Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________ 
FORM 10-Q
___________________________________________
þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2016
OR
 ¨   
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission file number 001-08641
____________________________________________ 
COEUR MINING, INC.
(Exact name of registrant as specified in its charter)
____________________________________________
Delaware
 
82-0109423
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
104 S. Michigan Ave., Suite 900 Chicago, Illinois
 
60603
(Address of principal executive offices)
 
(Zip Code)
(312) 489-5800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
Accelerated filer
 
 ¨   
 
 
 
 
Non-accelerated filer
 
 ¨   
Smaller reporting company
 
 ¨   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
The Company has 300,000,000 shares of common stock, par value of $0.01, authorized of which 162,364,657 shares were issued and outstanding as of July 25, 2016.



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



2


PART I
Item 1.        Financial Statements
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended June 30,
 
Six months ended
June 30,
 
 
2016
 
2015
 
2016
 
2015
 
Notes
In thousands, except share data
Revenue
3
$
182,007

 
$
166,263

 
$
330,394

 
$
319,219

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
100,465

 
119,097

 
202,020

 
234,160

Amortization
 
37,505

 
38,974

 
65,470

 
72,064

General and administrative
 
7,400

 
8,451

 
15,676

 
17,286

Exploration
 
2,233

 
3,579

 
3,963

 
7,845

Write-downs
 

 

 
4,446

 

Pre-development, reclamation, and other
 
4,364

 
2,267

 
8,568

 
9,030

Total costs and expenses
 
151,967

 
172,368

 
300,143

 
340,385

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Fair value adjustments, net
10
(3,579
)
 
2,754

 
(12,274
)
 
(2,130
)
Interest expense, net of capitalized interest
18
(10,875
)
 
(10,734
)
 
(21,995
)
 
(21,499
)
Other, net
7
(1,857
)
 
(2,852
)
 
(543
)
 
(5,362
)
Total other income (expense), net
 
(16,311
)
 
(10,832
)
 
(34,812
)
 
(28,991
)
Income (loss) before income and mining taxes
 
13,729

 
(16,937
)
 
(4,561
)
 
(50,157
)
Income and mining tax (expense) benefit
8
768

 
260

 
(1,338
)
 
192

NET INCOME (LOSS)
 
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
$
(49,965
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of $(1,164) and $(2,174) for the three and six months ended June 30, 2016, respectively, and $7 for the three months June 30, 2015
 
2,103

 
(1,312
)
 
3,146

 
(2,813
)
Reclassification adjustments for impairment of equity securities
 
20

 
31

 
20

 
1,545

Reclassification adjustments for realized (gain) loss on sale of equity securities
 
(314
)
 
904

 
273

 
904

Other comprehensive income (loss)
 
1,809

 
(377
)
 
3,439

 
(364
)
COMPREHENSIVE INCOME (LOSS)
 
$
16,306

 
$
(17,054
)
 
$
(2,460
)
 
$
(50,329
)
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
9
 
 
 
 
 
 
 
Basic
 
$
0.09

 
$
(0.12
)
 
$
(0.04
)
 
$
(0.42
)
 
 
 
 
 
 
 
 
 
Diluted
 
$
0.09

 
$
(0.12
)
 
$
(0.04
)
 
$
(0.42
)
(1) Excludes amortization.
The accompanying notes are an integral part of these consolidated financial statements.


3


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
 
2016
 
2015
 
2016
 
2015
 
 
Notes
In thousands
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
(49,965
)
 
Adjustments:
 
 
 
 
 

 
 
 
Amortization
 
37,505

 
38,974

 
65,470

 
72,064

 
Accretion
 
2,848

 
3,526

 
6,017

 
6,676

 
Deferred income taxes
 
(15,170
)
 
(5,053
)
 
(17,275
)
 
(7,237
)
 
Fair value adjustments, net
10
3,579

 
(2,754
)
 
12,274

 
2,130

 
Stock-based compensation
5
2,307

 
2,604

 
5,222

 
4,754

 
Impairment of equity securities
13
20

 
31

 
20

 
1,545

 
Write-downs
 

 

 
4,446

 

 
Other
 
1,910

 
4,224

 
474

 
5,303

 
Changes in operating assets and liabilities:
 
 
 
 
 

 
 
 
Receivables
 
(12,402
)
 
(2,342
)
 
(8,921
)
 
214

 
Prepaid expenses and other current assets
 
(898
)
 
160

 
381

 
(1,167
)
 
Inventory and ore on leach pads
 
(7,686
)
 
4,649

 
(15,508
)
 
5,333

 
Accounts payable and accrued liabilities
 
19,429

 
9,662

 
5,855

 
(6,095
)
 
CASH PROVIDED BY OPERATING ACTIVITIES
 
45,939

 
37,004

 
52,556

 
33,555

 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(23,288
)
 
(23,677
)
 
(45,460
)
 
(41,297
)
 
Acquisitions, net
12

 
(9,152
)
 

 
(111,170
)
 
Proceeds from the sale assets
 
7,293

 
8

 
11,302

 
165

 
Purchase of investments
 
(92
)
 
(1,597
)
 
(99
)
 
(1,873
)
 
Sales and maturities of investments
 
648

 
399

 
1,645

 
469

 
Other
 
(1,446
)
 
(111
)
 
(2,919
)
 
(1,841
)
 
CASH USED IN INVESTING ACTIVITIES
 
(16,885
)
 
(34,130
)
 
(35,531
)
 
(155,547
)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
Issuance of common stock
 
73,071

 

 
73,071

 

 
Issuance of notes and bank borrowings
18

 
100,000

 

 
153,500

 
Payments on debt, capital leases, and associated costs
 
(6,712
)
 
(66,626
)
 
(12,683
)
 
(75,220
)
 
Gold production royalty payments
 
(10,461
)
 
(9,754
)
 
(19,592
)
 
(20,122
)
 
Other
 
(448
)
 
(72
)
 
(728
)
 
(495
)
 
CASH PROVIDED (USED IN) BY FINANCING ACTIVITIES
 
55,450

 
23,548

 
40,068

 
57,663

 
Effect of exchange rate changes on cash and cash equivalents
 
(302
)
 
(141
)
 
(216
)
 
(664
)
 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
84,202

 
26,281

 
56,877

 
(64,993
)
 
Cash and cash equivalents at beginning of period
 
173,389

 
179,587

 
200,714

 
270,861

 
Cash and cash equivalents at end of period
 
$
257,591

 
$
205,868

 
$
257,591

 
$
205,868

 

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

4


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
 
 
June 30, 2016
 
December 31, 2015
ASSETS
Notes
 
In thousands, except share data
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
257,591

 
$
200,714

Receivables
14
 
79,932

 
85,992

Inventory
15
 
84,074

 
81,711

Ore on leach pads
15
 
76,335

 
67,329

Prepaid expenses and other
 
 
11,614

 
10,942

 
 
 
509,546

 
446,688

NON-CURRENT ASSETS
 
 
 
 
 
Property, plant and equipment, net
16
 
217,345

 
195,999

Mining properties, net
17
 
552,035

 
589,219

Ore on leach pads
15
 
52,885

 
44,582

Restricted assets
 
 
14,792

 
11,633

Equity securities
13
 
11,250

 
2,766

Receivables
14
 
39,739

 
24,768

Deferred tax assets

 
1,370

 
1,942

Other
 
 
12,893

 
14,892

TOTAL ASSETS
 
 
$
1,411,855

 
$
1,332,489

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable
 
 
$
49,219

 
$
48,732

Accrued liabilities and other
 
 
50,169

 
53,953

Debt
18
 
108,809

 
10,431

Royalty obligations
10
 
12,915

 
24,893

Reclamation
4
 
1,790

 
2,071

 
 
 
222,902

 
140,080

NON-CURRENT LIABILITIES
 
 
 
 
 
Debt
18
 
402,257

 
479,979

Royalty obligations
10
 
7,069

 
4,864

Reclamation
4
 
85,048

 
83,197

Deferred tax liabilities

 
131,459

 
147,132

Other long-term liabilities
 
 
66,961

 
55,761

 
 
 
692,794

 
770,933

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 162,370,864 at June 30, 2016 and 151,339,136 at December 31, 2015
 
 
1,624

 
1,513

Additional paid-in capital
 
 
3,101,493

 
3,024,461

Accumulated other comprehensive income (loss)
 
 
(283
)
 
(3,722
)
Accumulated deficit
 
 
(2,606,675
)
 
(2,600,776
)
 
 
 
496,159

 
421,476

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
$
1,411,855

 
$
1,332,489


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


5


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
In thousands
Common
Stock
Shares
 
Common
Stock Par
Value
 
Additional
Paid-In Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Balances at December 31, 2015
151,339

 
$
1,513

 
$
3,024,461

 
$
(2,600,776
)
 
$
(3,722
)
 
$
421,476

Net income (loss)

 

 

 
(5,899
)
 

 
(5,899
)
Other comprehensive income (loss)

 

 

 

 
3,439

 
3,439

Issuance of common stock
9,253

 
93

 
72,978

 

 

 
73,071

Common stock issued under stock-based compensation plans, net
1,779

 
18

 
4,054

 

 

 
4,072

Balances at June 30, 2016
162,371

 
$
1,624

 
$
3,101,493

 
$
(2,606,675
)
 
$
(283
)
 
$
496,159

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

6

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


NOTE 1 - BASIS OF PRESENTATION
The interim condensed consolidated financial statements of Coeur Mining, Inc. and its subsidiaries (collectively "Coeur" or "the Company") are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results which will be reported for the year ending December 31, 2016. The condensed consolidated December 31, 2015 balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which amends several aspects of the accounting for share-based payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.

In February 2016, the FASB issued ASU 2016-02, "Leases," which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company's fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.

In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. The updated guidance became effective under early adoption for the Company's fiscal year beginning January 1, 2015, and resulted in a reclassification of amounts from Current deferred tax assets to Non-current deferred tax assets and Current deferred tax liabilities to Non-current deferred tax liabilities in the current and prior periods.
    
In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments," which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. These changes become effective for the Company's fiscal year beginning January 1, 2016. The Company's adoption had no impact on the Company's consolidated financial position, results of operations, and cash flows.
    
In August 2015, the FASB issued ASU 2015-14, "Deferral of the Effective Date", which defers the effective date of ASU 2014-09, "Revenue from Contracts with Customers" to January 1, 2018. The Company is currently evaluating the potential impact of adopting the prescribed changes on the Company's consolidated financial position, results of operations, and cash flows.    

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.

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

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis," which amends the consolidation requirements in ASC 810. These changes become effective for the Company's fiscal year beginning January 1, 2016. The Company's adoption had no impact on the Company's consolidated financial position, results of operations, and cash flows.


7

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

NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, Rochester, Kensington, Wharf, and San Bartolomé mines, and Coeur Capital. All operating segments are engaged in the discovery and mining of gold and silver and generate the majority of their revenues from the sale of these precious metals with the exception of Coeur Capital, which holds the Endeavor silver stream and other precious metals royalties. Other includes the La Preciosa project, Joaquin project, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended June 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
48,272

 
$
35,761

 
$
36,469

 
$
34,005

 
$
25,185

 
$
505

 
$

 
$
180,197

Royalties

 

 

 

 

 
1,810

 

 
1,810

 
48,272

 
35,761

 
36,469

 
34,005

 
25,185

 
2,315



 
182,007

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Costs applicable to sales(1)
22,865

 
21,721

 
22,611

 
14,342

 
18,645

 
281

 

 
100,465

Amortization
14,765

 
5,437

 
9,808

 
5,128

 
1,853

 
100

 
414

 
37,505

Exploration
562

 
188

 
977

 

 

 
85

 
421

 
2,233

Write-downs

 

 

 

 

 

 

 

Other operating expenses
278

 
700

 
257

 
688

 
1,076

 
38

 
8,727

 
11,764

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Fair value adjustments, net
(840
)
 
(2,687
)
 

 

 

 

 
(52
)
 
(3,579
)
Interest expense, net
(425
)
 
(181
)
 
(34
)
 
(27
)
 
(7
)
 

 
(10,201
)
 
(10,875
)
Other, net
(4,360
)
 
(3,860
)
 
1

 
204

 
411

 
1,460

 
4,287

 
(1,857
)
Income and mining tax (expense) benefit
3,153

 
8

 

 
(352
)
 
848

 
(2,275
)
 
(614
)
 
768

Net income (loss)
$
7,330

 
$
995

 
$
2,783

 
$
13,672

 
$
4,863

 
$
996

 
$
(16,142
)
 
$
14,497

Segment assets(2)
$
427,938

 
$
207,764

 
$
196,403

 
$
113,821

 
$
83,814

 
$
9,158

 
$
75,061

 
$
1,113,959

Capital expenditures
$
8,863

 
$
3,885

 
$
7,536

 
$
1,511

 
$
1,317

 
$

 
$
176

 
$
23,288

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interest
Three months ended June 30, 2015
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
38,875

 
$
36,340

 
$
42,468

 
$
20,373

 
$
23,366

 
$
3,083

 
$

 
$
164,505

Royalties

 

 

 

 

 
1,758

 

 
1,758

 
38,875

 
36,340

 
42,468

 
20,373

 
23,366

 
4,841

 

 
166,263

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
30,112

 
24,392

 
27,452

 
16,632

 
19,157

 
1,352

 

 
119,097

Amortization
9,046

 
5,387

 
12,684

 
3,491

 
5,271

 
2,619

 
476

 
38,974

Exploration
1,837

 
501

 
432

 

 
43

 
75

 
691

 
3,579

Other operating expenses
324

 
307

 
526

 
506

 
241

 
13

 
8,801

 
10,718

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
429

 
1,137

 

 

 

 

 
1,188

 
2,754

Interest expense, net
(844
)
 
(205
)
 
(57
)
 

 
(293
)
 

 
(9,335
)
 
(10,734
)
Other, net
(505
)
 

 
(14
)
 
37

 
420

 
(924
)
 
(1,866
)
 
(2,852
)
Income and mining tax (expense) benefit
837

 
(350
)
 
(994
)
 
(274
)
 
195

 
(623
)
 
1,469

 
260

Net income (loss)
$
(2,527
)
 
$
6,335

 
$
309

 
$
(493
)
 
$
(1,024
)
 
$
(765
)
 
$
(18,512
)
 
$
(16,677
)
Segment assets(2)
$
657,448

 
$
190,704

 
$
197,241

 
$
131,990

 
$
173,451

 
$
55,896

 
$
78,395

 
$
1,485,125

Capital expenditures
$
10,723

 
$
5,915

 
$
4,714

 
$
1,244

 
$
994

 
$

 
$
87

 
$
23,677

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


8

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


Six months ended June 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
78,085

 
$
65,743

 
$
72,212

 
$
61,934

 
$
46,463

 
$
2,396

 
$

 
$
326,833

Royalties

 

 

 

 

 
3,561

 

 
3,561

 
78,085


65,743


72,212


61,934


46,463


5,957




330,394

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
43,903

 
44,206

 
47,029

 
29,803

 
36,142

 
937

 

 
202,020

Amortization
22,054

 
10,750

 
18,157

 
9,179

 
3,607

 
881

 
842

 
65,470

Exploration
1,363

 
297

 
930

 

 

 
206

 
1,167

 
3,963

Write-downs

 

 

 

 

 
4,446

 

 
4,446

Other operating expenses
593

 
1,381

 
509

 
1,181

 
1,367

 
175

 
19,038

 
24,244

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Fair value adjustments, net
(5,704
)
 
(4,936
)
 

 

 

 

 
(1,634
)
 
(12,274
)
Interest expense, net
(1,159
)
 
(352
)
 
(77
)
 
(27
)
 
(10
)
 

 
(20,370
)
 
(21,995
)
Other, net
(5,595
)
 
(3,857
)
 
(19
)
 
214

 
726

 
3,742

 
4,246

 
(543
)
Income and mining tax (expense) benefit
3,251

 
(415
)
 

 
(236
)
 
(723
)
 
(3,567
)
 
352

 
(1,338
)
Net income (loss)
$
965


$
(451
)

$
5,491


$
21,722


$
5,340


$
(513
)

