hazardous waste under the
Resource Conservation and Recovery Act (RCRA). If the EPA designates these wastes as hazardous
under RCRA, Coeur would be required to expend additional amounts on the handling of such wastes and
to make significant expenditures to construct hazardous waste disposal facilities. In addition, if
any of these wastes causes contamination in or damage to the environment at a mining facility, such
facility may be designated as a Superfund site under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA). Under CERCLA, any owner or operator of a Superfund site
since the time of its contamination may be held liable and may be forced to undertake extensive
remedial cleanup action or to pay for the governments cleanup efforts. Such owner or operator may
also be liable to governmental entities for the cost of damages to natural resources, which may be
substantial. Additional regulations or requirements are also imposed upon Coeurs tailings and
waste disposal areas in Alaska under the federal Clean Water Act (CWA) and in Nevada under the
Nevada Water Pollution Control Law which implements the CWA. Airborne emissions are subject to
controls under air pollution statutes implementing the Clean Air Act in Nevada and Alaska.
16
Compliance with CERCLA, the CWA and state environmental laws could entail significant costs,
which could have a material adverse effect on Coeurs operations.
In the context of environmental permits, including the approval of reclamation plans, Coeur
must comply with standards and regulations which entail significant costs and can entail
significant delays. Such costs and delays could have a dramatic impact on Coeurs operations.
There is no assurance that future changes in environmental regulation, if any, will not adversely
affect Coeurs operations. Coeur intends to fully comply with all applicable environmental
regulations.
We are required to obtain government permits to expand operations or begin new operations. The
acquisition of such permits can be materially impacted by third party litigation seeking to prevent
the issuance of such permits. The costs and delays associated with such approvals could affect our
operations, reduce our revenues, and negatively affect our business as a whole.
Mining companies are required to seek governmental permits for expansion of existing
operations or for the commencement of new operations such as the Kensington development project and
the Palmarejo project. Obtaining the necessary governmental permits is a complex and time-consuming
process involving numerous jurisdictions and often involving public hearings and costly
undertakings. The duration and success of permitting efforts are contingent on many factors that
are out of our control. The governmental approval process may increase costs and cause delays
depending on the nature of the activity to be permitted, and could cause us to not proceed with the
development of a mine. Accordingly, this approval process could harm our results of operations.
Reference is made to the discussion of the current litigation regarding the validity of the
mine tailings permit at the Kensington property in Alaska that is set forth under the above risk
factor entitled We may have to record additional write-downs, which could negatively impact our
results of operations.
Meanwhile, although Palmarejo currently holds all consents that it requires in order to carry
out its current drilling and development program on the Palmarejo project, Coeur cannot be certain
that it will receive the necessary permits on acceptable terms to conduct further exploration and
to develop the Palmarejo project in accordance with its pre-feasibility study. The failure to
obtain such permits, or delays in obtaining such permits, could increase costs and delay
activities, and could adversely affect the Palmarejo project.
Our business depends on good relations with our employees.
The Company could experience labor disputes, work stoppages or other disruptions in production
that could adversely affect us. As of December 31, 2007, unions represented approximately 44% of
our worldwide workforce. On that date, the Company had 316 employees at its Cerro Bayo mine and 120
employees at its Martha mine who were working under a collective bargaining agreement. The
agreement covering the Cerro Bayo mine expires on December 21, 2010 and a collective bargaining
agreement covering the Martha mine expires on June 1, 2008. Additionally, the Company had 21
employees at its San Bartolomé project working under a labor agreement which does not have a fixed
term.
We are an international company and are exposed to risks in the countries in which we have
significant
operations or interests. Foreign instability or variances in foreign currencies may cause
unforeseen losses, which may affect our business.
Any foreign operations or investment is subject to political and economic risks and
uncertainties. These risks and uncertainties may include exchange controls; extreme fluctuations
in currency exchange rates; high rates of inflation; labor unrest; civil unrest; military
repression; expropriation and nationalization; renegotiation or nullification of existing
concessions, licenses, permits and contracts; illegal mining; changes in taxation policies;
restrictions on foreign exchange and repatriation, and laws or policies in the U.S. affecting
foreign trade
17
investment and taxation. Further, foreign operations or investment is subject to changes in
government regulations with respect to, but not limited to, restrictions on production, price
controls, export controls, currency remittance, income taxes, expropriation of property, foreign
investment, maintenance of claims, environmental legislation, land use, land claims of local
people, water use and mine safety.
Chile, Argentina, Bolivia and Australia are the most significant foreign countries in which
Coeur now directly or indirectly owns or operates mining properties or developmental projects.
Coeur also conducts exploratory projects in these countries. With the acquisition of Palmarejo and
Bolnisi, Coeur also owns a major mining operation in Mexico. Argentina and Bolivia, while
currently economically and politically stable, have experienced political instability, provincial
government pressures on mining operations, currency value fluctuations and changes in banking
regulations in recent years. It is uncertain at this time how new mining or investment policies or
shifts in political attitude may affect mining in these countries.
Coeur may enter into agreements which require Coeur to purchase currencies of foreign
countries in which Coeur does business in order to ensure fixed exchange rates. In the event that
actual exchange rates vary from those set forth in the hedge contracts, Coeur will experience U.S.
dollar-denominated currency gains or losses. Future economic or political instabilities or changes
in the laws of foreign countries in which Coeur has significant operations or interests and
unfavorable fluctuations in foreign currency exchange rates could negatively impact its foreign
operations and its business as a whole. Further, property ownership in a foreign country is
generally subject to the risk of expropriation or nationalization with inadequate compensation.
Coeur is exposed to risks with respect to the legal systems in the countries in which it has
significant operations or interests, and resolutions of any disputes may adversely affect its
business.
Some of the jurisdictions in which Coeur currently and may in the future operate have less
developed legal systems than would be found in more established economies like the United States.
This may result in risks such as potential difficulties in obtaining effective legal redress in the
courts of such jurisdictions, whether in respect of a breach of law or regulation, or in an
ownership dispute; a higher degree of discretion on the part of governmental authorities; the lack
of judicial or administrative guidance on interpreting applicable rules and regulations;
inconsistencies or conflicts between and within various laws, regulations, decrees, orders and
resolutions; or relative inexperience of the judiciary and courts in such matters.
In certain jurisdictions the commitment of local business people, government officials and
agencies and the judicial system to abide by legal requirements and negotiated agreements may be
uncertain, creating particular concerns with respect to licenses and agreements for business.
These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed.
There can be no assurance that joint ventures, licenses, license applications or other legal
arrangements will not be adversely affected by the actions of government authorities or others and
the effectiveness of and enforcement of such arrangements in these jurisdictions cannot be assured.
Any of our future acquisitions may result in significant risks, which may adversely affect our
business.
An important element of our business strategy is the opportunistic acquisition of silver and
gold mines, properties and businesses or interests therein. While it is our practice to engage
independent mining consultants to assist in evaluating and making acquisitions, any mining
properties or interests therein we may acquire may not be developed profitably or, if profitable
when acquired, that profitability might not be sustained. In connection with any future
acquisitions, we may incur indebtedness or issue equity securities, resulting in increased interest
expense, or dilution of the percentage ownership of existing shareholders. We intend to seek
shareholder approval for any such acquisitions to the extent required by applicable law,
regulations or stock exchange rules. We cannot predict the impact of future acquisitions on the
price of our business or our common stock. Unprofitable acquisitions, or additional indebtedness or
issuances of securities in connection with such acquisitions, may impact the price of our common stock and negatively affect our results of operations.
18
Coeur is continuously considering possible acquisitions of additional mining properties or
interests therein that are located in other countries, and could be exposed to significant risks
associated with any such acquisitions.
In the ordinary course of Coeurs business, Coeur is continuously considering the possible
acquisition of additional significant mining properties or interests therein that may be located in
countries other than those in which Coeur now has operations or interests. Consequently, in
addition to the risks inherent in the valuation and acquisition of such mining properties, as well
as the subsequent development, operation or ownership thereof, Coeur could be subject to additional
risks in such countries as a result of governmental policies, economic instability, currency value
fluctuations and other risks associated with the development, operation or ownership of mining
properties or interests therein. Such risks could adversely affect Coeurs results of operations.
Our
ability to find and acquire new mineral properties is uncertain. Accordingly, our prospects are
uncertain for the future growth of our business.
Because mines have limited lives based on proven and probable ore reserves, we are continually
seeking to replace and expand our ore reserves. Identifying promising mining properties is
difficult and speculative. Furthermore, we encounter strong competition from other mining companies
in connection with the acquisition of properties producing or capable of producing silver and gold.
Many of these companies have greater financial resources than we do. Consequently, we may be unable
to replace and expand current ore reserves through the acquisition of new mining properties or
interests therein on terms we consider acceptable. As a result, our revenues from the sale of
silver and gold may decline, resulting in lower income and reduced growth.
Third parties may dispute our unpatented mining claims, which could result in the discovery of
defective titles and losses affecting our business.
The validity of unpatented mining claims, which constitute a significant portion of Coeurs
property holdings in the United States, is often uncertain and may be contested. Although Coeur
has attempted to acquire satisfactory title to undeveloped properties, Coeur, in accordance with
mining industry practice, does not generally obtain title opinions until a decision is made to
develop a property. As a result, some titles, particularly titles to undeveloped properties, may
be defective. Defective title to any of Coeurs mining claims could result in litigation,
insurance claims, and potential losses affecting its business as a whole.
The acquisition of title to concessions and similar property interests is a detailed and time
consuming process. Title to, and the area of, concessions and similar property interests may be
disputed.
No assurances can be given that title defects to the Palmarejo project do not exist. The
Palmarejo project may be subject to prior unregistered agreements, interests or native land claims
and title may be affected by undetected defects. There may be valid challenges to the title of any
of the claims comprising the Palmarejo project that, if successful, could impair development and/or
operations. A defect could result in Coeur losing all or a portion of its right, title, estate and
interest in and to the properties to which the title defect relates. Also, while Coeur believes
that the registration defects relating to certain non-material properties as described herein will
be remedied; there can be no assurance as to timing or successful completion.
Coeur does not own all of the concessions comprising the Palmarejo project, and Coeurs failure to
comply with its contractual commitments on such properties may result in their loss.
Planet Gold, S.A. de C.V., a wholly-owned indirect subsidiary of Palmarejo, is the registered
owner of most but not all of the concessions comprising the Palmarejo project. If Coeur fails to
meet payments or work commitments on these properties, Coeur may lose its interests in a portion of the Palmarejo
project or forfeit some of the concessions.
19
Item 1B. Unresolved Staff Comments
None
Item 2. Properties.
SILVER AND GOLD MINING PROPERTIES
North America
Rochester Mine
The Rochester Mine is a silver and gold surface mine located in Pershing County, Nevada, which
is located approximately 25 road miles northeast of the town of Lovelock. The mine commenced
operations in 1986. The Company owns 100% of the Rochester Mine by virtue of its 100% ownership of
its subsidiary, Coeur Rochester, Inc. (Coeur Rochester). The property consists of 22 patented
and 589 unpatented contiguous mining claims, including 54 mill-site claims and 53 unpatented,
leased claims totaling approximately 11,000 acres.
The Company acquired the Rochester property from Asarco Incorporated in 1983 and commenced
mining in 1986. No mining or processing was conducted at Rochester by the prior owner. The
Company acquired initial interest in the adjacent Nevada Packard property in 1996, completed the
full purchase in 1999 and commenced mining in 2003. Very limited mining and processing was
conducted at Nevada Packard by the prior owner. Collectively, the Rochester and Nevada Packard
properties comprise the Companys Rochester silver and gold mining and processing operation.
Production at the Rochester mine in 2007 was approximately 4.6 million ounces of silver and
50,400 ounces of gold, compared to 5.1 million ounces of silver and 71,900 ounces of gold in 2006.
Cash costs per ounce of silver decreased by $1.28 to $1.52 per ounce in 2007, compared to $2.80 per
ounce in 2006. The decrease in silver production was primarily due to decreased tons mined and
lower ore grades. The decrease in cash costs per ounce is due to decreased mining and crushing
costs during the year due to the fact that mining and crushing operations were terminated in August
2007 as ore reserves were fully mined. Residual heap leach activities are expected to continue
through 2011.
The mine utilizes the heap leaching process to extract both silver and gold from ore mined
using conventional open pit methods. The Company completed mining of the existing ore reserves in
August of 2007. While mining operations were discontinued, it is expected that metal production
will continue as a result of residual leaching until approximately 2011. The company is currently conducting exploration on
mineralized structures that exist near the pit bottom.
20
Ore was crushed and transported by conveyor to a loadout facility where it was transferred to
150-ton trucks which transport the crushed ore to leach pads where solution is applied via drip
irrigation to dissolve the silver and gold contained in the ore. Certain low-grade ores were
hauled directly, as run-of-mine, by 100-ton haul trucks to leach pads where solution is applied to
dissolve the silver and gold contained in the ore. The solutions containing the dissolved silver
and gold are pumped to a processing plant where zinc precipitation is used to recover the silver
and gold from solution as doré. The doré is transported to a refinery for final processing after
which the silver and gold is sold on established markets through third party broker dealers. The
property, plant and equipment are maintained in good working condition through a regular preventive
maintenance program and periodic improvements as required. During 2007, the company began selling
surplus equipment that is no longer required as a result of the cessation of mining activities.
Power is provided to the mine and processing facility from the public grid servicing the local
communities.
Based upon actual operating experience and certain metallurgical testing, the Company
estimates ultimate recovery rates from the crushed ore of between 59% and 61.5% for silver,
depending on the area being leached, and 93% for gold. The leach cycle at the Rochester Mine
requires leaching to approximately the year 2011 for all recoverable metal to be extracted. A
significant proportion of metal recovery occurs after mining is completed.
At the Nevada Packard satellite deposit, located south of the Rochester deposit, the Company
commenced mining of silver in the first quarter of 2003. Mining at Nevada Packard was completed in
mid-2007.
The Companys capital expenditures at the Rochester Mine totaled approximately $1.6 million in
2007. The Company plans capital expenditures at the Rochester Mine of $0.7 million in 2008.
Asarco Incorporated (Asarco), the prior owner, had a net smelter royalty interest which is
payable only when the market price of silver equals or exceeds $22.03 per ounce up to a maximum
rate of 5%. No royalties were required to be paid by the Company during the three years ended
December 31, 2007.
Silver and gold mineralization is hosted in folded and faulted volcanic rocks of the Rochester
Formation and overlying Weaver Formation. Silver and gold, consisting of silver sulfosalt minerals,
argentite, argentian tetrahedrite and minor native gold, are contained in zones of multiple quartz
veins and veinlets with variable but lesser amounts of pyrite.
In 2007, the Company commenced an exploration program to identify new silver- and gold-bearing
structures on its large holdings in the district. This program defined several areas of interest
and in the fourth quarter a program of nearly 3,000 feet of core drilling was completed on one of
those targets. During 2007, we spent $0.4 million on exploration in the Rochester area. The
Company has plans to follow-up on any favorable results from this drilling and to test other
targets in 2008.
Year-end Proven and Probable Ore Reserves Rochester Mine
(includes Nevada Packard)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1), (3), (5), (6) |
|
|
|
|
|
|
Tons (000s) |
|
|
0 |
|
|
|
3,720 |
|
|
|
10,168 |
|
Ounces of silver per ton |
|
|
0 |
|
|
|
0.66 |
|
|
|
0.86 |
|
Contained ounces of silver (000s) |
|
|
0 |
|
|
|
2,436 |
|
|
|
8,765 |
|
Ounces of gold per ton |
|
|
0 |
|
|
|
0.007 |
|
|
|
0.011 |
|
Contained ounces of gold |
|
|
0 |
|
|
|
26,400 |
|
|
|
112,650 |
|
21
Year-end Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
32,664 |
|
|
|
15,235 |
|
|
|
15,646 |
|
Ounces of silver per ton |
|
|
0.85 |
|
|
|
0.94 |
|
|
|
1.03 |
|
Ounces of gold per ton |
|
|
0.006 |
|
|
|
0.007 |
|
|
|
0.010 |
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore mined (000s) |
|
|
2,962 |
|
|
|
9,804 |
|
|
|
9,023 |
|
Tons crushed/leached (000s) |
|
|
5,061 |
|
|
|
10,399 |
|
|
|
9,327 |
|
Ore grade silver (oz./ton) |
|
|
0.65 |
|
|
|
0.74 |
|
|
|
0.91 |
|
Ore grade gold (oz./ton) |
|
|
0.006 |
|
|
|
0.010 |
|
|
|
0.010 |
|
Recovery/Ag oz (4) |
|
|
141.4 |
% |
|
|
65.9 |
% |
|
|
67.5 |
% |
Recovery/Au oz (4) |
|
|
167.6 |
% |
|
|
68.9 |
% |
|
|
76.2 |
% |
Silver produced (oz.) |
|
|
4,614,780 |
|
|
|
5,113,504 |
|
|
|
5,720,489 |
|
Gold produced (oz.) |
|
|
50,408 |
|
|
|
71,891 |
|
|
|
70,298 |
|
Cost per Ounce of Silver |
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs (2) |
|
$ |
1.52 |
|
|
$ |
2.80 |
|
|
$ |
4.82 |
|
Non-cash costs |
|
|
2.30 |
|
|
|
3.04 |
|
|
|
1.84 |
|
|
|
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
3.82 |
|
|
$ |
5.84 |
|
|
$ |
6.66 |
|
|
|
|
(1) |
|
Metal prices used in calculating proven and probable reserves were $11.00 per ounce of
silver and $600 per ounce of gold in 2007. |
|
(2) |
|
Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See
Item 7: Managements Discussion and Analysis of Financial Condition and Results of
Operations Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
|
(3) |
|
The ore reserves are open pit minable reserves and include no additional factors for
mining dilution or recovery. |
|
(4) |
|
The leach cycle at Rochester requires 5 to 10 years to recover gold and silver
contained in the ore. The Company estimates the ultimate recovery to be approximately
61.5% for silver and 93.0% for gold. However, ultimate recoveries will not be known until
leaching operations cease which is currently estimated for 2011. Current recovery may vary
significantly from ultimate recovery. Recoveries are calculated based on the ounces
recovered as a percent of the ounces placed on the pad. As ore production ceased in August
2007, silver and gold recoveries increased significantly as a percent of ore placed on the
pad. See Critical Accounting Policies and Estimates Ore on Leach Pad. |
|
(5) |
|
Ore reserve estimates were prepared by the Companys technical staff. |
|
(6) |
|
Ore reserves are defined by a drill grid of at least 65 feet by 140 feet for proven and
at least 100 feet by 200 feet for probable and may include open pit mine production
sampling information, especially for proven. In practice, ore reserve blocks are defined
by the number of proximal composites and three-dimensional geologic controls. For proven
reserves, the number of composites must be at least 4 at Rochester and 20 at Nevada Packard
with a maximum search distance of 75 feet. For probable reserves, the number of composites
must be at least 4 at Rochester and 5 at Nevada Packard with a maximum search distance of
150 feet for Rochester and 120 feet at Nevada Packard. Mineralized material is similarly
classified. |
22
South America
Chile Cerro Bayo Mine
The Cerro Bayo District covers about 176 square miles and is located south of Coyhaique, the
capital of Region XI in southern Chile, and due west of the town of Chile Chico. The project lies
on the east side of the Andes mountain range at an elevation ranging from 600 to 4,500 feet and is
serviced by a gravel road from Chile Chico. The mineral rights for the Cerro Bayo property are
fully-owned by Compania Minera Cerro Bayo Ltd., a wholly-owned subsidiary of the Company,
encompassing a continuous block of 68,715 acres of mining claims. An additional 44,231 acres of
exploration concessions are owned by the Company in Region XI. These concessions and separate
surface use agreements from private owners cover the ore reserves of the property as well as the
necessary rights to permit mining and exploration.
The Company acquired the property in 1990 from Freeport Chilean Exploration Company. No mining
or processing was conducted by the prior owner. Initial mining and processing commenced by the
Company in 1995 at the Laguna Verde area in the western portion of the holdings. Mining and
processing temporarily ceased in late 2000 then recommenced in 2002 at the Cerro Bayo area on the
east. The entire holdings and infrastructure are now referred to as the Cerro Bayo district.
Construction of two ramps to intersect the high-grade Lucero Vein in the Cerro Bayo zone on the
east side of its holdings commenced in November 2001. Additional mineralized high-grade gold and
silver vein systems were discovered since then from surface and underground exploration.
Production at the Cerro Bayo mine in 2007 was approximately 1.7 million ounces of silver and
37,479 ounces of gold compared to 2.3 million ounces of silver and 40,923 ounces of gold in 2006.
The decrease in silver production was due to a 19% decline in ore grades and a 9.6% decrease in
tons mined as a result of the Company focusing its mining activities on narrower vein systems of
the mine. Gold grades were marginally affected. In 2008, production will include additional vein
system areas that are wider and more productive. Cash costs per ounce of silver produced increased
to $8.22 in 2007 from $3.04 in 2006 primarily due to lower grades and lower tons mined.
The ore processing mill for the Cerro Bayo Mine uses a standard flotation process to produce a
high grade gold and silver concentrate. During 2007, the concentrate processed at this mill was
sold to third-party smelters, primarily in Japan and Mexico. The mill has a design capacity of
1,650 tons per day. During 2007, the Company experienced recovery rates of approximately 94.4% for
silver and 92.2% for gold. Electrical power is generated on-site by diesel generators and process
water is obtained from a combination of the adjacent General Carrera Lake and from tailings
re-circulation. The property, plant and equipment are maintained in good working condition through
a regular preventive maintenance program and periodic improvements as required. Mining is conducted
utilizing underground methods. Total capital expenditures at the Cerro Bayo property in 2007 were
$11.3 million and the Company plans approximately $9.5 million of capital expenditures there in
2008.
During 2007, the Company continued its exploration and development program in the district
with its efforts concentrated in the Cerro Bayo and Laguna Verde zones in the east and west
sections of the Companys land holdings. In 2007, we spent approximately $2.9 million on
exploration and $2.2 million on reserve development for new gold and silver mineralization and
completed nearly 204,000 feet of core drilling. In the second half of the year five new silver- and
gold-bearing veins were discovered approximately one mile east of the ore processing facilities at
Laguna Verde. These veins are named Dagny, Fabiola, Coyita, Yasna and Dalila. Drilling commenced
on the new discoveries late in the third quarter and reached a total of 48,536 feet by the end of
the year. The Company plans to continue its extensive exploration and mine development programs in
the district in 2008 with a budget of $4.9 million for this work.
23
Silver and gold mineralization is hosted in epithermal quartz veins and veinlets and lesser
amounts of stockworks and breccias within generally sub-horizontal volcanic rocks of the Ibanez
Formation. Veins and veinlets occur in sub-parallel clusters largely trending north-northwest and dipping steeply
to the west and east. The main ore minerals of silver and gold are silver sulfosalt minerals,
argentite and electrum (a naturally-occurring gold and silver alloy). Numerous epithermal veins
located within the 205 square mile property package in the Cerro Bayo district offer exploration
and development opportunities for us. To date, we have discovered over 100 veins, the majority of
which are located within nine miles of our existing ore processing facilities.
Year-end Proven and Probable Ore Reserves Cerro Bayo Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1),
(3), (5), (6), (7), (8) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
782 |
|
|
|
634 |
|
|
|
935 |
|
Ounces of silver per ton |
|
|
9.26 |
|
|
|
9.69 |
|
|
|
8.00 |
|
Contained ounces of silver (000s) |
|
|
7,234 |
|
|
|
6,144 |
|
|
|
7,476 |
|
Ounces of gold per ton |
|
|
0.14 |
|
|
|
0.19 |
|
|
|
0.14 |
|
Contained ounces of gold |
|
|
111,600 |
|
|
|
122,000 |
|
|
|
131,600 |
|
Year-end Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
2,865 |
|
|
|
2,509 |
|
|
|
4,113 |
|
Ounces of silver per ton |
|
|
9.28 |
|
|
|
8.23 |
|
|
|
6.19 |
|
Ounces of gold per ton |
|
|
0.14 |
|
|
|
0.15 |
|
|
|
0.10 |
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled |
|
|
387,378 |
|
|
|
428,346 |
|
|
|
403,695 |
|
Ore grade silver (oz./ton) |
|
|
4.68 |
|
|
|
5.76 |
|
|
|
7.52 |
|
Ore grade gold (oz./ton) |
|
|
0.105 |
|
|
|
0.103 |
|
|
|
0.163 |
|
Recovery silver (%) |
|
|
94.4 |
|
|
|
94.5 |
|
|
|
94.7 |
|
Recovery gold (%) |
|
|
92.2 |
|
|
|
93.0 |
|
|
|
92.8 |
|
Silver produced (oz.) |
|
|
1,709,830 |
|
|
|
2,331,060 |
|
|
|
2,875,047 |
|
Gold produced (oz.) |
|
|
37,479 |
|
|
|
40,923 |
|
|
|
61,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs (2) |
|
$ |
8.22 |
|
|
$ |
3.04 |
|
|
$ |
0.54 |
|
Non-cash costs |
|
|
3.60 |
|
|
|
2.42 |
|
|
|
1.76 |
|
|
|
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
11.82 |
|
|
$ |
5.46 |
|
|
$ |
2.30 |
|
|
|
|
(1) |
|
Metal prices used to calculate proven and probable reserves were $11.00/ounce of
Ag and $600/ounce of Au. |
|
(2) |
|
Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See Item
7: Managements Discussion and Analysis of Financial Condition and Results of Operations;
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
|
(3) |
|
The ore reserves are minable reserves within underground mine designs and include
factors for mining dilution and recovery. |
|
(4) |
|
Veins less than 1.2 meters wide are diluted to 1.2 meters at zero grade. Veins
greater than 1.2 meters wide receive a 0.2 meter dilution at zero grade. Mining recovery is
95%. |
|
(5) |
|
Metallurgical (mill) recovery factors of 93.8% and 91.6% should be applied to the
in-place silver and gold reserves ounces, respectively. |
24
|
|
|
(6) |
|
Ore reserve estimates were prepared by the Companys technical staff. |
|
(7) |
|
Proven and probable ore reserves are defined by a drill spacing of no more than 35
meters and may include underground production sampling information, especially for proven. In
practice, ore reserve blocks are defined by the number of proximal composites and
three-dimensional geologic controls. For proven reserves the number of composites must be at
least 1 with a maximum search distance of generally 15 meters. For probable, the number of
composites must be at least 2 with a maximum search distance of generally 35 meters.
Mineralized material is similarly classified. |
|
(8) |
|
Mineralized material includes 1,599,400 tons grading 10.21 Ag ounces per ton and
0.14 Au ounces per ton classified as additional Inferred Mineral Resources. |
Argentina Martha Mine
The Martha mine is an underground mine owned and operated by Coeur Argentina S.R.L., a
wholly-owned subsidiary of the Company, which is located in the Santa Cruz Province of southern
Argentina. Access to the mine is provided by all-weather gravel roads 30 miles northeast of the
town of Gubernador Gregores and approximately 270 miles southeast of Cerro Bayo.
The mineral rights for the Martha property are fully-owned by Coeur Argentina S.R.L.,
encompassing over 363,000 acres of exploration claims, discovery claims, and exploitation claims
(568 square miles). The concessions cover the ore reserves of the property as well as the necessary
rights to permit mining and exploration. The property and equipment are maintained in good working
condition through a regular preventive maintenance program and periodic improvements as required.
Power is provided by Company-owned diesel generators.
The Company acquired the property in 2002 through the purchase of a subsidiary of Yamana
Resources Inc. for $2.5 million. The prior owner conducted minor underground mining on the
near-surface portion of the Martha vein from late 2000 to mid 2001. The Company is obligated to
pay a 2% net smelter royalty on silver and gold production to Royal Gold Corporation.
Prior to January 1, 2008 we transported the Martha mine ore by truck approximately 600 miles
by road for processing at the Cerro Bayo mill. In 2007, the Company commenced the construction of
a 240 ton per day flotation mill which was completed in December 2007 and produces a flotation
concentrate. During December 2007, the newly-constructed facility commenced operating. In 2008, we
will commence shipping the concentrate to a third party smelter located in Mexico. The new mill is
expected to lower operating costs since it will no longer be necessary to transport ore to Cerro
Bayo for processing. This is expected to have a beneficial impact upon the ore reserve cut-off
grade and overall ore reserves.
In June 2002, we commenced shipping of high-grade Martha mine ore to the Cerro Bayo mill. All
of the production came from the Martha vein, which was one of six known veins on the Martha Mine
property prior to our acquisition of the property. Also in 2002, exploration discovered both
extensions of the Martha Mine vein and the R4 Zone within the vein, which is located 300 feet
southwest of the main Martha Mine mining areas.
Production at the Martha mine in 2007 was approximately 2.7 million ounces of silver and 4,127
ounces of gold compared to 2.7 million ounces of silver and 3,440 ounces of gold in 2006. Cash
cost per ounce of silver produced was $6.27 in 2007 compared to $4.88 in 2006.
During 2007, we spent $2.0 million on exploration and $0.8 million on reserve development at
the Martha mine, and $2.4 million at our other properties in the Santa Cruz province, to discover
new silver- and gold-bearing veins and define new reserves. In 2007, exploration defined extensions
at depth and on strike on the Martha, R4, Catalina, Francisca, Isabel and Betty ore-bearing
structures which were a major focus of the years program. A total of 72,243 feet of drilling was
completed in 2007. During 2008, we expect to spend $6.8 million on
25
exploration for the discovery of new mineralization and reserve development, across our large
land holdings in the province of Santa Cruz which totals over 568 square miles.
Silver and gold mineralization is hosted in epithermal quartz veins and veinlets within
generally sub-horizontal volcanic rocks of the Chon Aike Formation. The veins and veinlets occur
as sub-parallel clusters largely trending west-northwest and dipping steeply to the southwest. The
main ore minerals of silver and gold are silver sulfosalt minerals, argentite, electrum (a
naturally-occurring gold and silver alloy) and native silver.
Total capital expenditures at the Martha mine in 2007 were $16.4 million and the Company plans
approximately $3.4 million of additional capital expenditures there in 2008.
Year-end Proven and Probable Ore Reserves Martha Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1),
(3), (4), (5), (6) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
154 |
|
|
|
99 |
|
|
|
67 |
|
Ounces of silver per ton |
|
|
53.97 |
|
|
|
61.33 |
|
|
|
60.29 |
|
Contained ounces of silver (000s) |
|
|
8,293 |
|
|
|
6,084 |
|
|
|
4,054 |
|
Ounces of gold per ton |
|
|
0.07 |
|
|
|
0.09 |
|
|
|
0.08 |
|
Contained ounces of gold |
|
|
10,600 |
|
|
|
8,800 |
|
|
|
5,400 |
|
Year-end Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(7) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
165 |
|
|
|
112 |
|
|
|
134 |
|
Ounces of silver per ton |
|
|
32.75 |
|
|
|
42.91 |
|
|
|
45.37 |
|
Ounces of gold per ton |
|
|
0.04 |
|
|
|
0.05 |
|
|
|
0.05 |
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled |
|
|
37,047 |
|
|
|
35,843 |
|
|
|
35,293 |
|
Ore grade silver (oz./ton) |
|
|
78.10 |
|
|
|
79.93 |
|
|
|
62.53 |
|
Ore grade gold (oz./ton) |
|
|
0.120 |
|
|
|
0.104 |
|
|
|
0.079 |
|
Recovery silver (%) |
|
|
95.0 |
|
|
|
94.7 |
|
|
|
94.9 |
|
Recovery gold (%) |
|
|
92.7 |
|
|
|
92.5 |
|
|
|
92.9 |
|
Silver produced (oz.) |
|
|
2,748,705 |
|
|
|
2,712,846 |
|
|
|
2,093,464 |
|
Gold produced (oz.) |
|
|
4,127 |
|
|
|
3,440 |
|
|
|
2,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs (2) |
|
$ |
6.27 |
|
|
$ |
4.88 |
|
|
$ |
4.60 |
|
Non-cash costs |
|
|
0.51 |
|
|
|
0.48 |
|
|
|
0.41 |
|
|
|
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
6.78 |
|
|
$ |
5.36 |
|
|
$ |
5.01 |
|
|
|
|
(1) |
|
Metal prices used in calculating proven and probable reserves were $11.00/ounce of
Ag and $600/ounce of Au. |
|
(2) |
|
Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See Item
7: Managements Discussion and Analysis of Financial Condition and Results of Operations;
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
|
(3) |
|
The ore reserves are underground minable reserves and include factors for dilution
at zero grade and an average mining recovery of 97.5%. |
26
|
|
|
(4) |
|
Metallurgical (mill) recovery factors of 95% and 92% should be applied to the silver
and gold reserve ounces, respectively. |
|
(5) |
|
Ore reserve estimates were prepared by the Companys technical staff. |
|
(6) |
|
Proven and probable reserves are defined by a drill spacing of no more than 25
meters and may include underground production sampling information, especially for proven. In
practice, ore reserve blocks are defined by the number of proximal composites and
three-dimensional geologic controls. For proven reserves the number of composites must be at
least 2 with a maximum search distance of generally 18 meters. For probable, the number of
composites must be at least 2 with a maximum search distance of generally 25 meters.
Mineralized material is similarly classified. |
|
(7) |
|
Mineralized material includes 72,400 tons grading 37.78 Ag ounces per ton and 0.04
Au ounces per ton classified as additional Inferred Mineral Resources. |
Australia Endeavor Mine
The Endeavor Mine is located in north central New South Wales, Australia. Access to the mine
is by paved roads 30 miles to the northwest from the community of Cobar.
