e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2010
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 1-8641
COEUR DALENE MINES
CORPORATION
(Exact name of registrant as
specified in its charter)
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Idaho
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82-0109423
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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505 Front Ave., P. O. Box
I
Coeur dAlene, Idaho
(Address of principal
executive offices)
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83816
(Zip Code)
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Registrants telephone number, including area code:
(208) 667-3511
Securities Registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange/Toronto Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark 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 o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405) is not contained herein, and will not be
contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to
the price at which the common equity was last sold, or the
average bid and asked price of such common equity, as of the
last business day of the registrants most recently
completed second fiscal quarter.
$1,401,781,852
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date.
As of February 25, 2011, 89,517,575 shares of Common
Stock, Par Value $0.01
DOCUMENTS INCORPORATED BY REFERENCE
Certain information called for by Part III of the
Form 10-K
is incorporated by reference from the registrants
definitive proxy statement for the 2011 Annual Meeting of
Shareholders which will be filed pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year
covered by this report.
TABLE OF
CONTENTS
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PART I
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Item 1.
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Business
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2
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Item 1A.
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Risk Factors
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12
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Item 1B.
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Unresolved Staff Comments
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19
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Item 2.
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Properties
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19
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Item 3.
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Legal Proceedings
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41
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Item 4.
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(Removed and Reserved
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41
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PART II
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Item 5.
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Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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41
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Item 6.
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Selected Financial Data
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43
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Item 7.
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Managements Discussion and Analysis of Financial Condition
and Results of Operations
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44
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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70
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Item 8.
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Financial Statements and Supplementary Data
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73
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
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73
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Item 9A.
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Controls and Procedures
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73
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Item 9B.
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Other Information
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74
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PART III
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Item 10.
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Directors, Executive Officers of the Registrant
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74
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Item 11.
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Executive Compensation
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74
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
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75
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Item 13.
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Certain Relationships and Related Transactions
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75
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Item 14.
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Principal Accounting Fees and Services
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75
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PART IV
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Item 15.
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Exhibits, Financial Statement Schedules
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75
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SIGNATURES
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79
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PART I
INTRODUCTION
Coeur dAlene Mines Corporation (referred to separately as
Coeur and referred to along with its subsidiaries as
it and the Company) is a large primary
silver producer with growing gold production and has assets
located in the United States, Mexico, Bolivia, Argentina and
Australia. The Palmarejo mine, San Bartolomé mine,
Kensington mine, Rochester mine and Martha mine, each of which
is operated by the Company, and the Endeavor mine, which is
operated by a non-affiliated party, constituted the
Companys principal sources of mining revenues during 2010.
The Kensington mine, the Companys newest operating mine,
began processing ore on June 24, 2010 and began commercial
production July 3, 2010. The Company sold its Cerro Bayo
mine in Chile in August 2010. Coeur is an Idaho corporation
incorporated in 1928.
OVERVIEW
OF MINING PROPERTIES AND INTERESTS
The Companys most significant operating properties and
interests are described below:
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Coeur owns 100% of Empresa Minera Manquiri S.A., a Bolivian
company that controls the mining rights for the
San Bartolomé mine, which is a surface silver mine in
Bolivia where Coeur commenced commercial production in June
2008. San Bartolomé produced 6.7 million ounces
of silver during its second full year of operation in 2010. On
October 14, 2009, the Bolivian state-owned mining
organization COMIBOL, announced a temporary suspension of mining
activities above the elevation of 4,400 meters above sea level
while stability studies of Cerro Rico Mountain are undertaken.
The mine plan has been temporarily adjusted and mining continues
on the remainder of the property. In March 2010,
San Bartolomé began mining operations in the Huacajchi
deposit above the 4,400 meter level under an agreement with the
Cooperativa Reserva Fiscal. Although restrictions on mining
above the 4,400 meter level continue, the Huacajchi deposit was
confirmed to be excluded from the October 2009 resolution
restricting mining above the 4,400 meter level of Cerro Rico
Mountain. Access to the Huacajchi deposit and its higher grade
material is having a beneficial effect on production and costs
at the mine. The Company does not use explosives in its
surface-only mining activities and is sensitive to the
preservation of the mountain under its contracts with the
state-owned mining entity and the local cooperatives. It is
uncertain at this time how long the suspension on other areas
above the 4,400 meter level will remain in place.
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Coeur owns 100% of Coeur Mexicana S.A. de C.V., which operates
the underground and surface Palmarejo silver and gold mine in
Mexico. The Palmarejo mine poured its first silver/gold
doré on March 30, 2009 and began shipping doré in
April 2009. Palmarejo produced 5.9 million ounces of silver
and 102,440 gold ounces during its first full year of operation
in 2010. On January 21, 2009, the Company entered into a
gold production royalty transaction with Franco-Nevada
Corporation under which Franco-Nevada purchased a royalty
covering 50% of the life of mine gold to be produced by Coeur
from the Palmarejo mine. Royalty payments made beyond the
minimum obligation are payable when the market price per ounce
of gold is greater than $400.00. The Company also controls other
exploration-stage properties in northern Mexico.
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The Company owns 100% of Coeur Alaska, Inc., which owns the
Kensington mine, an underground gold mine located north of
Juneau, Alaska. The Kensington mine began processing ore on
June 24, 2010 and began commercial production on
July 3, 2010. Kensington produced 43,143 ounces of gold
during it partial year of operation in 2010.
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The Company owns 100% of Coeur Rochester, Inc., which has owned
and operated the Rochester mine, a silver and gold surface
mining operation located in northwestern Nevada, since 1986. The
active mining of ore at the Rochester mine was completed in
2007; however, silver and gold production is expected to
continue through 2014 as a result of continuing heap leaching
operations. In addition, the Company recently completed a
feasibility study regarding the recommencement of mining
operations at the Rochester mine. These mining operations are
expected to increase average annual production to
2.4 million ounces of silver and 35,000 ounces of gold. In
October 2010, the company received a key permitting decision
from the
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Bureau of Land Management (BLM) supporting the resumption of
active mining operations. This decision was appealed to the
Interior Board of Land Appeals by a conservation group, however,
the decision record stands during the administrative appeal.
Work on the construction of a new leach pad and related
infrastructure began in the first quarter of 2011 with costs
estimated to total $26.8 million in 2011 and
$38.0 million over the life of the project. Rochester
produced 2.0 million ounces of silver and 9,641 ounces of
gold in 2010.
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Coeur owns, directly or indirectly, 100% of Coeur Argentina
S.R.L., which owns and operates the underground silver
and gold Martha mine located in Santa Cruz, Argentina. Mining
operations commenced at the Martha mine in June 2002. The
Company carries on an active exploration program at its Martha
mine and on its other exploration properties in Santa Cruz,
which totals over 544 square miles. During 2010, Martha
produced 1.6 million ounces of silver and 1,838 ounces of
gold.
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In May 2005, the Company acquired, for $44.0 million, all
of the silver production and reserves (up to 20.0 million
payable ounces) contained at the Endeavor mine in New South
Wales, Australia, which is owned and operated by Cobar
Operations Pty. Limited, a wholly-owned subsidiary of CBH
Resources Ltd. (CBH). The Endeavor mine is an
underground zinc, lead and silver mine, which has been in
production since 1983. Endeavor produced 566,134 ounces of
silver in 2010.
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In August 2010, the Company sold its subsidiary
Compañía Minera Cerro Bayo Ltda. (Cerro
Bayo), which controls the Cerro Bayo mine in southern
Chile, to Mandalay Resources Corporation (Mandalay).
Under the terms of the agreement, Coeur received the following
from Mandalay in exchange for all of the outstanding shares of
Minera Cerro Bayo; (i) $6.0 million in cash;
(ii) 17,857,143 common shares of Mandalay;
(iii) 125,000 ounces of silver to be delivered in six equal
quarterly installments commencing in the third quarter of 2011
which had an estimated fair value of $2.3 million;
(iv) a 2.0% Net Smelter Royalty (NSR) on production from
Minera Cerro Bayo in excess of a cumulative 50,000 ounces of
gold and 5,000,000 ounces of silver which had an estimated fair
value of $5.4 million; and (v) existing value added
taxes of $3.5 million. As part of the transaction, Mandalay
also will pay $6 million of reclamation costs associated
with Minera Cerro Bayos nearby Furioso property. Any
reclamation costs above that amount will be shared equally by
Mandalay and Coeur. As a result of the sale, the Company
realized a loss on the sale of approximately $2.1 million,
net of income taxes. Results for the Cerro Bayo mine for the
period prior to the sale are reflected in discontinued
operations.
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Effective July 1, 2009, the Company sold its 100% interest
in silver contained at the Broken Hill mine in New South Wales,
Australia to Perilya Broken Hill Lt. for $55.0 million in
cash. Results for the Broken Hill mine for the period prior to
the sale are reflected in discontinued operations.
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Coeur also has interests in other properties that are subject to
silver or gold exploration activities upon which no minable ore
reserves have yet been delineated.
SILVER
AND GOLD PRICES
The Companys operating results are substantially dependent
upon the world market prices of silver and gold. The Company has
no control over silver and gold prices, which can fluctuate
widely. The volatility of such prices is illustrated by the
following table, which sets forth the high and low prices of
silver (as reported by Handy and Harman) and gold (as reported
by London Gold PM) per ounce during the periods indicated:
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Year Ended December 31,
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2010
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2009
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2008
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High
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Low
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High
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Low
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High
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Low
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Silver
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$
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30.64
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$
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14.78
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$
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19.28
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$
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10.45
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$
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20.70
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$
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8.81
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Gold
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$
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1,421.00
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$
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1,058.00
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$
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1,212.50
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$
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810.00
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$
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1,011.25
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$
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712.50
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3
MARKETING
All of the Companys mining operations produce silver and
gold in doré form except for the Martha Mine, which
produces a concentrate that contains both silver and gold, the
Kensington Mine, which produces gold concentrate, and the
Endeavor Mine which produces a concentrate that contains silver.
The Company markets its refined metal and doré to credit
worthy bullion trading houses, market makers and members of the
London Bullion Market Association, industrial companies and
sound financial institutions. The refined metals are sold to end
users for use in electronic circuitry, jewelry, silverware, and
the pharmaceutical and technology industries. The Company
currently has seven trading counterparties (International
Commodities, JP Morgan, Mitsui, Mitsubishi, Standard Bank,
Valcambi and Auramet) and the sales of metals to these companies
amounted to approximately 83%, 83% and 66% of total metal sales
in 2010, 2009 and 2008, respectively. Generally, the loss of a
single bullion trading counterparty would not adversely affect
the Company due to the liquidity of the markets and the
availability of alternative trading counterparties.
The Company refines and markets its precious metals doré
and concentrates using a geographically diverse group of third
party smelters and refiners, including clients located in
Mexico, Switzerland, Australia, China, and the United States
(Penoles, Valcambi, China National Gold and Johnson Matthey).
Sales of silver concentrates to third-party smelters amounted to
approximately 17%, 17% and 34% of total metal sales for the
years ended December 31, 2010, 2009, and 2008,
respectively. The loss of any one smelting and refining client
may have a material adverse effect if alternate smelters and
refiners are not available. The Company believes there is
sufficient global capacity available to address the loss of any
one smelter.
HEDGING
ACTIVITES
The Companys strategy is to provide shareholders with
leverage to changes in silver and gold prices by selling silver
and gold production at market prices. The Company has entered
into derivative contracts to protect the selling price for
certain anticipated gold production and to manage risks
associated with foreign currencies. For additional information
see Item 7A. Quantitative and Qualitative Disclosures About
Market Risk and Note Q to the consolidated financial
statements, Derivative Financial Instruments and Fair Value of
Financial Instruments.
GOVERNMENT
REGULATION
General
The Companys activities are subject to extensive federal,
state and local laws governing the protection of the
environment, prospecting, development, production, taxes, labor
standards, occupational health, mine safety, toxic substances
and other matters. The costs associated with compliance with
such regulatory requirements are substantial and possible future
legislation and regulations could cause additional expense,
capital expenditures, restrictions and delays in the development
and continued operation of the Companys properties, the
extent of which cannot be predicted. In the context of
environmental permitting, including the approval of reclamation
plans, the Company must comply with known standards and
regulations which may entail significant costs and delays.
Although Coeur has been recognized for its commitment to
environmental responsibility and believes it is in substantial
compliance with applicable laws and regulations, amendments to
current laws and regulations, more stringent application of
these laws and regulations through judicial review or
administrative action or the adoption of new laws could have a
materially adverse effect upon the Company and its results of
operations.
Estimated future reclamation costs are based primarily on legal
and regulatory requirements. As of December 31, 2010,
$27.3 million was accrued for reclamation costs relating to
currently developed and producing properties. The Company is
also involved in several matters concerning environmental
obligations associated with former mining activities. Based upon
the Companys best estimate of its liabilities for these
items, $1.8 million was accrued as of December 31,
2010. These amounts are included in reclamation and mine closure
liabilities on the consolidated balance sheet.
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Federal
Environmental Laws
Certain mining wastes from extraction and beneficiation of ores
are currently exempt from the extensive set of Environmental
Protection Agency (EPA) regulations governing
hazardous waste, although such wastes may be subject to
regulation under state law as a solid or hazardous waste. The
EPA has worked on a program to regulate these mining wastes
pursuant to its solid waste management authority under the
Resource Conservation and Recovery Act (RCRA).
Certain ore processing and other wastes are currently regulated
as hazardous wastes by the EPA under RCRA. If the Companys
mine wastes were treated as hazardous waste or such wastes
resulted in operations being designated as a
Superfund site under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA)
for cleanup, material expenditures could be required for the
construction of additional waste disposal facilities or for
other remediation expenditures. Under CERCLA, any present owner
or operator of a Superfund site or an owner or operator at the
time of its contamination generally may be held liable and may
be forced to undertake remedial cleanup action or to pay for the
governments cleanup efforts. Such owner or operator may
also be liable to governmental entities for the cost of damages
to natural resources, which may be substantial. Additional
regulations or requirements may also be imposed upon the
Companys tailings and waste disposal in Alaska under the
Clean Water Act (CWA) and state law counterparts,
and in Nevada under the Nevada Water Pollution Control Law which
implements the CWA. Air emissions are subject to controls under
Nevadas and Alaskas air pollution statutes
implementing the Clean Air Act. The Company has reviewed and
considered current federal legislation relating to climate
change and does not believe it to have a material effect on its
operations. Additional regulation or requirements under any of
these laws and regulations could have a materially adverse
effect upon the Company and its results of operations.
Proposed
Mining Legislation
A portion of the Companys U.S. mining properties are
on unpatented mining claims on federal lands. Legislation has
been introduced regularly in the U.S. Congress over the
last decade to change the Mining Law of 1872 as amended, under
which the Company holds these unpatented mining claims. It is
possible that the Mining Law may be amended or replaced by less
favorable legislation in the future. Previously proposed
legislation contained a production royalty obligation, new
environmental standards and conditions, additional reclamation
requirements and extensive new procedural steps which would
likely result in delays in permitting. The ultimate content of
future proposed legislation, if enacted, is uncertain. If a
royalty on unpatented mining claims were imposed, the
Companys U.S. operations could be adversely affected.
In addition, the Forest Service and the Bureau of Land
Management have considered revising regulations governing
operations under the Mining Law on federal lands they
administer, which, if implemented, may result in additional
procedures and environmental conditions and standards on those
lands. The majority of the Companys operations are either
outside of the United States or on private patented lands and
would be unaffected by potential legislation.
Any such reform of the Mining Law or Bureau of Land Management
and Forest Service regulations there under could increase the
costs of mining activities on unpatented mining claims, or could
materially impair the ability of the Company to develop or
continue operations which derive ore from federal lands, and as
a result could have an adverse effect on the Company and its
results of operations. Until such time, if any, as new reform
legislation or regulations are enacted, the ultimate effects and
costs of compliance on the Company cannot be estimated.
Foreign
Government Regulations
The mining properties of the Company that are located in
Argentina are subject to various government laws and regulations
pertaining to the protection of the air, surface water, ground
water and the environment in general, as well as the health of
the work force, labor standards and the socio-economic impacts
of mining facilities upon the communities. The Company believes
it is in substantial compliance with all applicable laws and
regulations to which it is subject in Argentina.
Bolivia, where the San Bartolomé mine is located, and
Mexico, where the Palmarejo mine is located, have both adopted
laws and guidelines for environmental permitting that are
similar to those in effect in the United States and other South
American countries. The permitting process requires a thorough
study to determine the baseline
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condition of the mining site and surrounding area, an
environmental impact analysis, and proposed mitigation measures
to minimize and offset the environmental impact of mining
operations. The Company has received all permits required to
operate the San Bartolomé and Palmarejo mines.
The Company does not directly hold any interest in mining
properties in Australia. However, under the Silver Sale
Agreements with CBH Resources Limited (CBH), the
Company has purchased CBHs silver reserves and resources
in the ground at the Endeavor mine. CBH is responsible for the
mining operation and compliance with government regulations and
the Company is not responsible for compliance. The Company is
however at risk for any production stoppages resulting from
non-compliance. CBHs mining property is subject to a range
of state and federal government laws and regulations pertaining
to the protection of the air, surface water, ground water,
noise, site rehabilitation and the environment in general, as
well as the occupational health and safety of the work force,
labor standards and the socio-economic impacts of mining
facilities among local communities. In addition, the various
federal and state native title laws and regulations recognize
and protect the rights and interests in Australia of Aboriginal
and Torres Strait Islander people in land and waters and may
restrict mining and exploration activity
and/or
result in additional costs. CBH is required to deal with a
number of governmental departments in connection with the
development and exploitation of its mining property.
The Company is not aware of any substantial non-compliance with
applicable laws and regulations to which CBH is subject in
Australia.
Maintenance
of Claims
Bolivia
The Bolivian state-owned mining organization, Corporación
Minera de Bolivia (COMIBOL), is the underlying owner
of all of the mining rights relating to the
San Bartolomé mine. COMIBOLs ownership derives
from the Supreme Decree 3196 issued in October 1952, when the
government nationalized most of the mines in Potosí.
COMIBOL has leased the mining rights for the surface sucu or
pallaco gravel deposits to several Potosí cooperatives. The
cooperatives in turn have subleased their mining rights to
Coeurs subsidiary, Manquiri through a series of
joint venture contracts. In addition to those
agreements with the cooperatives Manquiri holds additional
mining rights under lease agreements directly with COMIBOL. All
of Manquiris mining and surface rights collectively
constitute the San Bartolomé project. For additional
information regarding the maintenance of its claims to the
San Bartolomé mine, see Item 2.
Properties Silver and Gold Mining
Properties Bolivia-San Bartolomé below.
Mexico
In order to carry out mining activities in Mexico, the Company
is required to obtain a mining concession from the General
Bureau of Mining which belongs to the Ministry of Economy
(Secretaría de Economía) of the Federal
Government, or be assigned previously granted concession rights,
and both must be recorded with the Public Registry of Mining. In
addition, mining works may have to be authorized by other
authorities when performed in certain areas, including villages,
dams, channels, general communications ways, submarine shelves
of islands, islets and reefs, marine beds and subsoil and
federal maritime-terrestrial zones. Reports have to be filed
with the General Bureau of Mining in May of each year evidencing
previous calendar year mining works. Generally nominal biannual
mining duties are payable in January and July of each year, and
failure to pay these duties could lead to cancellation of the
concessions. Obligations such as not to withdraw permanent works
of fortification and to file technical reports are to be
fulfilled upon expiration or cancellation of the concession.
United
States
At mining properties in the United States, including the
Rochester and Kensington mines, operations are conducted upon
both patented and unpatented mining claims. Pursuant to
applicable federal law it is necessary to pay to the Secretary
of the Interior, on or before August 31 of each year, a claim
maintenance fee of $140 per claim. This claim maintenance fee is
in lieu of the assessment work requirement contained in the
Mining Law. In addition, in Nevada, holders of unpatented mining
claims are required to pay the county recorder of the county in
which the claim is situated an annual fee of $8.50 per claim.
For unpatented claims in Alaska, the Company is required to pay
a
6
variable, annual rental fee based on the age of the claim and
must perform annual labor or make an annual payment in lieu of
annual labor. No maintenance fees are payable for federal
patented claims. Patented claims are similar to land held by an
owner who is entitled to the entire interest in the property
with unconditional power of disposition and are subject to local
property taxes.
Argentina
Minerals are owned by the provincial governments, which impose a
maximum 3% mine-mouth royalty on mineral production. The first
step in acquiring mining rights is filing a cateo, which gives
exclusive prospecting rights for the requested area for a period
of time, generally up to three years. The maximum size of each
cateo is 10,000 hectares; a maximum of 20 cateos, or 200,000
hectares, can be held by a single entity (individual or company)
in any one province.
The holder of a cateo has exclusive right to establish a
Manifestation of Discovery (MD) on that cateo, but
MDs can also be set without a cateo on any land not covered by
someone elses cateo. MDs are filed as either a vein or
disseminated discovery. A square protection zone can be declared
around the discovery up to 840 hectares for a vein
MD or up to 7,000 hectares for a disseminated MD. The protection
zone grants the discoverer exclusive rights for an indefinite
period, during which the discoverer must provide an annual
report presenting a program of exploration work and investments
related to the protection zone. A MD can later be upgraded to a
Mina (mining claim), which gives the holder the right to begin
commercial extraction of minerals.
Australia
At the Endeavor mining property in Australia operated by CBH,
operations are conducted on designated mining leases issued by
the relevant state government mining department. Mining leases
are issued for a specific term and include a range of
environmental and other conditions including the payment of
production royalties, annual lease fees and the use of cash or a
bank guarantee as security for reclamation liabilities. The
amounts required to be paid to secure reclamation liabilities
are determined on a case by case basis. In addition, CBH holds a
range of exploration titles and permits, which are also issued
by the respective state government mining departments for
specified terms and require payment of annual fees and
completion of designated expenditure programs on the leases to
maintain title. In Australia, minerals in the ground are owned
by the state until severed from the ground through mining
operations.
Chile
In Chile, mineral rights are owned by the national government.
Mineral concessions are granted by the court with jurisdiction
over the land where the requested concession is located. For
exploitation concessions (somewhat similar to a
U.S. patented claim), to maintain the concession, an annual
tax is payable to the government before March 31 of each year in
the approximate amount of $8.00 per hectare. For exploration
concessions, to maintain the right, the annual tax is
approximately $1.60 per hectare. An exploration concession is
valid for a five-year period. It may be renewed unless a third
party claims the right to explore upon the property, in which
event the exploration concession must be converted to an
exploitation concession in order to maintain the rights to the
concession. At the end of 2010, the company held concessions on
three properties in Chile, totaling 18 square miles (4,664
hectares).
Condition
of Physical Assets and Insurance
The Company business is capital intensive, requiring ongoing
capital investment for the replacement, modernization or
expansion of equipment and facility. For more information see,
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations, below.
The Company maintains insurance policies against property loss
and business interruption and insures against risks that are
typical in the operation of its business, in amounts the Company
believes to be reasonable. Such insurance, however, contains
exclusions and limitations on coverage, particularly with
respect to environmental liability and political risk. There can
be no assurance that claims would be paid under such insurance
policies in connection with a particular event. See,
Item 1A. Risk Factors, below.
7
EMPLOYEES
The number of full-time employees at the Company as of
December 31, 2010 was:
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|
|
|
|
U.S. Corporate Staff and Office
|
|
|
43
|
|
Rochester Mine
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|
|
57
|
|
Kensington Mine
|
|
|
178
|
|
South American Administrative Offices
|
|
|
20
|
|
South American Exploration
|
|
|
9
|
|
Martha Mine/Argentina(1)
|
|
|
94
|
|
San Bartolomé Mine/Bolivia(1)
|
|
|
297
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|
Palmarejo Mine/Mexico
|
|
|
772
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|
Australia
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|
|
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|
Tanzania
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|
1
|
|
|
|
|
|
|
Total
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|
1,471
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company maintains two labor agreements in South America,
consisting of a labor agreement with Associacion Obrera Minera
Argentina at its Martha mine in Argentina and a labor agreement
with Sindicato de la Empresa Minera Manquiri at the
San Bartolomé mine in Bolivia. The Martha mine labor
agreement is effective from June 12, 2006 to June 30,
2011. The San Bartolomé mine labor agreement, which
became effective October 11, 2007, does not have a fixed
term. As of December 31, 2010, approximately 17% of the
Companys worldwide labor force was covered by collective
bargaining agreements. |
EXPLORATION
STAGE MINING PROPERTIES
The Company, either directly or through wholly-owned
subsidiaries, owns, leases and has interests in certain
exploration-stage mining properties located in the United
States, Chile, Argentina, Bolivia, Mexico and Tanzania. During
2011, the Company expects to invest approximately
$20.7 million in exploration and reserve development
compared to $18.0 million spent on similar activities in
2010.
BUSINESS
STRATEGY
The Companys business strategy is to discover, acquire,
develop and operate low-cost silver and gold operations that
will produce long-term cash flow, provide opportunities for
growth through continued exploration, and generate superior and
sustainable returns for shareholders.
SOURCES
OF REVENUE
The San Bartolomé mine, Palmarejo mine, Kensington
mine, Rochester mine, and Martha mine, each operated by the
Company and the Endeavor mine, operated by a non-affiliated
party, constituted the Companys principal sources of
mining revenues in 2010. See the Financial Statements,
Note T Segment Reporting, under the heading
Geographical Information, for revenues attributed to
all foreign countries. The following table sets forth
information regarding the percentage contribution to the
Companys total revenues (i.e., revenues from the sale
8
of concentrates and doré) by the sources of those revenues
during the past five years, excluding discontinued operations:
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|
Coeur Percentage
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|
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|
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|
Ownership at
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Percentage of Total Revenues(2)(3)
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|
|
|
December 31,
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|
For The Years Ended December 31,
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Mine/Company
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Palmarejo Mine
|
|
|
100
|
%
|
|
|
45
|
%
|
|
|
30
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
San Bartolomé Mine
|
|
|
100
|
%
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|
|
28
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|
|
|
38
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
Kensington Mine
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|
|
100
|
%
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|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester Mine
|
|
|
100
|
%
|
|
|
11
|
|
|
|
15
|
|
|
|
52
|
|
|
|
69
|
|
|
|
72
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|
Martha Mine
|
|
|
100
|
%
|
|
|
10
|
|
|
|
15
|
|
|
|
24
|
|
|
|
26
|
|
|
|
24
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|
Endeavor Mine(1)
|
|
|
100
|
%
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|
|
2
|
|
|
|
2
|
|
|
|
10
|
|
|
|
5
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
(1) |
|
Ownership interest reflects the Companys ownership
interest in the propertys silver production. Other
constituent metals are owned by a non-affiliated entity. |
|
(2) |
|
Effective July 1, 2009, the Company sold to Perilya Broken
Hill Ltd. its 100% interest in silver contained at the Broken
Hill mine for $55.0 million in cash. |
|
(3) |
|
Effective August 9, 2010, the Company sold its interest in
the Cerro Bayo mine to Mandalay Resources Corporation. |
DEFINITIONS
The following sets forth definitions of certain important mining
terms used in this report.
Ag is the abbreviation for silver.
Au is the abbreviation for gold.
Backfill is primarily waste sand or rock used
to support the roof or walls after removal of ore from a stope.
By-Product is a secondary metal or mineral
product recovered in the milling process, such as gold.
Cash Costs are costs directly related to the
physical activities of producing silver and gold, and include
mining, processing, transportation and other plant costs,
third-party refining and smelting costs, marketing expense,
on-site
general and administrative costs, royalties and in-mine drilling
expenditures that are related to production and other direct
costs. Sales of by-product metals, including gold, are deducted
from the above in computing cash costs per ounce. Cash costs
exclude depreciation, depletion and amortization, corporate
general and administrative expense, exploration, interest, and
pre-feasibility costs and accruals for mine reclamation. Cash
costs are calculated and presented using the Gold
Institute Production Cost Standard applied consistently
for all periods presented.
Cash Costs per Ounce are calculated by
dividing the cash costs computed for each of the Companys
mining properties for a specific period by the amount of gold
ounces or silver ounces produced by that property during that
same period. Management uses cash costs per ounce produced as a
key indicator of the profitability of each of its mining
properties. Gold and silver are sold and priced in the world
financial markets on a U.S. dollar per ounce basis. By
calculating the cash costs from each of the Companys mines
on the same unit basis, management can determine the gross
margin that each ounce of gold and silver produced is
generating. While this represents a key indicator of the
performance of the Companys mining properties you are
cautioned not to place undue reliance on this single
measurement. To fully evaluate a mines performance,
management also monitors U.S. Generally Accepted Accounting
Principles (U.S. GAAP) based profit/(loss),
depreciation and amortization expenses and capital expenditures
for each mine as presented in Note T Segment
Reporting. Total cash costs per ounce is a non-GAAP measurement
and investors are cautioned not to place undue reliance on it
and are urged to read all GAAP accounting disclosures presented
in the consolidated financial statements and accompanying
footnotes.
9
Concentrate is a very fine powder-like
product containing the valuable metal from which most of the
waste material in the ore has been eliminated.
Contained Ounces represents ounces in the
ground before reduction of ounces not able to be recovered by
applicable metallurgical process.
Cutoff Grade is the minimum metal at which an
ore body can be economically mined; used in the calculation of
reserves in a given deposit.
Cyanidation is a method of extracting gold or
silver by dissolving it in a weak solution of sodium or
potassium cyanide.
Development is work carried out for the
purpose of accessing a mineral deposit. In an underground mine
that includes shaft sinking, crosscutting, drifting and raising.
In an open pit mine, development includes the removal of over
burden.
Dilution is an estimate of the amount of
waste or low-grade mineralized rock which will be mined with the
ore as part of normal mining practices in extracting an ore body.
Doré is unrefined gold and silver
bullion bars which contain gold, silver and minor amounts of
impurities which will be further refined to almost pure metal.
Drilling
Core: with a hollow bit with a diamond cutting
rim to produce a cylindrical core that is used for geological
study and assays used in mineral exploration.
In-fill: is any method of drilling intervals
between existing holes, used to provide greater geological
detail and to help establish reserve estimates.
Exploration is prospecting, sampling,
mapping, diamond drilling and other work involved in searching
for ore.
Gold is a metallic element with minimum
fineness of 999 parts per 1000 parts pure gold.
Grade is the amount of metal in each ton of
ore, expressed as troy ounces per ton or grams per tonne for
precious metals.
Heap Leach Pad is a large impermeable
foundation or pad used as a base for ore during heap leaching.
Heap Leaching Process is a process of
extracting gold and silver by placing broken ore on an
impermeable pad and applying a diluted cyanide solution that
dissolves a portion of the contained gold and silver, which are
then recovered in metallurgical processes.
Hectare is a metric unit of area equal to
10,000 square meters (2.471 acres).
Mill is a processing facility where ore is
finely ground and thereafter undergoes physical or chemical
treatments to extract the valuable metals.
Mill-Lead Grades are metal content of mined
ore going into a mill for processing.
Mineralized Material is gold and silver
bearing material that has been physically delineated by one or
more of a number of methods, including drilling, underground
work, surface trenching and other types of sampling. This
material has been found to contain a sufficient amount of
mineralization of an average grade of metal or metals to have
economic potential that warrants further exploration evaluation.
While this material is not currently or may never be classified
as ore reserves, it is reported as mineralized material only if
the potential exists for reclassification into the reserves
category. This material cannot be classified in the reserves
category until final technical, economic and legal factors have
been determined. Under the United States Securities and Exchange
Commissions standards, a mineral deposit does not qualify
as a reserve unless it can be economically and legally extracted
at the time of reserve determination and it constitutes a proven
or probable reserve (as defined below). In accordance with
Securities and Exchange Commission guidelines, mineralized
material reported in the Companys
Form 10-K
no longer includes inferred mineral resources.
10
Mining Rate tons of ore mined per day or even
specified time period.
Non-cash Costs are costs that are typically
accounted for ratably over the life of an operation and include
depreciation, depletion and amortization of capital assets,
accruals for the costs of final reclamation and long-term
monitoring and care that are usually incurred at the end of mine
life, and the amortization of the cost of property acquisitions.
Open Pit is a mine where the minerals are
mined entirely from the surface.
Operating Cash Costs Per Ounce are cash costs
per ounce minus production taxes and royalties.
Ore is rock, generally containing metallic or
non-metallic minerals, that can be mined and processed at a
profit.
Ore Body is a sufficiently large amount of
ore that can be mined economically.
Ore Reserve is the part of a mineral deposit
that could be economically and legally extracted or produced at
the time of the reserve determination.
Probable Reserve is a part of a mineralized
deposit which can be extracted or produced economically and
legally at the time of the reserve determination. The quantity
and grade
and/or
quality of a probable reserve is computed from information
similar to that used for a proven reserve, but the sites for
inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to
assume continuity between points of observation. Mining
dilution, where appropriate, has been factored into the
estimation of probable reserves.
Proven Reserve is a portion of a mineral
deposit which can be extracted or produced economically and
legally at the time of the reserve determination. The quantity
of a proven reserve is computed from dimensions revealed in
outcrops, trenches, workings or drill holes; grade
and/or
quality are computed from the results of detailed sampling and
the sites for inspections, sampling and measurement are spaced
so closely and the geologic character is so well defined that
size, shape, depth and mineral content of a proven reserve is
well-established. Mining dilution, where appropriate, has been
factored into the estimation of proven reserves.
Reclamation is the process by which lands
disturbed as a result of mining activity are modified to support
beneficial land use. Reclamation activity may include the
removal of buildings, equipment, machinery and other physical
remnants of mining, closure of tailings, leach pads and other
features, and contouring, covering and re-vegetation of waste
rock and other disturbed areas.
Recovery Rate is a term used in process
metallurgy to indicate the proportion of valuable material
physically recovered in the processing of ore. It is generally
stated as a percentage of material recovered compared to the
material originally present.
Refining is the final stage of metal
production in which impurities are removed from the molten metal.
Run-of-mine
Ore is mined ore which has not been subjected to any
pretreatment, such as washing, sorting or crushing prior to
processing.
Silver is a metallic element with minimum
fineness of 995 parts per 1000 parts pure silver.
Stripping Ratio is the ratio of the number of
tons of waste material to the number of tons of ore extracted at
an open-pit mine.
Tailings is the material that remains after
all economically and technically recovered precious metals have
been removed from the ore during processing.
Ton means a short ton which is equivalent to
2,000 pounds, unless otherwise specified.
Total costs are the sum of cash costs and
non-cash costs.
11
IMPORTANT
FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
This report contains numerous forward-looking statements
relating to the Companys gold and silver mining business,
including estimated production data, expected operating
schedules, expected capital costs and other operating data and
permit and other regulatory approvals. Such forward-looking
statements are identified by the use of words such as
believes, intends, expects,
hopes, may, should,
plan, projected,
contemplates, anticipates or similar
words. Actual production, operating schedules, results of
operations, ore reserve and resources could differ materially
from those projected in the forward-looking statements. The
factors that could cause actual results to differ materially
from those projected in the forward-looking statements include
(i) the risk factors set forth below under Item 1A,
(ii) the risks and hazards inherent in the mining business
(including environmental hazards, industrial accidents, weather
or geologically related conditions), (iii) changes in the
market prices of gold and silver, (iv) the uncertainties
inherent in the Companys production, exploratory and
developmental activities, including risks relating to permitting
and regulatory delays, (v) any future labor disputes or
work stoppages, (vi) the uncertainties inherent in the
estimation of gold and silver ore reserves, (vii) changes
that could result from the Companys future acquisition of
new mining properties or businesses, (viii) reliance on
third parties to operate certain mines where the Company owns
silver production and reserves, (ix) the loss of 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, (xii) the worldwide
economic downturn and difficult conditions in the global capital
and credit markets, and (xiii) the Companys 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.
AVAILABLE
INFORMATION
The Company maintains an internet website at
http://www.coeur.com.
Coeur makes available, free of charge, on or through its
website, its Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
Proxy Statements and Forms 3, 4 and 5, as soon as
reasonably practicable after electronically filing such reports
with the Securities and Exchange Commission. Copies of
Coeurs Corporate Governance Guidelines, charters of the
key Committees of the Board of Directors (Audit, Compensation,
Nominating and Corporate Governance) and its Code of Business
Conduct and Ethics for Directors, Officers and Employees,
applicable to the Chief Executive Officer, Chief Financial
Officer and Chief Accounting Officer, are available at the
Companys website
http://www.coeur.com.
Information contained on the Companys website is not a
part of this report.
The following sets forth information relating to important risks
and uncertainties that could materially adversely affect the
Companys business, financial condition or operating
results. References to Coeur, in these risk factors
refer to the Company. Additional risks and uncertainties that
the Company does not presently know or that the Company
currently deem immaterial may also impair its business
operations.
The
Companys results of operations and cash flows are highly
dependent upon the market prices of silver and gold, which are
volatile and beyond its control.
Silver and gold are commodities, and their prices are volatile.
During 2010, the price of silver ranged from a low of $14.78 per
ounce to a high of $30.64 per ounce, and the price of gold
ranged from a low of $1,058 per ounce to a high of $1,421 per
ounce. The market prices of silver and gold on February 25,
2011 were $32.95 per ounce and $1,402.50 per ounce,
respectively.