$
(38,453
)
 
$
(5,899
)
Segment assets(2)
$
427,938

 
$
207,764

 
$
196,403

 
$
113,821

 
$
83,814

 
$
9,158

 
$
75,061

 
$
1,113,959

Capital expenditures
$
17,678

 
$
7,174

 
$
15,626

 
$
2,921

 
$
1,838

 
$

 
$
223

 
$
45,460

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Six months ended June 30, 2015
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
78,269

 
$
80,371

 
$
86,506

 
$
20,373

 
$
44,913

 
$
5,028

 
$

 
$
315,460

Royalties

 

 

 

 

 
3,759

 

 
3,759

 
78,269

 
80,371

 
86,506

 
20,373

 
44,913

 
8,787

 

 
319,219

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
64,603

 
55,785

 
56,871

 
16,632

 
38,284

 
1,985

 

 
234,160

Amortization
16,380

 
12,230

 
24,238

 
3,491

 
9,961

 
4,770

 
994

 
72,064

Exploration
2,960

 
1,223

 
2,094

 

 
79

 
150

 
1,339

 
7,845

Other operating expenses
638

 
1,448

 
761

 
671

 
485

 
30

 
22,283

 
26,316

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
(1,116
)
 
(1,155
)
 

 

 

 

 
141

 
(2,130
)
Interest expense, net
(2,184
)
 
(430
)
 
(120
)
 

 
(574
)
 

 
(18,191
)
 
(21,499
)
Other, net
(1,608
)
 
(40
)
 
(18
)
 
54

 
872

 
(2,449
)
 
(2,173
)
 
(5,362
)
Income and mining tax (expense) benefit
(534
)
 
(700
)
 
(994
)
 
412

 
(1,211
)
 
(24
)
 
3,243

 
192

Net income (loss)
$
(11,754
)
 
$
7,360

 
$
1,410

 
$
45

 
$
(4,809
)
 
$
(621
)
 
$
(41,596
)
 
$
(49,965
)
Segment assets(2)
$
657,448

 
$
190,704

 
$
197,241

 
$
131,990

 
$
173,451

 
$
55,896

 
$
78,395

 
$
1,485,125

Capital expenditures
$
19,907

 
$
9,170

 
$
8,859

 
$
1,295

 
$
1,943

 
$

 
$
123

 
$
41,297

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

Assets
June 30, 2016

December 31, 2015
Total assets for reportable segments
$
1,113,959

 
$
1,103,310

Cash and cash equivalents
257,591

 
200,714

Other assets
40,305

 
28,465

Total consolidated assets
$
1,411,855


$
1,332,489



9

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

Geographic Information
Long-Lived Assets
June 30, 2016

December 31, 2015
Mexico
$
387,562

 
$
390,694

United States
332,007

 
336,210

Bolivia
31,297

 
35,201

Australia
3,235

 
5,952

Argentina
10,227

 
10,871

Other
5,051

 
9,058

Total
$
769,379


$
787,986

 

Revenue
Three months ended June 30,
 
Six months ended June 30,
2016
 
2015
 
2016
 
2015
United States
$
106,236

 
$
99,180

 
$
199,890

 
$
187,249

Mexico
48,489

 
39,443

 
79,011

 
79,584

Bolivia
25,185

 
23,366

 
46,463

 
44,913

Australia
504

 
3,083

 
2,395

 
5,028

Other
1,593

 
1,191

 
2,635

 
2,445

Total
$
182,007


$
166,263


$
330,394


$
319,219



NOTE 4 – RECLAMATION
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties. On an ongoing basis, management evaluates its estimates and assumptions, and future expenditures could differ from current estimates.
Changes to the Company’s asset retirement obligations for operating sites are as follows:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2016
 
2015
 
2016
 
2015
Asset retirement obligation - Beginning
$
83,974

 
$
86,059

 
$
82,072

 
$
67,214

Accretion
2,009

 
1,990

 
3,968

 
3,614

Additions and changes in estimates
(130
)
 

 
121

 
18,270

Settlements
(308
)
 
(448
)
 
(616
)
 
(1,497
)
Asset retirement obligation - Ending
$
85,545

 
$
87,601

 
$
85,545

 
$
87,601

The Company has accrued $1.3 million and $3.2 million at June 30, 2016 and December 31, 2015, respectively, for reclamation liabilities related to former mining activities, which are included in Reclamation.

NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, restricted stock, and performance shares. Stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 was $2.3 million and $2.6 million and $5.2 million and $4.8 million, respectively. At June 30, 2016, there was $9.5 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.5 years. During the six months ended June 30, 2016, the supplemental incentive accrual increased $0.4 million to $1.6 million.


10

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

The following table summarizes the grants awarded during the six months ended June 30, 2016:
Grant date
 
Restricted
stock
 
Grant date fair
value of
restricted stock
 
Stock options
 
Grant date
fair value of
stock
options
 
Performance
shares
 
Grant date fair
value of
performance
shares
January 20, 2016
 
1,030,833

 
$
1.81

 
165,479

 
$
0.86

 
1,428,314

 
$
1.78

March 21, 2016
 
685,633

 
$
5.76

 
17,772

 
$
2.84

 
8,763

 
$
3.76


The following options and stock appreciation rights were exercisable during the six months ended June 30, 2016:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 

 
$

 
423,706

 
$
15.15

Stock appreciation rights
 

 
$

 
46,572

 
$
14.06



NOTE 6 – RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan that covers all eligible U.S. employees. Eligible employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations. The Company generally makes matching contributions equal to 100% of the employee’s contribution up to 4% of the employee's salary. The Company may also provide an additional contribution based on an eligible employee's salary. Total plan expenses recognized for the three and six months ended June 30, 2016 and 2015 were $0.9 million and $1.6 million and $1.9 million and $3.2 million, respectively.

NOTE 7 - OTHER, NET

Other, net consists of the following:
 
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
 
2016
 
2015
 
2016
 
2015
Impairment of equity securities
 
$
(20
)
 
$
(31
)
 
$
(20
)
 
$
(1,545
)
Foreign exchange loss
 
(5,656
)
 
(2,056
)
 
(5,819
)
 
(4,262
)
Gain on sale of assets
 
2,812

 
107

 
4,486

 
63

Other
 
1,007


(872
)

810


382

Other, net
 
$
(1,857
)
 
$
(2,852
)
 
$
(543
)
 
$
(5,362
)

NOTE 8 – INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and six months ended June 30, 2016 and 2015 by significant jurisdiction:
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
119

$
(1,810
)
 
$
(9,764
)
$
319

 
$
(9,242
)
$
(2,342
)
 
$
(30,471
)
$
2,204

Argentina
4,453

(1,793
)
 
(656
)
(1
)
 
3,438

(250
)
 
(1,352
)
(2
)
Mexico
3,353

4,316

 
(5,582
)
548

 
(4,155
)
4,333

 
(15,255
)
(716
)
Bolivia
4,016

848

 
(1,219
)
196

 
6,062

(722
)
 
(3,598
)
(1,211
)
Other jurisdictions
1,788

(793
)
 
284

(802
)
 
(664
)
(2,357
)
 
519

(83
)
 
$
13,729

$
768

 
$
(16,937
)
$
260

 
$
(4,561
)
$
(1,338
)
 
$
(50,157
)
$
192


The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. In addition, the Company's consolidated effective income and mining

11

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

tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in our consolidated effective tax rate.

A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets. For additional information, see Part II, Item 1A of this Report.
    
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The statute of limitations remains open from 2012 forward for the U.S. federal jurisdiction and from 2008 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next 12 months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $3.5 million and $4.5 million in the next 12 months.

At June 30, 2016 and December 31, 2015, the Company had $23.0 million and $17.9 million of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At June 30, 2016 and December 31, 2015, the amount of accrued income-tax-related interest and penalties was $14.7 million and $9.2 million, respectively.
    
NOTE 9 – NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the three and six months ended June 30, 2016 and 2015, 439,721 and 3,375,337 shares and 1,600,669 and 3,415,129 shares, respectively, of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
The 3.25% Convertible Senior Notes ("Convertible Notes") were not included in the computation of diluted net income (loss) per share for the three and six months ended June 30, 2016 and 2015 because there is no excess value upon conversion over the principal amount of the Convertible Notes.
 
Three months ended June 30,
 
Six months ended June 30,
In thousands except per share amounts
2016
 
2015
 
2016
 
2015
Net income (loss) available to common stockholders
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
$
(49,965
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
153,972

 
135,036

 
152,110

 
118,897

Effect of stock-based compensation plans
3,928

 

 

 

Diluted
157,900


135,036


152,110


118,897

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.09

 
$
(0.12
)
 
$
(0.04
)
 
$
(0.42
)
Diluted
$
0.09

 
$
(0.12
)
 
$
(0.04
)
 
$
(0.42
)

During the three months ended June 30, 2016, the Company completed a $75.0 million “at the market” stock offering. In connection with the offering, the Company sold 9,253,016 shares of its common stock at an average price of $8.11 per share.


12

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


NOTE 10 – FAIR VALUE MEASUREMENTS
 
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
 
2016
 
2015
 
2016
 
2015
Palmarejo royalty obligation embedded derivative
 
$
(878
)
 
$
385

 
$
(5,756
)
 
$
(1,160
)
Rochester net smelter returns ("NSR") royalty obligation
 
(2,687
)
 
1,137

 
(4,936
)
 
(1,155
)
Silver and gold options
 
(14
)
 
1,232

 
(1,582
)
 
185

Fair value adjustments, net
 
$
(3,579
)
 
$
2,754

 
$
(12,274
)
 
$
(2,130
)
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
 
Fair Value at June 30, 2016
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
11,250

 
$
11,243

 
$

 
$
7

Other derivative instruments, net
655

 

 
655

 

 
$
11,905

 
$
11,243

 
$
655

 
$
7

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
3,317

 
$

 
$

 
$
3,317

Rochester NSR royalty obligation
12,559

 

 

 
12,559

 
$
15,876

 
$

 
$

 
$
15,876

 
 
Fair Value at December 31, 2015
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
2,766

 
$
2,756

 
$

 
$
10

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
4,957

 
$

 
$

 
$
4,957

Rochester NSR royalty obligation
9,593

 

 

 
9,593

Other derivative instruments, net
508

 

 
508

 

 
$
15,058

 
$

 
$
508

 
$
14,550

The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate and certain doré sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves, credit spreads, and other unobservable inputs. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The fair values of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation were estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company has classified these obligations as Level 3 financial liabilities. Based on current mine plans, 2.1 years was used to estimate the fair value of the Rochester NSR royalty obligation at June 30, 2016.

13

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

No assets or liabilities were transferred between fair value levels in the six months ended June 30, 2016.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three and six months ended June 30, 2016:
 
Three Months Ended June 30, 2016
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
7

 
$

 
$

 
$
7

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
6,827

 
$
878

 
$
(4,388
)
 
$
3,317

Rochester NSR royalty obligation
$
10,877

 
$
2,687

 
$
(1,005
)
 
$
12,559

 
Six Months Ended June 30, 2016
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
10

 
$

 
$
(3
)
 
$
7

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
4,957

 
$
5,756

 
$
(7,396
)
 
$
3,317

Rochester NSR royalty obligation
$
9,593

 
$
4,936

 
$
(1,970
)
 
$
12,559

The fair value of financial assets and liabilities carried at book value in the financial statements at June 30, 2016 and December 31, 2015 is presented in the following table:
 
June 30, 2016
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
712

 
$
706

 
$

 
$
706

 
$

7.875% Senior Notes due 2021(1)
373,957

 
362,650

 

 
362,650

 

Term Loan due 2020(2)
94,545

 
94,545

 

 
94,545

 

Palmarejo gold production royalty obligation
4,108

 
4,144

 

 

 
4,144

(1)
Net of unamortized debt issuance costs and premium received of $4.8 million.
(2)
Net of unamortized debt issuance costs of $4.5 million.
 
December 31, 2015
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
712

 
$
693

 
$

 
$
693

 
$

7.875% Senior Notes due 2021(1)
373,433

 
227,487

 

 
227,487

 

Term Loan due 2020(2)
94,489

 
99,500

 

 
99,500

 

San Bartolomé Lines of Credit
4,571

 
4,571

 

 
4,571

 

Palmarejo gold production royalty obligation
15,207

 
15,580

 

 

 
15,580

(1)
Net of unamortized debt issuance costs and premium received of $5.3 million.
(2)
Net of unamortized debt issuance costs of $5.0 million.
The fair values of the Convertible Notes and 7.875% Senior Notes due 2021 (the "Senior Notes") outstanding were estimated using quoted market prices. The fair value of the Term Loan due 2020 (the "Term Loan") approximates book value (excluding unamortized debt issuance costs) as the liability is secured, has a variable interest rate, and lacks significant credit

14

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

concerns. The fair value of the San Bartolomé line of credit approximates book value due to the short-term nature of the liability and absence of significant interest rate or credit concerns. The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input.

NOTE 11 – DERIVATIVE FINANCIAL INSTRUMENTS
Palmarejo Gold Production Royalty
On January 21, 2009, the Company's subsidiary, Coeur Mexicana S.A. de C.V. ("Coeur Mexicana"), entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and legacy adjacent properties, excluding production from the recently acquired Paramount Gold and Silver Corp. ("Paramount") properties. The royalty transaction includes a minimum obligation of 4,167 gold ounces per month and terminates when payments on 400,000 gold ounces have been made. At June 30, 2016, a total of 8,493 gold ounces remain outstanding under the obligation.
The price volatility associated with the minimum royalty obligation is considered an embedded derivative. The Company is required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. Unrealized gains are recognized in periods when the gold price has decreased from the previous period and unrealized losses are recognized in periods when the gold price increases. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was 8.3% and 19.9% at June 30, 2016 and December 31, 2015, respectively. The fair value of the embedded derivative at June 30, 2016 and December 31, 2015 was a liability of $3.3 million and $5.0 million, respectively. For the three and six months ended June 30, 2016 and 2015, the mark-to-market adjustments were losses of $0.9 million and gains of $0.4 million and losses of $5.8 million and $1.2 million, respectively.
Payments on the royalty obligation decrease the carrying amount of the minimum obligation and the derivative liability. Each monthly payment is an amount equal to the greater of the minimum of 4,167 ounces of gold or 50% of actual gold production multiplied by the excess of the monthly average market price of gold above $416 per ounce, subject to a 1% annual inflation adjustment. For the three and six months ended June 30, 2016 and 2015, realized losses on settlement of the liabilities were $4.3 million and $3.6 million and $7.3 million and $11.7 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. Changes in silver and gold prices resulted in provisional pricing mark-to-market gains of $0.6 million and losses of $0.6 million and gains of $1.2 million and $0.3 million in the three and six months ended June 30, 2016 and 2015, respectively. At June 30, 2016, the Company had outstanding provisionally priced sales of 0.5 million ounces of silver and 34,876 ounces of gold at prices of $18.28 and $1,257, respectively.
Silver and Gold Options
During the three and six months ended June 30, 2016, the Company had no unrealized gains or losses and during 2015, the Company recorded unrealized gains of $1.2 million and $1.0 million, respectively, related to outstanding options which were included in Fair value adjustments, net. The Company recognized realized losses of $51 thousand and no realized losses or gains during the three months ended June 30, 2016 and 2015, respectively, and realized losses of $1.6 million and realized gains of $0.8 million during the six months ended June 30, 2016 and 2015, respectively, from settled contracts. At June 30, 2016, the Company had no outstanding gold and silver options contracts.