On May 23, 2005, the Company acquired all of the silver production and reserves, up to a
maximum 17.7 million payable ounces, contained at the Endeavor Mine in Australia, which is owned
and operated by Cobar Operations Pty. Limited (Cobar), a wholly-owned subsidiary of CBH Resources
Ltd. (CBH), for $43.8 million. The Endeavor Mine is located 720 km northwest of Sydney in New
South Wales and has been in production since 1983. Under the terms of the original agreement, CDE
Australia, a wholly-owned subsidiary of Coeur, paid Cobar $15.4 million of cash at the closing. In
addition, CDE Australia will pay Cobar approximately $26.3 million upon the receipt of a report
confirming that the reserves at the Endeavor mine are equal to or greater than the reported ore
reserves for 2004. The mine met the criteria for payment of the additional $26.3 million in early
2008. Cobar and the Company have agreed to payment of this amount on April 1, 2008 plus accrued
interest at the rate of 7.5% per annum from January 24, 2008. In addition to these upfront
payments, Coeur originally committed to pay Cobar an operating cost contribution of $1.00 for each
ounce of payable silver plus a further increment when the silver price exceeds $5.23 per ounce.
This further increment was to have begun on the second anniversary of this agreement and is 50% of
the amount by which the silver price exceeds $5.23 per ounce. A cost contribution of $0.25 per
ounce was also payable by Coeur in respect of new ounces of proven and probable silver reserves as
they are discovered. The Company paid a cost contribution of approximately $2.1 million during
2007.
On March 28, 2006, CDE Australia Pty, Ltd. (CDE Australia) reached an agreement with CBH
Resources Ltd. to modify the terms of the original silver purchase agreement. Under the modified
terms, CDE Australia owns all silver production and reserves up to a total of 20.0 million payable
ounces, up from 17.7 million payable ounces in the original agreement. The conditions relating to
the second payment were also modified and tied to certain paste fill plant performance criteria and
mill throughput tests. The Company has received approximately 1.4 million payable ounces to-date
and the current ore reserve contains approximately 14.4 million payable ounces based on current
metallurgical recovery and current smelter contract terms. Expansion of the ore reserve will be
required to achieve the maximum payable ounces of silver production as set forth in the modified
contract. It is expected that future expansion to the ore reserve will occur as a result of the
conversion of portions of the propertys existing inventory of mineralized material and future
exploration discoveries. CBH conducts regular exploration to discover new mineralization and to
define reserves from surface and underground drilling platforms. The silver price-sharing provision
is deferred until such time as Coeur has received approximately 2 million cumulative ounces of
silver from the mine or June 2007, whichever is later. In addition, the silver price-sharing
threshold increased to US$7.00 per ounce, from the previous level of US$5.23 per ounce. It is
expected that the silver price-sharing provision may become operative in 2009.
27
In connection with the modification of the terms of the agreement, CDE Australia agreed to
provide CBH with an advance of up to A$15.0 million of the A$30 million that remains to be paid
under the terms of the original agreement. The remaining payment from Coeur to CBH is subject to the Endeavor mine
achieving certain operational benchmarks. The advance, in the form of a loan facility, will bear
interest at 7.75% per annum once drawn by CBH. The term is for a twelve month period with an
option for CBH to extend the term for an additional six months. No advances have been drawn under
the facility as of December 31, 2007.
The Endeavor mine is an underground lead/zinc/silver mine. Silver, lead, zinc and lesser
amounts of copper mineralization at the Endeavor Mine are contained within sulfide lenses hosted in
fine-grained sedimentary rocks of the Paleozoic-aged Amphitheatre Group. Sulphide lenses are
elliptically-shaped, steeply-dipping to the southwest and strike to the northwest. Principal ore
minerals are galena, sphalerite and chalcopyrite. Silver occurs with both lead and zinc rich
sulphide zones. The mine employs bulk mining methods and utilizes a conventional flotation mill to
produce a concentrate that is sold to a third party smelter. Silver recovery averaged
approximately 48.0% in 2007 and 63.5% in 2006.
The reserves at Endeavor are covered by five Consolidated Mining Leases issued by the state of
New South Wales to CBH Resource Ltd. The leases form a contiguous block of 10,121 acres in size.
The property and equipment are maintained in good working condition, by CBH Resources, through a
regular preventive maintenance program and periodic improvements as required. Power to the mine and
processing facilities is provided by the grid servicing the local communities. CBH Resources Ltd.
conducts regular exploration to define new reserves at the mine from both underground and surface
core drilling platforms. For fiscal year 2007/2008 (July June), the exploration budget at the
mine is A$3.3 million (US$2.9 million). The Company is not required to contribute to ongoing
capital costs at the mine.
On October 24, 2005, CBH announced that mining operations at the Endeavor mine had been
suspended below the No. Four haulage level following an uncontrolled fall of waste ground into the
mines 6Z2 crown pillar stope. Limiting production to above this level was done as a safety
precaution due to the proximity of the 6Z2 crown pillar stope to the main haulage decline. In late
November 2005, CBH announced that mine operations had recommenced below the No. Four haulage level,
but at a reduced production rate. Based on the progress made to date in correcting issues related
to the ground fall, the Company expects the mine to resume normal operations during 2008.
Production at the Endeavor mine in 2007 was approximately 773,000 ounces of silver compared to
482,000 ounces of silver in 2006. Cash cost per ounce of silver produced was $2.67 in 2007
compared to $2.85 in 2006.
Proven and Probable Ore Reserves Endeavor Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1),
(2), (3), (4), (5), (7) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
19,731 |
|
|
|
21,385 |
|
|
|
12,125 |
|
Ounces of silver per ton |
|
|
1.52 |
|
|
|
1.50 |
|
|
|
1.93 |
|
Contained ounces of silver (000s) |
|
|
29,926 |
|
|
|
31,983 |
|
|
|
23,341 |
|
Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
12,291 |
|
|
|
9,370 |
|
|
|
8,488 |
|
Ounces of silver per ton |
|
|
2.44 |
|
|
|
3.00 |
|
|
|
2.03 |
|
28
Operating Data (Coeurs Share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled |
|
|
1,146,857 |
|
|
|
750,115 |
|
|
|
463,129 |
|
Ore grade silver (oz./ton) |
|
|
1.40 |
|
|
|
1.01 |
|
|
|
1.52 |
|
Recovery silver (%) |
|
|
48.0 |
|
|
|
63.5 |
|
|
|
45.0 |
|
Silver produced (oz.) |
|
|
772,609 |
|
|
|
481,991 |
|
|
|
316,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs (6) |
|
$ |
2.67 |
|
|
$ |
2.85 |
|
|
$ |
2.05 |
|
Non-cash costs |
|
|
0.98 |
|
|
|
1.02 |
|
|
|
1.30 |
|
|
|
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
3.65 |
|
|
$ |
3.87 |
|
|
$ |
3.35 |
|
|
|
|
(1) |
|
Ore reserves are reported as of June 30, 2007, which is the end of the most recent
fiscal year of the operator, CBH. Metal prices used were $15/ounce of silver. |
|
(2) |
|
The ore reserves are underground minable reserves and include an 11% average factor
for mining dilution and mining recovery factors ranging from 40% to 100%. |
|
(3) |
|
Metallurgical recovery factor of 55% should be applied to the silver reserve ounces. |
|
(4) |
|
Classification of reserves is based on spacing from drill hole composites to reserve
block centers. For proven reserves the maximum distance is 25 meters and for probable
reserves it is greater than 25 meters and less than 40 meters. Mineralized material is
similarly classified. |
|
(5) |
|
The Endeavor property was purchased on May 23, 2005. Operating data is presented
commencing as of that date. |
|
(6) |
|
Cash costs per ounce of silver or gold represent a non-U.S. GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See Item
7: Managements Discussion and Analysis of Financial Condition and Results of Operations;
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
|
(7) |
|
Mineralized material includes 118,900 tons grading 1.63 Ag ounces per ton classified
as additional Inferred Mineral Resources. |
Australia Broken Hill Mine
The Broken Hill Mine is located in western New South Wales, Australia. Access to the mine is
by paved roads leading from the adjacent community of Broken Hill.
On September 8, 2005, the Company acquired all of the silver production and reserves, up to
17.2 million payable ounces (24.5 million contained ounces), contained at the Broken Hill mine in
Australia, which is owned and operated by Perilya Broken Hill Ltd. (PBH), for $36.9 million. In
addition, CDE Australia will pay PBH an operating cost contribution of approximately $2.00 for each
ounce of payable silver. Under the terms of the agreement, PBH may earn up to US$0.75 million per
year of additional consideration by meeting certain silver production thresholds. No additional
payments pursuant to production thresholds were made during 2007.
The Broken Hill mine is an underground lead/zinc/silver mine. Silver, lead and zinc
mineralization at Broken Hill is contained within sulfide lenses hosted in metasedimentary and
igneous rocks of Precambrian-aged Broken Hill and underlying Thackaringa groups. In general
sulphide lenses are tabular in shape steeply dipping to the north-northwest and striking
east-northeast. Principal ore minerals are galena, sphalerite and chalcopyrite. Silver occurs
with both lead- and zinc-rich sulphide zones but is higher grade in the lead zones. The mine uses
bulk mining methods and utilizes a conventional flotation mill to produce a concentrate that is
sold to third party smelters in Australia. Silver recovery averaged approximately 83.6% in 2007
and 74.2% in 2006.
29
While the Company is entitled to all of the silver production and reserves up to a maximum of
17.2 million payable ounces, to date the Company has received 4.2 million payable ounces and the
current ore reserve contains approximately 12.5 million payable ounces based on current
metallurgical recovery and current smelter contract terms. Expansion of the ore reserve will be
required to achieve the maximum payable ounces of silver production as set forth in the contract.
It is expected that future expansion to the ore reserves will occur as a result of conversion of
portions of the propertys inventory of mineralized material and future exploration discoveries on
the property. Perilya conducts regular exploration to discover new mineralization and define
reserves from surface and underground drilling platforms. For its fiscal year 2007/2008
(July/June), Perilya has budgeted A$5.8 million (US$5.1 million) for this work. The Company is not
required to contribute to ongoing capital costs at the mine.
The reserves at Broken Hill are covered by nine Consolidated Mining Leases issued by the state
of New South Wales to Perilya Broken Hill Ltd. The leases form a northeast elongate contiguous
block of 18,502 acres in size. The property and equipment are maintained in good working condition
by Perilya Broken Hill Ltd., through a regular preventive maintenance program and periodic
improvements as required. Power to the mine and processing facilities is provided by the grid
servicing the local community. Perilya Broken Hill Ltd. conducts regular exploration to define new
reserves, largely from underground core drilling platforms.
The Companys share of silver production in 2007 from the Broken Hill mine amounted to
approximately 1.6 million ounces of silver compared to 2.2 million ounces of silver in 2006.
Production during 2007 was impacted by a fatality in the first quarter of 2007 which necessitated a
change in the mining method. The cash cost per ounce of silver production, which includes the
operating cost contribution and smelting, refining and transportation costs, was $3.18 in 2007
compared to $3.09 in 2006.
Proven and Probable Ore Reserves Broken Hill Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1),
(3), (4), (5), (7) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
12,394 |
|
|
|
12,908 |
|
|
|
11,519 |
|
Ounces of silver per ton |
|
|
1.45 |
|
|
|
1.40 |
|
|
|
1.30 |
|
Contained ounces of
silver (000s) |
|
|
17,931 |
|
|
|
18,015 |
|
|
|
14,955 |
|
Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
9,844 |
|
|
|
10,872 |
|
|
|
10,825 |
|
Ounces of silver per ton |
|
|
3.82 |
|
|
|
3.82 |
|
|
|
1.93 |
|
Operating Data (Coeurs share) (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled |
|
|
1,646,203 |
|
|
|
2,288,355 |
|
|
|
667,140 |
|
Ore grade silver (oz./ton) |
|
|
1.19 |
|
|
|
1.28 |
|
|
|
1.31 |
|
Recovery (%) |
|
|
83.6 |
|
|
|
74.2 |
|
|
|
75.4 |
|
Silver produced (oz.) |
|
|
1,642,205 |
|
|
|
2,174,585 |
|
|
|
657,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost per Ounce of Silver |
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(2) |
|
$ |
3.18 |
|
|
$ |
3.09 |
|
|
$ |
2.72 |
|
Non-cash costs |
|
|
1.86 |
|
|
|
2.35 |
|
|
|
2.75 |
|
|
|
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
5.04 |
|
|
$ |
5.44 |
|
|
$ |
5.47 |
|
30
|
|
|
(1) |
|
Ore reserves are effective as of June 30, 2007. Metal prices used were $13.50/ounce
of silver. |
|
(2) |
|
Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See Item
7: Managements Discussion and Analysis of Financial Condition and Results of Operations;
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
|
(3) |
|
The ore reserves are underground minable reserves and include factors for mining
dilution and recovery. Dilution ranges from 0% to 20% additional tonnage while recovery ranges
from 80% to 100% of the diluted tonnage and averages 85%. |
|
(4) |
|
Metallurgical recovery factor of 74% should be applied to the silver reserve ounces. |
|
(5) |
|
The proven and probable reserves are a combination of zinc, lead and silver
mineralization remnant from historic mining and new parts or extensions of the mine. Proven
and probable reserves must be accessible as defined by the site specific conditions of the
mine. Furthermore, reserves are defined by definition drilling on a grid of 40 meters
horizontally by 20 meters vertically and over 70% of the proven reserves are drilled on a 20
meter by 10 meter grid. |
|
(6) |
|
The Broken Hill property was purchased on September 8, 2005. Operating data is
presented commencing as of that date. |
|
(7) |
|
Mineralized material includes 4,490,000 tons grading 2.24 Ag ounces per ton
classified as additional Inferred Mineral Resources. |
Discontinued Operation Coeur Silver Valley
On June 1, 2006, the Company completed the sale of 100% of the shares of its wholly-owned
subsidiary Coeur Silver Valley, Inc. to U.S. Silver Corporation for $15 million in cash and
additional consideration received of $1.1 million for working capital. Coeur Silver Valley was a
wholly-owned subsidiary of the Company which owned and operated the Galena underground silver mine,
an operating mine, and the Coeur and Caladay properties, that adjoin to the Galena mine, located
in the heart of the Coeur dAlene Mining District. Coeur Silver Valleys property consists of 6,131
acres of Company-owned fee land, patented mining claims and unpatented claims in addition to 4,800
acres of leased claims. Coeur Silver Valleys operations are accessed by paved road from US
Interstate 90 south of the town of Wallace, Idaho. Silver Valley recommenced operations at the
Coeur mine in June 1996 and continued mining existing reserves there through July 2, 1998 when
known reserves were depleted. Silver Valley resumed production at the Galena Mine in May 1997 and
operations continued to the date of the sale.
The Galena Mine property is located immediately west of the City of Wallace in Shoshone County
in northern Idaho. The property consists of 52 patented mining claims and 25 unpatented mining
claims totaling approximately 1,100 acres.
The Galena Mine is an underground silver-copper mine and is served by two vertical shafts.
The No. 3 shaft is the primary production shaft and is 5,800 feet deep. The Galena shaft primarily
provides utility access for water, electrical power and sand backfill for underground operations
down to the 2,400 level.
The mine utilizes conventional and mechanized cut and fill mining methods with sand backfill
to extract ore from the high grade silver-copper vein deposits that constitute the majority of the
ore reserves. Silver and copper are recovered by a flotation mill that produces a silver rich
concentrate which is sold to third-party smelters in Canada. Silver recovery through the mill
averaged 96% in 2006 and 97% in 2005.
Waste material from the milling process is deposited in a tailings pond located approximately
two miles from the minesite. The tailings containment pond, which is expanded on an as needed
basis, has capacity for approximately seven additional years at current production rates.
Silver production at the Galena Mine in 2006, up to the date of the sale, was approximately
768,674 ounces of silver versus 2.1 million ounces in 2005. Cash costs for 2006 were $9.75
compared to $8.37 per ounce in 2005. Total capital expenditures by Silver Valley at the Galena
Mine in 2006 were $0.6 million.
31
Silver mineralization at Coeur Silver Valley is hosted in near vertical fracture filling veins
that cut through quartzite and argillite of the Upper Revett Formation. Veins consist of siderite
with variable amounts of pyrite and quartz. The silver ore minerals are tetrahedrite and
argentiferous galena. Lead is contained in galena and copper in tetrahedrite and chalcopyrite.
Year-end Proven and Probable Ore Reserves Galena Mine
|
|
|
|
|
|
|
2005 |
Tons (000s) |
|
|
444 |
|
Ounces of silver per ton |
|
|
24.50 |
|
Contained ounces of silver (000s) |
|
|
10,879 |
|
Year-end Mineralized Material
|
|
|
|
|
|
|
2005 |
Tons (000s) |
|
|
2,580 |
|
Ounces of silver per ton |
|
|
11.74 |
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
Production |
|
|
|
|
|
|
|
|
Tons ore milled |
|
|
52,876 |
|
|
|
128,502 |
|
Ore grade silver (oz./ton) |
|
|
15.15 |
|
|
|
16.53 |
|
Recovery (%) |
|
|
96 |
|
|
|
97 |
|
Silver produced (oz.) |
|
|
768,674 |
|
|
|
2,060,338 |
|
Gold produced (oz.) |
|
|
180 |
|
|
|
282 |
|
|
|
|
|
|
|
|
|
|
Cost per Ounce of Silver |
|
|
|
|
|
|
|
|
Cash costs(1) |
|
$ |
9.75 |
|
|
$ |
8.37 |
|
Non-cash costs |
|
|
0.89 |
|
|
|
0.97 |
|
|
|
|
|
|
|
|
Total production costs |
|
$ |
10.64 |
|
|
$ |
9.34 |
|
|
|
|
(1) |
|
Cash costs per ounce of silver or gold represent a non-U.S.-GAAP measurement that
management uses to monitor and evaluate the performance of its mining operations. See Item
7: Managements Discussion and Analysis of Financial Condition and Results of Operations;
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs. |
SILVER AND GOLD DEVELOPMENT PROPERTIES
Bolivia San Bartolomé Silver Project
The San Bartolomé silver development project is located on the flanks of the Cerro Rico
mountain near the town of Potosí, Bolivia. Access to the property is by paved and all-weather
gravel roads leading south from the adjacent city of Potosí. Coeur acquired 100% of the equity in
Empresa Minera Manquiri S.A. (Manquiri) from Asarco on September 9, 1999. Manquiris principal
asset is the mining rights to the San Bartolomé project. The silver mineralization is hosted in
gravel (pallaco) and reworked gravel (sucu) deposits that occur on the flanks of Cerro Rico. Cerro
Rico is a prominent mountain in the region that reaches an elevation of over 15,400 feet. It is
composed of Tertiary-aged volcanic and intrusive rocks that were emplaced into and over older
sedimentary, basement rocks. Silver, along with tin and base metals, is located in multiple veins
that occur in a northeast trending belt that transects Cerro Rico. The upper parts of the Cerro
Rico mineralized system were subsequently eroded and redeposited into the flanking pallaco and sucu deposits. Silver is hosted in all
portions of the pallacos and sucus with the best grades segregated to the coarser-grained
silicified fragments. These deposits lend themselves to simple, free digging surface mining
techniques and can be extracted without drilling and blasting. Of the several pallaco deposits
which are controlled by Coeur and surround Cerro Rico, three are of primary importance and are
known as Huacajchi, Diablo (consisting of Diablo Norte, and Diablo Este) and Santa Rita.
32
The mineral rights for the San Bartolomé project are held through joint venture and long-term
lease agreements with several independent mining cooperatives and the Bolivian State Mining Company
(COMIBOL). Manquiri controls 67 square kilometers under lease from COMIBOL and 16,600 acres
under lease from the cooperatives at San Bartolomé and approximately 17.8 square miles of
concessions at the Khori Huasi property, a gold exploration target south of Potosí. The San
Bartolomé lease agreements are generally subject to a 4% production royalty payable partially to
the cooperatives and partially to COMIBOL. During 2003, the Company acquired additional mining
rights known as the Plahipo project which includes the mining rights to oxide dumps adjacent to the
original property package. The oxide dumps included in the Plahipo project are subject to a sliding
scale royalty payable to COMIBOL that is a function of silver price. The properties are currently
subject to annual payments for these mining rights totaling approximately $2.5 million. Power is
supplied to the development activities by the local power utility. Power for the future processing
facility will be provided from the national grid via a four-mile high tension line.
Silver was first discovered in the area around 1545. Mining of silver and lesser amounts of
tin has been conducted nearly continuously since that time from multiple underground mines driven
into Cerro Rico. The Company acquired the rights to the San Bartolomé project in September 1999
from ASARCO Incorporated. The prior owner did not conduct any mining or processing of the surface
ores at San Bartolomé.
We completed a preliminary feasibility study in 2000, which concluded that an open pit mine
was potentially capable of producing approximately 6 million ounces of silver annually. In 2003,
SRK, an independent consulting firm, was retained to review the reserve/resource estimate to
include additional sampling data to incorporate additional resources acquired with the Plahipo
project at Cerro Rico. During 2003, we retained Fluor Daniel Wright to prepare an updated
feasibility study which was completed at the end of the third quarter of 2004. The study provides
for the use of a cyanide milling flow sheet with a wet preconcentration screen circuit which will
result in the production of a doré that may be treated by a number of refiners under a tolling
agreement which results in the return of refined silver to the Company that is readily marketed by
metal banks and brokers to the ultimate customer. In the second quarter of 2004, we obtained all
operating permits. The Company estimates the total capital cost (excluding political risk insurance
premiums and capitalized interest) at San Bartolomé will be approximately $220 million of which
$129.2 million had been incurred as of December 31, 2007. The Company estimates initial operating
cash costs once the plant achieves full-scale operation of $4.10 per ounce, excluding royalties and
production taxes of $2.03 per ounce. Based on the current development schedule, the Company expects
commercial production to begin in the first quarter of 2008 and expects initial full-year
production of approximately nine million ounces of silver per year. No assurances can be made that
the project will achieve its schedule and cost estimates as discussed above.
In November 2007, Bolivias Congress approved a reform to the mining tax code. The Bolivia tax
rate on most mining companies has increased from 25% to 37.5%. However, mining companies similar to
San Bartolomé will receive a 5% credit based upon their specific operation. Thus, the tax rate for
San Bartolomé will be 32.5%.
The San Bartolomé project involves risks that are inherent in any mining venture, as well as
particular risks associated with the location of the project. The estimate of mineralized material
indicated by the geologic studies performed to date are preliminary in nature and may differ
materially after further metallurgical testing is completed. Also, managing mining projects in the
altiplano area of Bolivia, where Cerro Rico is located, presents logistical challenges. The
political and cultural differences of Bolivia may also present challenges.
33
We have obtained a political risk insurance policy from the Overseas Private Insurance
Corporation (OPIC) and a private insurer. The combined policies are in the amount of $155
million and cover 85% of any loss arising from expropriation, political violence or currency
inconvertibility. The policies are expected to cost approximately $3.4 million during the course
of construction and $0.21 per ounce of silver produced when the project commences commercial
production.
Year-end Probable Ore Reserves San Bartolomé Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1),
(2), (3), (4), (5), (6) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
42,043 |
|
|
|
46,176 |
|
|
|
46,176 |
|
Ounces of silver per ton |
|
|
3.64 |
|
|
|
3.29 |
|
|
|
3.29 |
|
Contained ounces of silver (000s) |
|
|
153,000 |
|
|
|
151,882 |
|
|
|
151,882 |
|
Year-end Mineralized Material San Bartolomé Project
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
15,816 |
|
|
|
1,166 |
|
|
|
1,166 |
|
Ounces of silver per ton |
|
|
2.21 |
|
|
|
3.44 |
|
|
|
3.44 |
|
|
|
|
(1) |
|
Metal prices used in calculating proven and probable reserves were $11 per ounce
of silver. |
|
(2) |
|
The ore reserves are open pit minable reserves and include an average 2.5% factor
for mining dilution at zero grade and 97.5% for mining recovery. |
|
(3) |
|
An average metallurgical recovery factor of 61.3% should be applied to the mined
silver reserve ounces. |
|
(4) |
|
Ore reserve estimates were prepared by the Companys technical staff. |
|
(5) |
|
Proven and probable reserves are defined by surface sampling drill holes or
vertical shafts with an average spacing of no more than 70 meters. In practice, ore
reserve blocks are defined by the number of proximal composites and three-dimensional
geologic controls. For probable reserves, the number of composites must be at least 8 with
a maximum search distance of less than 275 meters. San Bartolomé has only probable
reserves. Mineralized material is similarly classified. |
|
(6) |
|
Mineralized material includes 249,000 tons grading 1.78 silver ounces per ton
classified as additional Inferred Mineral Resources. |
Alaska Kensington Gold Project
The Kensington gold development project, consisting of the Kensington and adjacent Jualin
properties, is located on the east side of the Lynn Canal about 45 miles north-northwest of Juneau,
Alaska. The mine will be an underground gold mine accessed by a horizontal tunnel and will utilize
conventional and mechanized underground mining methods. The ore will be processed in a flotation
mill that produces a concentrate which will be sold to third party smelters. Waste material will
be deposited in an impoundment facility on the property. Power is supplied to the site by on-site
diesel generators. Access to the project is presently by helicopter, float plane or boat from
Juneau.
The Kensington property, which contains the projects reserves, consists of over 6,100 acres
of patented and unpatented federal mining claims and state claims. The adjacent Jualin property to
the south consists of 9,236 acres of patented and unpatented federal mining claims and state
claims.
34
On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur Alaska, Inc. (Coeur
Alaska), acquired the 50% ownership interest of Echo Bay Exploration Inc. (Echo Bay) in the
Kensington property from Echo Bay and Echo Bay Alaska, Inc. (collectively the Sellers), giving
Coeur 100% ownership of the Kensington property. The Kensington project consists of approximately 6,000 acres, of which
approximately 750 acres are patented claims. The property is located on the east side of Lynn
Canal between Juneau and Haines, Alaska. Coeur Alaska is obligated to pay Echo Bay a scaled net
smelter return royalty on 1.0 million ounces of future gold production after Coeur Alaska recoups
the $32.5 million purchase price and its construction and development expenditures incurred after
July 7, 1995 in connection with placing the property into commercial production. The royalty
ranges from 1% at $400 gold prices to a maximum of 2 1/2% at gold prices above $475, with the royalty
to be capped at 1.0 million ounces of production.
In the second quarter of 2004, we completed an updated feasibility study based on an
alternative operating scenario which eliminated the need for a man camp, simplified operating
logistics and focused mining on higher-grade areas of the deposit (thereby reducing significantly
the size of the mill facilities). This plan significantly reduced capital and operating costs while
preserving the ability to expand production as market conditions warrant. In the second quarter of
2005, the Company received its final construction permits and updated the construction and
operating cost estimates set forth in the feasibility study. Due to a general increase in commodity
prices impacting the industry in general, the Company retained an independent engineering firm to
review its capital cost estimate during the fourth quarter of 2005. The Company has expended
approximately $269.7 million as of December 31, 2007. The Company expects the per ounce cash cost
of production to be approximately $310 in the initial years of operation. The Company believes that
commercial production could commence in 2009, subject to successful resolution of the permitting
and litigation issues described below. No assurances can be made that the project will achieve its
schedule and cost estimates as discussed above.
On September 12, 2005 three environmental groups (Plaintiffs) filed a lawsuit in Federal
District Court in Alaska against the U.S. Army Corps of Engineers (Corps of Engineers) and the
U.S. Forest Service (USFS) seeking to invalidate the permit issued to Coeur Alaska, Inc. for the
Companys Kensington mine. The Plaintiffs claim the Clean Water Act (CWA) Section 404 permit issued
by the Corps of Engineers authorizing the deposition of mine tailings into Lower Slate Lake
conflicts with the CWA. They additionally claim the USFSs approval of the Amended Plan of
Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of
Engineers. Following the District Courts remand of the Section 404 permit to the Corps of
Engineers for further review, the Corps reinstated the Companys permit on March 29, 2006. The
lawsuit challenging the permit was re-opened on April 6, 2006; Coeur Alaska filed its answer to the
Amended Complaint; and Coeur Alaska, the State of Alaska, and Goldbelt, Inc., a local native
corporation, were granted Defendant-Intervenor status to join the agencies in their defense of the
permit.
On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge
and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of
the decision to the Ninth Circuit Court of Appeals (Ninth Circuit Court) and on August 9, 2006
the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Ninth Circuit
Court. The Ninth Circuit Court granted a temporary injunction pending appeal on August 24, 2006,
enjoining certain activities relating to the lake tailings facility.
On May 22, 2007 the Ninth Circuit Court reversed the District Courts August 4, 2006 decision
which had upheld the Companys 404 permit and issued its opinion that remanded the case to the
District Court with instructions to vacate the Companys 404 permit as well as the USFS Record of
Decision approving the general tailings disposal plan as well as the Goldbelt 404 permit to
construct the Cascade Point Marine Facility. On August 20, 2007, Coeur Alaska filed a Petition for
Rehearing En Banc with the Ninth Circuit Court, as did the State of Alaska and Goldbelt, Inc. The
Department of Justice, on behalf of the Corps of Engineers, and USFS additionally filed a limited Petition for
Rehearing with the Ninth Circuit panel seeking reconsideration of the mandate of the May 22, 2007
panel decision. On October 29, 2007, the Ninth Circuit denied the Petitions for Rehearing En Banc.
On November 14, 2007 the Ninth Circuit granted a stay of the mandate pending further appeal to the
Supreme Court, subject to the development of a reclamation plan for the lake area. The Company, and
the State of Alaska, filed Petitions for Certiorari to the Supreme Court of the United States on
January 28, 2008. The Company cannot now predict the potential for obtaining further appeal or if
it will prevail upon appeal if one is granted.
35
As a result of continuing litigation involving the proposed tailing impoundment area, the
Company began investigating alternative sites. The Company believes it has located an alternative
site and has entered into discussions with government officials and environmental groups who have
indicated that they will support this alternative site. It will be necessary to obtain modified or
potentially new permits for an alternative tailings site which the Company believes could occur in
2008 which would allow for the completion of the tailings facility and commencement of commercial
production in 2009. When the permitting schedule is finalized and definitive engineering is
completed for the alternate site, the projects capital and operating cost estimates will be
updated.
No assurance can be given as to whether or when the Company will obtain any necessary
modification to permits for an alternative tailing site or whether or when it will prevail upon
appeal of the legal challenge set forth above. Further, no assurance can be given as to whether or
when regulatory permits and approvals granted to the Company may be further challenged, appealed or
contested by third parties or issuing agencies, or as to whether the Company will place the
Kensington project into commercial production.
During 2007, the Company invested $92.3 million in connection with the development of the
mine. The Company plans to spend approximately $25.2 million on the project during 2008.
In 2007, the Company continued the exploration program started in the third quarter of 2005
designed to increase the size and geologic continuity of gold mineralization in its mineralized
material inventory and ultimately result in an increase in ore reserves. In 2007, Coeur Alaska
completed 2,189 feet of drilling on exploration from surface platforms on the Jualin property and
12,873 feet of underground drilling at Kensington for a total of 15,062 feet. For the year, a
total of $0.6 million was spent on this drilling.
The Kensington ore deposit consists of multiple precious metals bearing mesothermal, quartz,
carbonate, pyrite vein swarms and discrete quartz-pyrite veins hosted in the Cretaceous age Jualin
diorite. The gold-telluride-mineral calaverite is associated with the pyrite mineralization.
Year-end Proven and Probable Ore Reserves Kensington Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
|
|
(1, 2, 3, 4, 5, 6, 7) |
|
|
|
|
|
|
|
|
Tons (000s) |
|
|
4,419 |
|
|
|
4,419 |
|
|
|
4,206 |
|
Ounces of gold per ton |
|
|
0.31 |
|
|
|
0.31 |
|
|
|
0.25 |
|
Contained ounces of gold |
|
|
1,352,100 |
|
|
|
1,352,100 |
|
|
|
1,050,000 |
|
Year-end Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Tons (000s) |
|
|
4,320 |
|
|
|
4,320 |
|
|
|
3,116 |
|
Ounces of gold per ton |
|
|
0.20 |
|
|
|
0.20 |
|
|
|
0.27 |
|
|
|
|
(1) |
|
A gold price of $550 per ounce was used to determine ore reserves. |
|
(2) |
|
The ore reserves are underground minable reserves and include factors for
mining dilution and recovery. An allowance of 25.6% additional tonnage at 0.124 ounce
per ton is included for internal dilution. A factor for external dilution, averaging
10.2% at 0.056 ounces per ton, is also included. An average 97% factor for mining
recovery is included. |
|
(3) |
|
Average metallurgical recovery factor of 95.3% should be applied to the
contained gold reserve ounces. |
36
|
|
|
(4) |
|
Ore reserve estimates were prepared by the Companys technical staff. Snowden
Mining Industry Consultants, an independent consultant group, performed an independent
review of the Companys updated resource estimate model used to prepare the ore reserve
estimates. |
|
(5) |
|
The Kensington gold development project contains only probable reserves. The
reserves are defined with over 470,000 feet of core drilling, largely from underground
drilling fans, and 38,000 feet of underground workings. In practice, reserve blocks
are defined by the number of proximal composites and three-dimensional geologic
controls. Probable reserve blocks must at least 2 drill holes spaced not more than 60
feet from the block center. Mineralized material is similarly classified. |
|
(6) |
|
Ore reserve estimates are based upon an operating scenario according to
operating permits that have been received. Certain of these permits are the subject of
legal proceedings. See the additional discussion under Alaska Kensington Gold
Project, Item 3 Legal Proceedings and Part I, Item 1A Risk Factors. |
|
(7) |
|
Mineralized material includes 1,183,600 tons grading 0.21 gold ounces per ton
classified as additional Inferred Mineral Resources. |
Mexico Palmarejo Silver and Gold Project
On December 21, 2007, the company acquired all of the outstanding stock of Bolnisi Gold NL
(Bolnisi), an Australian company listed on the Australian Stock Exchange, and Palmarejo Silver
and Gold Corporation (Palmarejo) a Canadian company listed on the TSX Venture Exchange. The
principal asset of Bolnisi was its ownership of 72.8% of the outstanding common shares of
Palmarejo. Palmarejo is engaged in the exploration and development of silver and gold properties
located in the state of Chihuahua in northern Mexico and its principal silver and gold properties
are collectively referred to as the Palmarejo project. The Palmarejo project is currently under
development and is expected to commence commercial production in the first half of 2009.