Silver and gold prices are affected by many factors beyond the
Companys control, including prevailing interest rates and
returns on other asset classes, expectations regarding
inflation, speculation, currency values, governmental decisions
regarding the disposal of precious metals stockpiles, global and
regional demand and production, political and economic
conditions and other factors. In addition, Exchange Traded Funds
(ETFs), which have substantially facilitated the
ability of large and small investors to buy and sell precious
metals, recently,
12
have become significant holders of gold and silver. Net inflows
of investments into and out of ETFs are amplifying the
historical volatility of gold and silver prices.
Because Coeur derives all of its revenues from sales of silver
and gold, the Companys results of operations and cash
flows will fluctuate as the prices of these metals increase or
decrease. A sustained period of declining gold and silver prices
would materially and adversely affect the Companys results
of operations and cash flows. Factors that are generally
understood to contribute to a decline in the prices of silver
and gold include a strengthening of the U.S. dollar, net
outflows from gold and silver ETFs, bullion sales by private and
government holders and a general global economic slowdown.
A
substantial decline in gold and silver prices could cause one or
more of the Companys mining properties to become
unprofitable, which could require it to record write-downs of
long-lived assets that would adversely impact the Companys
results of operations and financial condition.
Established accounting standards for impairment of the value of
long-lived assets such as mining properties requires Coeur to
review the recoverability of the cost of its assets by
estimating the future undiscounted cash flows expected to result
from the use and eventual disposition of the asset. Impairment,
measured by comparing an assets carrying value to its fair
value, must be recognized when the carrying value of the asset
exceeds these cash flows. A significant and sustained decline in
silver or gold prices, or the Companys failure to control
production costs or realize the minable ore reserves at its
mining properties, could lead the Company to terminate or
suspend mining operations at one or more of its properties and
require it to write down the carrying value of the
Companys assets. Any such actions would negatively affect
Coeurs results of operations and financial condition.
The Company also may record other types of additional mining
property charges in the future if it sells a property for a
price less than its carrying value or if it has to increase
reclamation liabilities in connection with the closure and
reclamation of a property. Any such additional write-downs of
mining properties could adversely affect the Companys
results of operations and financial condition.
Coeur
is an international company and is exposed to political and
social risks in the countries in which it has significant
operations or interests.
The Company has significant mining operations outside the United
States and is subject to significant risks inherent in resource
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
Companys control. These risks include the possible
unilateral cancellation or forced re-negotiation of contracts;
unfavorable changes in foreign laws and regulations; royalty and
tax increases, claims by governmental entities or indigenous
communities, expropriation or nationalization of property and
other risks arising out of foreign sovereignty over areas in
which Coeurs 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
Companys rights under local law may not be as secure in
countries where judicial systems are susceptible to manipulation
and intimidation by government agencies, non-governmental
organizations and 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, which could materially and adversely affect
Coeurs results of operations, cash flows and financial
condition.
The
Companys operations outside the United States also expose
it to economic and operational risks.
Coeurs operations outside the United States also expose it
to economic and operational risks. Local economic conditions can
cause the Company to experience shortages of skilled workers and
supplies, increase costs and adversely affect the security of
operations. In addition, higher incidences of criminal activity
and violence in the area of some of the Companys foreign
operations could adversely affect Coeurs ability to
operate in an optimal fashion, and may impose greater risks of
theft and greater risks as to property security. These
conditions could lead to lower productivity and higher costs,
which would adversely affect results of operations and cash
flows.
13
Coeur sells gold and silver doré in U.S. dollars, but
conducts the Companys operations outside the United States
in local currency. Currency exchange movements could adversely
affect results of operations.
Silver
and gold mining involves significant production and operational
risks.
Silver and gold mining involves significant production and
operational risks, including those related to uncertain mineral
exploration success, unexpected geological or mining conditions,
the difficulty of development of new deposits, unfavorable
climate conditions, equipment or service failures, current
unavailability of or delays in installing and commissioning
plants and equipment, import or customs delays and other general
operating risks. Commencement of mining can reveal
mineralization or geologic formations, including higher than
expected content of other minerals that can be difficult to
separate from silver, which can result in unexpectedly low
recovery rates.
Problems may also arise due to the quality or failure of locally
obtained equipment or interruptions to services (such as power,
water, fuel or transport or processing capacity) or technical
support, which could result in the failure to achieve expected
target dates for exploration, or could cause production
activities to require greater capital expenditure to achieve
expected recoveries.
Many of these production and operational risks are beyond the
Companys control. Delays in commencing successful mining
activities at new or expanded mines, disruptions in production
and low recovery rates could have adverse effects on results of
operations, cash flows and financial condition.
The
estimation of ore reserves is imprecise and depends upon
subjective factors. Estimated ore reserves may not be realized
in actual production. The Companys operating results may
be negatively affected by inaccurate estimates.
The ore reserve figures presented in the Companys public
filings are estimates made by Coeurs technical personnel
and by independent mining consultants contracted by Coeur.
Reserve estimates are a function of geological and engineering
analyses that require the Company to make assumptions about
production costs, recoveries and silver and gold market prices.
Reserve estimation is an imprecise and subjective process. The
accuracy of such estimates is a function of the quality of
available data and of engineering and geological interpretation,
judgment and experience. Assumptions about silver and gold
market prices are subject to great uncertainty as those prices
have fluctuated widely in the past. Declines in the market
prices of silver or gold may render reserves containing
relatively lower grades of ore uneconomic to exploit, and the
Company may be required to reduce reserve estimates, discontinue
development or mining at one or more of its properties or write
down assets as impaired. Should Coeur encounter mineralization
or geologic formations at any of its mines or projects different
from those predicted, the Company may adjust its reserve
estimates and alter its mining plans. Either of these
alternatives may adversely affect actual production and results
of operations, cash flows and financial condition.
Forward
sales and royalty arrangements can result in limiting the
Companys ability to take advantage of increased metal
prices while increasing its exposure to lower metal
prices.
From time to time the Company has entered into financing
arrangements under which it has agreed to make royalty or
similar payments to lenders in amounts that are based on
expected production and price levels for gold or silver. Coeur
enters into such arrangements when it concludes that they
provide the Company with necessary capital to develop a specific
mining property on favorable terms. The impact of royalty or
similar payment obligations, however, can limit the
Companys ability to realize the full effect of rising gold
or silver prices and require Coeur to make potentially
significant cash payments if the mine fails to achieve specified
minimum levels.
Coeurs
future operating performance may not generate cash flows
sufficient to meet its debt payment obligations.
As of December 31, 2010, the Company had a total of
approximately $435.7 million of outstanding indebtedness,
which includes $242.3 million for gold production royalty
payments due to Franco-Nevada Corporation for royalty covering
50% of the life of mine gold to be produced from the Palmarejo
silver and gold mine in Mexico. Coeurs ability to make
scheduled debt payments on its outstanding indebtedness will
depend on its future
14
results of operations and cash flows. Coeurs 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 its obligations and commitments. If the
Company cannot generate sufficient cash flow from operations to
service its debt, the Company may need to further refinance its
debt, dispose of assets or issue equity to obtain the necessary
funds. The Company cannot predict whether it will be able to
refinance its debt, issue equity or dispose of assets to raise
funds on a timely basis or on satisfactory terms.
The
Companys future growth will depend upon its ability to
develop new mines, either through exploration at its existing
properties or by acquisition from other mining
companies.
Because mines have limited lives based on proven and probable
ore reserves, an important element of the Companys
business strategy is the opportunistic acquisition of silver and
gold mines, properties and businesses or interests therein.
During 2010, Coeur successfully commenced operations at its
Kensington gold mine and substantially completed development of
its other major mining properties at Palmarejo and
San Bartolomé. The Companys ability to achieve
significant additional growth in revenues and cash flows will
depend upon its success in further developing Coeurs
existing properties and developing or acquiring new mining
properties. Both strategies are inherently risky, and the
Company cannot assure you that it would be able to successfully
compete in either the development of its existing or new mining
properties or acquisitions of additional mining properties.
While it is Coeurs practice to engage independent mining
consultants to assist in evaluating and making acquisitions, any
mining properties or interests that the Company may acquire may
not be developed profitably. If profitable when acquired, that
profitability might not be sustained. In connection with any
future acquisitions, the Company may incur indebtedness or issue
equity securities, resulting in increased interest expense, or
dilution of the percentage ownership of existing shareholders.
Coeur cannot predict the impact of future acquisitions on the
price of its business or its common stock or that it would be
able to obtain any necessary financing on acceptable terms.
Unprofitable acquisitions, or additional indebtedness or
issuances of securities in connection with such acquisitions,
may adversely affect the price of the Companys common
stock and negatively affect its results of operations.
Coeur
might be unable to raise additional financing necessary to meet
capital needs, conduct its business, make payments when due or
refinance its debt.
Coeur might need to raise additional funds in order to meet
capital needs, implement its business plan, refinance its debt
or acquire complementary businesses or products. Any required
additional financing might not be available on commercially
reasonable terms, or at all. If the Company raises additional
funds by issuing equity securities, holders of the
Companys common stock could experience significant
dilution of their ownership interest, and these securities could
have rights senior to those of the holders of the Companys
common stock.
Mineral
exploration and development inherently involves significant and
irreducible financial risks. Coeur may suffer from the failure
to find and develop profitable mines.
The exploration for and development of mineral deposits involves
significant financial risks that even a combination of careful
evaluation, experience and knowledge cannot eliminate.
Unprofitable efforts may result from the failure to discover
mineral deposits. Even if mineral deposits are found, those
deposits may be insufficient in quantity and quality to return a
profit from production, or it may take a number of years until
production is possible, during which time the economic viability
of the project may change. Few properties which are explored are
ultimately developed into producing mines.
Substantial expenditures are required to establish ore reserves,
to extract metals from ores and, in the case of new properties,
to construct mining and processing facilities. The economic
feasibility of any development project is based upon, among
other things, volatile metals prices, estimates of the size and
grade of ore reserves, proximity to infrastructures and other
resources such as water and power, metallurgical recoveries,
production rates and capital and operating costs. Development
projects also are subject to the completion of favorable
feasibility studies, issuance and maintenance of necessary
permits and receipt of adequate financing.
15
The commercial viability of a mineral deposit, once developed,
depends on a number of factors, including: the particular
attributes of the deposit, such as size, grade and proximity to
infrastructure; government regulations including taxes,
royalties and land tenure; land use; importing and exporting of
minerals; environmental protection; and mineral prices. Factors
that affect adequacy of infrastructure include: reliability of
roads, bridges, power sources and water supply; unusual or
infrequent weather phenomena; sabotage; and government or other
interference in the maintenance or provision of such
infrastructure. All of these factors are highly cyclical. The
exact effect of these factors cannot be accurately predicted,
but the combination may result in not receiving an adequate
return on invested capital.
Significant
investment risks and operational costs are associated with the
Companys exploration, development and mining activities.
These risks and costs may result in lower economic returns and
may adversely affect Coeurs business.
Coeurs ability to sustain or increase its present
production levels depends in part on successful exploration and
development of new ore bodies and expansion of existing mining
operations. Mineral exploration, particularly for silver and
gold, involves many risks and is frequently unproductive. The
economic feasibility of any development project is based upon,
among other things, estimates of the size and grade of ore
reserves, proximity to infrastructures and other resources (such
as water and power), metallurgical recoveries, production rates
and capital and operating costs of such development projects,
and metals prices. Development projects are also subject to the
completion of favorable feasibility studies, issuance and
maintenance of necessary permits and receipt of adequate
financing.
Development projects may have no operating history upon which to
base estimates of future operating costs and capital
requirements. Development project items such as estimates of
reserves, metal recoveries and cash operating costs are to a
large extent based upon the interpretation of geologic data,
obtained from a limited number of drill holes and other sampling
techniques, and feasibility studies. Estimates of cash operating
costs are then derived based upon anticipated tonnage and grades
of ore to be mined and processed, the configuration of the ore
body, expected recovery rates of metals from the ore, comparable
facility and equipment costs, anticipated climate conditions and
other factors.
As a result, actual cash operating costs and economic returns of
any and all development projects may materially differ from the
costs and returns estimated, and accordingly, the Companys
financial condition and results of operations may be negatively
affected.
A
significant delay or disruption in the Companys sales of
concentrates as a result of the unexpected discontinuation of
purchases by its smelter customers could have a material adverse
effect on the Companys operations.
The Company currently markets its silver and gold doré and
concentrates to third-party smelters and refineries in Mexico,
Switzerland, China, the United States and Australia. The loss of
any one smelter or refinery customer could have a material
adverse effect on the Company if alternative smelters and
refineries were unavailable. The Company cannot assure you that
alternative smelters or refineries would be available if the
need for them were to arise, or that the Company would not
experience delays or disruptions in sales that would materially
and adversely affect results of operations.
Coeurs
silver and gold production may decline in the future, reducing
its results of operations and cash flows.
The Companys silver and gold production, unless the
Company is able to develop or acquire new properties, will
decline over time due to the exhaustion of reserves and the
possible closure of mines in response to declining metals prices
or other factors. Identifying promising mining properties is
difficult and speculative. Coeur encounters strong competition
from other mining companies in connection with the acquisition
of properties producing or capable of producing silver and gold.
Many of these companies have greater financial resources than
the Company does. Consequently, Coeur may be unable to replace
and expand current ore reserves through the acquisition of new
mining properties or interests therein on terms that are
considered acceptable. As a result,
16
Coeurs revenues from the sale of silver and gold may
decline, resulting in lower income and reduced growth. The
Company cannot assure you that it would be able to replace the
production that would be lost due to the exhaustion of reserves
and the possible closure of mines.
There
are significant hazards associated with the Companys
mining activities, some of which may not be fully covered by
insurance.
The mining business is subject to risks and hazards, including
environmental hazards, industrial accidents, the encountering of
unusual or unexpected geological formations, cave-ins, flooding,
earthquakes and periodic interruptions due to inclement or
hazardous weather conditions. These occurrences could result in
damage to, or destruction of, mineral properties or production
facilities, personal injury or death, environmental damage,
reduced production and delays in mining, asset write-downs,
monetary losses and possible legal liability. Insurance fully
covering many environmental risks, including potential liability
for pollution or other hazards as a result of disposal of waste
products occurring from exploration and production, is not
generally available to the Company or to other companies in the
industry. Any liabilities that the Company incurs for these
risks and hazards could be significant and could adversely
affect results of operation, cash flows and financial condition.
The
Company is subject to significant governmental regulations, and
related costs and delays may negatively affect its
business.
Mining activities are subject to extensive federal, state, local
and foreign laws and regulations governing environmental
protection, natural resources, prospecting, development,
production, post-closure reclamation, taxes, labor standards and
occupational health and safety laws and regulations, including
mine safety, toxic substances and other matters. The costs
associated with compliance with such laws and regulations are
substantial. Possible future laws and regulations, or more
restrictive interpretations of current laws and regulations by
governmental authorities, could cause additional expense,
capital expenditures, restrictions on or suspensions of
operations and delays in the development of new properties.
Failure to comply with applicable laws, regulations and
permitting requirements may result in enforcement actions,
including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, which may require
corrective measures including capital expenditures, installation
of additional equipment or remedial actions. Parties engaged in
mining operations or in the exploration or development of
mineral properties may be required to compensate those suffering
loss or damage by reason of the mining activities and may be
subject to civil or criminal fines or penalties imposed for
violations of applicable laws or regulations.
Compliance
with environmental regulations and litigation based on
environmental regulations could require significant
expenditures.
Environmental regulations mandate, among other things, the
maintenance of air and water quality standards and land
reclamation, and set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous
waste. Environmental legislation is evolving in a manner that
will require stricter standards and enforcement, increased fines
and penalties for non-compliance, more stringent environmental
assessments of proposed projects, and a heightened degree of
responsibility for mining companies and their officers,
directors and employees. The Company may incur environmental
costs that could have a material adverse effect on its financial
condition and results of operations. Any failure to remedy an
environmental problem could require the Company 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 Coeur
has made for such remediation. The potential exposure may be
significant and could have a material adverse effect on the
Companys 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
17
environment after the closure of mines, are inherent in the
Companys operations. Coeur cannot assure you that any such
law, regulation, enforcement or private claim would not have a
negative effect on results of operations, cash flows or
financial condition.
Some of the Companys mining wastes currently are exempt to
a limited extent from the extensive set of federal Environmental
Protection Agency (EPA) regulations governing
hazardous waste under the Resource Conservation and Recovery Act
(RCRA). If the EPA designates these wastes as
hazardous under RCRA, Coeur would be required to expend
additional amounts on the handling of such wastes and to make
significant expenditures to construct hazardous waste disposal
facilities. In addition, if any of these wastes causes
contamination in or damage to the environment at a mining
facility, that facility could be designated as a
Superfund site under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA).
Under CERCLA, any owner or operator of a Superfund site since
the time of its contamination may be held liable and may be
forced to undertake extensive remedial cleanup action or to pay
for the governments cleanup efforts. The owner or operator
also may be liable to governmental entities for the cost of
damages to natural resources, which could be substantial.
Additional regulations or requirements also are imposed on the
Companys tailings and waste disposal areas in Alaska under
the federal Clean Water Act (CWA) and in Nevada
under the Nevada Water Pollution Control Law which implements
the CWA.
Airborne emissions are subject to controls under air pollution
statutes implementing the Clean Air Act in Nevada and Alaska. 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 materially adverse effect on the Companys results of
operations and cash flows.
The
Companys ability to obtain necessary government permits to
expand operations or begin new operations can be materially
affected by third party activists.
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 of the permitting process
and could cause the Company to not proceed with the development
or expansion of a mine.
Coeurs
operations in Bolivia are subject to political
risks.
The Bolivian government adopted a new constitution in early 2009
that strengthened state control over key economic sectors such
as mining. The Company cannot assure you that its operations at
the San Bartolomé mine in Bolivia will not be affected
in the current political environment in Bolivia. 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 backed by Supreme
Decree with COMIBOL as well as contracts with local mining
cooperatives that hold their rights through COMIBOL. 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. In
March 2010, the San Bartolomé mine began mining
operations in high grade material located in the Huacajchi
deposit above the 4,400 meter level under an agreement with the
Cooperative Reserva Fiscal. Although restriction on mining above
the 4,400 meter level continue, the Huacajchi deposit was
confirmed to be excluded from the October 2009 resolution. The
mine plan adjustment may reduce production until the Company is
able to resume mining above 4,400 meters generally. It is
uncertain at this time how long the temporary suspension will
remain in place. If the restriction is not lifted, the Company
may need to write down the carrying value of the asset. It is
also unknown if any new mining or investment policies or shifts
in political attitude may affect mining in Bolivia.
18
The
Companys business depends on good relations with its
employees.
The Company could experience labor disputes, work stoppages or
other disruptions in production that could adversely affect the
Company. As of December 31, 2010, unions represented
approximately 17% of Coeurs worldwide workforce. The
collective bargaining agreement covering the Martha mine expires
on June 30, 2011. Additionally, the Company has a labor
agreement at its San Bartolomé mine which became
effective October 11, 2007, and does not have a fixed term.
Third
parties may dispute the Companys unpatented mining claims,
which could result in the discovery of defective titles and
losses affecting Coeurs business.
The validity of unpatented mining claims, which constitute a
significant portion of Coeurs property holdings in the
United States, is often uncertain and may be contested. Although
the Company has attempted to acquire satisfactory title to
undeveloped properties, in accordance with mining industry
practice the Company does not generally obtain title opinions
until a decision is made to develop a property. As a result,
some titles, particularly titles to undeveloped properties may
be defective. Defective title to any of Coeurs mining
claims could result in litigation, insurance claims and
potential losses affecting its business as a whole.
There may be challenges to the title of any of the claims
comprising the Palmarejo mine that, if successful, could impair
development and operations. A defect could result in the Company
losing all or a portion of its right, title, estate and interest
in and to the properties to which the title defect relates.
The
Company has the ability to issue additional equity securities,
which would lead to dilution of its issued and outstanding
common stock and may materially and adversely affect the price
of its common stock.
The issuance of additional equity securities or securities
convertible into equity securities would result in dilution of
the Companys existing shareholders equity ownership.
The Company is authorized to issue, without shareholder
approval, 10,000,000 shares of preferred stock in one or
more series, to establish the number of shares to be included in
each series and to fix the designation, powers, preferences and
relative participating, optional, conversion and other special
rights of the shares of each series as well as the
qualification, limitations or restrictions on each series. Any
series of preferred stock could contain dividend rights,
conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences or other rights
superior to the rights of holders of the Companys common
stock. Coeurs Board of Directors has no present intention
of issuing any preferred stock, but reserves the right to do so
in the future and has reserved for issuance a series of
preferred stock in connection with its shareholder rights plan.
If the Company issued additional equity securities, the price of
its common stock may be materially and adversely affected.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None
SILVER
AND GOLD MINING PROPERTIES
The Companys operating segments include
San Bartolomé (Bolivia), Palmarejo (Mexico),
Kensington (Alaska, USA), Rochester (Nevada, USA), Martha
(Argentina), and Endeavor (New South Wales, Australia). See
Item 1A. Risk Factors, related to Coeurs
operations in Bolivia and Note T Segment
Reporting, for information relating to its business segments and
its domestic and export sales.
Mexico
Palmarejo
The Palmarejo surface and underground silver and gold mine, and
associated milling operation, owned and operated by Coeur
Mexican SA de CV (Coeur Mexicana), a wholly-owned subsidiary of
the Company since December 21, 2007, is located in the
state of Chihuahua, Mexico. Access to the property is provided
by air, rail, and all-weather paved and gravel roads from the
state capitol of Chihuahua.
19
In its first full year of operations in 2010, Palmarejo produced
5.9 million ounces of silver and 102,440 ounces of gold.
Cash operating costs per ounce and total cash costs per ounce of
silver for 2010 were both $4.10. Metal sales in 2010 from
Palmarejo totaled $230.0 million, or 45% of the
Companys total metal sales, compared with
$90.6 million and 30% of the Companys total metal
sales in 2009. Sales of gold totaled $119.4 million and
sales from silver were $110.6 million. Production costs in
2010 totaled $127.7 million while depreciation and
depletion expense was $91.5 million. Total capital
expenditures in 2010 were $54.2 million.
The Companys property position at Palmarejo consists of 32
mining concessions totaling 46.94 square miles (12,158
hectares). Of the total concessions, 29 concessions consisting
of 46.75 square miles (12,109 hectares) are owned 100% by
Coeur Mexicana S.A. de C.V. (Coeur Mexicana), formerly Planet
Gold S.A. de C.V. (a wholly-owned subsidiary of the Company),
and the remaining three concessions, representing
0.19 square miles (48.77 hectares) are partially owned (50
to 60%) by Coeur Mexicana. All of the Companys ore
reserves are located on concessions owned 100% by Coeur
Mexicana. All concessions owned by Coeur Mexicana are valid
until at least 2029. In addition to Palmarejo, the Company also
controls 8,289.7 hectares of concessions at the Yécora
exploration-stage property located in Sonora, on the border with
Chihuahua, and 7,169.9 hectares of concessions at the
La Guitarra exploration-stage property in Chihuahua, south
of Palmarejo. All property and equipment are in good operating
condition with no major maintenance expected. Power is supplied
to the property by the local power utility as well as by
generators. Water is supplied to the property by pipeline from
the Chinipas River and also from recycled process water
collected at site.
Commercial production commenced in April 2009. Recovery of gold
has been consistent with the initial metallurgical testwork and
feasibility study estimates and averaged 91.0% during 2010, up
from 88.2% in 2009. The recovery of silver averaged 70% during
2010, which was below feasibility study estimates, but up from
66.3% in 2009. Although the Company will continue pursuing
adjustments to the plant to increase silver recovery rates, it
now expects silver recoveries average 72% going forward.
The Palmarejo mine is located on the western flank of the Sierra
Madre Occidental, a mountain range that comprises the central
spine of northern Mexico. The north-northwest-trending Sierra
Madre Occidental is composed of a relatively flat-lying sequence
of Tertiary volcanic rocks that forms a volcanic plateau, cut by
numerous igneous intrusive rocks. This volcanic plateau is
deeply incised in the Palmarejo mine area, locally forming
steep-walled canyons. The Sierra Madre Occidental gives way to
the west to an extensional terrain that represents the southward
continuation of the Basin and Range Province of the western
United States, and then to the coastal plain of western Mexico.
The gold and silver deposits at the Palmarejo mine, typical of
many of the other silver and gold deposits in the Sierra Madre,
are classified as epithermal deposits and are hosted in multiple
veins, breccias and fractures. These geologic structures trend
generally northwest to southeast and dip either southwest or
northeast. The dip on the structures ranges from about 45
degrees to 70 degrees. In the mineralized portions of the
structures gold and silver are zoned from top to bottom with
higher silver values occurring in the upper parts of the deposit
to a gold-rich basal portion, sometimes accompanied by base
metal mineralization. The Palmarejo property contains a number
of mineralized zones or areas of interest. The most important of
these to date is the Palmarejo zone in the far north of the
concessions which covers the old Palmarejo gold-silver mine
formed at the intersection of the northwest-southeast trending
La Prieta and La Blanca gold-silver bearing
structures. In addition to Palmarejo, other mineralized vein and
alteration systems in the district area have been identified all
roughly
sub-parallel
to the Palmarejo zone. The most significant of these additional
targets are the Guadalupe (including Animas) and La Patria
vein systems in the southern part of the property which are
currently under investigation by the Companys exploration
teams.
The Company spent $7.8 million in the Palmarejo district in
2010 to discover new silver and gold mineralization and define
new ore reserves. This program consisted of drilling
194,678 feet (59,338 meters) of core. The exploration
budget for Palmarejo for 2011 is $7.5 million.
20
Year-end
Proven and Probable Ore Reserves Palmarejo
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(1, 2, 3, 4, 5)
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
4,649
|
|
|
|
7,277
|
|
|
|
6,840
|
|
Ounces of silver per ton
|
|
|
7.12
|
|
|
|
5.05
|
|
|
|
5.09
|
|
Contained ounces of silver (000s)
|
|
|
33,096
|
|
|
|
37,121
|
|
|
|
34,844
|
|
Ounces of gold per ton
|
|
|
0.09
|
|
|
|
0.06
|
|
|
|
0.06
|
|
Contained ounces of gold
|
|
|
436,600
|
|
|
|
442,000
|
|
|
|
406,000
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
9,019
|
|
|
|
10,623
|
|
|
|
5,355
|
|
Ounces of silver per ton
|
|
|
4.29
|
|
|
|
5.03
|
|
|
|
5.37
|
|
Contained ounces of silver (000s)
|
|
|
38,662
|
|
|
|
53,400
|
|
|
|
28,732
|
|
Ounces of gold per ton
|
|
|
0.05
|
|
|
|
0.06
|
|
|
|
0.07
|
|
Contained ounces of gold
|
|
|
433,600
|
|
|
|
660,000
|
|
|
|
350,000
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
13,668
|
|
|
|
17,900
|
|
|
|
12,195
|
|
Ounces of silver per ton
|
|
|
5.25
|
|
|
|
5.06
|
|
|
|
5.21
|
|
Contained ounces of silver (000s)
|
|
|
71,758
|
|
|
|
90,521
|
|
|
|
63,576
|
|
Ounces of gold per ton
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.06
|
|
Contained ounces of gold
|
|
|
870,200
|
|
|
|
1,102,000
|
|
|
|
756,000
|
|
Year-end
Mineralized Material Palmarejo Mine
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
4,503
|
|
|
|
4,493
|
|
|
|
15,373
|
|
Ounces of silver per ton
|
|
|
3.70
|
|
|
|
3.48
|
|
|
|
3.47
|
|
Ounces of gold per ton
|
|
|
0.04
|
|
|
|
0.05
|
|
|
|
0.04
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
|
1,835,408
|
|
|
|
1,065,508
|
|
|
|
|
|
Ore grade silver (oz./ton)
|
|
|
4.60
|
|
|
|
4.31
|
|
|
|
|
|
Ore grade gold (oz./ton)
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
|
|
Recovery silver(%)
|
|
|
69.8
|
|
|
|
66.3
|
|
|
|
|
|
Recovery gold(%)
|
|
|
91.1
|
|
|
|
88.2
|
|
|
|
|
|
Silver produced (oz.)
|
|
|
5,887,576
|
|
|
|
3,047,843
|
|
|
|
|
|
Gold produced (oz.)
|
|
|
102,440
|
|
|
|
54,740
|
|
|
|
|
|
Cost per Ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating costs
|
|
$
|
4.10
|
|
|
$
|
9.80
|
|
|
$
|
|
|
Other cash costs(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(7)
|
|
|
4.10
|
|
|
|
9.80
|
|
|
|
|
|
Non-cash costs
|
|
|
15.56
|
|
|
|
17.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
19.66
|
|
|
$
|
26.80
|
|
|
$
|
|
|
|
|
|
(1) |
|
Current ore reserves are effective as of December 31, 2010.
Metal prices used in calculating proven and probable reserves
were $16.25 per ounce of silver and $1,025 per ounce of gold. |
21
|
|
|
(2) |
|
The ore reserves are underground and open pit minable and
include an allowance for mining dilution and recovery. For the
underground-minable reserves, the dilution and mining recovery
is incorporated into the detailed design of each stope for the
Palmarejo mine; a 10% dilution at a grade of 0.71 g/t Au and 61
g/t Ag and 100% mining recovery was used for the Guadalupe
deposit. For the open pit-minable reserves, the mining dilution
and mining recovery was incorporated into a block diluted model
for the Palmarejo mine. No open pit reserves are included for
the Guadalupe deposit at this time. |
|
(3) |
|
Metallurgical recovery factors of 93% for gold and 63% to 80%
for silver were used in estimations for ore reserves for
Palmarejo. |
|
(4) |
|
The ore reserves were prepared by D. Thompson (Manager of
Corporate Technical Services) of the Companys technical
staff in conjunction with the independent consulting firms of
Applied Geo Science LLC, Mine Development Associates, Behre
Dolber, and AMEC Mine and Metals. |
|
(5) |
|
For the Palmarejo mine the proven and probable reserves are
defined as mineralized material above an economic cut-off grade
demonstrating grade continuity delineated by exploration and
definition drill holes with a nominal grid spacing of 15m to
40m, depending on area. Proven reserves is material at a
distance of less than or equal to 15m from the nearest composite
sample with a minimum of two drill holes (6 composite samples)
used in the grade estimate. Probable reserves are defined by
distance to the nearest composite sample of between 15m and 40m
and a minimum of two drill holes (6 composite samples) used in
the grade estimate. For the Guadalupe deposit the proven and
probable reserves are defined as mineralized material above an
economic cut-off grade demonstrating grade continuity delineated
by exploration drill holes with a nominal grid spacing of 20m to
40 m. Proven reserves is material at a distance of less than or
equal to 20m from the nearest composite sample with a minimum of
two drill holes (5 composite samples) used in the grade
estimate. Probable reserves are defined by distance to the
nearest composite sample of between 20m and 40m and a minimum of
two drill holes (5 composite samples) used in the grade estimate. |
|
(6) |
|
Includes production taxes and royalties, if applicable. |
|
(7) |
|
Cash costs per ounce of silver or gold represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of Non-GAAP
Cash Costs to GAAP Production Costs. |
Bolivia
San Bartolomé
The San Bartolomé open pit silver mine, and associated
milling operation, operated by Empresa Minera Manquiri SA
(Manquiri), a wholly-owned subsidiary of the
Company, is located on the flanks of the Cerro Rico Mountain
bordering the town of Potosí, Bolivia. Access to the
property and the Companys processing facilities is by
paved and all-weather gravel roads leading south-southwest from
Potosí.
Silver production for 2010 was 6.7 million ounces compared
to 7.5 million ounces in 2009. Cash operating costs per
ounce for 2010 were $7.87 per ounce compared to $7.80 per ounce
in 2009. Total cash costs per ounce (which includes production
taxes and royalties) for 2010 were $8.67 per ounce compared to
$10.48 per ounce in 2009. Metal sales in 2010 were
$143.0 million, representing 28% of the Companys
total metal sales. One hundred percent of these sales were
derived from silver. Production costs in 2010 totaled
$60 million and depreciation and depletion expense was
$19.7 million. Total capital expenditures in 2010 were
$6.2 million.
Coeur acquired 100% of the equity in Manquiri from Asarco
Incorporated (ASARCO) on September 9, 1999.
Manquiris principal asset is the mining rights to the
San Bartolomé mine. Silver was first discovered in the
area around 1545. Mining of silver and lesser amounts of tin and
base metals has been conducted nearly continuously since that
time from multiple underground mines driven into Cerro Rico. The
prior owner did not conduct any mining or processing of the
surface ores at San Bartolomé.
The Company completed a preliminary feasibility study in 2000,
which concluded that an open pit mine was potentially capable of
producing approximately six million ounces of silver annually.
In 2003, SRK, an independent consulting firm, was retained to
review the reserve/resource estimate to include additional
sampling data to incorporate additional resources acquired with
the Plahipo project at Cerro Rico. During 2003, Coeur retained
Fluor Daniel Wright to prepare an updated feasibility study
which was completed at the end of the third quarter of 2004.
22
The study provides for the use of a cyanide milling flow sheet
with a wet pre-concentration screen circuit which will result in
the production of a doré that may be treated by a number of
refiners under a tolling agreement which results in the return
of refined silver to the Company that is readily marketed by
metal banks and brokers to the ultimate customer. During 2004,
the Company obtained all operating permits and commercial
construction activities commenced.
The Companys total capital cost (excluding political risk
insurance premiums and capitalized interest) to place the mine
into production was $237.9 million. The property, plant and
equipment were placed into service in June 2008 and are
maintained in good working condition through a regular
preventative maintenance program with periodic improvements as
required. Power is supplied to the property by the local power
utility. Water is supplied to the property by a public water
source.
In November 2007, Bolivias Congress approved a reform to
the mining tax code. The Bolivian tax rate on most mining
companies has increased from 25.0% to 37.5%. However, mining
companies that produce a doré product, as the
San Bartolomé mine does, will receive a 5% credit
based upon their specific operation. Thus, the tax rate for
San Bartolomé is 32.5%.
The Company obtained political risk insurance policies from the
Overseas Private Insurance Corporation (OPIC) and
another private insurer. The combined policies are in the amount
of $155.0 million and cover Coeur up to the lesser of
$131.0 million or 85.0% of any loss arising from
expropriation, political violence or currency inconvertibility.
The policy costs were capitalized during the development and
construction phases and are now included as a cost of inventory
produced over the term of the policies which expire in 2019 and
2024.
The silver mineralization at San Bartolomé is hosted
in unconsolidated sediments (pallacos) and reworked gravel
(sucus and troceras) deposits and oxide stockpiles and dumps
(desmontes) from past mining that occurred on the flanks of
Cerro Rico. Cerro Rico is a prominent mountain in the region
that reaches an elevation of over 15,400 feet (over 4,700
meters). It is composed of Tertiary-aged volcanic and intrusive
rocks that were emplaced into and over older sedimentary, and
volcanic, basement rocks. Silver, along with tin and base
metals, is located in multiple veins and vein swarms that occur
in a northeast trending belt which transects Cerro Rico. The
upper parts of the Cerro Rico mineralized system were
subsequently eroded and re-deposited into the flanking gravel
deposits. Silver is hosted in all portions of the pallacos,
sucus, and troceras with the best grades segregated to the
coarser-grained silicified fragments. These deposits lend
themselves to simple, free digging surface mining techniques and
can be extracted without drilling and blasting. Of the several
pallaco deposits which are controlled by Coeur and surround
Cerro Rico, three are of primary importance and are known as
Huacajchi, Diablo and Santa Rita.
The mineral rights for the San Bartolomé mine are held
through joint venture and long-term lease agreements with
several independent mining cooperatives and the Bolivian
state-owned mining organization COMIBOL. Manquiri controls
47.93 square kilometers (11,578 acres) of land at
San Bartolomé around Cerro Rico under contracts and
concessions and approximately 37.45 square kilometers
(8.95 acres) of concessions at the Rio Blanco property, a
gold exploration target south of Potosí. The
San Bartolomé lease agreements, executed between 1996
and 2003 and with 25 year terms, are generally subject to a
4% production royalty payable partially to the cooperatives and
partially to COMIBOL. During 2003, the Company acquired
additional mining rights known as the Plahipo project which
include the mining rights to oxide dumps adjacent to the
original property package. The oxide dumps included in the
Plahipo project are subject to a sliding scale royalty payable
to COMIBOL that is a function of silver price. The Company
incurred royalty payment obligations to COMIBOL and the
Cooperatives for these mining rights totaling $5.4 million
and $20.0 million for the years ended 2010 and 2009,
respectively.
On October 14, 2009, 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 backed
by Supreme Decree with COMIBOL as well as contracts with local
mining cooperatives who hold their rights through COMIBOL. 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 mine plan has been temporarily adjusted and
mining continues on the remainder of the property. In March
2010, San Bartolomé began mining operations in high
grade material located in the Huacajchi deposit above the 4,400
meter level under an agreement with the Cooperative Reserva
Fiscal, although restrictions on mining above the 4,400 meter
level
23
continue. The Huacajchi deposit was confirmed to be excluded
from the October 2009. Access to the Huacajchi deposit and its
higher grade material is having beneficial effect on production
and cost at the mine. Other mining areas above the 4,400 meter
level continue to be suspended. The Company does not use
explosives in its surface-only mining activities and is
sensitive to the preservation of the mountain under its
contracts with the state-owned mining entity and the local
cooperatives.