15

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

At June 30, 2016, the Company had the following derivative instruments that settle as follows:
In thousands except average prices and notional ounces
2016
 
Thereafter
Palmarejo gold production royalty
$
7,487

 
$

Average gold price in excess of minimum contractual deduction
$
882

 
$

Notional ounces
8,493

 

 
 
 
 
Provisional silver sales
$
10,016

 
$

Average silver price
$
18.28

 
$

Notional ounces
547,940

 

 
 
 
 
Provisional gold sales
$
43,839

 
$

Average gold price
$
1,257

 
$

Notional ounces
34,876

 

 
 
 
 

The following summarizes the classification of the fair value of the derivative instruments:
 
June 30, 2016
In thousands
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Palmarejo gold production royalty

 

 
3,317

 

Provisional silver and gold sales contracts
841

 
186

 

 

 
$
841

 
$
186

 
$
3,317

 
$

 
December 31, 2015
In thousands
Prepaid expenses and other
 
Accrued liabilities and other
 
Current portion of royalty obligation
 
Non-current portion of royalty obligation
Palmarejo gold production royalty

 

 
4,957

 

Provisional silver and gold sales contracts
28

 
536

 

 

 
$
28

 
$
536

 
$
4,957

 
$

The following represent mark-to-market gains (losses) on derivative instruments for the three and six months ended June 30, 2016 and 2015 (in thousands):
 
 
 
Three months ended June 30,
 
Six months ended June 30, 2016
Financial statement line
Derivative
 
2016
 
2015
 
2016
 
2015
Revenue
Provisional silver and gold sales contracts
 
$
597

 
$
(623
)
 
$
1,163

 
$
291

Fair value adjustments, net
Palmarejo gold royalty
 
(878
)
 
385

 
(5,756
)
 
(1,160
)
Fair value adjustments, net
Silver and gold options
 
(14
)
 
1,232

 
(1,582
)
 
185

 
 
 
$
(295
)
 
$
994

 
$
(6,175
)
 
$
(684
)
Credit Risk
The credit risk exposure related to any derivative instrument is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with institutions management deems credit worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties.
NOTE 12 – ACQUISITIONS
On February 20, 2015, the Company completed its acquisition of the Wharf gold mine located near Lead, South Dakota, for $99.4 million in cash. The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their respective fair values at the acquisition date. The Company incurred $2.1 million of acquisition costs, which are included in Pre-development, reclamation, and other on the Condensed Consolidated Statements of Comprehensive Income (Loss).

16

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

The following table presents the unaudited pro forma summary of the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2016 and 2015, as if the acquisition had occurred on January 1, 2015. The following unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations as they would have been had the transaction occurred on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, potential synergies, and cost savings from operating efficiencies.
 
 
Three months ended June 30,
 
Six Months Ended June 30, 2016
In thousands
 
2016
 
2015
 
2016
 
2015 (Pro Forma)
Revenue
 
$
182,007

 
$
166,263

 
$
330,394

 
$
337,219

Income (loss) before income and mining taxes
 
13,729

 
(16,937
)
 
(4,561
)
 
(50,209
)
Net income (loss)
 
14,497

 
(16,677
)
 
(5,899
)
 
(50,017
)

NOTE 13 – INVESTMENTS
The Company invests in equity securities of silver and gold exploration and development companies. These investments are classified as available-for-sale and are measured at fair value in the financial statements with unrealized gains and losses recorded in Other comprehensive income (loss).
 
At June 30, 2016
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Equity securities
6,257

 
(180
)
 
5,173

 
11,250


 
At December 31, 2015
In thousands
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Equity securities
$
3,386

 
$
(1,179
)
 
$
559

 
$
2,766


The Company performs a quarterly assessment on each of its equity securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded pre-tax other-than-temporary impairment losses of $1.5 million in the six months ended June 30, 2015, in Other, net. The following table summarizes the gross unrealized losses on equity securities for which other-than-temporary impairments have not been recognized and the fair values of those securities, aggregated by the length of time the individual securities have been in a continuous unrealized loss position, at June 30, 2016:
 
Less than twelve months
 
Twelve months or more
 
Total
In thousands
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
Equity securities
$
(180
)
$
2,979

 
$

$

 
$
(180
)
$
2,979


NOTE 14 – RECEIVABLES
In thousands
June 30, 2016
 
December 31, 2015
Current receivables:
 
 
 
Trade receivables
$
25,791

 
$
17,878

Income tax receivable
493

 
13,678

Value added tax receivable
48,978

 
50,669

Other
4,670

 
3,767

 
$
79,932

 
$
85,992

Non-current receivables:
 
 
 
Value added tax receivable
$
26,961

 
$
24,768

Income tax receivable
12,778

 

 
39,739

 
24,768

Total receivables
$
119,671

 
$
110,760


17

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

NOTE 15 – INVENTORY AND ORE ON LEACH PADS
In thousands
June 30, 2016
 
December 31, 2015
Inventory:
 
 
 
Concentrate
$
19,932

 
$
16,165

Precious metals
22,505

 
21,908

Supplies
41,637

 
43,638

 
$
84,074

 
$
81,711

Ore on leach pads:
 
 
 
Current
$
76,335

 
$
67,329

Non-current
52,885

 
44,582

 
$
129,220

 
$
111,911

Total inventory and ore on leach pads
$
213,294

 
$
193,622


NOTE 16 – PROPERTY, PLANT AND EQUIPMENT
In thousands
June 30, 2016
 
December 31, 2015
Land
$
7,777

 
$
8,287

Facilities and equipment
653,966

 
654,585

Capital leases
54,968

 
30,648

 
716,711

 
693,520

Accumulated amortization
(510,070
)
 
(514,509
)
 
206,641

 
179,011

Construction in progress
10,704

 
16,988

Property, plant and equipment, net
$
217,345

 
$
195,999



18

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

NOTE 17 – MINING PROPERTIES
Mining properties consist of the following (in thousands):
June 30, 2016
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San
Bartolomé
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
161,865

 
$
153,091

 
$
251,847

 
$
33,122

 
$
39,531

 
$

 
$

 
$

 
$
639,456

Accumulated amortization
(135,122
)
 
(132,307
)
 
(143,840
)
 
(8,717
)
 
(31,313
)
 

 

 


 
(451,299
)
 
26,743

 
20,784

 
108,007

 
24,405

 
8,218

 

 

 

 
188,157

Mineral interests
629,303

 

 

 
45,837

 
12,868

 
49,085

 
10,000

 
37,272

 
784,365

Accumulated amortization
(364,403
)
 

 

 
(15,384
)
 
(11,556
)
 

 

 
(29,144
)
 
(420,487
)
 
264,900

 

 

 
30,453

 
1,312

 
49,085

 
10,000

 
8,128

 
363,878

Mining properties, net
$
291,643

 
$
20,784

 
$
108,007

 
$
54,858

 
$
9,530

 
$
49,085

 
$
10,000

 
$
8,128

 
$
552,035

December 31, 2015
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San
Bartolomé
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
151,828

 
$
149,756

 
$
238,786

 
$
32,318

 
$
39,474

 
$

 
$

 
$

 
$
612,162

Accumulated amortization
(131,055
)
 
(126,242
)
 
(131,236
)
 
(5,784
)
 
(30,325
)
 

 

 

 
(424,642
)
 
20,773

 
23,514

 
107,550

 
26,534

 
9,149

 

 

 

 
187,520

Mineral interests
629,303

 

 

 
45,837

 
12,868

 
49,085

 
10,000

 
59,343

 
806,436

Accumulated amortization
(348,268
)
 

 

 
(10,551
)
 
(11,400
)
 

 

 
(34,518
)
 
(404,737
)
 
281,035

 

 

 
35,286

 
1,468

 
49,085

 
10,000

 
24,825

 
401,699

Mining properties, net
$
301,808

 
$
23,514

 
$
107,550

 
$
61,820

 
$
10,617

 
$
49,085

 
$
10,000

 
$
24,825

 
$
589,219

In March 2016, Coeur sold its 2.0% NSR royalty on the Cerro Bayo mine to the operator, a subsidiary of Mandalay Resources Corporation ("Mandalay"), for total consideration of approximately $5.7 million, consisting of $4.0 million in cash and 2.5 million Mandalay shares. The Company recognized a $1.9 million pre-tax gain on this sale. The mineral interest associated with the Cerro Bayo mine was included in the Coeur Capital segment.
The operator of the Endeavor mine in Australia, on which the Company has a 100% silver stream, announced in early 2016 a significant curtailment of production due to low lead and zinc prices. As a result, Coeur recorded a $2.5 million write-down of the mineral interest associated with the Endeavor silver stream within the Coeur Capital segment at March 31, 2016.
In April 2016, Coeur sold its tiered NSR royalty on the El Gallo mine to the operator, a subsidiary of McEwen Mining Inc., for total consideration of approximately $6.3 million, including $1 million in contingent consideration payable in mid-2018. In anticipation of this sale, the Company recorded a $1.9 million write-down of the mineral interest within the Coeur Capital segment at March 31, 2016.
In April 2016, Coeur closed the sale of its 2.5% NSR royalty on the La Cigarra project to Kootenay Silver Inc. for total consideration of approximately $3.6 million, consisting of $500,000 in cash and 9.6 million Kootenay shares. The Company recognized a $1.2 pre-tax gain on this sale. The mineral interest associated with La Cigarra was included in the Coeur Capital segment.
In May 2016, Coeur closed on the sale of its Martha assets and related liabilities in Argentina to Hunt Mining Corp. for total cash consideration of $3.0 million, including $1.5 million received at closing and $1.5 million receivable on the one-year anniversary of the closing. The Company recognized a $5.3 million pre-tax gain on this sale.

19

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

NOTE 18 – DEBT
 
June 30, 2016
 
December 31, 2015
In thousands
Current
 
Non-Current
 
Current
 
Non-Current
3.25% Convertible Senior Notes due 2028
$
712

 
$

 
$

 
$
712

7.875% Senior Notes due 2021, net(1)

 
373,957

 

 
373,433

Term Loan due 2020, net(2)
94,545

 

 
1,000

 
93,489

San Bartolomé Lines of Credit

 

 

 
4,571

Capital lease obligations
13,552

 
28,300

 
9,431

 
7,774

 
$
108,809

 
$
402,257

 
$
10,431

 
$
479,979

(1) Net of unamortized debt issuance costs and premium received of $4.8 million and $5.3 million at June 30, 2016 and December 31, 2015, respectively.
(2) Net of unamortized debt issuance costs of $4.5 million and $5.0 million at June 30, 2016 and December 31, 2015, respectively.
7.875% Senior Notes due 2021
At any time prior to February 1, 2017, the Company may redeem all or part of the Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of 100% of the principal amount thereof, a make-whole premium as of the date of redemption, and accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem some or all of the Senior Notes on or after February 1, 2017, at redemption prices set forth in the Indenture for the Senior Notes, together with accrued and unpaid interest.

3.25% Convertible Senior Notes due 2028
In accordance with the indenture governing the 3.25% Convertible Senior Notes due 2028 (the “Convertible Notes”), the Company announced on February 12, 2015 that it was offering to repurchase all of the Convertible Notes. At June 30, 2016, $0.7 million of the Convertible Notes remained outstanding. The Convertible Notes are classified as current liabilities at June 30, 2016 as a result of the Company's intent to repurchase the notes in the next twelve months.
Term Loan due 2020
    
On June 23, 2015, the Company and certain of its subsidiaries entered into a credit agreement for the Term Loan with Barclays Bank PLC, as administrative agent (the “Term Loan Credit Agreement”). The Term Loan Credit Agreement provides for a five year $100.0 million term loan to the Company, of which a portion of the proceeds were used to repay the Short-term Loan, and the remaining proceeds were used to be used for general corporate purposes. The Term Loan contains no financial maintenance covenants and at June 30, 2016 bears interest at 9.0% on $24.75 million of principal based on a Eurodollar rate plus a margin of 8.00% (at no time will the adjusted Eurodollar rate be deemed to be less than 1.00% per annum) and at a U.S. Prime Rate-based rate equal to 10.5% on $74.25 million of principal. Voluntary prepayments of the Term Loan under the Term Loan Credit Agreement are permitted, subject to the payment of a make-whole premium if such prepayment occurs prior to the first anniversary of the closing date, a premium of 105.0% of the principal amount between the first anniversary and the second anniversary of the closing date and a premium of 103.0% if such prepayment occurs on or after the second anniversary but prior to the third anniversary of the closing date. The Term Loan Credit Agreement requires amortization payments equal to 1.0% of the principal amount of the Term Loan per annum and also required net cash proceeds of debt issuances, excess cash flow, asset sales and casualty insurance recoveries (in each case, subject to certain exceptions) to either be reinvested in long-term assets used in the Company’s business or be applied as a mandatory prepayment of the Term Loan. At June 30, 2016, the Company has made amortization payments totaling $1.0 million. The obligations under the Term Loan are secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington, Rochester and Wharf mines, as well as a pledge of the shares of certain of the Company's subsidiaries. The Term Loan Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants.
Lines of Credit
San Bartolomé had two available lines of credit for an aggregate amount of $27.0 million, both of which were undrawn at June 30, 2016.
Short-term Loan
On March 31, 2015, the Company entered into a credit agreement (the "Short-term Credit Agreement") with The Bank of Nova Scotia. The Short-term Credit Agreement provided for a $50.0 million loan (the "Short-term Loan") to the Company. The Short-term Loan generally bore interest at a rate equal to an adjusted Eurocurrency rate plus a margin of 2.50%. On June 25, 2015, the Short-term Loan was repaid in full, the security for the Short-term Loan was released, and the Short-term Credit Agreement was terminated.

20

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

Capital Lease Obligations
From time to time, the Company acquires mining equipment under capital lease agreements. During the six months ended June 30, 2016, the Company entered into new lease financing arrangements primarily for a haul truck fleet at its Rochester mine and mining equipment to support the continued underground mine expansion at the Palmarejo complex. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments. 
Palmarejo Gold Production Royalty Obligation
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation under which the subsidiary of Franco-Nevada Corporation purchased a royalty covering 50% of the life of mine gold to be produced from the Palmarejo silver and gold mine in Mexico. This royalty excludes production from the recently acquired Paramount properties.
The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight year period. Each monthly payment is an amount equal to the greater of 4,167 ounces of gold or 50% of actual gold production multiplied by the excess of the monthly average market price of gold above $416 per ounce, subject to a 1% annual inflation compounding adjustment. Payments under the royalty agreement are made in cash or gold bullion. During the three months ended June 30, 2016 and 2015, the Company paid $10.5 million and $9.8 million, respectively and the Company paid $19.6 million and $20.1 million during the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016, payments had been made on a total of 391,507 ounces of gold with further payments to be made on an additional 8,493 ounces of gold.     
The Company used an implicit interest rate of 30.5% to discount the original royalty obligation, based on the fair value of the consideration received projected over the expected future cash flows at inception of the obligation. The discounted obligation is accreted to its expected future value over the expected minimum payment period based on the implicit interest rate. The Company recognized accretion expense for the three months ended June 30, 2016 and 2015 of $0.4 million and $1.8 million, respectively, and $1.2 million and $3.8 million for the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016 and December 31, 2015, the remaining minimum obligation under the royalty agreement was $4.1 million and $15.2 million, respectively.
Interest Expense
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2016
 
2015
 
2016
 
2015
3.25% Convertible Senior Notes due 2028
$
6

 
$
6

 
$
12

 
$
43

7.875% Senior Notes due 2021
7,457

 
8,523

 
14,913

 
17,085

Short-term Loan

 
326

 

 
326

Term Loan due 2020
2,258

 
148

 
4,521

 
148

San Bartolomé Lines of Credit

 
293

 
15

 
565

Capital lease obligations
416

 
272

 
680

 
570

Other debt obligations
15

 

 
29

 

Accretion of Palmarejo gold production royalty obligation
397

 
1,771

 
1,162

 
3,802

Amortization of debt issuance costs
631

 
508

 
1,262

 
913

Accretion of debt premium
(91
)
 
(104
)
 
(182
)
 
(209
)
Capitalized interest
(214
)
 
(1,009
)
 
(417
)
 
(1,744
)
Total interest expense, net of capitalized interest
$
10,875

 
$
10,734

 
$
21,995

 
$
21,499


21

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

NOTE 19 - SUPPLEMENTAL GUARANTOR INFORMATION
The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10 of Regulation S-X resulting from the guarantees by Coeur Alaska, Inc., Coeur Explorations, Inc., Coeur Rochester, Inc., Coeur South America Corp., Wharf Resources (U.S.A.), Inc. and subsidiaries, and Coeur Capital, Inc. (collectively, the “Subsidiary Guarantors”) of the Senior Notes. The following schedules present Condensed Consolidating Financial Statements of (a) Coeur, the parent company; (b) the Subsidiary Guarantors; and (c) certain wholly-owned domestic and foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Each of the Subsidiary Guarantors is 100% owned by Coeur and the guarantees are full and unconditional. There are no restrictions on the ability of Coeur to obtain funds from its subsidiaries by dividend or loan.