The Palmarejo project (including the Trogan license area), the principal asset of Bolnisi
Gold NL (Bolnisi) and Palmarejo Silver and Gold Corporation, (Palmarejo) is located in the state of Chihuahua in northern Mexico,
approximately 15 kilometers northwest of the township of Temoris, where Bolnisi has established
field headquarters. Temoris is approximately 420 kilometers southwest from the city of Chihuahua,
the state capital, where Bolnisi has established its Mexican headquarters. In addition to the
Palmarejo project, the Company also acquired the Yecora exploration-stage property located in
Sonora, on the border with Chihuahua and the El Realito exploration-stage property in Chihuahua.
Due to the focus of activities on the Palmarejo project, no exploration work was undertaken at the
Yecora or El Realito projects during 2007.
The Palmarejo project contains a number of mineralized zones or areas of interest. The most
important of these to date is the Palmarejo zone in the far north of the concessions which covers
the old Palmarejo gold-silver mine based on the northwest-southeast trending La Prieta and La
Blanca gold-silver bearing structures. In addition to Palmarejo, mineralized vein and alteration
systems in the Trogan license area have been identified on other strongly mineralized corridors,
roughly sub-parallel to the Palmarejo zone. The most significant of these additional targets are
the Guadalupe (including Animas) and La Patria vein systems in the southern part of the property
and are currently under investigation by the Companys exploration teams.
The Palmarejo project consists of approximately 12,115 hectares covered by mining concessions,
of which about 11,817 hectares are owned outright by Planet Gold, a wholly-owned subsidiary of the
Company, with an additional 226 hectares held by means of leases and options to purchase, which
agreements are summarized below. In addition, Planet Gold has obtained the rights to, but has not
yet made all payments to complete, the purchase of 72 additional hectares.
37
The Chihuahua Informe Pericial (Mines Department) administers the lands in the Palmarejo
project area. The claim boundaries are surveyed as part of the process of obtaining mining
concessions in Mexico. Access to Palmarejo from Chihuahua is via paved Highway 127, a two-lane
road, to the town of San Rafael and then by gravel road to Temoris and finally Palmarejo. The
Chihuahua-Pacifico rail service operates between Chihuahua and Los Mochis on the southwest coast of
Mexico. Two passenger trains and one freight train operate daily from Chihuahua. Access from the
rail station at the town of Temoris to Palmarejo is along 35 km of government-maintained gravel
road, which is the extension of Highway 127, that continues on through to Chinipas. The climate of
the area is moderate. Average maximum temperature is about 34°C, with an average minimum
temperature of about 5°C. Rainfall occurs mainly during the summer months, with average annual
precipitation of about 800 millimeters. The elevation of Palmarejo is about 1,150 meters above sea
level. All anticipated exploration work can be conducted year round.
The Palmarejo project area has moderately well developed infrastructure and a local work force
familiar with mining operations. There are approximately four to five thousand inhabitants within
about a one-hour drive of the project. Chinipas and Temoris are the two nearest towns of any size,
both with an estimated population of approximately 1,500 inhabitants. The small village of
Palmarejo lies immediately northwest of the Palmarejo zone area and has an estimated population of
200.
A 33,000 volt power line has recently been constructed from Temoris to Chinipas by the
Commission of Federal Electricidad, the Mexican federal power authority. The line passes directly
through the Palmarejo area, but is inadequate to supply the electricity requirements of mining and
processing operations at Palmarejo without installation of a parallel line.
There are a number of potential sources of water in the area, including groundwater and local
streams that drain the project area, as well as the Chinipas River, which is located 12 kilometers
west of the Palmarejo-Trogan Project.
The Chihuahua-Pacifico railway connects Chihuahua with Los Mochis, located on Mexicos western
coast in the state of Sinaloa. Daily passenger and freight trains pass Temoris along this railway.
The rail station at Temoris is 35 kilometers by gravel road from Palmarejo. Airstrips for light
aircraft are located at Temoris and Chinipas.
The terrain at the Palmarejo project area is characterized by steep-sided hills and V-shaped
valleys, although sites for mining infrastructures such as a mill should not pose a significant
problem. Dumps and tailings will likely need to be placed within the upper reaches of drainage
valleys, which would require the construction of a retention dam(s).
The Palmarejo project is located on the western flank of the Sierra Madre Occidental, a
mountain range that comprises the central spine of northern Mexico. The north-northwest-trending
Sierra Madre Occidental is composed of a relatively flat-lying sequence of Tertiary volcanic rocks
that forms a volcanic plateau. This volcanic plateau is deeply incised in the Palmarejo project
area, locally forming steep-walled canyons. The Sierra Madre Occidental gives way to the west to an
extensional terrain that represents the southward continuation of the Basin and Range Province of
the western United States, and then to the coastal plain of western Mexico.
The gold and silver deposits at the Palmarejo project, typical of many of the other silver and
gold deposits in the Sierra Madre, are classified as epithermal deposits, and are hosted in
multiple veins, breccias and fractures. These geologic structures trend generally northwest
southeast and dip either southwest or northeast. The dip on the structures ranges from about 45
degrees to 70 degrees. In the mineralized portions of the structures gold and silver are zoned
from top to bottom with higher silver values occurring in the upper parts of the deposit to a
gold-rich basal portion, sometimes accompanied by base metal mineralization.
38
The capital cost of the project, from the time the Company acquired it on December 21, 2007 to
the commencement of commercial production, is currently estimated to be approximately $225 million.
Based upon the original prefeasibility report, it is expected that the project will commence
commercial production in the first half of 2009 and is expected to produce approximately 10 million
ounces of silver and 110,000 ounces of gold annually at an average cash cost per silver ounce of
($1.40), including gold by-product credit. The Company is currently completing the final updated
feasibility study, which is expected to be completed in the second quarter of 2008. No assurances
can be made that the project will achieve its schedule and cost estimates as discussed above.
The Company has budgeted over $8.0 million for exploration at the Palmarejo District in 2008,
its first year of exploration since completion of the acquisition, in an attempt to discover new
silver and gold mineralization and define new ore reserves.
Proven and probable ore reserves have not yet been established as of December 31, 2007. The
Company is currently completing its final updated feasibility study, which is expected to be
completed in the second quarter of 2008.
Year-end Mineralized Material Palmarejo Project
|
|
|
|
|
|
|
2007 |
|
|
(1),
(2), (3), (4) |
Tons (000s) |
|
|
33,852 |
|
Ounces of silver per ton |
|
|
4.44 |
|
Ounces of gold per ton |
|
|
0.05 |
|
|
|
|
(1) |
|
A cut-off grade of 0.023 ounces per ton Au equivalent (0.8 grams per tonne) was
used to estimate mineralized material. Au equivalent = Au grade + (Ag grade/55). This is
for the Palmarejo and La Patria deposits and the Guadalupe deposit to a depth of 150
meters. A cut off grade of 0.073 ounces per ton Au equivalent (2.5 grams per tonne) was
applied to Guadalupe below 150 meters depth. |
|
(2) |
|
Mineralized material includes estimates for the Palmarejo, Guadalupe and La
Patria zones prepared by Mine Development Associates (MDA) as of September 17, 2007. |
|
(3) |
|
The mineralized material estimates were based on information from 154,953 meters
(508,370 feet) of core and reverse circulation drilling. |
|
(4) |
|
Mineralized material includes 17,747,000 tons grading 0.04 gold ounces per ton
and 3.46 silver ounces per ton classified as additional Inferred Mineral Resources. |
EXPLORATION AND DEVELOPMENT ACTIVITY
Coeur, either directly or through its wholly-owned subsidiaries, owns, leases and has
interests in certain exploration-stage mining properties located in the United States, Chile,
Argentina, Tanzania, Bolivia, and as of December 21, 2007, Mexico. Exploration and mine
development expenditures of approximately $11.9 million, $9.5 million and $10.6 million were
incurred by the Company in 2007, 2006 and 2005, respectively.
US Kensington/Jualin
The Company possesses the right to develop the Jualin property, an exploratory property
located adjacent to the Kensington Property. A combined total of 15,062 feet of drilling was
completed in 2007 at Kensington, including 2,189 feet at the Falls-Diana leased, patented mining
claims. The Company plans for an additional drilling program in 2008. The Companys rights to use
and develop the Jualin property are subject to an Amended Lease Agreement dated August 5, 2005
between Hyak Mining Company Inc. as Lessor and Coeur Alaska Inc. as Lessee which expires in August 2020 with provision for lease extension.
Approximately $0.6 million was spent in exploration in 2007 on Jualin and Falls-Diana.
39
Chile Cerro Bayo Mine
Coeur continued to have exploration success at its 100%-owned Cerro Bayo gold/silver mining
operation in southern Chile. Approximately $2.9 million was spent in exploration, and $2.2 million
was capitalized as reserve development during 2007. A total of nearly 204,000 feet of core drilling
was completed during the year to discover new mineralization and define new ore reserves. The most
significant result of this program was the discovery of five new silver-and gold-bearing veins near
the Laguna Verde ore processing facility. The Company believes that there is potential to
discover additional high grade veins within the entire Cerro Bayo district. The exploration budget
for 2008 is $4.9 million.
Argentina Martha Mine
In 2007, the Companys exploration efforts consisted of mapping, sampling and over 72,200 feet
of core drilling for a total expenditure of $2.8 million, of which $0.8 million was capitalized as
reserve development. An ongoing drill program during 2008 is planned near the Martha mine totaling
approximately $3.5 million to explore for additional high-grade veins and define new ore reserves.
Argentina Other Properties
The Company also continued reconnaissance in Santa Cruz Province where its activities resulted
in identification and acquisition of four new exploration-stage properties in 2006 believed to be
prospective for silver and gold mineralization. These properties consist of the El Aguila, Sol de
Mayo, Sascha and Joaquin. El Aguila and Sol del Mayo are controlled by private Argentine
interest. The Company has the right to purchase both properties from the owners, who will retain a
production royalty, after completion of staged work and payment obligations. Sascha and Joaquin
are controlled by Mirasol Resources Ltd. a publicly-traded, Canadian exploration company. Coeur
has the right to earn up to a 71% managing interest in a joint venture with Mirasol in return for
staged work and payment obligations. In 2007 all four new properties were explored with mapping,
sampling, geophysical surveys and core drilling. By property, core drilling amounted to the
following subtotals: El Aguila 6,729 feet, Sol de Mayo 2,238 feet, Sascha 12,221 feet, and
Joaquin 1,841 feet. In addition, the Company also conducted exploration at its wholly-owned
Lejano and Cisne properties in west central Santa Cruz Province. At Cisne, a total of 2,595 core
feet were drilled in the fourth quarter. Total exploration spending in 2007 on all these
properties and reconnaissance activity to identify new properties in Argentina was $2.4 million and
the Company plans to continue to map, sample and drill targets on its holdings in 2008 with a
budget of $3.3 million.
Tanzania, Africa
During the first quarter of 2004, the Company acquired ten prospecting licenses for properties
located in the Lake Victoria Gold Belt of Tanzania, Africa, and in 2005, 2006 and 2007 added the
Saragurwa, Bismark and Pangea properties, respectively. Based on results from its annual
exploration programs, four of the original ten concessions were not renewed. Except for Saragurwa,
Bismark and Pangea, all properties are held 100% by a Tanzanian subsidiary of the Company.
Saragurwa and Bismark are owned by separate private Tanzanian interests and Pangea is controlled by
a Tanzanian subsidiary of Barrick Gold Company. Coeur Tanzania Ltd. has an option to acquire all
three properties in return for staged work and payment commitments.
In 2007, exploration work consisted of mapping, trenching, sampling and acquisition and
interpretation of detailed ground geophysical data and core and reverse circulation drilling. In
total 31,170 feet of drilling was completed in 2007. The majority of the drilling was completed at
Kiziba Hill and Saragurwa which lie on the same belt of Archean-aged rocks, commonly termed
greenstone, which host the Geita gold mine to the east.
40
Greenstones, a mixture of volcanic, sedimentary and intrusive rocks, are a major host to gold
mineralization around the globe. Gold anomalies defined in trenches on the Bunda 1 property, to
the northeast of the city of Mwanza, in 2006 were further explored this year.
During 2007, the Company spent $2.1 million on exploration activities in Tanzania and expects
to spend approximately $2.4 million in 2008.
SILVER AND GOLD PRICES
The Companys operating results are substantially dependent upon the world market prices of
silver and gold. The Company has no control over silver and gold prices, which can fluctuate
widely. The volatility of such prices is illustrated by the following table, which sets forth the
high and low prices of silver (as reported by Handy and Harman) and gold (London Final) per ounce
during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2007 |
|
2006 |
|
2005 |
|
|
High |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
Silver |
|
$ |
15.67 |
|
|
$ |
11.54 |
|
|
$ |
14.93 |
|
|
$ |
8.84 |
|
|
$ |
9.11 |
|
|
$ |
6.38 |
|
Gold |
|
$ |
841.10 |
|
|
$ |
608.40 |
|
|
$ |
725.00 |
|
|
$ |
524.75 |
|
|
$ |
536.50 |
|
|
$ |
411.10 |
|
|
MARKETING
The Company markets its metals products and concentrates primarily to bullion trading banks
and third party smelters. These customers then sell the metals to end users for use in industry
applications such as electronic circuitry, jewelry and silverware production and the manufacture
and development of photographic film. Sales of metals to bullion trading banks amounted to
approximately 47%, 47% and 45% of total sales of metals in 2007, 2006 and 2005, respectively, and
sales of metal concentrates to third party smelters amounted to approximately 53%, 53% and 55% of
total metal sales in 2007, 2006 and 2005, respectively. Generally, the loss of a single bullion
trading bank customer would not adversely affect the Company in view of the liquidity of the
product and availability of alternative trading banks. In 2007, the Company had sales of
concentrates to two third-party smelters, Met-Mex Penoles and Zinifex, which each constituted 10%
or more of the Companys total metal sales. A significant delay or disruption as the result of a
disruption in the Companys contracts could have a materially adverse effect on our operations if
we were unable to locate an alternate smelter to treat our concentrates.
The Company had no future silver or gold production hedged at December 31, 2007 and has no
plans to hedge in the future. Coeur has historically sold the gold from its mines both pursuant to
forward contracts and at spot prices prevailing at the time of sale. Silver has been sold at spot
prices prevailing at the time of sale.
GOVERNMENT REGULATION
General
The Companys commitment to environmental responsibility has been recognized in 24 awards
received since 1987, which included the Dupont/Conoco Environmental Leadership Award, awarded to
the Company on October 1, 1991 by a judging panel that included representatives from environmental
organizations and the federal government, the Star award granted on June 23, 1993 by the National
Environmental Development Association, the Environmental Waikato Regional Council award for Golden
Cross environmental initiative granted on May 15, 1995 and in March 2004 the Habitat Restoration
Award from the Nevada Division of Wildlife for developing habitat at the Rochester mine. In 1994,
the Companys Chairman and Chief Executive Officer, and in 1997, the Companys Vice President of
Environmental and Governmental Affairs, were awarded the American Institute of Mining,
Metallurgical and Petroleum Engineers Environmental Conservation Distinguished Service Award. In
2006, the Companys Kensington Gold Project was awarded the
prestigious 2006 Hardrock Mineral Community Outreach and Economic Security Award presented by the U.S. Bureau
of Land Management (BLM) in recognition of responsible mineral resource development while
demonstrating an understanding of sustainable development.
41
The Companys activities are
subject to extensive federal, state and local laws governing the
protection of the environment, prospecting, development, production, taxes, labor standards,
occupational health, mine safety, toxic substances and other matters. Although the Company is
usually involved in regulatory proceedings for renewal or reissuance of various permits, such
regulations have never caused the Company to close any mine. The costs associated with compliance
with such regulatory requirements are substantial and possible future legislation and regulations
could cause additional expense, capital expenditures, restrictions and delays in the development
and continued operation of the Companys properties, the extent of which cannot be predicted. In
the context of environmental permitting, including the approval of reclamation plans, the Company
must comply with known standards and regulations which may entail significant costs and delays.
Although Coeur has been recognized for its commitment to environmental responsibility and believes
it is in substantial compliance with applicable laws and regulations, amendments to current laws
and regulations, the more stringent implementation thereof through judicial review or
administrative action or the adoption of new laws could have a materially adverse effect upon the
Company.
For the years ended
December 31, 2007, 2006 and 2005, the Company expended $5.2 million, $5.6
million and $4.9 million, respectively, in connection with routine environmental compliance
activities at its operating properties and expects to expend approximately $5.0 million for that
purpose in 2008. Future environmental expenditures will be determined by governmental regulations
and the overall scope of the Companys operating and development activities.
Federal Environmental Laws
Certain mining wastes from extraction and beneficiation of ores are currently exempt from the
extensive set of Environmental Protection Agency (EPA) regulations governing hazardous waste,
although such wastes may be subject to regulation under state law as a solid or hazardous waste.
The EPA has worked on a program to regulate these mining wastes pursuant to its solid waste
management authority under the Resource Conservation and Recovery Act (RCRA). Certain ore
processing and other wastes are currently regulated as hazardous wastes by the EPA under RCRA. If
the Companys mine wastes were treated as hazardous waste or such wastes resulted in operations
being designated as a Superfund site under the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA or Superfund) for cleanup, material expenditures would be required
for the construction of additional waste disposal facilities or for other remediation expenditures.
Under CERCLA, any present owner or operator of a Superfund site or an owner or operator at the
time of its contamination generally may be held liable and may be forced to undertake remedial
cleanup action or to pay for the governments cleanup efforts. Such owner or operator may also be
liable to governmental entities for the cost of damages to natural resources, which may be
substantial. Additional regulations or requirements may also be imposed upon the Companys tailings
and waste disposal in Alaska under the Federal Clean Water Act (CWA) and state law counterparts,
and in Nevada under the Nevada Water Pollution Control Law which implements the CWA. Air emissions
are subject to controls under Nevadas and Alaskas air pollution statutes implementing the Clean
Air Act.
Proposed Mining Legislation
Legislation has been introduced regularly in the U.S. Congress over the last decade to change
the Mining Law of 1872, as amended, under which the Company holds unpatented mining claims on federal
lands. A portion of the Companys U.S. mining properties are on unpatented mining claims on
federal lands. It is possible that the Mining Law may be amended or be replaced by more onerous
legislation in the future. Previously proposed legislation contained a production royalty
obligation, new environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would be likely to result in
delays in permitting. Most recently, in late 2007, the U.S. House of Representatives passed a Hardrock
Mining and Reclamation Act of 2007. The bill contains new proposed royalties on gross revenues
for new and existing mining operations on public lands, among other provisions. The ultimate
content of the proposed legislation, if enacted, is uncertain. If a royalty on unpatented mining
claims were to be imposed under any ultimately enacted law, the Companys operations could be
adversely affected, although the majority of the Companys operations are either outside of the
United States or on private patented lands and unaffected by potential legislation. In addition,
the Forest Service and the Bureau of Land Management have considered revising regulations governing
operations under the Mining Law on federal lands they administer, which, if implemented, may result
in additional procedures and environmental conditions and standards on those lands.
42
Any reform of the Mining Law or Bureau of Land Management and Forest Service regulations
thereunder based on these initiatives could increase the costs of mining activities on unpatented
mining claims, or could materially impair the ability of the Company to develop or continue
operations which derive ore from federal lands, and as a result could have an adverse effect on the
Company and its results of operations. Until such time, if any, as new reform legislation or
regulations are enacted, the ultimate effects and costs of compliance on the Company cannot be
estimated.
Foreign Government Regulations
The mining properties of the Company that are located in Chile and Argentina are subject to
various government laws and regulations pertaining to the protection of the air, surface water,
ground water and the environment in general, as well as the health of the work force, labor
standards and the socioeconomic impacts of mining facilities upon the communities. A recently
established State Council for the Environment (CODEMA) has responsibility to define policy, approve
plans and programs, control regulatory activities and enforce compliance. The Company believes it
is in substantial compliance with all applicable laws and regulations to which it is subject in
Chile and Argentina.
The Republic of Bolivia, where the San Bartolomé project is located, and the country of
Mexico, where the Palmarejo project is located, have adopted laws and guidelines for environmental
permitting that are similar to those in effect in the United States and other South American
countries. The permitting process requires a thorough study to determine the baseline condition of
the mining site and surrounding area, an environmental impact analysis, and proposed mitigation
measures to minimize and offset the environmental impact of mining operations. The Company has
received all permits required to build and operate the San Bartolomé mine and the Palmarejo mine.
The Company does not directly hold any interest in mining properties in Australia. However,
under the respective Silver Sale Agreements with CBH Resources Limited and Perilya Broken Hill
Limited, the Company has purchased the silver reserves and resources in the ground of these mining
companies. These two companies are responsible for the mining operation and compliance with
government regulations and the Company is not responsible for compliance. The Company is however at
risk for any production stoppages resulting from non-compliance. The mining properties of CBH and
Perilya are subject to a range of state and federal government laws and regulations pertaining to
the protection of the air, surface water, ground water, noise, site rehabilitation and the
environment in general, as well as the occupational health and safety of the work force, labor
standards and the socio-economic impacts of mining facilities among local communities. In addition,
the various federal and state native title legislation recognizes and protects the rights and
interests in Australia of Aboriginal and Torres Strait Islander people in land and waters,
according to their traditional laws and customs, and may restrict mining and exploration activity
and/or result in additional costs. CBH and Perilya are required to deal with a number of
governmental departments in development and exploitation of their respective mining properties.
The Company is not aware of any substantial non-compliance with applicable laws and regulations to
which its partners are subject in Australia.
43
Maintenance of Claims
United States
At mining properties in the United States, including the Rochester and Kensington mines,
operations are conducted in part upon unpatented mining claims, as well as patented mining claims.
Pursuant to applicable federal law, it is necessary to maintain the unpatented claims, to pay to
the Secretary of the Interior, on or before August 31 of each year, a claim maintenance fee of $125
per claim. This claim maintenance fee is in lieu of the assessment work requirement contained in
the Mining Law. In addition, in Nevada, holders of unpatented mining claims are required to pay
the county recorder of the county in which the claim is situated an annual fee of $8.50 per claim.
No maintenance fees are payable for patented claims. Patented claims are similar to land held by
an owner who is entitled to the entire interest in the property with unconditional power of
disposition.
Chile
In Chile, operations are conducted upon mineral concessions granted by the national
government. For exploitation concessions (somewhat similar to a U.S. patented claim), to maintain
the concession, an annual tax is payable to the government before March 31 of each year in the
approximate amount of $1.14 per hectare. For exploration concessions, to maintain the right, the
annual tax is approximately $0.30 per hectare. An exploration concession is valid for a five-year
period. It may be renewed for new periods unless a third party claims the right to explore upon
the property, in which event the exploration concession must be converted to an exploitation
concession in order to maintain the rights to the concession.
Argentina
Minerals are owned by the Argentine government, which allows individual provinces to impose a
maximum 3% mine-mouth royalty on mineral production. The first step in acquiring mining rights is
filing a cateo, which gives exclusive prospecting rights for the requested area for a period of
time, generally up to 3 years. Maximum size of each cateo is 10,000 hectares; a maximum of 20
cateos can be held by a single entity (individual or company) in any one province.
The holder of a cateo has exclusive right to establish a Manifestation of Discovery (MD) on
that cateo, but MDs can also be set without a cateo on any land not covered by someone elses
cateo. MDs are filed as either a vein or disseminated discovery. A square protection zone can be
declared around the discovery up to 840 hectares for vein MD or up to 7,000 hectares for a
disseminated MD. The protection zone grants the discoverer exclusive rights for an indefinite
period, during which the discoverer must provide an annual report presenting a program of
exploration work and investments related to the protection zone. A MD can later be upgraded to a
Mina (mining claim), which give the holder the right to begin commercial extraction of minerals.
Bolivia
The Bolivian national mining company, Corporación Minera de Bolivia (Comibol), is the
underlying owner of all of the mining rights relating to the San Bartolomé project, with the
exception of the Thuru property, which is owned by the Cooperativa Reserva Fiscal, a local miners
cooperative. Comibols ownership derives from the Supreme Decree 3196 in October 1952, when the
government nationalized most of the mines in Potosí. Comibol has leased the mining rights for the
surface sucu or pallaco gravel deposits to several Potosí cooperatives. The cooperatives in turn
have subleased their mining rights to Manquiri through a series of joint venture contracts with
Manquiri. In addition to those agreements with the cooperatives, Coeur, through its subsidiary
Manquiri, holds additional mining rights under lease agreements with Comibol. All of Manquiris
mining and surface rights collectively constitute the San Bartolomé project.
44
Australia
At mining properties in Australia operated by CBH Resources Limited and Perilya Broken Hill
Limited, operations are conducted on designated Mining Leases issued by the relevant state
government mining department. Mining Leases are issued for a specific term and include a range of
environmental and other conditions including the payment of production royalties, annual lease fees
and the use of cash or a bank guarantee as security for reclamation liabilities. The amounts
required to be paid to secure reclamation liabilities are determined on a case by case basis. In
addition, both CBH Resources Limited and Perilya Broken Hill Limited hold a range of exploration
titles permits which are also issued by the respective state government mining departments for
specified terms and require payment of annual fees and completion of designated expenditure
programs on the leases to maintain title. In Australia, minerals in the ground are owned by the
state until severed from the ground through mining operations.
Mexico
In order to carry out mining activities in Mexico, the Company is required to obtain a mining
concession from the General Bureau of Mining which belongs to the Ministry of Economy (Secretaría
de Economía) of the Federal Government, or previously granted concession rights assigned, and both
recorded with the Public Registry of Mining. In addition, mining works may have to be authorized by
other authorities when performed at villages, dams, channels, general communications ways,
submarine shelf of islands, islets and reefs, marine beds and subsoil, federal maritime-terrestrial
zones, etc. Reports have to be filed with the Bureau in May of each year evidencing previous
calendar year mining works. Generally nominal biannual mining duties are payable in January and
August of each year, however lack of said duties payment may cause cancellation of the concessions.
Upon any expiration or cancellation of the concession, the Company
must fulfill certain obligations such as refraining from withdrawal
permanent works of fortification, providing certain technical
reports, and other required actions mandated by the Bureau.
EMPLOYEES
The number of full-time employees at December 31, 2007 of Coeur dAlene Mines Corporation and
its subsidiaries was:
|
|
|
|
|
United States Corporate Staff and Office |
|
|
37 |
|
Rochester Mine |
|
|
42 |
|
Kensington Project |
|
|
80 |
|
South American Corporate Offices |
|
|
18 |
|
South American Exploration |
|
|
52 |
|
Cerro Bayo Mine/Chile (1) |
|
|
502 |
|
Mina Martha/Argentina (1) |
|
|
163 |
|
San Bartolomé Project/Bolivia |
|
|
79 |
|
Palmarejo Project/Mexico |
|
|
69 |
|
Australia |
|
|
1 |
|
Tanzania |
|
|
4 |
|
|
|
|
|
Total |
|
|
1,047 |
|
|
|
|
|
|
|
|
(1) |
|
The Company maintains two labor agreements in South America, consisting of a
labor agreement with Syndicato de Trabajadores de Compañía Minera Cerro Bayo Ltd. at
its Cerro Bayo mine in Chile and with Associacion Obrera Minera Argentina at its Martha
mine in Argentina. The agreement at Cerro Bayo is effective from December 24, 2007 to
December 21, 2010 and the agreement at Mina Martha is effective from June 12, 2006 to
June 1, 2008. Additionally, certain employees at San Bartolomé are covered by a labor
agreement that became effective October 11, 2007; this Bolivian labor agreement does
not have a fixed term. As of December 31, 2007, the Company had approximately 44% of
its worldwide labor force covered by collective bargaining agreements. |
45
Item 3. Legal Proceedings.
States of Maine, Idaho and Colorado Superfund Sites Related to Callahan Mining Corporation
During 1991, the Company acquired all of the outstanding common stock of Callahan Mining
Corporation.
During 2001, the United States Forest Service made a formal request for information regarding
the Deadwood Mine Site located in central Idaho. Callahan Mining Corporation had operated at this
site during the 1940s. The Forest Service believes that some cleanup action is required at the
location. However, Coeur dAlene Mines Corporation did not acquire Callahan until 1991, more than
40 years after Callahan disposed of its interest in the Deadwood property. The Company did not
make any decisions with respect to generation, transport or disposal of hazardous waste at the
site. Therefore, it is believed that the Company is not liable for any cleanup, and if Callahan
might be liable, it has no substantial assets with which to satisfy any such liability. To date,
no claim has been made by the United States for any cleanup costs against either the Company or
Callahan.
During 2002, the EPA made a formal request for information regarding a Callahan mine site in
the State of Maine. Callahan operated there in the late 1960s, shut the operations down in the
early 1970s and disposed of the property. The EPA contends that some cleanup action is warranted
at the site, and listed it on the National Priorities List in late 2002. The Company believes that
because it made no decisions with respect to generation, transport or disposal of hazardous waste
at this location, it is not liable for any cleanup costs. If Callahan might have liability, it has
no substantial assets with which to satisfy such liability. To date, no claim has been made for
any cleanup costs against either the Company or Callahan.
In January 2003, the U.S. Forest Service made a formal request for information regarding a
Callahan mine site in the State of Colorado known as the Akron Mine Site. Callahan operated there
in approximately the late 1930s through the 1940s, and to the Companys knowledge, disposed of the
property. The Company is not aware of what, if any, cleanup action the Forest Service is
contemplating. However, the Company did not make decisions with respect to generation, transport or
disposal of hazardous waste at this location, and therefore believes it is not liable for any
cleanup costs. If Callahan might have liability, it has no substantial assets with which to satisfy
such liability. To date, no claim has been made for any cleanup costs against either the Company or
Callahan.
Federal District Court of Alaska Permit Challenge
On September 12, 2005 three environmental groups (Plaintiffs) filed a lawsuit in Federal
District Court in Alaska against the U.S. Army Corps of Engineers (Corps of Engineers) and the
U.S. Forest Service (USFS) seeking to invalidate the permit issued to Coeur Alaska, Inc. for the
Companys Kensington mine. The Plaintiffs claim the Clean Water Act (CWA) Section 404 permit issued
by the Corps of Engineers authorizing the deposition of mine tailings into Lower Slate Lake
conflicts with the CWA. They additionally claim the USFSs approval of the Amended Plan of
Operations is arbitrary and capricious because it relies on the 404 permit issued by the Corps of
Engineers. Following the District Courts remand of the Section 404 permit to the Corps of
Engineers for further review, the Corps reinstated the Companys permit on March 29, 2006. The
lawsuit challenging the permit was re-opened on April 6, 2006; Coeur Alaska filed its answer to the
Amended Complaint; and Coeur Alaska, the State of Alaska, and Goldbelt, Inc., a local native
corporation, were granted Defendant-Intervenor status to join the agencies in their defense of the
permit.
46
On August 4, 2006, the Federal District Court in Alaska dismissed the Plaintiffs challenge
and upheld the Section 404 permit. On August 7, 2006 the Plaintiffs filed a Notice of Appeal of
the decision to the Ninth Circuit Court of Appeals (Ninth Circuit Court) and on August 9, 2006
the Plaintiffs additionally filed a Motion for Injunction Pending Appeal with the Ninth Circuit Court. The Ninth Circuit Court granted a
temporary injunction pending appeal on August 24, 2006, enjoining certain activities relating to
the lake tailings facility.
On May 22, 2007 the Ninth Circuit Court reversed the District Courts August 4, 2006 decision
which had upheld the Companys 404 permit and issued its opinion that remanded the case to the
District Court with instructions to vacate the Companys 404 permit as well as the USFS Record of
Decision approving the general tailings disposal plan as well as the Goldbelt 404 permit to
construct the Cascade Point Marine Facility. On August 20, 2007, Coeur Alaska filed a Petition for
Rehearing En Banc with the Ninth Circuit Court, as did the State of Alaska and Goldbelt, Inc. The
Department of Justice, on behalf of the Corps of Engineers, and USFS additionally filed a limited Petition for
Rehearing with the Ninth Circuit panel seeking reconsideration of the mandate of the May 22, 2007
panel decision. On October 29, 2007, the Ninth Circuit denied the Petitions for Rehearing En Banc.
On November 14, 2007 the Ninth Circuit granted a stay of the mandate pending further appeal to the
Supreme Court, subject to the development of a reclamation plan for the lake area. The Company and
the State of Alaska, filed Petitions for Certiorari to the Supreme Court of the United States on
January 28, 2008. The Company cannot now predict the potential for obtaining further appeal or if
it will prevail upon appeal if one is granted.
The Company has identified a potential alternate tailings site and is engaged in discussions
with government officials in addition to pursuing its appeal to the Supreme Court of the United
States. Coeur cannot predict the potential for obtaining a Supreme Court appeal or if one is
granted, if it will prevail upon appeal. No assurance can be given as to whether or when regulatory
permits and approvals granted to the Company may be further challenged, appealed or contested by
third parties or issuing agencies, or as to whether the Company will place the Kensington project
into commercial production.
This litigation has contributed to an increase in capital costs. While the Company cannot now
predict with certainty the outcome of this litigation, it believes it should ultimately prevail. In
the event that the Company does not prevail, it could be necessary to seek an alternate site for
the tailings disposal facility. The Company has identified an alternate site which it believes can
be permitted and has submitted a modified plan to the USFS. Based upon the Companys current
estimates, an impairment writedown could be necessary should the expectation of the long-term price
for gold decrease below approximately $606 per ounce. As of December 31, 2007, the carrying value
of the Kensington projects long-lived assets was $298.2 million.
AVAILABLE INFORMATION
The Companys website is http://www.coeur.com. Coeur makes available free of charge,
on or through its website, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and Forms 3 and 4, as soon as reasonably practicable after electronically
filing such reports with the Securities and Exchange Commission. Copies of the charters of the
Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of the
Board of Directors are available at our website www.coeur.com. Coeur has adopted a Code of Conduct
and Ethics for Directors, Officers and Employees, including the chief executive officer, chief
financial officer and chief accounting officer. A copy of the code of ethics and our Corporate
Governance Guidelines are available at our website www.coeur.com. Information contained on the
Companys website is not a part of this report.