In 2010, no exploration work was performed at
San Bartolomé. New pits (pozos) were dug to obtain
samples for grade control purposes and to further define and
expand the ore reserves.
Year-end
Proven and Probable Ore Reserves
San Bartolomé Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(1, 2, 3, 4, 5)
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
476
|
|
|
|
131
|
|
|
|
160
|
|
Ounces of silver per ton
|
|
|
3.62
|
|
|
|
3.29
|
|
|
|
6.35
|
|
Contained ounces of silver (000s)
|
|
|
1,723
|
|
|
|
430
|
|
|
|
1,015
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
27,602
|
|
|
|
31,241
|
|
|
|
35,147
|
|
Ounces of silver per ton
|
|
|
3.81
|
|
|
|
3.83
|
|
|
|
3.81
|
|
Contained ounces of silver (000s)
|
|
|
105,295
|
|
|
|
119,603
|
|
|
|
134,015
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
28,078
|
|
|
|
31,372
|
|
|
|
35,307
|
|
Ounces of silver per ton
|
|
|
3.81
|
|
|
|
3.83
|
|
|
|
3.82
|
|
Contained ounces of silver (000s)
|
|
|
107,018
|
|
|
|
120,033
|
|
|
|
135,030
|
|
Year-end
Mineralized Material San Bartolomé
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
36,953
|
|
|
|
36,953
|
|
|
|
37,087
|
|
Ounces of silver per ton
|
|
|
1.75
|
|
|
|
1.75
|
|
|
|
1.75
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled
|
|
|
1,504,779
|
|
|
|
1,518,671
|
|
|
|
505,514
|
|
Ore grade silver (oz./ton)
|
|
|
5.03
|
|
|
|
5.49
|
|
|
|
7.46
|
|
Recovery silver(%)
|
|
|
88.6
|
|
|
|
89.6
|
|
|
|
75.8
|
|
Silver produced (oz.)
|
|
|
6,708,775
|
|
|
|
7,469,222
|
|
|
|
2,861,500
|
|
Cost per Ounce of Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating costs
|
|
$
|
7.87
|
|
|
$
|
7.80
|
|
|
$
|
8.22
|
|
Other cash costs(5)
|
|
|
0.80
|
|
|
|
2.68
|
|
|
|
2.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(6)
|
|
|
8.67
|
|
|
|
10.48
|
|
|
|
10.53
|
|
Non-cash costs
|
|
|
3.05
|
|
|
|
2.48
|
|
|
|
1.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
11.72
|
|
|
$
|
12.96
|
|
|
$
|
12.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Current ore reserves are effective as of December 31, 2010.
The metal price used for current ore reserves was $16.25 per
ounce of silver. |
24
|
|
|
(2) |
|
Ore reserves are open pit-minable and include a mining recovery
such that 15 cm buffer of ore material above the bedrock was
excluded from the reserve; this equates to a mining recovery of
99.0%. |
|
(3) |
|
Ore reserves were prepared by D. Thompson (Manager of Corporate
Technical Services) of the Companys technical staff. |
|
(4) |
|
Proven and probable ore reserves are defined by surface drill
holes and pits (pozos) with an average spacing of no more than
70 meters. Proven reserves are those reserves in stockpile at
the end of 2010. The grade of ore reserve block is determined by
the grade of proximal drill hole and/or pit composites and
three-dimensional models of geologic controls. A minimum of 8
and maximum of 20 composite were used to classify proven and
probable ore reserves and variable geostatistical estimation
variances. Mineralized material is similarly classified. |
|
(5) |
|
Includes production taxes and royalties, if applicable. |
|
(6) |
|
Costs per ounce of silver represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of Non-GAAP Cash
Costs to GAAP Production Costs. |
USA
Alaska-Kensington Mine
The Kensington underground gold mine and associated milling
facilities are located on the east side of the Lynn Canal about
45 miles north-northwest of Juneau, Alaska. The Kensington
mine commenced commercial production on July 3, 2010. The
mine is accessed by a horizontal tunnel and utilizes
conventional and mechanized underground mining methods. Ore is
processed in a flotation mill that produces a concentrate which
is sold to third party smelters. Waste material is deposited in
an impoundment facility on the property. Power is supplied to
the site by
on-site
diesel generators. Access to the project is by a combination of
road vehicles, boat, helicopter, float plane, or boat direct
from Juneau.
Production during the mines initial, partial year was
43,143 ounces of gold. In 2010, the Company conducted
exploration to increase the size and geologic continuity of gold
mineralization, which is expected to ultimately lead to an
increase in ore reserves. In 2010, a total of $1.0 million
was spent on this program and was focused on the new Raven zone,
west of the currently mined area. Metal sales in 2010 at
Kensington were $23.6 million. Production costs were
$14.0 million and depreciation and depletion expense was
$17.5 million. The Companys capital expenditures at
the Kensington mine totaled approximately $92.7 million in
2010.
Coeur Alaska, Inc., (Coeur Alaska), a wholly-owned
subsidiary of the Company, controls two contiguous land groups:
the Kensington and Jualin properties. The Kensington property
consists of 51 private patented lode and mill-site claims
covering approximately 766 acres, 294 federal unpatented
lode claims covering approximately 3,127 acres, and eight
State of Alaska mining claims covering approximately
95 acres. The Company controls the Jualin Property, under a
lease agreement with Hyak Mining Company, through the cessation
of mining, so long as the Company makes timely payments pursuant
to the lease agreement. The Jualin Property consists of 23
patented lode and mill-site claims covering approximately
383.6 acres, 438 federal unpatented lode claims and one
unpatented mill-site claim covering approximately
7,911 acres, and 17 State of Alaska mining claims covering
approximately 110 acres. The federal and state claims, as
well as the private patented lode and mill-site claims, provide
Coeur with the necessary rights to mine and process ore from
Kensington. All of the Companys Alaska ore reserves are
located within the patented claims. The unpatented claims and
mill site are maintained via annual filings and fees to the
U.S. Bureau of Land Management (BLM), which acts as
administrator of the claims. State claims are maintained via
filings and fees to Alaska Department of Nautral
Resources Juneau Recorders Office. Real
property taxes to the State of Alaska are paid yearly for the
patented claims. Lease payments are paid annually and all leases
are in good standing.
Coeur Alaska is obligated to pay a scaled net smelter return
royalty on 1.0 million ounces of future gold production
after Coeur Alaska recoups the $32.5 million purchase price
and its construction and development expenditures incurred after
July 7, 1995 in connection with placing the property into
commercial production. The royalty ranges from 1% at $400 per
ounce gold prices to a maximum of 2.5% at gold prices above $475
per ounce, with the royalty to be capped at 1.0 million
ounces of production.
25
On June 22, 2009, the U.S. Supreme Court reversed the
Ninth Circuit Court of Appeals decision that had invalidated the
previously issued Section 404 Permit for the tailings
facility for the Kensington gold mine.
Following the U.S. Supreme Court decision, on
August 14, 2009, the U.S. Army Corps of Engineers
re-activated the Companys 404 permit, clearing the way for
construction at the tailing facility to continue. Production
started on July 3, 2010.
The Kensington ore deposit consists of multiple precious metals
bearing mesothermal, quartz, carbonate and pyrite vein swarms
and discrete quartz-pyrite veins hosted in the Cretaceous
age Jualin diorite. Gold occurs as native grains in quartz
veins and is associated with pyrite and various
gold-telluride-minerals associated with the pyrite
mineralization.
Year-end
Proven and Probable Ore Reserves Kensington
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(1, 2, 3, 4, 5)
|
|
|
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
319
|
|
|
|
199
|
|
|
|
199
|
|
Ounces of gold per ton
|
|
|
0.45
|
|
|
|
0.38
|
|
|
|
0.38
|
|
Contained ounces of gold (000s)
|
|
|
145
|
|
|
|
76
|
|
|
|
76
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
5,618
|
|
|
|
5,301
|
|
|
|
5,301
|
|
Ounces of gold per ton
|
|
|
0.23
|
|
|
|
0.26
|
|
|
|
0.26
|
|
Contained ounces of gold (000s)
|
|
|
1,265
|
|
|
|
1,402
|
|
|
|
1,402
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
5,937
|
|
|
|
5,500
|
|
|
|
5,500
|
|
Ounces of gold per ton
|
|
|
0.24
|
|
|
|
0.27
|
|
|
|
0.27
|
|
Contained ounces of gold (000s)
|
|
|
1,410
|
|
|
|
1,478
|
|
|
|
1,478
|
|
Year-end
Mineralized Material Kensington Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
2,504
|
|
|
|
2,724
|
|
|
|
2,724
|
|
Ounces of gold per ton
|
|
|
0.19
|
|
|
|
0.18
|
|
|
|
0.18
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
|
174,028
|
|
|
|
|
|
|
|
|
|
Ore grade gold (oz./ton)
|
|
|
0.28
|
|
|
|
|
|
|
|
|
|
Recovery gold(%)
|
|
|
89.9
|
|
|
|
|
|
|
|
|
|
Gold produced (oz.)
|
|
|
43,143
|
|
|
|
|
|
|
|
|
|
Cost per Ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating costs
|
|
$
|
988.63
|
|
|
$
|
|
|
|
$
|
|
|
Other cash costs(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(7)
|
|
|
988.63
|
|
|
|
|
|
|
|
|
|
Non-cash costs
|
|
|
405.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
1,393.95
|
|
|
$
|
|
|
|
$
|
|
|
26
|
|
|
(1) |
|
Current ore reserves are effective as of December 31, 2010.
Metal price used in calculating proven and probable reserves was
$1,025 per ounce of gold. |
|
(2) |
|
The ore reserves are underground minable and include factors for
mining dilution and recovery. A factor of approximately 10%
additional tonnage at 0.063 ounces per ton of dilution was
included. An average 94% mining recovery was included. |
|
(3) |
|
Metallurgical recovery factor of 95.3% should be applied to the
contained gold reserve ounces. |
|
(4) |
|
The ore reserves were estimated by J. Barry (Mine Engineer) of
the Companys technical staff and R. White (Independent
Consultant). Snowden Mining Industry Consultants and AMEC,
independent consultant groups, have performed independent
reviews of the Companys resource estimate model used to
prepare the ore reserve estimates. |
|
(5) |
|
Proven and probable reserves are defined underground drilling
and underground workings. In practice, reserve blocks are
defined by the number of proximal composites and
three-dimensional geologic controls. Proven ore reserves include
stockpiled ore. Ore reserve must be defined by at least 10 drill
samples from at least 2 drill holes spaced not more than
60 feet from the block center. |
|
(6) |
|
Includes production taxes and royalties, if applicable. |
|
(7) |
|
Cash costs per ounce of silver or gold represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of
Non-GAAP Cash Costs to GAAP Production Costs. |
USA
Nevada-Rochester Mine
The Rochester mine and associated heap leach facilities, is an
open pit silver and gold mine, located in Pershing County,
Nevada, which is located approximately 25 miles of paved and
all-weather gravel road northeast of the town of Lovelock. The
Company owns 100% of the Rochester Mine through the
Companys wholly-owned subsidiary, Coeur Rochester, Inc.
(Coeur Rochester). The mine consists of the main
Rochester deposit and the adjacent Nevada Packard deposit, due
south of Rochester.
Production at the Rochester mine in 2010 was approximately
2.0 million ounces of silver and 9,641 ounces of gold,
compared to approximately 2.2 million ounces of silver and
12,663 ounces of gold in 2009. Production was lower due to
decreased ounces recovered from the ore on leach pad. Cash
operating costs per ounce of silver increased to $2.93 per ounce
in 2010, compared to $1.95 per ounce in 2009. Total cash costs
per ounce of silver (which includes production taxes and
royalties) were $3.78 per ounce in 2010 compared to $2.58 per
ounce in 2009. This increase was primarily due the decrease in
ore produced from the current leach pad, combined with a lack of
incremental ore production in 2010. Rochesters total metal
sales in 2010 totaled $54.3 million, or approximately 11%
of the Companys total metal sales. Approximately 78% of
Rochesters metal sales were derived from silver, while 22%
were derived from gold. Production costs totaled
$24.8 million in 2010 and depreciation and depletion
expenses were $1.9 million, compared to $24.2 million
and $1.9 million in 2009. The Companys capital
expenditures at the Rochester mine totaled approximately
$2.3 million in 2010 and $0.3 million in 2009. The
Company plans capital expenditures at the Rochester mine of
$26.8 million in 2011, primarily for construction of a new
leach pad and related infrastructure. Construction is expected
to begin in the first quarter of 2011. This extension will
increase total average annual silver and gold production to over
2.4 million ounces and 35,000 ounces, respectively, over
several years.
Coeur Rochester controls 541 U.S. Federal unpatented claims
(including 54 mill sites), 23 patented claims, and leases an
additional 53 unpatented claims, totaling approximately
7,200 acres. All of the Companys mineral reserves are
located within the claims. The unpatented claims and mill sites
are maintained via annual fees to the U.S. Bureau of Land
Management (BLM) and to Pershing County, which acts as
administrator of the claims. Real property taxes to the State of
Nevada are paid yearly for the patented claims. Lease payments
are paid annually; all leases are in good standing.
The Company acquired the Rochester property from ASARCO in 1983
and commenced mining in 1986. No mining or processing was
conducted at Rochester by the prior owner. The Company acquired
its initial interest in
27
the adjacent Nevada Packard property in 1996, completed the full
purchase in 1999 and commenced mining in 2003. Very limited
mining and processing was conducted at Nevada Packard by the
prior owner. Collectively, the Rochester and Nevada Packard
properties comprise the Companys Rochester silver and gold
mining and processing operation.
The Rochester mine is fully supported with electricity, supplied
by a local power company on their public grid, telephone and
radio communications, production water wells, and processing,
maintenance, warehouse, and office facilities. All of these
facilities are in good operating condition with no major
maintenance expected. The mine utilizes the heap leaching
process to extract both silver and gold from ore mined using
conventional open pit methods.
Gold and silver are recovered by heap leaching of crushed
open-pit ore placed on pads located east of the Rochester mining
area. Based upon actual operating experience and metallurgical
testing, the Company estimates ultimate recovery rates from the
crushed ore of between 59.0% and 63.0% for silver, depending on
the ore being leached, and 93.0% for gold. See
Note C Summary of Significant Accounting
Policies to our financial statements included herein, for
further discussion.
In August 2007, the Company determined that the ore reserves at
Rochester were fully depleted and therefore ceased mining and
crushing operations at the Rochester mine. The Company expects
to continue residual heap leach activities through 2014 on this
ore.
In 2008, the Company commenced studies to investigate the
potential to recommence mining and leaching of new material and
in 2009 and 2010 completed feasibility studies demonstrating the
viability of an expansion of mining and leaching operations at
its Rochester mine through 2017. The Company prepared an Amended
Plan of Operations for resumption of mining within the existing
and permitted Rochester pit and construction of an additional
heap leach pad, all within the currently permitted mine
boundary. The Bureau of Land Management (BLM) deemed this plan
complete in August 2009 under federal regulations and initiated
the National Environmental Policy Act process. The BLM issued a
positive Decision Record (DR) for the mine to extend silver and
gold mining operations by several years with new production
ounces expected to begin being recovered in the fourth quarter
of 2011.
At Rochester, silver and gold mineralization is hosted in folded
and faulted volcanic rocks of the Rochester Formation and
overlying Weaver Formation. Silver and gold, consisting of
silver sulfosalt minerals, argentite, silver-bearing
tetrahedrite and minor native gold, are contained in zones of
multiple quartz veins and veinlets (vein and vein swarms and
stockworks) with variable amounts of pyrite.
The Company is obligated to pay a net smelter royalty interest
only when the average quarterly market price of silver equals or
exceeds $23.02 per ounce indexed for inflation ($22.87 per ounce
in 2010 and $22.61 per ounce in 2009) up to a maximum rate
of 5% to ASARCO, the prior owner. Royalty expense was
$0.2 million, nil and nil for the years ended
December 31, 2010, 2009 and 2008, respectively.
In 2010, exploration expenditures of $0.2 million funded
13,980 feet (4,261 meters) of angled reverse circulation
drilling at the Nevada Packard deposit area.
28
Year-end
Proven and Probable Ore Reserves Rochester
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(1, 2, 3, 4, 5, 6)
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
35,959
|
|
|
|
31,821
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
0.54
|
|
|
|
0.58
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
19,499
|
|
|
|
18,361
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.005
|
|
|
|
0.006
|
|
|
|
|
|
Contained ounces of gold
|
|
|
196,100
|
|
|
|
185,000
|
|
|
|
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
12,312
|
|
|
|
10,596
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
0.65
|
|
|
|
0.71
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
8,057
|
|
|
|
7,523
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.004
|
|
|
|
0.005
|
|
|
|
|
|
Contained ounces of gold
|
|
|
51,300
|
|
|
|
48,000
|
|
|
|
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
48,271
|
|
|
|
42,417
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
0.57
|
|
|
|
0.61
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
27,556
|
|
|
|
25,884
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.005
|
|
|
|
0.005
|
|
|
|
|
|
Contained ounces of gold
|
|
|
247,400
|
|
|
|
233,000
|
|
|
|
|
|
Year-end
Mineralized Material Rochester Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
215,603
|
|
|
|
104,783
|
|
|
|
114,058
|
|
Ounces of silver per ton
|
|
|
0.44
|
|
|
|
0.52
|
|
|
|
0.54
|
|
Ounces of gold per ton
|
|
|
0.003
|
|
|
|
0.004
|
|
|
|
0.005
|
|
29
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore mined (000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons crushed/leached (000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore grade silver (oz./ton)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore grade gold (oz./ton)
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery/Ag oz(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery/Au oz(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver produced (oz.)
|
|
|
2,023,423
|
|
|
|
2,181,788
|
|
|
|
3,033,721
|
|
Gold produced (oz.)
|
|
|
9,641
|
|
|
|
12,663
|
|
|
|
21,041
|
|
Cost per Ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash costs
|
|
$
|
2.93
|
|
|
$
|
1.95
|
|
|
$
|
(0.75
|
)
|
Other cash costs(7)
|
|
|
0.85
|
|
|
|
0.63
|
|
|
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(8)
|
|
|
3.78
|
|
|
|
2.58
|
|
|
|
(0.03
|
)
|
Non-cash costs
|
|
|
1.04
|
|
|
|
0.93
|
|
|
|
0.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
4.82
|
|
|
$
|
3.51
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Current ore reserves are effective as of December 31, 2010.
Metal prices used in calculating proven and probable reserves
were $16.25 per ounce of silver and $1,025 per ounce of gold. |
|
(2) |
|
Reserves were estimated with a cutoff grade of 0.48 silver
equivalent ounces per ton. |
|
(3) |
|
The mineralized material for Rochester and Nevada Packard
deposits was estimated with silver and gold prices of $20.00 and
$1,300 per ounce, respectively, historical metallurgical
recoveries for gold and silver, historical mine operating costs
within a
Whittle®
open pit model, and include no additional factors for dilution
or recovery. The estimate of mineralized material and reserves
was constrained to exclude any silver and gold mineralization
beneath existing leaching operations. |
|
(4) |
|
Metallurgical recovery for oxide ore were 61% for silver and 92%
for gold. Approximately 1.05 million tons (2.1%) of sulfide
bearing ore is included in the total ore reserves at lower
metallurgical recovery rates. However, ultimate recoveries will
not be known until leaching operations cease. Current recovery
may vary significantly from ultimate recovery, calculated based
on the ounces recovered as a percent of the ounces placed on the
pad. The ore reserves were estimated by D. Thompson (Manager of
Corporate Technical Services) and C. Kiel (Superintendent of
Rochester Technical Services) of the Companys technical
staff. The firm of Pincock, Allen & Holt, an
independent consulting group, was used to review engineering
studies and the consulting firm of Reserva International was
used to model results from drilling and update estimates of
mineralized material. |
|
(5) |
|
Ore reserves are defined by drilling on a grid of 100 feet
by 200 feet, or closer, and include open pit mine
production sampling to assist with determination of gold and
silver grades. The grade is defined by the number of proximal
composites and three-dimensional geologic controls. The number
of drill samples used in estimation of grades must be at least 4
with a maximum search distance 150 feet at Rochester and
120 feet at Nevada Packard. |
|
(6) |
|
Mining and crushing operations terminated in August 2007 and are
expected to resume in 2011. |
|
(7) |
|
Includes production taxes and royalties, if applicable. |
|
(8) |
|
Cash costs per ounce of silver or gold represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of Non-GAAP Cash
Costs to GAAP Production Costs. |
30
Argentina
Martha Mine
The Martha underground silver and gold mine, and associated
milling operation, owned and operated by Coeur Argentina S.R.L.,
a wholly-owned subsidiary of the Company, is located in the
Santa Cruz Province of southern Argentina. Access to the
property is provided by all-weather gravel roads leading
30 miles northeast of the town of Gobernador Gregores.
Production at the Martha mine in 2010 was approximately
1.6 million ounces of silver and 1,838 ounces of gold
compared to 3.7 million ounces of silver and 4,709 ounces
of gold in 2009. The 57.5% decrease in silver production was
primarily due to a 48.3% decrease in tons milled as a result of
the reduction in mining operations in 2010. Cash operating costs
per ounce for 2010 were $13.16 per ounce compared to $6.19 per
ounce in 2009. Total cash costs per ounce of silver (which
includes production taxes and royalties) were $14.14 in 2010
compared to $6.68 in 2009. The increase in total cash costs per
ounce was attributed to the decrease in silver production as
compared to 2009 due to a significant decrease in tons milled in
2010. Metal sales in 2010 totaled $53.9 million at Martha.
Approximately 94% of these metal sales were derived from silver,
with the balance coming from gold. Production costs totaled
$27.0 million and depreciation and depletion expenses were
$8.5 million, compared with $18.0 million and
$7.4 million in 2009. Total capital expenditures at the
Martha mine in 2010 were $0.1 million.
The mineral rights for the Martha property are fully-owned by
Coeur Argentina S.R.L. Mineral rights owned by Coeur Argentina
S.R.L. in the Santa Cruz Province (excluding options on Joaquin
and Satélite) total 184 square miles (47,660 hectares)
of exploration concessions (claims), 256.3 square miles
(66,380 hectares) of discovery concessions, and 3.4 square
miles (874 hectares) of exploitation concessions. Martha is
centered on the exploitation concessions, which fully cover the
area of the mine infrastructure and the ore reserves reported
herein. Concessions do not have an expiration date; subject only
to required annual fees. Surface rights covering the Martha
deposit are controlled by the 137.8 square mile
(35,705-hectare) Cerro Primero de Abril Estancia which is owned
by Coeur Argentina S.R.L. Included on the estancia is a
60-person
camp, mine and exploration offices, and assay laboratory.
The Company acquired the property in 2002 through the purchase
of a subsidiary of Yamana Resources Inc. for $2.5 million.
The prior owner conducted minor underground mining on the
near-surface portion of the Martha vein from late 2000 to mid
2001. The Company is obligated to pay a 2.0% net smelter royalty
on silver and gold production to Royal Gold Corporation granted
by Yamana Resources. In addition, the Company is subject to a
3.0% net proceeds royalty payable to the Province of Santa Cruz.
The Company incurred royalty expense totaling $1.5 million,
$1.8 million and $1.9 million for the years ended
2010, 2009 and 2008, respectively.
Prior to 2008, ore from the Martha mine was trucked
approximately 600 miles by road for processing at the
Companys previously owned Cerro Bayo mill located
approximately 270 miles away. In 2007, the Company
commenced the construction of a 240 tonne per day flotation
mill. The mill was completed and commenced operating in December
2007 and produces a flotation concentrate. In 2008, concentrate
began to be shipped to a third-party smelter located in Mexico.
The property and equipment are maintained in good working
condition through a regular preventive maintenance program with
periodic improvements as required. Power is provided by
Company-owned diesel generators.
At Martha, silver and gold mineralization is hosted in
epithermal quartz veins and veinlets within generally
sub-horizontal
volcanic rocks of the Jurassic-aged Chon Aike Formation. The
veins and veinlets occur as
sub-parallel
clusters largely trending west-northwest and dipping steeply to
the southwest. The main ore minerals of silver and gold are
silver sulfosalt minerals, argentite, electrum (a
naturally-occurring gold and silver alloy) and native silver.
During 2010, the Company spent $0.5 million to test
extensions of the R4, Catalina, Betty Oeste and Betty Sur
ore-bearing structures with drilling of 2,217 meters
(7,274 feet) of new core drilling. The 2011 budget for
exploration at Martha is $0.3 million.
31
Year-end
Proven and Probable Ore Reserves Martha
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
|
|
(1, 2, 3, 4, 5)
|
|
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
|
|
|
|
|
|
|
|
55.86
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
|
|
|
|
|
|
|
|
992
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
|
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
Contained ounces of gold
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
45
|
|
|
|
38
|
|
|
|
58
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
18.61
|
|
|
|
33.14
|
|
|
|
31.22
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
828
|
|
|
|
1,249
|
|
|
|
1,817
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.02
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
|
|
Contained ounces of gold
|
|
|
1,089
|
|
|
|
1,400
|
|
|
|
2,000
|
|
|
|
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
45
|
|
|
|
38
|
|
|
|
76
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
18.61
|
|
|
|
33.14
|
|
|
|
36.99
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
828
|
|
|
|
1,249
|
|
|
|
2,809
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.02
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
|
|
Contained ounces of gold
|
|
|
1,089
|
|
|
|
1,400
|
|
|
|
3,000
|
|
|
|
|
|
Year-end
Mineralized Material Martha Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Short tons (000s)
|
|
|
39
|
|
|
|
29
|
|
|
|
46
|
|
Ounces of silver per ton
|
|
|
14.02
|
|
|
|
59.54
|
|
|
|
29.50
|
|
Ounces of gold per ton
|
|
|
0.01
|
|
|
|
0.05
|
|
|
|
0.02
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled
|
|
|
56,401
|
|
|
|
109,974
|
|
|
|
57,886
|
|
Ore grade silver (oz./ton)
|
|
|
31.63
|
|
|
|
36.03
|
|
|
|
49.98
|
|
Ore grade gold (oz./ton)
|
|
|
0.04
|
|
|
|
0.05
|
|
|
|
0.07
|
|
Recovery silver(%)
|
|
|
88.3
|
|
|
|
93.6
|
|
|
|
93.7
|
|
Recovery gold(%)
|
|
|
84.1
|
|
|
|
87.6
|
|
|
|
88.3
|
|
Silver produced (oz.)
|
|
|
1,575,827
|
|
|
|
3,707,544
|
|
|
|
2,710,673
|
|
Gold produced (oz.)
|
|
|
1,838
|
|
|
|
4,709
|
|
|
|
3,313
|
|
Cost per Ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating costs
|
|
$
|
13.16
|
|
|
$
|
6.19
|
|
|
$
|
6.87
|
|
Other cash costs(6)
|
|
|
0.98
|
|
|
|
0.49
|
|
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(7)
|
|
|
14.14
|
|
|
|
6.68
|
|
|
|
7.57
|
|
Non-cash costs
|
|
|
5.88
|
|
|
|
1.94
|
|
|
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
20.02
|
|
|
$
|
8.62
|
|
|
$
|
9.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
(1) |
|
Current ore reserves are effective as of December 31, 2010.
Metal prices used for current ore reserves were $22.00 per ounce
of silver and $1,200 per ounce of gold |
|
(2) |
|
Ore reserves are mostly underground minable with minor additions
from small open pits. Underground reserves include a variable
dilution, at zero grade, added to vein true widths. Underground
mining recovery is
70-95%. Open
pit reserves have variable dilution from
16-20% at
zero grade and a mining recovery of 85%. |
|
(3) |
|
Metallurgical recovery factors of 85% for silver and 88% for
gold should be applied to the contained silver and gold ounces. |
|
(4) |
|
Ore reserves were prepared by D. Thompson (Manager of Corporate
Technical Services) and O. Orosco (Mine Manager for the Martha
mine) of the Companys technical staff. |
|
(5) |
|
Ore reserves are defined with polygonal estimation using
underground channels and drill hole samples. For probable
reserves: An area demonstrating grade continuity with channel
sample or drill hole spacing less than 25 meters. Mineralized
material is similarly classified. |
|
(6) |
|
Includes production taxes and royalties, if applicable. |
|
(7) |
|
Cash costs per ounce of silver or gold represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of
Non-GAAP Cash Costs to GAAP Production Costs. |
Australia
New South Wales Endeavor Mine
The Endeavor mine, is an underground silver and base metal
operation, and associated mill facility, located in
north-central New South Wales, Australia, about 447 miles
(720 kilometers) from Sydney. Access to the mine is by paved
roads 30 miles (18 kilometers) to the northwest from the
community of Cobar.
Production at the Endeavor mine in 2010 was 566,134 ounces of
silver compared to 461,800 ounces of silver in 2009. The
increase in silver production was due to an 18.2% increase in
tons milled combined with a 17.4% increase in ore grades as
compared to 2009. Cash operating costs and total cash costs per
ounce of silver produced were $10.15 in 2010 compared to $6.80
in 2009. This increase was due primarily to the price
participation component of the transaction and increased
refining costs due to silver deduction retained by the refiner.
Metal sales at the Endeavor mine in 2010 were
$10.6 million, all of which was derived from silver.
Production costs totaled $4.1 million and depreciation and
depletion costs were $2.0 million. The Company incurred no
capital expenditures at the Endeavor mine in 2010.
The ore reserves at Endeavor are covered by five consolidated
mining leases issued by the state of New South Wales to Cobar
Operations Pty. Limited (Cobar), a wholly-owned
subsidiary of CBH Resources Ltd. (CBH). The leases
form a contiguous block of 10,121 acres in size and expire
between 2019 and 2027. Following the completion of the
acquisition of all of CBHs issued ordinary shares on the
23rd of
September, 2010, CBH Resources Limited is now a wholly-owned
subsidiary of Toho Zinc Co. Ltd, a company listed on the Tokyo
Stock Exchange.
The Endeavor mine has been in production since 1983. On
September 12, 2003, CBH acquired the Elura mine and
processing facilities from Pasminco and changed the name to the
Endeavor mine. On May 23, 2005, CDE Australia Pty. Ltd., a
wholly-owned subsidiary of Coeur (CDE Australia),
acquired all of the silver production and reserves, up to a
maximum 17.7 million payable ounces, contained at the
Endeavor Mine, which is owned and operated by CBH, for
$44.0 million including transaction fees. Under the terms
of the original agreement, CDE Australia paid Cobar
$15.4 million of cash at the closing. In addition, CDE
Australia agreed to pay Cobar approximately $26.5 million
upon the receipt of a report confirming that the reserves at the
Endeavor mine are equal to or greater than the reported ore
reserves for 2004. In addition, CDE Australia originally
committed to pay Cobar an operating cost contribution of $1.00
for each ounce of payable silver plus a further increment when
the silver price exceeds $5.23 per ounce. This further increment
was to have begun on the second anniversary of this agreement
and is 50% of the amount by which the silver price exceeds $5.23
per ounce. A cost contribution of $0.25 per ounce is also
payable by CDE Australia in respect of new ounces of proven and
probable silver reserves as they
33
are discovered. During the first quarter of 2007,
$2.1 million was paid for additional ounces of proven and
probable silver reserves under the terms of the contract. This
amount was capitalized as a cost of the mineral interests
acquired and is being amortized using the units of production
method. The Company is not required to contribute to ongoing
capital costs at the mine.
On March 28, 2006, CDE Australia reached an agreement with
CBH to modify the terms of the original silver purchase
agreement. Under the modified terms, CDE Australia owns all
silver production and reserves up to a total of
20.0 million payable ounces, up from 17.7 million
payable ounces in the original agreement. The silver
price-sharing provision was deferred until such time as CDE
Australia had received approximately two million cumulative
ounces of silver from the mine or June 2007, whichever was
later. In addition, the silver price-sharing threshold increased
to $7.00 per ounce, from the previous level of $5.23 per ounce.
The conditions relating to the second payment were also modified
and tied to certain paste fill plant performance criteria and
mill throughput tests. In January 2008, the mine met the
criteria for payment of the additional $26.2 million. This
amount was paid on April 1, 2008, plus accrued interest at
the rate of 7.5% per annum from January 24, 2008. Expansion
of the ore reserve will be required to achieve the maximum
payable ounces of silver production as set forth in the modified
contract. It is expected that future expansion to the ore
reserve will occur as a result of the conversion of portions of
the propertys existing inventory of mineralized material
and future exploration discoveries near the mine.
The mine employs bulk mining methods and utilizes a conventional
flotation mill to produce a concentrate that is sold to a
third-party smelter. Silver recovery averaged approximately
44.3% in 2010 and 49.9% in 2009. Power to the mine and
processing facilities is provided by the grid servicing the
local communities. The property and equipment are maintained in
good working condition, by CBH, through a regular preventive
maintenance program with periodic improvements as required.
At Endeavor, silver, lead, zinc and lesser amounts of copper
mineralization are contained within sulfide lenses hosted in
fine-grained sedimentary rocks of the Paleozoic-aged
Amphitheatre Group. Sulfide lenses are elliptically-shaped,
steeply-dipping to the southwest and strike to the northwest.
Principal ore minerals are galena, sphalerite and chalcopyrite.
Silver occurs with both lead- and zinc-rich sulfide zones.
CBH conducts regular exploration to define new reserves at the
mine from both underground and surface core drilling platforms.
For fiscal year ended June 30, 2010, which is the fiscal
year used by the operator (CBH), the exploration expenditure at
the mine was $0.6 million. Budgeted exploration for 2011 is
approximately $1.3 million.
Year-end
Proven and Probable Ore Reserves Endeavor
Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
|
(1, 2, 3, 4)
|
|
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
3,472
|
|
|
|
1,984
|
|
|
|
3,417
|
|
Ounces of silver per ton
|
|
|
1.87
|
|
|
|
1.93
|
|
|
|
1.47
|
|
Contained ounces of silver (000s)
|
|
|
6,482
|
|
|
|
3,820
|
|
|
|
5,019
|
|
Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
3,605
|
|
|
|
6,393
|
|
|
|
5,842
|
|
Ounces of silver per ton
|
|
|
3.73
|
|
|
|
3.15
|
|
|
|
3.55
|
|
Contained ounces of silver (000s)
|
|
|
13,457
|
|
|
|
20,139
|
|
|
|
20,753
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
7,077
|
|
|
|
8,377
|
|
|
|
9,259
|
|
Ounces of silver per ton
|
|
|
2.82
|
|
|
|
2.86
|
|
|
|
2.78
|
|
Contained ounces of silver (000s)
|
|
|
19,939
|
|
|
|
23,959
|
|
|
|
25,772
|
|
34
Year-end
Mineralized Material Endeavor Mine
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
16,535
|
|
|
|
20,205
|
|
|
|
18,127
|
|
Ounces of silver per ton
|
|
|
1.82
|
|
|
|
1.77
|
|
|
|
0.96
|
|
Operating
Data (Coeurs Share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons ore milled
|
|
|
653,550
|
|
|
|
552,799
|
|
|
|
1,030,368
|
|
Ore grade silver (oz./ton)
|
|
|
1.96
|
|
|
|
1.67
|
|
|
|
1.41
|
|
Recovery silver(%)
|
|
|
44.3
|
|
|
|
49.9
|
|
|
|
56.5
|
|
Silver produced (oz.)
|
|
|
566,134
|
|
|
|
461,800
|
|
|
|
824,093
|
|
Cost per Ounce of Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash costs
|
|
$
|
10.15
|
|
|
$
|
6.80
|
|
|
$
|
2.55
|
|
Other cash costs(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(6)
|
|
|
10.15
|
|
|
|
6.80
|
|
|
|
2.55
|
|
Non-cash costs
|
|
|
3.51
|
|
|
|
2.75
|
|
|
|
2.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
13.66
|
|
|
$
|
9.55
|
|
|
$
|
4.94
|
|
|
|
|
(1) |
|
Ore reserves are effective as of June 30, 2010, which is
the end of the most recent fiscal year of the operator, CBH
Resources Ltd. These totals do not include additions or
depletions through December 31, 2010. Metal prices used
were $12.00 per ounce of silver for open pit mine designs and
$16.00 for underground. |
|
(2) |
|
The ore reserves are underground and open pit minable.
Underground reserves include 11% additional tons of dilution
(11% additional waste) and mining recovery factor of 95%. |
|
(3) |
|
Metallurgical recovery factor of 45% should be applied to the
silver reserve ounces. |
|
(4) |
|
Classification of reserves is based on spacing from drill hole
composites to reserve block centers. For proven reserves the
maximum distance is 20 meters and for probable reserves it is 40
meters. A minimum of 15 drill hole samples are used in
estimation of ore reserve grades. Mineralized material is
similarly classified. |
|
(5) |
|
Includes production taxes and royalties, if applicable. |
|
(6) |
|
Cash costs per ounce of silver represent a non U.S. GAAP
measurement that management uses to monitor and evaluate the
performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations; Reconciliation of Non-GAAP Cash
Costs to GAAP Production Costs. |
Discontinued
Operations
Australia
New South Wales Broken Hill Mine
Effective July 1, 2009, the Company sold to Perilya Broken
Hill Ltd. its 100% interest in silver contained at the Broken
Hill mine for $55.0 million in cash. As a result of this
transaction, the Company realized a gain on the sale in the
third quarter of 2009 of approximately $25.5 million, net
of income taxes. Coeur originally purchased this interest from
Perilya Broken Hill Ltd. in September 2005 for
$36.9 million. This transaction closed on July 30,
2009.