22

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

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
106,207

 
$
75,800

 
$

 
$
182,007

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
58,674

 
41,791

 

 
100,465

Amortization
 
413

 
20,374

 
16,718

 

 
37,505

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
General and administrative
 
7,096

 
203

 
101

 

 
7,400

Exploration
 
479

 
1,249

 
505

 

 
2,233

Write-downs
 

 

 

 

 

Pre-development, reclamation, and other
 
934

 
1,446

 
1,984

 

 
4,364

Total costs and expenses
 
8,922

 
81,946

 
61,099

 

 
151,967

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
(53
)
 
(2,686
)
 
(840
)
 

 
(3,579
)
Other, net
 
1,341

 
(2,193
)
 
143

 
(1,148
)
 
(1,857
)
Interest expense, net of capitalized interest
 
(10,241
)
 
(243
)
 
(1,539
)
 
1,148

 
(10,875
)
Total other income (expense), net
 
(8,953
)
 
(5,122
)
 
(2,236
)
 

 
(16,311
)
Loss before income and mining taxes
 
(17,875
)
 
19,139

 
12,465

 

 
13,729

Income and mining tax (expense) benefit
 
(248
)
 
(1,595
)
 
2,611

 

 
768

Total loss after income and mining taxes
 
(18,123
)
 
17,544

 
15,076

 

 
14,497

Equity income (loss) in consolidated subsidiaries
 
32,620

 
(674
)
 

 
(31,946
)
 

NET INCOME (LOSS)
 
$
14,497

 
$
16,870

 
$
15,076

 
$
(31,946
)
 
$
14,497

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
2,103

 
2,103

 

 
(2,103
)
 
2,103

Reclassification adjustments for impairment of equity securities, net of tax
 
20

 
20

 

 
(20
)
 
20

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
(314
)
 
(314
)
 

 
314

 
(314
)
Other comprehensive income (loss)
 
1,809

 
1,809

 

 
(1,809
)
 
1,809

COMPREHENSIVE INCOME (LOSS)
 
$
16,306

 
$
18,679

 
$
15,076

 
$
(33,755
)
 
$
16,306

(1) Excludes amortization.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2015
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
99,635

 
$
66,628

 
$

 
$
166,263

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
68,477

 
50,620

 

 
119,097

Amortization
 
496

 
21,772

 
16,706

 

 
38,974

General and administrative
 
8,377

 
7

 
67

 

 
8,451

Exploration
 
591

 
1,008

 
1,980

 

 
3,579

Pre-development, reclamation, and other
 
(838
)
 
1,338

 
1,767

 

 
2,267

Total costs and expenses
 
8,626

 
92,602

 
71,140

 

 
172,368

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
1,188

 
1,138

 
428

 

 
2,754

Other, net
 
611

 
(904
)
 
(1,614
)
 
(945
)
 
(2,852
)
Interest expense, net of capitalized interest
 
(9,336
)
 
(263
)
 
(2,080
)
 
945

 
(10,734
)
Total other income (expense), net
 
(7,537
)
 
(29
)
 
(3,266
)
 

 
(10,832
)
Income (Loss) before income and mining taxes
 
(16,163
)
 
7,004

 
(7,778
)
 

 
(16,937
)
Income and mining tax (expense) benefit
 
1,945

 
(1,618
)
 
(67
)
 

 
260

Income (Loss) after income and mining taxes
 
(14,218
)
 
5,386

 
(7,845
)
 

 
(16,677
)
Equity income (loss) in consolidated subsidiaries
 
(2,460
)
 
(649
)
 

 
3,109

 

NET INCOME (LOSS)
 
$
(16,678
)
 
$
4,737

 
$
(7,845
)
 
$
3,109

 
$
(16,677
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
(1,312
)
 
(486
)
 

 
486

 
(1,312
)
Reclassification adjustments for impairment of equity securities, net of tax
 
31

 
31

 

 
(31
)
 
31

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
904

 
904

 

 
(904
)
 
904

Other comprehensive income (loss)
 
(377
)
 
449

 

 
(449
)
 
(377
)
COMPREHENSIVE INCOME (LOSS)
 
$
(17,055
)
 
$
5,186

 
$
(7,845
)
 
$
2,660

 
$
(17,054
)
(1) Excludes amortization.



23

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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
25,384

 
$
31,117

 
$
21,384

 
$
(31,946
)
 
45,939

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(88
)
 
(12,932
)
 
(10,268
)
 

 
(23,288
)
Proceeds from the sale of long-lived assets
 

 
41

 
7,252

 

 
7,293

Purchase of investments
 
(92
)
 

 

 

 
(92
)
Sales and maturities of investments
 

 
648

 

 

 
648

Other
 
(1,601
)
 
196

 
(41
)
 

 
(1,446
)
Investments in consolidated subsidiaries
 
(24,352
)
 
15,981

 

 
8,371

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(26,133
)
 
3,934

 
(3,057
)
 
8,371

 
(16,885
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on debt, capital leases, and associated costs
 
(250
)
 
(5,673
)
 
(789
)
 

 
(6,712
)
Gold production royalty payments
 

 

 
(10,461
)
 

 
(10,461
)
Net intercompany financing activity
 
(5,222
)
 
(5,720
)
 
(12,633
)
 
23,575

 

Issuance of common stock
 
73,071

 

 

 

 
73,071

Other
 
(448
)
 

 

 

 
(448
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
67,151

 
(11,393
)
 
(23,883
)
 
23,575

 
55,450

Effect of exchange rate changes on cash and cash equivalents
 

 
1

 
(303
)
 

 
(302
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
66,402

 
23,659

 
(5,859
)
 

 
84,202

Cash and cash equivalents at beginning of period
 
61,401

 
29,889

 
82,099

 

 
173,389

Cash and cash equivalents at end of period
 
$
127,803

 
$
53,548

 
$
76,240

 
$

 
$
257,591


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2015
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(7,793
)
 
$
28,679

 
$
13,009

 
$
3,109

 
37,004

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(75
)
 
(11,873
)
 
(11,729
)
 

 
(23,677
)
Proceeds from the sale of long-lived assets
 

 

 
8

 

 
8

Purchase of investments
 
(1,597
)
 

 

 

 
(1,597
)
Sales and maturities of investments
 
13

 
386

 

 

 
399

Acquisitions
 
(8,170
)
 
(982
)
 

 

 
(9,152
)
Other
 
4

 
23

 
(138
)
 

 
(111
)
Investments in consolidated subsidiaries
 
(27,904
)
 
1,634

 
116

 
26,154

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(37,729
)
 
(10,812
)
 
(11,743
)
 
26,154

 
(34,130
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
100,000

 

 

 

 
100,000

Payments on long-term debt, capital leases, and associated costs
 
(55,286
)
 
(1,885
)
 
(9,455
)
 

 
(66,626
)
Gold production royalty payments
 

 

 
(9,754
)
 

 
(9,754
)
Net intercompany financing activity
 
11,703

 
5,283

 
11,535

 
(28,521
)
 

Other
 
(72
)
 

 
742

 
(742
)
 
(72
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
56,345

 
3,398

 
(6,932
)
 
(29,263
)
 
23,548

Effect of exchange rate changes on cash and cash equivalents
 

 

 
(141
)
 

 
(141
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
10,823

 
21,265

 
(5,807
)
 

 
26,281

Cash and cash equivalents at beginning of period
 
113,872

 
5,994

 
59,721

 

 
179,587

Cash and cash equivalents at end of period
 
$
124,695

 
$
27,259

 
$
53,914

 
$

 
$
205,868



24

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

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
200,161

 
$
130,233

 
$

 
$
330,394

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
121,038

 
80,982

 

 
202,020

Amortization
 
836

 
38,233

 
26,401

 

 
65,470

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
General and administrative
 
15,176

 
221

 
279

 

 
15,676

Exploration
 
1,102

 
1,433

 
1,428

 

 
3,963

Write-downs
 

 

 
4,446

 

 
4,446

Pre-development, reclamation, and other
 
1,386

 
2,862

 
4,320

 

 
8,568

Total costs and expenses
 
18,500

 
163,787

 
117,856

 

 
300,143

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
(1,635
)
 
(4,935
)
 
(5,704
)
 

 
(12,274
)
Other, net
 
1,679

 
61

 
(110
)
 
(2,173
)
 
(543
)
Interest expense, net of capitalized interest
 
(20,496
)
 
(456
)
 
(3,216
)
 
2,173

 
(21,995
)
Total other income (expense), net
 
(20,452
)
 
(5,330
)
 
(9,030
)
 

 
(34,812
)
Loss before income and mining taxes
 
(38,952
)
 
31,044

 
3,347

 

 
(4,561
)
Income and mining tax (expense) benefit
 
(457
)
 
(1,902
)
 
1,021

 

 
(1,338
)
Total loss after income and mining taxes
 
(39,409
)
 
29,142

 
4,368

 

 
(5,899
)
Equity income (loss) in consolidated subsidiaries
 
33,510

 
(5,153
)
 

 
(28,357
)
 

NET INCOME (LOSS)
 
$
(5,899
)
 
$
23,989

 
$
4,368

 
$
(28,357
)
 
$
(5,899
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
3,146

 
3,079

 

 
(3,079
)
 
3,146

Reclassification adjustments for impairment of equity securities, net of tax
 
20

 
20

 

 
(20
)
 
20

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
273

 
(695
)
 

 
695

 
273

Other comprehensive income (loss)
 
3,439

 
2,404

 

 
(2,404
)
 
3,439

COMPREHENSIVE INCOME (LOSS)
 
$
(2,460
)
 
$
26,393

 
$
4,368

 
$
(30,761
)
 
$
(2,460
)
(1) Excludes amortization.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2015
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
188,307

 
$
130,912

 
$

 
$
319,219

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
129,288

 
104,872

 

 
234,160

Amortization
 
998

 
40,339

 
30,727

 

 
72,064

General and administrative
 
17,127

 
14

 
145

 

 
17,286

Exploration
 
1,154

 
3,466

 
3,225

 

 
7,845

Pre-development, reclamation, and other
 
2,550

 
2,878

 
3,602

 

 
9,030

Total costs and expenses
 
21,829

 
175,985

 
142,571

 

 
340,385

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
142

 
(1,155
)
 
(1,117
)
 

 
(2,130
)
Other, net
 
1,891

 
(2,457
)
 
(3,030
)
 
(1,766
)
 
(5,362
)
Interest expense, net of capitalized interest
 
(18,191
)
 
(551
)
 
(4,523
)
 
1,766

 
(21,499
)
Total other income (expense), net
 
(16,158
)
 
(4,163
)
 
(8,670
)
 

 
(28,991
)
Income (Loss) before income and mining taxes
 
(37,987
)
 
8,159

 
(20,329
)
 

 
(50,157
)
Income and mining tax (expense) benefit
 
3,495

 
(1,282
)
 
(2,021
)
 

 
192

Income (Loss) after income and mining taxes
 
(34,492
)
 
6,877

 
(22,350
)
 

 
(49,965
)
Equity income (loss) in consolidated subsidiaries
 
(15,473
)
 
160

 

 
15,313

 

NET INCOME (LOSS)
 
$
(49,965
)
 
$
7,037

 
$
(22,350
)
 
$
15,313

 
$
(49,965
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax
 
(2,813
)
 
(1,982
)
 

 
1,982

 
(2,813
)
Reclassification adjustments for impairment of equity securities, net of tax
 
1,545

 
1,545

 

 
(1,545
)
 
1,545

Reclassification adjustments for realized loss on sale of equity securities, net of tax
 
904

 
904

 

 
(904
)
 
904

Other comprehensive income (loss)
 
(364
)
 
467

 

 
(467
)
 
(364
)
COMPREHENSIVE INCOME (LOSS)
 
$
(50,329
)
 
$
7,504

 
$
(22,350
)
 
$
14,846

 
$
(50,329
)
(1) Excludes amortization.



25

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

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(3,258
)
 
$
52,577

 
$
31,594

 
$
(28,357
)
 
52,556

 
 
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(134
)
 
(25,722
)
 
(19,604
)
 

 
(45,460
)
Proceeds from the sale of long-lived assets
 

 
4,041

 
7,261

 

 
11,302

Purchase of investments
 
(99
)
 

 

 

 
(99
)
Sales and maturities of investments
 
500

 
1,145

 

 

 
1,645

Other
 
(3,139
)
 
302

 
(82
)
 

 
(2,919
)
Investments in consolidated subsidiaries
 
(20,932
)
 
24,160

 

 
(3,228
)
 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(23,804
)
 
3,926

 
(12,425
)
 
(3,228
)
 
(35,531
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on debt, capital leases, and associated costs
 
(500
)
 
(6,503
)
 
(5,680
)
 

 
(12,683
)
Gold production royalty payments
 

 

 
(19,592
)
 

 
(19,592
)
Net intercompany financing activity
 
(13,101
)
 
(30,685
)
 
12,201

 
31,585

 

Issuance of common stock
 
73,071

 

 

 

 
73,071

Other
 
(728
)
 


 

 

 
(728
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
58,742

 
(37,188
)
 
(13,071
)
 
31,585

 
40,068

Effect of exchange rate changes on cash and cash equivalents
 

 
5

 
(221
)
 

 
(216
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
31,680

 
19,320

 
5,877

 

 
56,877

Cash and cash equivalents at beginning of period
 
96,123

 
34,228

 
70,363

 

 
200,714

Cash and cash equivalents at end of period
 
$
127,803

 
$
53,548

 
$
76,240

 
$

 
$
257,591


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2015
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(52,711
)
 
$
51,389

 
$
19,564

 
$
15,313

 
33,555

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(87
)
 
(19,323
)
 
(21,887
)
 

 
(41,297
)
Proceeds from the sale of long-lived assets
 

 
145

 
20

 

 
165

Purchase of investments
 
(1,873
)
 

 

 

 
(1,873
)
Sales and maturities of investments
 
12

 
386

 
71

 

 
469

Acquisitions
 
(111,170
)
 

 

 

 
(111,170
)
Other
 
(1,764
)
 
23

 
(100
)
 

 
(1,841
)
Investments in consolidated subsidiaries
 
(15,683
)
 
824

 
116

 
14,743

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(130,565
)
 
(17,945
)
 
(21,780
)
 
14,743

 
(155,547
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
150,000

 

 
3,500

 

 
153,500

Payments on long-term debt, capital leases, and associated costs
 
(61,868
)
 
(3,703
)
 
(9,649
)
 

 
(75,220
)
Gold production royalty payments
 

 

 
(20,122
)
 

 
(20,122
)
Net intercompany financing activity
 
9,973

 
(8,263
)
 
26,811

 
(28,521
)
 

Other
 
(495
)
 

 
1,535

 
(1,535
)
 
(495
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
97,610

 
(11,966
)
 
2,075

 
(30,056
)
 
57,663

Effect of exchange rate changes on cash and cash equivalents
 

 

 
(664
)
 

 
(664
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(85,666
)
 
21,478

 
(805
)
 

 
(64,993
)
Cash and cash equivalents at beginning of period
 
210,361

 
5,781

 
54,719

 

 
270,861

Cash and cash equivalents at end of period
 
$
124,695

 
$
27,259

 
$
53,914

 
$

 
$
205,868



26

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

CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2016
In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
127,803

 
$
53,548

 
$
76,240

 
$

 
$
257,591

Receivables
 
26

 
12,454

 
67,452

 

 
79,932

Ore on leach pads
 

 
76,335

 

 

 
76,335

Inventory
 

 
46,484

 
37,590

 

 
84,074

Prepaid expenses and other
 
2,314

 
2,313

 
6,987

 

 
11,614

 
 
130,143

 
191,134

 
188,269

 

 
509,546

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
3,844

 
144,514

 
68,987

 

 
217,345

Mining properties, net
 

 
183,649

 
368,386

 