The Companys Board of Directors adopted an addendum to its Policies and Procedures Manual to
establish a code of ethics for the chief executive and principal financial and accounting officers
of the Company. The Company will provide a copy of the code free of charge to any person that
requests a copy by writing to the Secretary, Coeur dAlene Mines Corporation, 400 Coeur dAlene
Mines Building, 505 Front Avenue, Post Office Box I, Coeur dAlene, Idaho 83816-0316.
47
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of shareholders of the Company was convened and adjourned (due to lack of a
quorum) on December 3, 2007, and, reconvened on December 7, 2007 (at which time a quorum was
present or represented by proxy). Of the Companys total 278,465,840 shares of common stock
outstanding on October 19, 2007 (the record date), 143,826,056 shares (or 51.65% of the
outstanding shares of common stock) were represented in person or by proxy at the special meeting.
The first proposal was a proposal to amend and restate the Companys articles of incorporation
to increase the authorized number of shares of the Companys common stock from 500,000,000 to
750,000,000. The proposal was approved by the holders of more than the required majority of the
shares voting at the meeting by a vote of 126,966,199 shares for, 11,569,155 shares against with
5,290,702 shares abstaining.
The second proposal was the proposed issuance of new shares of the Companys common stock to
Bolnisi Gold NL shareholders in connection with the combination of Bolnisi with the Company, and
the proposed issuance of new shares of the Companys common stock to Palmarejo Silver and Gold
Corporation shareholders in connection with the combination of the Company and Palmarejo. The
proposal was approved by the holders of more than the required majority of the outstanding shares
of common stock by a vote of 127,482,674 shares for, 11,034,944 shares against with 5,308,438
shares abstaining.
The third and last proposal was a proposal to approve the adjournment or postponement of the
special meeting, if necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt any of the foregoing proposals. The
proposal was approved by the holders of more than the required majority of the shares of common
stock voting at the meeting by a vote of 123,865,808 shares for, 14,149,841 shares against with
5,810,407 shares abstaining.
Item 4A. Executive Officers of the Registrant.
The following table sets forth certain information regarding the Companys current executive
officers:
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Age |
|
Positions with Coeur |
|
Since |
Dennis E. Wheeler
|
|
|
65 |
|
|
Chairman of the Board
|
|
|
1992 |
|
|
|
|
|
|
|
Chief Executive Officer and President
|
|
|
1986 |
|
James A. Sabala
|
|
|
53 |
|
|
Executive Vice President and Chief Financial Officer
|
|
|
2003 |
|
Richard M. Weston
|
|
|
56 |
|
|
Senior Vice President, Operations
|
|
|
2006 |
|
James K. Duff
|
|
|
62 |
|
|
President, South American Operations
|
|
|
2005 |
|
Donald J. Birak
|
|
|
54 |
|
|
Senior Vice President, Exploration
|
|
|
2004 |
|
Alan L. Wilder
|
|
|
59 |
|
|
Senior Vice President, Project Development
|
|
|
2004 |
|
Mitchell J. Krebs
|
|
|
36 |
|
|
Senior Vice President, Corporate Development
|
|
|
2003 |
|
Kelli C. Kast
|
|
|
41 |
|
|
Vice President, General Counsel and
Corporate Secretary
|
|
|
2005 |
|
Luke J. Russell
|
|
|
52 |
|
|
Vice President, Environmental Services
|
|
|
2005 |
|
Tom T. Angelos |
|
|
52 |
|
|
Vice President, Controller and Chief Accounting Officer |
|
|
2004 |
|
Larry A. Nelson
|
|
|
55 |
|
|
Vice President, Human Resources
|
|
|
2008 |
|
Carolyn S. Turner
|
|
|
39 |
|
|
Treasurer
|
|
|
2008 |
|
48
Dennis E. Wheeler has been Chairman of the Board of Coeur dAlene Mines Corporation since May 1992
and Chief Executive Officer since December 1986. Previously, Mr. Wheeler served as President of
Coeur, commencing in December 1980. Mr. Wheeler was our Chief Administrative Officer from December
1980 to December 1986, Secretary from January 1980 to December 1980 and Senior Vice President and
General Counsel from 1978 to 1980.
James A. Sabala was appointed as Executive Vice President and Chief Financial Officer of Coeur in
January 2003. Prior to that, Mr. Sabala was Vice President and Chief Financial Officer of
Stillwater Mining Company from 1998 to 2003, and from 1981 to 1998 was employed by Coeur in various
capacities, most recently as Executive Vice President and Chief Financial Officer.
Richard M. Weston was appointed Senior Vice President Operations in May, 2007. Prior to that Mr.
Weston served as Senior Vice President and Managing Director of Coeur Australia Pty. Limited and
Vice President of South American Operations in December 2006. Prior thereto, he served as Senior
Vice President and Managing Director of Coeur Australia from February 2006 to December 2006. Prior
to that, Mr. Weston was employed with Barrick Australia from January 2003 to February 2006 as
General Manager of Cowal Gold Project and Rio Tinto Australia from December 2000 to November 2002
as General Manager of the ERA and Jabiluka mines.
James K. Duff was appointed President South American Operations September of 2005. Prior to that
Mr. Duff served as President of Empresa Manquiri SA from June 2005 to September 2005. Prior to that
he was employed as an independent contractor by Coeur from November 2002 to June 2005 and prior to
that he was employed from March 1990 to November 2002 as Vice President Business Development for
Coeur dAlene Mines.
Donald J. Birak was appointed as Senior Vice President Exploration of Coeur in January 2004.
Prior to that, Mr. Birak was employed with AngloGold North America, Inc. from March 1999 to January
20, 2004, as Vice President Exploration and as Vice President of Exploration for Independence
Mining Company Inc from 1995 to 1999.
Alan L. Wilder was appointed Senior Vice President, Project Development in July 2004. Prior to
that Mr. Wilder was an independent consultant from July 2002 to July 2004 for Glamis Gold and
Coeur dAlene Mines Corporation. Prior thereto, he was Project Manager for BHP Tintaya from
February 2000 to June 2002 and from 1999 to 2000 he was an independent consultant for the mining
industry.
Mitchell J. Krebs was appointed to the position of Senior Vice President, Corporate Development of
Coeur in May 2006. Prior to that, Mr. Krebs served as Vice President, Corporate Development of
Coeur from February 2003 to May 2006. Mr. Krebs was employed as an independent consultant from
September 2001 through January 2003, and from May 2000 through August 2001 was employed as the
President of Mine Depot Inc. From August 1999 through April 2000, Mr. Krebs was an associate with
Allied Capital Corporation. From August 1995 through November 1997, Mr. Krebs was employed by Coeur
as Manager, Acquisition Evaluation.
49
Kelli C. Kast was appointed Vice President, General Counsel and Corporate Secretary in May 2005.
Prior to that Ms. Kast served as Corporate Counsel for HealtheTech. Inc. from April 2004 to April
2005. Prior thereto, she served as Assistant General Counsel and Corporate Secretary for Global
Water Technologies Inc. and Psychrometric Systems, Inc. from December 1997 through February 2003.
Luke J. Russell was appointed Vice President of Environmental Services at Coeur in 2005. Prior to
that, Mr. Russell was Coeur dAlene Basin Project Manager for the State of Idahos Department of
Environmental Quality. Before that, he held a series of increasingly responsible positions in the
management of environmental affairs at major mining companies and was previously Director of
Environmental and Government Affairs for Coeur from 1995 to 2000.
Tom T. Angelos was appointed Vice President, Controller and Chief Accounting Officer in December
2006. Prior to that, he had held the position of Controller and Chief Accounting Officer of Coeur
since 2004. Mr. Angelos was previously Controller of Stillwater Mining Company from 1998 to 2004,
and from 1983 to 1998 was employed by Coeur in various capacities, most recently as Controller.
Larry A. Nelson was appointed Vice President Human Resources in January 2008. Prior to that, Mr.
Nelson served as Director Human Resources from 2005 to 2008. Mr. Nelson held the position of Human
Resources Manager at Coeur Silver Valley from 1996 to 2005. Prior to that, he was employed in
corporate and site human resource positions within the mining industry since 1977.
Carolyn S. Turner was appointed Treasurer in January 2008. Prior to that, Ms. Turner served as
Assistant Treasurer from 2006 to 2008. Ms. Turner served as Director of Budgeting and Forecasting
from 2005 to 2006 and from 1996 to 2005 held various positions at Coeur Silver Valley, most
recently as Administrative Manager.
Part II
|
|
|
Item 5. |
|
Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities. |
The Companys Common Stock is listed on the New York Stock Exchange (the NYSE), the Toronto
Stock Exchange (TSX) and the Australian Stock Exchange (ASX). The following table sets forth,
for the periods indicated, the high and low closing sales prices of the Common Stock as reported by
the NYSE:
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
2006 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
6.71 |
|
|
$ |
4.11 |
|
Second Quarter |
|
$ |
7.37 |
|
|
$ |
3.95 |
|
Third Quarter |
|
$ |
5.75 |
|
|
$ |
4.41 |
|
Fourth Quarter |
|
$ |
5.45 |
|
|
$ |
4.35 |
|
2007 |
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
4.80 |
|
|
$ |
3.95 |
|
Second Quarter |
|
$ |
4.32 |
|
|
$ |
3.51 |
|
Third Quarter |
|
$ |
4.22 |
|
|
$ |
3.25 |
|
Fourth Quarter |
|
$ |
4.94 |
|
|
$ |
3.62 |
|
2008 |
|
|
|
|
|
|
|
|
First Quarter (through February 12, 2008) |
|
$ |
5.06 |
|
|
$ |
4.20 |
|
50
The Company has not paid per share cash distributions or dividends on its Common Stock since 1996.
Future distributions or dividends on the Common Stock, if any, will be determined by the Companys
Board of Directors and will depend upon the Companys results of operations, financial conditions, capital
requirements and other factors.
At February 12, 2008, there were 4,698 record holders of the Companys outstanding Common
Stock.
On December 21, 2007 the Company, Bolnisi Gold NL (Bolnisi) and Palmarejo Silver and Gold
Corporation (Palmarejo) completed the transactions whereby Coeur acquired all the shares of
Bolnisi and Palmarejo in exchange for approximately 272 million new shares of the Companys common
stock and cash. Bolnisi shareholders received 0.682 shares of Coeur common stock for each Bolnisi
share they owned (or, at the election of the Bolnisi shareholder, CHESS Depositary interests
representing Coeur shares) and Palmarejo shareholders (other than Bolnisi) received 2.715 Coeur
shares for each Palmarejo share they owned. The Coeur shares issued were not registered under the
Securities Act of 1933 in reliance on Section 3(a)(10) thereof, as the shares issued to Bolnisi
shareholders were issued pursuant to a scheme of arrangement that was approved by the Federal Court
of Australia, and the shares issued to Palmarejo shareholders were issued pursuant to a plan of
arrangement that was approved by the Ontario Superior Court of Justice.
The Company made no repurchases of its common stock during the year ended December 31, 2007.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2007 regarding the Companys
equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares remaining |
|
|
|
Number of shares to be |
|
|
|
|
|
|
available for future issuance |
|
|
|
issued upon exercise of |
|
|
Weighted-average exercise |
|
|
under equity compensation |
|
|
|
outstanding options, |
|
|
price of outstanding options, |
|
|
plans (excluding securities |
|
Plan category |
|
warrants and rights |
|
|
warrants and rights |
|
|
reflected in column (a)) |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
Equity compensation
plans approved by
security holders |
|
|
2,281,595 |
|
|
$ |
3.42 |
|
|
|
4,875,261 |
|
Equity compensation
plans not approved
by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,281,595 |
|
|
$ |
3.42 |
|
|
|
4,875,261 |
|
|
|
|
|
|
|
|
|
|
|
51
STOCK PERFORMANCE CHART
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG COEUR DALENE MINES CORPORATION,
S&P 500 INDEX AND PEER GROUP INDEX
The following chart compares our cumulative total shareholder return for the five years ended
December 31, 2007 with (i) the S&P 500 Index, which is a performance indicator of the overall stock
market, and (ii) a peer group determined by us.
Comparison of Five-Year Cumulative Total Return Coeur dAlene Mines Corporation, S&P 500, and
Coeur dAlene Mines Comparator Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec. |
|
|
Dec. |
|
|
Dec. |
|
|
Dec. |
|
|
Dec. |
|
|
Dec. |
|
|
|
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
Coeur dAlene Mines
Corporation Common
Stock |
|
|
|
100.00 |
|
|
|
|
301.04 |
|
|
|
|
204.68 |
|
|
|
|
208.34 |
|
|
|
|
257.82 |
|
|
|
|
257.29 |
|
|
|
S&P 500 Index |
|
|
|
100.00 |
|
|
|
|
128.68 |
|
|
|
|
142.67 |
|
|
|
|
149.65 |
|
|
|
|
173.28 |
|
|
|
|
182.67 |
|
|
|
Peer Group Index** |
|
|
|
100.00 |
|
|
|
|
123.37 |
|
|
|
|
117.98 |
|
|
|
|
155.14 |
|
|
|
|
221.81 |
|
|
|
|
266.80 |
|
|
|
Assumes $100 invested on January 1, 2003, in our common stock, S&P 500 Index and the peer group index.
|
|
|
* |
|
Total return assumes reinvestment of dividends. |
|
** |
|
The issuers of common stock included in the peer group in 2007 are Agnico Eagle Mines,
Goldcorp, Hecla Mining Co., IAM Gold, Kinross Gold Corp., Northgate Minerals, Pan American
Silver Corp. and Stillwater Mining Co. (Bema Gold was dropped due to mergers and
acquisitions, Centerra was dropped due to the fact that it no longer trades on any U.S. stock
exchange and Yamana Gold was added.) The issuers of common stock included in the peer group in
2006 are Agnico Eagle Mines, Bema Gold, Centerra Gold, Goldcorp, Hecla Mining Co., IAM Gold,
Kinross Gold Corp., Meridian Gold, Inc., Northgate Minerals, Pan American Silver Corp. and
Stillwater Mining Co. |
52
Item 6. Selected Financial Data
The following table summarizes certain selected consolidated financial data with respect to
the Company and its subsidiaries and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
|
|
(In thousands, except per share data) |
|
Income Statement Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metal |
|
$ |
215,319 |
|
|
$ |
216,573 |
|
|
$ |
156,284 |
|
|
$ |
109,047 |
|
|
$ |
93,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales |
|
|
117,025 |
|
|
|
92,378 |
|
|
|
88,232 |
|
|
|
63,715 |
|
|
|
64,970 |
|
Depreciation and depletion |
|
|
20,984 |
|
|
|
26,772 |
|
|
|
18,889 |
|
|
|
16,833 |
|
|
|
15,107 |
|
Administrative and general |
|
|
23,875 |
|
|
|
19,369 |
|
|
|
20,624 |
|
|
|
17,499 |
|
|
|
12,264 |
|
Exploration |
|
|
11,941 |
|
|
|
9,474 |
|
|
|
10,553 |
|
|
|
8,031 |
|
|
|
4,277 |
|
Litigation settlement |
|
|
507 |
|
|
|
2,365 |
|
|
|
1,600 |
|
|
|
|
|
|
|
|
|
Pre-development |
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
11,449 |
|
|
|
1,967 |
|
Other holding costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
174,332 |
|
|
|
150,358 |
|
|
|
145,955 |
|
|
|
117,527 |
|
|
|
103,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
40,987 |
|
|
|
66,215 |
|
|
|
10,329 |
|
|
|
(8,480 |
) |
|
|
(9,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
18,195 |
|
|
|
18,654 |
|
|
|
8,385 |
|
|
|
3,165 |
|
|
|
2,064 |
|
Interest expense, net |
|
|
(365 |
) |
|
|
(1,224 |
) |
|
|
(2,485 |
) |
|
|
(2,831 |
) |
|
|
(12,851 |
) |
Merger expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,675 |
) |
|
|
|
|
Loss on early retirement of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
17,830 |
|
|
|
17,430 |
|
|
|
5,900 |
|
|
|
(15,341 |
) |
|
|
(52,351 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
income taxes |
|
|
58,817 |
|
|
|
83,645 |
|
|
|
16,229 |
|
|
|
(23,821 |
) |
|
|
(61,794 |
) |
Income tax (provision) benefit |
|
|
(14,927 |
) |
|
|
(8,226 |
) |
|
|
(1,483 |
) |
|
|
5,785 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
43,890 |
|
|
|
75,419 |
|
|
|
14,746 |
|
|
|
(18,036 |
) |
|
|
(61,787 |
) |
Income (loss) from discontinued operations |
|
|
|
|
|
|
1,935 |
|
|
|
(4,195 |
) |
|
|
1,178 |
|
|
|
(2,139 |
) |
Gain on sale of net assets of discontinued operation |
|
|
|
|
|
|
11,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,306 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
43,890 |
|
|
$ |
88,486 |
|
|
$ |
10,551 |
|
|
$ |
(16,858 |
) |
|
$ |
(66,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
86 |
|
|
|
2,391 |
|
|
|
447 |
|
|
|
(908 |
) |
|
|
(556 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
$ |
43,976 |
|
|
$ |
90,877 |
|
|
$ |
10,998 |
|
|
$ |
(17,766 |
) |
|
$ |
(66,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income (Loss) Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Income (Loss) Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.15 |
|
|
$ |
0.28 |
|
|
$ |
0.06 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.37 |
) |
Income (loss) from discontinued operations |
|
|
|
|
|
|
0.05 |
|
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
(0.01 |
) |
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
0.15 |
|
|
$ |
0.33 |
|
|
$ |
0.04 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Income (Loss) Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
0.06 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.37 |
) |
Income (loss) from discontinued operations |
|
|
|
|
|
|
0.04 |
|
|
|
(0.02 |
) |
|
|
0.00 |
|
|
|
(0.01 |
) |
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
0.14 |
|
|
$ |
0.30 |
|
|
$ |
0.04 |
|
|
$ |
(0.08 |
) |
|
$ |
(0.39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of
common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
285,972 |
|
|
|
271,357 |
|
|
|
242,915 |
|
|
|
215,969 |
|
|
|
168,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
310,524 |
|
|
|
296,082 |
|
|
|
243,683 |
|
|
|
215,969 |
|
|
|
168,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,651,694 |
|
|
$ |
849,626 |
|
|
$ |
594,816 |
|
|
$ |
525,777 |
|
|
$ |
259,467 |
|
Working capital |
|
$ |
152,390 |
|
|
$ |
383,082 |
|
|
$ |
281,977 |
|
|
$ |
345,894 |
|
|
$ |
96,994 |
|
Long-term liabilities |
|
$ |
812,650 |
|
|
$ |
210,117 |
|
|
$ |
206,921 |
|
|
$ |
198,873 |
|
|
$ |
29,461 |
|
Shareholders equity |
|
$ |
1,727,367 |
|
|
$ |
580,994 |
|
|
$ |
341,553 |
|
|
$ |
293,454 |
|
|
$ |
197,478 |
|
53
|
|
|
(1) |
|
On December 21, 2007, the Company completed its acquisition of all the shares of
Bolnisi and Palmarejo in exchange for a total of approximately 272 million shares of Coeur
common stock and a total cash payment of approximately $1.1 million. The total consideration
paid amounted to $1.1 billion and the total liabilities assumed were $0.7 billion. |
|
|
|
Item 7. |
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations |
General
The results of the Companys operations are significantly affected by the market prices of
gold and silver which fluctuate widely and are affected by many factors beyond the Companys
control, including interest rates, expectations regarding inflation, currency values, governmental
decisions regarding the disposal of precious metals stockpiles, global and regional political and
economic conditions, and other factors.
The Companys business strategy is to capitalize on the ore reserve/mineralized material bases
located at its operating mines and the expertise of its management team to continue as a leading
primary silver production company through long-term, cash flow generating growth. The principal
elements of the Companys business strategy are to: (i) increase the Companys silver production
and reserves; (ii) decrease cash costs and increase production at the Companys existing silver
mining operations; (iii) transform development-stage properties into producing mines; (iv) acquire
operating mines, mineral interests, exploration and/or development properties with a view to
reducing the Companys cash and total costs, provide short-term positive cash flow return and
expand its silver production base and reserves; and (v) continue to explore for new silver and gold
discoveries primarily near its existing mine sites and evaluate new opportunities to expand its
production through acquisitions and exploration.
The Rochester mine, Cerro Bayo mine and Martha mine, each operated by the Company, and the
Endeavor and Broken Hill mines which are operated by others, constituted the Companys principal
sources of mining revenues in 2007.
Critical Accounting Policies and Estimates
Management considers the following policies to be most critical in understanding the judgments
that are involved in preparing the Companys consolidated financial statements and the
uncertainties that could impact its results of operations, financial condition and cash flows. Our
consolidated financial statements are impacted by the accounting policies used and the estimates
and assumptions made by management during their preparation. We have identified the policies below
as critical to our business operations and the understanding of our results of operations.
Managements discussion and analysis of our financial condition and results of operations are based
on our consolidated financial statements, which have been prepared in
conformity with U.S. generally accepted accounting
principles (GAAP). The preparation of these statements
requires that we make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our financial
statements, and the reported amounts of revenue and expenses during the reporting period. We base
these estimates on historical experience and on assumptions that we consider reasonable under the
circumstances; however, reported results could differ from those based on the current estimates
under different assumptions or conditions. The impact and any associated risks
related to these policies on our business operations are discussed throughout Managements
Discussion and Analysis of Financial Condition and Results of Operations. The areas requiring the
use of managements estimates and assumptions relate to recoverable ounces from proven and probable
ore reserves that are the basis of future cash flow estimates and units-of-production depreciation
and amortization calculations; useful lives utilized for depreciation, depletion and amortization
for long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; the
amount and timing of reclamation and remediation costs; and valuation allowances for deferred tax
assets. For a detailed discussion on the application of these and other accounting policies, see
Note B in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K.
54
Revenue Recognition. Revenue includes sales value received for our principal product, silver, and
associated by-product revenues from the sale of by-product metals consisting primarily of gold and
copper. Revenue is recognized when title to silver and gold passes to the buyer and when
collectability is reasonably assured. The passing of title to the customer is based on terms of
the sales contract. Product pricing is determined at the point revenue is recognized by reference
to active and freely traded commodity markets, for example the London Bullion Market, an active and
freely traded commodity market for both gold and silver in an identical form to the product sold.
Under our concentrate sales contracts with third-party smelters, final gold and silver prices
are set on a specified future quotation period, typically one to three months, after the shipment
date based on metal market prices. Revenues are recorded under these contracts at the time title
passes to the buyer based on the forward price for the expected settlement period. The contracts,
in general, provide for a provisional payment based upon provisional assays and quoted metal
prices. Final settlement is based on the average applicable price for a specified future period,
and generally occurs from three to six months after shipment. Final sales are settled using
smelter weights, settlement assays (average of assays exchanged and/or umpire assay results) and
are priced as specified in the smelter contract. The Companys 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 derivative does not qualify for hedge accounting. The embedded
derivative is recorded as a derivative asset in prepaid expenses and other, or a derivative
liability in accrued liabilities and other on the balance sheet and is adjusted to fair value
through revenue each period until the date of final gold and silver settlement. The form of the
material being sold, after deduction for smelting and refining is in an identical form to that sold
on the London Bullion Market. The form of the product is metal in flotation concentrate, which is
the final process for which the Company is responsible.
The effects of forward sales contracts are reflected in revenue at the date the related
precious metals are delivered. Third party smelting and refining costs are recorded as a reduction
of revenue.
At December 31, 2007, the Company had outstanding provisionally priced sales of $61.2 million
consisting of 3.3 million ounces of silver and 20,775 ounces of gold, which had a fair value of
approximately $63.8 million including the embedded derivative. For each one cent per ounce change
in realized silver price, revenue would vary (plus or minus) approximately $33,300 and for each one
dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately
$20,800. At December 31, 2006, the Company had outstanding provisionally priced sales of $74.5
million consisting of 4.6 million ounces of silver and 29,577 ounces of gold, which had a fair
value of approximately $75.6 million including the embedded derivative. For each one cent per ounce
change in realized silver price, revenue would vary (plus or minus) approximately $45,700 and for
each one dollar per ounce change in realized gold price, revenue would vary (plus or minus)
approximately $29,600.
Ore Reserve Estimates. The preparation of this Annual Report on Form 10-K requires us to make
estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial statements, and the reported amounts
of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The
most critical accounting principles upon which the Companys financial status depends are those
requiring estimates of recoverable ounces from proven and probable ore reserves and/or assumptions
of future commodity prices. There are a number of uncertainties inherent in estimating quantities
of ore reserves, including many factors beyond our control. Ore reserve estimates are based upon
geologic and engineering evaluations of samplings of drill holes and other openings. These
estimates involve assumptions regarding future silver and gold prices, the geology of our mines,
the mining methods we use and the related costs we incur to develop and mine our reserves. Changes
in these assumptions could result in material adjustments to our reserve estimates. We use ore
reserve estimates in determining the units-of-production depreciation and amortization expense, as
well as in evaluating possible mine asset impairments.
55
We review and evaluate our long-lived assets for impairment when events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. We utilize the
methodology set forth in Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, to evaluate the recoverability of capitalized
mineral property costs. An impairment is considered to exist if total estimated future cash flows
or probability-weighted cash flows on an undiscounted basis is less than the carrying amount of the
assets, including property, plant and equipment, mineral property, development property, and any
deferred costs such as deferred stripping. The accounting estimates related to impairment are
critical accounting estimates because the future cash flows used to determine whether an impairment
exists is dependent on reserve estimates and other assumptions, including silver and gold prices,
production levels, and capital and reclamation costs, all of which are based on detailed
engineering life-of-mine plans. An impairment loss exists when estimated undiscounted cash flows
expected to result from the use of the asset and its eventual disposition are less than its
carrying amount. Any impairment loss recognized represents the excess of the assets carrying
value over its estimated fair value. The Company reviews the carrying value of its assets whenever
events or changes in circumstances indicate that the carrying amount of its assets may not be fully
recoverable. The Company did not record any impairments during the years ended December 31, 2007,
2006 and 2005.
We depreciate our property, plant and equipment, mining properties and mine development costs
using the units-of-production method over the estimated life of the ore body based on our proven
and probable recoverable reserves or on a straight-line basis over the useful life, whichever is
shorter. The accounting estimates related to depreciation and amortization are critical accounting
estimates because the 1) determination of reserves involves uncertainties with respect to the
ultimate geology of our reserves and the assumptions used in determining the economic feasibility
of mining those reserves; and 2) changes in estimated proven and probable reserves and useful asset
lives can have a material impact on net income.
Ore on leach pad. The Rochester Mine utilizes the heap leach process to extract silver and
gold from ore. The heap leach process is a process of extracting silver and gold by placing ore on
an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the
contained silver and gold, which are then recovered in metallurgical processes.
The key stages in the conversion of ore into silver and gold are (i) the blasting process in
which the ore is broken into large pieces; (ii) the processing of the ore through a crushing
facility that breaks it into smaller pieces; (iii) the transportation of the crushed ore to the
leach pad where the leaching solution is applied; (iv) the collection of the leach solution; (v)
subjecting the leach solution to the precipitation process, in which gold and silver is converted
back to a fine solid; (vi) the conversion of the precipitate into dorè; and (vii) the conversion by
a third party refinery of the dorè into refined silver and gold bullion.
We use several integrated steps to scientifically measure the metal content of ore placed on
the leach pads during the key stages. As the ore body is drilled in preparation for the blasting
process, samples of the drill residue are assayed to determine estimated quantities of contained
metal. We estimate the quantity of ore by utilizing global positioning satellite survey techniques. We then process the ore through a
crushing facility where the output is again weighed and sampled for assaying. A metallurgical
reconciliation with the data collected from the mining operation is completed with appropriate
adjustments made to previous estimates. We then transport the crushed ore to the leach pad for
application of the leaching solution. As the leach solution is collected from the leach pads, we
continuously sample for assaying. We measure the quantity of leach solution by flow meters
throughout the leaching and precipitation process. After precipitation, the product is converted
to dorè, which is the final product produced by the mine. We again sample and assay the dorè.
Finally, a third party smelter converts the dorè into refined silver and gold bullion. At this
point we are able to determine final ounces of silver and gold available for sale. We then review
this end result and reconcile it to the estimates we had used and developed throughout the
production process. Based on this review, we adjust our estimation procedures when appropriate.
56
Our reported inventories include metals estimated to be contained in the ore on the leach pads
of $50.9 million as of December 31, 2007. Of this amount, $25.9 million is reported as a current
asset and $25.0 million is reported as a noncurrent asset. The distinction between current and
noncurrent is based upon the expected length of time necessary for the leaching process to remove
the metals from the broken ore. The historical cost of the metal that is expected to be extracted
within twelve months is classified as current and the historical cost of metals contained within
the broken ore that will be extracted beyond twelve months is classified as noncurrent. The ore on
leach pad inventory is stated at actual production costs incurred to produce and place ore on the
leach pad during the current period, adjusted for the effects on monthly production costs of
abnormal production levels.
The estimate of both the ultimate recovery expected over time, and the quantity of metal that
may be extracted relative to such twelve month period, requires the use of estimates which are
inherently inaccurate since they rely upon laboratory testwork. Testwork consists of 60 day leach
columns from which we project metal recoveries into the future. The quantities of metal contained
in the ore are based upon actual weights and assay analysis. The rate at which the leach process
extracts gold and silver from the crushed ore is based upon laboratory column tests and actual
experience occurring over approximately nineteen years of leach pad operation at the Rochester
Mine. The assumptions we use to measure metal content during each stage of the inventory
conversion process includes estimated recovery rates based on laboratory testing and assaying. We
periodically review our estimates compared to actual experience and revise our estimates when
appropriate. The length of time necessary to achieve our currently estimated ultimate recoveries
of 61.5% for silver and 93% for gold is estimated to be between 5 and 10 years. In August 2007,
the Company terminated mining and crushing operations as ore reserves were fully mined. Residual
heap leach activities are expected to continue through 2011. The Company has announced that it may
consider the sale of the property during 2008.
When we began operations at the Rochester mine in 1986, based solely on laboratory testing, we
estimated the ultimate recovery of silver and gold at 50% and 80%, respectively. Since 1986, we
have adjusted the expected ultimate recovery three times (once in each of 1989, 1997 and 2003)
based upon actual experience gained from leach operations. In 1989, we increased our estimated
recoveries for silver and gold to 55% and 85%, respectively. The change was accounted for
prospectively as a change in estimate, which had the effect of increasing the estimated recoverable
ounces of silver and gold contained in the heap by 1.6 million ounces and 10,000 ounces,
respectively. In 1997, we revised our estimated recoveries for silver and gold to 59% and 89%,
respectively, which increased the estimated recoverable ounces of silver and gold contained in the
heap by 4.7 million ounces and 39,000 ounces, respectively. Finally, in 2003, we revised our
estimated recoveries for silver to between 59% and 61.5% depending on the area being leached, and
93% for gold, which increased the estimated recoverable ounces of silver and gold contained in the
heap by 1.8 million ounces and 41,000 ounces, respectively. The leach cycle at the Rochester Mine
requires leaching to approximately the year 2011 for all recoverable metal to be recovered.
57
If our estimate of ultimate recovery requires adjustment, the impact upon our inventory
valuation and upon our income statement would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive/Negative |
|
Positive/Negative |
|
|
Change in Silver Recovery |
|
Change in Gold Recovery |
|
|
1% |
|
2% |
|
3% |
|
1% |
|
2% |
|
3% |
Quantity of recoverable ounces |
|
1.7 million |
|
3.5 million |
|
5.2 million |
|
|
13,240 |
|
|
|
26,480 |
|
|
|
39,720 |
|
Positive impact on future
cost of production per silver
equivalent ounce for
increases in recovery rates |
|
$ |
1.68 |
|
|
$ |
2.78 |
|
|
$ |
3.55 |
|
|
$ |
0.82 |
|
|
$ |
1.49 |
|
|
$ |
2.04 |
|
Negative impact on future
cost of production per silver
equivalent ounce for
decreases in recovery rates |
|
$ |
(2.93 |
) |
|
$ |
(9.30 |
) |
|
$ |
(33.77 |
) |
|
$ |
(1.04 |
) |
|
$ |
(2.38 |
) |
|
$ |
(4.21 |
) |
Inventories of ore on leach pads are valued based upon actual production costs incurred to
produce and place such ore on the leach pad, adjusted for the effects on monthly production of
costs of abnormal production levels, less costs allocated to minerals recovered through the leach
process. The costs consist of those production activities occurring at the mine site and include
the costs, including depreciation, associated with mining, crushing and precipitation circuits. In
addition, refining is provided by a third party refiner to place the metal extracted from the leach
pad in a saleable form. These additional costs are considered in the valuation of inventory.
Reclamation and remediation costs. Reclamation and remediation costs are based principally on
legal and regulatory requirements. Management estimates costs associated with reclamation of
mining properties as well as remediation cost for inactive properties. The Company follows SFAS
No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction, development and
normal use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a reasonable estimate
of fair value can be made. The fair value of the liability is added to the carrying amount of the
associated asset and this additional carrying amount is depreciated over the life of the asset. An
accretion cost, representing the increase over time in the present value of the liability, is
recorded each period in depreciation, depletion and amortization expense. As reclamation work is
performed or liabilities are otherwise settled, the recorded amount of the liability is reduced.
Future remediation costs for inactive mines are accrued based on managements best estimate at
the end of each period of the undiscounted costs expected to be incurred at the site. Such cost
estimates include, where applicable, ongoing care and maintenance and monitoring costs. Changes in
estimates are reflected in earnings in the period an estimate is revised.
Operating Statistics and Ore Reserve Estimates
The Companys total production from continuing operations in 2007 was 11.5 million ounces of
silver and 92,014 ounces of gold, compared to 12.8 million ounces of silver and 116,254 ounces of
gold in 2006. Total estimated proven and probable reserves at December 31, 2007 were approximately
216.0 million ounces of silver and 1.5 million ounces of gold, compared to silver and gold ore
reserves at December 31, 2006 of approximately 216.5 million ounces and 1.5 million ounces,
respectively.