Silver production in 2009 from the Broken Hill mine amounted to
approximately 0.8 million ounces of silver compared to
1.4 million ounces of silver in 2008. The decrease in
silver production was due to the sale of the Companys
interest in the silver production from the Broken Hill mineral
interests on July 1, 2009. The cash cost per ounce of
silver production, which includes the operating cost
contribution and smelting, refining and transportation
35
costs, was $3.40 in 2009 compared to $3.41 in 2008. Results for
the Broken Hill mine are included in Note G - Discontinued
Operations And Assets And Liabilities Held For Sale.
Year-end
Proven and Probable Ore Reserves Broken Hill
Mine
|
|
|
|
|
|
|
2008
|
|
|
(1, 2, 3, 4, 5)
|
|
Proven
|
|
|
|
|
Short tons (000s)
|
|
|
6,431
|
|
Ounces of silver per ton
|
|
|
1.58
|
|
Contained ounces of silver (000s)
|
|
|
10,185
|
|
Probable
|
|
|
|
|
Short tons (000s)
|
|
|
4,616
|
|
Ounces of silver per ton
|
|
|
1.05
|
|
Contained ounces of silver (000s)
|
|
|
4,861
|
|
Proven and Probable
|
|
|
|
|
Short tons (000s)
|
|
|
11,047
|
|
Ounces of silver per ton
|
|
|
1.36
|
|
Contained ounces of silver (000s)
|
|
|
15,046
|
|
Year-end
Mineralized Material Broken Hill Mine
|
|
|
|
|
|
|
2008
|
|
Short tons (000s)
|
|
|
6,376
|
|
Ounces of silver per ton
|
|
|
4.51
|
|
Operating
Data (Coeurs share)
|
|
|
|
|
|
|
|
|
|
|
2009(8)
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
Tons ore milled
|
|
|
827,766
|
|
|
|
1,952,066
|
|
Ore grade silver (oz./ton)
|
|
|
1.44
|
|
|
|
0.97
|
|
Recovery(%)
|
|
|
70.6
|
|
|
|
72.5
|
|
Silver produced (oz.)
|
|
|
842,751
|
|
|
|
1,369,009
|
|
Cost per Ounce of Silver
|
|
|
|
|
|
|
|
|
Operating cash costs
|
|
$
|
3.40
|
|
|
$
|
3.41
|
|
Other cash costs(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(7)
|
|
|
3.40
|
|
|
|
3.41
|
|
Non-cash costs
|
|
|
1.86
|
|
|
|
1.83
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
5.26
|
|
|
$
|
5.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ore reserves are effective as of June 30, 2008, which is
the end of the most recent fiscal year of the operator. Metal
prices used were $2.22 per ounce of silver. |
|
(2) |
|
The ore reserves are underground minable reserves and include
factors for mining dilution and recovery. Dilution ranges from
0% to 20% of additional tonnage while recovery ranges from 80%
to 100% of the diluted tonnage and averages 85%. |
|
(3) |
|
Metallurgical recovery factor of 72% should be applied to the
silver reserve ounces. |
36
|
|
|
(4) |
|
The ore reserves were estimated by the technical staff of CBH
Resources, the mine operator, and reviewed by B. OLeary
(Mine Engineer) and J. L. Sims (Geologist) of the Companys
technical staff. |
|
(5) |
|
The proven and probable reserves are a combination of zinc, lead
and silver mineralization remnant from historic mining and new
parts or extensions of the mine. Proven and probable reserves
must be accessible as defined by the site specific conditions of
the mine. Furthermore, reserves are defined by definition
drilling on a grid of 40 meters horizontally by 20 meters
vertically and over 70% of the proven reserves are drilled on a
20 meter by 10 meter grid. |
|
(6) |
|
Includes production taxes. |
|
(7) |
|
Cash costs per ounce of silver represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations; Reconciliation of Non-GAAP Cash
Costs to GAAP Production Costs. |
|
(8) |
|
Broken Hill was sold in July 2009 therefore production totals
represent a partial year. |
Chile
Cerro Bayo Mine
In August 2010, the Company sold its subsidiary
Compañía Minera Cerro Bayo Ltda. (Minera Cerro
Bayo), which controls the Cerro Bayo mine in southern
Chile, to Mandalay Resources Corporation (Mandalay).
Under the terms of the agreement, the Company received the
following from Mandalay in exchange for all of the outstanding
shares of Minera Cerro Bayo: (i) $6.0 million in cash;
(ii) 17,857,143 common shares of Mandalay;
(iii) 125,000 ounces of silver to be delivered in six equal
quarterly installments commencing in the third quarter of 2011,
which had an estimated fair value of $2.3 million;
(iv) a 2.0% Net Smelter Royalty (NSR) on production from
Minera Cerro Bayo in excess of a cumulative 50,000 ounces of
gold and 5,000,000 ounces of silver, which had an estimated fair
value of $5.4 million; and (v) existing value-added
taxes collected from the Chilean government in excess of
$3.5 million. As part of the transaction, Mandalay agreed
to pay the next $6.0 million of reclamation costs
associated with Minera Cerro Bayos nearby Furioso
property. Any reclamation costs above that amount will be shared
equally by Mandalay and the Company. The Company realized a loss
on the sale of approximately $2.1 million, net of income
taxes. Results for the Cerro Bayo mine are included in
Note G Discontinued Operations And Assets And
Liabilites Held For Sale.
37
Year-end
Proven and Probable Ore Reserves Cerro Bayo
Mine
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
|
(1, 2, 3, 4, 5)
|
|
|
|
Proven
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
41
|
|
|
|
|
|
Ounces of silver per ton
|
|
|
8.32
|
|
|
|
|
|
Contained ounces of silver (000s)
|
|
|
345
|
|
|
|
|
|
Ounces of gold per ton
|
|
|
0.05
|
|
|
|
|
|
Contained ounces of gold
|
|
|
2,000
|
|
|
|
|
|
Probable
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
734
|
|
|
|
547
|
|
Ounces of silver per ton
|
|
|
9.86
|
|
|
|
10.18
|
|
Contained ounces of silver (000s)
|
|
|
7,242
|
|
|
|
5,564
|
|
Ounces of gold per ton
|
|
|
0.08
|
|
|
|
0.07
|
|
Contained ounces of gold
|
|
|
55,000
|
|
|
|
38,000
|
|
Proven and Probable
|
|
|
|
|
|
|
|
|
Short tons (000s)
|
|
|
775
|
|
|
|
547
|
|
Ounces of silver per ton
|
|
|
9.78
|
|
|
|
10.18
|
|
Contained ounces of silver (000s)
|
|
|
7,587
|
|
|
|
5,564
|
|
Ounces of gold per ton
|
|
|
0.07
|
|
|
|
0.07
|
|
Contained ounces of gold
|
|
|
57,000
|
|
|
|
38,000
|
|
Year-end
Mineralized Material Cerro Bayo Mine
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
Short tons (000s)
|
|
|
769
|
|
|
|
908
|
|
Ounces of silver per ton
|
|
|
10.36
|
|
|
|
9.71
|
|
Ounces of gold per ton
|
|
|
0.15
|
|
|
|
0.14
|
|
Operating
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010(8)
|
|
|
2009
|
|
|
2008
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore tons milled
|
|
|
|
|
|
|
|
|
|
|
236,403
|
|
Ore grade silver (oz./ton)
|
|
|
|
|
|
|
|
|
|
|
5.54
|
|
Ore grade gold (oz./ton)
|
|
|
|
|
|
|
|
|
|
|
0.102
|
|
Recovery silver(%)
|
|
|
|
|
|
|
|
|
|
|
93.4
|
|
Recovery gold(%)
|
|
|
|
|
|
|
|
|
|
|
90.2
|
|
Silver produced (oz.)
|
|
|
|
|
|
|
|
|
|
|
1,224,083
|
|
Gold produced (oz.)
|
|
|
|
|
|
|
|
|
|
|
21,761
|
|
Cost per Ounce
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8.56
|
|
Other cash costs(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs(7)
|
|
|
|
|
|
|
|
|
|
|
8.56
|
|
Non-cash costs
|
|
|
|
|
|
|
|
|
|
|
6.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total production costs
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
(1) |
|
Ore reserves are effective as of December 31, 2009. Metal
prices used to calculate proven and probable reserves were
$14.50 per ounce of silver and $850 per ounce of gold. |
|
(2) |
|
Ore reserves are minable reserves within underground mine
designs and include factors for mining dilution and recovery.
Veins are diluted to a minimum mining width of 2.4 meters at
zero grade. Mining recovery is 90%. |
|
(3) |
|
Metallurgical recoveries of 93.4% and 90.5% should be applied to
the contained silver and gold ounces, respectively. |
|
(4) |
|
Ore reserve estimates were prepared by J. Sims (Geologist), and
D. Duffy (Mining Engineer) of the Companys technical staff. |
|
(5) |
|
Proven and probable reserves are defined by geostatistical
methods within manual boundaries based on grade thickness
contouring. For proven reserves: An area demonstrating grade
continuity defined by two or more bounding horizontal levels of
drill holes or channel samples spaced vertically no more than
about 12.5 meters containing horizontally spaced samples less
than 5 meters apart the key feature being
confirmation on two levels. For probable reserves: An area
demonstrating grade continuity with channel sample or drill hole
spacing less than about 35 meters. Mineralized material is
similarly classified . |
|
(6) |
|
Includes production taxes. |
|
(7) |
|
Cash costs per ounce of silver or gold represent a
non-U.S.
GAAP measurement that management uses to monitor and evaluate
the performance of its mining operations. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations Reconciliation of
Non-GAAP Cash Costs to GAAP Production Costs. |
|
(8) |
|
Cerro Bayo was sold in August 2010 and there was no production
during the year prior to the sale. |
SILVER
AND GOLD DEVELOPMENT PROPERTIES
The Company had no development properties at December 31,
2010.
EXPLORATION
AND DEVELOPMENT ACTIVITY
Coeur, either directly or through its wholly-owned subsidiaries,
owns, leases or has interests in certain exploration-stage
mining properties located in the United States, Chile,
Argentina, Tanzania, Bolivia, and Mexico. Exploration and
reserve development expenditures of $18.0 million,
$15.8 million and $19.3 million were incurred by the
Company in 2010, 2009 and 2008, respectively.
The main components of the 2010 program included:
|
|
|
|
|
Drilling to extend the strike length of, and define the
Guadalupe Norte and Las Animas zones at Guadalupe in the
Palmarejo district and initial testing of several new targets in
the Palmarejo district.
|
|
|
|
Drilling to define and expand known mineralized zones in and
around the current Palmarejo surface and underground mine.
|
|
|
|
Definition drilling on two targets on the Joaquin advanced
exploration property, termed La Negra and La Morocha,
and exploration on the large Joaquin property in Argentina as
well as initial drilling on two new targets in Argentina called
Satélite and Tornado.
|
|
|
|
Initial drilling on the Raven Vein at Kensington; the first
program of drilling on this target conducted by the Company.
|
|
|
|
Drilling to test extensions of the main north-northeast
mineralized trends from Nevada Packard at Rochester.
|
Coeur plans to spend $20.7 million in exploration during
2011 with approximately 84% of the budget earmarked for
expansion of ore reserves and mineralized material at or near
its existing operations at San Bartolomé (Bolivia),
Martha (Argentina), Palmarejo (Mexico), Kensington (Alaska),
Rochester (Nevada), and on its large exploration land holdings
in Santa Cruz, Argentina.
39
Mexico
Exploration in Mexico was focused primarily in the Palmarejo
district in the state of Chihuahua. A total of $8.1 million
was spent on the program in 2010 on mapping, sampling, drill
target generation and drilling to find and define new silver and
gold mineralization. A total of 59,338 meters
(194,678 feet) was completed at Palmarejo consisting of
34,498 meters (113,182 feet) on surface and underground
platforms around the current Palmarejo surface and underground
mine. The remainder was devoted to the Guadalupe deposit area
and other, new, targets in the Palmarejo district. The budget
for 2011 for exploration in Mexico is similar to 2010 at
$8.5 million of which nearly 89% is to be allocated to
Palmarejo.
In 2010 the company agreed to sell its interest in 8 mining
concessions at the El Realito property, which is located about
30 kilometers south of the Palmarejo mill facilities, for a
total of $0.5 million and a graduated net smelter return
royalty.
USA
Kensington
Exploration in 2010 consisted of drilling 35 core holes,
totaling 21,539 feet (6,565 meters), at Kensington. This
work was devoted to the Raven vein which is parallel to and
approximately 2,000 feet (600 meters) west of the main
Kensington mine area. The Company plans for an additional
drilling program in 2011 on Raven and other targets with a
budget of $2.9 million.
USA
Rochester
The Company conducted a drilling program at the Nevada Packard
deposit area in 2010. This program, amounting to
13,980 feet (4,261 meters) of angled, reverse circulation
drill holes, was focused on testing northern extensions of the
main mineralized trends in the Nevada Packard deposit. The
Company has allocated $0.4 million for exploration in 2011
at the greater Rochester property, including
follow-up on
2010 drilling results at Nevada Packard.
Chile
Other Properties
The 2011 exploration budget for Chile is expected to be
$0.4 million.
In 2010 the Company agreed to sell its wholly-owned Puchuldiza
gold property in northern Chile for a total of $1.5 million
cash, 500,000 paid up shares of Southern Legacy Inc., and a 1.5%
net smelter return royalty on future mineral production with a
cap of $5.0 million.
Argentina
Martha Mine
In 2010, the Companys exploration efforts at the Martha
Mine consisted of 7,274 feet (2,217 meters) of core
drilling in several locations around the mine.
Argentina
Other Properties
The Company also continued exploration in other parts of the
Santa Cruz Province. Activities focused on the Joaquin, Tornado
and Satélite properties. A total of over 62,228 feet
of drilling (18,967 meters) was completed on these three areas.
Drilling at Joaquin during 2010 continued to return encouraging
results on two targets: La Negra and La Morocha.
Joaquin is located about 80 kilometers north of the Martha mine,
and the Company has an option to earn up to a 71% managing
interest in a joint venture with property owners Mirasol
Resources Ltd. Additional exploratory and definition drilling
will continue in 2011 on in this property. In 2010, the company
met its obligations, under its agreement with Mirasol, to earn
an initial 51% joint venture interest in the 92+ square mile
(24,000+ hectare) property.
The Company has budgeted $6.1 million for exploration
during 2011 in Argentina, including on Martha, Joaquin, Tornado,
and Satélite.
40
Africa,
Tanzania
During 2010 the company continued to wind-down its activities in
Tanzania.
|
|
Item 3.
|
Legal
Proceedings.
|
For a discussion of legal proceedings, see
Note U Litigation and Other Events to our
financial statements included herein.
|
|
Item 4.
|
(Removed
and Reserved).
|
PART II
|
|
Item 4.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Number
|
|
|
|
|
|
|
Total Number
|
|
(or Approximate
|
|
|
|
|
|
|
Shares (or
|
|
Dollar Value) of
|
|
|
|
|
|
|
Sold as
|
|
Shares (or Units)
|
|
|
Total Number of
|
|
Average Price
|
|
Part of Publicly
|
|
That May Yet be
|
|
|
Shares (or Units)
|
|
Received per Share
|
|
Announced
|
|
Sold Under the
|
Period
|
|
Sold
|
|
(or Unit)
|
|
or Programs
|
|
Plans or Programs
|
|
10/1/10 - 10/31/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/1/10 - 11/30/10(1)
|
|
|
2,885
|
|
|
|
9.37
|
|
|
|
|
|
|
|
|
|
12/1/10 - 12/31/10(1)
|
|
|
962
|
|
|
|
9.37
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,847
|
|
|
|
9.37
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Exercise of Employee Options. |
The Companys common stock is listed on the New York Stock
Exchange (the NYSE) and the Toronto Stock Exchange
(TSX). The Company voluntarily ceased to list its
common stock on the Australian Stock Exchange (ASX)
effective December 14, 2010. The following table sets
forth, for the periods indicated, the high and low closing sales
prices of the common stock as reported by the NYSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
20.39
|
|
|
$
|
13.41
|
|
|
$
|
9.80
|
|
|
$
|
5.80
|
|
Second Quarter
|
|
$
|
19.14
|
|
|
$
|
13.96
|
|
|
$
|
16.70
|
|
|
$
|
10.00
|
|
Third Quarter
|
|
$
|
20.17
|
|
|
$
|
14.02
|
|
|
$
|
21.56
|
|
|
$
|
10.51
|
|
Fourth Quarter
|
|
$
|
28.20
|
|
|
$
|
19.11
|
|
|
$
|
24.29
|
|
|
$
|
17.96
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter through February 25, 2011
|
|
$
|
27.77
|
|
|
$
|
22.46
|
|
|
|
|
|
|
|
|
|
The Company has not paid per share cash distributions or
dividends on its common stock since 1996. Future distributions
or dividends on the common stock, if any, will be determined by
the Companys Board of Directors and will depend upon the
Companys results of operations, financial conditions,
capital requirements and other factors.
On February 25, 2011, there were outstanding
89,517,575 shares of the Companys common stock which
were held by approximately 3,042 stockholders of record.
41
STOCK
PERFORMANCE CHART
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG COEUR DALENE MINES CORPORATION,
S&P 500 INDEX AND PEER GROUP INDEX
The following performance graph compares the performance of the
Companys common stock during the period beginning
December 31, 2005 and ending December 31, 2010 to the
S&P 500 and a Peer Group Index consisting of the following
companies: Agnico Eagle Mines, Goldcorp, Hecla Mining Co.,
IAMGold, Kinross Gold Corp., Northgate Minerals, Pan American
Silver Corp., Centerra Gold, Inc, and Stillwater Mining Co. for
the same period. The graph assumes a $100 investment in the
Companys Common Stock and in each of the indexes at the
beginning of the period, and a reinvestment of dividends paid on
such investments throughout the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
|
|
|
Dec.
|
|
|
Dec.
|
|
|
Dec.
|
|
|
Dec.
|
|
|
Dec.
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
Coeur dAlene Mines Corporation
|
|
|
|
100.00
|
|
|
|
|
123.75
|
|
|
|
|
123.49
|
|
|
|
|
22.00
|
|
|
|
|
45.15
|
|
|
|
|
68.29
|
|
S&P 500 Index
|
|
|
|
100.00
|
|
|
|
|
115.79
|
|
|
|
|
122.16
|
|
|
|
|
76.97
|
|
|
|
|
97.32
|
|
|
|
|
111.98
|
|
Peer Group Only
|
|
|
|
100.00
|
|
|
|
|
121.65
|
|
|
|
|
145.66
|
|
|
|
|
119.72
|
|
|
|
|
153.92
|
|
|
|
|
187.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This stock performance information is furnished and
shall not be deemed to be soliciting material or
subject to Rule 14A, shall not be deemed filed
for purposes of Section 18 of the Exchange Act or otherwise
subject to the liabilities of that section, and shall not be
deemed incorporated by reference in any filing under the
Securities Act of 1933, as amended, or the Exchange Act, whether
made before or after the date of this report and irrespective of
any general incorporation by reference language in any such
filing, except to the extent that it specifically incorporates
the information by reference.
42
|
|
Item 6.
|
Selected
Financial Data
|
The following table summarizes certain selected consolidated
financial data with respect to the Company and should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto appearing elsewhere in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Data:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Sales of metal
|
|
$
|
515,457
|
|
|
$
|
300,361
|
|
|
$
|
129,285
|
|
|
$
|
146,923
|
|
|
$
|
142,489
|
|
Production costs applicable to sales
|
|
|
(257,636
|
)
|
|
|
(191,311
|
)
|
|
|
(78,652
|
)
|
|
|
(78,139
|
)
|
|
|
(60,234
|
)
|
Depreciation and depletion
|
|
|
(141,619
|
)
|
|
|
(81,376
|
)
|
|
|
(16,499
|
)
|
|
|
(11,669
|
)
|
|
|
(15,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
116,202
|
|
|
|
27,674
|
|
|
|
34,134
|
|
|
|
57,115
|
|
|
|
66,398
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and general
|
|
|
24,176
|
|
|
|
22,070
|
|
|
|
25,825
|
|
|
|
22,822
|
|
|
|
17,960
|
|
Exploration
|
|
|
14,249
|
|
|
|
13,056
|
|
|
|
17,838
|
|
|
|
9,034
|
|
|
|
6,836
|
|
Care and maintenance and other
|
|
|
1,987
|
|
|
|
1,371
|
|
|
|
124
|
|
|
|
939
|
|
|
|
1,380
|
|
Pre-development
|
|
|
890
|
|
|
|
97
|
|
|
|
16,950
|
|
|
|
|
|
|
|
|
|
Litigation settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
507
|
|
|
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
41,302
|
|
|
|
36,594
|
|
|
|
60,737
|
|
|
|
33,302
|
|
|
|
28,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
74,900
|
|
|
|
(8,920
|
)
|
|
|
(26,603
|
)
|
|
|
23,813
|
|
|
|
37,857
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (loss) on debt extinguishments
|
|
|
(20,300
|
)
|
|
|
31,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments, net
|
|
|
(117,094
|
)
|
|
|
(82,227
|
)
|
|
|
1,756
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
771
|
|
|
|
1,648
|
|
|
|
4,023
|
|
|
|
16,605
|
|
|
|
17,845
|
|
Interest expense, net of capitalized interest
|
|
|
(30,942
|
)
|
|
|
(18,102
|
)
|
|
|
(4,726
|
)
|
|
|
(342
|
)
|
|
|
(1,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(167,565
|
)
|
|
|
(67,153
|
)
|
|
|
1,053
|
|
|
|
16,263
|
|
|
|
16,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(92,665
|
)
|
|
|
(76,073
|
)
|
|
|
(25,550
|
)
|
|
|
40,076
|
|
|
|
54,561
|
|
Income tax benefit (provision)
|
|
|
9,481
|
|
|
|
33,071
|
|
|
|
17,387
|
|
|
|
(8,988
|
)
|
|
|
(6,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(83,184
|
)
|
|
|
(43,002
|
)
|
|
|
(8,163
|
)
|
|
|
31,088
|
|
|
|
47,697
|
|
Income (loss) from discontinued operations
|
|
|
(6,029
|
)
|
|
|
(9,601
|
)
|
|
|
7,536
|
|
|
|
12,803
|
|
|
|
29,657
|
|
Gain (loss) on sale of net assets of discontinued operation
|
|
|
(2,095
|
)
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
|
11,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(91,308
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(627
|
)
|
|
$
|
43,891
|
|
|
$
|
88,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(5
|
)
|
|
|
|
|
|
|
(634
|
)
|
|
|
86
|
|
|
|
2,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
(91,313
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(1,261
|
)
|
|
$
|
43,977
|
|
|
$
|
90,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Income (Loss) Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(0.95
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
1.09
|
|
|
$
|
1.76
|
|
Income (loss) from discontinued operations
|
|
|
(0.10
|
)
|
|
|
0.22
|
|
|
|
0.14
|
|
|
|
0.44
|
|
|
|
1.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1.05
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.53
|
|
|
$
|
3.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations(3),(4)
|
|
$
|
(0.95
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
1.00
|
|
|
$
|
1.61
|
|
Income (loss) from discontinued operations(3),(4)
|
|
|
(0.10
|
)
|
|
|
0.22
|
|
|
|
0.14
|
|
|
|
0.41
|
|
|
|
1.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1.05
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
1.41
|
|
|
$
|
2.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
87,185
|
|
|
|
71,565
|
|
|
|
55,073
|
|
|
|
28,597
|
|
|
|
27,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
87,185
|
|
|
|
71,565
|
|
|
|
55,073
|
|
|
|
31,052
|
|
|
|
29,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:(2)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Total assets
|
|
$
|
3,157,527
|
|
|
$
|
3,054,035
|
|
|
$
|
2,928,121
|
|
|
$
|
2,651,694
|
|
|
$
|
849,626
|
|
Working capital
|
|
$
|
(4,506
|
)
|
|
$
|
(2,572
|
)
|
|
$
|
(8,533
|
)
|
|
$
|
152,390
|
|
|
$
|
383,082
|
|
Long-term liabilities
|
|
$
|
846,043
|
|
|
$
|
867,381
|
|
|
$
|
981,225
|
|
|
$
|
812,650
|
|
|
$
|
210,117
|
|
Shareholders equity
|
|
$
|
2,040,767
|
|
|
$
|
1,998,046
|
|
|
$
|
1,785,912
|
|
|
$
|
1,727,367
|
|
|
$
|
580,994
|
|
|
|
|
(1) |
|
In May 2009, Coeur Board of Directors authorized a
1-for-10
reverse stock split which became effective on May 26, 2009.
Consequently, previously reported amounts for weighted average
number of shares of common stock have been adjusted to reflect
the 1-for-10
reverse stock split. |
|
(2) |
|
On December 21, 2007, the Company completed its acquisition
of all the shares of Bolnisi Gold NL and Palmarejo Silver and
Gold Corporation in exchange for a total of approximately
272 million shares of Coeur common stock and a total cash
payment of approximately $1.1 million. The value of the
total consideration paid amounted to $1.1 billion and the
total liabilities assumed were $0.7 billion. |
|
(3) |
|
Effective July 1, 2009, the Company sold to Perilya Broken
Hill Ltd. its 100% interest in the silver contained at the
Broken Hill mine for $55.0 million in cash. Coeur
originally purchased this interest from Perilya Broken Hill,
Ltd. in September 2005 for $36.9 million. As a result of
this transaction, the Company realized a gain on the sale of
approximately $25.5 million, net of income taxes in 2009. |
|
(4) |
|
In August 2010, the Company sold its 100% interest in subsidiary
Compañía Minera Cerro Bayo (Minera Cerro
Bayo) to Mandalay Resources Corporation
(Mandalay). Under the terms of the agreement, Coeur
received the following from Mandalay in exchange for all of the
outstanding shares of Minera Cerro Bayo;
(i) $6.0 million in cash; (ii) 17,857,143 common
shares of Mandalay; (iii) 125,000 ounces of silver to be
delivered in six equal quarterly installments commencing in the
third quarter of 2011, which had an estimated fair value of
$2.3 million; (iv) a 2.0% Net Smelter Royalty (NSR) on
production from Minera Cerro Bayo in excess of a cumulative
50,000 ounces of gold and 5,000,000 ounces of silver, which had
an estimated fair value of $5.4 million; and
(v) existing value added taxes collected from the Chilean
government in excess of $3.5 million. As part of the
transaction, Mandalay agreed to pay the next $6.0 million
of reclamation costs associated with Minera Cerro Bayos
nearby Furioso property. Any reclamation costs above that amount
will be shared equally by Mandalay and Coeur. The Company
realized a loss on the sale of approximately $2.1 million,
net of income taxes. |
|
|
Item 7.
|
Managements
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 dAlene Mines Corporation and its subsidiaries for
the three years ended December 31, 2010. It consists of the
following subsections:
|
|
|
|
|
Overview which provides a brief summary of the
Companys financial position and the primary factors
affecting those results.
|
|
|
|
Critical Accounting Policies which provides a
discussion of the accounting policies Coeur considers critical
because of their effect on the reported amounts of assets,
liabilities, income
and/or
expenses in the Companys consolidated financial statements
and/or
because they require different objectives or complex judgments
by management.
|
|
|
|
Operating statistics and ore reserve estimates which
provides a summary of the consolidated production results for
the three years ended December 31, 2010 and discussion of
Coeurs reported ore reserves.
|
|
|
|
Results of operations which sets forth an analysis
of the operating results for the last three years.
|
|
|
|
Liquidity and capital resources which contains a
discussion of the Companys cash flows and liquidity,
investing activities and financing activities, contractual
obligations and environmental compliance expenditures.
|
|
|
|
Recently issued accounting pronouncements, which
summarizes recently published authoritative accounting guidance,
how it might apply to Coeur, and how it might affect the
Companys future results.
|
44
Overview
The Company is a large primary silver producer with growing gold
production and has assets located in the United States, Mexico,
Bolivia, Argentina and Australia. The San Bartolomé
mine, Palmarejo mine, Kensington mine, Rochester mine, and
Martha mine, each of which is operated by the Company, and the
Endeavor mine, which is operated by a non-affiliated party,
constituted the Companys principal sources of mining
revenues during 2010. The Kensington mine, the Companys
newest operating mine, began processing ore on June 24,
2010 and began commercial production July 3, 2010. The
Company sold its Cerro Bayo mine in Chile in August 2010. Coeur
is an Idaho corporation incorporated in 1928.
The Companys business strategy is to discover, acquire,
develop and operate low-cost silver and gold operations that
will produce long-term cash flow, provide opportunities for
growth through continued exploration, and generate superior and
sustainable returns for shareholders. The Companys
management focuses on maximizing cash flow from its existing
operations, the main elements of which are silver and gold
prices, cash costs of production and capital expenditures. The
Company also focuses on reducing its non-operating costs in
order to maximize cashflow.
The results of the Companys operations are significantly
affected by fluctuation in prices of silver and gold, which may
fluctuate widely and are affected by numerous factors beyond its
control, including interest rates, expectations regarding
inflation, currency values, governmental decisions regarding the
disposal of precious metals stockpiles, global and regional
political and economic conditions and other factors. In
addition, The company faces challenges including raising
capital, increasing production and managing social, political
and environmental issues. Operating costs at the Companys
mines are subject to variation due to a number of factors such
as changing commodity prices, ore grades, metallurgy, revisions
to mine plans and changes in accounting principles. At foreign
locations, operating costs are also influenced by currency
fluctuations that may affect its U.S. dollar costs.
Highlights during 2010:
|
|
|
|
|
Silver and gold prices averaged $20.15 per ounce and $1,225 per
ounce in 2010, respectively. Silver hit a high of $30.64 per
ounce on December 29, 2010 and a low of $14.78 per ounce on
February 5, 2010. Gold hit a high of $1,421.00 per ounce on
November 9, 2010 and a low of $1,058.00 per ounce on
February 5, 2010.
|
|
|
|
The Company produced a total of 16.8 million ounces of
silver during 2010, which was a 0.6% decrease from 2009. The
Company produced 157,062 ounces of gold during 2010, which was a
117.8% increase over 2009.
|
|
|
|
The Company experienced a 71.6% increase in metal sales to
$515.5 million.
|
|
|
|
Net cash provided by operating activities in 2010 was
$165.6 million, compared to $60.1 million in 2009.
|
|
|
|
The Company spent $156.0 million in capital expenditures,
which represents a 28.5% decrease from 2009.
|
|
|
|
The Kensington mine began processing ore on June 24, 2010
and began commercial production July 3, 2010. Kensington
produced 43,143 ounces of gold during 2010.
|
|
|
|
San Bartolomé produced 6.7 million ounces of
silver during 2010, with cash operating costs of $7.87 per
silver ounce. See discussion in Item 2.
Properties Silver and Gold Mining
Properties Bolivia San Bartolomé
for further details.
|
Critical
Accounting Policies and Estimates
Management considers the following policies to be most critical
in understanding the judgments that are involved in preparing
the Companys consolidated financial statements and the
uncertainties that could impact its results of operations,
financial condition and cash flows. The Companys
consolidated financial statements are affected by the accounting
policies used and the estimates and assumptions made by
management during their preparation. The Company has identified
the policies below as critical to its business operations and
the understanding of its results of operations. The information
provided herein is based on the Companys consolidated
financial statements, which have been prepared in accordance
with U.S. GAAP. The preparation of these statements
requires that the Company make estimates and assumptions that
affect the reported amounts of assets and liabilities,
45
disclosure of contingent assets and liabilities at the date of
its financial statements, and the reported amounts of revenue
and expenses during the reporting period. The Company bases
these estimates on historical experience and on assumptions that
it consider reasonable under the circumstances; however,
reported results could differ from those based on the current
estimates under different assumptions or conditions. The effects
and associated risks of these policies on its business
operations are discussed throughout this discussion and
analysis. The areas requiring the use of managements
estimates and assumptions relate to recoverable ounces from
proven and probable reserves that are the basis of future cash
flow estimates and
units-of-production
depreciation and amortization calculations; useful lives
utilized for depreciation, depletion, and long lived assets;
estimates of recoverable gold and silver ounces in ore on leach
pad; reclamation and remediation costs; valuation allowance for
deferred tax assets; and post-employment and other employee
benefit liabilities. For a detailed discussion on the
application of these and other accounting policies, see
Note C Summary of Significant Accounting
Policies to our financial statements included herein.
Revenue Recognition. Revenue includes sales
value received for the Companys principal product, silver,
and associated by-product revenues from the sale of by-product
metals consisting primarily of gold. Revenue is recognized when
title to silver and gold passes to the buyer and when
collectability is reasonably assured. Title passes to the buyer
based on terms of the sales contract. Product pricing is
determined at the point revenue is recognized by reference to
active and freely traded commodity markets, for example, the
London Bullion Market for both gold and silver, in an identical
form to the product sold.
Under the Companys concentrate sales contracts with
third-party smelters, final gold and silver prices are set on a
specified future quotational period, typically one to three
months, after the shipment date based on market metal prices.
Revenues are recorded under these contracts at the time title
passes to the buyer based on the forward price for the expected
settlement period. The contracts, in general, provide for
provisional payment based upon provisional assays and quoted
metal prices. Final settlement is based on the average
applicable price for the specified future quotational period and
generally occurs from three to six months after shipment. Final
sales are settled using smelter weights and settlement assays
(average of assays exchanged
and/or
umpire assay results) and are priced as specified in the smelter
contract. The Companys provisionally priced sales contain
an embedded derivative that is required to be separated from the
host contract for accounting purposes. The host contract is the
receivable from the sale of concentrates at the forward price at
the time of sale. The embedded derivative does not qualify for
hedge accounting. The embedded derivative is recorded as a
derivative asset in prepaid expenses and other assets or as a
derivative liability in accrued liabilities and other on the
balance sheet and is adjusted to fair value through revenue each
period until the date of final gold and silver settlement. The
form of the material being sold, after deduction for smelting
and refining, is in an identical form to that sold on the London
Bullion Market. The form of the product is metal in flotation
concentrate, which is the final process for which the Company is
responsible.
The effects of forward sales contracts are reflected in revenue
at the date the related precious metals are delivered.
Third-party smelting and refining costs are recorded as a
reduction of revenue.
At December 31, 2010, the Company had outstanding
provisionally priced sales of $35.7 million consisting of
0.6 million ounces of silver and 12,758 ounces of gold,
which had a fair value of approximately $37.4 million
including the embedded derivative. For each one cent per ounce
change in realized silver price, revenue would vary (plus or
minus) approximately $6,000 and for each one dollar per ounce
change in realized gold price, revenue would vary (plus or
minus) approximately $12,800. At December 31, 2009, the
Company had outstanding provisionally priced sales of
$19.1 million consisting of 1.0 million ounces of
silver and 1,227 ounces of gold, which had a fair value of
approximately $19.1 million including the embedded
derivative. For each one cent per ounce change in realized
silver price, revenue would vary (plus or minus) approximately
$10,000 and for each one dollar per ounce change in realized
gold price, revenue would vary (plus or minus) approximately
$1,200.
Estimates. The preparation of the
Companys consolidated financial statements in conformity
with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at
the date of its financial statements, and the reported amounts
of revenue and expenses during the reporting period. There can
be no assurance that actual results will not differ from those
estimates. The most critical accounting principles upon which
the Companys financial status
46
depends are those requiring estimates of recoverable ounces from
proven and probable reserves
and/or
assumptions of future commodity prices. There are a number of
uncertainties inherent in estimating quantities of reserves,
including many factors beyond the Companys control. Ore
reserve estimates are based upon engineering evaluations of
samplings of drill holes and other openings. These estimates
involve assumptions regarding future silver and gold prices, the
geology of its mines, the mining methods it uses and the related
costs it incurs to develop and mine its reserves. Changes in
these assumptions could result in material adjustments to the
Companys reserve estimates. The Company uses reserve
estimates in determining the
units-of-production
depreciation and amortization expense, as well as in evaluating
mine asset impairments.
The Company reviews and evaluates its long-lived assets for
impairment when events or changes in circumstances indicate that
the related carrying amounts may not be recoverable. An
impairment is considered to exist if total estimated future cash
flows or probability-weighted cash flows on an undiscounted
basis are less than the carrying amount of the assets, including
property, plant and equipment, mineral property, development
property, and any deferred costs. The accounting estimates
related to impairment are critical accounting estimates because
the future cash flows used to determine whether an impairment
exists is dependent on reserve estimates and other assumptions,
including silver and gold prices, production levels, and capital
and reclamation costs, all of which are based on detailed
engineering
life-of-mine
plans.