 
552,035

Ore on leach pads
 

 
52,885

 

 

 
52,885

Restricted assets
 
8,901

 
185

 
5,706

 

 
14,792

Equity securities
 

 
11,250

 

 

 
11,250

Receivables
 

 

 
39,739

 

 
39,739

Deferred tax assets
 

 

 
1,370

 

 
1,370

Net investment in subsidiaries
 
151,006

 
10,850

 

 
(161,856
)
 

Other
 
218,195

 
9,352

 
3,540

 
(218,194
)
 
12,893

TOTAL ASSETS
 
$
512,089

 
$
603,819

 
$
675,997

 
$
(380,050
)
 
$
1,411,855

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,481

 
$
19,431

 
$
28,307

 
$

 
$
49,219

Accrued liabilities and other
 
16,958

 
12,718

 
20,493

 

 
50,169

Debt
 
95,257

 
8,288

 
5,264

 

 
108,809

Royalty obligations
 

 
5,490

 
7,425

 

 
12,915

Reclamation
 

 
1,402

 
388

 

 
1,790

 
 
113,696

 
47,329

 
61,877

 

 
222,902

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
373,956

 
17,848

 
228,647

 
(218,194
)
 
402,257

Royalty obligations
 

 
7,069

 

 

 
7,069

Reclamation
 

 
64,334

 
20,714

 

 
85,048

Deferred tax liabilities
 
28,430

 
6,778

 
96,251

 

 
131,459

Other long-term liabilities
 
2,070

 
4,731

 
60,160

 

 
66,961

Intercompany payable (receivable)
 
(502,222
)
 
392,069

 
110,153

 

 

 
 
(97,766
)
 
492,829

 
515,925

 
(218,194
)
 
692,794

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,624

 
250

 
163,455

 
(163,705
)
 
1,624

Additional paid-in capital
 
3,101,493

 
179,553

 
1,863,739

 
(2,043,292
)
 
3,101,493

Accumulated deficit
 
(2,606,675
)
 
(115,859
)
 
(1,928,999
)
 
2,044,858

 
(2,606,675
)
Accumulated other comprehensive income (loss)
 
(283
)
 
(283
)
 

 
283

 
(283
)
 
 
496,159

 
63,661

 
98,195

 
(161,856
)
 
496,159

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
512,089

 
$
603,819

 
$
675,997

 
$
(380,050
)
 
$
1,411,855



27

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

CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2015

In thousands
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
96,123

 
$
34,228

 
$
70,363

 
$

 
$
200,714

Receivables
 
11

 
12,773

 
73,208

 

 
85,992

Ore on leach pads
 

 
67,329

 

 

 
67,329

Inventory
 

 
45,491

 
36,220

 

 
81,711

Prepaid expenses and other
 
3,496

 
1,075

 
6,371

 

 
10,942

 
 
99,630

 
160,896

 
186,162

 

 
446,688

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
4,546

 
138,706

 
52,747

 

 
195,999

Mining properties, net
 

 
199,303

 
389,916

 

 
589,219

Ore on leach pads
 

 
44,582

 

 

 
44,582

Restricted assets
 
5,755

 
381

 
5,497

 

 
11,633

Equity securities
 
434

 
2,332

 

 

 
2,766

Receivables
 

 

 
24,768

 

 
24,768

Deferred tax assets
 

 

 
1,942

 

 
1,942

Net investment in subsidiaries
 
127,671

 
27,657

 

 
(155,328
)
 

Other
 
54,578

 
9,197

 
5,695

 
(54,578
)
 
14,892

TOTAL ASSETS
 
$
292,614

 
$
583,054

 
$
666,727

 
$
(209,906
)
 
$
1,332,489

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,743

 
$
18,535

 
$
28,454

 
$

 
$
48,732

Accrued liabilities and other
 
20,555

 
14,598

 
18,800

 

 
53,953

Debt
 
1,000

 
8,120

 
1,311

 

 
10,431

Royalty obligations
 

 
4,729

 
20,164

 

 
24,893

Reclamation
 

 
1,401

 
1,821

 
(1,151
)
 
2,071

 
 
23,298

 
47,383

 
70,550

 
(1,151
)
 
140,080

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
467,634

 
4,947

 
61,976

 
(54,578
)
 
479,979

Royalty obligations
 

 
4,864

 

 

 
4,864

Reclamation
 

 
61,924

 
20,122

 
1,151

 
83,197

Deferred tax liabilities
 
28,600

 
6,927

 
111,605

 

 
147,132

Other long-term liabilities
 
2,171

 
3,838

 
49,752

 

 
55,761

Intercompany payable (receivable)
 
(650,565
)
 
411,103

 
239,462

 

 

 
 
(152,160
)
 
493,603

 
482,917

 
(53,427
)
 
770,933

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,513

 
250

 
130,885

 
(131,135
)
 
1,513

Additional paid-in capital
 
3,024,461

 
179,553

 
1,896,047

 
(2,075,600
)
 
3,024,461

Accumulated deficit
 
(2,600,776
)
 
(135,049
)
 
(1,913,672
)
 
2,048,721

 
(2,600,776
)
Accumulated other comprehensive income (loss)
 
(3,722
)
 
(2,686
)
 

 
2,686

 
(3,722
)
 
 
421,476

 
42,068

 
113,260

 
(155,328
)
 
421,476

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
292,614

 
$
583,054

 
$
666,727

 
$
(209,906
)
 
$
1,332,489



28

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

NOTE 20 – COMMITMENTS AND CONTINGENCIES
Labor Union Contract
The Company maintains a labor agreement with Sindicato de Trabajadores Mineros de la Empresa Manquiri S.A. at the San Bartolomé mine in Bolivia. The San Bartolomé mine labor agreement, which became effective January 28, 2010, is currently active and does not have a fixed term. At June 30, 2016, approximately 11% of the Company’s global labor force was covered by this collective bargaining agreement. The Company cannot predict whether this agreement will be renewed on similar terms or at all, whether future labor disruptions will occur or, if disruptions do occur, how long they will last.
Rochester Production Royalty
Commencing January 1, 2014, Coeur Rochester is obligated to pay a 3.4% net smelter returns royalty on up to 39.4 million silver equivalent ounces produced and sold from a portion of the Rochester mine, payable on a quarterly basis. For each calendar quarter, the royalty is payable on the actual sales prices received (exclusive of gains or losses associated with trading activities), less refining and related costs, of gold and silver produced and sold from the applicable portions of the Rochester mine. Changes in the Company's mine plan and silver and gold prices result in the recognition of mark-to-market gains or losses in Fair value adjustments, net. At June 30, 2016, a total of 22.1 million silver equivalent ounces remain outstanding under the obligation.
Palmarejo Gold Production Royalty and Gold Stream
On January 21, 2009, Coeur Mexicana entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation under which the subsidiary of Franco-Nevada Corporation purchased a royalty covering 50% of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico (excluding production from the recently acquired Paramount properties). The royalty agreement provides for a minimum obligation of 4,167 ounces per month over an initial eight-year period for a total of 400,000 ounces of gold. At June 30, 2016, a total of 8,493 gold ounces remain outstanding under the obligation.
On October 2, 2014, Coeur Mexicana terminated the Palmarejo gold production royalty in exchange for a termination payment of $2.0 million, effective upon completion of the minimum ounce delivery requirement. Subsequently, Coeur Mexicana entered into a gold stream agreement with a subsidiary of Franco-Nevada Corporation whereby Coeur Mexicana will sell 50% of Palmarejo gold production (excluding production from the recently acquired Paramount properties) upon completion of the gold production royalty minimum ounce delivery requirement, for the lesser of $800 or spot price per ounce. Under the gold stream agreement, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement.
Sites Related to Callahan Mining Corporation
In 1991, the Company acquired all of the outstanding common stock of Callahan Mining Corporation. The Company has received requests for information or notices of potential liability from state or federal agencies with regard to Callahan's operations at sites in Maine, Colorado and Washington. The Company did not make any decisions with respect to generation, transport or disposal of hazardous waste at these sites. Therefore, the Company believes that it is not liable for any potential cleanup costs either directly as an operator or indirectly as a parent. The Company anticipates that further agency interaction may occur with respect to these sites.

Callahan operated a mine and mill in Brooksville, Maine from 1968 until 1972 and subsequently disposed of the property. In 2000, the U.S. Environmental Protection Agency, or EPA, made a formal request to the Company for information regarding the site. The site was placed on the National Priorities List on September 5, 2002, and the Maine Department of Transportation, a partial owner of the property, signed a consent order in 2005. In January 2009, the EPA and the State of Maine made additional formal requests to the Company for information relating to the site, to which the Company responded. The first phase of cleanup at the site began in April 2011.
    
The Van Stone Mine in Stevens County, Washington consists of several parcels of land and was mined from 1926 until 1993 by multiple owners. Callahan sold its parcel in 1990. In February 2010, the State of Washington Department of Ecology notified Callahan that it, among others, is a potentially liable person (PLP) under Washington law.

Under lease and option agreements with several owners, Callahan was involved with the Akron Mine located in Gunnison County, Colorado from 1937-1960. The United States Forest Service (“USFS”) made formal requests for information to Callahan regarding the site in December 2003, February 2007, March 2013, and November 2013. Callahan timely responded to each request. In August 2014, Callahan received a notice of potential CERCLA liability from the USFS regarding environmental contamination at the Akron Mine.

29

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

Bolivian Temporary Restriction on Mining above 4,400 Meters
On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives that hold their rights under contract themselves with COMIBOL. The stability studies have been completed and officially submitted to the Bolivian mining technical authorities. Accordingly, the COMIBOL suspension has expired in accordance with the terms of the resolution. As a result of the resolution, the Company temporarily adjusted its mine plan to confine mining activities to the ore deposits below 4,400 meters above sea level and timely notified COMIBOL of the need to lift the restriction. The Cooperative Reserva Fiscal, with whom the Company has one of those contracts, subsequently interpreted the COMIBOL resolution and determined that the Huacajchi deposit was not covered by such resolution. In March 2010, the Cooperative Reserva Fiscal notified COMIBOL that, based on its interpretation, it was resuming mining of high grade material above the 4,400 meter level in the Huacajchi deposit. In December 2011, the Cooperative Reserva Fiscal sent a similar notification to COMIBOL with respect to a further area above the 4,400 meter level known as Huacajchi Sur. Based on these notifications and on the absence of any objection from COMIBOL, the Company resumed limited mining operations at the San Bartolomé mine on the Huacajchi deposit and Huacajchi Sur. Despite the fact that the COMIBOL suspension has expired, the Company has not resumed mining in other areas above the 4,400 meter level due to community relations concerns and the current political climate in Bolivia.

While the COMIBOL suspension has expired, it is uncertain at this time how long the Company will continue to suspend its mining operations in areas above the 4,400 meter level other than at Huacajchi and Huacajchi Sur. If COMIBOL decides to affirmatively adopt a new resolution to restrict access above the 4,400 meter level on a permanent basis, the Company may need to further write down the carrying value of the asset. While a portion of the Company's proven and probable reserves relate to material above the 4,400 meter level at San Bartolomé, so long as operations remain suspended, there is a risk that silver may not be produced from this material at expected levels or at all, particularly given the remaining anticipated mine life of this asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.
NOTE 21 – SUBSEQUENT EVENTS

On July 15, 2016, the Company voluntarily terminated the Term Loan due 2020 for $103.4 million including the $99.0 million remaining principal balance and a $4.4 million prepayment premium.
All of the outstanding Convertible Notes were redeemed on July 25, 2016 for $0.7 million.
On July 25, 2016, the Company completed the sale of its NSR royalty on the Correnso mine in New Zealand to the operator, a subsidiary of OceanaGold Corporation, for total consideration of $5.2 million, including $0.7 million in contingent consideration payable in 2017.
On July 26, 2016, the remaining minimum obligation under the Palmarejo royalty agreement was satisfied and the termination of the Palmarejo royalty agreement became effective.




30


Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively "the Company", "our", or "we"). We use certain non-GAAP financial performance measures in Management's Discussion and Analysis ("MD&A") such as costs applicable to sales, all-in sustaining costs, adjusted net income (loss), EBITDA, and adjusted EBITDA. For a detailed description of each of these non-GAAP measures, please see "Non-GAAP Financial Performance Measures" at the end of this item. We believe it is important to read this item in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 10-K"), as well as other information we file with the Securities and Exchange Commission.
We provide certain operational and financial data on a silver equivalent basis, converting gold to silver at a 60:1 ratio of silver ounces to gold ounces. We also provide silver equivalent data using a ratio determined by average realized silver and gold prices during the relevant period. Silver and gold equivalence are stated at a 60:1 ratio unless otherwise noted.
Overview
We are a gold and silver producer with mines located in the United States, Mexico, and Bolivia and exploration projects in the United States, Mexico and Argentina. The Palmarejo complex, Rochester, Kensington, Wharf, and San Bartolomé mines constitute our principal sources of revenue. The Company also owns Coeur Capital, which is primarily comprised of the Endeavor silver stream.
The Company's strategy is to discover, acquire, develop and operate low-cost silver and gold mines that produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders. Management focuses on maximizing net cash flow through identifying and implementing revenue enhancement opportunities, reducing operating and non-operating costs, exercising consistent capital discipline, and efficient working capital management.
Second Quarter Highlights
Net income of $14.5 million ($0.09 per share) and adjusted net income of $17.3 million ($0.11 per share) (see "Non-GAAP Financial Performance Measures")
Metal sales of $180.2 million
Production of 9.6 million silver equivalent ounces, consisting of 4.0 million silver ounces and 92,727 gold ounces
Costs applicable to sales were $10.82 per silver equivalent ounce ($10.15 per realized silver equivalent ounce) and $649 per gold equivalent ounce (see "Non-GAAP Financial Performance Measures")
All-in sustaining costs were $14.92 per silver equivalent ounce ($13.36 per realized silver equivalent ounce) (see "Non-GAAP Financial Performance Measures")
General and administrative expenses reduced 12% from 2015 to $7.4 million
Capital expenditures of $23.3 million, primarily for the development of the Jualin deposit at Kensington and Guadalupe and Independencia underground deposits at Palmarejo
Received regulatory approval for the construction of an additional 120 million tons of leach capacity at Rochester
Completed a $75.0 million “at the market” stock offering
Sale of non-core assets completed for total consideration of $12.9 million
Cash and cash equivalents of $257.6 million at June 30, 2016








31



Selected Financial and Operating Results
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Metal sales
$
180,197

 
$
164,505

 
$
326,833

 
$
315,460

Net income (loss)
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
$
(49,965
)
Net income (loss) per share, basic
$
0.09

 
$
(0.12
)
 
$
(0.04
)
 
$
(0.42
)
Adjusted net income (loss)(1)
$
17,262

 
$
(18,058
)
 
$
6,215

 
$
(42,450
)
Adjusted net income (loss) per share, basic(1)
$
0.11

 
$
(0.13
)
 
$
0.04

 
$
(0.36
)
EBITDA(1)
$
62,109

 
$
32,771

 
$
82,904

 
$
43,406

Adjusted EBITDA(1)
$
72,355

 
$
36,442

 
$
108,138

 
$
63,092

Silver ounces produced
4,029,976

 
4,258,941

 
7,402,450

 
8,102,522

Gold ounces produced
92,727

 
80,855

 
170,799

 
150,589

Silver equivalent ounces produced
9,593,596


9,110,241


17,650,390

 
17,137,862

Silver ounces sold
3,973,475

 
4,008,894

 
7,502,977

 
8,097,519

Gold ounces sold
88,543

 
84,312

 
167,634

 
152,733

Silver equivalent ounces sold
9,286,033

 
9,067,614

 
17,561,045

 
17,261,499

Average realized price per silver ounce
$
17.38

 
$
16.23

 
$
16.34

 
$
16.50

Average realized price per gold ounce
$
1,255

 
$
1,179

 
$
1,218

 
$
1,191

Costs applicable to sales per silver equivalent ounce(1)
$
10.82

 
$
12.84

 
$
11.53

 
$
13.59

Costs applicable to sales per realized silver equivalent ounce(1)
$
10.15

 
$
12.01

 
$
10.72

 
$
12.77

Costs applicable to sales per gold equivalent ounce(1)
$
649

 
$
820

 
$
688

 
$
811

All-in sustaining costs per silver equivalent ounce(1)
$
14.92

 
$
16.80

 
$
15.56

 
$
17.18

All-in sustaining costs per realized silver equivalent ounce(1)
$
13.36

 
$
14.99

 
$
13.66

 
$
15.51

(1)
See "Non-GAAP Financial Performance Measures."