58
The following table shows the estimated amounts of proven and probable ore reserves and
mineralized material at the following Company locations at year-end 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proven and Probable Ore Reserves (1) |
|
Mineralized Material |
|
|
|
|
|
|
Grade |
|
Grade |
|
Ounces Ag |
|
Ounces Au |
|
|
|
|
|
Grade |
|
Grade |
|
|
Tons (000s) |
|
Ag oz/t |
|
Au oz/t |
|
(000s) |
|
(000s) |
|
Tons (000s) |
|
Ag oz/t |
|
Au oz/t |
Rochester |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,664 |
|
|
|
0.85 |
|
|
|
0.01 |
|
Cerro Bayo |
|
|
782 |
|
|
|
9.26 |
|
|
|
0.14 |
|
|
|
7,234 |
|
|
|
112 |
|
|
|
2,865 |
|
|
|
9.28 |
|
|
|
0.14 |
|
Mina Martha |
|
|
154 |
|
|
|
53.97 |
|
|
|
0.07 |
|
|
|
8,293 |
|
|
|
11 |
|
|
|
165 |
|
|
|
32.75 |
|
|
|
0.04 |
|
Endeavor (2) |
|
|
19,731 |
|
|
|
1.52 |
|
|
|
|
|
|
|
29,926 |
|
|
|
|
|
|
|
12,291 |
|
|
|
2.44 |
|
|
|
|
|
Broken Hill (2) |
|
|
12,394 |
|
|
|
1.45 |
|
|
|
|
|
|
|
17,931 |
|
|
|
|
|
|
|
9,844 |
|
|
|
3.82 |
|
|
|
|
|
San Bartolomé |
|
|
42,043 |
|
|
|
3.64 |
|
|
|
|
|
|
|
153,003 |
|
|
|
|
|
|
|
15,816 |
|
|
|
2.21 |
|
|
|
|
|
Kensington |
|
|
4,419 |
|
|
|
|
|
|
|
0.31 |
|
|
|
|
|
|
|
1,352 |
|
|
|
4,320 |
|
|
|
|
|
|
|
0.20 |
|
Palmarejo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,852 |
|
|
|
4.44 |
|
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tons |
|
|
79,523 |
|
|
|
|
|
|
|
|
|
|
|
216,387 |
|
|
|
1,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ag oz/t |
|
Au oz/t |
|
|
|
|
|
Ag oz/t |
|
Au oz/t |
Summary by metal: |
|
Total tons (000s) |
|
(Wt. Avg.) |
|
(Wt. Avg.) |
|
Total tons (000s) |
|
(Wt. Avg.) |
|
(Wt. Avg.) |
Silver |
|
|
75,104 |
|
|
|
2.88 |
|
|
|
|
|
|
|
107,495 |
|
|
|
2.91 |
|
|
|
|
|
Gold |
|
|
5,354 |
|
|
|
|
|
|
|
0.28 |
|
|
|
73,865 |
|
|
|
|
|
|
|
0.04 |
|
|
|
|
(1) |
|
Using silver price of $11.00 and gold price of $600, except for Endeavor which uses a
$15.00 silver price, Broken Hill which uses a $13.50 silver price and Kensington which uses
a gold price of $550. |
|
(2) |
|
Ore reserves are provided by the operator as of June 30, 2007, the end of the operators
most recent fiscal year. These totals do not include additions or depletions through December 31,
2007. |
The ore reserves at December 31, 2007 may change with fluctuations in the price of gold and silver.
The following table shows the estimated changes to ore reserves at mines operated by the Company
at different pricing ranges.
Proven and Probable Ore Reserve Sensitivity to Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per ounce |
|
Per ounce |
|
|
|
|
|
(000s) |
|
(000s) |
|
|
Silver Price |
|
Gold Price |
|
Tons (000s) |
|
Ounces Ag |
|
Ounces Au |
Cerro Bayo |
|
$ |
10 |
|
|
$ |
550 |
|
|
|
625 |
|
|
|
6,235 |
|
|
|
97 |
|
|
|
$ |
11 |
|
|
$ |
600 |
|
|
|
782 |
|
|
|
7,234 |
|
|
|
112 |
|
|
|
$ |
12 |
|
|
$ |
650 |
|
|
|
839 |
|
|
|
7,739 |
|
|
|
117 |
|
|
|
$ |
13 |
|
|
$ |
600 |
|
|
|
895 |
|
|
|
8,126 |
|
|
|
120 |
|
Mina Martha |
|
$ |
10 |
|
|
$ |
550 |
|
|
|
148 |
|
|
|
8,200 |
|
|
|
10 |
|
|
|
$ |
11 |
|
|
$ |
600 |
|
|
|
154 |
|
|
|
8,293 |
|
|
|
11 |
|
|
|
$ |
12 |
|
|
$ |
650 |
|
|
|
160 |
|
|
|
8,377 |
|
|
|
11 |
|
|
|
$ |
13 |
|
|
$ |
700 |
|
|
|
164 |
|
|
|
8,434 |
|
|
|
11 |
|
San Bartolomé |
|
$ |
10 |
|
|
|
|
|
|
|
36,967 |
|
|
|
142,060 |
|
|
|
|
|
|
|
$ |
11 |
|
|
|
|
|
|
|
42,043 |
|
|
|
153,003 |
|
|
|
|
|
|
|
$ |
12 |
|
|
|
|
|
|
|
48,331 |
|
|
|
165,413 |
|
|
|
|
|
|
|
$ |
13 |
|
|
|
|
|
|
|
52,783 |
|
|
|
173,135 |
|
|
|
|
|
Kensington |
|
|
|
|
|
$ |
510 |
|
|
|
4,102 |
|
|
|
|
|
|
|
1,294 |
|
|
|
|
|
|
|
$ |
550 |
|
|
|
4,419 |
|
|
|
|
|
|
|
1,352 |
|
|
|
|
|
|
|
$ |
600 |
|
|
|
4,594 |
|
|
|
|
|
|
|
1,380 |
|
59
The following table presents production information by mine and consolidated sales information
for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
2005 |
Rochester |
|
|
|
|
|
|
|
|
|
|
|
|
Tons processed |
|
|
5,060,678 |
|
|
|
10,399,416 |
|
|
|
9,327,180 |
|
Ore grade/Ag oz |
|
|
0.65 |
|
|
|
0.74 |
|
|
|
0.91 |
|
Ore grade/Au oz |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.01 |
|
Recovery/Ag oz (A) |
|
|
141.4% |
|
|
|
65.9% |
|
|
|
67.5% |
|
Recovery/Au oz (A) |
|
|
167.6% |
|
|
|
68.9% |
|
|
|
76.2% |
|
Silver production ounces |
|
|
4,614,780 |
|
|
|
5,113,504 |
|
|
|
5,720,489 |
|
Gold production ounces |
|
|
50,408 |
|
|
|
71,891 |
|
|
|
70,298 |
|
Cash cost/oz |
|
$ |
1.52 |
|
|
$ |
2.80 |
|
|
$ |
4.82 |
|
Total cost/oz |
|
$ |
3.82 |
|
|
$ |
5.84 |
|
|
$ |
6.66 |
|
Cerro Bayo |
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled |
|
|
387,378 |
|
|
|
428,346 |
|
|
|
403,695 |
|
Ore grade/Ag oz |
|
|
4.68 |
|
|
|
5.76 |
|
|
|
7.52 |
|
Ore grade/Au oz |
|
|
0.11 |
|
|
|
0.10 |
|
|
|
0.16 |
|
Recovery/Ag oz |
|
|
94.4% |
|
|
|
94.5% |
|
|
|
94.7% |
|
Recovery/Au oz |
|
|
92.2% |
|
|
|
93.0% |
|
|
|
92.8% |
|
Silver production ounces |
|
|
1,709,830 |
|
|
|
2,331,060 |
|
|
|
2,875,047 |
|
Gold production ounces |
|
|
37,479 |
|
|
|
40,923 |
|
|
|
61,058 |
|
Cash cost/oz |
|
$ |
8.22 |
|
|
$ |
3.04 |
|
|
$ |
0.54 |
|
Total cost/oz |
|
$ |
11.82 |
|
|
$ |
5.46 |
|
|
$ |
2.30 |
|
Martha Mine |
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled |
|
|
37,047 |
|
|
|
35,843 |
|
|
|
35,293 |
|
Ore grade/Ag oz |
|
|
78.10 |
|
|
|
79.93 |
|
|
|
62.53 |
|
Ore grade/Au oz |
|
|
0.12 |
|
|
|
0.10 |
|
|
|
0.08 |
|
Recovery/Ag oz |
|
|
95.0% |
|
|
|
94.7% |
|
|
|
94.9% |
|
Recovery/Au oz |
|
|
92.7% |
|
|
|
92.5% |
|
|
|
92.9% |
|
Silver production ounces |
|
|
2,748,705 |
|
|
|
2,712,846 |
|
|
|
2,093,464 |
|
Gold production ounces |
|
|
4,127 |
|
|
|
3,440 |
|
|
|
2,589 |
|
Cash cost/oz |
|
$ |
6.27 |
|
|
$ |
4.88 |
|
|
$ |
4.60 |
|
Total cost/oz |
|
$ |
6.78 |
|
|
$ |
5.36 |
|
|
$ |
5.01 |
|
Endeavor (B) |
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled |
|
|
1,146,857 |
|
|
|
750,115 |
|
|
|
463,129 |
|
Ore grade/Ag oz |
|
|
1.40 |
|
|
|
1.01 |
|
|
|
1.52 |
|
Recovery/Ag oz |
|
|
48.0% |
|
|
|
63.5% |
|
|
|
45.0% |
|
Silver production ounces |
|
|
772,609 |
|
|
|
481,991 |
|
|
|
316,169 |
|
Cash cost/oz |
|
$ |
2.67 |
|
|
$ |
2.85 |
|
|
$ |
2.05 |
|
Total cost/oz |
|
$ |
3.65 |
|
|
$ |
3.87 |
|
|
$ |
3.35 |
|
Broken Hill (B) |
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled |
|
|
1,646,203 |
|
|
|
2,288,355 |
|
|
|
667,140 |
|
Ore grade/Ag oz |
|
|
1.19 |
|
|
|
1.28 |
|
|
|
1.31 |
|
Recovery/Ag oz |
|
|
83.6% |
|
|
|
74.2% |
|
|
|
75.4% |
|
Silver production ounces |
|
|
1,642,205 |
|
|
|
2,174,585 |
|
|
|
657,093 |
|
Cash cost/oz |
|
$ |
3.18 |
|
|
$ |
3.09 |
|
|
$ |
2.72 |
|
Total cost/oz |
|
$ |
5.04 |
|
|
$ |
5.44 |
|
|
$ |
5.47 |
|
CONSOLIDATED PRODUCTION TOTALS |
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces |
|
|
11,488,129 |
|
|
|
12,813,986 |
|
|
|
11,662,262 |
|
Gold ounces |
|
|
92,014 |
|
|
|
116,254 |
|
|
|
133,945 |
|
Cash cost per oz/silver |
|
$ |
3.97 |
|
|
$ |
3.33 |
|
|
$ |
3.53 |
|
Total cost/oz |
|
$ |
5.88 |
|
|
$ |
5.53 |
|
|
$ |
5.13 |
|
CONSOLIDATED SALES TOTALS (C) |
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces sold |
|
|
11,506,560 |
|
|
|
12,841,634 |
|
|
|
12,579,634 |
|
Gold ounces sold |
|
|
94,284 |
|
|
|
116,400 |
|
|
|
146,749 |
|
Realized price per silver ounce |
|
$ |
13.59 |
|
|
$ |
12.03 |
|
|
$ |
7.47 |
|
Realized price per gold ounce |
|
$ |
700 |
|
|
$ |
623 |
|
|
$ |
452 |
|
60
|
|
|
(A) |
|
The leach cycle at Rochester requires 5 to 10 years to recover gold and silver
contained in the ore. The Company estimates the ultimate recovery to be approximately 61.5%
for silver and 93% for gold. However, ultimate recoveries will not be known until leaching operations cease which is currently expected to
continue through 2011. Current recovery may vary significantly from ultimate recovery. See
Critical Accounting Policies and Estimates Ore on Leach Pad. In August 2007, mining and
crushing activities were terminated as ore reserves were fully mined. |
|
(B) |
|
The Company acquired its interests in the Endeavor and Broken Hill mines in May
2005 and September 2005, respectively. |
|
(C) |
|
Units sold at realized metal prices will not match reported metal sales due
primarily to the effects on revenues of mark-to-market adjustments on embedded derivatives in
the Companys provisionally priced sales contracts. |
Cash Costs per Ounce are calculated by dividing the cash costs computed for each of the Companys
mining properties for a specified period by the amount of gold ounces or silver ounces produced by
that property during that same period. Management uses cash costs per ounce as a key indicator of
the profitability of each of its mining properties. Gold and silver are sold and priced in the
world financial markets on a U.S. dollar per ounce basis.
Cash Costs are costs directly related to the physical activities of producing silver and gold,
and include mining, processing and other plant costs, third-party refining and smelting costs,
marketing expense, on-site general and administrative costs, royalties, in-mine drilling
expenditures that are related to production and other direct costs. Sales of by-product metals are
deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and
amortization, accretion, corporate general and administrative expense, exploration, interest, and
pre-feasibility costs. Cash costs are calculated and presented using the Gold Institute
Production Cost Standard applied consistently for all periods presented.
Total cash costs per ounce is a non-GAAP measure and investors are cautioned not to place undue
reliance on it and are urged to read all GAAP accounting disclosures presented in the consolidated
financial statements and accompanying footnotes. In addition, see the reconciliation of cash
costs to production costs under Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs
set forth below.
Operating Statistics From Discontinued Operation
The following table presents information for Coeur Silver Valley which was sold on June 1,
2006:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2006 |
|
2005 |
Silver Valley/Galena |
|
|
|
|
|
|
|
|
Tons milled |
|
|
52,876 |
|
|
|
128,502 |
|
Ore grade/Silver oz |
|
|
15.15 |
|
|
|
16.53 |
|
Recovery/Silver oz |
|
|
96.0 |
% |
|
|
97.0 |
% |
Silver production ounces |
|
|
768,674 |
|
|
|
2,060,338 |
|
Cash cost/oz |
|
$ |
9.75 |
|
|
$ |
8.37 |
|
Total cost/oz |
|
$ |
10.64 |
|
|
$ |
9.34 |
|
Gold production |
|
|
180 |
|
|
|
282 |
|
The production figures at the Galena mine reflect the five-month period ending May 31, 2006
and therefore are not comparable to the year ended December 31, 2005. Silver production during the
period of Coeurs ownership of the Galena mine in 2006 amounted to 768,674 ounces. Silver
production for the year ended December 31, 2005 was 2,060,338 ounces. Total cash costs per ounce
were $9.75 during the five-month period ending May 31, 2006. Total cash costs per ounce were $8.37
for the year ended December 31, 2005. The lower production and higher costs per ounce
for the periods presented are due to lower than expected production grades as mine operations
adjusted to changing geologic ground conditions and ultimately the sale of Coeur Silver Valley on
June 1, 2006.
Reconciliation of Non-GAAP Cash Costs to GAAP Production Costs
The tables below present reconciliations between non-GAAP cash costs per ounce to production
costs applicable to sales including depreciation, depletion and amortization (GAAP).
61
Total cash costs include all direct and indirect operating cash costs related directly to the
physical activities of producing metals, including mining, processing and other plant costs,
third-party refining and marketing expense, on-site general and administrative costs, royalties and
mining production taxes, net of by-product revenues earned from all metals other than the primary
metal produced at each unit. Total cash costs are a performance measure and provide management and
investors with an indication of net cash flow, after consideration of the realized price received
for production sold. Management also uses this measurement for the comparative monitoring of
performance of our mining operations period-to-period from a cash flow perspective. Total cash
costs per ounce is a measure developed by precious metals companies in an effort to provide a
comparable standard, however, there can be no assurance that our reporting of this non-GAAP measure
is similar to that reported by other mining companies.
Production costs applicable to sales including depreciation, depletion and amortization, is
the most comparable financial measure calculated in accordance with GAAP to total cash costs. The
sum of the production costs applicable to sales and depreciation, depletion and amortization for
our mines as set forth in the tables below is included in our Consolidated Statements of Operations
and Comprehensive Income.
Year Ended December 31, 2007
(In thousands except ounces and per ounce costs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester |
|
|
Cerro Bayo |
|
|
Martha |
|
|
Endeavor (1) |
|
|
Broken Hill (1) |
|
|
Total |
|
Production of silver (ounces) |
|
|
4,614,780 |
|
|
|
1,709,830 |
|
|
|
2,748,705 |
|
|
|
772,609 |
|
|
|
1,642,205 |
|
|
|
11,488,129 |
|
Cash costs per ounce |
|
$ |
1.52 |
|
|
$ |
8.22 |
|
|
$ |
6.27 |
|
|
$ |
2.67 |
|
|
$ |
3.18 |
|
|
$ |
3.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs (Non-GAAP) |
|
$ |
7,035 |
|
|
$ |
14,055 |
|
|
$ |
17,245 |
|
|
$ |
2,064 |
|
|
$ |
5,228 |
|
|
$ |
45,627 |
|
Add/Subtract: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs |
|
|
|
|
|
|
(3,603 |
) |
|
|
(2,112 |
) |
|
|
(1,347 |
) |
|
|
(2,006 |
) |
|
|
(9,068 |
) |
By-product credit (2) |
|
|
34,664 |
|
|
|
26,199 |
|
|
|
2,889 |
|
|
|
|
|
|
|
|
|
|
|
63,752 |
|
Other adjustment |
|
|
1,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,926 |
|
Change in inventory |
|
|
16,738 |
|
|
|
(1,701 |
) |
|
|
(146 |
) |
|
|
(172 |
) |
|
|
69 |
|
|
|
14,788 |
|
Depreciation, depletion and
amortization |
|
|
8,697 |
|
|
|
6,155 |
|
|
|
1,383 |
|
|
|
755 |
|
|
|
3,055 |
|
|
|
20,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to
sales, including depreciation,
depletion and amortization
(GAAP) |
|
$ |
69,060 |
|
|
$ |
41,105 |
|
|
$ |
19,259 |
|
|
$ |
1,300 |
|
|
$ |
6,346 |
|
|
$ |
137,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
(In thousands except ounces and per ounce costs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester |
|
|
Cerro Bayo |
|
|
Martha |
|
|
Endeavor (1) |
|
|
Broken Hill (1) |
|
|
Total |
|
Production of silver (ounces) |
|
|
5,113,504 |
|
|
|
2,331,060 |
|
|
|
2,712,846 |
|
|
|
481,991 |
|
|
|
2,174,585 |
|
|
|
12,813,986 |
|
Cash costs per ounce |
|
$ |
2.80 |
|
|
$ |
3.04 |
|
|
$ |
4.88 |
|
|
$ |
2.85 |
|
|
$ |
3.09 |
|
|
$ |
3.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs (Non-GAAP) |
|
$ |
14,299 |
|
|
$ |
7,089 |
|
|
$ |
13,240 |
|
|
$ |
1,373 |
|
|
$ |
6,712 |
|
|
$ |
42,713 |
|
Add/Subtract: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs |
|
|
|
|
|
|
(3,475 |
) |
|
|
(1,853 |
) |
|
|
(948 |
) |
|
|
(2,620 |
) |
|
|
(8,896 |
) |
By-product credit (2) |
|
|
43,697 |
|
|
|
24,861 |
|
|
|
2,079 |
|
|
|
|
|
|
|
|
|
|
|
70,637 |
|
Other adjustment |
|
|
1,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,803 |
|
Change in inventory |
|
|
(12,489 |
) |
|
|
(1,105 |
) |
|
|
(518 |
) |
|
|
(39 |
) |
|
|
272 |
|
|
|
(13,879 |
) |
Depreciation, depletion and
amortization |
|
|
13,745 |
|
|
|
5,638 |
|
|
|
1,297 |
|
|
|
490 |
|
|
|
5,120 |
|
|
|
26,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to
sales, including depreciation,
depletion and amortization
(GAAP) |
|
$ |
61,055 |
|
|
$ |
33,008 |
|
|
$ |
14,245 |
|
|
$ |
876 |
|
|
$ |
9,484 |
|
|
$ |
118,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
Year Ended December 31, 2005
(In thousands except ounces and per ounce costs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester |
|
|
Cerro Bayo |
|
|
Martha |
|
|
Endeavor (1) |
|
|
Broken Hill (1) |
|
|
Total |
|
Production of silver (ounces) |
|
|
5,720,489 |
|
|
|
2,875,047 |
|
|
|
2,093,464 |
|
|
|
316,169 |
|
|
|
657,093 |
|
|
|
11,662,262 |
|
Cash costs per ounce |
|
$ |
4.82 |
|
|
$ |
0.54 |
|
|
$ |
4.60 |
|
|
$ |
2.05 |
|
|
$ |
2.72 |
|
|
$ |
3.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs (Non-GAAP) |
|
$ |
27,575 |
|
|
$ |
1,542 |
|
|
$ |
9,637 |
|
|
$ |
648 |
|
|
$ |
1,790 |
|
|
$ |
41,192 |
|
Add/Subtract: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs |
|
|
|
|
|
|
(2,783 |
) |
|
|
(1,165 |
) |
|
|
(370 |
) |
|
|
(570 |
) |
|
|
(4,888 |
) |
By-product credit (2) |
|
|
31,601 |
|
|
|
27,114 |
|
|
|
1,152 |
|
|
|
|
|
|
|
|
|
|
|
59,867 |
|
Other adjustment |
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
140 |
|
Change in inventory |
|
|
(14,769 |
) |
|
|
7,421 |
|
|
|
(328 |
) |
|
|
|
|
|
|
(403 |
) |
|
|
(8,079 |
) |
Depreciation, depletion and
amortization |
|
|
10,402 |
|
|
|
5,064 |
|
|
|
843 |
|
|
|
411 |
|
|
|
1,807 |
|
|
|
18,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to
sales, including depreciation,
depletion and amortization
(GAAP) |
|
$ |
54,949 |
|
|
$ |
38,358 |
|
|
$ |
10,139 |
|
|
$ |
689 |
|
|
$ |
2,624 |
|
|
$ |
106,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present a reconciliation between non-GAAP cash costs per ounce to GAAP
production costs applicable to sales reported in Discontinued
Operations (see Note D):
|
|
|
|
|
|
|
|
|
Coeur Silver Valley/Galena |
|
2006
(3) |
|
|
2005 |
|
Production of silver (ounces) |
|
|
768,674 |
|
|
|
2,060,338 |
|
Cash costs per ounce |
|
$ |
9.75 |
|
|
$ |
8.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs (Non-GAAP) |
|
$ |
7,498 |
|
|
$ |
17,248 |
|
Add/Subtract: |
|
|
|
|
|
|
|
|
Third party smelting costs |
|
|
(1,464 |
) |
|
|
(3,091 |
) |
By-product
credit (2) |
|
|
1,473 |
|
|
|
2,722 |
|
Change in inventory |
|
|
726 |
|
|
|
(181 |
) |
Depreciation, depletion and amortization |
|
|
681 |
|
|
|
1,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales,
including depreciation, depletion and
amortization (GAAP) |
|
$ |
8,914 |
|
|
$ |
18,694 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Companys share of silver production at Endeavor and Broken Hill commenced in
May 2005 and September 2005, respectively. |
|
(2) |
|
By-product credits are based upon production units and the periods average metal
price for purposes of reporting cash costs per ounce. |
|
(3) |
|
Amounts represent five months ended May 31, 2006. |
Results of Operations
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Revenues
Sales of metal from continuing operations in the year ended December 31, 2007 decreased by
$1.3 million, or 1%, from the year ended December 31, 2006 to $215.3 million. The decrease in
sales of metal was primarily due to a decrease in the quantity of silver and gold ounces sold
during 2007, partially offset by increased metal prices realized. In 2007, the Company sold 11.6
million ounces of silver and 94,284 ounces of gold, compared to sales of 12.8
million ounces of silver and 116,400 ounces of gold in 2006. In the
year ended December 31,
2007, the Company realized average silver and gold prices of $13.59 and $700, respectively,
compared with realized average prices of $12.03 and $623, respectively, in the prior year.
63
Included in revenues is the by-product revenue associated with by-product metal sales
consisting of gold. In 2007, by-product revenues totaled $64.4 million compared to $68.8 million
in 2006. The decrease is due to a decrease in the quantity of gold sold in 2007. The Company
believes, based on the best estimates, that presentation of these revenue streams as by-products
from its current operations will continue to be appropriate in the future.
In the year ended December 31, 2007, the Company produced a total of 11.5 million ounces of
silver and 92,014 ounces of gold compared to 12.8 million ounces of silver and 116,254 ounces of
gold in 2006. The decrease in silver production in 2007, as compared to 2006, was primarily due to
decreased production at the Rochester, Cerro Bayo and Broken Hill mines in 2007 as compared to
2006.
Costs and Expenses
Production costs applicable to sales from continuing operations for the year ended 2007
increased by $24.6 million, or 26.7%, from the same period of 2006 to $117.0 million.
The increase in production costs applicable to sales for the year is primarily the result of
higher costs per ounce allocated with the drawdown of heap leach inventory associated with historic
ore production, which is recognized as expense as ounces are recovered from the leaching process
and sold. In addition, the increase in production costs is attributable to higher costs of labor,
fuel, power and other consumables at the Companys other mine operations. In addition, during 2007,
the Rochester mine recorded a $1.5 million expense associated with the cessation of mining and
crushing activities and a $1.0 million expense associated with early termination of employees
employed in mining and crushing activities.
Depreciation and amortization decreased in the year ended December 31, 2007 by $5.8 million,
or 21.6%, over the prior year, primarily due to decreased depreciation and depletion expense
attributable to the Rochester mine due to the cessation of mining and crushing activities in August
of 2007.
Administrative and general expenses
increased $4.5 million in 2007
compared to 2006 due primarily to compensation costs associated with the Companys annual incentive
plan, business development activities related to the Bolnisi and
Palmarejo acquisitions and increases in
other corporate expenses.
Total exploration expenses were $11.9 million in 2007 compared to
$9.5 million in 2006.
Litigation settlement expenses decreased by $1.9 million in 2007 to $0.5 million. During 2006,
the Company commenced payments pursuant to the Federal Natural Resource Settlement Decree dated May
14, 2001. Under the terms of the settlement, the Company was required to pay royalties on all of
its domestic and foreign operating properties, up to a cumulative maximum of $3.0 million,
amounting to a 2% net smelter royalty on silver production if the price of silver exceeds $6.50 per
ounce, and a $5.00 per ounce royalty on gold production if the price of gold exceeds $325 per
ounce. The royalty payment obligation commenced on May 14, 2006 and
expires after May 14, 2021. The Company made its final payment to the U.S. government called
for under the settlement agreement in the first quarter of 2007.
Other Income and Expenses
Interest and other income in the year ended December 31, 2007 decreased by $0.5 million
compared with the year ended December 31, 2006. The increase was primarily due to an increase in
gain on sale of assets of $1.9 million offset by a decrease in interest income due to lower levels
of cash and short-term investments and lower interest rates earned on the Companys cash, cash
equivalents and short-term investments.
64
Income Taxes
For the year ended December 31, 2007, the Company recorded an income tax provision of
approximately $14.9 million compared to $8.2 million in 2006. The following table summarizes the
components of the Companys income tax provision for the years ended December 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
Current: |
|
|
|
|
|
|
|
|
United States Alternative minimum tax |
|
$ |
(381 |
) |
|
$ |
(900 |
) |
United States Foreign withholding |
|
|
(904 |
) |
|
|
(713 |
) |
Foreign Argentina |
|
|
(6,590 |
) |
|
|
(4,842 |
) |
Foreign Australia |
|
|
(4,898 |
) |
|
|
(4,673 |
) |
Deferred: |
|
|
|
|
|
|
|
|
Foreign Argentina |
|
|
172 |
|
|
|
65 |
|
Foreign Australia |
|
|
(664 |
) |
|
|
(93 |
) |
Foreign Chile |
|
|
(1,662 |
) |
|
|
2,930 |
|
|
|
|
|
|
|
|
Income tax provision |
|
$ |
(14,927 |
) |
|
$ |
(8,226 |
) |
|
|
|
|
|
|
|
In 2007, due to higher metal prices,
the Company recognized a current provision in the U.S. and
all foreign operating jurisdictions. Further, the Company accrued foreign withholding taxes of
approximately $0.9 million on interest payable on inter-company
loans from the U.S. Parent to the
Argentina and Australia subsidiaries. Finally, the Company recognized a $2.2 million deferred tax
provision in foreign jurisdictions for the recognition of the benefit of tax loss carryforwards in
Chile net of the recognition of deferred taxes on taxable temporary differences in Argentina and
Australia. During 2007, the Company recorded $1.1 million in income tax provisions resulting from
its assessment of prior period tax contingencies across its various tax jurisdictions in connection
with the adoption of FIN 48 effective January 1, 2007.
In 2006, due to significantly higher metals prices, additional proven and probable reserves,
and a full year of operation in Australia, the Company recognized a
current provision in the U.S. and
all foreign operating jurisdictions. Further, the Company accrued foreign withholding taxes of
approximately $0.7 million on interest payable on inter-company
loans from the U.S. Parent to the
Argentina and Australia subsidiaries. Finally, the Company recognized an additional $2.9 million
deferred tax benefit in Chile as anticipated metals prices and projections of future pre-tax income
are sufficient to utilize the remaining net operating loss carry-forwards in Chile.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Revenues
Sales of metal from continuing operations in the year ended December 31, 2006 increased by
$60.3 million, or 39%, over the year ended December 31, 2005 to $216.6 million. The increase in
sales of metal was primarily attributable to increased metal prices realized, partially offset by a
decrease in the quantity of ounces of gold sold during 2006 as compared to 2005. In 2006, the
Company sold 12.8 million ounces of silver and 116,400 ounces of gold, compared to sales of 12.6
million ounces of silver and 146,749 ounces of gold in 2005. In the year ended December 31, 2006,
the Company realized average silver and gold prices of $12.03 and $623, respectively, compared with
realized average prices of $7.47 and $452, respectively, in the prior year.
65
Included in revenues is the by-product revenue associated with by-product metal sales
consisting of gold. In 2006, by-product revenues totaled $68.8 million compared to $64.4 million
in 2005. The increase is due to an increase in realized prices for gold. The Company believes,
based on the best estimates, that presentation of these revenue streams as by-products from its
current operations will continue to be appropriate in the future.
In the year ended December 31, 2006, the Company produced a total of 12.8 million ounces of
silver and 116,254 ounces of gold compared to 11.7 million ounces of silver and 133,945 ounces of
gold in 2005. The increase in silver production in 2006, as compared to 2005, was primarily due to
higher silver production from the Martha mine and the silver production from the Endeavor and
Broken Hill mines, in which the Company acquired certain silver production and reserves on May 23,
2005 and September 8, 2005, respectively, offset by decreased silver production at the Rochester
and Cerro Bayo mines.
Costs and Expenses
Production costs applicable to sales from continuing operations, for the year ended December 31, 2006,
increased by $4.1 million, or 4.7%, from the same period of 2005 to $92.4 million. The increase in
production costs applicable to sales for the year is primarily the result of production costs
associated with the Endeavor and Broken Hill mines, in which the Company acquired the silver
production and reserves on May 23, 2005 and September 8, 2005, respectively.
Depreciation and amortization increased in the year ended December 31, 2006 by $7.9 million,
or 42%, over the prior year, primarily due to the increase in depletion associated with the newly
acquired Endeavor and Broken Hill mines, and at the Rochester mine as a result of changes in its
ore reserve estimates.
Administrative and general expenses decreased $1.3 million in the year ended December 31, 2006
compared to 2005 due primarily to a $1.4 million decrease in general corporate services and outside
audit services related to financial reporting compliance activities, partially offset by a $0.1
million increase in holding costs on inactive properties.
Total exploration expenses decreased $1.1 million in the year ended December 31, 2006 compared
to 2005, primarily as a result of lower exploration activities at the Kensington, Cerro Bayo and
Martha mines.
Pre-development expense decreased $6.1 million due to the classification of the Kensington
project as a development-stage property in third quarter of 2005.
Litigation settlement expenses increased by $0.8 million in 2006 to $2.4 million. During 2006,
the Company commenced payments pursuant to the Federal Natural Resource Settlement Decree dated May
14, 2001. Under the terms of the settlement, the Company is required to pay royalties on all of
its domestic and foreign operating properties, up to a cumulative maximum of $3.0 million,
amounting to a 2% net smelter royalty on silver production if the price of silver exceeds $6.50 per
ounce, and a $5.00 per ounce royalty on gold production if the price of gold exceeds $325 per
ounce. The royalty payment obligation commenced on May 14, 2006 and expires after May 14, 2021. As
of December 31, 2006, $2.5 million (including discontinued operations) of the $3.0 million has been
paid.
During 2005, the Company recorded a litigation settlement of $1.6 million related to the
Companys settlement of the suit by Credit Suisse First Boston.
66
Other Income and Expenses
Interest and other income in the year ended December 31, 2006 increased by $11.5 million
compared with the year ended December 31, 2005. The increase was primarily due to higher levels of
invested cash and short-term investments on hand and higher interest rates earned on the Companys
cash, cash equivalents and short-term investments. Interest expense decreased $1.3 million in the
year ended December 31, 2006 compared to 2005, due to increased capitalized interest expense
associated with the higher capital expenditures at the Kensington and San Bartolomé development
projects. Capitalized interest was $1.4 million in 2006 compared to $0.2 million in 2005.