The Company depreciates its property, plant and equipment,
mining properties and mine development using the
units-of-production
method over the estimated life of the ore body based on its
proven and probable recoverable reserves or on a straight-line
basis over the useful life, whichever is shorter. The accounting
estimates related to depreciation and amortization are critical
accounting estimates because 1) the determination of
reserves involves uncertainties with respect to the ultimate
geology of its reserves and the assumptions used in determining
the economic feasibility of mining those reserves and
2) changes in estimated proven and probable reserves and
useful asset lives can have a material impact on net income.
Ore on leach pad. The heap leach process is a
process of extracting silver and gold by placing ore on an
impermeable pad and applying a diluted cyanide solution that
dissolves a portion of the contained silver and gold, which are
then recovered in metallurgical processes. In August 2007, the
Company terminated mining and crushing operations at the
Rochester mine as ore reserves were fully mined. Residual heap
leach activities are expected to continue through 2014. The
Company is working towards a potential restart of active mining
at the Rochester mine in 2011. In furtherance of that, the
Company recently completed a feasibility study and in October
2010 the Company received a key permitting decision record from
the Bureau of Land Management (BLM) to support the resumption of
active mining operations.
The Company uses several integrated steps to scientifically
measure the metal content of ore placed on the leach pads. As
the ore body is drilled in preparation for the blasting process,
samples are taken of the drill residue which were assayed to
determine estimated quantities of contained metal. The Company
estimates the quantity of ore by utilizing global positioning
satellite survey techniques. The Company then processes the ore
through crushing facilities where the output is again weighed
and sampled for assaying. A metallurgical reconciliation with
the data collected from the mining operation is completed with
appropriate adjustments made to previous estimates. The crushed
ore is then transported to the leach pad for application of the
leaching solution. As the leach solution is collected from the
leach pads, it is continuously sampled for assaying. The
quantity of leach solution is measured by flow meters throughout
the leaching and precipitation process. After precipitation, the
product is converted to doré, which is the final product
produced by the mine. The inventory is stated at lower of cost
or market, with cost being determined using a weighted average
cost method.
The Company reported ore on leach pad of $18.0 million as
of December 31, 2010. Of this amount, $8.0 million is
reported as a current asset and $10.0 million is reported
as a non-current asset. The distinction between current and
non-current is based upon the expected length of time necessary
for the leaching process to remove the metals from the broken
ore. The historical cost of the metal that is expected to be
extracted within twelve months is classified as current and the
historical cost of metals contained within the broken ore that
will be extracted beyond twelve months is classified as
non-current. Inventories of ore on leach pad are valued based on
actual production costs incurred to produce and place ore on the
leach pad, adjusted for effects on monthly production of costs
of abnormal production levels, less costs allocated to minerals
recovered through the leach process.
47
The estimate of both the ultimate recovery expected over time
and the quantity of metal that may be extracted relative to the
time the leach process occurs requires the use of estimates
which are inherently inaccurate since they rely upon laboratory
testwork. Testwork consists of 60 day leach columns from
which the Company projects metal recoveries up to five years in
the future. The quantities of metal contained in the ore are
estimated based upon actual weights and assay analysis. The rate
at which the leach process extracts gold and silver from the
crushed ore is based upon laboratory column tests and actual
experience occurring over more than twenty years of leach pad
operations at the Rochester mine. The assumptions used by the
Company to measure metal content during each stage of the
inventory conversion process includes estimated recovery rates
based on laboratory testing and assaying. The Company
periodically reviews its estimates compared to actual experience
and revises its estimates when appropriate. The Company believes
its current residual heap leach activities are expected to
continue through 2014. The ultimate recovery will not be known
until leaching operations cease. If its estimate of ultimate
recovery requires adjustment, the impact upon its valuation and
upon its income statement would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Positive/Negative
|
|
Positive/Negative
|
|
|
Change in Silver Recovery
|
|
Change in Gold Recovery
|
|
|
1%
|
|
2%
|
|
3%
|
|
1%
|
|
2%
|
|
3%
|
|
Quantity of recoverable ounces
|
|
|
1.7 million
|
|
|
|
3.5 million
|
|
|
|
5.2 million
|
|
|
|
13,240
|
|
|
|
26,480
|
|
|
|
39,720
|
|
Positive impact on future cost of production per silver
equivalent ounce for increases in recovery rates
|
|
$
|
1.91
|
|
|
$
|
2.84
|
|
|
$
|
3.38
|
|
|
$
|
0.89
|
|
|
$
|
1.53
|
|
|
$
|
2.01
|
|
Negative impact on future cost of production per silver
equivalent ounce for decreases in recovery rates
|
|
$
|
6.25
|
|
|
$
|
12.04
|
|
|
$
|
12.04
|
|
|
$
|
1.31
|
|
|
$
|
2.52
|
|
|
$
|
2.52
|
|
Inventories of ore on leach pads are valued based upon actual
production costs incurred to produce and place such ore on the
leach pad during the current period, adjusted for the effects on
monthly production of costs of abnormal production levels, less
costs allocated to minerals recovered through the leach process.
The costs consist of those production activities occurring at
the mine site and include the costs, including depreciation,
associated with mining, crushing and precipitation circuits. In
addition, refining is provided by a third-party refiner to place
the metal extracted from the leach pad in a saleable form. These
additional costs are considered in the valuation of inventory.
Reclamation and remediation costs. The Company
recognizes obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. These legal obligations are associated with the
retirement of long-lived assets that result from the
acquisition, construction, development and normal use of the
asset. The fair value of a liability for an asset retirement
obligation will be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of
the associated asset and this additional carrying amount is
depreciated over the life of the asset. An accretion cost,
representing the increase over time in the present value of the
liability, is recorded each period in depreciation, depletion
and amortization expense. As reclamation work is performed or
liabilities are otherwise settled, the recorded amount of the
liability is reduced.
Future remediation costs for inactive mines are accrued based on
managements best estimate at the end of each period of the
undiscounted costs expected to be incurred at the site. Such
cost estimates include, where applicable, ongoing care and
maintenance and monitoring costs. Changes in estimates are
reflected in earnings in the period an estimate is revised.
Income taxes. The Company computes income
taxes using an asset and liability approach which results in the
recognition of deferred tax liabilities and assets for the
expected future tax consequences or benefits of temporary
differences between the financial reporting bases and the tax
bases of assets and liabilities, as well as operating loss and
tax credit carryforwards, using enacted tax rates in effect in
the years in which the differences are expected to reverse.
48
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of its deferred tax assets will not be
realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment. A valuation
allowance has been provided for the portion of the
Companys net deferred tax assets for which it is more
likely than not that they will not be realized.
The Company and its subsidiaries are subject to
U.S. federal income tax as well as income tax of multiple
state and foreign jurisdictions. The Company has substantially
concluded all U.S. federal income tax matters for years
through 1999. Federal income tax returns for 2000 through 2009
are subject to examination. The Companys practice is to
recognize interest
and/or
penalties related to income tax matters in income tax expense.
There were no significant accrued interest or penalties at
December 31, 2010.
Mine
Safety Disclosures
In July 2010, the U.S. Congress passed the Dodd-Frank Wall
Street Reform and Consumer Protection Act. The following mine
safety information is provided pursuant to this legislation.
Two of the Companys mines, the Kensington mine and the
Rochester mine, are subject to the Federal Mine Safety and
Health Act of 1977 (FMSHA). The FMSHA is
administered by the Mine Safety and Health Administration
(MSHA).
During 2010 MSHA proposed penalties of $5,198 against the
Kensington mine, issued eleven citations pursuant to
Section 104 of FMSHA for violations of mandatory health or
safety standards that could significantly and substantially
contribute to a mine safety or health hazard. With respect to
the Rochester mine, MSHA proposed penalties of $4,525 in 2010,
and issued eight citations pursuant to Section 104,
including one citation pursuant to Section 104(d) of FMSHA
for unwarrantable failures to comply with mandatory health or
safety standards.
Neither the Kensington mine nor the Rochester mine experienced
mining-related fatalities during 2010 nor received written
notice from MSHA pursuant to Section 104(e) of FMSHA of a
pattern of violations of mandatory health or safety standards or
the potential for such a pattern and issued. No orders were
issued to either mine pursuant to Section 104(b) of FMSHA.
MSHA did not deem any violations as flagrant pursuant to
Section 110(b)(2) of MSHA and issued no imminent danger
orders under Section 107(a) of FMSHA at either mine.
The Company has three legal actions pending before the Federal
Mine Health Safety Review Commission, one involving the
Kensington mine, located 45 miles northwest of Juneau
Alaska and two involving the Rochester mine, which is located
25 miles east of Lovelock Nevada. On October 26, 2010
the Company contested a citation issued by MSHA as to the
Kensington mine alleging the Company failed to report an
inundation of gases in the mine in a timely manner following a
blast. On March 26, 2010 the Company contested two
citations issued by MSHA as to the Rochester Mine. The Rochester
citations are related to the same issue as to what constitutes
proper and adequate monitoring of control measures for dust,
gas, mist and fume at the mines processing facility.
Operating
Statistics and Ore Reserve Estimates
The Companys total production, excluding discontinued
operations in 2010 was 16.8 million ounces of silver and
157,062 ounces of gold, compared to 16.9 million ounces of
silver and 72,112 ounces of gold in 2009. Total estimated proven
and probable reserves at December 31, 2010 were
approximately 227.1 million ounces of silver and
2.5 million ounces of gold, compared to silver and gold ore
reserves at December 31, 2009 of approximately
269.2 million ounces and 2.9 million ounces,
respectively.
49
The following table shows the estimated amounts of proven and
probable ore reserves and mineralized material at the following
Company locations at year-end 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proven and Probable Ore Reserves
|
|
|
Mineralized Material
|
|
|
|
(000s)
|
|
|
Grade
|
|
|
Grade
|
|
|
(000s)
|
|
|
(000s)
|
|
|
(000s)
|
|
|
Grade
|
|
|
Grade
|
|
|
|
Tons
|
|
|
Ag oz/t
|
|
|
Au oz/t
|
|
|
Ounces Ag
|
|
|
Ounces Au
|
|
|
Tons
|
|
|
Ag oz/t
|
|
|
Au oz/t
|
|
|
Palmarejo
|
|
|
13,668
|
|
|
|
5.25
|
|
|
|
0.06
|
|
|
|
71,758
|
|
|
|
870
|
|
|
|
4,503
|
|
|
|
3.70
|
|
|
|
0.04
|
|
San Bartolomé
|
|
|
28,078
|
|
|
|
3.81
|
|
|
|
|
|
|
|
107,018
|
|
|
|
|
|
|
|
36,953
|
|
|
|
1.75
|
|
|
|
|
|
Kensington
|
|
|
5,937
|
|
|
|
|
|
|
|
0.24
|
|
|
|
|
|
|
|
1,410
|
|
|
|
2,505
|
|
|
|
|
|
|
|
0.19
|
|
Rochester
|
|
|
48,271
|
|
|
|
0.57
|
|
|
|
0.01
|
|
|
|
27,556
|
|
|
|
247
|
|
|
|
215,603
|
|
|
|
0.44
|
|
|
|
0.00
|
|
Mina Martha
|
|
|
45
|
|
|
|
18.61
|
|
|
|
0.02
|
|
|
|
828
|
|
|
|
1
|
|
|
|
39
|
|
|
|
14.02
|
|
|
|
0.01
|
|
Endeavor
|
|
|
7,077
|
|
|
|
2.82
|
|
|
|
|
|
|
|
19,939
|
|
|
|
|
|
|
|
16,535
|
|
|
|
1.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
103,076
|
|
|
|
|
|
|
|
|
|
|
|
227,099
|
|
|
|
2,528
|
|
|
|
276,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tons
|
|
|
Ag oz/t
|
|
|
Au oz/t
|
|
|
|
|
|
|
|
|
Total tons
|
|
|
Ag oz/t
|
|
|
Au oz/t
|
|
|
|
(000s)
|
|
|
(Wt. Avg.)
|
|
|
(Wt. Avg.)
|
|
|
|
|
|
|
|
|
(000s)
|
|
|
(Wt. Avg.)
|
|
|
(Wt. Avg.)
|
|
|
Summary by metal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver
|
|
|
97,138
|
|
|
|
2.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,634
|
|
|
|
0.75
|
|
|
|
|
|
Gold
|
|
|
67,921
|
|
|
|
|
|
|
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
222,650
|
|
|
|
|
|
|
|
0.01
|
|
The following table presents production information by mine and
consolidated sales information for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
PRIMARY SILVER OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmarejo(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
1,835,408
|
|
|
|
1,065,508
|
|
|
|
|
|
Ore grade/Ag oz
|
|
|
4.60
|
|
|
|
4.31
|
|
|
|
|
|
Ore grade/Au oz
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
|
|
Recovery/Ag oz (1)
|
|
|
69.8
|
%
|
|
|
66.3
|
%
|
|
|
|
|
Recovery/Au oz (1)
|
|
|
91.1
|
%
|
|
|
88.2
|
%
|
|
|
|
|
Silver production ounces(3)
|
|
|
5,887,576
|
|
|
|
3,047,843
|
|
|
|
|
|
Gold production ounces(3)
|
|
|
102,440
|
|
|
|
54,740
|
|
|
|
|
|
Cash operating costs/oz
|
|
$
|
4.10
|
|
|
$
|
9.80
|
|
|
$
|
|
|
Cash cost/oz
|
|
$
|
4.10
|
|
|
$
|
9.80
|
|
|
$
|
|
|
Total production cost/oz
|
|
$
|
19.66
|
|
|
$
|
26.80
|
|
|
$
|
|
|
San Bartolomé
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
1,504,779
|
|
|
|
1,518,671
|
|
|
|
505,514
|
|
Ore grade/Ag oz
|
|
|
5.03
|
|
|
|
5.49
|
|
|
|
7.46
|
|
Recovery/Ag oz
|
|
|
88.6
|
%
|
|
|
89.6
|
%
|
|
|
75.8
|
%
|
Silver production ounces(3)
|
|
|
6,708,775
|
|
|
|
7,469,222
|
|
|
|
2,861,500
|
|
Cash operating costs/oz
|
|
$
|
7.87
|
|
|
$
|
7.80
|
|
|
$
|
8.22
|
|
Cash cost/oz
|
|
$
|
8.67
|
|
|
$
|
10.48
|
|
|
$
|
10.53
|
|
Total production cost/oz
|
|
$
|
11.72
|
|
|
$
|
12.96
|
|
|
$
|
12.50
|
|
Rochester(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons processed
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore grade/Ag oz
|
|
|
|
|
|
|
|
|
|
|
|
|
Ore grade/Au oz
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery/Ag oz(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery/Au oz(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver production ounces(3)
|
|
|
2,023,423
|
|
|
|
2,181,788
|
|
|
|
3,033,720
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Gold production ounces(3)
|
|
|
9,641
|
|
|
|
12,663
|
|
|
|
21,041
|
|
Cash operating costs/oz
|
|
$
|
2.93
|
|
|
$
|
1.95
|
|
|
$
|
(0.75
|
)
|
Cash cost/oz
|
|
$
|
3.78
|
|
|
$
|
2.58
|
|
|
$
|
(0.03
|
)
|
Total production cost/oz
|
|
$
|
4.82
|
|
|
$
|
3.51
|
|
|
$
|
0.75
|
|
Martha
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
56,401
|
|
|
|
109,974
|
|
|
|
57,886
|
|
Ore grade/Ag oz
|
|
|
31.63
|
|
|
|
36.03
|
|
|
|
49.98
|
|
Ore grade/Au oz
|
|
|
0.04
|
|
|
|
0.05
|
|
|
|
0.07
|
|
Recovery/Ag oz
|
|
|
88.3
|
%
|
|
|
93.6
|
%
|
|
|
93.7
|
%
|
Recovery/Au oz
|
|
|
84.1
|
%
|
|
|
87.6
|
%
|
|
|
88.3
|
%
|
Silver production ounces
|
|
|
1,575,827
|
|
|
|
3,707,544
|
|
|
|
2,710,673
|
|
Gold production ounces
|
|
|
1,838
|
|
|
|
4,709
|
|
|
|
3,313
|
|
Cash operating costs/oz
|
|
$
|
13.16
|
|
|
$
|
6.19
|
|
|
$
|
6.87
|
|
Cash cost/oz
|
|
$
|
14.14
|
|
|
$
|
6.68
|
|
|
$
|
7.57
|
|
Total production cost/oz
|
|
$
|
20.02
|
|
|
$
|
8.62
|
|
|
$
|
9.38
|
|
Endeavor
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
653,550
|
|
|
|
552,799
|
|
|
|
1,030,368
|
|
Ore grade/Ag oz
|
|
|
1.96
|
|
|
|
1.67
|
|
|
|
1.41
|
|
Recovery/Ag oz
|
|
|
44.3
|
%
|
|
|
49.9
|
%
|
|
|
56.5
|
%
|
Silver production ounces
|
|
|
566,134
|
|
|
|
461,800
|
|
|
|
824,093
|
|
Cash operating costs/oz
|
|
$
|
10.15
|
|
|
$
|
6.80
|
|
|
$
|
2.55
|
|
Cash cost/oz
|
|
$
|
10.15
|
|
|
$
|
6.80
|
|
|
$
|
2.55
|
|
Total production cost/oz
|
|
$
|
13.66
|
|
|
$
|
9.55
|
|
|
$
|
4.94
|
|
GOLD OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Kensington
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
174,028
|
|
|
|
|
|
|
|
|
|
Ore grade/Au oz
|
|
|
0.28
|
|
|
|
|
|
|
|
|
|
Recovery/Au oz
|
|
|
89.9
|
%
|
|
|
|
|
|
|
|
|
Gold production ounces(3)
|
|
|
43,143
|
|
|
|
|
|
|
|
|
|
Cash operating costs/oz
|
|
$
|
988.63
|
|
|
$
|
|
|
|
$
|
|
|
Cash cost/oz
|
|
$
|
988.63
|
|
|
$
|
|
|
|
$
|
|
|
Total production cost/oz
|
|
$
|
1,393.95
|
|
|
$
|
|
|
|
$
|
|
|
CONSOLIDATED PRODUCTION TOTALS
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces(3)
|
|
|
16,761,735
|
|
|
|
16,868,197
|
|
|
|
9,429,896
|
|
Gold ounces(3)
|
|
|
157,062
|
|
|
|
72,112
|
|
|
|
24,354
|
|
Cash operating costs/oz
|
|
$
|
6.53
|
|
|
$
|
7.03
|
|
|
$
|
4.45
|
|
Cash cost per oz/silver
|
|
$
|
7.05
|
|
|
$
|
8.40
|
|
|
$
|
5.58
|
|
Total production cost/oz
|
|
$
|
14.52
|
|
|
$
|
13.19
|
|
|
$
|
7.16
|
|
CONSOLIDATED SALES TOTALS
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces sold(3)
|
|
|
17,221,335
|
|
|
|
16,310,225
|
|
|
|
8,243,096
|
|
Gold ounces sold(3)
|
|
|
130,142
|
|
|
|
65,607
|
|
|
|
25,887
|
|
Realized price per silver ounce
|
|
$
|
20.99
|
|
|
$
|
14.83
|
|
|
$
|
13.53
|
|
Realized price per gold ounce
|
|
$
|
1,236.80
|
|
|
$
|
1,002.87
|
|
|
$
|
877.55
|
|
|
|
|
(1) |
|
Palmarejo commenced commercial production on April 20,
2009. Mine statistics do not represent normal operating results |
|
|
|
(2) |
|
The leach cycle at Rochester requires 5 to 10 years to
recover gold and silver contained in the ore. The Company
estimates the metallurgical recovery to be approximately 61% for
silver and 92% for gold. Current |
51
|
|
|
|
|
recovery may vary significantly from ultimate recovery. See
Critical Accounting Policies and Estimates Ore on
Leach Pad. |
|
(C) |
|
Current production ounces and recoveries reflect final metal
settlements of previously reported production ounces. |
Operating
Statistics From Discontinued Operations
The following table presents information for Broken Hill which
was sold on July 30, 2009, effective as of July 1,
2009 and Cerro Bayo which was sold on August 9, 2010,
effective as of August 1, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Broken Hill
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
|
|
|
|
827,766
|
|
|
|
1,952,066
|
|
Ore grade/Silver oz
|
|
|
|
|
|
|
1.44
|
|
|
|
0.97
|
|
Recovery/Silver oz
|
|
|
|
|
|
|
70.6
|
%
|
|
|
72.5
|
%
|
Silver production ounces
|
|
|
|
|
|
|
842,751
|
|
|
|
1,369,009
|
|
Cash operating cost/oz
|
|
$
|
|
|
|
$
|
3.40
|
|
|
$
|
3.41
|
|
Cash cost/oz
|
|
$
|
|
|
|
$
|
3.40
|
|
|
$
|
3.41
|
|
Total cost/oz
|
|
$
|
|
|
|
$
|
5.26
|
|
|
$
|
5.24
|
|
Cerro Bayo
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons milled
|
|
|
|
|
|
|
|
|
|
|
236,403
|
|
Ore grade/Ag oz
|
|
|
|
|
|
|
|
|
|
|
5.54
|
|
Ore grade/Au oz
|
|
|
|
|
|
|
|
|
|
|
0.10
|
|
Recovery/Ag oz
|
|
|
|
|
|
|
|
|
|
|
93.4
|
%
|
Recovery/Au oz
|
|
|
|
|
|
|
|
|
|
|
90.2
|
%
|
Silver production ounces
|
|
|
|
|
|
|
|
|
|
|
1,224,084
|
|
Gold production ounces
|
|
|
|
|
|
|
|
|
|
|
21,761
|
|
Cash operating costs/oz
|
|
|
|
|
|
|
|
|
|
$
|
8.56
|
|
Cash cost/oz
|
|
|
|
|
|
|
|
|
|
$
|
8.56
|
|
Total production cost/oz
|
|
|
|
|
|
|
|
|
|
$
|
14.65
|
|
Reconciliation
of Non-GAAP Cash Costs to GAAP Production
Costs
The following table presents a reconciliation between non-GAAP
cash operating costs per ounce and cash costs per ounce to
production costs applicable to sales including depreciation,
depletion and amortization, calculated in accordance with
U.S. GAAP.
Total cash costs include all direct and indirect operating cash
costs related directly to the physical activities of producing
metals, including mining, processing and other plant costs,
third-party refining and marketing expense,
on-site
general and administrative costs, royalties and mining
production taxes, net of by-product revenues earned from all
metals other than the primary metal produced at each unit. Cash
operating costs include all cash costs except production taxes
and royalties if applicable. Total cash costs and cash operating
costs are performance measures which the Comapny believes
provide management and investors with an indication of net cash
flow, after consideration of the realized price received for
production sold. Management also uses these measurements for the
comparative monitoring of performance of its mining operations
period-to-period
from a cash flow perspective. Cash operating costs per
ounce and Total cash costs per ounce are
measures developed by precious metals companies in an effort to
provide a comparable standard, however, there can be no
assurance that the Companys reporting of these non-GAAP
measures is similar to that of other mining companies. Cash
operating costs and total cash costs, as alternative measures,
have the limitation of excluding potentially large amounts
related to inventory adjustments, non-cash charges and byproduct
credits. Management compensates for this limitation by using
both the U.S. GAAP production costs and the non-GAAP cash
costs metrics in its planning.
52
Production costs applicable to sales including depreciation,
depletion and amortization, is the most comparable financial
measure calculated in accordance with U.S. GAAP to total
cash costs. The sum of the production costs applicable to sales
and depreciation, depletion and amortization for the
Companys mines as set forth in the tables below is
included in its Consolidated Statements of Operations and
Comprehensive Loss.
Reconciliation
of Non-U.S.
GAAP Cash Costs to U.S. GAAP Production
Costs
Year
Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands except ounces and
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per ounce costs)
|
|
Palmarejo
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Total
|
|
|
Production of silver (ounces)
|
|
|
5,887,576
|
|
|
|
6,708,775
|
|
|
|
|
|
|
|
2,023,423
|
|
|
|
1,575,827
|
|
|
|
566,134
|
|
|
|
16,761,735
|
|
Production of gold (ounces)
|
|
|
|
|
|
|
|
|
|
|
43,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,143
|
|
Cash operating cost per Ag ounce
|
|
$
|
4.10
|
|
|
$
|
7.87
|
|
|
$
|
|
|
|
$
|
2.93
|
|
|
$
|
13.16
|
|
|
$
|
10.15
|
|
|
$
|
6.53
|
|
Cash costs per Ag ounce
|
|
$
|
4.10
|
|
|
$
|
8.67
|
|
|
$
|
|
|
|
$
|
3.78
|
|
|
$
|
14.14
|
|
|
$
|
10.15
|
|
|
$
|
7.05
|
|
Cash operating cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
988.63
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
988.63
|
|
Cash cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
988.63
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
988.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Cost
(Non-U.S.
GAAP)
|
|
$
|
24,164
|
|
|
$
|
52,810
|
|
|
$
|
42,652
|
|
|
$
|
5,932
|
|
|
$
|
20,730
|
|
|
$
|
5,747
|
|
|
$
|
152,035
|
|
Royalties
|
|
|
|
|
|
|
5,384
|
|
|
|
|
|
|
|
174
|
|
|
|
1,548
|
|
|
|
|
|
|
|
7,106
|
|
Production taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs
(Non-U.S.
GAAP)
|
|
|
24,164
|
|
|
|
58,194
|
|
|
|
42,652
|
|
|
|
7,646
|
|
|
|
22,278
|
|
|
|
5,747
|
|
|
|
160,681
|
|
Add/Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs
|
|
|
|
|
|
|
|
|
|
|
(4,599
|
)
|
|
|
|
|
|
|
(3,299
|
)
|
|
|
(1,544
|
)
|
|
|
(9,442
|
)
|
By-product credit
|
|
|
126,588
|
|
|
|
|
|
|
|
|
|
|
|
11,756
|
|
|
|
2,192
|
|
|
|
|
|
|
|
140,536
|
|
Other adjustments
|
|
|
131
|
|
|
|
806
|
|
|
|
|
|
|
|
211
|
|
|
|
1,422
|
|
|
|
|
|
|
|
2,570
|
|
Change in inventory
|
|
|
(23,224
|
)
|
|
|
1,022
|
|
|
|
(24,011
|
)
|
|
|
5,148
|
|
|
|
4,446
|
|
|
|
(90
|
)
|
|
|
(36,709
|
)
|
Depreciation, depletion and amortization
|
|
|
91,457
|
|
|
|
19,650
|
|
|
|
17,487
|
|
|
|
1,890
|
|
|
|
7,848
|
|
|
|
1,989
|
|
|
|
140,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP)
|
|
$
|
219,116
|
|
|
$
|
79,672
|
|
|
$
|
31,529
|
|
|
$
|
26,651
|
|
|
$
|
34,887
|
|
|
$
|
6,102
|
|
|
$
|
397,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Non-U.S.
GAAP Cash Costs to U.S. GAAP Production
Costs
Year
Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands except ounces and per ounce costs)
|
|
Palmarejo(1)
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Total
|
|
|
Production of silver (ounces)
|
|
|
3,047,843
|
|
|
|
7,469,222
|
|
|
|
|
|
|
|
2,181,788
|
|
|
|
3,707,544
|
|
|
|
461,800
|
|
|
|
16,868,197
|
|
Production of gold (ounces)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating cost per Ag ounce
|
|
$
|
9.80
|
|
|
$
|
7.80
|
|
|
$
|
|
|
|
$
|
1.95
|
|
|
$
|
6.19
|
|
|
$
|
6.80
|
|
|
$
|
7.03
|
|
Cash costs per Ag ounce
|
|
$
|
9.80
|
|
|
$
|
10.48
|
|
|
$
|
|
|
|
$
|
2.58
|
|
|
$
|
6.68
|
|
|
$
|
6.80
|
|
|
$
|
8.40
|
|
Cash operating cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Cash cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Cost
(Non-U.S.
GAAP)
|
|
$
|
29,883
|
|
|
$
|
58,293
|
|
|
$
|
|
|
|
$
|
4,236
|
|
|
$
|
22,963
|
|
|
$
|
3,142
|
|
|
$
|
118,517
|
|
Royalties
|
|
|
|
|
|
|
19,988
|
|
|
|
|
|
|
|
|
|
|
|
1,815
|
|
|
|
|
|
|
|
21,803
|
|
Production taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs
(Non-U.S.
GAAP)
|
|
|
29,883
|
|
|
|
78,281
|
|
|
|
|
|
|
|
5,637
|
|
|
|
24,778
|
|
|
|
3,142
|
|
|
|
141,721
|
|
Add/Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs
|
|
|
(1,416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,118
|
)
|
|
|
(1,035
|
)
|
|
|
(9,569
|
)
|
By-product credit(2)
|
|
|
55,386
|
|
|
|
|
|
|
|
|
|
|
|
12,335
|
|
|
|
4,615
|
|
|
|
|
|
|
|
72,336
|
|
Other adjustments
|
|
|
20
|
|
|
|
8
|
|
|
|
|
|
|
|
171
|
|
|
|
669
|
|
|
|
|
|
|
|
868
|
|
Change in inventory
|
|
|
(19,028
|
)
|
|
|
2,590
|
|
|
|
|
|
|
|
6,063
|
|
|
|
(5,048
|
)
|
|
|
(38
|
)
|
|
|
(15,461
|
)
|
Depreciation, depletion and amortization
|
|
|
51,801
|
|
|
|
18,509
|
|
|
|
|
|
|
|
1,852
|
|
|
|
6,511
|
|
|
|
1,269
|
|
|
|
79,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP)
|
|
$
|
116,646
|
|
|
$
|
99,388
|
|
|
$
|
|
|
|
$
|
26,058
|
|
|
$
|
24,407
|
|
|
$
|
3,338
|
|
|
$
|
269,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
Reconciliation
of Non-U.S.
GAAP Cash Costs to U.S. GAAP Production
Costs
Year
Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands except ounces and per ounce costs)
|
|
Palmarejo
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Total
|
|
|
Production of silver (ounces)
|
|
|
|
|
|
|
2,861,500
|
|
|
|
|
|
|
|
3,033,720
|
|
|
|
2,710,673
|
|
|
|
824,093
|
|
|
|
9,429,986
|
|
Production of gold (ounces)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash operating cost per Ag ounce
|
|
$
|
|
|
|
$
|
8.22
|
|
|
$
|
|
|
|
$
|
(0.75
|
)
|
|
$
|
6.87
|
|
|
$
|
2.55
|
|
|
$
|
4.92
|
|
Cash costs per Ag ounce
|
|
$
|
|
|
|
$
|
10.53
|
|
|
$
|
|
|
|
$
|
(0.03
|
)
|
|
$
|
7.57
|
|
|
$
|
2.55
|
|
|
$
|
5.92
|
|
Cash operating cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Cash cost per Au ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Cost
(Non-U.S.
GAAP)
|
|
$
|
|
|
|
$
|
23,535
|
|
|
$
|
|
|
|
$
|
(2,290
|
)
|
|
$
|
18,619
|
|
|
$
|
2,101
|
|
|
$
|
41,965
|
|
Royalties
|
|
|
|
|
|
|
6,605
|
|
|
|
|
|
|
|
|
|
|
|
1,889
|
|
|
|
|
|
|
|
8,494
|
|
Production taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,188
|
|
|
|
|
|
|
|
|
|
|
|
2,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash Costs
(Non-U.S.
GAAP)
|
|
|
|
|
|
|
30,140
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
20,508
|
|
|
|
2,101
|
|
|
|
52,647
|
|
Add/Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,019
|
)
|
|
|
(1,212
|
)
|
|
|
(4,231
|
)
|
By-product credit(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,499
|
|
|
|
2,880
|
|
|
|
|
|
|
|
21,379
|
|
Other adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
470
|
|
|
|
|
|
|
|
482
|
|
Change in inventory
|
|
|
|
|
|
|
(12,393
|
)
|
|
|
|
|
|
|
23,837
|
|
|
|
(3,240
|
)
|
|
|
171
|
|
|
|
8,375
|
|
Depreciation, depletion and amortization
|
|
|
|
|
|
|
5,638
|
|
|
|
|
|
|
|
2,353
|
|
|
|
4,431
|
|
|
|
1,971
|
|
|
|
14,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP)
|
|
$
|
|
|
|
$
|
23,385
|
|
|
$
|
|
|
|
$
|
44,599
|
|
|
$
|
22,030
|
|
|
$
|
3,031
|
|
|
$
|
93,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Palmarejo gold production royalty is currently reflected as
a minimum royalty obligation which commenced on July 1,
2009 and ends when payments have been made on a total of 400,000
ounces of gold, at which time a royalty expense will be recorded. |
|
(2) |
|
Amounts reflect final metal settlement adjustments. |
The following tables present a reconciliation between non-GAAP
cash costs per ounce to U.S. GAAP production costs
applicable to sales reported in Discontinued Operations for the
years ended 2010, 2009, and 2008 (see Note G
Discontinued Operations And Assets And Liabilities Held For Sale
included herein):
|
|
|
|
|
|
|
|
|
|
|
|
|
Broken Hill
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production of silver (ounces)
|
|
|
|
|
|
|
842,751
|
|
|
|
1,369,009
|
|
Cash operating costs per ounce
|
|
$
|
|
|
|
$
|
3.40
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs per ounce
|
|
$
|
|
|
|
$
|
3.40
|
|
|
$
|
3.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs (Non-U.S. GAAP)
|
|
$
|
|
|
|
$
|
2,862
|
|
|
$
|
4,670
|
|
Add/Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs
|
|
|
|
|
|
|
(1,164
|
)
|
|
|
(1,938
|
)
|
By-product credit
|
|
|
|
|
|
|
|
|
|
|
|
|
Other adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in inventory
|
|
|
|
|
|
|
39
|
|
|
|
22
|
|
Depreciation, depletion and amortization
|
|
|
|
|
|
|
1,570
|
|
|
|
2,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP)
|
|
$
|
|
|
|
$
|
3,307
|
|
|
$
|
5,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
Cerro Bayo
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Production of silver (ounces)
|
|
|
|
|
|
|
|
|
|
|
1,224,084
|
|
Cash operating cost per ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash costs per ounce
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating cost (Non-U.S. GAAP)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,478
|
|
Royalties
|
|
|
|
|
|
|
|
|
|
|
|
|
Production taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash costs (Non-U.S. GAAP)
|
|
|
|
|
|
|
|
|
|
|
10,478
|
|
Add/Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party smelting costs
|
|
|
|
|
|
|
|
|
|
|
(3,818
|
)
|
By-product credit
|
|
|
|
|
|
|
|
|
|
|
19,595
|
|
Other adjustments
|
|
|
|
|
|
|
|
|
|
|
(425
|
)
|
Change in inventory
|
|
|
|
|
|
|
|
|
|
|
2,099
|
|
Depreciation, depletion and amortization
|
|
|
|
|
|
|
|
|
|
|
7,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production costs applicable to sales, including depreciation,
depletion and amortization (U.S. GAAP)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
35,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs per Ounce and Cash Costs per
Ounce are calculated by dividing the operating cash costs
and cash costs computed for each of the Companys mining
properties for a specified period by the amount of gold ounces
or silver ounces produced by that property during that same
period. Management uses cash operating costs and cash costs per
ounce as key indicators of the profitability of each of its
mining properties. Gold and silver are sold and priced in the
world financial markets on a U.S. dollar per ounce basis.
Cash Operating Costs and Cash Costs are
costs directly related to the physical activities of producing
silver and gold, and include mining, processing and other plant
costs, third-party refining and smelting costs, marketing
expense,
on-site
general and administrative costs, royalties, in-mine drilling
expenditures that are related to production and other direct
costs. Sales of by-product metals are deducted from the above in
computing cash costs. Cash costs exclude depreciation, depletion
and amortization, accretion, corporate general and
administrative expense, exploration, interest, and
pre-feasibility costs. Cash operating costs include all cash
costs except production taxes and royalties, if applicable. Cash
costs are calculated and presented using the Gold
Institute Production Cost Standard applied consistently
for all periods presented.
Total operating costs and cash costs per ounce are non-GAAP
measures and investors are cautioned not to place undue reliance
on them and are urged to read all GAAP accounting disclosures
presented in the consolidated financial statements and
accompanying footnotes. In addition, see the reconciliation of
cash costs to production costs under Reconciliation of
Non-GAAP Cash Costs to GAAP Production Costs set
forth above.
Results
of Operations
Year
Ended December 31, 2010 Compared to Year Ended
December 31, 2009
Revenues
Sales of metal from continuing operations in the year ended
December 31, 2010 increased by $215.1 million, or
71.6%, from the year ended December 31, 2009 to
$515.5 million. The increase was primarily due to an
increase in the quantity of silver and gold ounces sold and a
higher realized price per ounce for both metals in 2010. The
increased sale of gold ounces was primarily due to increased
gold production at the Palmarejo mine and new gold production at
the Kensington mine, which began commercial operations on
July 3, 2010. In 2010, the Company sold 17.2 million
ounces of silver and 130,134 ounces of gold, compared to sales
of 16.3 million ounces of silver and 65,607 ounces of gold
in 2009 from continuing operations. In the year ended
December 31, 2010, the Company realized average silver and
gold prices of $20.99 per ounce and $1,237 per ounce,
respectively, compared with
55
realized average prices of $14.83 per ounce and $1,003.00 per
ounce, respectively, in the prior year. Silver contributed 69.3%
of sales as compared to 30.7% from gold.