Consolidated Financial Results
Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015
Net Income (Loss)
Net income was $14.5 million ($0.09 per share) compared to Net loss of $16.7 million ($(0.12) per share).  The increase in Net income is primarily due to higher gold production, higher average realized silver and gold prices, lower costs applicable to sales per silver and gold ounce, and lower general and administrative expenses, partially offset by lower silver production and unfavorable fair value adjustments.
Revenue
Metal sales increased 10% due to higher average realized silver and gold prices and higher gold ounces sold. The Company's average realized silver and gold prices increased by 7% and 6%, respectively. The Company sold 4.0 million silver ounces and 88,543 gold ounces, compared to sales of 4.0 million silver ounces and 84,312 gold ounces. Gold contributed 62% of sales and silver contributed 38%, compared to 60% of sales from gold and 40% from silver. Royalty revenue was consistent as higher attributable production and metal prices were offset by the divestiture of several royalties.
Costs Applicable to Sales
Costs applicable to sales were lower due to lower unit costs at all mine sites and lower silver ounces sold, partially offset by higher gold ounces sold. For a complete discussion of costs applicable to sales, see Results of Operations below.

32


Amortization
Amortization decreased by $1.5 million, or 4%, primarily due to lower silver production and lower amortizable mineral interests and mining equipment.
Expenses
General and administrative expenses decreased 12% due to lower compensation and professional services costs.
Exploration expense decreased $1.3 million, or 38%, due to less drilling activity at Palmarejo and Rochester.
Pre-development, reclamation, and other expenses increased 93% to $4.4 million due to higher legal and transaction related costs.
Other Income and Expenses
Non-cash fair value adjustments, net, were a loss of $3.6 million compared to a gain of $2.8 million, primarily due to the impact of changes in future metal prices on the Palmarejo gold production royalty and the Rochester 3.4% NSR royalty obligation.
Interest expense (net of capitalized interest of $0.2 million) increased to $10.9 million from $10.7 million primarily due to interest expense associated with additional borrowings, partially offset by lower accretion of the Palmarejo gold production royalty obligation.
Other, net decreased by $1.0 million, primarily due to the $5.3 million gain on the sale of Martha assets and the $1.2 million gains on the sale of non-core royalty assets, partially offset by higher foreign exchange losses
Income and Mining Taxes
During the second quarter of 2016, the Company reported estimated income and mining tax benefit of approximately $0.8 million, for an effective tax rate of 5.6%. Estimated income and mining tax benefit during the second quarter of 2015 was $0.26 million, for an effective tax rate of 1.5%. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
 
Three months ended June 30, 2016
 
Three months ended June 30, 2015
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
119

$
(1,810
)
 
$
(9,764
)
$
319

Argentina
4,453

(1,793
)
 
(656
)
(1
)
Mexico
3,353

4,316

 
(5,582
)
548

Bolivia
4,016

848

 
(1,219
)
196

Other jurisdictions
1,788

(793
)
 
284

(802
)
 
$
13,729

$
768


$
(16,937
)
$
260


The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in its consolidated effective tax rate.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.

Likewise, there are a number of factors that can potentially impact the Company’s effective tax, including the geographic distribution of income, the non-recognition of tax assets, changes in tax laws, and the impact of specific transactions.





33


Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015
Net Income (Loss)
Net loss was $5.9 million ($(0.04) per share) compared to $50.0 million ($(0.42) per share). The lower Net loss is primarily due to higher gold production, higher average realized gold prices, lower costs applicable to sales per silver and gold ounce, lower exploration costs, and lower general and administrative expenses, partially offset by lower average realized silver prices, lower silver production, and more unfavorable fair value adjustments.
Revenue
Metal sales increased 4% due to higher average realized gold prices and higher gold ounces sold as a result of a full six months of Wharf production in the current period, partially offset by lower average realized silver prices and lower silver ounces sold. The Company's average realized silver and gold prices decreased by 1% and increased by 2%, respectively. The Company sold 7.5 million silver ounces and 167,634 gold ounces, compared to sales of 8.1 million silver ounces and 152,733 gold ounces. Gold contributed 62% of sales and silver contributed 38%, compared to 58% of sales from gold and 42% from silver. Royalty revenue was consistent with the prior year as higher attributable production and higher metal prices were offset by the divestitures of several royalties.
Costs Applicable to Sales
Costs applicable to sales were lower due to lower unit costs at all mine sites and lower silver ounces sold partially offset by higher gold ounces sold. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization decreased by $6.6 million, or 9%, due to lower silver production and lower amortizable mineral interests and mining equipment.
Expenses
General and administrative expenses decreased $1.6 million, or 9%, due to lower compensation and professional services costs.
Exploration expense decreased $3.9 million, or 49%, due to less drilling activity at Palmarejo, Kensington, and Rochester.
Pre-development, reclamation, and other expenses decreased 5% to $8.6 million, primarily due to prior year Wharf acquisition costs.
Write-downs were $4.4 million ($3.9 million net of tax) related to the Company's silver stream on the Endeavor mine in Australia as a result of the decision by the mine operator to significantly curtail production due to low lead and zinc prices. In addition, the anticipated sale of the Company's NSR royalty on the El Gallo mine contributed to the write-down.
Other Income and Expenses
Non-cash fair value adjustments, net, were a loss of $12.3 million compared to a loss of $2.1 million, primarily due to the impact of changes in future metal prices on the Palmarejo gold production royalty and the Rochester 3.4% NSR royalty obligation.
Interest expense (net of capitalized interest of $0.4 million) increased to $22.0 million from $21.5 million primarily due to interest expense associated with additional borrowings, partially offset by lower accretion of the Palmarejo gold production royalty obligation.
Other, net increased by $4.8 million, primarily due to the $5.3 million gain on the sale of Martha assets and the $3.1 million gain on the sale of non-core royalty assets, partially offset by changes in higher foreign exchange losses.
Income and Mining Taxes
During the first half of 2016, the Company reported estimated income and mining tax expense of approximately $1.3 million, for an effective tax rate of 29.3%. Estimated income and mining tax benefit during the first half of 2015 was $0.2 million, for an effective tax rate of 0.4%.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:

34


 
Six months ended June 30, 2016
 
Six months ended June 30, 2015
In thousands
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(9,242
)
$
(2,342
)
 
$
(30,471
)
$
2,204

Argentina
3,438

(250
)
 
(1,352
)
(2
)
Mexico
(4,155
)
4,333

 
(15,255
)
(716
)
Bolivia
6,062

(722
)
 
(3,598
)
(1,211
)
Other jurisdictions
(664
)
(2,357
)
 
519

(83
)
 
$
(4,561
)
$
(1,338
)

$
(50,157
)
$
192


The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in its consolidated effective tax rate.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.

Likewise, there are a number of factors that can potentially impact the Company’s effective tax, including the geographic distribution of income, the non-recognition of tax assets, changes in tax laws, and the impact of specific transactions.

Results of Operations
The Company produced 4.0 million ounces of silver and 92,727 ounces of gold in the three months ended June 30, 2016, compared to 4.3 million ounces of silver and 80,855 ounces of gold in the three months ended June 30, 2015. Silver production decreased due to timing of leach pad recoveries at Rochester, lower mill throughput at San Bartolomé, and lower silver production at Endeavor, partially offset by higher grades and recovery at Palmarejo. Gold production increased 15% in the three months ended June 30, 2016, primarily due to higher grade and recovery at Wharf.
The Company produced 7.4 million ounces of silver and 170,799 ounces of gold in the six months ended June 30, 2016, compared to 8.1 million ounces of silver and 150,589 ounces of gold in the six months ended June 30, 2015. Silver production decreased 9% due to lower mill throughput at Palmarejo as the mine completed its transition to a lower tonnage, higher grade underground operation, timing of leach pad recoveries at Rochester, and lower silver production at Endeavor. Gold production increased 13% in the six months ended June 30, 2016 primarily due to a full six months of production of Wharf and higher grade at Kensington.
Costs applicable to sales were $10.82 per silver equivalent ounce and $649 per gold ounce in the three months ended June 30, 2016 compared to $12.84 per silver equivalent ounce and $820 per gold ounce in the three months ended June 30, 2015. Costs applicable to sales per silver equivalent ounce decreased 16% in the three months ended June 30, 2016 due to lower unit costs at Palmarejo, Rochester, and San Bartolomé. Costs applicable to sales per gold equivalent ounce decreased 21% in the three months ended June 30, 2016 due to lower unit costs at Wharf and Kensington.
Costs applicable to sales were $11.53 per silver equivalent ounce and $688 per gold ounce in the six months ended June 30, 2016 compared to $13.59 per silver equivalent ounce and $811 per gold ounce in the six months ended June 30, 2015. Costs applicable to sales per silver equivalent ounce decreased 15% in the six months ended June 30, 2016 due to lower unit costs at Palmarejo and San Bartolomé. Costs applicable to sales per gold equivalent ounce decreased 15% in the six months ended June 30, 2016 due to lower unit costs at Kensington and Wharf.
All-in sustaining costs were $14.92 per silver equivalent ounce in the three months ended June 30, 2016 compared to $16.80 per silver equivalent ounce in the three months ended June 30, 2015. The 11% reduction in all-in sustaining costs per silver equivalent ounce in the three months ended June 30, 2016 was primarily due to higher production, lower costs applicable to sales per Company-wide silver equivalent ounce, and lower general and administrative expenses, partially offset by higher sustaining capital expenditures.

35


        
All-in sustaining costs were $15.56 per silver equivalent ounce in the six months ended June 30, 2016 compared to $17.18 per silver equivalent ounce in the six months ended June 30, 2015. The 9% reduction in all-in sustaining costs per silver equivalent ounce in the six months ended June 30, 2016 was primarily due to higher production and lower costs applicable to sales per Company-wide silver equivalent ounce, lower general and administrative expenses and exploration expenses, partially offset by higher sustaining capital expenditures.
Palmarejo
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Tons milled
270,142

 
435,841

 
516,675

 
887,759

Silver ounces produced
1,307,097

 
1,247,011

 
2,240,466

 
2,601,011

Gold ounces produced
18,731

 
18,127

 
33,399

 
33,622

Silver equivalent ounces produced
2,430,957

 
2,334,631

 
4,244,406

 
4,618,331

Costs applicable to sales per silver equivalent oz(1)
$
9.14

 
$
13.88

 
$
10.44

 
$
14.93

Costs applicable to sales per realized silver equivalent oz(1)
$
8.35

 
$
12.68

 
$
9.40

 
$
13.78

(1)
See Non-GAAP Financial Performance Measures.

Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015

Silver equivalent production increased 4% due to significantly higher silver and gold grades and higher recoveries. Metal sales were $48.3 million, or 27% of Coeur's metal sales, compared with $38.9 million, or 24% of Coeur's metal sales. Costs applicable to sales per ounce decreased 34% as a result of lower waste tons mined, lower milling, diesel, and consumables costs, favorable currency exchange rates, and lower maintenance costs. Amortization increased to $14.8 million compared to $9.0 million, primarily due to the ramp-up of production at Guadalupe and Independencia. Capital expenditures remained comparable at $8.9 million as the Company continues to develop the Guadalupe and Independencia underground operations.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015

Silver equivalent production decreased 8% due to planned lower mill throughput primarily sourced from underground operations, partially offset by higher silver and gold grades and recovery. Metal sales were $78.1 million, or 24% of Coeur's metal sales, compared with $78.3 million, or 26% of Coeur's metal sales. Costs applicable to sales per ounce decreased 30% as a result of reduced mining and ore haulage costs, lower waste tons mined, lower milling, diesel, and consumables costs, favorable currency exchange rates, and lower maintenance costs. Amortization increased to $22.1 million, primarily due to the ramp-up of production at Guadalupe and Independencia. Capital expenditures remained comparable at $17.7 million as the Company continues to develop the underground operations.
Rochester
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Tons placed
6,402,013

 
3,859,965

 
10,776,472

 
7,873,844

Silver ounces produced
1,197,013

 
1,294,371

 
2,125,915

 
2,437,941

Gold ounces produced
13,940

 
16,411

 
24,401

 
30,132

Silver equivalent ounces produced
2,033,413

 
2,279,031

 
3,589,975

 
4,245,861

Costs applicable to sales per silver equivalent oz(1)
$
11.36

 
$
12.05

 
$
11.98

 
$
12.56

Costs applicable to sales per realized silver equivalent oz(1)
$
10.49

 
$
10.98

 
$
10.92

 
$
11.52

(1)
See Non-GAAP Financial Performance Measures.


36


Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015

Silver equivalent production decreased 11% due to the timing of recoveries and lower silver grade, partially offset by higher tons placed. Metal sales were $35.8 million, or 20% of Coeur’s metal sales, compared with $36.3 million, or 22% of Coeur's metal sales, due to lower production. Costs applicable to sales per silver equivalent ounce decreased 6% due to lower diesel, maintenance, and processing costs. Amortization was $5.4 million in both periods. Capital expenditures decreased to $3.9 million compared to $5.9 million.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015

Silver equivalent production decreased 15% due to the timing of recoveries and lower silver grade, partially offset by higher tons placed. Metal sales were $65.7 million, or 20% of Coeur’s metal sales, compared with $80.4 million, or 25% of Coeur's metal sales, due to lower production. Costs applicable to sales per silver equivalent ounce decreased 5% due to lower diesel, maintenance and processing costs. Amortization was $10.8 million compared to $12.2 million due to lower production. Capital expenditures decreased to $7.2 million compared to $9.2 million.

Kensington
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Tons milled
157,117

 
170,649

 
316,477

 
335,600

Gold ounces produced
32,210

 
29,845

 
64,183

 
63,754

Costs applicable to sales/oz(1)
$
749

 
$
750

 
$
761

 
$
774

(1)
See Non-GAAP Financial Performance Measures.

Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015

Gold production increased 8% due to 22% higher grade, partially offset by lower mill throughput. Metal sales were $36.5 million, or 20% of Coeur's metal sales, compared to $42.5 million, or 26% of Coeur’s metal sales due to fewer gold ounces sold. Costs applicable to sales per ounce were mostly unchanged. Amortization was $9.8 million compared to $12.7 million due to higher pebble reject production. Capital expenditures were $7.5 million compared to $4.7 million, due to the continued development of the high-grade Jualin deposit.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015

Gold production increased due to higher grade, partially offset by lower mill throughput. Metal sales were $72.2 million, or 22% of Coeur's metal sales, compared to $86.5 million, or 27% of Coeur’s metal sales, due to lower gold ounces sold. Costs applicable to sales per ounce decreased 2% due to lower mining and equipment rental costs. Amortization was $18.2 million compared to $24.2 million due to due to higher pebble reject production. Capital expenditures were $15.6 million compared to $8.9 million, due to the underground development of the high-grade Jualin deposit.

Wharf
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015(1)
Tons placed
915,631

 
887,409

 
1,890,294

 
1,303,405

Gold ounces produced
27,846

 
16,472

 
48,816

 
23,081

Silver ounces produced
35,201

 
19,336

 
48,180

 
19,336

Gold equivalent ounces produced(2)
28,433


16,794


49,619


23,403

Costs applicable to sales per gold equivalent oz(2)
$
535

 
$
971

 
$
597

 
$
971

(1)
Amounts are post-acquisition (February 20, 2015).
(2)
See Non-GAAP Financial Performance Measures.