Income Taxes
For the year ended December 31, 2006, the Company recorded an income tax provision of
approximately $8.2 million compared to $1.5 million in 2005. The following table summarizes the
components regarding the Companys income tax (provision) benefit for the years ended December 31,
2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Current: |
|
|
|
|
|
|
|
|
United States Alternative minimum tax |
|
$ |
(900 |
) |
|
$ |
212 |
|
United States Foreign withholding |
|
|
(713 |
) |
|
|
|
|
Foreign Argentina |
|
|
(4,842 |
) |
|
|
(66 |
) |
Foreign Australia |
|
|
(4,673 |
) |
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
Foreign Argentina |
|
|
65 |
|
|
|
929 |
|
Foreign Australia |
|
|
(93 |
) |
|
|
(404 |
) |
Foreign Chile |
|
|
2,930 |
|
|
|
(2,154 |
) |
|
|
|
|
|
|
|
Income tax provision |
|
$ |
(8,226 |
) |
|
$ |
(1,483 |
) |
|
|
|
|
|
|
|
In 2006, due to significantly higher metals prices, additional proven and probable reserves,
and a full year of operation in Australia, the Company recognized a
current provision in the U.S. and
all foreign operating jurisdictions. Further, the Company accrued foreign withholding taxes of
approximately $0.7 million on interest payable on inter-company
loans from the U.S. Parent to the
Argentina and Australia subsidiaries. Finally, the Company recognized an additional $2.9 million
deferred tax benefit in Chile as anticipated metals prices and projections
of future pre-tax income are sufficient to utilize the remaining net operating loss carry-forwards
in Chile.
In 2005, the Company recognized a
$0.2 million current U.S. benefit from the refund of prior
year alternative minimum taxes, an estimated current provision in Argentina, and $0.9 million
Argentina deferred tax benefit from the anticipated utilization of other deductible temporary
differences. Further, the Company recognized a $0.4 million Australia deferred tax provision on
originating temporary differences, and a $2.2 million Chile deferred tax provision related to the
utilization of net operating loss carry-forwards for which deferred tax assets were previously
recognized.
Results of Discontinued Operations
On June 1, 2006, the Company completed the sale of 100% of the shares of Coeur Silver Valley
Inc. to U.S. Silver Corporation for $15 million in cash. Pursuant to SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, Coeur Silver Valley has been classified as an asset
held for sale and reported in discontinued operations for the years
ended December 31, 2006 and 2005. The Company recognized a gain of approximately $11.1 million on the sale in 2006.
67
The following is a summary of the Companys discontinued operations included in the
consolidated statements of operations for the years ended December 31, 2006 and 2005 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Sales of metal |
|
$ |
11,223 |
|
|
$ |
16,052 |
|
Production costs applicable to sales |
|
|
(8,233 |
) |
|
|
(16,698 |
) |
Depreciation and depletion |
|
|
(681 |
) |
|
|
(1,996 |
) |
Mining exploration |
|
|
(279 |
) |
|
|
(1,361 |
) |
Other |
|
|
(95 |
) |
|
|
(192 |
) |
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of taxes |
|
|
1,935 |
|
|
|
(4,195 |
) |
Gain on sale of net assets of discontinued operations |
|
|
11,132 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for discontinued operations, net of
taxes |
|
$ |
13,067 |
|
|
$ |
(4,195 |
) |
|
|
|
|
|
|
|
Liquidity and Capital Resources
Working Capital; Cash and Cash Equivalents
The Companys working capital at December 31, 2007 was approximately $152.4 million compared
to $383.1 million at December 31, 2006. The ratio of current assets to current liabilities was 2.4
to 1 at December 31, 2007 compared to 7.5 to 1 at December 31, 2006.
Net cash provided by operating activities in 2007 was $40.1 million compared with net cash
provided by operating activities of $91.2 million in 2006 and $6.7 million in 2005. The changes
were primarily a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
(In thousands) |
|
2007 |
|
|
2006 |
|
|
2005 |
|
Cash collected from customers |
|
$ |
220,055 |
|
|
$ |
212,102 |
|
|
$ |
136,967 |
|
Cash paid to suppliers, employees, etc. |
|
|
(195,377 |
) |
|
|
(139,417 |
) |
|
|
(134,321 |
) |
Interest received |
|
|
15,589 |
|
|
|
17,674 |
|
|
|
9,620 |
|
Interest paid |
|
|
(210 |
) |
|
|
(921 |
) |
|
|
(2,186 |
) |
Discontinued operations |
|
|
|
|
|
|
1,792 |
|
|
|
(3,404 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
40,057 |
|
|
$ |
91,230 |
|
|
$ |
6,676 |
|
|
|
|
|
|
|
|
|
|
|
A total of $211.5 million was used in investing activities in 2007 compared to $20.3 million
used in 2006. The increase of $191.9 million used in investing activities is primarily due
to an increase in capital expenditures related to the construction activities at the
Kensington and San Bartolomé projects partially offset by net proceeds from sales of short-term
investments.
68
The Companys financing activities used $0.6 million of cash during 2007 compared to net cash
provided by financing activities of $144.9 million in 2006. The decrease is primarily due the sale
of 27.6 million shares of common stock during the first quarter of 2006. Cash and cash equivalents
decreased by $172.0 million in 2007 compared to an increase of $215.8 million in 2006.
The Company believes its cash, cash equivalents and short-term investments and cash from
operations will be adequate to meet its operating obligations during the next twelve months.
However, the Company may invest as much as approximately $398 million in capital activities in 2008
including development of San Bartolomé, Kensington and Palmarejo in addition to sustaining capital.
The Company may elect to defer some capital investment activities or to secure additional capital
to ensure it maintains sufficient liquidity. In addition, if the Company decides to pursue
additional mineral interests or acquisitions, additional equity issuances or financing may be
necessary. There can be no assurances that such financing will be available when or if needed.
The Company estimates approximately $119.7 million will be spent during 2008 on capital
expenditures at its operating mines and development-stage properties.
Acquisitions of Bolnisi and Palmarejo
On December 21, 2007, the Company
completed its acquisition of all the shares of Bolnisi Gold NL and
Palmarejo Gold and Silver Corporation in exchange for a total of approximately 272 million shares of Coeur common stock, a
total cash payment of approximately $1.1 million and the assumption of liabilities of $0.7 billion.
Coeur issued 0.682 shares of Coeur common stock (or, at the election of the Bolnisi shareholder,
CHESS Depositary Interests representing Coeur shares) and A$0.004 in cash (or approximately US$1.0 million in
the aggregate) for each Bolnisi ordinary share, and 2.715 shares of Coeur common
stock and C$0.004 in cash (or approximately US$0.1 million in the aggregate) for each Palmarejo
common share. The total consideration paid amounted to $1.1 billion and the total liabilities
assumed were $0.7 billion.
Palmarejo is engaged in the exploration and development of silver and gold properties located
in the State of Chihuahua in northern Mexico, and its principal silver and gold properties are
collectively referred to as the Palmarejo project. The capital cost of the project, from the
time the Company acquired it on December 21, 2007 to the commencement of commercial production, is
currently estimated to be approximately $225 million. Based upon the original prefeasibility
report, it is expected that the project will commence commercial production in the first half of
2009 and is expected to produce approximately 10 million ounces of silver and 110,000 ounces of
gold annually at an average cash cost per silver ounce of ($1.40), including gold by-product credits.
The Company is currently completing the final updated feasibility study, which is expected to be
completed in the second quarter of 2008. No assurances can be made
that the project will achieve its schedule and cost estimates
discussed above.
Capitalized Expenditures
During 2007, the Company expended $1.6 million at the Rochester mine, $11.3 million at the
Cerro Bayo mine, $16.4 million at the Martha mine, $2.1 million at the Endeavor mine, $0.2 million
at the Broken Hill mine, $1.9 million for corporate and other
activities, $100.2 million for the
development of the San Bartolomé project and $92.3 million for construction and
development activities at the Kensington project. During 2008, the Company plans to expend
approximately $0.7 million for investment activities at the Rochester mine, $9.5 million at Cerro
Bayo, $2.7 million at Martha, $24.0 million at the Kensington development property, $100.7 million
at the San Bartolomé development property, $24.0 million at the Palmarejo development property and
$4.4 million for corporate and other activities. In addition, the Company expects to expend
approximately $26.3 million in 2008 related to the remaining obligation for the purchase of the
Endeavor silver reserves.
69
Debt and Capital Resources
1 1/4% Convertible Senior Notes
The $180.0 million principal amount of 1 1/4% Debentures due 2024 outstanding at December 31,
2007 are convertible into shares of common stock at the option of the holder on January 15, 2011,
2014, and 2019, unless previously redeemed, at a conversion price of $7.60 per share, subject to
adjustment in certain events.
The Company is required to make semi-annual interest payments on the debentures. The
debentures are redeemable at the option of the Company before January 18, 2011, if the closing
price of the Companys common stock over a specified number of trading days has exceeded 150% of
the conversion price, and anytime thereafter. Before January 18, 2011, the redemption price is
equal to 100% of the principal amount of the notes plus an amount equal to 8.75% of the principal
amount of the notes, less the amount of any interest actually paid on the notes on or prior to the
redemption date. The debentures have no other funding requirements until their maturity on January
15, 2024.
The fair value of the debentures is determined by market transactions on or near December 31,
2007 and 2006, respectively. The fair value of the debentures, as of December 31, 2007 and 2006,
was $156.6 million and $163.8 million, respectively.
Bridging Debt Facility
On October 22, 2007, Bolnisi entered into a $20 million credit facility with
Macquarie Bank Limited (MBL) to fund further exploration and development of the Palmarejo
silver/gold project, surrounding exploration areas and for working
capital purposes. The credit facility was extended to
June 30, 2008 and bears interest at a variable rate (LIBOR) plus a margin of 2.45%. As of December
31, 2007, the Company has $20 million outstanding under the credit facility bearing an interest rate of
7.35%. Events of default under the credit facility include customary provisions for similar types
of facilities.
Bank Loan
On August 30, 2007 (as amended on October 9, 2007), Palmarejo Gold entered into a temporary
credit facility of $2.0 million secured by the Companys investments in Asset Backed Commercial
Paper, to fund working capital requirements. The credit facility has been extended through May 31,
2008. As of December 31, 2007, an amount of $1.7 million has been drawn on the facility, which
bears interest at prime less 1.50%. The Company is required to reduce the amount of the
outstanding credit facility with any proceeds received from the sale of the Asset Backed Commercial
Paper.
Issuances of Common Stock
During the first quarter of 2006, the Company completed a public offering of 27.6 million
shares of common stock at a public offering price of $5.60 per share. The Company realized net
proceeds of $146.2 million after payment of the underwriters discount and other offering costs.
Offering costs incurred were $8.3 million.
During 2005, the Company completed a public offering of 9.9 million shares of common stock at
a public offering price of $3.70 per share. The Company realized total net proceeds for the
offering of $35.9 million after payment of the underwriters discount. Offering costs incurred were
$0.6 million.
70
Contractual Obligations
The following table summarizes our contractual obligations at December 31, 2007 and the effect
such obligations are expected to have on our liquidity and cash flow in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
Less Than |
|
|
|
|
|
3-5 |
|
More Than |
Contractual Obligations |
|
Total |
|
1 Year |
|
1- 3 Years |
|
Years |
|
5 Years |
Convertible debt (1) |
|
$ |
180,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
180,000 |
|
Interest on convertible debt |
|
|
36,000 |
|
|
|
2,250 |
|
|
|
4,500 |
|
|
|
4,500 |
|
|
|
24,750 |
|
Capital lease (2) |
|
|
39,196 |
|
|
|
11,554 |
|
|
|
15,731 |
|
|
|
11,911 |
|
|
|
|
|
Kensington Trust (3) |
|
|
459 |
|
|
|
385 |
|
|
|
74 |
|
|
|
|
|
|
|
|
|
Hyak Mining Lease |
|
|
9,468 |
|
|
|
231 |
|
|
|
462 |
|
|
|
3,462 |
|
|
|
5,313 |
|
Plahipo mining lease with COMIBOL |
|
|
28,680 |
|
|
|
4,972 |
|
|
|
23,708 |
|
|
|
|
|
|
|
|
|
Reclamation and mine closure (4) |
|
|
57,387 |
|
|
|
4,183 |
|
|
|
9,518 |
|
|
|
11,157 |
|
|
|
32,529 |
|
Severance (5) |
|
|
4,081 |
|
|
|
407 |
|
|
|
90 |
|
|
|
811 |
|
|
|
2,773 |
|
Macquarie Bank line of credit (6) |
|
|
20,029 |
|
|
|
20,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
National Bank of Canada line of credit
(6) |
|
|
1,728 |
|
|
|
1,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Endeavor payment |
|
|
26,301 |
|
|
|
26,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
403,329 |
|
|
$ |
72,040 |
|
|
$ |
54,083 |
|
|
$ |
31,841 |
|
|
$ |
245,365 |
|
|
|
|
|
|
|
(1) |
|
The $180.0 million principal amount of 1 1/4% Debentures due 2024 outstanding
at December 31, 2007 are convertible into shares of common stock at the option of the
holder on January 15, 2011, 2014 and 2019 unless previously redeemed at a conversion rate
of approximately 131.5789 shares of Coeur common stock per $1,000 principal amount of
Notes, representing a conversion price of $7.60 per share, subject to adjustment in certain
events. |
|
|
|
The Company is required to make semi-annual interest payments. The Debentures are redeemable
at the option of the Company before January 18, 2011, if the closing price of the Companys
common stock over a specified number of trading days has exceeded 150% of the conversion
price, and anytime thereafter. The Debentures have no other funding requirements until
maturity on January 15, 2024. |
|
(2) |
|
The Company has entered into various capital lease agreements for commitments
principally over the next year. |
|
(3) |
|
Purchased obligation for the Kensington property in Alaska. |
|
(4) |
|
Reclamation and mine closure amounts represent the Companys estimate of the cash
flows associated with its legal obligation to reclaim and remediate mining properties.
This amount will decrease as reclamation and remediation work is completed. Amounts shown
on table are undiscounted. |
|
(5) |
|
Severance amounts represent a termination benefit program at the Rochester mine
as the mine approaches the end of mine life and accrued benefits for government mandated
severance at the Cerro Bayo mine and San Bartolomé project. |
|
(6) |
|
In connection with the Bolnisi and Palmarejo acquisition, the Company assumed a
credit facility with Macquarie Bank of Australia and a line of credit loan with the
National Bank of Canada. |
Risk Factors; Forward-Looking Statements
For information relating to important risks and uncertainties that could materially adversely
affect the Companys business, securities, financial condition or operating results, reference is
made to the disclosure set forth under Item 1A above. In addition, because the preceding
discussion includes numerous forward-looking statements relating to the Company, its results of
operations and financial condition and business, reference is made to the information set forth
above in Item 1 under the caption Important Factors Relating to Forward-Looking Statements.
71
Environmental Compliance Expenditures
For the years ended December 31, 2007, 2006, and 2005, the Company expended $5.2 million, $5.6
million and $4.9 million, respectively, in connection with routine environmental compliance
activities at its operating properties. Such activities include monitoring, earth moving, water
treatment and re-vegetation activities.
The Company estimates that environmental compliance expenditures during 2008 will be
approximately $5.0 million to obtain permit modifications and other regulatory authorizations.
Future environmental expenditures will be determined by governmental regulations and the overall
scope of the Companys operating and development activities. The Company places a very high
priority on its compliance with environmental regulations.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Accounting Developments
Recently Adopted Pronouncements
Income Taxes
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize
in its financial statements the impact of a tax position, if that tax position is more likely than
not of being sustained on audit, based on the technical merits of the position. FIN 48 also
provides guidance on derecognition, classification of interest and penalties, accounting in interim
periods and disclosure. The provisions of FIN 48 were effective beginning January 1, 2007. The
adoption of FIN 48 did not have a material effect on the Companys financial position, results of
operations or cash flows.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax
of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S.
federal income tax matters for years through 1999. Federal income tax returns for 2000 through 2006
are subject to examination. The Companys continuing practice is to recognize interest and/or
penalties related to income tax matters in income tax expense. There were no significant accrued
interest or penalties at December 31, 2007.
Recently Issued Pronouncements
Fair Value Option
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (FAS 159). FAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value, with the objective of improving
financial reporting by mitigating volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting provisions. The
provisions of FAS 159 are effective for the Companys fiscal year ending December 31, 2008. The
Company is currently evaluating the impact that the adoption of this statement will have on the
Companys consolidated financial position, results of operations and disclosures.
72
Fair Value Measurements
In September 2006, the FASB issued FASB Statement No. 157 Fair Value Measurements (FAS 157).
FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. The provisions of FAS
157 are effective for the Companys fiscal year ending December 31, 2008. The Company is currently
evaluating the impact of the adoption of this statement on the Companys consolidated financial
position, results of operations and disclosures.
Recent Developments
Accounting for Convertible Debt Instruments
On September 5, 2007, the FASB
published FASB Staff Position (FSP) No. APB 14-a, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion. The proposed FSP applies to convertible
debt instruments that, by their stated terms, may be settled in cash (or other assets) upon
conversion, including partial cash settlement, unless the embedded conversion option is required to
be separately accounted for as a derivative under SFAS 133. Convertible debt instruments within the
scope of the proposed FSP are not addressed by the existing
Accounting Principles Board (APB) Opinion No. 14. The proposed FSP
would require that the liability and equity components of convertible debt instruments within the
scope of the proposed FSP shall be separately accounted for in a manner that reflects the entitys
nonconvertible debt borrowing rate. This will require an allocation of the convertible debt
proceeds between the liability component and the embedded conversion option (i.e., the equity
component). The difference between the principal amount of the debt and the amount of the proceeds
allocated to the liability component would be reported as a debt discount and subsequently
amortized to earnings over the instruments expected life using the effective interest method. If
the proposed FSP were to be adopted, the Company estimates that approximately $129.2 million of
debt discount would be recorded and the effective interest rate on its 2024 1 1/4% notes would
increase by approximately 9 percent for the non-cash amortization of the debt discount.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks as a part of its operations. In an effort to
mitigate losses associated with these risks, the Company may, at times, enter into derivative
financial instruments. These may take the form of forward sales contracts, foreign currency
exchange contracts and interest rate swaps. The Company does not actively engage in the practice
of trading derivative instruments for profit. This discussion of the Companys market risk
assessments contains forward looking statements that contain risks and uncertainties. Actual
results and actions could differ materially from those discussed below.
The Companys operating results are substantially dependent upon the world market prices of
silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely
and are affected by numerous factors, such as supply and demand and investor sentiment. In order to
mitigate some of the risk associated with these fluctuations, the Company will at times enter into
forward sale contracts. The Company continually evaluates the potential benefits of engaging in
these strategies based on current market conditions. The Company may be exposed to nonperformance
by counterparties as a result of its hedging activities. This exposure would be limited to the
amount that the spot price of the metal falls short of the contract price. The Company has
historically sold silver and gold produced by our mines pursuant to forward contracts and at spot
prices prevailing at the time of sale. Since 1999, the Company has not engaged in any silver
hedging activities and is currently not engaged in any gold hedging activities.
The Company enters into concentrate sales contracts with third-party smelters. The contracts,
in general, provide for a provisional payment based upon provisional 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
from the sale of concentrates at the forward price at the time of sale. The embedded derivative,
which is the final settlement price based on a future price, does not qualify for hedge accounting.
These embedded derivatives are recorded as derivative assets (in Prepaid expenses and other), or
derivative liabilities (in Accrued liabilities and other), on the balance sheet and are adjusted to
fair value through earnings each period until the date of final settlement.
73
At December 31, 2007, the Company had outstanding provisionally priced sales of $61.2 million
consisting of 3.3 million ounces of silver and 20,775 ounces of gold, which had a fair value of
approximately $63.8 million including the embedded derivative. For each one cent per ounce change
in realized silver price, revenue would vary (plus or minus) approximately $33,300 and for each one
dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately
$20,800.
The Company operates, or has mining interests, in several foreign countries, specifically
Australia, Bolivia, Chile, and Argentina, which exposes it to risks associated with fluctuations in
the exchange rates of the currencies involved. As part of its program to manage foreign currency
risk, the Company enters into, from time to time, foreign currency forward exchange contracts.
These contracts enable the Company to purchase a fixed amount of foreign currencies. Gains and
losses on foreign exchange contracts that are related to firm commitments are designated and
effective as hedges and are deferred and recognized in the same period as the related transaction.
All other contracts that do not qualify as hedges are marked to market and the resulting gains or
losses are recorded in income. The Company continually evaluates the potential benefits of entering
into these contracts to mitigate foreign currency risk and proceeds when it believes that the
exchange rates are most beneficial. During 2007 and 2006, the Company entered into forward foreign
currency exchange contracts to reduce the foreign exchange risk associated with forecasted Chilean
peso operating costs for 2007 and 2008 at its Cerro Bayo mine. The contracts entered into in 2007
require the Company to exchange U.S. dollars for Chilean pesos at a weighted average exchange rate
of 503 pesos to each U.S. dollar. At December 31, 2007 and 2006, the Company had foreign exchange
contracts of $9.0 million and $4.8 million in U.S. dollars, respectively. For the years ended
December 31, 2007 and 2006, the Company recorded a
realized gain (loss) of approximately $0.4 million and $(0.4) million, respectively, in
connection with its foreign currency hedging program. As of December 31, 2007, the fair value of
the foreign exchange contracts was a liability of $0.1 million.
All of the Companys long-term debt at December 31, 2007, is fixed-rate based. The fair value
of the Companys long-term debt at December 31, 2007 was $156.6 million. The fair value was
estimated based upon bond market closing prices near the balance sheet date.
Item 8. Financial Statements and Supplementary Data
The financial statements required hereunder and contained herein are listed under Item
15(a)(1) below.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a) Disclosure Controls and Procedures
The Companys disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed by it in its periodic reports filed with the Securities
and Exchange Commission is recorded, processed, summarized and reported, within the time periods
specified in the Commissions rules and forms. Based on an evaluation of the Companys disclosure
controls and procedures conducted by the Companys Chief Executive Officer and Chief Financial
Officer, such officers concluded that the Companys disclosure controls and procedures were
effective at a reasonable assurance level as of December 31, 2007.
74
(b) Managements Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate
internal control over financial reporting. The Securities and Exchange Act of 1934 defines internal
control over financial reporting in Rule 13a-15(f) and 15d-15(f) as a process designed by, or under
the supervision of, the companys principal executive and principal financial officers and effected
by the companys board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company; |
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and |
|
|
|
|
Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the companys
assets that could have a material effect on the consolidated financial
statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
The Companys management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2007. In making this assessment, the Companys management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based upon its assessment, management concluded
that, as of December 31, 2007, the Companys internal control over financial reporting is effective
based upon those criteria.
In accordance with SEC regulations, managements above assessment of the effectiveness of
internal control over financial reporting excludes Bolnisi Gold NL and Palmarejo Silver and Gold
Corporation, which the Company acquired on December 21, 2007. The total assets of Bolnisi and
Palmarejo at December 31, 2007, were approximately $1.8 billion of the Companys total consolidated
assets. The acquired businesses will be included in managements assessment for the year ending
December 31, 2008.
The
Companys auditors, KPMG LLP (KPMG), have audited the Companys internal control over financial reporting
as of December 31, 2007, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). KPMGs attestation report dated February 29, 2008 expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2007. KPMGs attestation report on the
Companys internal control over financial reporting is included
in the Companys consolidated financial statements set forth
elsewhere herein.
75
(c) Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the most
recently completed fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item
regarding directors is hereby incorporated by reference from our definitive proxy statement or
amendment hereto to be filed pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this report. Information regarding our executive officers is set forth
under Item 4A of this Form 10-K.
Item 11. Executive Compensation
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is
hereby incorporated by reference from our definitive proxy statement or amendment hereto to be
filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is
hereby incorporated by reference from our definitive proxy statement or amendment hereto to be
filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is
hereby incorporated by reference from our definitive proxy statement or amendment hereto to be
filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report.
Item 14. Principal Accounting Fees and Services
Pursuant to General Instruction G(3) of Form 10-K, the information called for by this item is
hereby incorporated by reference from our definitive proxy statement or amendment hereto to be
filed pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report.
76
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) |
|
The following financial statements are filed herewith: |
|
(1) |
|
The following consolidated financial statements of Coeur dAlene Mines Corporation and
subsidiaries are included in Item 8: |
|
|
|
Consolidated Balance Sheets December 31, 2007 and 2006. |
|
|
|
|
Consolidated Statements of Operations and Comprehensive Income (Loss) Years Ended
December 31, 2007, 2006 and 2005. |
|
|
|
|
Consolidated Statements of Changes in Shareholders Equity for the Years Ended
December 31, 2007, 2006 and 2005. |
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and
2005. |
|
|
|
|
Notes to Consolidated Financial Statements. |
(b) |
|
Exhibits: The following listed documents are filed as Exhibits to this report: |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(a) |
|
|
|
Merger Implementation Agreement dated May 3, 2007 by and among Coeur dAlene
Mines Corporation, Coeur dAlene Mines Australia Pty Ltd, Coeur Sub Two, Inc. and
Bolnisi Gold NL (Incorporated herein by reference to Exhibit 2.2 to the Registrants
Form 8-K filed May 4, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(b) |
|
|
|
Amending Agreement dated June 8, 2007 Relating to Merger Implementation
Agreement dated May 3, 2007 by and among Coeur dAlene Mines Corporation, Coeur dAlene
Mines Australia Pty Ltd, Coeur Sub Two, Inc. and Bolnisi Gold NL (Incorporated herein
by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed June
8, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(c) |
|
-
|
|
Second Amending Agreement dated June 22, 2007 Relating to Merger
Implementation Agreement dated May 3, 2007 by and among Coeur dAlene Mines
Corporation, Coeur dAlene Mines Australia Pty Ltd, Coeur Sub Two, Inc. and Bolnisi
Gold NL, as amended on June 8, 2007 (Incorporated herein by reference to Exhibit 2.1 to
the Registrants Current Report on Form 8-K filed
June 22, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(d) |
|
-
|
|
Deed Poll made by the Registrant in favor of Bolnisi shareholders dated May
3, 2007 (Incorporated herein by reference to Exhibit 2.3 to the Registrants Current
Report on Form 8-K filed May 4, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(e) |
|
-
|
|
Conditional Extension dated September 24, 2007 to Merger Implementation
Agreement dated May 3, 2007 by and among Coeur dAlene Mines Corporation, Coeur dAlene
Mines Australia Pty Ltd, Coeur Sub Two, Inc. and Bolnisi Gold NL (Incorporated herein
by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed
September 25, 2007.) |
77
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(f) |
|
-
|
|
Third Amending Agreement dated October 23, 2007 to Merger Implementation
Agreement dated May 3, 2007 by and among Coeur dAlene Mines Corporation, Coeur dAlene
Mines Australia Pty Ltd, Coeur Sub Two, Inc. and Bolnisi Gold NL (Incorporated herein
by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed
October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(g) |
|
-
|
|
Fourth Amending Agreement dated December 5, 2007 to Merger Implementation
Agreement dated May 3, 2007 by and among Coeur dAlene Mines Corporation, Coeur dAlene
Mines Australia Pty Ltd, Coeur Sub Two, Inc. and Bolnisi Gold NL (Incorporated herein
by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed
December 10, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(h) |
|
-
|
|
Merger Implementation Agreement dated May 3, 2007 by and among Coeur dAlene
Mines Corporation and Palmarejo Silver and Gold Corporation (Incorporated herein by
reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed May 4,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(i) |
|
-
|
|
Extension dated September 24, 2007 to Merger Implementation Agreement dated
May 3, 2007 by and between Coeur dAlene Mines Corporation and Palmarejo Silver and
Gold Corporation. (Incorporated herein by reference to Exhibit 2.2 to the Registrants
Current Report on Form 8-K filed September 25, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(j) |
|
-
|
|
Amendment dated October 23, 2007 to Merger Implementation Agreement dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Palmarejo Silver and Gold
Corporation (Incorporated herein by reference to Exhibit 2.2 to the Registrants
Current Report on Form 8-K filed October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
2 |
(k) |
|
-
|
|
Second Amendment dated December 4, 2007 to Merger Implementation Agreement
dated May 3, 2007 by and between Coeur dAlene Mines Corporation and Palmarejo Silver
and Gold Corporation (Incorporated herein by reference to Exhibit 2.2 to the
Registrants Current Report on Form 8-K filed
December 10, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(a) |
|
-
|
|
Articles of Incorporation of the Registrant and amendments thereto.
(Incorporated herein by reference to Exhibit 3(a) to the Registrants Annual Report on
Form 10-K for the year ended December 31, 1988.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(b) |
|
-
|
|
Bylaws of the Registrant and amendments thereto. (Incorporated herein by
reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K dated August
30, 2004.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(c) |
|
-
|
|
Certificate of Designations, Powers and Preferences of the Series B Junior
Preferred Stock of the Registrant, as filed with Idaho Secretary of State on May 13,
1999. (Incorporated herein by reference to the Registrants Annual Report on Form 10-K
for the year ended December 31, 2002.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(d) |
|
-
|
|
Restated and Amended Articles of Incorporation of the Registrant as filed
with the Secretary of State of the State of Idaho effective September 13, 1999.
(Incorporated herein by reference to Exhibit 3 to the Registrants Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999.) |
78
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(e) |
|
-
|
|
Amendment to Restated and Amended Articles of Incorporation of the Registrant
(Incorporated herein by reference to Exhibit 3.1 to the Registrants Quarterly Report
on Form 10-Q for the quarter ended September 30, 2002.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(f) |
|
-
|
|
Articles of Amendment, dated May 20, 2004, to the Restated and Amended
Articles of Incorporation of the Registrant (Incorporated herein by reference to
Exhibit 3.5 to the Form S-4 Registration Statement of Coeur d Alene Mines Holding
Company and Coeur d Alene Canadian Acquisition Corporation filed on July 13, 2004
(file No. 333-117325).) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(g) |
|
-
|
|
Certificate of Amendment to the Certificate of Designations, Powers and
Preferences of the Series B Junior Preferred Stock of the Registrant, dated December 7,
2007. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(h) |
|
-
|
|
Amended and Restated Certificate of Designations, Powers and Preferences of
the Series B Junior Preferred Stock of the Registrant, dated
December 7, 2007. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(i) |
|
-
|
|
Articles of Amendment to the Restated and Amended Articles of Incorporation
of the Registrant, dated December 7, 2007. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(j) |
|
-
|
|
Restated and Amended Articles of Incorporation of the Registrant, dated
December 7, 2007. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
3 |
(k) |
|
-
|
|
Bylaws of the Registrant, as amended effective July 16, 2007. (Incorporated
herein by reference to Exhibit 3 to the Registrants Quarterly Report on Form 10-Q for
the quarter ended September 30, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
4 |
(a) |
|
-
|
|
Specimen certificate of the Registrants stock. (Incorporated herein by
reference to Exhibit 4 to the Registrants Registration Statement on Form S-2 (File No.
2-84174).) |
|
|
|
|
|
|
|
|
|
|
|
|
4 |
(b) |
|
-
|
|
Indenture dated as of January 13, 2004, by and between the Registrant and the
Bank of New York relating to the Registrants 1 1/4% Convertible Senior Notes due 2024
(Incorporated herein by reference to Exhibit 4.1 to Registrants Current Report on Form
8-K dated January 7, 2004.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(a) |
|
-
|
|
Agreement, dated January 1, 1994, between Coeur-Rochester, Inc. and Johnson
Matthey Inc. (Incorporated herein by reference to Exhibit 10(m) of the Registrants
Annual Report on Form 10-K for the year ended December 31, 1993.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(b) |
|
-
|
|
Master Equipment Lease No. 099-03566-01, dated as of December 28, 1988,
between Idaho First National Bank and the Registrant. (Incorporated herein by
reference to Exhibit 10(w) of the Registrants Annual Report on Form 10-K for the year
ended December 31, 1988.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(c) |
|
-
|
|
Master Equipment Lease No. 01893, dated as of December 28, 1988, between
Cargill Leasing Corporation and the Registrant. (Incorporated herein by reference to
Exhibit 10(x) of the Registrants Annual Report on Form 10-K for the year ended
December 31, 1988.) |
|
|
|
* |
|
Management contract or compensatory plan. |
79
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(d) |
|
-
|
|
Rights Agreement, dated as of May 11, 1999, between the Registrant and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent. (Incorporated herein by
reference to Exhibit 1 to the Registrants Form 8-A relating to the registration of the
Rights on the New York and Pacific Stock Exchanges.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(e) |
|
-
|
|
Amended and Restated Profit Sharing Retirement Plan of the Registrant.
(Incorporated herein by reference to Exhibit 10(ff) to the Registrants Annual Report
on Form 10-K for the year ended December 31, 1993.) * |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(f) |
|
-
|
|
1993 Annual Incentive Plan and Long-Term Performance Share Plan of the
Registrant. (Incorporated herein by reference to Exhibit 10(jj) to the Registrants
Annual Report on Form 10-K for the year ended December 31, 1993.)* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(g) |
|
-
|
|
Lease Agreement, dated January 12, 1994, between First Security Bank of
Idaho and Coeur Rochester, Inc. (Incorporated herein by reference to Exhibit 10(mm) to
the Registrants Annual Report on Form 10-K for the year ended December 31, 1993.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(h) |
|
-
|
|
401(k) Plan of the Registrant. (Incorporated by reference to Exhibit 10 (pp)
to the Registrants Annual Report on Form 10-K for the year ended December 31, 1994.)* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(i) |
|
-
|
|
Form of severance/change in control agreements entered into by the
Registrant with each of its executive officers (James A. Sabala January 13, 2003).
(Incorporated by reference to Exhibit 10(hh) to the Registrants Annual Report on Form
10-K for the year ended December 31, 2001).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(j) |
|
-
|
|
Employment Agreement, dated as of January 13, 2003, between the Registrant
and James A. Sabala. (Incorporated by reference to Exhibit 10(jj) to Registrants
Annual Report on Form 10-K for the period ended December 31, 2002).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(k) |
|
-
|
|
2003 Long-Term Incentive Plan of the Registrant. (Incorporated herein by
reference to Appendix A to the Registrants definitive Proxy Statement on Schedule 14A
filed with the SEC on April 21, 2003.) * |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(l) |
|
-
|
|
Silver Sale and Purchase Agreement, dated April 7, 2005, between CDE
Australia Pty. Limited and Cobar Operations Pty. Limited. (Portions of this exhibit
have been omitted pursuant to a request for confidential treatment.) (Incorporated by
reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.) |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(m) |
|
-
|
|
2005 Non-Employee Directors Equity Incentive Plan (Incorporated herein by
reference to Appendix A to the Registrants proxy statement dated April 5, 2005). |
|
|
|
* |
|
Management contract or compensatory plan. |
80
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(n) |
|
-
|
|
Amended and Restated Employment Agreement and Change in
Control Agreement, effective July 1, 2005, between the
Registrant and Donald J. Birak (Incorporated herein by
reference to Exhibit 10.4 to the Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(o) |
|
-
|
|
Employment Agreement, dated as of September 17, 2002, between
the Registrant and Dennis E. Wheeler (Incorporated herein by
reference to Exhibit 10(z) to the Registrants Annual Report
on Form 10-K for the year ended December 31, 2005.)* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(p) |
|
-
|
|
Amended Mining Lease, effective as of August 5, 2005, between
Hyak Mining Company, Inc. and Coeur Alaska, Inc.