Included in revenues is by-product metal sales derived from the
sale of gold. In 2010, by-product revenues totaled
$134.9 million compared to $61.9 million in 2009. The
increase is a result of the Palmarejo mine being in operation
for the full year and the Kensington mine starting commercial
operations on July 3, 2010. The Company believes that
presentation of these revenue streams as by-products from its
current operations will continue to be appropriate in the future.
In the year ended December 31, 2010, the Companys
continuing operations produced a total of 16.8 million
ounces of silver and 157,062 ounces of gold compared to
16.9 million ounces of silver (excludes 842,751 ounces of
silver production from Broken Hill) and 72,112 ounces of gold in
2009. The decrease in silver production at the Martha mine and
the San Bartolomé mine were offset by an increase in
silver production at the Palmarejo mine, which operated at full
capacity during the year ended 2010. The increase in gold
production is due to an increase of 47,700 ounces at the
Palmarejo mine and first partial year production of 43,143
ounces at the Kensington mine, which began operations on
July 3, 2010.
Production costs applicable to sales from continuing operations
for the year ended 2010 increased by $66.3 million, or
34.7%, from the same period of 2009 to $257.6 million. The
increase in production costs applicable to sales for the year is
primarily due to the inclusion of a full year of operating costs
for Palmarejo and the commencement of operations at the
Kensington mine in July 2010.
Depreciation and depletion increased in the year ended
December 31, 2010 by $60.2 million, or 74.0%, over the
prior year, primarily due to a full year of depreciation and
depletion expense from the Palmarejo mine and the inclusion of
depreciation and depletion at the Kensington mine, which began
operations in July 2010.
Costs
and Expenses
Administrative and general expenses increased $2.1 million
or 9.6% in 2010 compared to 2009 due primarily to an increase in
stock-based executive compensation related to the increase in
the Companys stock price.
Exploration expenses increased by $1.2 million or 9.1% in
2010 compared to 2009 primarily as a result of increased
exploration activity at and around the Companys existing
properties.
Care and maintenance and other expenses were $2.0 million,
an increase of $0.6 million from 2009.
Pre-development costs were $0.9 million in 2010, primarily
for pre-development activity, focused on recommencement of
mining at Rochester.
Other
Income and Expenses
The Company recognized $20.3 million of loss from debt
extinguishments during 2010 due to the exchange of a portion of
the 3.25% convertible senior notes and the 1.25% convertible
senior notes for shares of common stock, and the early payment
premium for the early paydown of the Senior Term Notes. The
Company recognized $31.5 million of gains from debt
extinguishments during 2009 from the exchange of a portion of
the 3.25% convertible senior notes and the 1.25% convertible
senior notes for shares of common stock.
Fair value adjustments during 2010 totaled $117.1 million,
which was $34.9 million greater than in 2009. The increase
in loss was primarily due to negative adjustment on the
Franco-Nevada derivative of $20.0 million, a loss on the
put and call options associated with the Kensington Term
Facility of $12.8 million, and a loss on the gold lease
facility of $0.7 million.
Interest and other income in 2010 decreased by $0.9 million
compared with 2009. The decrease was primarily due to increased
losses on foreign currency transactions, which was offset by the
sale of the Mandalay shares of stock the Company received from
the sale of Minera Cerro Bayo.
Interest expense, net of capitalized interest was
$30.9 million in 2010 compared to $18.1 million in
2009. The increase in interest expense is primarily the result
of increased accretion expenses for the Franco-Nevada obligation
and interest expense and offering costs for the Senior Term
Notes issued in February 2010. See Note L Debt
and
56
Royalty Obligation to our financial statements included herein,
for further discussion. In addition, the Kensington project was
placed into service on July 3, 2010, decreasing capitalized
interest in 2010. Capitalized interest was $9.9 million in
2010 compared to $22.8 million in 2009.
Income
Taxes
For the year ended December 31, 2010, the Company reported
an income tax benefit of approximately $9.5 million
compared to an income tax benefit of $33.1 million in 2009.
The following table summarizes the components of the
Companys income tax benefit for the years ended 2010 and
2009.
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December
|
|
|
|
2010
|
|
|
2009
|
|
|
Current:
|
|
|
|
|
|
|
|
|
United States Alternative minimum tax
|
|
$
|
(482
|
)
|
|
$
|
(2,249
|
)
|
United States Foreign withholding tax
|
|
|
(1,009
|
)
|
|
|
(1,509
|
)
|
Argentina
|
|
|
(7,094
|
)
|
|
|
(6,284
|
)
|
Australia
|
|
|
(251
|
)
|
|
|
592
|
|
Mexico
|
|
|
(316
|
)
|
|
|
(124
|
)
|
Bolivia
|
|
|
(20,268
|
)
|
|
|
(2,673
|
)
|
Canada
|
|
|
|
|
|
|
(53
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Australia
|
|
|
(541
|
)
|
|
|
200
|
|
Bolivia
|
|
|
(1,388
|
)
|
|
|
(6,221
|
)
|
Mexico
|
|
|
24,371
|
|
|
|
37,681
|
|
United States
|
|
|
16,459
|
|
|
|
13,711
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
|
$
|
9,481
|
|
|
$
|
33,071
|
|
|
|
|
|
|
|
|
|
|
In 2010, the Company recognized a current provision in the
U.S. and certain foreign jurisdictions primarily related to
higher metals prices, inflationary adjustments on non-monetary
assets and unrealized foreign exchange gains on U.S. dollar
denominated liabilities in Bolivia. Further, the Company accrued
foreign withholding taxes of approximately $1.0 million on
inter-company transactions between the U.S. parent and the
Argentina, Mexico and Australia subsidiaries. Finally, the
Company recognized a $40.8 million deferred tax benefit for
the recognition of deferred taxes on deductible temporary
differences and net operating loss carryforwards in various
jurisdictions (principally Mexico). The Company recognized a
deferred tax provision of $1.9 million for inflation
adjustments on non-monetary assets in Bolivia.
In 2009, the Company recognized a current provision in the
U.S. and certain foreign jurisdictions primarily related to
higher metals prices, inflationary adjustments on non-monetary
assets and unrealized foreign exchange gains on U.S. dollar
denominated liabilities in Bolivia. Further, the Company accrued
foreign withholding taxes of approximately $1.5 million on
inter-company transactions between the U.S. parent and the
Argentina, Mexico and Australia subsidiaries. Finally, the
Company recognized a $51.4 million deferred tax benefit for
the recognition of deferred taxes on deductible temporary
differences and net operating loss carryforwards in various
jurisdictions (principally Mexico). The Company recognized a
deferred tax provision of $6.2 million for inflation
adjustments on non-monetary assets in Bolivia.
Results
of Discontinued Operations
Effective July 1, 2009, the Company completed the sale of
its mineral interest in the Broken Hill mine to Perilya Broken
Hill Ltd. for $55.0 million in cash. Pursuant to
U.S. GAAP, the Broken Hill segment has been
57
reported in discontinued operations for the three years ended
December 31, 2009. The Company recognized a gain, net of
taxes, of $25.5 million on the sale in 2009.
Effective August 9, 2010, Coeur sold its subsidiary,
Compañía Minera Cerro Bayo Ltd. (Minera Cerro
Bayo), which controls the Cerro Bayo mine in southern
Chile, to Mandalay Resources Corporation (Mandalay).
Under the terms of the agreement, Coeur received the following
from Mandalay in exchange for all of the outstanding shares of
Minera Cerro Bayo; (i) $6.0 million in cash;
(ii) 17,857,143 common shares of Mandalay;
(iii) 125,000 ounces of silver to be delivered in six equal
quarterly installments commencing in the third quarter of 2011,
which had an estimated fair value of $2.3 million;
(iv) a 2.0% Net Smelter Royalty (NSR) on production from
Minera Cerro Bayo in excess of a cumulative 50,000 ounces of
gold and 5,000,000 ounces of silver, which had an estimated fair
value of $5.4 million; and (v) existing value-added
taxes collected from the Chilean government in excess of
$3.5 million. As part of the transaction, Mandalay agreed
to pay the next $6.0 million of reclamation costs
associated with Minera Cerro Bayos nearby Furioso
property. Any reclamation costs above that amount will be shared
equally by Mandalay and the Company. As a result of the sale,
the Company realized a loss on the sale of approximately
$2.1 million, net of income taxes.
Loss from discontinued operations, net of taxes, was
$6.0 million during 2010 compared to $9.6 million
during 2009. In addition, the Company recognized a loss of
$2.1 million, net of taxes, on the sale of Minera Cerro
Bayo in 2010 and a gain of $25.5 million, net of taxes, on
the sale of Broken Hill in 2009.
The following is a summary of the Companys discontinued
operations included in the consolidated statements of operations
for the years ended December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Sales of metal
|
|
$
|
|
|
|
$
|
12,108
|
|
Production costs applicable to sales
|
|
|
|
|
|
|
(2,863
|
)
|
Depreciation and depletion
|
|
|
(2,194
|
)
|
|
|
(5,765
|
)
|
Administrative and general
|
|
|
(18
|
)
|
|
|
(25
|
)
|
Mining exploration
|
|
|
|
|
|
|
(2,153
|
)
|
Other
|
|
|
(2,351
|
)
|
|
|
(10,430
|
)
|
Other income and expense
|
|
|
(145
|
)
|
|
|
1,600
|
|
Income tax expense
|
|
|
(1,321
|
)
|
|
|
(2,073
|
)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(6,029
|
)
|
|
|
(9,601
|
)
|
Gain (loss) on sale of net assets of discontinued operations,
net of taxes
|
|
|
(2,095
|
)
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
Net (loss) from discontinued operations
|
|
$
|
(8,124
|
)
|
|
$
|
(15,936
|
)
|
|
|
|
|
|
|
|
|
|
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
Revenues
Sales of metal from continuing operations in the year ended
December 31, 2009 increased by $171.1 million, or
132.3%, from the year ended December 31, 2008 to
$300.4 million. The increase was primarily due to an
increase in the quantity of silver ounces sold due to
contributions from the Companys two new mines:
(i) the San Bartolomé mine which operated at full
capacity during the year ended December 31, 2009 and
commenced operations in June 2008; and (ii), the Palmarejo
silver and gold mine which began commercial operations on
April 20, 2009. In 2009, the Company sold 16.3 million
ounces of silver and 65,607 ounces of gold, compared to sales of
8.2 million ounces of silver and 25,887 ounces of gold in
2008 from continuing operations. In the year ended
December 31, 2009, the Company realized average silver and
gold prices of $14.83 per ounce and $1,003 per ounce,
respectively, compared with realized average prices of $13.53
per ounce and $878 per ounce, respectively, in the prior year.
Included in revenues is by-product metal sales derived from the
sale of gold. In 2009, by-product revenues totaled
$61.9 million compared to $21.4 million in 2008. The
increase is a result of the Companys Palmarejo mine being
in operation since April 20, 2009. The Company believes
that presentation of these revenue streams as by-products from
its current operations will continue to be appropriate in the
future.
58
In the year ended December 31, 2009, the Companys
continuing operations produced a total of 16.9 million
ounces of silver (excludes 842,751 ounces of silver production
from Broken Hill) and 72,112 ounces of gold compared to
9.4 million ounces of silver and 24,354 ounces of gold in
2008. The increase in silver production in 2009, as compared to
2008, was primarily due to the increase of 4.6 million
ounces from the San Bartolomé mine, which operated at
full capacity during the year ended 2009 and commenced
operations in June 2008. There was also an increase of
3.0 million ounces at the Palmarejo silver and gold mine,
which began operations on April 20, 2009, and an increase
of 1.0 million ounces at the Martha mine. The increase in
gold production is primarily due to an increase of 54,740 ounces
at the Palmarejo mine partially offset by a decrease of 8,378
ounces at the Rochester mine during 2009.
Production costs applicable to sales from continuing operations
for the year ended 2009 increased by $112.7 million, or
143.2%, from the same period of 2008 to $191.3 million. The
increase in production costs applicable to sales for the year is
primarily due to increased production costs at the Palmarejo and
San Bartolomé mines related to the commencement of
operations at Palmarejo and inclusion of operating costs for
San Bartolomé for the entire year ended 2009.
Depreciation and depletion increased in the year ended
December 31, 2009 by $64.9 million, or 393.2%, over
the prior year, primarily due to increased depreciation and
depletion expense from the Palmarejo mine and a full year of
depreciation and depletion expense from the
San Bartolomé mine.
Costs
and Expenses
Administrative and general expenses decreased $3.8 million
or 14.5% in 2009 compared to 2008 due primarily to realization
of cost reduction initiatives.
Exploration expenses decreased by $4.8 million or 26.8% in
2009 compared to 2008 as a result of decreased exploration
activity.
Care and maintenance and other expenses increased by
$1.3 million compared to 2008.
Pre-development costs were $0.1 million in 2009.
Pre-development expenses of $17.0 million were recorded as
a result of pre-development activities at the Palmarejo project
during 2008. The Company completed its final feasibility study
in the second quarter of 2008 and commenced capitalizing its
mine development expenditures for the remainder of 2008 and the
year ended 2009.
Other
Income and Expenses
The Company recognized $31.5 million of gains from debt
extinguishments during 2009 from the exchange of a portion of
the 3.25% convertible senior notes and the 1.25% convertible
senior notes for shares of common stock. There were no gains
from debt extinguishments recorded during the year ended
December 31, 2008.
Fair value adjustements during 2009 were a loss of
$82.2 million. The increase was due to
mark-to-market
adjustments driven by higher gold and silver prices related to
the Franco-Nevada royalty obligation and warrant, the gold lease
facility, warrants to acquire the senior secured floating rate
convertible notes, put and call options and forward foreign
exchange contracts. See Note Q Derivative
Financial Instruments and Fair Value of Financial Instruments to
our financial statements included herein, for further discussion.
Interest and other income in 2009 decreased by $2.4 million
compared with the same period in 2008.
Interest expense, net of capitalized interest was
$18.1 million in 2009 compared to $4.7 million in
2008. The increase in interest expense is related to accretion
expenses for the Franco Nevada obligation, the
3.25% Convertible debentures, and interest expense for the
gold lease facility and other short term borrowings and capital
lease obligations. See Note L Debt and Royalty
Obligation to our financial statements included herein, for
further discussion. In addition, the Palmarejo project was
placed into service on April 20, 2009, thereby, decreasing
capitalized interest in 2009. Capitalized interest was
$22.8 million in 2009 compared to $12.2 million in
2008.
59
Income
Taxes
For the year ended December 31, 2009, the Company reported
an income tax benefit of approximately $33.1 million
compared to an income tax benefit of $17.4 million in 2008.
The following table summarizes the components of the
Companys income tax benefit for the years ended 2009 and
2008.
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
United States Alternative minimum tax
|
|
$
|
(2,249
|
)
|
|
$
|
(644
|
)
|
United States Foreign withholding tax
|
|
|
(1,509
|
)
|
|
|
(1,498
|
)
|
Argentina
|
|
|
(6,284
|
)
|
|
|
(2,047
|
)
|
Australia
|
|
|
592
|
|
|
|
(1,085
|
)
|
Mexico
|
|
|
(124
|
)
|
|
|
(623
|
)
|
Bolivia
|
|
|
(2,673
|
)
|
|
|
|
|
Canada
|
|
|
(53
|
)
|
|
|
(34
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
|
|
|
|
(1,410
|
)
|
Australia
|
|
|
200
|
|
|
|
1,115
|
|
Bolivia
|
|
|
(6,221
|
)
|
|
|
(2,480
|
)
|
Mexico
|
|
|
37,681
|
|
|
|
(27,753
|
)
|
United States
|
|
|
13,711
|
|
|
|
53,846
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
|
$
|
33,071
|
|
|
$
|
17,387
|
|
|
|
|
|
|
|
|
|
|
In 2009, the Company recognized a current provision in the
U.S. and certain foreign jurisdictions primarily related to
higher metals prices, inflationary adjustments on non-monetary
assets and unrealized foreign exchange gains on U.S. dollar
denominated liabilities in Bolivia. Further, the Company accrued
foreign withholding taxes of approximately $1.5 million on
inter-company transactions between the U.S. parent and the
Argentina, Mexico and Australia subsidiaries. Finally, the
Company recognized a $51.4 million deferred tax benefit for
the recognition of deferred taxes on deductible temporary
differences and net operating loss carryforwards in various
jurisdictions (principally Mexico). The Company recognized a
deferred tax provision of $6.2 million for inflation
adjustments on non-monetary assets in Bolivia.
In 2008, due to higher metals prices, the Company recognized a
current provision in the U.S. and certain foreign operating
jurisdictions. Further, the Company accrued foreign withholding
taxes of approximately $1.5 million on inter-company
transactions between the U.S. parent and the Mexico,
Argentina and Australia subsidiaries. The Company recognized a
$31.6 million deferred tax provision primarily in Bolivia
and Mexico related to higher metal prices and inflationary
adjustments on non-monetary assets and unrealized foreign
exchange gains on U.S. dollar denominated liabilities in
Bolivia. Finally, the Company recognized a deferred tax benefit
of $55.0 million related to the recognition of deferred
taxes and deductible temporary differences in net operating loss
carryforwards in various jurisdictions, principally in the U.S.
Results
of Discontinued Operations
Effective July 1, 2009, the Company completed the sale of
its mineral interest in the Broken Hill mine to Perilya Broken
Hill Ltd. for $55.0 million in cash. Pursuant to
U.S. GAAP, the Broken Hill segment has been reported in
discontinued operations for the two years ended
December 31, 2009.
Effective August 9, 2010, the Company sold its subsidiary
Compañía Minera Cerro Bayo Ltda. (Minera Cerro
Bayo), which controls the Cerro Bayo mine in southern
Chile, to Mandalay Resources Corporation (Mandalay).
Under the terms of the agreement, the Company received the
following from Mandalay in exchange for all of the outstanding
shares of Minera Cerro Bayo; (i) $6.0 million in cash;
(ii) 17,857,143 common shares of Mandalay;
60
(iii) 125,000 ounces of silver to be delivered in six equal
quarterly installments commencing in the third quarter of 2011,
which had an estimated fair value of $2.3 million;
(iv) a 2.0% Net Smelter Royalty (NSR) on production from
Minera Cerro Bayo in excess of a cumulative 50,000 ounces of
gold and 5,000,000 ounces of silver, which had an estimated fair
value of $5.4 million; and (v) existing value-added
taxes collected from the Chilean government in excess of
$3.5 million. As part of the transaction, Mandalay agreed
to pay the next $6.0 million of reclamation costs
associated with Minera Cerro Bayos nearby Furioso
property. Any reclamation costs above that amount will be shared
equally by Mandalay and the Company. The Company realized a loss
on the sale of approximately $2.1 million, net of income
taxes.
Loss from discontinued operations, net of taxes, was
$9.6 million during 2009 compared to income from
discontinued operations of $7.5 million during 2008. The
Company recognized a gain, net of taxes, of $25.5 million
on the sale of Broken Hill in 2009.
The following is a summary of the Companys discontinued
operations included in the consolidated statements of operations
for the years ended December 31, 2009 and 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Sales of metal
|
|
$
|
12,108
|
|
|
$
|
60,180
|
|
Production costs applicable to sales
|
|
|
(2,863
|
)
|
|
|
(30,685
|
)
|
Depreciation and depletion
|
|
|
(5,765
|
)
|
|
|
(10,862
|
)
|
Administrative and general
|
|
|
(25
|
)
|
|
|
(22
|
)
|
Mining exploration
|
|
|
(2,153
|
)
|
|
|
(2,693
|
)
|
Care, maintenance, and other
|
|
|
(10,430
|
)
|
|
|
|
|
Write downs
|
|
|
|
|
|
|
(3,031
|
)
|
Other income and expense
|
|
|
1,600
|
|
|
|
(1,465
|
)
|
Income tax expense
|
|
|
(2,073
|
)
|
|
|
(3,886
|
)
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
(9,601
|
)
|
|
|
7,536
|
|
Gain on sale of net assets of
|
|
|
|
|
|
|
|
|
discontinued operations, net of taxes
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
|
$
|
15,936
|
|
|
$
|
7,536
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources
Working
Capital; Cash and Cash Equivalents
The Companys working capital at December 31, 2010
decreased by $1.9 million to a deficit of approximately
$4.5 million compared to a working capital deficit of
approximately $2.6 million at December 31, 2009. The
ratio of current assets to current liabilities was 0.98 to 1 at
December 31, 2010 compared to 0.99 to 1 at
December 31, 2009.
Net cash provided by operating activities in 2010 was
$165.6 million compared with net cash provided by operating
activities of $60.1 million in 2009 and net cash used by
operating activities of $7.4 million in 2008.
A total of $131.7 million was used in investing activities
in 2010 compared to $146.8 million used in 2009. This
decrease included a $62.2 million decrease in capital
expenditures from $218.2 million in 2009 to
$156.0 million in 2010. This was offset by lower cash
proceeds from the sale of investments and assets in 2009.
The Companys financing activities provided
$9.5 million of cash during 2010 compared to net cash
provided by financing activities of $88.7 million in 2009.
The decrease in net cash provided by financing activities was
primarily due to payments on the gold production royalty and
payments under the gold lease facility. In addition, the Company
issued $100 million in Senior Term Notes on
February 10, 2010 and subsequently paid $67.8 million
in principal, interest, and associated costs within the year.
Cash and cash equivalents increased by $43.3 million to
$66.1 million as of December 31, 2010, compared to an
increase of $2.0 million in 2009.
61
Liquidity
As of December 31, 2010, the Companys cash,
equivalents and short-term investments totaled
$66.1 million. As of the date of this
Form 10-K,
the Company estimates its cash, equivalents and short-term
investments to be $60.0 million (See
Note W Subsequent Events to our financial
statements included herein). During 2010, the Company received
approximately $100.0 million of cash proceeds from the
Senior Secured Notes, $4.9 million from sales/leaseback
transactions, $18.4 million from the gold lease facility,
$76.2 million from borrowings (primarily draws on the
Kensington Term Facility) and $6.2 million related to the
sale of Minera Cerro Bayo in August of 2010. (See
Note G Discontinued Operations and Assets and
Liabilities Held for Sale to our financial statements included
herein).
The Company believes that its liquidity and projected operating
cashflows will be adequate to meet its obligations for at least
the next twelve months.
The Company may elect to defer some capital investment
activities or to secure additional capital to ensure it
maintains sufficient liquidity. In addition, if the Company
decides to pursue the acquisition of additional mineral
interests, new capital projects, or acquisitions of new
properties, mines or companies, additional financing activities
may be necessary. There can be no assurances that such financing
will be available when or if needed upon acceptable terms, or at
all.
Capitalized
Expenditures
During 2010, capital expenditures totaled $156.0 million,
which was a $62.2 million decrease from 2009 expenditures
of $218.2 million. The Company spent $54.2 million at
the Palmarejo project, $92.7 million for construction and
development activities at the Kensington project,
$6.2 million for the development of the
San Bartolomé project, $0.1 million at the Martha
mine, $2.3 million at the Rochester mine, and
$0.4 million on other capital purchases.
Gold
Lease Facility
On December 18, 2008, the Company entered into a gold lease
facility with Mitsubishi International Corporation
(MIC). Pursuant to this facility, the Company may
lease amounts of gold from MIC and is obligated to deliver the
same amounts back to MIC and to pay specified lease fees to MIC
that are equivalent to interest at current market rates on the
value of the gold leased. Pursuant to a Second Amended and
Restated Collateral Agreement, the Companys obligations
under the facility are secured by certain collateral. The
collateral agreement specifies the maximum amount of gold the
Company may lease from MIC, as well as the amount and type of
collateral.
On July 16, 2010 the Company and MIC entered into an
Amendment No. 4 to the Second Amended and Restated
Collateral Agreement to increase the availability under the
facility. Under the amended agreement, the maximum amount the
Company may lease under the facility, aggregated with lease
fees, is $49.5 million. In addition, the amended agreement
provides for a customary commitment fee. On December 23,
2010, the Company entered into an Amendment No. 5 to the
second Amended and Restated Collateral Agreement, lowering the
value of the collateral required to secure its obligations to
30% of the outstanding amount, including lease fees. The Company
is not obligated to enter into any additional leases as of
December 31, 2010.
The collateral agreement contains usual and customary covenants
and agreements, including limitations on the Companys
ability to sell or grant liens in the collateral, as well as
covenants as to cooperation, payment of charges and protection
of security. The collateral agreement and the master lease
agreement governing the gold lease facility both contain
customary events of default.
As of December 31, 2010, the Company had 10,000 ounces of
gold leased from MIC. The Company has committed to deliver this
number of ounces of gold to MIC on a scheduled delivery date in
the first quarter of 2011. The Company accounts for the gold
lease facility as a derivative instrument, which is recorded in
accrued liabilities and other in the balance sheet.
62
As of December 31, 2010, and 2009, based on the current
futures metals prices for each of the delivery dates and using a
3.1% and 5.7% discount rate, respectively, the fair value of the
instrument was a liability of $14.1 million and
$28.5 million, respectively. The pre-credit risk adjusted
fair value of the net derivative liability as of
December 31, 2010 was $14.2 million. A credit risk
adjustment of $0.1 million to the fair value of the
derivative reduced the reported amount of the net derivative
liability on the Companys consolidated balance sheet to
$14.1 million.
Mark-to-market
adjustments for the gold lease facility amounted to a gain of
$2.9 million for the twelve months ended December 31,
2010 and loss of $6.3 million for the twelve months ended
December 31, 2009. The Company recorded realized losses of
$10.1 million and $0.2 million for the twelve months
ended December 31, 2010 and 2009, respectively. The
mark-to-market
adjustments and realized losses are included in fair value
adjustments, net.
Debt and
Capital Resources
3.25% Convertible
Senior Notes due 2028
As of December 31, 2010, the outstanding balance of the
3.25% Convertible Senior Notes was $48.7 million or
$43.2 million net of debt discount.
On March 18, 2008, the Company completed an offering of
$230.0 million in aggregate principal amount of
3.25% Convertible Senior Notes due 2028. The notes are
unsecured and bear interest at a rate of 3.25% per year, payable
on March 15 and September 15 of each year. The notes mature on
March 15, 2028, unless earlier converted, redeemed or
repurchased by the Company.
Each holder of the notes may require that the Company repurchase
some or all of the holders notes on March 15, 2013,
March 15, 2015, March 15, 2018 and March 15, 2023
at a repurchase price equal to 100% of the principal amount of
the notes to be repurchased, plus accrued and unpaid interest,
in cash, shares of common stock or a combination of cash and
shares of common stock, at the Companys election. Holders
will also have the right, following certain fundamental change
transactions, to require the Company to repurchase all or any
part of their notes for cash at a repurchase price equal to 100%
of the principal amount of the notes to be repurchased plus
accrued and unpaid interest. The Company may redeem the notes
for cash in whole or in part at any time on or after
March 22, 2015 at 100% of the principal amount of the notes
to be redeemed plus accrued and unpaid interest.
The notes provide for net share settlement of any
conversions. Pursuant to this feature, upon conversion of the
notes, the Company (1) will pay the note holder an amount
in cash equal to the lesser of the conversion obligation or the
principal amount of the notes and (2) will settle any
excess of the conversion obligation above the notes
principal amount in the Companys common stock, cash or a
combination thereof, at the Companys election.
The notes are convertible under certain circumstances, as
defined in the indenture agreement, at the holders option,
at an initial conversion rate of 17.60254 shares of the
Companys common stock per $1,000 principal amount of
notes, which is equivalent to an initial conversion price of
approximately $56.81 per share, subject to adjustment in certain
circumstances.
As of December 31, 2010, $99.7 million of the
3.25% Convertible Senior Notes due 2028 had been
repurchased in exchange for 6.5 million shares of the
Companys common stock which reduced the principal amount
of the notes outstanding to $48.7 million
($43.2 million net of debt discount). The Company
recognized a loss on the repurchase of $8.6 million
reflected in Gain (Loss) on debt extinguishments.
The fair value of the notes outstanding, as determined by market
transactions at December 31, 2010, and 2009, was
$48.2 million and $131.3 million, respectively. The
carrying value of the equity component at December 31,
2010, and 2009 was $10.9 million and $33.4 million,
respectively.
For the periods ended December 31, 2010, and 2009, interest
expense was $2.4 million and $5.9 million,
respectively. Accretion of the debt discount was
$3.0 million for the period ended December 31, 2010,
and $7.1 million for the period ended December 31,
2009. The debt discount remaining at December 31, 2010 was
$5.4 million, which will be amortized through
March 15, 2013. The effective interest rate on the notes
was 8.9%.
63
1.25% Convertible
Senior Notes due 2024
As of December 31, 2010 the balance of the
1.25% Convertible Senior Notes was $1.9 million.
During the year ended December 31, 2010, $20.4 million
of the 1.25% Convertible Senior Notes due 2024 were
repurchased in exchange for an aggregate 1.2 million shares
of the Companys common stock. During January 2011,
$945,000 of the 1.25% Convertible Senior Notes were
repurchased pursuant to a put right of the noteholders, and the
remaining $914,000 of the 1.25% Convertible Senior Notes
were redeemed, in each case for cash at 100% of the principal
amount of the notes, plus accrued and unpaid interest.
The 1.25% Convertible Notes due 2024 were convertible into
shares of common stock at the option of the holder on
January 15, 2011, 2014, and 2019, unless previously
redeemed, at a conversion price of $76.00 per share, subject to
adjustment in certain circumstances.
The terms of the 1.25% Convertible Senior Notes due 2024
required the Company to make semi-annual interest payments. The
notes were redeemable at the option of the Company before
January 18, 2011 if the closing price of the Companys
common stock over a specified number of trading days exceeded
150% of the conversion price, and at anytime commencing
January 18, 2011. Before January 18, 2011, the
redemption price was equal to 100% of the principal amount of
the notes, plus an amount equal to 8.75% of the principal amount
of the notes, less the amount of any interest actually paid on
the notes on or prior to the redemption date. Commencing
January 18, 2011, the redemption price was equal to 100% of
the principal amount of the notes, plus accrued and unpaid
interest. The maturity date of the notes was January 15,
2024.
The terms of the 1.25% Convertible Senior Notes permitted
each holder of the notes to require the Company to repurchase
some or all of the holders notes on January 15, 2011,
January 15, 2014 and January 15, 2019 at a repurchase
price equal to 100% of the principal amount of the notes to be
repurchased, plus accrued and unpaid interest, in cash, shares
of common stock or a combination of cash and shares of common
stock, at the Companys election. Holders also had the
right, following certain fundamental change transactions, to
require the Company to repurchase all or any part of their notes
for cash at a repurchase price equal to 100% of the principal
amount of the notes to be repurchased plus accrued and unpaid
interest.
The fair value of the notes outstanding, as determined by market
transactions on December 31, 2010, and 2009, was
$1.8 million and $22.8 million, respectively.
Interest on the notes for the year ended December 31, 2010
was $28,100. Interest on the notes for the year ended
December 31, 2009 was $1.5 million.
Senior
Term Notes due December 31, 2012
As of December 31, 2010 the balance of the Senior Term
Notes was $30.0 million.
On February 5, 2010 the Company completed the sale of
$100 million of Senior Term Notes due in quarterly payments
through December 31, 2012. In conjunction with the sale of
these notes, the Company also issued 297,455 shares of its
common stock valued at $4.2 million as financing costs. The
principal of the notes is payable in twelve equal quarterly
installments, with the first such installment paid on
March 31, 2010. The Company has the option of paying
amounts due on the notes in cash, shares of common stock or a
combination of cash and shares of common stock. The stated
interest rate on the notes is 6.5%, but the payments for
principal and interest due on any payment date are computed to
give effect to recent share prices, valuing the shares of common
stock at 90% of a weighted average share price over a pricing
period ending shortly before the payment date.
In December 2010, pursuant to privately-negotiated purchase
agreements, the Company re-purchased $36.7 million
aggregate principal amount of the Notes for approximately
$43.4 million.
For the twelve months ended December 31, 2010, the Company
paid in cash $57.5 million in principal and
$3.3 million in interest and issued 1,060,413 shares
of its common stock in connection with the quarterly payments.
The effective interest rate for the twelve months ended
December 31, 2010 was approximately 6.5%. The effective
interest rate does not include a loss of $10.0 million for
twelve months ended December 31, 2010 realized in
64
connection with quarterly debt payments and early payoff
premiums. The loss is recorded in Gain (loss) on debt
extinguishments and the Company anticipates additional losses on
debt repayments in the future.
Kensington
Term Facility
As of December 31, 2010 the balance of the Kensington Term
Facility was $74.2 million.
On October 27, 2009, Coeur Alaska Inc. (Coeur
Alaska), a wholly-owned subsidiary of the Company, entered
into a $45.0 million secured term facility to finance
construction at the Companys Kensington mine located north
of Juneau, Alaska. On December 20, 2010, the agreement was
amended and restated to allow borrowings up to $100 million
and to define a payment schedule through December 31, 2015.
Coeur Alaskas obligations under the Kensington term
facility are secured by all of Coeur Alaskas assets and
the land mineral rights and infrastructure at the Kensington
mine, as well as a pledge of the shares of Coeur Alaska owned by
the Company, and are guaranteed by the Company. In connection
with the amendment of the credit facility, the guarantee was
amended to provide that the Company will limit borrowings or
asset dispositions by its Bolivian subsidiary Empresa Minera
Manquiri S.A.
Borrowings under the amended Credit Facility bear interest at a
rate equal to LIBOR plus 4.5% per year. Interest of
$1.7 million was capitalized into the loan balance for the
year ended December 31, 2010.
The Company is also subject to financial covenants including
(i) guarantor tangible net worth; (ii) borrower
tangible net worth; (iii) debt to equity ratio;
(iv) debt service coverage ratio and (v) maximum
production cost. Events of default in the Kensington term
facility include (i) a cross-default of other indebtedness;
(ii) a material adverse effect; (iii) loss of or
failure to obtain applicable permits; or (iv) failure to
achieve final completion date.
As a condition to the Kensington term facility with Credit
Suisse noted above, the Company agreed to enter into a gold
hedging program which protects a minimum of 187,500 ounces of
gold production over the life of the facility against the risk
associated with fluctuations in the market price of gold. This
program consists of a series of zero cost collars which consist
of a floor price and a ceiling price of gold. Collars protecting
182,500 ounces of gold were outstanding at December 31,
2010. The weighted average put feature of each collar is $911.99
and the weighted average call feature of each collar is
$1,795.18. Collars protecting 125,000 ounces of gold were
outstanding at December 31, 2009. The weighted average put
feature of each collar is $862.50 and the weighted average call
feature of each collar is $1,688.50.
Voluntary prepayments of the loans and voluntary reductions of
the unutilized portion of the commitments under the Kensington
term facility are permissible, subject to certain conditions
pertaining to minimum notice and minimum reduction amounts. In
addition, voluntary prepayments and reductions are subject to
payment of customary break costs. The Kensington term facility
requires Coeur Alaska to maintain accounts for a debt service
reserve and project proceeds. Coeur Alaska has pledged each of
these accounts to Credit Suisse under account pledge agreements.
The Amended Credit Facility contains affirmative and negative
covenants that the Company believes are usual and customary,
including financial covenants that Coeur Alaskas debt to
equity ratio shall not exceed 40% and that the ratio of project
cash flow to debt service shall be at least 125%. Project
covenants include covenants as to performance of sales
contracts, maintenance and management.
The negative covenants include limitations (each of which is
subject to customary exceptions for financings of this type) on
Coeur Alaskas ability to grant liens, enter into mergers,
pay dividends or other distributions or incur additional debt.
The Amended Credit Facility also contains customary events of
default (subject to grace periods and exceptions).
Bank
Loans
On September 1, 2010, Empresa Minera Manquiri borrowed
$0.5 million pursuant to a short-term bank loan from Banco
Bisa bearing interest at 4% to fund working capital
requirements. The short-term loan was scheduled to mature on
February 23, 2011. As of December 31, 2010, there were
no amounts outstanding with Banco Bisa.
On July 6, 2010, the Company entered into a short-term
financing agreement with AFCO Credit Corporation of
$2.4 million bearing interest at 2.9% to finance insurance
premiums. Installments of $0.2 million are paid
65
monthly with the final payment to be made on June 1, 2011.
As of December 31, 2010 the outstanding balance was
$1.1 million.
On April 14, 2010, Empresa Minera Manquiri borrowed
$2.5 million pursuant to a short-term bank loan from Banco
de Credito de Bolivia bearing interest at rates ranging from
4.5% to 5.25% to fund working capital requirements. The
short-term borrowings mature and renew every 60 days. As of
December 31, 2010, there were no amounts outstanding with
Banco de Credito de Bolivia.
On March 3, 2010, the Companys wholly owned Mexican
subsidiary, Coeur Mexicana, S.A. de C.V. (Coeur
Mexicana) entered into three bank loans in the aggregate
amount of $5.2 million with Fideicomiso de Fomento Minero
(FIFOMI). These loans are intended to fund working capital
requirements guaranteed by the Company and are secured by
certain machinery and equipment. The bank loans bear interest at
13.45% and mature after 36 to 60 months. At
December 31, 2010, there were no amounts outstanding with
FIFOMI.