37


Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015
    
Gold equivalent production increased 69% due to timing of recoveries and higher gold grade. Metal sales were $34.0 million, or 19% of Coeur's metal sales compared to $20.4 million, or 12% of Coeur's metal sales, due to higher gold ounces sold. Costs applicable to sales per gold equivalent ounce decreased primarily due to lower mining and diesel costs. Amortization was $5.1 million compared to $3.5 million due to higher production. Capital expenditures were $1.5 million compared to $1.2 million.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015
    
Gold equivalent production increased 112% due to a full six-months of production, higher gold grade and timing of recoveries. Metal sales were $61.9 million, or 19% of Coeur's metal sales, compared to $20.4 million, or 6% of Coeur's metal sales, due to higher gold ounces sold. Costs applicable to sales per gold equivalent ounce decreased primarily due to lower mining and diesel costs. Amortization was $9.2 million compared to $3.5 million due to higher production. Capital expenditures were $2.9 million compared to $1.3 million.
    
San Bartolomé
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Tons milled
440,441

 
457,232

 
848,247

 
864,183

Silver ounces produced
1,457,944

 
1,494,550

 
2,839,857

 
2,707,803

Costs applicable to sales/oz(1)
$
13.14

 
$
13.31

 
$
12.89

 
$
14.03

(1)
See Non-GAAP Financial Performance Measures.

Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015

Silver production decreased 2% due to lower mill throughput partially offset by higher grade supplemental ore purchases. Silver sales were $25.2 million, or 14% of Coeur's metal sales, compared with $23.4 million, or 14% of Coeur's metal sales. Costs applicable to sales per ounce declined to $13.14 due to the supplemental ore purchases and lower processing costs. Amortization was $1.9 million compared to $5.3 million due to lower amortizable mineral interest and mining equipment. Capital expenditures were $1.3 million compared to $1.0 million.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015

Silver production increased 5% primarily due to higher recovery rates and higher grade supplemental ore purchases. Silver sales were $46.5 million, or 14% of Coeur's metal sales, compared with $44.9 million, or 14% of Coeur's metal sales. Costs applicable to sales per ounce declined 8% to $12.89 due to the supplemental ore purchases and lower processing costs. Amortization was $3.6 million compared to $10.0 million due to lower amortizable mineral interest and mining equipment. Capital expenditures were $1.8 million compared to $1.9 million.

Coeur Capital
 
Three months ended June 30,
 
Six months ended June 30,
Endeavor Silver Stream
2016
 
2015
 
2016
 
2015
Tons milled
37,521

 
191,175

 
124,384

 
376,474

Silver ounces produced
32,721

 
203,673

 
148,032

 
336,431

Costs applicable to sales/oz(1)
$
7.94

 
$
6.46

 
$
5.93

 
$
6.07

(1)
See Non-GAAP Financial Performance Measures.

Three Months Ended June 30, 2016 compared to Three Months Ended June 30, 2015

Silver production at Endeavor decreased as a result of the mine operator's decision to significantly curtail production due to low lead and zinc prices. Costs applicable to sales per ounce increased due to the impact of silver prices on the Company's silver price sharing agreement with the Endeavor mine operator. Royalty revenue was $1.8 million in both periods. Amortization was

38


$0.1 million compared to $2.6 million due to lower production and the impact of lower amortizable mineral interest. In the second quarter of 2016, Coeur completed the sale of non-core royalty assets for total consideration of $9.9 million. The Company recognized a gain of $1.2 million, which is recorded in Other, net, related to the sale of these non-core assets.

Six Months Ended June 30, 2016 compared to Six Months Ended June 30, 2015

Silver production at Endeavor decreased as a result of the mine operator's decision to significantly curtail production due to low lead and zinc prices. Costs applicable to sales per ounce was mostly consistent. Royalty revenue was $3.6 million compared to $3.8 million. Amortization was $0.9 million compared to $4.8 million due to lower production, and the impact of lower amortizable mineral interest. In the first half of 2016, Coeur completed the sale of non-core royalty assets for total consideration of $15.6 million. The Company recognized a gain of $3.1 million, which is recorded in Other, net, related to the sale of these non-core assets.

Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the three and six months ended June 30, 2016 was $45.9 million and $52.6 million, respectively, compared to net cash provided by operating activities of $37.0 million and $33.6 million, respectively, for the three and six months ended June 30, 2015, and was impacted by the following key factors:
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Consolidated silver equivalent ounces sold
9,286,033

 
9,067,614

 
17,561,045

 
17,261,499

Average realized price per silver equivalent ounce
$
19.41

 
$
18.14

 
$
18.61

 
$
18.28

Costs applicable to sales per consolidated silver equivalent ounce (1)
(10.82
)
 
(13.13
)
 
(11.50
)
 
(13.57
)
Operating margin per consolidated silver equivalent ounce
$
8.59

 
$
5.01

 
$
7.11

 
$
4.71

(1)
See Non-GAAP Financial Performance Measures.
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2016
 
2015
 
2016
 
2015
Cash flow before changes in operating assets and liabilities
$
47,496

 
$
24,875

 
$
70,749

 
$
35,270

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Receivables
(12,402
)
 
(2,342
)
 
(8,921
)
 
214

Prepaid expenses and other
(898
)
 
160

 
381

 
(1,167
)
Inventories
(7,686
)
 
4,649

 
(15,508
)
 
5,333

Accounts payable and accrued liabilities
19,429

 
9,662

 
5,855

 
(6,095
)
CASH PROVIDED BY OPERATING ACTIVITIES
$
45,939

 
$
37,004

 
$
52,556

 
$
33,555

Cash provided by operating activities increased $8.9 million for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 due to higher average realized prices, higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by unfavorable working capital adjustments. Metal sales for the three months ended June 30, 2016 increased $15.7 million of which $11.0 million was due to higher average realized prices and $4.7 million was due to higher silver equivalent ounces sold. The $1.6 million working capital increase for the three months ended June 30, 2016 was primarily due to an increase in trade receivables and ore on leach pads, partially offset by an increase in accounts payable, compared to the $12.1 million working capital decrease for the three months ended June 30, 2015, primarily due to an increase in accrued interest, payroll, and other benefits.
Cash provided by operating activities increased $19.0 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 due to higher average realized prices, higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by unfavorable working capital adjustments. Metal sales for the six months ended June 30, 2016 increased $11.2 million of which $2.8 million was due to higher average realized prices and $8.4 million was due to higher silver equivalent ounces sold. The $18.2 million working capital increase for the six months ended June

39


30, 2016 was primarily due to an increase in ore on leach pads and trade receivables, partially offset by an increase in accounts payable, compared to the $1.7 million working capital increase for the six months ended June 30, 2015, primarily due to payment of payroll and other benefits.
Cash Used in Investing Activities
Net cash used in investing activities in the three months ended June 30, 2016 was $16.9 million compared to $34.1 million in the three months ended June 30, 2015, primarily due to proceeds from the sale of non-core assets in 2016 and the acquisition of Paramount in 2015. The Company had capital expenditures of $23.3 million for the three months ended June 30, 2016 compared with $23.7 million in the three months ended June 30, 2015. Capital expenditures in both periods were primarily related to underground development at Palmarejo and Kensington.
Net cash used in investing activities in the six months ended June 30, 2016 was $35.5 million compared to $155.5 million in the six months ended June 30, 2015, primarily due to proceeds from the sale of non-core assets in 2016 and the acquisition of the Wharf gold mine for $99.4 million in February 2015. The Company had capital expenditures of $45.5 million for the six months ended June 30, 2016 compared with $41.3 million in the six months ended June 30, 2015. Capital expenditures in both periods were primarily related to underground development at Palmarejo and Kensington.
Cash Provided by Financing Activities
Net cash provided by financing activities for the three months ended June 30, 2016 was $55.5 million compared to $23.5 million in the three months ended June 30, 2015. During the three months ended June 30, 2016, the Company received net proceeds of $73.1 million from the sale of 9.3 million shares of its common stock in connection with $75.0 million “at the market” stock offering. During the three months ended June 30, 2015, the Company entered into the $100.0 million Term Loan due 2020, partially offset by the simultaneous repayment of a $50.0 million short-term loan entered into in connection with the Wharf acquisition and $9.4 million of debt repayment at San Bartolome.

Net cash provided by financing activities for the six months ended June 30, 2016 was $40.1 million compared to $57.7 million in the six months ended June 30, 2015. During the six months ended June 30, 2016, the Company received net proceeds of approximately $73.1 million from the sale of 9.3 million shares of its common stock. During the six months ended June 30, 2015, the Company entered into a $50.0 million Short-term Loan which was subsequently repaid upon entering into the $100.0 million Term Loan due 2020 and $9.4 million of debt repayment at San Bartolome.

On July 15, 2016, the Company voluntarily terminated the Term Loan due 2020 for $103.4 million including the $99.0 million remaining principal balance and a $4.4 million prepayment premium.
    
Other Liquidity Matters

The Company has asserted indefinite reinvestment of certain foreign subsidiary earnings as determined by management’s judgment about and intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity.
We believe that our liquidity and capital resources are adequate to fund our operations and corporate activities.
In order to reduce future cash interest payments, and/or amounts due at maturity or upon redemption, from time to time we may repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or unsecured notes or equity, in each case in open market or privately negotiated transactions. We regularly engage in conversations with our bondholders and evaluate any such transactions in light of prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be significant and any such transactions may occur at a substantial discount to the debt securities' face amount.


40


Critical Accounting Policies and Accounting Developments
Please see Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contained in the Company’s Form 10-K for the year ended December 31, 2015 for the Company's critical accounting policies and estimates.

Non-GAAP Financial Performance Measures
Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles ("GAAP"). These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
Adjusted Net Income (Loss)
Management uses Adjusted net income (loss) to evaluate the Company's operating performance, and to plan and forecast its operations. The Company believes the use of Adjusted net income (loss) reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Management's determination of the components of Adjusted net income (loss) are evaluated periodically and are based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Adjusted net income (loss) is reconciled to Net income (loss) in the table below:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands except per share amounts
2016
 
2015
 
2016
 
2015
Net income (loss)
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
$
(49,965
)
Fair value adjustments
3,579

 
(2,754
)
 
12,274

 
2,130

Impairment of marketable securities
20

 
31

 
20

 
1,545

Write-downs

 

 
4,446

 

Gain on sale of assets
(2,812
)
 
(107
)
 
(4,486
)
 
(63
)
(Gain) loss on debt extinguishments

 
524

 

 
271

Transaction-related costs
792

 
38

 
1,172

 
2,013

Tax effect of adjustments
3,996

 
136

 
2,621

 
(409
)
Foreign exchange (gain) loss
(2,810
)
 
751

 
(3,933
)
 
2,028

Adjusted net income (loss)
$
17,262

 
$
(18,058
)
 
$
6,215

 
$
(42,450
)
 
 
 
 
 
 
 
 
Adjusted net income (loss) per share
$
0.11

 
$
(0.13
)
 
$
0.04

 
$
(0.36
)

41


EBITDA and Adjusted EBITDA
Management uses EBITDA to evaluate the Company's operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. In addition, Adjusted EBITDA is a measure used in the Company's Senior Notes due 2021 indenture to determine our ability to make certain payments and incur additional indebtedness. EBITDA and Adjusted EBITDA do not represent, and should not be considered an alternative to, Net income (Loss) or Cash Flow from Operations as determined under GAAP. Other companies may calculate Adjusted EBITDA differently and those calculations may not be comparable to our presentation. Adjusted EBITDA is reconciled to Net income (loss) in the table below:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands except per share amounts
2016
 
2015
 
2016
 
2015
Net income (loss)
$
14,497

 
$
(16,677
)
 
$
(5,899
)
 
$
(49,965
)
Interest expense, net of capitalized interest
10,875

 
10,734

 
21,995

 
21,499

Income tax provision (benefit)
(768
)
 
(260
)
 
1,338

 
(192
)
Amortization
37,505

 
38,974

 
65,470

 
72,064

EBITDA
62,109


32,771


82,904


43,406

Fair value adjustments, net
3,579

 
(2,754
)
 
12,274

 
2,130

Impairment of equity securities
20

 
31

 
20

 
1,545

Foreign exchange losses
5,655

 
2,056

 
5,820

 
4,262

(Gain) loss on sale of assets
(2,812
)
 
(107
)
 
(4,486
)
 
(63
)
(Gain) loss on debt extinguishment

 
524

 

 
524

Transaction-related costs
792

 
38

 
1,172

 
2,011

Asset retirement obligation accretion
2,066

 
2,078

 
4,125

 
3,787

Inventory adjustments
946

 
1,805

 
1,863

 
5,490

Write-downs

 

 
4,446

 

Adjusted EBITDA
$
72,355


$
36,442


$
108,138


$
63,092

Costs Applicable to Sales and All-in Sustaining Costs

Management uses Costs applicable to sales ("CAS") and All-in sustaining costs ("AISC") to evaluate the Company’s current operating performance and life of mine performance from discovery through reclamation. We believe these measures assist analysts, investors and other stakeholders in understanding the costs associated with producing silver and gold, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. These measures may not be indicative of operating profit or cash flow from operations as determined under GAAP. Management believes converting the benefit from selling gold into silver equivalent ounces best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS and AISC differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit rather than converting to silver equivalent ounces, differences in the determination of sustaining capital expenditures, and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards.

















42


Three Months Ended June 30, 2016
 
 
Silver
 
Gold
 
Total
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
37,630


$
27,158

 
$
20,498

 
$
365

 
$
85,651

 
$
32,419

 
$
19,470

 
$
51,889

 
$
137,540

Amortization
 
14,765

 
5,437

 
1,853

 
84

 
22,139

 
9,808

 
5,128

 
14,936

 
37,075

Costs applicable to sales
 
$
22,865

 
$
21,721

 
$
18,645

 
$
281

 
$
63,512

 
$
22,611

 
$
14,342

 
$
36,953

 
$
100,465

Silver equivalent ounces sold
 
2,502,442

 
1,911,885

 
1,418,455

 
35,411

 
5,868,193

 
 
 
 
 
 
 
9,286,033

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
30,178

 
26,786

 
56,964

 
 
Costs applicable to sales per ounce
 
$
9.14


$
11.36

 
$
13.14

 
$
7.94

 
$
10.82

 
$
749

 
$
535

 
$
649

 
$
10.82

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per realized ounce
 
$
8.35

 
$
10.49

 

 

 
$
10.15

 

 

 

 
$
9.69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
100,465

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,128

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,019

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,400

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,233

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,170

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,098

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
138,513

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,868,193

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,417,840

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,286,033

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14.92

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All-in sustaining costs per realized silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
13.36

(1)
Excludes development capital for Guadalupe, Independencia and Rochester crushing capacity expansion.
Three Months Ended June 30, 2015
 
 
Silver
 
Gold
 
 
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
39,158

 
$
29,779

 
$
24,428

 
$
3,204

 
$
96,569

 
$
40,136

 
$
20,123

 
$
60,259

 
$
156,828

Amortization
 
9,046

 
5,387

 
5,271

 
1,852

 
21,556

 
12,684

 
3,491

 
16,175

 
37,731

Costs applicable to sales
 
$
30,112

 
$
24,392

 
$
19,157

 
$
1,352

 
$
75,013

 
$
27,452

 
$
16,632

 
$
44,084

 
$
119,097

Silver equivalent ounces sold
 
2,169,960

 
2,024,856

 
1,439,388

 
209,130

 
5,843,334

 
 
 
 
 
 
 
9,067,614

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
36,607

 
17,131

 
53,738

 
 
Costs applicable to sales per ounce
 
$
13.88


$
12.05


$
13.31


$
6.46


$
12.84

 
$
750


$
971


$
820

 
$
13.13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per realized ounce
 
$
12.68

 
$
10.98

 

 

 
$
12.01

 
 
 
 
 
 
 
$
11.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
119,097

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,526

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,625

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,451

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,579

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,036

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,030

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
152,344

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,843,334

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,224,280

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,067,614

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
16.80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All-in sustaining costs per realized silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
14.99

(1)
Excludes development capital for Jualin, Independencia and Rochester expansion permitting.