(Incorporated herein by reference to Exhibit 10.5 to the
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005). |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(q) |
|
-
|
|
Silver Sale Agreement, dated September 8,
2005, between the Registrant, Perilya
Broken Hill Ltd and CDE Australia Pty.
Ltd. (Portions of this exhibit have been
omitted pursuant to a request for
confidential treatment.) (Incorporated
herein by reference to Exhibit 10.1 to
the Registrants Quarterly Report on Form
10-Q for the quarter ended September 30,
2005). |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(r) |
|
-
|
|
Employment Agreement and Change in
Control Agreement, effective October 15,
2005, between the Registrant and James K.
Duff. (Incorporated herein by reference
to Exhibit 10.2 to the Registrants
Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(s) |
|
-
|
|
Form of Restricted Stock Agreement
(Incorporated herein by reference to
Exhibit 10.1 to the Registrants Current
Report on Form 8-K dated February 15,
2005).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(t) |
|
-
|
|
Form of Incentive Stock Option Agreement (Incorporated herein
by reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K dated February 15, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(u) |
|
-
|
|
Form of Non-Qualified Stock Option Agreement (Incorporated
herein by reference to Exhibit 10.3 to the Registrants
Current Report on Form 8-K dated February 15, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(v) |
|
-
|
|
First Amendment to Employment to Agreement, effective March 30,
2006, between the Registrant and Dennis E. Wheeler (Incorporated
herein by reference to Exhibit 10(a) to the Registrants Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006).* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(w) |
|
-
|
|
Amended and Restated Silver Sale and Purchase Agreement, dated
March 28, 2006, between CDE Australia Pty Limited and Cobar
Operations Pty Limited (Portions of this exhibit have been omitted
pursuant to a request for confidential treatment.) (Incorporated
herein by reference to Exhibit 10(b) to the Registrants Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006). |
|
|
|
* |
|
Management contract or compensatory plan. |
81
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(x) |
|
-
|
|
Employment Agreement, dated July 31, 2006, between the Registrant
and Alan L. Wilder. (Incorporated herein by reference to Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.)* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(y) |
|
-
|
|
Amendment, dated July 31, 2006, to Employment Agreement between the
Registrant and Donald J. Birak. (Incorporated herein by reference
to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006.)* |
|
|
|
|
|
|
|
|
|
|
|
|
10 |
(z) |
|
-
|
|
Amendment, dated July 31, 2006, to Employment Agreement between the
Registrant and James K. Duff. (Incorporated herein by reference to
Exhibit 10(z) to the Registrants Annual Report on Form 10-K for
the year ended December 31, 2006.)* |
|
|
|
|
|
|
|
|
|
|
|
10(aa)
|
|
-
|
|
Second Amendment to Employment Agreement, dated July 31, 2007, to employment
agreement dated July 1, 2005, as amended on July 31, 2006, between the Registrant and
Donald J. Birak (Incorporated herein by reference to Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007.)* |
|
|
|
|
|
|
|
|
|
|
|
10(bb)
|
|
-
|
|
Second Amendment to Employment Agreement, dated May 2, 2007, between the Registrant
and Dennis E. Wheeler (Incorporated herein by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on
May 7, 2007.)* |
|
|
|
|
|
|
|
|
|
|
|
10(cc)
|
|
-
|
|
Supplemental Agreement in respect of the Amended and Restated Silver Sale and
Purchase Agreement, dated January 29, 2008, between CDE Australia Pty Limited and Cobar
Operations Pty Limited. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
10(dd)
|
|
-
|
|
Amended and Restated Employment Agreement and Change in Control Agreement,
effective July 1, 2005, between the Registrant and Mitchell J. Krebs (Incorporated
herein by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
10(ee)
|
|
-
|
|
First Amendment to Employment Agreement, effective July 31, 2006, between the
Registrant and Mitchell J. Krebs. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
10(ff)
|
|
-
|
|
Second Amendment to Employment Agreement, effective July 31, 2007, between the
Registrant and Mitchell J. Krebs. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
10(gg)
|
|
-
|
|
Amended and Restated Employment Agreement and Change in Control Agreement,
effective July 1, 2005, between the Registrant and Harry F. Cougher (Incorporated
herein by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005).* |
|
|
|
|
|
|
|
|
|
|
|
10(hh)
|
|
-
|
|
First Amendment to Employment Agreement, effective July 31, 2006, between the
Registrant and Harry F. Cougher. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
10(ii)
|
|
-
|
|
Employment Agreement, dated as of February 13, 2006, between CDE Australia Pty Ltd
and Richard M. Weston. (Filed herewith.)* |
|
|
|
* |
|
Management contract or compensatory plan. |
82
|
|
|
|
|
|
|
|
|
|
|
10(jj)
|
|
-
|
|
First Amendment to Employment Agreement, effective as of July 31, 2006, between the
Registrant and Richard M. Weston. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
10(kk)
|
|
-
|
|
Second Amendment to Employment Agreement, effective as of July 31, 2007, between
the Registrant and Richard M. Weston. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
10(ll)
|
|
-
|
|
First Amendment to Employment Agreement, dated February 6, 2008, between the
Registrant and Alan L. Wilder. (Filed herewith.)* |
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
-
|
|
List of subsidiaries of the Registrant. (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
-
|
|
Consent of KPMG LLP (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
-
|
|
Certification of the CEO (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
-
|
|
Certification of the CFO (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
-
|
|
CEO Section 1350 Certification (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
32.2 |
|
|
-
|
|
CFO Section 1350 Certification (Filed herewith.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(a) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Kenneth M. Phillips (Incorporated herein by reference to Exhibit 99.1(a) to the
Registrants Current Report on Form 8-K filed May 4,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(b) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Altinova Nominees Pty Ltd (Incorporated herein by reference to Exhibit 99.1(b) to
the Registrants Current Report on Form 8-K filed
May 4, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(c) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Dragonlyn Pty Ltd (Incorporated herein by reference to Exhibit 99.1(c) to the
Registrants Current Report on Form 8-K filed May 4,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(d) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Rosignol Consultants Pty Ltd (Incorporated herein by reference to Exhibit 99.1(d)
to the Registrants Current Report on Form 8-K filed
May 4, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(e) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Promin Mining Services Pty Limited (Incorporated herein by reference to Exhibit
99.1(e) to the Registrants Current Report on Form 8-K
filed May 4, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(f) |
|
-
|
|
Option Deed dated May 3, 2007 by and between Coeur dAlene Mines Corporation
and Rosignol Pty Limited (Incorporated herein by reference to Exhibit 99.1(f) to the
Registrants Current Report on Form 8-K filed May 4,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(g) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Kenneth M. Phillips. (Incorporated herein
by reference to Exhibit 99.1 to the Registrants Form 8-K filed September 25, 2007.) |
|
|
|
* |
|
Management contract or compensatory plan. |
83
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(h) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Altinova Nominees Pty Ltd. (Incorporated
herein by reference to Exhibit 99.2 to the Registrants Form 8-K filed September 25,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(i) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Dragonlyn Pty Ltd. (Incorporated herein by
reference to Exhibit 99.3 to the Registrants Form 8-K filed September 25, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(j) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Rosignol Consultants Pty Ltd. (Incorporated
herein by reference to Exhibit 99.4 to the Registrants Form 8-K filed September 25,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(k) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Promin Mining Services Pty Ltd.
(Incorporated herein by reference to Exhibit 99.5 to the Registrants Form 8-K filed
September 25, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(l) |
|
-
|
|
Amendments dated September 24, 2007 to Option Deed dated May 3, 2007 by and
between Coeur dAlene Mines Corporation and Rosignol Consultants Pty Ltd. (Incorporated
herein by reference to Exhibit 99.6 to the Registrants Form 8-K filed September 25,
2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(m) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Kenneth M. Phillips, as
amended to date (Incorporated herein by reference to Exhibit 99.1 to the Registrants
Current Report on Form 8-K filed October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(n) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Altinova Nominees Pty Ltd,
as amended to date (Incorporated herein by reference to Exhibit 99.2 to the
Registrants Current Report on Form 8-K filed
October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(o) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Dragonlyn Pty Ltd, as
amended to date (Incorporated herein by reference to Exhibit 99.3 to the Registrants
Current Report on Form 8-K filed October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(p) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Rosignol Consultants Pty
Ltd, as amended to date (Incorporated herein by reference to Exhibit 99.4 to the
Registrants Current Report on Form 8-K filed
October 29, 2007.) |
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(q) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Promin Mining Services Pty
Limited, as amended to date (Incorporated herein by reference to Exhibit 99.5 to the
Registrants Current Report on Form 8-K filed
October 29, 2007.) |
84
|
|
|
|
|
|
|
|
|
|
|
|
99 |
(r) |
|
-
|
|
Amending Agreement dated October 23, 2007 relating to Option Deed dated May
3, 2007 by and between Coeur dAlene Mines Corporation and Rosignol Pty Limited, as
amended to date (Incorporated herein by reference to Exhibit 99.6 to the Registrants
Current Report on Form 8-K filed October 29, 2007.) |
(c) |
|
Independent auditors reports are included herein as follows: |
|
|
|
Report of KPMG LLP as of December 31, 2007 and for the years ended December 31, 2007, 2006
and 2005. |
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
Coeur dAlene Mines Corporation
(Registrant)
|
|
Date: February 29, 2008 |
By: |
/s/ Dennis E. Wheeler
|
|
|
|
Dennis E. Wheeler |
|
|
|
(Chairman, President and Chief Executive Officer) |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Chairman, President, Chief Executive Officer
|
|
February 29, 2008 |
Dennis E. Wheeler
|
|
and Director |
|
|
|
|
|
|
|
/s/ James A. Sabala
James A. Sabala
|
|
Executive Vice President and
Chief Financial Officer
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Tom T. Angelos
Tom T. Angelos
|
|
Vice President, Controller and
Chief Accounting Officer
|
|
February 29, 2008 |
|
|
|
|
|
/s/ James J. Curran
James J. Curran
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Sebastian Edwards
Sebastian Edwards
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Andrew D. Lundquist
Andrew D. Lundquist
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Robert E. Mellor
Robert E. Mellor
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ John H. Robinson
John H. Robinson
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ J. Kenneth Thompson
J. Kenneth Thompson
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Alex Vitale
Alex Vitale
|
|
Director
|
|
February 29, 2008 |
|
|
|
|
|
/s/ Timothy R. Winterer
Timothy R. Winterer
|
|
Director
|
|
February 29, 2008 |
86
ANNUAL REPORT ON FORM 10-K
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2007
COEUR DALENE MINES CORPORATION
COEUR DALENE, IDAHO
|
|
|
Reports of Independent Registered Public Accounting Firm
|
|
F-2 F-4 |
|
|
|
Consolidated Balance Sheets December 31, 2007 and 2006
|
|
F-5 F-6 |
|
|
|
Consolidated Statements of Operations and Comprehensive Income
for the Years Ended December 31, 2007, 2006 and
2005
|
|
F-7 |
|
|
|
Consolidated Statements of Changes in Shareholders Equity for
the Years Ended December 31, 2007, 2006 and 2005
|
|
F-8 |
|
|
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, 2006 and 2005
|
|
F-9 |
|
|
|
Notes to Consolidated Financial Statements
|
|
F-10 |
F-1
Report of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
Coeur dAlene Mines Corporation:
We have audited the accompanying consolidated balance sheets of Coeur dAlene Mines Corporation and
subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of
operations and comprehensive income, changes in shareholders equity, and cash flows for each of
the years in the three-year period ended December 31, 2007. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Coeur dAlene Mines Corporation and subsidiaries as of
December 31, 2007 and 2006, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 2007, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note B to the consolidated financial statements, the Company has adopted Statement
of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, and Emerging Issues
Task Force Issue No. 04-6, Accounting for Stripping Costs Incurred during Production in the Mining
Industry, as of January 1, 2006.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Coeur dAlene Mines Corporations internal control over financial reporting
as of December 31, 2007, based on criteria established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated February 29, 2008 expressed an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
KPMG LLP
Boise, Idaho
February 29, 2008
F-2
Report of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
Coeur dAlene Mines Corporation:
We have audited Coeur dAlene Mines Corporations internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Coeur dAlene Mines
Corporations management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Coeur dAlene Mines Corporation maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2007, based on criteria established in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
The Company acquired Bolnisi Gold NL and Palmarejo Silver and Gold Corporation on December 21,
2007, and management excluded from its assessment of the effectiveness of the Companys internal
control over financial reporting as of December 31, 2007, Bolnisi Gold NLs and Palmarejo Silver
and Gold Corporations internal control over financial reporting associated with total assets of
$1.8 billion and total revenues of nil, included in the consolidated financial statements of Coeur
dAlene Mines Corporation and subsidiaries as of and for the year ended December 31, 2007. Our
audit of internal control over financial reporting of Coeur dAlene Mines Corporation also excluded
an evaluation of the internal control over financial reporting of Bolnisi Gold NL and Palmarejo
Silver and Gold Corporation.
F-3
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Coeur dAlene Mines Corporation as of
December 31, 2007 and 2006, and the related consolidated statements of operations and comprehensive
income, shareholders equity, and cash flows for each of the years in the three-year period ended
December 31, 2007, and our report dated February 29, 2008 expressed an unqualified opinion on those
consolidated financial statements.
KPMG LLP
Boise, Idaho
February 29, 2008
F-4
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
98,671 |
|
|
$ |
270,672 |
|
Short-term investments |
|
|
53,039 |
|
|
|
70,373 |
|
Receivables |
|
|
56,121 |
|
|
|
43,233 |
|
Ore on leach pad |
|
|
25,924 |
|
|
|
31,302 |
|
Metal and other inventory |
|
|
18,918 |
|
|
|
16,341 |
|
Deferred tax assets |
|
|
3,573 |
|
|
|
3,629 |
|
Prepaid expenses and other |
|
|
7,821 |
|
|
|
6,047 |
|
|
|
|
|
|
|
|
|
|
|
264,067 |
|
|
|
441,597 |
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
322,733 |
|
|
|
132,315 |
|
Less accumulated depreciation |
|
|
(69,937 |
) |
|
|
(64,206 |
) |
|
|
|
|
|
|
|
|
|
|
252,796 |
|
|
|
68,109 |
|
|
|
|
|
|
|
|
|
|
MINING PROPERTIES |
|
|
|
|
|
|
|
|
Operational mining properties |
|
|
143,324 |
|
|
|
130,447 |
|
Less accumulated depletion |
|
|
(124,401 |
) |
|
|
(116,361 |
) |
|
|
|
|
|
|
|
|
|
|
18,923 |
|
|
|
14,086 |
|
|
|
|
|
|
|
|
|
|
Mineral interests |
|
|
1,731,715 |
|
|
|
72,201 |
|
Less accumulated depletion |
|
|
(11,639 |
) |
|
|
(7,828 |
) |
|
|
|
|
|
|
|
|
|
|
1,720,076 |
|
|
|
64,373 |
|
|
|
|
|
|
|
|
|
|
Non-producing and development properties |
|
|
311,469 |
|
|
|
190,988 |
|
|
|
|
|
|
|
|
|
|
|
2,050,468 |
|
|
|
269,447 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Ore on leach pad, non-current portion |
|
|
24,995 |
|
|
|
35,367 |
|
Restricted cash and cash equivalents |
|
|
25,760 |
|
|
|
23,508 |
|
Debt issuance costs, net |
|
|
4,848 |
|
|
|
5,151 |
|
Deferred tax assets |
|
|
1,109 |
|
|
|
2,544 |
|
Other |
|
|
27,651 |
|
|
|
3,903 |
|
|
|
|
|
|
|
|
|
|
|
84,363 |
|
|
|
70,473 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
2,651,694 |
|
|
$ |
849,626 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(In thousands, except |
|
|
|
share data) |
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
49,642 |
|
|
$ |
22,315 |
|
Accrued liabilities and other |
|
|
9,072 |
|
|
|
10,971 |
|
Accrued income taxes |
|
|
7,547 |
|
|
|
10,317 |
|
Accrued payroll and related benefits |
|
|
9,342 |
|
|
|
8,527 |
|
Accrued interest payable |
|
|
1,060 |
|
|
|
1,031 |
|
Current portion of long-term debt and capital lease obligations |
|
|
30,831 |
|
|
|
894 |
|
Current portion of reclamation and mine closure |
|
|
4,183 |
|
|
|
4,460 |
|
|
|
|
|
|
|
|
|
|
|
111,677 |
|
|
|
58,515 |
|
LONG-TERM LIABILITIES |
|
|
|
|
|
|
|
|
1 1/4% Convertible Senior Notes due January 2024 |
|
|
180,000 |
|
|
|
180,000 |
|
Reclamation and mine closure |
|
|
30,629 |
|
|
|
27,226 |
|
Deferred income taxes |
|
|
573,681 |
|
|
|
272 |
|
Obligations under capital leases |
|
|
23,661 |
|
|
|
|
|
Other long-term liabilities |
|
|
4,679 |
|
|
|
2,619 |
|
|
|
|
|
|
|
|
|
|
|
812,650 |
|
|
|
210,117 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
(See Notes
I, J, M, N, O, P, Q and S) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Common Stock, par value $1.00 per share; authorized 750,000,000
shares in 2007 and 500,000,000 in 2006, issued 551,512,230 and
279,054,344 shares in 2007 and 2006 (1,059,211 shares held in
treasury) |
|
|
551,512 |
|
|
|
279,054 |
|
Additional paid-in capital |
|
|
1,607,737 |
|
|
|
777,798 |
|
Accumulated deficit |
|
|
(419,331 |
) |
|
|
(463,221 |
) |
Shares held in treasury |
|
|
(13,190 |
) |
|
|
(13,190 |
) |
Accumulated other comprehensive income |
|
|
639 |
|
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
1,727,367 |
|
|
|
580,994 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
2,651,694 |
|
|
$ |
849,626 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands, except per share data) |
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metal |
|
$ |
215,319 |
|
|
$ |
216,573 |
|
|
$ |
156,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales |
|
|
117,025 |
|
|
|
92,378 |
|
|
|
88,232 |
|
Depreciation and depletion |
|
|
20,984 |
|
|
|
26,772 |
|
|
|
18,889 |
|
Administrative and general |
|
|
23,875 |
|
|
|
19,369 |
|
|
|
20,624 |
|
Exploration |
|
|
11,941 |
|
|
|
9,474 |
|
|
|
10,553 |
|
Litigation settlements |
|
|
507 |
|
|
|
2,365 |
|
|
|
1,600 |
|
Pre-development |
|
|
|
|
|
|
|
|
|
|
6,057 |
|
|
|
|
|
|
|
|
|
|
|
Total cost and expenses |
|
|
174,332 |
|
|
|
150,358 |
|
|
|
145,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
40,987 |
|
|
|
66,215 |
|
|
|
10,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME AND EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
18,195 |
|
|
|
18,654 |
|
|
|
8,385 |
|
Interest expense, net of capitalized interest |
|
|
(365 |
) |
|
|
(1,224 |
) |
|
|
(2,485 |
) |
|
|
|
|
|
|
|
|
|
|
Total other income and expense |
|
|
17,830 |
|
|
|
17,430 |
|
|
|
5,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
58,817 |
|
|
|
83,645 |
|
|
|
16,229 |
|
Income tax provision |
|
|
(14,927 |
) |
|
|
(8,226 |
) |
|
|
(1,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
43,890 |
|
|
|
75,419 |
|
|
|
14,746 |
|
Income (loss) from discontinued operations, net of income taxes |
|
|
|
|
|
|
1,935 |
|
|
|
(4,195 |
) |
Gain on sale of net assets of discontinued operations, net of
income taxes |
|
|
|
|
|
|
11,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
43,890 |
|
|
|
88,486 |
|
|
|
10,551 |
|
Other comprehensive income |
|
|
86 |
|
|
|
2,391 |
|
|
|
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
|
$ |
43,976 |
|
|
$ |
90,877 |
|
|
$ |
10,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED INCOME (LOSS) PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.15 |
|
|
$ |
0.28 |
|
|
$ |
0.06 |
|
Income
(loss) from discontinued operations |
|
|
|
|
|
|
0.05 |
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.15 |
|
|
$ |
0.33 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.14 |
|
|
$ |
0.26 |
|
|
$ |
0.06 |
|
Income (loss) from discontinued operations |
|
|
|
|
|
|
0.04 |
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.14 |
|
|
$ |
0.30 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
285,972 |
|
|
|
271,357 |
|
|
|
242,915 |
|
Diluted |
|
|
310,524 |
|
|
|
296,082 |
|
|
|
243,683 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, 2007, 2006 and 2005 |
|
|
|
(In thousands, except share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
|
|
|
|
Shares |
|
|
Other |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Held in |
|
|
Comprehensive |
|
|
|
|
|
|
Shares |
|
|
$1 Par |
|
|
Capital |
|
|
Deficit |
|
|
Treasury |
|
|
Income (Loss) |
|
|
Total |
|
Balances at January 1, 2005 |
|
|
241,028 |
|
|
$ |
241,028 |
|
|
$ |
629,809 |
|
|
$ |
(561,908 |
) |
|
$ |
(13,190 |
) |
|
$ |
(2,285 |
) |
|
$ |
293,454 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,551 |
|
|
|
|
|
|
|
|
|
|
|
10,551 |
|
Unrealized gain on short-term
investments and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
853 |
|
|
|
853 |
|
Change in fair value of derivative
hedging instruments, net of
settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(171 |
) |
|
|
(171 |
) |
Excess additional pension liability
over unrecognized prior service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(237 |
) |
|
|
(237 |
) |
Issuance of common stock |
|
|
9,863 |
|
|
|
9,863 |
|
|
|
26,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,214 |
|
Common stock issued under long-term
incentive plans, net |
|
|
70 |
|
|
|
70 |
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
887 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2005 |
|
|
250,961 |
|
|
$ |
250,961 |
|
|
$ |
656,977 |
|
|
$ |
(551,357 |
) |
|
$ |
(13,190 |
) |
|
$ |
(1,838 |
) |
|
$ |
341,553 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,486 |
|
|
|
|
|
|
|
|
|
|
|
88,486 |
|
Cumulative effect of accounting change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350 |
) |
|
|
|
|
|
|
|
|
|
|
(350 |
) |
Unrealized gain on short-term
investments and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
63 |
|
Change in fair value of cash flow
hedging instruments, net of
settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|
|
111 |
|
Elimination of excess additional
pension liability over unrecognized
prior service cost attributable to
discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,219 |
|
|
|
2,219 |
|
Issuance of common stock |
|
|
27,600 |
|
|
|
27,600 |
|
|
|
118,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146,231 |
|
Common stock issued under long-term
incentive plans, net |
|
|
493 |
|
|
|
493 |
|
|
|
2,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,683 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2006 |
|
|
279,054 |
|
|
$ |
279,054 |
|
|
$ |
777,798 |
|
|
$ |
(463,221 |
) |
|
$ |
(13,190 |
) |
|
$ |
553 |
|
|
$ |
580,994 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,890 |
|
|
|
|
|
|
|
|
|
|
|
43,890 |
|
Unrealized gain on short-term
investments and marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
103 |
|
Change in fair value of cash flow
hedging instruments, net of
settlements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23 |
) |
|
|
(23 |
) |
Issuance of common stock in
Bolnisi/Palmarejo merger |
|
|
271,969 |
|
|
|
271,969 |
|
|
|
826,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,098,030 |
|
Common stock issued under long-term
incentive plans, net |
|
|
489 |
|
|
|
489 |
|
|
|
3,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,367 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2007 |
|
|
551,512 |
|
|
$ |
551,512 |
|
|
$ |
1,607,737 |
|
|
$ |
(419,331 |
) |
|
$ |
(13,190 |
) |
|
$ |
639 |
|
|
$ |
1,727,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
(In thousands) |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
43,890 |
|
|
$ |
88,486 |
|
|
$ |
10,551 |
|
Add (deduct) non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion |
|
|
20,984 |
|
|
|
26,772 |
|
|
|
18,889 |
|
Deferred taxes |
|
|
2,154 |
|
|
|
(2,902 |
) |
|
|
1,629 |
|
Unrealized (gain) loss on embedded derivatives |
|
|
(1,462 |
) |
|
|
1,166 |
|
|
|
(2,052 |
) |
Share-based compensation |
|
|
3,448 |
|
|
|
2,218 |
|
|
|
1,237 |
|
Amortization of debt issuance costs |
|
|
303 |
|
|
|
303 |
|
|
|
303 |
|
Amortization of premium and/or discount on
short-term investments, net |
|
|
(6 |
) |
|
|
24 |
|
|
|
790 |
|
Gain on asset retirement obligation |
|
|
(871 |
) |
|
|
(41 |
) |
|
|
(215 |
) |
Gain on foreign currency transactions |
|
|
(433 |
) |
|
|
(147 |
) |
|
|
170 |
|
(Gain) loss of sales of assets |
|
|
(1,947 |
) |
|
|
(237 |
) |
|
|
90 |
|
Other non-cash charges |
|
|
616 |
|
|
|
112 |
|
|
|
205 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
(24,021 |
) |
|
|
(14,781 |
) |
|
|
(19,571 |
) |
Prepaid expenses and other |
|
|
(4,065 |
) |
|
|
(599 |
) |
|
|
(183 |
) |
Inventories |
|
|
13,172 |
|
|
|
(15,555 |
) |
|
|
(8,308 |
) |
Accounts payable and accrued liabilities |
|
|
(11,705 |
) |
|
|
17,686 |
|
|
|
2,349 |
|
Discontinued operations |
|
|
|
|
|
|
(11,275 |
) |
|
|
792 |
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
40,057 |
|
|
|
91,230 |
|
|
|
6,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of short-term investments |
|
|
(167,346 |
) |
|
|
(317,743 |
) |
|
|
(212,252 |
) |
Proceeds from sales of short-term investments |
|
|
183,121 |
|
|
|
430,292 |
|
|
|
277,021 |
|
Capital expenditures |
|
|
(216,978 |
) |
|
|
(147,998 |
) |
|
|
(113,290 |
) |
Merger related costs |
|
|
(13,727 |
) |
|
|
|
|
|
|
|
|
Proceeds from sale of assets |
|
|
3,270 |
|
|
|
314 |
|
|
|
289 |
|
Other |
|
|
187 |
|
|
|
(642 |
) |
|
|
(186 |
) |
Discontinued operations |
|
|
|
|
|
|
15,446 |
|
|
|
(3,346 |
) |
|
|
|
|
|
|
|
|
|
|
CASH USED IN INVESTING ACTIVITIES |
|
|
(211,473 |
) |
|
|
(20,331 |
) |
|
|
(51,764 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from short-term borrowings |
|
|
1,698 |
|
|
|
|
|
|
|
|
|
Repayment of long-term debt and capital leases |
|
|
(1,360 |
) |
|
|
(1,448 |
) |
|
|
(685 |
) |
Proceeds from issuance of common stock |
|
|
|
|
|
|
154,560 |
|
|
|
36,493 |
|
Payments of common stock issuance costs |
|
|
(726 |
) |
|
|
(8,329 |
) |
|
|
(557 |
) |
Other |
|
|
(197 |
) |
|
|
94 |
|
|
|
(485 |
) |
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES: |
|
|
(585 |
) |
|
|
144,877 |
|
|
|
34,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(172,001 |
) |
|
|
215,776 |
|
|
|
(10,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
270,672 |
|
|
|
54,896 |
|
|
|
65,218 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
98,671 |
|
|
$ |
270,672 |
|
|
$ |
54,896 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
2,283 |
|
|
$ |
2,334 |
|
|
$ |
2,280 |
|
Income taxes |
|
$ |
11,994 |
|
|
$ |
814 |
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-9
COEUR DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise specified)
NOTE A BUSINESS OF COEUR DALENE MINES CORPORATION
Coeur dAlene Mines Corporation and its subsidiaries (collectively, Coeur or the Company)
is principally engaged in silver and gold mining and related activities including exploration,
development, and mining at its properties located in the United States (Nevada and Alaska), South
America (Chile, Argentina and Bolivia), Australia (New South Wales), Mexico (Chihuahua) and Africa
(Tanzania).
NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
wholly-owned subsidiaries of the Company, the most significant of which are Coeur Rochester, Inc.,
Coeur Silver Valley, Inc., Coeur Alaska, Inc., CDE Cerro Bayo Ltd., Coeur Argentina, CDE Australia
and Empresa Minera Manquiri S.A., Bolnisi Gold NL and Palmarejo Silver and Gold Corporation. The
consolidated financial statements also include all entities in which voting control of more than
50% is held by the Company. The Company has no investments in entities in which it has greater
than 50% ownership interest accounted for using the equity method. Intercompany balances and
transactions have been eliminated in consolidation. Investments in corporate joint ventures where
the Company has ownership of 50% or less and funds its proportionate share of expenses are
accounted for under the equity method. The Company has no investments in entities in which it has
a greater than 20% ownership interest accounted for using the cost method.
Revenue Recognition: Pursuant to guidance in Staff Accounting Bulletin (SAB) No.
104, Revenue Recognition for Financial Statements, revenue is recognized when persuasive evidence
of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations
remain and collectability is probable. The passing of title to the customer is based on the terms
of the sales contract. Product pricing is determined at the point revenue is recognized by
reference to active and freely traded commodity markets, for example the London Bullion Market for
both gold and silver, in an identical form to the product sold.
Under our concentrate sales contracts with third-party smelters, final gold and silver prices
are set on a specified future quotational period, typically one to three months, after the shipment
date based on market metal prices. Revenues are recorded under these contracts at the time title
passes to the buyer based on the forward price for the expected settlement period. The contracts,
in general, provide for a provisional payment based upon provisional assays and quoted metal
prices. Final settlement is based on the average applicable price for a specified future period,
and generally occurs from three to six months after shipment. Final sales are settled using
smelter weights, settlement assays (average of assays exchanged and/or umpire assay results) and
are priced as specified in the smelter contract. The Companys 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 measured at the
forward price at the time of sale. The embedded derivative does not qualify for hedge accounting.
The embedded derivative is recorded as a derivative asset, in prepaid expenses and other assets or
as a derivative liability in accrued liabilities and other on the balance sheet and is adjusted to
fair value through revenue each period until the date of final gold and silver settlement. The
form of the material being sold, after deduction for smelting and refining is in an identical form
to that sold on the London Bullion Market. The form of the product is metal in flotation
concentrate, which is the final process for which the Company is responsible.
F-10
The effects of forward sales contracts are reflected in revenue at the date the related
precious metals are delivered or the contracts expire. Third party smelting and refining costs of
$8.4 million, $9.1 million and $6.1 million in 2007, 2006 and 2005, respectively, are recorded as a
reduction of revenue.
At December 31, 2007, the Company had outstanding provisionally priced sales of $61.2 million
consisting of 3.3 million ounces of silver and 20,775 ounces of gold, which had a fair value of
approximately $63.8 million including the embedded derivative. For each one cent per ounce change
in realized silver price, revenue would vary (plus or minus) approximately $33,300 and for each one
dollar per ounce change in realized gold price, revenue would vary (plus or minus) approximately
$20,800. At December 31, 2006, the Company had outstanding provisionally priced sales of $74.5
million, consisting of 4.6 million ounces of silver and 29,577 ounces of gold. For each one cent
per ounce change in realized silver price, revenue would vary (plus or minus) approximately $45,700
and for each one dollar per ounce change in realized gold price, revenue would vary (plus or minus)
approximately $29,600.
Cash and Cash Equivalents: Cash and cash equivalents include all highly-liquid
investments with a maturity of three months or less at the date of purchase. The Company minimizes
its credit risk by investing its cash and cash equivalents with major international banks and
financial institutions located principally in the United States and Chile with a minimum credit
rating of A1 as defined by Standard & Poors. The Companys management believes that no
concentration of credit risk exists with respect to the investment of its cash and cash
equivalents.
Short-term Investments: Short-term investments principally consist of highly-liquid
United States, foreign government and corporate securities and investment-grade auction rate
securities, all classified as available-for-sale and reported at fair value with maturities that
could range from three months to forty years. Unrealized gains and losses on these investments are
recorded in accumulated other comprehensive income as a separate component of shareholders equity.
Any decline in market value considered to be other than temporary is recognized in determining net
income/loss. Realized gains and losses from the sale of these investments are included in
determining net income/loss. The Company maintains a pledge of collateral agreement to reserve
$1.0 million against the investment portfolio to cover credit exposure related to ACH transactions.
Ore on Leach Pad: The heap leach process used at the Rochester mine is a process of
extracting silver and gold by placing ore on an impermeable pad and applying a diluted cyanide
solution that dissolves a portion of the contained silver and gold, which are then recovered in
metallurgical processes.
The Company uses several integrated steps to scientifically measure the metal content of ore
placed on the leach pads. As the ore body is drilled in preparation for the blasting process,
samples are taken of the drill residue which is assayed to determine estimated quantities of
contained metal. The Company estimates the quantity of ore by utilizing global positioning
satellite survey techniques. The Company then processes the ore through crushing facilities where
the output is again weighed and sampled for assaying. A metallurgical reconciliation with the data
collected from the mining operation is completed with appropriate adjustments made to previous
estimates. The crushed ore is then transported to the leach pad for application of the leaching
solution. As the leach solution is collected from the leach pads, it is continuously sampled for
assaying. The quantity of leach solution is measured by flow meters throughout the leaching and
precipitation process. After precipitation, the product is converted to dorè, which is the final
product produced by the mine. The inventory is stated at lower of cost or market, with cost being
determined using a weighted average cost method.