On November 27, 2009, Empresa Minera Manquiri borrowed
$5.0 million pursuant to a bank loan from Banco Bisa
bearing an interest rate of 6.5% to fund working capital
requirements. As of December 31, 2010, the outstanding
balance was $2.5 million. The bank loan matures on
November 17, 2011.
On July 15, 2009, to fund equipment purchases, Coeur
Mexicana entered into an equipment financing agreement bearing
interest at 8.26% with Atlas Copco. This agreement is secured by
certain machinery and equipment. Twenty-four monthly
installments will be made on the loans with the final payment
being made on January 31, 2012. As of December 31,
2010, the outstanding balance was $1.2 million.
Palmarejo
Gold Production Royalty Obligation
On January 21, 2009, the Companys wholly-owned
subsidiary, Coeur Mexicana SA de CV, entered into a gold
production royalty transaction with Franco-Nevada Corporation
under which Franco-Nevada purchased a royalty covering 50% of
the life of mine gold to be produced from its Palmarejo silver
and gold mine in Mexico. Coeur Mexicana received total
consideration of $78.0 million consisting of
$75.0 million in cash plus a warrant to acquire
Franco-Nevada Common Shares (the Franco-Nevada
warrant), which was valued at $3.0 million at closing
of the Franco-Nevada transaction. On September 19, 2010,
the warrant was exercised and the related shares were sold for
$10.0 million.
The royalty agreement provides for a minimum obligation to be
paid in monthly payments 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 per month
multiplied by the excess of the monthly average market price of
gold above $400 per ounce (which $400 floor is subject to a 1%
annual inflation compounding adjustment beginning on
January 21, 2013). As of December 31, 2010, payments
had been made on a total of 79,879 ounces of gold with further
payments to be made on an additional 320,121 ounces of gold.
After payments have been made on a total of 400,000 ounces of
gold, the royalty obligation is payable in the amount of 50% of
actual gold production per month multiplied by the excess of the
monthly average market price of gold above $400 per ounce,
adjusted as described above. Payments under the royalty
agreement are to be made in cash or gold bullion. During the
twelve months ended December 31, 2010, the Company paid
$43.1 million in royalty payments to Franco-Nevada
Corporation. Payments made during the minimum obligation period
will result in a reduction to the remaining minimum obligation.
Payments made beyond the minimum obligation period will be
recognized as other cash operating expenses and result in an
increase to Coeur Mexicanas reported cash cost per ounce
of silver.
The Company used an implicit interest rate of 27.8% to discount
the original 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 twelve months ended
December 31, 2010 and 2009, of $20.5 million and
$19.1 million, respectively. As of December 31, 2010,
and 2009, the remaining minimum obligation under the royalty
agreement was $80.3 million and $84.8 million,
respectively.
The price volatility associated with the minimum royalty
obligation is considered an embedded derivative under
U.S. GAAP. Fluctuations in the market price of gold since
inception of the agreement have resulted in the recognition of
additional fair value adjustments and resulted in higher
payments to date. These derivative
66
instruments are recorded in prepaid expenses and other and
current or non-current portion of royalty obligation on the
balance sheet and are adjusted to fair value through current
earnings. During the twelve months ended December 31, 2010,
mark-to-market adjustments for the embedded derivative amounted
to a loss of $84.0 million and mark-to-market adjustments for
the warrants were a gain of $3.5 million. For the same period in
2009, a loss of $78.0 million was recorded for mark-to-market
adjustments for the embedded derivative and a gain of $3.3
million were recorded for the warrants. For the twelve months
ended December 31, 2010, realized losses on settlement of the
liabilities were $18.2 million. For the twelve months ended
December 31, 2009, realized losses on settlements of liabilities
were $3.5 million. The mark-to-market adjustments and realized
losses are included in Fair value adjustments, net in the
consolidated statement of operations. Please see
Note Q Derivative Financial Instruments and
Fair Value of Financial Instruments Palmarejo Gold
Production Royalty to our financial statements included herein,
for further discussion of the embedded derivative feature of the
royalty agreement.
Capitalized
Interest
The Company capitalizes interest incurred on its various debt
instruments as a cost of properties under development. For the
twelve months ended December 31, 2010, 2009 and 2008, the
Company capitalized interest of $9.9 million,
$22.8 million and $12.2 million, respectively.
Contractual
Obligations
The following table summarizes the Companys contractual
obligations at December 31, 2010 and the effect such
obligations are expected to have on its liquidity and cash flow
in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 Year
|
|
|
1- 3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Long-term debt obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt(1)
|
|
$
|
50,517
|
|
|
$
|
1,859
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
48,658
|
|
Senior Secured Notes(2)
|
|
|
30,000
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Interest on debt
|
|
|
37,216
|
|
|
|
6,618
|
|
|
|
6,778
|
|
|
|
3,262
|
|
|
|
20,558
|
|
Kensington Term Facility(3)
|
|
|
74,231
|
|
|
|
25,908
|
|
|
|
40,796
|
|
|
|
7,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
191,964
|
|
|
|
49,385
|
|
|
|
62,574
|
|
|
|
10,789
|
|
|
|
69,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations(4)
|
|
|
42,312
|
|
|
|
17,663
|
|
|
|
23,207
|
|
|
|
1,442
|
|
|
|
|
|
Operating lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hyak Mining Lease
|
|
|
6,347
|
|
|
|
254
|
|
|
|
508
|
|
|
|
508
|
|
|
|
5,077
|
|
Operating leases
|
|
|
3,354
|
|
|
|
2,027
|
|
|
|
1,143
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,701
|
|
|
|
2,281
|
|
|
|
1,651
|
|
|
|
692
|
|
|
|
5,077
|
|
Other long-term obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclamation and mine closure(5)
|
|
|
67,794
|
|
|
|
1,305
|
|
|
|
3,811
|
|
|
|
11,324
|
|
|
|
51,354
|
|
Lines of credit and other financing
|
|
|
4,832
|
|
|
|
4,790
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
Severance payments(6)
|
|
|
6,579
|
|
|
|
523
|
|
|
|
1,193
|
|
|
|
|
|
|
|
4,863
|
|
Gold Lease Facility(7)
|
|
|
14,128
|
|
|
|
14,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palmarejo Royalty Obligation(8)
|
|
|
356,405
|
|
|
|
55,818
|
|
|
|
105,448
|
|
|
|
113,735
|
|
|
|
81,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
449,738
|
|
|
|
76,564
|
|
|
|
110,494
|
|
|
|
125,059
|
|
|
|
137,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
693,715
|
|
|
$
|
145,893
|
|
|
$
|
197,926
|
|
|
$
|
137,982
|
|
|
$
|
211,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On March 18, 2008, the Company completed an offering of
$230 million in aggregate principal amount of
3.25% Convertible Senior Notes due 2028. The notes are
unsecured and bear interest at a rate of 3.25% per year, payable
on March 15 and September 15 of each year, beginning on
September 15, 2008. The notes mature on March 15,
2028, unless earlier converted, redeemed or repurchased by the
Company. Each holder of the notes may require that the Company
repurchase some or all of the holders notes on
March 15, 2013, March 15, 2015, |
67
|
|
|
|
|
March 15, 2018 and March 15, 2023 at a repurchase
price equal to 100% of the principal amount of the notes to be
repurchased, plus accrued and unpaid interest, in cash, shares
of common stock or a combination of cash and shares of common
stock, at the Companys election. Holders will also have
the right, following certain fundamental change transactions, to
require the Company to repurchase all or any part of their notes
for cash at a repurchase price equal to 100% of the principal
amount of the notes to be repurchased plus accrued and unpaid
interest. The Company may redeem the notes for cash in whole or
in part at any time on or after March 22, 2015 at 100% of
the principal amount of the notes to be redeemed plus accrued
and unpaid interest. The notes provide for net share
settlement of any conversions. Pursuant to this feature,
upon conversion of the notes, the Company (1) will pay the
note holder an amount in cash equal to the lesser of the
conversion obligation or the principal amount of the notes, and
(2) will settle any excess of the conversion obligation
above the notes principal amount in the Companys
common stock, cash or a combination thereof, at the
Companys election. The notes will be convertible under
certain circumstances, at the holders option, at an
initial conversion rate of 176.0254 shares of the
Companys common stock per $1,000 principal amount of
notes, which is equivalent to an initial conversion price of
approximately $56.81 per share of common stock, subject to
adjustment in certain circumstances. |
|
|
|
During the year ended December 31, 2010, $20.4 million
of the 1.25% Convertible Senior Notes due 2024 were
repurchased in exchange for an aggregate 1.2 million shares
of the Companys common stock. Since the year end, $945,000
of the 1.25% Convertible Senior Notes were repurchased
pursuant to a put right of the noteholders, and the remaining
$914,000 of the 1.25% Convertible Senior Notes were
redeemed, by the company, in each case for $1,000 in cash per
$1,000 in principal amount, plus accrued and unpaid interest. |
|
|
|
The $1.9 million principal amount of 1.25% Convertible
Senior Notes due 2024 outstanding at December 31, 2010 are
convertible into shares of common stock at the option of the
holder on January 15, 2011, 2014 and 2019 unless previously
redeemed at a conversion rate of approximately
131.5789 shares of Coeur common stock per $1,000 principal
amount of Notes, representing a conversion price of $7.60 per
share, subject to adjustment in certain events. |
|
|
|
The Company was required to make semi-annual interest payments
on the 1.25% Convertible Senior Notes due 2024. The notes were
redeemable at the option of the Company before January 18,
2011, if the closing price of the Companys common stock
over a specified number of trading days has exceeded 150% of the
conversion price, and anytime thereafter. The notes have had no
other funding requirements until maturity on January 15,
2024. |
|
(2) |
|
On February 5, 2010 the Company completed the sale of
$100 million of Senior Term Notes due in quarterly payments
through December 31, 2012. In conjunction with the sale of
these notes, the Company also issued 297,455 shares of its
common stock valued at $4.2 million as financing costs. The
principal of the notes is payable in twelve equal quarterly
installments, with the first such installment paid on
March 31, 2010. The Company has the option of paying
amounts due on the notes in cash, shares of common stock or a
combination of cash and shares of common stock. The stated
interest rate on the notes is 6.5%, but the payments for
principal and interest due on any payment date are computed to
give effect to recent share prices, valuing the shares of common
stock at 90% of a weighted average share price over a pricing
period ending shortly before the payment date. In December 2010,
pursuant to privately-negotiated purchase agreements, the
Company re-purchased $36.7 million aggregate principal
amount of the Notes for approximately $43.4 million. For
the twelve months ended December 31, 2010, the Company paid
in cash $57.5 million in principal and $3.3 million in
interest and issued 1,060,413 shares of its common stock in
connection with the quarterly payments. The effective interest
rate for the twelve months ended December 31, 2010 was
approximately 6.5%. The effective interest rate does not include
a loss of $10.0 million for twelve months ended
December 31, 2010 realized in connection with quarterly
debt payments and early payoff premiums. The loss is recorded in
Gain (loss) on debt extinguishments and the Comapny anticipates
additional losses on debt repayments in the future. As of
December 31, 2010 the balance of the Senior Term Notes was
$30.0 million. |
|
(3) |
|
Coeur Alaska entered into a $45.0 million secured term
facility with Credit Suisse as arranger, security agent,
facility agent and hedge provider, and the lender party thereto,
to finance construction at the Companys Kensington mine
located north of Juneau, Alaska. On December 20, 2010,
Coeur Alaska and Coeur amended and restated this secured term
facility with Credit Suisse AG as arranger, security agent,
facility agent and lender and Credit Suisse International as
hedge provider. As amended, the Kensington term facility permits
borrowings of up to $100 million and expires
December 31, 2015. Amounts may be borrowed under the
Kensington term facility to finance general corporate and
working capital purposes of Coeur Alaska or Coeur, |
68
|
|
|
|
|
to fund certain capital expenditures or to repay certain
obligations. Coeur Alaskas obligations under the
Kensington term facility are secured by all of its assets and
the land mineral rights and infrastructure at the Kensington
mine, as well as a pledge of the Coeur Alaska shares owned by
Coeur, and are guaranteed by Coeur. In connection with the
amendment of the credit facility, the guarantee was amended to
provide that the Company will limit borrowings or asset
dispositions by its Bolivian subsidiary Empresa Minera Manquiri
S.A. |
|
(4) |
|
The Company has entered into various capital lease agreements
for commitments principally over the next three years. |
|
(5) |
|
Reclamation and mine closure amounts represent the
Companys estimate of the cash flows associated with its
legal obligation to reclaim and remediate mining properties.
This amount will decrease as reclamation and remediation work is
completed. Amounts shown on the table are undiscounted. |
|
(6) |
|
Severance amounts represent a termination benefit program at the
Rochester mine and accrued benefits for government mandated
severance at the Palmarejo mine, Martha mine and
San Bartolomé mine. |
|
(7) |
|
On December 18, 2008, the Company entered into a gold lease
facility with Mitsubishi International Corporation
(MIC). Currently 10,000 ounces of gold are leased
from MIC to the Company, for which the Company received proceeds
of $11.9 million. |
|
(8) |
|
On January 21, 2009, the Company entered into a gold
production royalty transaction with Franco-Nevada Corporation
under which Franco-Nevada purchased a royalty covering 50% of
the life of mine gold to be produced by Coeur from its Palmarejo
silver and gold mine in Mexico. Coeur received total
consideration of $78.0 million consisting of
$75.0 million in cash, plus a warrant to acquire
Franco-Nevada Common Shares (the Franco-Nevada
warrant), which was valued at $3.0 million at closing
of the Franco-Nevada transaction. The royalty obligation is
payable in an amount equal to the greater of 4,167 ounces of
gold or 50% of actual gold production per month multiplied by
the market price of gold in excess of $400 (increasing by 1% per
annum beginning on the fourth anniversary of the transaction).
The minimum royalty obligation commenced on July 1, 2009
and ends when payments have been made on a total of 400,000
ounces of gold. Amounts shown in table are undiscounted. |
Environmental
Compliance Expenditures
For the years ended December 31, 2010, 2009, and 2008, the
Company expended $7.7 million, $5.8 million and
$8.1 million, respectively, in connection with routine
environmental compliance activities at its operating properties.
Such activities include monitoring, earth moving, water
treatment and re-vegetation activities. In addition, the Company
has incurred reclamation costs of $0.8 million,
$1.5 million and $3.3 million for the years ended
December 31, 2010, 2009 and 2008. Such costs stem from
activities including monitoring, earth moving water treatment
and re-vegetation activities.
The Company estimates that environmental compliance expenditures
during 2011 will be approximately $5.9 million to obtain
permit modifications and other regulatory authorizations. Future
environmental expenditures will be determined by governmental
regulations and the overall scope of the Companys
operating and development activities. The Company places a very
high priority on its compliance with environmental regulations.
Off-Balance
Sheet Arrangements
The Company has no off-balance sheet arrangements.
Recently
Adopted Accounting Standards
The
Accounting Standard Codification
In June 2009, the FASB issued new accounting standards related
to its accounting standards codification of the hierarchy of
generally accepted accounting principles. The new standard is
the source of authoritative U.S. GAAP to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (SEC) under
authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. The Codification
superseded non-SEC accounting and reporting standards. All
accounting literature that is not in the Codification, not
issued by the SEC and not otherwise grandfathered is
non-authoritative.
69
The new standard is effective for the Companys interim
quarterly period beginning July 1, 2009. The adoption had
no impact on the Companys consolidated financial position,
results of operations or cash flows.
Subsequent
Events
In May 2009, the FASB issued new accounting standards that
established accounting and reporting standards for events that
occur after the balance sheet date but before financial
statements are issued or are available to be issued. The new
standard sets forth (i) a period after the balance sheet
date during which a reporting entitys management should
evaluate events or transactions for possible recognition or
disclosure in financial statements, (ii) the circumstances
under which an entity should recognize events or transactions
occurring after the balance sheet in its financial statements,
and (iii) the disclosures that an entity should make about
events or transactions occurring after the balance sheet date in
its financial statements. The Company adopted the provisions of
the new accounting standards for the interim period ended
June 30, 2009. The adoption had no impact on the
Companys consolidated financial position results of
operations or cash flows.
Equity
Linked Financial Instruments
In June 2008, the Emerging Issues Task Force, or EITF, reached a
consensus which clarifies the accounting treatment of an
instrument (or an embedded feature) that is indexed to an
entitys own stock, which would qualify as a scope
exception under U.S. GAAP. The adoption of the consensus
reached by the EITF was effective for the Companys fiscal
year beginning January 1, 2009. Upon adoption, the Company
determined that the bifurcated embedded conversion option in its
Senior Secured Floating Rate Convertible Notes was no longer a
derivative that is required to be adjusted to fair value at the
end of each period. The carrying amount of the liability of
$21.6 million for the conversion option was reclassified to
shareholders equity upon adoption.
Risk
Factors; Forward-Looking Statements
For information relating to important risks and uncertainties
that could materially adversely affect the Companys
business, securities, financial condition or operating results,
reference is made to the disclosure set forth under
Item 1A. Risk Factors above. In addition,
because the preceding discussion includes numerous
forward-looking statements relating to the Company, its results
of operations and financial condition and business, reference is
made to the information set forth above in Item 1.
Business under the caption Important Factors
Relating to Forward-Looking Statements.
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
The Company is exposed to various market risks as a part of its
operations. In an effort to mitigate losses associated with
these risks, the Company may, at times, enter into derivative
financial instruments. These may take the form of forward sales
contracts, foreign currency exchange contracts and interest rate
swaps. The Company does not actively engage in the practice of
trading derivative instruments for profit. This discussion of
the Companys market risk assessments contains
forward looking statements that contain risks and
uncertainties. Actual results and actions could differ
materially from those discussed below.
The Companys operating results are substantially dependent
upon the world market prices of silver and gold. The Company has
no control over silver and gold prices, which can fluctuate
widely and are affected by numerous factors, such as supply and
demand and investor sentiment. In order to mitigate some of the
risk associated with these fluctuations, the Company will at
times enter into forward sale contracts. The Company continually
evaluates the potential benefits of engaging in these strategies
based on current market conditions. The Company may be exposed
to nonperformance 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 enters into contracts and other arrangements
from time to time in an effort to reduce the negative effect of
price changes on its cashflows. These arrangements typically
consist of managing its exposure to foreign currency exchange
rates and market prices associated with changes in gold and
silver commodity prices. The Company may also manage price risk
through the purchase of put options.
The Company enters into concentrate sales contracts with
third-party smelters. The contracts, in general, provide for a
provisional payment based upon provisional assays and quoted
metal prices. The provisionally priced
70
sales contracts contain an embedded derivative that is required
to be separated from the host contract for accounting purposes.
The host contract is the receivable from the sale of
concentrates at the forward price at the time of sale. The
embedded derivative, which is the final settlement based on a
future price, does not qualify for hedge accounting. These
embedded derivatives are recorded as derivative assets in
prepaid expenses and other or as derivative liabilities in
accrued liabilities and other on the balance sheet and are
adjusted to fair value through earnings each period until the
date of final settlement.
At December 31, 2010, the Company had outstanding
provisionally priced sales of $35.7 million consisting of
0.6 million ounces of silver and 12,758 ounces of gold,
which had a fair value of approximately $37.4 million
including the embedded derivative. For each one cent per ounce
change in realized silver price, revenue would vary (plus or
minus) approximately $6,000 and for each one dollar per ounce
change in realized gold price, revenue would vary (plus or
minus) approximately $12,800. At December 31, 2009, the
Company had outstanding provisionally priced sales of
$19.1 million consisting of 1.0 million ounces of
silver and 1,227 ounces of gold, which had a fair value of
approximately $19.1 million including the embedded
derivative. For each one cent per ounce change in realized
silver price, revenue would vary (plus or minus) approximately
$10,000 and for each one dollar per ounce change in realized
gold price, revenue would vary (plus or minus) approximately
$1,200.
The Company operates, or has mining interests, in several
foreign countries, specifically Australia, Bolivia, Chile,
Mexico and Argentina, which exposes it to risks associated with
fluctuations in the exchange rates of the currencies involved.
As part of its program to manage foreign currency risk, the
Company from time to time enters into foreign currency forward
exchange contracts. These contracts enable the Company to
purchase a fixed amount of foreign currencies. Gains and losses
on foreign exchange contracts that are related to firm
commitments are designated and effective as hedges and are
deferred and recognized in the same period as the related
transaction. All other contracts that do not qualify as hedges
are marked to market and the resulting gains or losses are
recorded in income. The Company continually evaluates the
potential benefits of entering into these contracts to mitigate
foreign currency risk and proceeds when it believes that the
exchange rates are most beneficial.
During 2010 and the fourth quarter of 2009, the Company entered
into forward foreign currency exchange contracts to reduce the
foreign exchange risk associated with forecasted Mexican peso
(MXP) operating costs at its Palmarejo mine.
At December 31, 2010, the Company had MXP foreign exchange
contracts of $28.8 million in U.S. dollars. These
contracts require the Company to exchange U.S. dollars for
MXP at a weighted average exchange rate of 12.63 MXP to each
U.S. dollar and had a fair value of $4,000 at
December 31, 2010. The Company recorded unrealized gains
(losses) of ($1.3) million, $1.3 million and
$3.5 million for the years ended December 31, 2010,
2009 and 2008, respectively, which is reflected in the gain
(loss) on derivatives. The Company recorded realized gains
(losses) of $1.6 million, $1.5 million and
$(0.6) million in production costs applicable to sales
during the years ended December 31, 2010, 2009 and 2008,
respectively.
On December 12, 2008, the Company entered into a gold lease
facility with Mitsubishi International Corporation
(MIC). Pursuant to this facility, the Company may
lease amounts of gold from MIC and is obligated to deliver the
same amounts back to MIC and to pay specified lease fees to MIC
that are equivalent to interest at current market rates on the
value of the gold leased. Pursuant to a Second Amended and
Restated Collateral Agreement, the Companys obligations
under the facility are secured by certain collateral. The
collateral agreement specifies the maximum amount of gold the
Company may lease from MIC, as well as the amount and type of
collateral.
On July 16, 2010 the Company and MIC entered into an
Amendment No. 4 to the Second Amended and Restated
Collateral Agreement to increase the availability under the
facility. Under the amended agreement, the maximum amount the
Company may lease under the facility, aggregated with lease
fees, is $49.5 million. In addition, the amended agreement
provides for a customary commitment fee. On December 23,
2010, the Company entered into an Amendment No. 5 to the
second Amended and Restated Collateral Agreement, lowering
the value of the collateral required to secure its obligations
to 30% of the outstanding amount, including lease fees. The
Company is not obligated to enter into any additional leases as
of December 31, 2010.
71
The collateral agreement contains usual and customary covenants
and agreements, including limitations on the Companys
ability to sell or grant liens in the collateral, as well as
covenants as to cooperation, payment of charges and protection
of security. The collateral agreement and the master lease
agreement governing the gold lease facility both contain
customary events of default.
As of December 31, 2010, the Company had 10,000 ounces of
gold leased from MIC. The Company has committed to deliver this
number of ounces of gold to MIC on a scheduled delivery date in
the first quarter of 2011. As of December 31, 2010, the
Company is required to pledge certain metal inventory held by a
refiner as collateral under the facility. The Company accounts
for the gold lease facility as a derivative instrument, which is
recorded in accrued liabilities and other in the balance sheet.
As of December 31, 2010, and 2009, based on the current
futures metals prices for each of the delivery dates and using a
3.1% and 5.7% discount rate, respectively, the fair value of the
instrument was a liability of $14.1 million and
$28.5 million, respectively. The pre-credit risk adjusted
fair value of the net derivative liability as of
December 31, 2010 was $14.2 million. A credit risk
adjustment of $0.1 million to the fair value of the
derivative reduced the reported amount of the net derivative
liability on the Companys consolidated balance sheet to
$14.1 million. Mark-to market adjustments for the gold
lease facility amounted to a gain of $2.9 million for the
twelve months ended December 31, 2010 and loss of
$6.3 million for the twelve months ended December 31,
2009. The Company recorded realized losses of $10.1 million
and $0.2 million for the twelve months ended
December 31, 2010 and 2009, respectively. The
mark-to-market
adjustments and realized losses are included in fair value
adjustments, net.
During the twelve months ended December 31, 2010,
outstanding put options allowing the Company to deliver
5.4 million ounces of silver at an average strike price of
$9.21 per ounce expired. The Company recorded realized losses of
$2.1 million for the twelve months ended December 31,
2010, included in fair value adjustments, net. During the twelve
months ended December 31, 2009, the Company recorded
realized gains of $0.9 million, included in Fair value
adjustments, net.
As a condition to the Kensington term facility with Credit
Suisse noted above, the Company agreed to enter into a gold
hedging program which protects a minimum of 187,500 ounces of
gold production over the life of the facility against the risk
associated with fluctuations in the market price of gold. This
program took the form of a series of zero cost collars which
consist of a floor price and a ceiling price of gold. Collars
protecting 182,500 ounces of gold were outstanding at
December 31, 2010. The weighted average put feature of each
collar is $911.99 and the weighted average call feature of each
collar is $1795.18.
On January 21, 2009, the Companys wholly-owned
subsidiary, Coeur Mexicana SA de CV, entered into a gold
production royalty transaction with Franco-Nevada Corporation
under which Franco-Nevada purchased a royalty covering 50% of
the life of mine gold to be produced from the Palmarejo silver
and gold mine in Mexico. Coeur Mexicana received total
consideration of $78.0 million consisting of
$75.0 million in cash plus a warrant to acquire
Franco-Nevada Common Shares (the Franco-Nevada
warrant), which was valued at $3 million at closing
of the Franco-Nevada transaction. On September 19, 2010,
the warrant was exercised and the related shares were sold for
$10.0 million.
The royalty agreement provides for a minimum obligation to be
paid in monthly payments 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 per month
multiplied by the excess of the monthly average market price of
gold above $400 per ounce (which $400 floor is subject to a 1%
annual inflation compounding adjustment beginning on
January 21, 2013). As of December 31, 2010, payments
had been made on a total of 79,879 ounces of gold with further
payments to be made on an additional 320,121 ounces of gold.
After payments have been made on a total of 400,000 ounces of
gold, the royalty obligation is payable in the amount of 50% of
actual gold production per month multiplied by the excess of the
monthly average market price of gold above $400 per ounce,
adjusted as described above. Payments under the royalty
agreement are to be made in cash or gold bullion. During the
twelve months ended December 31, 2010, the Company paid
$43.1 million in royalty payments to Franco-Nevada
Corporation. Payments made during the minimum obligation period
will result in a reduction to the remaining minimum obligation.
Payments made beyond the minimum obligation period will be
72
recognized as other cash operating expenses and result in an
increase to Coeur Mexicanas reported cash cost per ounce
of silver.
The Company used an implicit interest rate of 27.8% to discount
the original 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 twelve months ended
December 31, 2010, and 2009 of $20.5 million and
$19.1 million, respectively. As of December 31, 2010,
and 2009, the remaining minimum obligation under the royalty
agreement was $80.3 million and $84.8 million,
respectively.
The price volatility associated with the minimum royalty
obligation is considered an embedded derivative under
U.S. GAAP. Fluctuations in the market price of gold since
inception of the agreement have resulted in the recognition of
additional fair value adjustments and resulted in higher
payments to date. Please see Note Q Derivative
Financial Instruments and Fair Value of Financial Instruments to
our financial statements included herein, for further discussion
of the embedded derivative feature of the royalty agreement.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
The financial statements required hereunder and contained herein
are listed under Item 15. Exhibits, Financial
Statement Schedules below.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Not applicable.
|
|
Item 9A.
|
Controls
and Procedures
|
|
|
(a)
|
Disclosure
Controls and Procedures
|
The Companys disclosure controls and procedures are
designed to provide reasonable assurance that information
required to be disclosed by it in its periodic reports filed
with the SEC is recorded, processed, summarized and reported,
within the time periods specified in the SECs rules and
forms, and to ensure that such information is accumulated and
communicated to the Companys management, including its
Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required
disclosure. Based on an evaluation of the Companys
disclosure controls and procedures conducted by the
Companys Chief Executive Officer and Chief Financial
Officer, such officers concluded that the Companys
disclosure controls and procedures were effective and operating
at a reasonable assurance level as of December 31, 2010.
|
|
(b)
|
Managements
Report on Internal Control Over Financial
Reporting
|
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting. The Securities and Exchange Act of 1934 defines
internal control over financial reporting in
Rule 13a-15(f)
and
15d-15(f) as
a process designed by, or under the supervision of, the
Companys principal executive and principal financial
officers and effected by the Companys board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:
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Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of the assets of the Company;
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Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and
directors of the Company; and
|
73
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|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
consolidated financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Companys management assessed the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2010. In making this assessment, the
Companys management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework. Based
upon its assessment, management concluded that, as of
December 31, 2010, the Companys internal control over
financial reporting is effective based upon those criteria.
The Companys independent registered public accounting
firm, KPMG LLP, has audited in accordance with the standards of
the Public Company Accounting Oversight Board (United States),
the Companys internal control over financial reporting as
of December 31, 2010, based on criteria established in
Internal Control Integrated Framework issued
by COSO, and its report dated March 1, 2011, which is
included in this
Form 10-K
immediately preceding the Companys audited financial
statements, expressed an unqualified opinion on the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2010.
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(c)
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Changes
in Internal Control Over Financial Reporting
|
There have been no changes in the Companys internal
control over financial reporting during the most recently
completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, its internal control
over financial reporting.
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Item 9B.
|
Other
Information
|
As of the filing of this
10-K,
Mitchell Krebs, our chief financial officer, is our principal
accounting officer and Mr. Angelos has ceased to act as
principal accounting officer.
PART III
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Item 10.
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Directors,
Executive Officers and Corporate Governance
|
Pursuant to General Instruction G(3) of
Form 10-K,
the information called for by this item regarding directors is
hereby incorporated by reference from the Companys
definitive proxy statement for the 2011 Annual Meeting of
Shareholders, filed pursuant to Regulation 14A or an
amendment hereto, to be filed not later than 120 days after
the end of the fiscal year covered by this report under the
captions Proposal No. 1 Election of
Directors, Executive Officers,
Section 16(a) Beneficial Ownership Reporting
Compliance, and Audit Committee Report.
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Item 11.
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Executive
Compensation
|
Pursuant to General Instruction G(3) of
Form 10-K,
the information called for by this item is hereby incorporated
by reference from the Companys definitive proxy statement
for the 2011 Annual Meeting of Shareholders, filed pursuant to
Regulation 14A or amendment hereto, to be filed not later
than 120 days after the end of the fiscal year covered by
this report under the captions Compensation Discussion and
Analysis, 2010 Summary Compensation Table,
2010 Grants of Plan-Based Awards, Outstanding
Equity Awards at 2010 Fiscal Year End, 2010 Option
Exercises and Stock Vested, Pension Benefits and
Non-Qualified Deferred Compensation, Director
Compensation and Compensation Committee Report.
74
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Item 12.
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Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Pursuant to General Instruction G(3) of
Form 10-K,
certain information called for by this item is hereby
incorporated by reference from the Companys definitive
proxy statement for the 2011 Annual Meeting of Shareholders
filed pursuant to Regulation 14A or an amendment hereto, to
be not later than 120 days after the end of the fiscal year
covered by this report under the caption Share
Ownership.
Equity
Compensation Plan Information
The following table sets forth information as of
December 31, 2010 regarding the Companys equity
compensation plans.
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Number of shares remaining
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Number of shares to be
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available for future issuance
|
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issued upon exercise of
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Weighted-average exercise
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under equity compensation
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outstanding options,
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price of outstanding options,
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plans (excluding securities
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Plan category
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warrants and rights
|
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warrants and rights
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reflected in column(a)
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(1)
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(1)
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(1)
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Equity compensation plans approved by security holders
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330,840
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$
|
24.60
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4,219,762
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Equity compensation plans not approved by security holders
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Total
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330,840
|
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$
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24.60
|
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4,219,762
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(1) |
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Amounts include 100,828 performance shares which are issued at
the end of the three year service period if certain market
conditions are met and the recipient remains an employee of the
Company. |
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Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
Pursuant to General Instruction G(3) of
Form 10-K,
the information called for by this item is hereby incorporated
by reference from the Companys definitive proxy statement
for the 2011 Annual Meeting of Shareholders, pursuant to
Regulation 14A, or an amendment hereto, to be filed not
later than 120 days after the end of the fiscal year
covered by this report under the captions Certain Related
Person Transactions and Committees of the Board of
Directors.
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Item 14.
|
Principal
Accounting Fees and Services
|
Pursuant to General Instruction G(3) of
Form 10-K,
the information called for by this item is hereby incorporated
by reference from the Companys definitive proxy statement
for the 2011 Annual Meeting of Shareholders, pursuant to
Regulation 14A, or an amendment hereto, to be filed not
later than 120 days after the end of the fiscal year
covered by this report under the captions Audit and
Non-Audit Fees and Audit Committee Policies and
Procedures for Pre-Approval of Independent Auditor
Services.
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
(a) The following financial statements are filed herewith:
|
|
(1) |
The following consolidated financial statements of Coeur
dAlene Mines Corporation and subsidiaries are included in
Item 8. Financial Statements and Supplementary
Data.
|
Consolidated Balance Sheets December 31, 2010
and 2009.
75
Consolidated Statements of Operations and Comprehensive Loss for
the Years Ended December 31, 2010, 2009 and 2008.
Consolidated Statements of Changes in Shareholders Equity
for the Years Ended December 31, 2010, 2009 and 2008.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2010, 2009 and 2008.
Notes to Consolidated Financial Statements.
(b) Exhibits: The following listed documents are
filed as Exhibits to this report:
|
|
|
|
|
|
3
|
.1
|
|
Restated and Amended Articles of Incorporation of the
Registrant, as amended effective May 26, 2009.
(Incorporated herein by reference to Exhibit 3.1 to the
Registrants Quarterly Report on
Form 10-Q
filed on May 10, 2010).
|
|
3
|
.2
|
|
Certificate of Designation, Preferences and Rights of the
Series B Junior Preferred Stock of the Registrant, as filed
with Idaho Secretary of State on May 13, 1999 (Incorporated
herein by reference to Exhibit 3.C to the Registrants
Annual Report on
Form 10-K
filed on March 21, 2003).
|
|
3
|
.3
|
|
Certificate of Amendment to the Certificate of Designation,
Preferences and Rights of Series B Junior Preferred Stock
of the Registrant, dated December 7, 2007 (Incorporated
herein by reference to Exhibit 3(G) to the
Registrants Annual Report on
Form 10-K
filed on February 29, 2008).
|
|
3
|
.4
|
|
Bylaws of the Registrant, as amended effective July 16,
2007 (Incorporated herein by reference to Exhibit 3 to the
Registrants Quarterly Report on
Form 10-Q
filed on November 2, 2007).
|
|
4
|
.1
|
|
Specimen certificate of the Registrants stock.
(Incorporated herein by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed on May 27, 2009).
|
|
4
|
.2
|
|
Indenture dated as of March 18, 2008, by and between the
Registrant and the Bank of New York relating to the
Registrants 3.25% Convertible Senior Notes due 2028
(Incorporated herein by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed on March 20, 2008).
|
|
4
|
.3
|
|
First Supplemental Indenture dated as of March 18, 2008 to
Indenture dated as of March 18, 2008, by and between the
Registrant and the Bank of New York relating to the
Registrants 3.25% Convertible Senior Notes due 2028
(Incorporated herein by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
filed on March 20, 2008).
|
|
4
|
.4
|
|
Indenture between the Company and The Bank of New York Mellon,
as trustee, dated as of February 5, 2010 (Incorporated by
herein reference to Exhibit 4.1 to the Registrants
Current Report on
Form 8-K
filed on February 9, 2010).
|
|
4
|
.5
|
|
First Supplemental Indenture between the Company and The Bank of
New York Mellon, as trustee, dated as of February 5, 2010
(Incorporated herein by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
filed on February 9, 2010).
|
|
4
|
.6
|
|
Form of Senior Term Note due December 31, 2012, dated
February 5, 2010 (Incorporated herein by reference to
Exhibit 4.3 to the Registrants Current Report on
Form 8-K
filed on February 9, 2010).
|
|
10
|
.1
|
|
401k Plan of the Registrant. (Incorporated by reference to
Exhibit 10(pp) to the Registrants Annual Report on
Form 10-K
filed on March 29, 1995).*
|
|
10
|
.2
|
|
Amended and Restated 2005 Non-Employee Directors Equity
Incentive Plan, as amended for the Registrants reverse
stock split. (Incorporated herein by reference to
Exhibit 10(b) to the Registrants Annual Report on
Form 10-K
filed on February 26, 2010).*
|
|
10
|
.3
|
|
Amended Mining Lease, effective as of August 5, 2005,
between Hyak Mining Company, Inc. and Coeur Alaska, Inc.
(Incorporated herein by reference to Exhibit 10.5 to the
Registrants Quarterly Report on
Form 10-Q
filed on August 12, 2005).
|
|
10
|
.4
|
|
Silver Sale Agreement, dated September 8, 2005, between the
Registrant, Perilya Broken Hill Ltd. and CDE Australia Pty. Ltd.