43


Six Months Ended June 30, 2016
 
 
Silver
 
Gold
 
Total
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
65,957

 
$
54,956

 
$
39,749

 
$
1,320

 
$
161,982

 
$
65,186

 
$
38,982

 
$
104,168

 
$
266,150

Amortization
 
22,054

 
10,750

 
3,607

 
383

 
36,794

 
18,157

 
9,179

 
27,336

 
64,130

Costs applicable to sales
 
$
43,903

 
$
44,206

 
$
36,142

 
$
937

 
$
125,188

 
$
47,029

 
$
29,803

 
$
76,832

 
$
202,020

Silver equivalent ounces sold
 
4,204,732

 
3,691,261

 
2,802,846

 
158,106

 
10,856,945

 
 
 
 
 
 
 
17,561,045

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
61,827

 
49,908

 
111,735

 
 
Costs applicable to sales per ounce
 
$
10.44


$
11.98


$
12.89


$
5.93


$
11.53

 
$
761


$
597


$
688

 
$
11.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per realized ounce
 
$
9.40

 
$
10.92

 
 
 
 
 
$
10.72

 
 
 
 
 
 
 
$
10.10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
202,020

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,286

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37,729

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15,676

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,963

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,931

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,655

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
273,260

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,856,945

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
6,704,100

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,561,045

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15.56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All-in sustaining costs per realized silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
13.66

(1)
Excludes development capital for Guadalupe, Independencia and Rochester crushing capacity expansion and miscellaneous land purchases.

Six Months Ended June 30, 2015
 
 
Silver
 
Gold
 
Total
In thousands except per ounce amounts
 
Palmarejo
 
Rochester
 
San Bartolomé
 
Endeavor
 
Total
 
Kensington
 
Wharf
 
Total
 
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
80,983

 
$
68,015

 
$
48,245

 
$
5,096

 
$
202,339

 
$
81,109

 
$
20,123

 
$
101,232

 
$
303,571

Amortization
 
16,380

 
12,230

 
9,961

 
3,111

 
41,682

 
24,238

 
3,491

 
27,729

 
69,411

Costs applicable to sales
 
$
64,603

 
$
55,785

 
$
38,284

 
$
1,985

 
$
160,657

 
$
56,871

 
$
16,632

 
$
73,503

 
$
234,160

Silver equivalent ounces sold
 
4,327,572

 
4,440,959

 
2,729,255

 
326,993

 
11,824,779

 
 
 
 
 
 
 
17,261,499

Gold equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
73,481

 
17,131

 
90,612

 
 
Costs applicable to sales per ounce
 
$
14.93


$
12.56


$
14.03


$
6.07


$
13.59

 
$
774


$
971


$
811

 
$
13.57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales per realized ounce
 
$
13.78

 
$
11.52

 
 
 
 
 
$
12.77

 
 
 
 
 
 
 
$
12.25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
234,160

Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,016

Sustaining capital(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,535

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,286

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,845

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,313

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,341

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
296,496

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,824,779

Kensington and Wharf silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
5,436,720

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,261,499

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
17.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All-in sustaining costs per realized silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
15.51

(1)
Excludes development capital for Jualin, Independencia and Rochester expansion permitting.

44


Cautionary Statement Concerning Forward-Looking Statements

This report contains numerous forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the Company’s gold and silver mining business, including statements regarding strategies to produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders, maximizing net cash flow, reducing operating and non-operating costs, demonstrating consistent capital discipline, efficient management of working capital, tax positions, efforts to mitigate risks associated with gold and silver price and foreign currency fluctuations and the adequacy of liquidity and capital resources. 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 results 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 in the "Risk Factors" section of the 2015 10-K and in this Quarterly Report on Form 10-Q and the risks and uncertainties discussed in this MD&A, (ii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver and a sustained lower price environment, including the resulting impact on cash flows and debt covenant compliance, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions and grade variability, (v) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vi) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) the absence of control over and reliance on third parties to operate mines in which the Company or any of its subsidiaries holds royalty or streaming interests and risks related to these mining operations (including results of mining and exploration activities, environmental, economic and political risks, and changes in mine plans and project parameters); (ix) the loss of access to any third-party smelter to which the Company markets silver and gold, (x) the effects of environmental and other governmental regulations, (xi) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt. 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.


45


Item 3.        Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks as a part of its operations and engages in risk management strategies to mitigate these risks. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company does not actively engage in the practice of trading derivative instruments for profit. Additional information about the Company’s derivative financial instruments may be found in Note 11 -- Derivative Financial Instruments in the notes to the condensed consolidated financial statements. This discussion of the Company's market risk assessments contains "forward looking statements". For additional information regarding forward-looking statements and risks and uncertainties that could impact the Company, please refer to Item 2 of this Report - Cautionary Statement Concerning Forward-Looking Statements. Actual results and actions could differ materially from those discussed below.
Gold and Silver Price
Gold and silver prices may fluctuate widely due to numerous factors such as U.S. dollar strength or weakness, demand, investor sentiment, inflation or deflation, and global mine production. The Company's profitability and cash flow may be significantly impacted by changes in the market price of gold and silver.
Gold and Silver Hedging
To mitigate the risks associated with gold and silver price fluctuations, the Company may enter into option contracts to hedge future production.
If the market price of silver were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period. The Company may be exposed to non-performance risk 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 had no outstanding gold and silver hedging contracts at June 30, 2016.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract. Depending on the difference between the price at the time of sale and the final settlement price, embedded derivatives are recorded as either a derivative asset or liability. The embedded derivatives do not qualify for hedge accounting and, as a result, are marked to the market gold and silver price at the end of each period from the provisional sale date to the date of final settlement. The mark-to-market gains and losses are recorded in earnings. Changes in silver and gold pricing resulted in provisional pricing mark-to-market gains of $1.2 million in the six months ended June 30, 2016.
At June 30, 2016, the Company had outstanding provisionally priced sales of 0.5 million ounces of silver and 34,876 ounces of gold at prices of $18.28 and $1,257, respectively. A 10% change in realized silver price would cause revenue to vary by $1.0 million and a 10% change in realized gold price would cause revenue to vary by $4.4 million.
Palmarejo Gold Production Royalty
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties and includes a minimum obligation of 4,167 gold ounces per month which terminates when payments in respect of 400,000 gold ounces have been made. The minimum royalty obligation is considered an embedded derivative financial instrument due to the impact of fluctuating gold prices on the underlying gold ounces.
At June 30, 2016, a total of 8,493 ounces of gold remain outstanding under the minimum royalty obligation. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was 8.3% at June 30, 2016. The fair value of the embedded derivative at June 30, 2016 was a liability of $3.3 million. A 10% change in the price of gold would result in a change in the fair value of the net derivative liability at June 30, 2016 to vary by $0.6 million. On July 26, 2016, payments on the remaining ounces under the minimum royalty obligation were made and termination of the royalty was effective.

46


Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Australia, Bolivia, Chile, Mexico, Argentina, Ecuador, and New Zealand, which exposes it to foreign currency exchange rate risks. Foreign currency exchange rates are influenced by world market factors beyond the Company's control such as supply and demand for U.S. and foreign currencies and related monetary and fiscal policies. Fluctuations in local currency exchange rates in relation to the U.S. dollar may significantly impact profitability and cash flow.
Foreign Exchange Hedging
To manage foreign currency risk, the Company may enter into forward foreign exchange contracts and option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at June 30, 2016.

47


Item 4.        Controls and Procedures

(a) Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management’s control objectives. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by it in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control Over Financial Reporting

Based on an evaluation by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that there was no change in the Company’s internal control over financial reporting during the three months ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


48


PART II
Item 1.         Legal Proceedings
For a discussion of legal proceedings, see Note 20 -- Commitments and Contingencies in the notes to the condensed consolidated financial statements included herein.

Item 1A.     Risk Factors

Item 1A -- Risk Factors of the 2015 10-K sets forth information relating to important risks and uncertainties that could materially adversely affect the Company's business, financial condition or operating results.Those risk factors have been supplemented and updated in this Form 10-Q. Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.

The Company is an international company and is exposed to political and social risks in the countries in which it has significant operations or interests.

A significant portion of the Company’s revenues are generated by operations outside the United States, and it is subject to significant risks inherent in mineral extraction by foreign companies and contracts with government owned entities. Exploration, development, production and closure activities in many countries are potentially subject to heightened political and social risks that are beyond the Company’s control. These risks include the possible unilateral cancellation or forced renegotiation of contracts, unfavorable changes in foreign laws and regulations, royalty and tax increases, risks associated with the value-added tax (“VAT”) and income tax refund recovery and collection process, claims by governmental entities or indigenous communities, expropriation or nationalization of property and other risks arising out of foreign sovereignty over areas in which operations are conducted. The right to export silver and gold may depend on obtaining certain licenses and quotas, which could be delayed or denied at the discretion of the relevant regulatory authorities. In addition, the Company’s rights under local law may be less secure in countries where judicial systems are susceptible to manipulation and intimidation by government agencies, non-governmental organizations or civic groups.

Any of these developments could require the Company to curtail or terminate operations at its mines, incur significant costs to meet newly-imposed environmental or other standards, pay greater royalties or higher prices for labor or services and recognize higher taxes, or experience significant delays or obstacles in the recovery of VAT or income tax refunds owed, which could materially and adversely affect financial condition, results of operations and cash flows.

These risks may be higher in developing countries in which the Company may expand its exploration for and development of mineral deposits. Potential operations in these areas increase the Company’s exposure to risks of war, local economic conditions, political disruption, civil disturbance and governmental policies that may disrupt its operations.

The Company’s ongoing and future success depends on developing and maintaining productive relationships with the communities, including indigenous peoples, and other stakeholders in its operating locations. The Company believes its operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development and other benefits associated with ongoing payment of taxes. In addition, the Company seeks to maintain its partnerships and relationships with local communities and stakeholders in a variety of ways, including in-kind contributions, volunteer time, sponsorships and donations. Notwithstanding the Company’s ongoing efforts, local communities and stakeholders can become dissatisfied with its activities or the level of benefits provided, which may result in civil unrest, protests, direct action or campaigns against it. Any such occurrences could materially and adversely affect the Company’s financial condition, results of operations and cash flows.

The Company’s future operating performance may not generate cash flows sufficient to meet debt payment obligations.

As of July 26, 2016, the Company had approximately $420.6 million of outstanding indebtedness. The Company’s ability to make scheduled debt payments on outstanding indebtedness will depend on future results of operations and cash flows. The Company’s results of operations and cash flows, in part, are subject to economic factors beyond its control, including the market prices of silver and gold. The Company may not be able to generate enough cash flow to meet obligations and commitments under outstanding debt instruments. If the Company cannot generate sufficient cash flow from operations to service debt, it may need to further refinance debt, dispose of assets or issue equity to obtain the necessary funds.

The Company cannot predict whether it would be able to refinance debt, issue equity or dispose of assets to raise funds on a timely basis or on satisfactory terms. In a rising interest rate environment, the costs of borrowing additional funds or refinancing outstanding indebtedness would also be expected to increase.

49


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, land development and land reclamation, and set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner that may 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 (financial and otherwise) for mining companies and their officers, directors and employees. The Company may incur environmental costs that could have a material adverse effect on financial condition and results of operations. Any failure to remedy an environmental problem could require it to suspend operations or enter into interim compliance measures pending completion of the required remedy. The environmental standards that ultimately may be imposed at a mine site affect the cost of remediation and could exceed the financial accruals that the Company has made for such remediation. The potential exposure may be significant and could have a material adverse effect on the Company’s financial condition and results of operations.

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 prior and current operations, including operations conducted by other mining companies many years ago at sites located on properties that the Company currently or formerly owned. These lawsuits 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 the Company’s operations. The Company cannot assure that any such law, regulation, enforcement or private claim would not have a material adverse effect on its financial condition, results of operations or cash flows.

Some of the mining wastes from the Company’s U.S. mines currently are exempt to a limited extent from the extensive set of EPA regulations governing hazardous waste under the RCRA. If the EPA were to repeal this exemption, and designate these mining wastes as hazardous under RCRA, the Company would be required to expend additional amounts on the handling of such wastes and to make significant expenditures to construct hazardous waste storage or disposal facilities. In addition, if any of these wastes causes contamination in or damage to the environment at a U.S. mining facility, that facility could be designated as a “Superfund” site under CERCLA. Under CERCLA, any present owner or operator of a Superfund site or the owner or operator at the time of contamination may be held jointly and severally liable regardless of fault, and may be forced to undertake extensive remedial cleanup action or to pay for the cleanup efforts. The owner or operator also may be liable to federal, state and tribal governmental entities for the cost of damages to natural resources, which could be substantial. Additional regulations or requirements also are imposed on the Company’s tailings and waste disposal areas in Alaska under the federal Clean Water Act (“CWA”), in Nevada under the Nevada Water Pollution Control Law which implements the CWA, and in South Dakota under the South Dakota Water Pollution Control Act and the Administrative Rules of the State of South Dakota.

Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada, Alaska and South Dakota. In addition, there are numerous legislative and regulatory proposals related to climate change, including legislation pending in the U.S. Congress to require reductions in greenhouse gas emissions. Adoption of these proposals could have a material adverse effect on results of operations and cash flows.

The Company is required to obtain and renew governmental permits in order to conduct operations, a process which is often costly and time-consuming. The Company’s ability to obtain necessary government permits to expand operations or begin new operations can be materially affected by third party activists.

In the normal course of its business, the Company is required to obtain and renew governmental permits for exploration, operations and expansion of existing operations and for the development of new projects. Obtaining and renewing governmental permits is a complex and time-consuming process. The timeliness and success of permitting efforts are contingent upon many variables not within the Company's control, including the interpretation of permit approval requirements administered by the applicable permitting authority. The Company may not be able to obtain or renew permits that are necessary to its operations or the cost and time required to obtain or renew permits may exceed the Company's expectations. Any unexpected delays or costs associated with the permitting process could delay the development or impede the operation of a mine, which in turn could materially adversely affect the Company's revenues and future growth. In addition, key permits and approvals may be revoked or suspended or may be changed in a manner that adversely affects the Company’s operations.

Private parties such as environmental activists frequently attempt to intervene in the permitting process and to persuade regulators to deny necessary permits or seek to overturn permits that have been issued. Obtaining the necessary governmental permits is a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. These third party actions can materially increase the costs and cause delays in the permitting process and could cause the Company to not proceed with the development or expansion of a mine. In addition, the Company’s ability to successfully

50


obtain key permits and approvals to explore for, develop, operate and expand mines and to conduct its operations will likely depend on the Company’s ability to develop, operate, expand and close mines in a manner that is consistent with the creation of social and economic benefits in the surrounding communities, which may or may not be required by law. The Company’s ability to obtain permits and approvals and to successfully operate in particular communities may be adversely impacted by real or perceived detrimental events associated with its activities or those of other mining companies affecting the environment, human health and safety of communities in which it operates.

Item 4.         Mine Safety Disclosures

Information pertaining to mine safety matters is reported in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act in Exhibit 95.1 attached to this Form 10-Q.

Item 6.         Exhibits
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).
95.1
Mine Safety Disclosure (Filed herewith).
101.INS
XBRL Instance Document**
101.SCH
XBRL Taxonomy Extension Schema**
101.CAL
XBRL Taxonomy Extension Calculation Linkbase**
101.DEF
XBRL Taxonomy Extension Definition Linkbase**
101.LAB
XBRL Taxonomy Extension Label Linkbase**
101.PRE
XBRL Taxonomy Extension Presentation Linkbase**
*    Management contract or compensatory plan or arrangement.
**    The following financial information from Coeur Mining, Inc.'s Quarterly Report on Form 10-Q for the three months ended and six months ended June 30, 2016, formatted in XBRL (Extensible Business Reporting Language): Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statement of Changes in Stockholders' Equity

51


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
COEUR MINING, INC.
 
 
 
(Registrant)
 
 
 
 
 
Dated
7/27/2016
/s/ Mitchell J. Krebs
 
 
 
MITCHELL J. KREBS
 
 
 
President and Chief Executive Officer (Principal Executive Officer)
 
 
 
 
Dated
7/27/2016
/s/ Peter C. Mitchell
 
 
 
PETER C. MITCHELL
 
 
 
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
 
 
 
 
Dated
7/27/2016
/s/ Mark Spurbeck
 
 
 
MARK SPURBECK
 
 
 
Vice President, Finance (Principal Accounting Officer)


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