The Company reported ore on the leach pads of $50.9 million as of December 31, 2007. Of this
amount, $25.9 million is reported as a current asset and $25.0 million is reported as a non-current
asset. The distinction between current and non-current is based upon the expected length of time
necessary for the leaching process to remove the metals from the broken ore. The historical cost
of the metal that is expected to be extracted within twelve months is classified as current and the
historical cost of metals contained within the broken ore that will be extracted beyond twelve
months is classified as non-current. Inventories of ore on leach pad are valued based on actual
production costs incurred to produce and place ore on the leach pad, adjusted for effects on monthly production of costs of abnormal
production levels, less costs allocated to minerals recovered through the leach process.
F-11
The estimate of both the ultimate recovery expected over time and the quantity of metal that
may be extracted relative to the time the leach process occurs requires the use of estimates which
are inherently inaccurate since they rely upon laboratory testwork. Testwork consists of 60 day
leach columns from which the Company projects metal recoveries up to five years in the future. The
quantities of metal contained in the ore are based upon actual weights and assay analysis. The rate
at which the leach process extracts gold and silver from the crushed ore is based upon laboratory
column tests and actual experience occurring over approximately nineteen years of leach pad
operations at the Rochester Mine. The assumptions used by the Company to measure metal content
during each stage of the inventory conversion process includes estimated recovery rates based on
laboratory testing and assaying. The Company periodically reviews its estimates compared to actual
experience and revises its estimates when appropriate. The length of time necessary to achieve
ultimate recoveries for silver and gold is currently estimated between 5 and 10 years. In August
2007, the Company terminated mining and crushing operations at the Rochester mine as ore reserves
were fully mined. Residual heap leach activities are expected to continue through 2011.
Metal and Other Inventory: Inventories include concentrate ore, dorè, ore in
stockpiles and operating materials and supplies. The classification of inventory is determined by
the stage at which the ore is in the production process. Inventories of ore in stock piles are
sampled for gold and silver content and are valued based on the lower of actual costs incurred or
estimated net realizable value based upon the period ending prices of gold and silver. Material
that does not contain a minimum quantity of gold and silver to cover estimated processing expense
to recover the contained gold and silver is not classified as inventory and is assigned no value.
All inventories are stated at the lower of cost or market, with cost being determined using a
weighted average cost method. Concentrate and dorè inventory includes product at the mine site and
product held by refineries and are also valued at lower of cost or market value. Metal inventory
costs include direct labor, materials, depreciation, depletion and amortization as well as
administrative overhead costs relating to mining activities.
Property, Plant, and Equipment: Expenditures for new facilities, capital leases, new
assets or expenditures that extend the useful lives of existing facilities are capitalized and
depreciated using the straight-line method at rates sufficient to depreciate such costs over the
shorter of estimated productive lives of such facilities or the useful life of the individual
assets. Productive lives range from 7 to 31 years for buildings and improvements, 3 to 13 years
for machinery and equipment and 3 to 7 years for furniture and fixtures. Certain mining equipment
is depreciated using the units-of-production method based upon estimated total proven and probable
reserves. Maintenance and repairs are expensed as incurred.
Operational Mining Properties and Mine Development: Costs incurred to develop new
properties are capitalized as incurred, where it has been determined that the property can be
economically developed. At the Companys surface mines, these costs include costs to further
delineate the ore body. At the Companys underground mines, these costs include the cost of
building access ways, shaft sinking and access, lateral development, drift development, ramps and
infrastructure development. All such costs are amortized using the units of production method over
the estimated life of the ore body based on recoverable ounces to be mined from proven and probable
reserves. Interest expense allocable to the cost of developing mining properties and to construct
new facilities is capitalized until assets are ready for their intended use. Gains or losses from
sales or retirements of assets are included in other income or expense. Costs incurred during the
start-up phase of a mine are expensed as incurred. Ongoing mining expenditures on producing
properties are charged against earnings as incurred. Major development expenditures incurred to
increase production or extend the life of the mine are capitalized. Mineral exploration costs are
expensed as incurred.
Mineral Interests: Significant payments related to the acquisition of land and
mineral rights are capitalized as incurred. Prior to acquiring such land or mineral rights, the
Company generally makes a preliminary evaluation to determine that the property has significant
potential to develop an economic ore body. The time between initial acquisition and full evaluation of a propertys potential is
variable and is determined by many factors including: location relative to existing infrastructure,
the propertys stage of development, geological controls and metal prices. If a minable ore body
is discovered, such costs are amortized when production begins using the units-of-production method
based on recoverable ounces to be mined from proven and probable reserves. If no minable ore body
is discovered, such costs are expensed in the period in which it is determined the property has no
future economic value.
F-12
Asset Impairment: The Company follows Statement of Financial Accounting Standard
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to evaluate the
recoverability of its assets. Management reviews and evaluates its long-lived assets for
impairment when events and changes in circumstances indicate that the related carrying amounts of
its assets may not be recoverable. Impairment is considered to exist if total estimated future
cash flows or probability-weighted cash flows on an undiscounted basis, are less than the carrying
amount of the assets, including property plant and equipment, mineral property, development
property, and any deferred costs such as deferred stripping. An impairment loss is measured and
recorded based on the difference between book value and discounted estimated future cash flows or
the application of an expected present value technique to estimate fair value in the absence of a
market price. Future cash flows include estimates of recoverable ounces, gold and silver prices
(considering current and historical prices, price trends and related factors), production levels
and capital, all based on life-of-mine plans and projections. Assumptions underlying future cash
flow estimates are subject to risks and uncertainties. If the assets are impaired, a calculation of
fair value is performed and if the fair value is lower than the carrying value of the assets, the
assets are reduced to their fair market value. Any differences between significant assumptions and
market conditions and/or the Companys operating performance could have a material effect on the
Companys determination of ore reserves, or its ability to recover the carrying amounts of its
long-lived assets resulting in impairment charges. In estimating future cash flows, assets are
grouped at the lowest level for which there are identifiable cash flows that are largely
independent of cash flows from other asset groups. Generally, in estimating future cash flows, all
assets are grouped at a particular mine for which there is identifiable cash flow.
Restricted Cash and Cash Equivalents: The Company, under the terms of its lease, self
insurance, and bonding agreements with certain banks, lending institutions and regulatory agencies,
is required to collateralize certain portions of the Companys obligations. The Company has
collateralized these obligations by assigning certificates of deposit that have maturity dates
ranging from three months to a year, to the respective institutions or agency. At December 31,
2007 and December 31, 2006, the Company held certificates of deposit and cash under these
agreements of $25.8 million and $23.5 million, respectively, restricted for this purpose. The
ultimate timing for the release of the collateralized amounts is dependent on the timing and
closure of each mine. In order to release the collateral, the Company must seek approval from
certain government agencies responsible for monitoring the mine closure status. Collateral could
also be released to the extent the Company was able to secure alternative financial assurance
satisfactory to the regulatory agencies. The Company believes there is a reasonable probability
that the collateral will remain in place beyond a twelve-month period and has therefore classified
these investments as long-term.
Deferred Stripping Costs: Effective January 1, 2006, the Company adopted Emerging
Issues Task Force (EITF) Issue No. 04-06, Accounting for Stripping Costs Incurred during
Production in the Mining Industry. EITF Issue No. 04-06 addresses the accounting for stripping
costs incurred during the production phase of a mine and refers to these costs as variable
production costs that should be included as a component of inventory to be recognized in costs
applicable to sales in the same period as the revenue from the sale of inventory. The consensus
requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The
Company recorded a charge of approximately $0.4 million to retained earnings at January 1, 2006 to
write off previously capitalized deferred stripping costs, as the cumulative effect of a change in
accounting method.
F-13
Reclamation and Remediation Costs: The Company follows SFAS No. 143, Accounting for
Asset Retirement Obligations, which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated asset retirement
costs. The standard applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of fair value can be
made. The fair value of the liability is added to the carrying amount of the associated asset and
this additional carrying amount is depreciated over the life of the asset. An accretion cost,
representing the increase over time in the present value of the liability, is recorded each period
in depreciation, depletion and amortization expense. As reclamation work is performed or
liabilities are otherwise settled, the recorded amount of the liability is reduced.
Future remediation costs for inactive mines are accrued based on managements best estimate at
the end of each period of the undiscounted costs expected to be incurred at the site. Such cost
estimates include, where applicable, ongoing care and maintenance and monitoring costs. Changes in
estimates are reflected in earnings in the period an estimate is revised.
Foreign Currency: Substantially all assets and liabilities of foreign subsidiaries are
translated at exchange rates in effect at the end of each period. Revenues and expenses are
translated at the average exchange rate for the period. Foreign currency transaction gains and
losses are included in the determination of net income.
Derivative Financial Instruments: The Company accounts for derivative financial
instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities. These Statements require recognition of all derivatives as either assets or
liabilities on the balance sheet and measurement of those instruments at fair value. Appropriate
accounting for changes in the fair value of derivatives held is dependent on whether the derivative
instrument is designated and qualifies as an accounting hedge and on the classification of the
hedge transaction.
For derivative instruments that are designated and qualify as cash flow hedges, the effective
portions of changes in fair value of the derivative are recorded in other comprehensive income, and
are recognized in the Consolidated Statement of Operations when the hedged item affects net income
for the period. Ineffective portions of changes in the fair value of cash flow hedges are
recognized currently in earnings. Refer to Note O Derivative Financial Instruments and Fair Value
of Financial Instruments.
Stock-based Compensation Plans: Effective January 1, 2006, the Company began
recording compensation expense associated with awards of equity instruments in accordance with
SFAS No. 123(R), Share-Based Payment. Prior to
January 1, 2006, the Company accounted for awards of equity instruments according to the provisions
of SFAS No. 123, Accounting for Stock-Based Compensation, and related interpretations, and
therefore no related compensation expense was recorded for awards granted with no intrinsic value.
The Company adopted the modified prospective transition method provided for under SFAS No. 123(R),
and, consequently, has not retroactively adjusted results from prior periods. Under this
transition method, compensation cost associated with awards of equity instruments recognized during
2006 includes: 1) amortization related to the remaining unvested portion of all awards granted for
the fiscal years 1995 to 2005, based on the grant date fair value, estimated in accordance with the
original provisions of SFAS No. 123, Accounting for Stock-Based Compensation; and 2) amortization
related to all equity instrument awards granted subsequent to December 31, 2005, based on the
grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). The
compensation costs are included in administrative and general expenses, productions costs and the
cost of self-constructed property, plant and equipment as deemed appropriate.
F-14
The Company continues to estimate the fair value of each stock option award on the date of
grant using the Black-Scholes option valuation model. The Company estimates forfeitures of stock
based awards based on historical data and adjusts the forfeiture rate periodically.
Income Taxes: The Company computes income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires an asset and liability approach which results
in the recognition of deferred tax liabilities and assets for the expected future tax consequences
or benefits of temporary differences between the financial reporting basis and the tax basis of
assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax
rates in effect in the years in which the differences are expected to reverse.
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of its deferred tax assets will not be realized.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment. A valuation allowance has been
provided for the portion of the Companys net deferred tax assets for which it is more likely than
not that they will not be realized.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax
of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S.
federal income tax matters for years through 1999. Federal income tax returns for 2000 through 2006
are subject to examination. The Companys continuing practice is to recognize interest and/or
penalties related to income tax matters in income tax expense. There were no significant accrued
interest or penalties at December 31, 2007.
Comprehensive Income: Comprehensive income includes net income (loss) as well as
changes in stockholders equity that result from transactions and events other than those with
stockholders. Items of comprehensive income include the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
Net income |
|
$ |
43,890 |
|
|
$ |
88,486 |
|
|
$ |
10,551 |
|
Unrealized
gain on short-term investments and marketable securities |
|
|
103 |
|
|
|
63 |
|
|
|
853 |
|
Change in fair value of cash flow hedges, net of settlements |
|
|
(23 |
) |
|
|
111 |
|
|
|
(169 |
) |
Minimum pension liabilities |
|
|
|
|
|
|
2,219 |
|
|
|
(237 |
) |
Foreign
currency translation |
|
|
6 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,976 |
|
|
$ |
90,877 |
|
|
$ |
10,998 |
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Share: The Company follows SFAS No. 128, Earnings Per Share, which
requires the presentation of basic and diluted earnings per share. Basic earnings per share is
computed by dividing net income available to common shareholders by the weighted average number of
common shares outstanding during each period. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue common stock were exercised or
converted into common stock. The effect of potentially dilutive stock options and debentures
outstanding in the years ending December 31, 2007, 2006 and 2005 are as follows:
F-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, 2007 |
|
|
December 31, 2006 |
|
|
December 31, 2005 |
|
|
|
Income |
|
|
Shares |
|
|
Per-Share |
|
|
Income |
|
|
Shares |
|
|
Per-Share |
|
|
Income |
|
|
Shares |
|
|
Per-Share |
|
(In thousands except for EPS) |
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
|
(Numerator) |
|
|
(Denominator) |
|
|
Amount |
|
Basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
|
$ |
43,890 |
|
|
|
285,972 |
|
|
$ |
0.15 |
|
|
$ |
75,419 |
|
|
|
271,357 |
|
|
$ |
0.28 |
|
|
$ |
14,746 |
|
|
|
242,915 |
|
|
$ |
0.06 |
|
Income from discontinued
operations |
|
|
|
|
|
|
285,972 |
|
|
|
|
|
|
|
13,067 |
|
|
|
271,357 |
|
|
|
0.05 |
|
|
|
(4,195 |
) |
|
|
242,915 |
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
43,890 |
|
|
|
285,972 |
|
|
$ |
0.15 |
|
|
$ |
88,486 |
|
|
|
271,357 |
|
|
$ |
0.33 |
|
|
$ |
10,551 |
|
|
|
242,915 |
|
|
$ |
0.04 |
|
Effect of Dilutive Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards |
|
|
|
|
|
|
868 |
|
|
|
|
|
|
|
|
|
|
|
1,041 |
|
|
|
|
|
|
|
|
|
|
|
768 |
|
|
|
|
|
1.25% convertible notes |
|
|
297 |
|
|
|
23,684 |
|
|
|
|
|
|
|
1,117 |
|
|
|
23,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations |
|
$ |
44,187 |
|
|
|
310,524 |
|
|
|
0.14 |
|
|
$ |
76,536 |
|
|
|
296,082 |
|
|
|
0.26 |
|
|
$ |
14,746 |
|
|
|
243,683 |
|
|
$ |
0.06 |
|
Income (loss) from
discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,067 |
|
|
|
296,082 |
|
|
|
0.04 |
|
|
|
(4,195 |
) |
|
|
243,683 |
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
44,187 |
|
|
|
310,524 |
|
|
$ |
0.14 |
|
|
$ |
89,603 |
|
|
|
296,082 |
|
|
$ |
0.30 |
|
|
$ |
10,551 |
|
|
|
243,683 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended 2007, 2006 and 2005, options to purchase 531,112, 322,653 and 876,192
shares of common stock at prices between $4.81 to $8.94, $6.66 to $15.19 and $3.92 to $17.94,
respectively, were not included in the computation of diluted EPS because the exercise price of
options was greater than the average market price of the common shares. The options, which expire
between 2008 to 2017, are outstanding at December 31, 2007. Potentially diluting shares totaling
23,684,211 shares attributed to the 1.25% convertible notes have been excluded from the earnings
per share calculation for the year ended December 31, 2005 as their effect was anti-dilutive.
Debt Issuance Costs: Costs associated with the issuance of debt are included in other
noncurrent assets and are amortized over the term of the related debt.
Use of Estimates: The preparation of the Companys consolidated financial statements
in conformity with U.S. generally accepted accounting principles
(GAAP) requires management to make estimates and assumptions that affect the amounts reported in their
consolidated financial statements and accompanying notes. The areas requiring the use of
managements estimates and assumptions relate to recoverable ounces from proven and probable
reserves that are the basis of future cash flow estimates and units-of-production depreciation and
amortization calculations; useful lives utilized for depreciation, depletion and amortization of
long lived assets; estimates of recoverable gold and silver ounces in ore on leach pad; the amount
and timing of reclamation and remediation costs; valuation allowances for deferred tax assets; and
post-employment and other employee benefit liabilities.
Reclassifications: Certain reclassifications of prior year balances have been made to
conform to the current year presentation. These reclassifications had no impact on the Companys
consolidated financial position, results of operations or cash flows for the periods presented. The
most significant reclassifications were to reclassify the income
statement results from historical presentation to income (loss) from discontinued operations in the consolidated statements of operations for
the years ended December 31, 2006 and 2005. The consolidated statements of cash flows have been
reclassified for discontinued operations for the periods ended December 31, 2006 and 2005. In
addition, investments in auction rate securities have been reclassified from cash and cash
equivalents to short-term investments on the consolidated balance sheet and corresponding
adjustments were made to the consolidated statements of cash flows for the periods ended December
31, 2006 and 2005.
Recent Accounting Pronouncements: In February 2007, the FASB issued Statement
No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS 159). SFAS
159 permits entities to choose to measure many financial instruments and certain other items at
fair value, with the objective of improving financial reporting by mitigating volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. The provisions of SFAS 159 are effective for the Companys fiscal year ending
December 31, 2008. The Company is currently evaluating the impact that the adoption of this
statement will have on the Companys consolidated financial position, results of operations and
disclosures.
F-16
In September 2006, the FASB issued Statement No. 157
Fair Value Measurements (SFAS 157).
SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value
measurements. The provisions of SFAS
157 are effective for the Companys fiscal year ending December 31, 2008. The Company is currently
evaluating the impact of the adoption of this statement on the Companys consolidated financial
position, results of operations and disclosures.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize
in its financial statements the impact of a tax position, if that tax position is more likely than
not of being sustained on audit, based on the technical merits of the position. FIN 48 also
provides guidance on derecognition, classification of interest and penalties, accounting in interim
periods and disclosure. The provisions of FIN 48 were effective beginning January 1, 2007. The
adoption of FIN 48 did not have a material effect on the Companys financial position, results of
operations or cash flows.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax
of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S.
federal income tax matters for years through 1999. Federal income tax returns for 2000 through 2006
are subject to examination. The Companys continuing practice is to recognize interest and/or
penalties related to income tax matters in income tax expense. There were no significant accrued
interest or penalties at December 31, 2007.
NOTE C ACQUISITIONS OF BOLNISI AND PALMAREJO
On December 21, 2007, the Company completed its acquisition of all the shares of Bolnisi Gold
NL (Bolnisi) and Palmarejo Gold and Silver Corporation (Palmarejo) in exchange for a total of
approximately 272 million shares of Coeur common stock, a total cash payment of approximately $1.1
million and assumption of liabilities of $0.7 billion. Coeur issued 0.682 shares of Coeur common
stock (or, at the election of the Bolnisi shareholder, CHESS Depositary Interests representing
Coeur shares) and A$0.004 in cash (or approximately US$1.0 million in the aggregate) for each
Bolnisi ordinary share, and 2.715 shares of Coeur common stock and C$0.004 in cash (or
approximately US$0.1 million in the aggregate) for each Palmarejo common share. The transaction
was accounted for as a purchase of assets and not as a business combination since Bolnisi and
Palmarejo are considered to be in the development stage.
The total consideration paid for the
acquisition was as follows (in thousands):
|
|
|
|
|
Consideration: |
|
|
|
|
Coeur stock issued (271,969,428 shares at $4.04) |
|
$ |
1,098,757 |
|
Cash payments |
|
|
1,102 |
|
Transaction advisory fees and other costs |
|
|
16,621 |
|
|
|
|
|
Total purchase price |
|
|
1,116,480 |
|
|
|
|
|
|
Current liabilities |
|
|
54,946 |
|
Other long-term liabilities |
|
|
23,642 |
|
Deferred income taxes |
|
|
572,711 |
|
|
|
|
|
Total liabilities assumed |
|
|
651,299 |
|
|
|
|
|
|
|
$ |
1,767,779 |
|
|
|
|
|
F-17
The following summarizes the estimated fair values of the assets acquired on December 21,
2007 (in thousands):
|
|
|
|
|
Fair value of assets acquired: |
|
|
|
|
Cash |
|
$ |
3,996 |
|
Other current assets |
|
|
3,789 |
|
Property, plant and equipment |
|
|
97,519 |
|
Mineral interests |
|
|
1,657,189 |
|
Other assets |
|
|
5,286 |
|
|
|
|
|
Total assets acquired |
|
$ |
1,767,779 |
|
|
|
|
|
NOTE D DISCONTINUED OPERATIONS
During the first quarter of 2006, the Company committed to a plan to sell Coeur Silver Valley
Inc. (CSV), a wholly owned subsidiary of Coeur dAlene Mines Corporation, that owned and operated
the Galena underground silver mine and adjoining properties in Northern Idaho. On April 10, 2006,
the Company announced that it had entered into an agreement to sell 100% of the shares of CSV to
U.S. Silver Corporation for $15 million in cash. On June 1, 2006, the Company completed the sale of
100% of CSV to U.S. Silver Corporation for a total of $15 million in cash plus a post-closing
working capital adjustment of $1.1 million. The Company recorded, within discontinued operations,
a gain of approximately $11.1 million in the year ended December 31, 2006. Pursuant to SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, CSV was classified as held
for sale and the results of its operations reported in discontinued operations beginning in the
period ended June 30, 2006.
The following table details selected financial information included in the income (loss) from
discontinued operations in the consolidated statements of operations for the years ended December
31, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Sales of metal |
|
$ |
11,223 |
|
|
$ |
16,052 |
|
Production costs applicable to sales |
|
|
(8,233 |
) |
|
|
(16,698 |
) |
Depreciation and depletion |
|
|
(681 |
) |
|
|
(1,996 |
) |
Mining exploration |
|
|
(279 |
) |
|
|
(1,361 |
) |
Other |
|
|
(95 |
) |
|
|
(192 |
) |
|
|
|
|
|
|
|
Income (loss) from discontinued operations |
|
|
1,935 |
|
|
|
(4,195 |
) |
Gain on sale of net assets of discontinued operations |
|
|
11,132 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinued operations |
|
$ |
13,067 |
|
|
$ |
(4,195 |
) |
|
|
|
|
|
|
|
F-18
NOTE E INVESTMENTS AND OTHER MARKETABLE SECURITIES
The Company classifies its investment securities as available-for-sale securities. Pursuant
to SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, such securities
are measured at fair market value in the financial statements with unrealized gains or losses
recorded in other comprehensive income. At the time securities are sold or otherwise
disposed of, gains or losses are included in net income. The following is a summary of
available-for-sale securities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-For-Sale Securities |
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Losses |
|
|
Gains |
|
|
Value |
|
|
|
|
As of December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Corporate |
|
$ |
2,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,000 |
|
U.S. Government |
|
|
51,031 |
|
|
|
|
|
|
|
8 |
|
|
|
51,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities |
|
|
53,031 |
|
|
|
|
|
|
|
8 |
|
|
|
53,039 |
|
Equity securities |
|
|
99 |
|
|
|
|
|
|
|
702 |
|
|
|
801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,130 |
|
|
$ |
|
|
|
$ |
710 |
|
|
$ |
53,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Corporate |
|
$ |
65,372 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
65,372 |
|
U.S. Government |
|
|
5,000 |
|
|
|
|
|
|
|
1 |
|
|
|
5,001 |
|
Total debt securities |
|
|
70,372 |
|
|
|
|
|
|
|
1 |
|
|
|
70,373 |
|
Equity securities |
|
|
99 |
|
|
|
1 |
|
|
|
622 |
|
|
|
720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
70,471 |
|
|
$ |
1 |
|
|
$ |
623 |
|
|
$ |
71,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains and losses are based on a carrying value (cost, net of discount or
premium) of short-term investments sold or adjusted for other than temporary decline in market
value. Short-term investments mature at various dates. There were no realized gains and/or losses
in 2007, 2006 and 2005.
Asset-Backed Commercial Paper (ABCP)
The Company acquired certain asset-backed securities in connection with the Bolnisi and
Palmarejo acquisition. Palmarejo has investments in non-bank sponsored ABCP (before accounting for an impairment charge), of which $6.3 million is
invested in Apsley Trust Class E and $0.5 million in Aurora Trust Class A.
Since a certain percentage of the assets supporting the commercial paper was invested in U.S.
sub-prime residual mortgage-backed securities, the Company recorded an impairment based on the best
available market data for such investments at the date of acquisition. Consequently, the Company
recorded these investments at their estimated fair value of $5.3 million for the ABCP held by Palmarejo.
The fair value of the ABCP are determined based on the Companys assessment of market
conditions at the date of acquisition, no further impairments were deemed necessary at December 31,
2007. The fair value reported may change materially in subsequent periods.
NOTE F METAL AND OTHER INVENTORIES
Inventories
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Concentrate and dorè inventory |
|
$ |
11,221 |
|
|
$ |
9,680 |
|
Supplies |
|
|
7,697 |
|
|
|
6,661 |
|
|
|
|
|
|
|
|
Metal and other inventory |
|
$ |
18,918 |
|
|
$ |
16,341 |
|
|
|
|
|
|
|
|
F-19
NOTE G PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Land |
|
$ |
1,133 |
|
|
$ |
1,112 |
|
Building improvements |
|
|
130,795 |
|
|
|
51,818 |
|
Machinery and equipment |
|
|
153,328 |
|
|
|
77,040 |
|
Capitalized leases for machinery and
equipment |
|
|
37,477 |
|
|
|
2,345 |
|
|
|
|
|
|
|
|
|
|
|
322,733 |
|
|
|
132,315 |
|
Accumulated depreciation |
|
|
(69,937 |
) |
|
|
(64,206 |
) |
|
|
|
|
|
|
|
|
|
$ |
252,796 |
|
|
$ |
68,109 |
|
|
|
|
|
|
|
|
The Companys capital expenditures, excluding the acquisitions of Bolnisi and Palmarejo, were
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
Rochester |
|
$ |
1,647 |
|
|
$ |
1,225 |
|
|
$ |
1,197 |
|
Cerro Bayo |
|
|
11,330 |
|
|
|
7,555 |
|
|
|
2,731 |
|
Martha |
|
|
16,444 |
|
|
|
2,481 |
|
|
|
2,108 |
|
San Bartolomé |
|
|
100,169 |
|
|
|
16,805 |
|
|
|
11,089 |
|
Kensington |
|
|
92,337 |
|
|
|
122,640 |
|
|
|
53,155 |
|
Endeavor |
|
|
2,112 |
|
|
|
|
|
|
|
15,410 |
|
Broken Hill |
|
|
213 |
|
|
|
|
|
|
|
36,667 |
|
Other |
|
|
1,942 |
|
|
|
588 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
Net asset additions |
|
$ |
226,194 |
|
|
$ |
151,294 |
|
|
$ |
122,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
Coeur Silver
Valley |
|
$ |
|
|
|
$ |
617 |
|
|
$ |
3,537 |
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, 2006 and 2005, approximately $22.1 million, $12.9 million and $9.6,
respectively, of invoices for capital expenditures remained in accounts payable and for purposes of
the consolidated cash flows were treated as non-cash transactions.
In connection with the acquisition of Bolnisi and Palmarejo, the Company assumed certain
liabilities related to capital leases. In December 2006, Bolnisi, through its Canadian subsidiary
Palmarejo, entered into a 2-year lease agreement for a power station. Under the terms of the
agreement, including an amendment in January 2007, the Company will pay a fixed monthly amount of
$0.3 million, including interest calculated at the rate of LIBOR
plus 2.5%, starting at the date
that the construction of the equipment is completed. The Company has the option at the end of the
agreement to purchase the equipment by paying a nominal amount. In June 2007, Palmarejo entered
into a 5-year lease agreement for $30.6 million of mining equipment to be delivered to Palmarejo as
the equipment becomes available from the supplier. Mining equipment
with a cost of $30.1 million
has been delivered as of December 31, 2007. The Company will pay a monthly amount varying between
$0.6 million and $0.8 million during the 2008 period and a
fixed monthly amount of $0.6
million thereafter, including interest calculated at the rate of LIBOR plus 3.65%. The Company has
the option at the end of the agreement to purchase the equipment by paying a nominal amount.
F-20
Minimum future lease payments under capital leases at December 31, 2007 are
as follows (in thousands):
|
|
|
|
|
|
|
Capital |
|
Year Ending December 31, |
|
Leases |
|
2008 |
|
|
11,554 |
|
2009 |
|
|
8,976 |
|
2010 |
|
|
6,755 |
|
2011 |
|
|
6,755 |
|
Thereafter |
|
|
5,156 |
|
|
|
|
|
|
|
|
|
|
Total minimum payments due |
|
|
39,196 |
|
Less: Amount representing interest |
|
|
6,432 |
|
|
|
|
|
Present value of net minimum lease payments |
|
|
32,764 |
|
Less: Current maturities |
|
|
9,103 |
|
|
|
|
|
|
|
$ |
23,661 |
|
|
|
|
|
The Company has entered into various operating lease agreements which expire over the next
year. Total rent expense charged to net income under these agreements was $1.7 million, $2.6
million and $3.5 million for 2007, 2006, and 2005, respectively.
NOTE H MINING PROPERTIES
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Capitalized costs for mining properties,
net of accumulated depletion
consist of the following (in
thousands):(A) |
|
|
|
|
|
|
|
|
Operational mining properties: |
|
|
|
|
|
|
|
|
Rochester Mine |
|
$ |
|
|
|
$ |
4,445 |
|
Cerro Bayo Mine |
|
|
17,091 |
|
|
|
8,531 |
|
Martha Mine |
|
|
1,832 |
|
|
|
1,110 |
|
|
|
|
|
|
|
|
Total operational mining properties |
|
|
18,923 |
|
|
|
14,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral interests, net of accumulated depletion |
|
|
|
|
|
|
|
|
Endeavor Mine |
|
|
15,865 |
|
|
|
14,508 |
|
Broken Hill Mine |
|
|
26,897 |
|
|
|
29,740 |
|
San Bartolomé (B) |
|
|
20,125 |
|
|
|
20,125 |
|
Palmarejo (C) |
|
|
1,657,189 |
|
|
|
|
|
|
|
|
|
|
|
|
Total mineral interests |
|
|
1,720,076 |
|
|
|
64,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-producing and developmental properties: |
|
|
|
|
|
|
|
|
Kensington (D) |
|
|
256,443 |
|
|
|
170,458 |
|
San Bartolomé (E) |
|
|
54,884 |
|
|
|
20,388 |
|
Other |
|
|
142 |
|
|
|
142 |
|
|
|
|
|
|
|
|
Total non-producing and developmental properties |
|
|
311,469 |
|
|
|
190,988 |
|
|
|
|
|
|
|
|
Total mining properties |
|
$ |
2,050,468 |
|
|
$ |
269,447 |
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
On June 1, 2006, the Company completed the sale of 100% of the shares of its
wholly-owned subsidiary, Coeur Silver Valley Inc., to US Silver Corporation for $15
million in cash and additional consideration received of $1.1 million for working
capital. |
|
(B) |
|
Balance represents acquisition cost of mineral interest. |
|
(C) |
|
On December 31, 2007, the Company completed its acquisition of all of the
shares of Bolnisi and Palmarejo in exchange for a total of approximately 272 million
shares of Coeur common stock and a total cash payment of approximately $1.1
million. The total consideration paid was $1.1 billion and assumed
liabilities were $0.7 billion. |
|
(D) |
|
During the third quarter of 2005, the Company commenced construction
activities at its Kensington property. The costs incurred subsequent to commencing
construction were capitalized as developmental properties. |
F-21
|
|
|
(E) |
|
During the fourth quarter of 2004, the Company commenced construction
activities at its San Bartolomé property. The costs incurred subsequent to commencing
construction were capitalized as developmental properties. |
Operational Mining Properties
Rochester Mine: The Company has conducted operations at the Rochester Mine, located in
Western Nevada, since September 1986. The mine utilizes the heap-leaching process to extract both
silver and gold from ore mined using open pit methods. Rochesters primary product is silver with
gold produced as a by-product.
Cerro Bayo Mine: The Cerro Bayo Mine is a gold and silver underground mine located in
southern Chile. Commercial production commenced on April 18, 2002.
Martha Mine: The Martha Mine is an underground silver mine located in Argentina,
approximately 270 miles southeast of Coeurs Cerro Bayo mine. Coeur acquired a 100% interest in
the Martha mine in April 2002. In July 2002, Coeur commenced shipment of ore from the Martha mine
to the Cerro Bayo facility for processing. In December 2007, the
Company completed a 240 tonne per
day flotation mill which produces a flotation concentrate.
Mineral Interests
Endeavor Mine: On May 23, 2005, the Company acquired all of the silver production and
reserves, up to a maximum 17.7 million payable ounces, contained at the Endeavor Mine in Australia,
which is owned and operated by Cobar Operations Pty. Limited (Cobar), a wholly-owned subsidiary
of CBH Resources Ltd. (CBH), for $43.8 million. The Company is entitled to all of the silver
production and reserves up to a maximum of 17.7 million payable ounces. The Endeavor Mine is
located 720 km northwest of Sydney in New South Wales and has been in production since 1983. Under
the terms of the original agreement, CDE Australia, a wholly-owned subsidiary of Coeur, paid Cobar
$15.4 million of cash at the closing. In addition, CDE Australia, subject to certain conditions,
will pay Cobar approximately $26.3 million upon the receipt of a report confirming that the
reserves at the Endeavor mine are equal to or greater than the reported ore reserves for 2004.
Payment will occur in 2008. In addition to these upfront payments, pursuant to the original
agreement, Coeur pays Cobar an operating cost contribution of $1.00 for each ounce of payable
silver plus a further increment which was to begin when the silver price exceeds $5.23 per ounce.
This further increment was to begin on the second anniversary of the agreement and would have been
50% of the amount by which the silver price exceeds $5.23 per ounce. A cost contribution of $0.25
per ounce is also payable by Coeur in respect of new ounces of proven and probable silver reserves
as they are discovered. The Company has paid a cost contri