(Portions of this exhibit have been omitted pursuant to a
request for confidential treatment.) (Incorporated herein by
reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
filed on November 9, 2005).
|
|
10
|
.5
|
|
Form of Restricted Stock Award Agreement (Incorporated herein by
reference to Exhibit 10.1 to the Registrants Current
Report on
Form 8-K
filed on February 18, 2005).*
|
76
|
|
|
|
|
|
10
|
.6
|
|
Form of Incentive Stock Option Award Agreement (Incorporated
herein by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
filed on February 18, 2005).*
|
|
10
|
.7
|
|
Form of Non-Qualified Stock Option Award Agreement (Incorporated
herein by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
filed on February 18, 2005).*
|
|
10
|
.8
|
|
Form of Performance Share Award Agreement (Incorporated herein
by reference to Exhibit 10(i) to the Registrants
Annual Report on
form 10-K
filed on February 26, 2010).*
|
|
10
|
.9
|
|
Form of Performance Unit Award Agreement (Incorporated herein by
reference to Exhibit 10(j) to the Registrants Annual
Report on
Form 10-K
filed on February 26, 2010).*
|
|
10
|
.10
|
|
Form of Cash Settled Restricted Stock Unit Award Agreement
(Incorporated herein by reference to Exhibit 10(k) to the
Registrants Annual Report on
Form 10-K
filed on February 26, 2010).*
|
|
10
|
.11
|
|
Form of Cash-Settled Stock Appreciation Rights Award Agreement
(Incorporated here in by reference to Exhibit 10(l) to the
Registrans Annual Report on
form 10-K
filed on February 26, 2010).*
|
|
10
|
.12
|
|
Amended and Restated Silver Sale and Purchase Agreement, dated
March 28, 2006, between CDE Australia Pty Limited and Cobar
Operations Pty Limited (Portions of this exhibit have been
omitted pursuant to a request for confidential treatment.)
(Incorporated herein by reference to Exhibit 10(b) to the
Registrants Quarterly Report on
Form 10-Q
filed on May 9, 2006).
|
|
10
|
.13
|
|
Supplemental Agreement in respect of the Amended and Restated
Silver Sale and Purchase Agreement, dated January 29, 2008,
between CDE Australia Pty Limited and Cobar Operations Pty
Limited (Incorporated herein by reference to Exhibit 10(cc)
to the Registrants Annual Report on
Form 10-K
filed on February 29, 2008).
|
|
10
|
.14
|
|
Gold royalty stream agreement, dated as of January 21,
2009, by and between the Registrant and Franco-Nevada
(Incorporated herein by reference to Exhibit 10.5 to the
Registrants Quarterly Report on
Form 10-Q
filed on May 11, 2009).*
|
|
10
|
.15
|
|
Deed of Termination, dated July 15, 2009, of the Silver
Sale Agreement, dated September 8, 2005, between the
Registrant, Perilya Broken Hill Ltd. and CDE Australia Pty. Ltd.
(Incorporated herein by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
filed on August 6, 2009.)
|
|
10
|
.16
|
|
Term Facility Agreement dated October 27, 2009 by and among
Coeur Alaska Inc. and the financial institutions listed in
schedule I thereto (Incorporated herein by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
filed on November 2, 2009).
|
|
10
|
.17
|
|
Guarantee and Indemnity Agreement dated October 27, 2009
between the Registrant and Credit Suisse, as Security Agent
(Incorporated herein by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
filed on November 2, 2009).
|
|
10
|
.18
|
|
Capital Expenditure and Cost Overrun Guarantee and Indemnity
Agreement dated October 27, 2009 among the Registrant,
Coeur Alaska Inc. as Borrower and Credit Suisse, as Security
Agent (Incorporated herein by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
filed on November 2, 2009).
|
|
10
|
.19
|
|
Securities Purchase Agreement among the Company, Sonoma Capital
Offshore, Ltd., Sonoma Capital, L.P., Manchester Securities
Corp, JGB Capital L.P., JGB Capital Offshore Ltd. and SAMC LLC,
dated as of February 5, 2010 (Incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
filed on February 9, 2010)
|
|
10
|
.20
|
|
Second Amended and Restated Employment Agreement, effective
December 31, 2008, between the Registrant and Dennis E.
Wheeler. (Incorporated herein by reference to Exhibit 10.1
to the Registrants Current Report on
Form 8-K
filed on January 7, 2009).*
|
|
10
|
.21
|
|
Amended and Restated Employment Agreement, effective
December 31, 2008, between the Registrant and Mitchell J.
Krebs. (Incorporated herein by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
filed on January 7, 2009).*
|
|
10
|
.22
|
|
Amended and Restated Employment Agreement, effective
December 31, 2008, between the Registrant and Donald J.
Birak. (Incorporated herein by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
filed on January 7, 2009).*
|
|
10
|
.23
|
|
Amended and Restated Employment Agreement, dated
December 31, 2008, between the Registrant and K. Leon
Hardy. (Incorporated herein by reference to Exhibit 10.1 to
the Registrants Current Report on
Form 8-K
filed on March 2, 2010).*
|
77
|
|
|
|
|
|
10
|
.24
|
|
First Amendment to Restated Employment Agreement, dated
July 31, 2009, between the Registrant and K. Leon Hardy.
(Incorporated herein by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
filed on March 2, 2010).*
|
|
10
|
.25
|
|
Second Amendment to Restated Employment Agreement, dated
March 2, 2010, between the Registrant and K. Leon Hardy.
(Incorporated herein by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
filed on March 2, 2010).*
|
|
10
|
.26
|
|
Amended and Restated 2003 Long-Term Incentive Plan of Coeur
dAlene Mines Corporation. (Incorporated herein by
reference to Exhibit 10.1 to the Companys Current
Report on
Form 8-K
filed on May 14, 2010).*
|
|
10
|
.27
|
|
Two-Way Metals Lease Agreement, dated December 12, 2008,
between the Registrant and Mitsubishi International Corporation.
(Incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on July 22, 2010).
|
|
10
|
.28
|
|
Second Amended and Restated Collateral agreement, dated as of
August 7, 2009, among the Registrant, CDE Australia Pty Ltd
and Mitsubishi International Corporation. (Incorporated herein
by reference to Exhibit 10.2 to the Companys Current
Report on
Form 8-K
filed on July 22, 2010).
|
|
10
|
.29
|
|
Amendment No. 4 to Second Amended and Restated Collateral
Agreement, dated as of July 16, 2010, between the
Registrant and Mitsubishi International Corporation.
(Incorporated herein by reference to Exhibit 10.3 to the
Companys Current Report on
Form 8-K
filed on July 22, 2010).
|
|
10
|
.30
|
|
Amendment No. 1 to Two-Way Metal Lease Agreement and
Amendment No. 5 to Second Amended and Restated Collateral
Agreement, dated as of December 23, 2010, between the
Registrant and Mitsubishi International Corporation.
|
|
10
|
.31
|
|
First Amendment to Second Amended and Restated Employment
Agreement, effective August 6, 2010, between the Company
and Dennis E. Wheeler. (Incorporated herein by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K
filed on August 9, 2010).*
|
|
10
|
.32
|
|
Third Amendment to Restated Employment Agreement, effective
August 6, 2010 between the Company and Mitchell J. Krebs.
(Incorporated herein by reference to Exhibit 10.5 to the
Companys Quarterly Report on
Form 10-Q
filed on November 4, 2010).*
|
|
10
|
.33
|
|
Second Amendment to Restated Employment Agreement, effective
August 2, 2010 between the Company and Donald J. Birak.
(Incorporated herein by reference to Exhibit 10.6 to the
Companys Quarterly Report on
Form 10-Q
filed on November 4, 2010).*
|
|
10
|
.34
|
|
Second Amendment to Restated Employment Agreement, effective
August 2, 2010 between the Company and Kelli C. Kast.
(Incorporated herein by reference to Exhibit 10.7 to the
Companys Quarterly Report on
Form 10-Q
filed on November 4, 2010).*
|
|
10
|
.35
|
|
Third Amendment to Restated Employment Agreement, effective
August 2, 2010 between the Company and K. Leon Hardy.
(Incorporated herein by reference to Exhibit 10.8 to the
Companys Quarterly Report on
Form 10-Q
filed on November 4, 2010).*
|
|
10
|
.36
|
|
Amended and restated Term Facility Agreement, dated as of
December 20, 2010, among Coeur Alaska Inc. as Borrower,
Credit Suisse AG as Arranger, Security Agent, Facility Agent and
lender and Credit Suisse International as Hedge Provider.
(Incorporated herein by reference to Exhibit 10.1 to the
Companys Current Report on
Form 8-K
filed on December 27, 2010).
|
|
10
|
.37
|
|
Letter, dated December 20, 2010, from the Company to Credit
Suisse A.G. (Incorporated herein by reference to
Exhibit 10.2 to the Companys Current Report on
Form 8-K
filed on December 27, 2010).
|
|
12
|
|
|
Computation of Ratio of Earnings to Fixed Charges. (Filed
herewith).
|
|
21
|
|
|
List of subsidiaries of the Registrant. (Filed herewith).
|
|
23
|
|
|
Consent of KPMG LLP (Filed herewith).
|
|
31
|
.1
|
|
Certification of the CEO (Filed herewith).
|
|
31
|
.2
|
|
Certification of the CFO (Filed herewith).
|
|
32
|
.1
|
|
CEO Section 1350 Certification (Filed herewith).
|
|
32
|
.2
|
|
CFO Section 1350 Certification (Filed herewith).
|
|
|
|
* |
|
Management contract or compensatory plan. |
78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Coeur dAlene Mines Corporation
(Registrant)
|
|
|
|
|
Date: March 1, 2011
|
|
By:
|
|
/s/ Dennis
E.
Wheeler Dennis
E. Wheeler
(Chairman, President and
Chief Executive Officer)
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Dennis
E. Wheeler
Dennis
E. Wheeler
|
|
Chairman, President, Chief Executive
Officer and Director
(Principal Executive Officer)
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Mitchell
J. Krebs
Mitchell
J. Krebs
|
|
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
|
|
March 1, 2011
|
|
|
|
|
|
/s/ James
J. Curran
James
J. Curran
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Sebastian
Edwards
Sebastian
Edwards
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Andrew
D. Lundquist
Andrew
D. Lundquist
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Robert
E. Mellor
Robert
E. Mellor
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ John
H. Robinson
John
H. Robinson
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ J.
Kenneth Thompson
J.
Kenneth Thompson
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Michael
Bogert
Michael
Bogert
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Timothy
R. Winter
Timothy
R. Winter
|
|
Director
|
|
March 1, 2011
|
79
ANNUAL
REPORT ON
FORM 10-K
CONSOLIDATED
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2010
COEUR DALENE MINES CORPORATION
COEUR DALENE, IDAHO
|
|
|
|
|
Reports of Independent Registered Public Accounting Firm
|
|
|
F-2 F-3
|
|
Consolidated Balance Sheets December 31, 2010
and 2009
|
|
|
F-4
|
|
Consolidated Statements of Operations and Comprehensive Loss for
the Years Ended December 31, 2010, 2009 and 2008
|
|
|
F-5
|
|
Consolidated Statements of Changes in Shareholders Equity
for the Years Ended December 31, 2010, 2009 and 2008
|
|
|
F-6
|
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2010, 2009 and 2008
|
|
|
F-7
|
|
F-1
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Coeur dAlene Mines Corporation:
We have audited Coeur dAlene Mines Corporations
internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Coeur dAlene Mines Corporations
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Coeur dAlene Mines Corporation maintained,
in all material respects, effective internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Coeur dAlene Mines
Corporation and subsidiaries as of December 31, 2010 and
2009, and the related consolidated statements of operations and
comprehensive loss, changes in shareholders equity, and
cash flows for each of the years in the three-year period ended
December 31, 2010, and our report dated March 1, 2011
expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
Boise, Idaho
March 1, 2011
F-2
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Coeur dAlene Mines Corporation:
We have audited the accompanying consolidated balance sheets of
Coeur dAlene Mines Corporation and subsidiaries as of
December 31, 2010 and 2009, and the related consolidated
statements of operations and comprehensive loss, changes in
shareholders equity, and cash flows for each of the years
in the three-year period ended December 31, 2010. These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Coeur dAlene Mines Corporation and
subsidiaries as of December 31, 2010 and 2009, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2010, in
conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Coeur
dAlene Mines Corporations internal control over
financial reporting as of December 31, 2010, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report
dated March 1, 2011 expressed an unqualified opinion on the
effectiveness of the Companys internal control over
financial reporting.
/s/ KPMG LLP
Boise, Idaho
March 1, 2011
F-3
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands,
|
|
|
|
except share data)
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
66,118
|
|
|
$
|
22,782
|
|
Receivables
|
|
|
58,880
|
|
|
|
58,981
|
|
Ore on leach pad (Note C )
|
|
|
7,959
|
|
|
|
9,641
|
|
Metal and other inventory (Note I)
|
|
|
118,340
|
|
|
|
67,712
|
|
Restricted assets
|
|
|
25
|
|
|
|
2,275
|
|
Prepaid expenses and other
|
|
|
14,889
|
|
|
|
24,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,211
|
|
|
|
186,036
|
|
NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
668,101
|
|
|
|
539,037
|
|
Mining properties (Note K)
|
|
|
2,122,216
|
|
|
|
2,240,056
|
|
Ore on leach pad, non-current portion (Note C)
|
|
|
10,005
|
|
|
|
14,391
|
|
Restricted assets (Note C)
|
|
|
29,028
|
|
|
|
26,546
|
|
Receivables, non current
|
|
|
42,866
|
|
|
|
37,534
|
|
Debt issuance costs, net
|
|
|
4,333
|
|
|
|
3,544
|
|
Deferred tax assets (Note N)
|
|
|
804
|
|
|
|
2,355
|
|
Other
|
|
|
13,963
|
|
|
|
4,536
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
3,157,527
|
|
|
$
|
3,054,035
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
88,321
|
|
|
$
|
77,003
|
|
Accrued liabilities and other
|
|
|
18,608
|
|
|
|
33,517
|
|
Accrued income taxes
|
|
|
28,397
|
|
|
|
11,783
|
|
Accrued payroll and related benefits
|
|
|
17,953
|
|
|
|
9,815
|
|
Accrued interest payable
|
|
|
834
|
|
|
|
1,744
|
|
Current portion of capital leases and other debt obligations
|
|
|
63,317
|
|
|
|
15,403
|
|
Current portion of royalty obligation (Note L and Q)
|
|
|
51,981
|
|
|
|
34,672
|
|
Current portion of reclamation and mine closure (Note M)
|
|
|
1,306
|
|
|
|
4,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,717
|
|
|
|
188,608
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Long-term debt (Note L)
|
|
|
130,067
|
|
|
|
185,397
|
|
Non-current portion of royalty obligation (Note L and Q)
|
|
|
190,334
|
|
|
|
128,107
|
|
Reclamation and mine closure (Note M)
|
|
|
27,779
|
|
|
|
35,241
|
|
Deferred income taxes (Note N)
|
|
|
474,264
|
|
|
|
511,837
|
|
Other long-term liabilities
|
|
|
23,599
|
|
|
|
6,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
846,043
|
|
|
|
867,381
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
(See
Notes L, M, O, P, Q, R, S,
and U)
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Common Stock, par value $0.01 per share; authorized
150,000,000 shares, 89,315,767 issued at December 31,
2010 and 80,310,347 shares issued at December 31, 2009
|
|
|
893
|
|
|
|
803
|
|
Additional paid-in capital
|
|
|
2,578,206
|
|
|
|
2,444,262
|
|
Accumulated deficit
|
|
|
(538,332
|
)
|
|
|
(447,024
|
)
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,040,767
|
|
|
|
1,998,046
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
|
|
$
|
3,157,527
|
|
|
$
|
3,054,035
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
F-4
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except share data)
|
|
|
Sales of metal
|
|
$
|
515,457
|
|
|
$
|
300,361
|
|
|
$
|
129,285
|
|
Production costs applicable to sales
|
|
|
(257,636
|
)
|
|
|
(191,311
|
)
|
|
|
(78,652
|
)
|
Depreciation and depletion
|
|
|
(141,619
|
)
|
|
|
(81,376
|
)
|
|
|
(16,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
116,202
|
|
|
|
27,674
|
|
|
|
34,134
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and general
|
|
|
24,176
|
|
|
|
22,070
|
|
|
|
25,825
|
|
Exploration
|
|
|
14,249
|
|
|
|
13,056
|
|
|
|
17,838
|
|
Care and maintenance and other
|
|
|
1,987
|
|
|
|
1,371
|
|
|
|
124
|
|
Pre-development
|
|
|
890
|
|
|
|
97
|
|
|
|
16,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost and expenses
|
|
|
41,302
|
|
|
|
36,594
|
|
|
|
60,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
74,900
|
|
|
|
(8,920
|
)
|
|
|
(26,603
|
)
|
OTHER INCOME AND EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on debt extinguishments
|
|
|
(20,300
|
)
|
|
|
31,528
|
|
|
|
|
|
Fair value adjustments, net
|
|
|
(117,094
|
)
|
|
|
(82,227
|
)
|
|
|
1,756
|
|
Interest and other income
|
|
|
771
|
|
|
|
1,648
|
|
|
|
4,023
|
|
Interest expense, net of capitalized interest
|
|
|
(30,942
|
)
|
|
|
(18,102
|
)
|
|
|
(4,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income and expense
|
|
|
(167,565
|
)
|
|
|
(67,153
|
)
|
|
|
1,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(92,665
|
)
|
|
|
(76,073
|
)
|
|
|
(25,550
|
)
|
Income tax benefit
|
|
|
9,481
|
|
|
|
33,071
|
|
|
|
17,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(83,184
|
)
|
|
|
(43,002
|
)
|
|
|
(8,163
|
)
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(6,029
|
)
|
|
|
(9,601
|
)
|
|
|
7,536
|
|
Gain (loss) on sale of net assets of discontinued operations,
net of taxes $0.0 million for 2010 and $6.5 million
for 2009
|
|
|
(2,095
|
)
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(91,308
|
)
|
|
|
(27,066
|
)
|
|
|
(627
|
)
|
Other comprehensive loss
|
|
|
(5
|
)
|
|
|
|
|
|
|
(634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(91,313
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(1,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.95
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.15
|
)
|
Income (loss) from discontinued operations
|
|
|
(0.10
|
)
|
|
|
0.22
|
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1.05
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.95
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(0.15
|
)
|
Income (loss )from discontinued operations
|
|
|
(0.10
|
)
|
|
|
0.22
|
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1.05
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
87,185
|
|
|
|
71,565
|
|
|
|
55,073
|
|
Diluted
|
|
|
87,185
|
|
|
|
71,565
|
|
|
|
55,073
|
|
See accompanying notes to consolidated financial statements.
F-5
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Other
|
|
|
|
|
|
|
Stock
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
Held in
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Paid-In Capital
|
|
|
Accumulated Deficit
|
|
|
Treasury
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balances at January 1, 2008
|
|
|
55,151
|
|
|
$
|
552
|
|
|
$
|
2,158,697
|
|
|
$
|
(419,331
|
)
|
|
$
|
(13,190
|
)
|
|
$
|
639
|
|
|
$
|
1,727,367
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(627
|
)
|
|
|
|
|
|
|
|
|
|
|
(627
|
)
|
Effect of change in accounting for convertible debt instrument
|
|
|
|
|
|
|
|
|
|
|
49,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,841
|
|
Conversions of Senior Secured Floating Rate Convertible Notes to
common stock
|
|
|
1,591
|
|
|
|
16
|
|
|
|
7,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,131
|
|
Unrealized loss on short-term investments and marketable
securities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
|
|
(716
|
)
|
Common stock issued under long- term incentive plans, net
|
|
|
38
|
|
|
|
|
|
|
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,834
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2008
|
|
|
56,780
|
|
|
$
|
568
|
|
|
$
|
2,218,487
|
|
|
$
|
(419,958
|
)
|
|
$
|
(13,190
|
)
|
|
$
|
5
|
|
|
$
|
1,785,912
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,066
|
)
|
|
|
|
|
|
|
|
|
|
|
(27,066
|
)
|
Reclassification of liability for embedded conversion option
upon adoption of new accounting standard
|
|
|
|
|
|
|
|
|
|
|
21,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,566
|
|
Fractional shares purchased related to reverse stock split
|
|
|
(1
|
)
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
Conversion of Senior Secured Floating Rate Convertible Notes to
common stock
|
|
|
8,666
|
|
|
|
87
|
|
|
|
27,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,757
|
|
Common stock issued to extinguish debt
|
|
|
14,866
|
|
|
|
148
|
|
|
|
187,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,745
|
|
Retirement of treasury shares
|
|
|
(106
|
)
|
|
|
(1
|
)
|
|
|
(13,189
|
)
|
|
|
|
|
|
|
13,190
|
|
|
|
|
|
|
|
|
|
Common stock issued under long-term incentive plans, net
|
|
|
105
|
|
|
|
1
|
|
|
|
2,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2009
|
|
|
80,310
|
|
|
$
|
803
|
|
|
$
|
2,444,262
|
|
|
$
|
(447,024
|
)
|
|
$
|
|
|
|
$
|
5
|
|
|
$
|
1,998,046
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(91,308
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(91,308
|
)
|
Common stock issued for payment of principal, interest and
financing fees on 6.5% Senior Secured Notes
|
|
|
1,357
|
|
|
|
13
|
|
|
|
19,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,370
|
|
Common stock issued to extinguish 3.25% and 1.25% debt
|
|
|
7,639
|
|
|
|
77
|
|
|
|
113,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,070
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
(5
|
)
|
Common stock issued/cancelled under long-term incentive plans,
net
|
|
|
10
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2010
|
|
|
89,316
|
|
|
$
|
893
|
|
|
$
|
2,578,206
|
|
|
$
|
(538,332
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,040,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
F-6
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(91,308
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(627
|
)
|
Add (deduct) non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and depletion
|
|
|
143,813
|
|
|
|
87,140
|
|
|
|
27,362
|
|
Amortization of debt discount and debt issuance costs
|
|
|
3,374
|
|
|
|
504
|
|
|
|
2,064
|
|
Accretion of royalty obligation
|
|
|
19,018
|
|
|
|
14,209
|
|
|
|
|
|
Deferred income taxes
|
|
|
(37,628
|
)
|
|
|
(43,061
|
)
|
|
|
(23,165
|
)
|
Loss (gain) on debt extinguishment
|
|
|
20,300
|
|
|
|
(31,528
|
)
|
|
|
|
|
Fair value adjustments
|
|
|
115,458
|
|
|
|
81,035
|
|
|
|
1,888
|
|
Loss on foreign currency transactions
|
|
|
3,867
|
|
|
|
546
|
|
|
|
2,216
|
|
Share-based compensation
|
|
|
7,217
|
|
|
|
4,876
|
|
|
|
2,692
|
|
Loss on sale of asset backed securities
|
|
|
|
|
|
|
600
|
|
|
|
2,600
|
|
Loss (gain) on asset retirement obligation
|
|
|
(167
|
)
|
|
|
1,181
|
|
|
|
(3,169
|
)
|
Gain on sales of assets
|
|
|
(25
|
)
|
|
|
(31,988
|
)
|
|
|
(632
|
)
|
Environmental remediation
|
|
|
|
|
|
|
5,040
|
|
|
|
|
|
Other non-cash charges
|
|
|
|
|
|
|
|
|
|
|
413
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables and other current assets
|
|
|
(6,228
|
)
|
|
|
(10,592
|
)
|
|
|
(19,414
|
)
|
Prepaid expenses and other
|
|
|
5,871
|
|
|
|
(3,728
|
)
|
|
|
476
|
|
Inventories
|
|
|
(47,887
|
)
|
|
|
(26,804
|
)
|
|
|
4,799
|
|
Accounts payable and accrued liabilities
|
|
|
29,888
|
|
|
|
39,783
|
|
|
|
(4,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
|
|
|
165,563
|
|
|
|
60,147
|
|
|
|
(7,367
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments
|
|
|
(5,872
|
)
|
|
|
(24,012
|
)
|
|
|
(336,350
|
)
|
Proceeds from sales of investments
|
|
|
24,244
|
|
|
|
38,531
|
|
|
|
375,047
|
|
Capital expenditures
|
|
|
(155,994
|
)
|
|
|
(218,235
|
)
|
|
|
(365,019
|
)
|
Proceeds from sales of assets
|
|
|
6,211
|
|
|
|
57,364
|
|
|
|
133
|
|
Other
|
|
|
(284
|
)
|
|
|
(494
|
)
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
(131,695
|
)
|
|
|
(146,846
|
)
|
|
|
(326,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of gold production royalty
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
Additions to restricted assets associated with Kensington Term
Facility
|
|
|
(2,353
|
)
|
|
|
(966
|
)
|
|
|
|
|
Payments on gold production royalty
|
|
|
(43,125
|
)
|
|
|
(15,762
|
)
|
|
|
|
|
Proceeds from issuance of notes and bank borrowings
|
|
|
176,166
|
|
|
|
40,804
|
|
|
|
297,395
|
|
Payments on notes, long-term debt, capital leases, credit
facility, and associated costs
|
|
|
(104,595
|
)
|
|
|
(26,226
|
)
|
|
|
(32,261
|
)
|
Proceeds from gold lease facility
|
|
|
18,445
|
|
|
|
5,108
|
|
|
|
|
|
Payments of gold lease facility
|
|
|
(37,977
|
)
|
|
|
(1,627
|
)
|
|
|
|
|
Proceeds from sale-leaseback transactions
|
|
|
4,853
|
|
|
|
12,511
|
|
|
|
|
|
Payments of common stock and debt issuance costs
|
|
|
(2,232
|
)
|
|
|
(121
|
)
|
|
|
(9,476
|
)
|
Proceeds from exercise of stock options
|
|
|
286
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
9,468
|
|
|
|
88,721
|
|
|
|
255,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
43,336
|
|
|
|
2,022
|
|
|
|
(77,911
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
22,782
|
|
|
|
20,760
|
|
|
|
98,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
66,118
|
|
|
$
|
22,782
|
|
|
$
|
20,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
F-7
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
(Dollar amounts in thousands, unless otherwise specified)
|
|
NOTE A
|
NATURE OF
OPERATIONS
|
The Company is a large primary silver producer with significant
gold assets located in North America and is engaged, through its
subsidiaries, in the operation and ownership, development and
exploration of silver and gold mining properties and companies
located primarily within South America (Argentina and Bolivia),
Mexico (Chihuahua), the United States (Nevada and Alaska) and
Australia (New South Wales). Coeur is an Idaho corporation
incorporated in 1928.
|
|
NOTE B
|
BASIS OF
PRESENTATION
|
These consolidated financial statements have been prepared under
United States Generally Accepted Accounting Principles
(U.S. GAAP).
Effective July 1, 2009, the Company sold its interest in
silver contained at the Broken Hill mine. On August 9,
2010, the Company sold its 100% interest in the Cerro Bayo mine.
Consequently, for all of the periods presented, income (loss)
from Cerro Bayo and Broken Hill have been presented within
discontinued operations in the consolidated statements of
operations.
|
|
NOTE C
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles of Consolidation: The consolidated financial
statements include the wholly-owned subsidiaries of the Company,
the most significant of which are Empresa Minera Manquiri S.A.,
Coeur Mexicana S.A. de C.V., Coeur Rochester, Inc., Coeur
Alaska, Inc., Coeur Argentina S.R.L. and CDE Australia Pty. Ltd.
The consolidated financial statements also include all entities
in which voting control of more than 50% is held by the Company.
The Company has no investments in entities in which it has
greater than 50% ownership interest accounted for using the
equity method. Intercompany balances and transactions have been
eliminated in consolidation. Investments in corporate joint
ventures where the Company has ownership of 50% or less and
funds its proportionate share of expenses are accounted for
under the equity method. The Company has no investments in
entities in which it has a greater than 20% ownership interest
accounted for using the cost method.
Recently Adopted Accounting Pronouncements: In January
2010, Accounting Standards Codification (ASC) guidance for fair
value measurements and disclosure was updated to require
additional disclosures related to transfers in and out of
level 1 and 2 fair value measurements and enhanced detail
in the reconciliation. The guidance was amended to clarify the
level of disaggregation required for assets and liabilities and
the disclosures required for inputs and valuation techniques
used to measure the fair value of assets and liability that fall
in either level 2 or level 3. The updated guidance was
effective for the Companys fiscal year beginning
January 1, 2010, with the exception of the level 3
disaggregation which is effective for the Companys fiscal
year beginning January 1, 2011. The update had no effect on
the Companys consolidated financial position, results of
operations or cash flows. Refer to Note F Fair
Value Measurements, for further details regarding the
Companys assets and liabilities measured at fair value.
Revenue Recognition: Revenue is recognized
when persuasive evidence of an arrangement exists, delivery has
occurred, the price is fixed or determinable, no obligations
remain and collection is probable. The passing of title to the
customer is based on the terms of the sales contract. Product
pricing is determined at the point revenue is recognized by
reference to active and freely traded commodity markets, for
example the London Bullion Market for both gold and silver, in
an identical form to the product sold.
Under the Companys concentrate sales contracts with
third-party smelters, final gold and silver prices are set on a
specified future quotational period, typically one to three
months, after the shipment date based on market metal prices.
Revenues and production costs applicable to sales are recorded
on a gross basis under these contracts at the time title passes
to the buyer based on the forward price for the expected
settlement period. The contracts, in general, provide for
provisional payment based upon provisional assays and quoted
metal prices. Final settlement is
F-8
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
based on the average applicable price for the specified future
quotational period and generally occurs from three to six months
after shipment. Final sales are settled using smelter weights
and settlement assays (average of assays exchanged
and/or
umpire assay results) and are priced as specified in the smelter
contract. The Companys provisionally priced sales contain
an embedded derivative that is required to be separated from the
host contract for accounting purposes. The host contract is the
receivable from the sale of concentrates measured at the forward
price at the time of sale. The embedded derivative does not
qualify for hedge accounting. The embedded derivative is
recorded as a derivative asset in prepaid expenses and other
assets or as a derivative liability in accrued liabilities and
other on the consolidated balance sheet and is adjusted to fair
value through revenue each period until the date of final gold
and silver settlement. The form of the material being sold,
after deduction for smelting and refining, is in an identical
form to that sold on the London Bullion Market. The form of the
product is metal in flotation concentrate, which is the final
process for which the Company is responsible. Revenue includes
the sales of by-product gold from the Companys silver
mining operations.
The effects of forward sales contracts are reflected in revenue
at the date the related precious metals are delivered or the
contracts expire. Third-party smelting and refining costs of
$8.6 million, $6.7 million and $4.2 million in
2010, 2009 and 2008, respectively, are recorded as a reduction
of revenue.
At December 31, 2010, the Company had outstanding
provisionally priced sales of $35.7 million consisting of
0.6 million ounces of silver and 12,758 ounces of gold,
which had a fair value of approximately $37.4 million
including the embedded derivative. For each one cent per ounce
change in realized silver price, revenue would vary (plus or
minus) approximately $6,000 and for each one dollar per ounce
change in realized gold price, revenue would vary (plus or
minus) approximately $12,800. At December 31, 2009, the
Company had outstanding provisionally priced sales of
$19.1 million consisting of 1.0 million ounces of
silver and 1,227 ounces of gold, which had a fair value of
approximately $19.1 million including the embedded
derivative. For each one cent per ounce change in realized
silver price, revenue would vary (plus or minus) approximately
$10,000 and for each one dollar per ounce change in realized
gold price, revenue would vary (plus or minus) approximately
$1,200.
Cash and Cash Equivalents: Cash and cash equivalents
include all highly-liquid investments with a maturity of three
months or less at the date of purchase. The Company minimizes
its credit risk by investing its cash and cash equivalents with
major international banks and financial institutions located
principally in the United States with a minimum credit rating of
A1 as defined by Standard & Poors. The
Companys management believes that no concentration of
credit risk exists with respect to the investment of its cash
and cash equivalents.
Ore on Leach Pad: The heap leach process is a process of
extracting silver and gold by placing ore on an impermeable pad
and applying a diluted cyanide solution that dissolves a portion
of the contained silver and gold, which are then recovered in
metallurgical processes. In August 2007, the Company ceased
mining and crushing operations at the Rochester mine as ore
reserves were determined to have been fully mined at
then-current market prices. Residual heap leach activities are
expected to continue through 2014.
The Company completed a technical and economic study in early
2010 demonstrating the viability of an expansion of mining and
leaching operations at its Rochester mine through 2017. The
Company prepared an Amended Plan of Operations for resumption of
mining within the existing and permitted Rochester Pit and
construction of an additional heap leach pad, all within the
currently permitted mine boundary. In October 2010, the Bureau
of Land Management issued a positive Decision Record for the
mine to extend silver and gold mining operations under this plan.
The Company used several integrated steps to scientifically
measure the metal content of ore placed on the leach pads. As
the ore body was drilled in preparation for the blasting
process, samples were taken of the drill residue which were
assayed to determine estimated quantities of contained metal.
The Company estimated the quantity of ore by utilizing global
positioning satellite survey techniques. The Company then
processed the ore through crushing facilities where the output
was again weighed and sampled for assaying. A metallurgical
F-9
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
reconciliation with the data collected from the mining operation
was completed with appropriate adjustments made to previous
estimates. The crushed ore was then transported to the leach pad
for application of the leaching solution. As the leach solution
was collected from the leach pads, it was continuously sampled
for assaying. The quantity of leach solution was measured by
flow meters throughout the leaching and precipitation process.
After precipitation, the product is converted to doré,
which is the final product produced by the mine. The inventory
is stated at lower of cost or market, with cost being determined
using a weighted average cost method.
The Company reported ore on the leach pads of $18.0 million
as of December 31, 2010. Of this amount, $8.0 million
is reported as a current asset and $10.0 million is
reported as a non-current asset. The distinction between current
and non-current is based upon the expected length of time
necessary for the leaching process to remove the metals from the
broken ore. The historical cost of the metal that is expected to
be extracted within twelve months is classified as current and
the historical cost of metals contained within the broken ore
that will be extracted beyond twelve months is classified as
non-current. Inventories of ore on leach pad are valued based on
actual production costs incurred to produce and place ore on the
leach pad, adjusted for effects on monthly production of costs
of abnormal production levels, less costs allocated to minerals
recovered through the leach process.
The estimate of both the ultimate recovery expected over time
and the quantity of metal that may be extracted relative to the
time the leach process occurs requires the use of estimates
which are inherently inaccurate since they rely upon laboratory
testwork. Testwork consists of 60 day leach columns from
which the Company projects metal recoveries up to five years in
the future. The quantities of metal contained in the ore are
based upon actual weights and assay analysis. The rate at which
the leach process extracts gold and silver from the crushed ore
is based upon laboratory column tests and actual experience
occurring over more than twenty years of leach pad operations at
the Rochester mine. The assumptions used by the Company to
measure metal content during each stage of the inventory
conversion process includes estimated recovery rates based on
laboratory testing and assaying. The Company periodically
reviews its estimates compared to actual experience and revises
its estimates when appropriate. During the first quarter of
2010, the Company increased its estimated silver ounces
contained in the heap inventory by 1.2 million ounces. The
increase in estimated silver ounces contained in the heap
inventory is due to changes in estimated recoveries anticipated
for the remainder of the residual leach phase. There were no
significant changes in estimates related to gold contained in
the heap. The ultimate recovery will not be known until leaching
operations cease.
Metal and Other Inventory: Inventories include
concentrate ore, doré, ore in stockpiles and operating
materials and supplies. The classification of inventory is
determined by the stage at which the ore is in the production
process. To the extent there is work in process inventories at
the Endeavor mine, such amounts are carried as inventories.
Inventories of ore in stock piles are sampled for gold and
silver content and are valued based on the lower of actual costs
incurred or estimated net realizable value based upon the period
ending prices of gold and silver. Material that does not contain
a minimum quantity of gold and silver to cover estimated
processing expense to recover the contained gold and silver is
not classified as inventory and is assigned no value. All
inventories are stated at the lower of cost or market, with cost
being determined using a weighted average cost method.
Concentrate and doré inventory includes product at the mine
site and product held by refineries and are also valued at lower
of cost or market value. Concentrate inventories associated with
the Endeavor mine are held by third parties. Metal inventory
costs include direct labor, materials, depreciation, depletion
and amortization as well as administrative overhead costs
relating to mining activities.
Property, Plant, and Equipment: Expenditures for new
facilities, assets acquired pursuant to capital leases, new
assets or expenditures that extend the useful lives of existing
facilities are capitalized and depreciated using the
straight-line method at rates sufficient to depreciate such
costs over the shorter of estimated productive lives of such
facilities or the useful life of the individual assets.
Productive lives range from 7 to 31 years for buildings and
improvements, 3 to 13 years for machinery and equipment and
3 to 7 years for furniture and fixtures. Certain mining
F-10
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
equipment is depreciated using the
units-of-production
method based upon estimated total proven and probable reserves.
Maintenance and repairs are expensed as incurred.
Operational Mining Properties and Mine Development:
Capitalization of mine development costs that meet the
definition of an asset begins once all operating permits have
been secured, mineralization is classified as proven and
probable reserves and a final feasibility study has been
completed. Mine development costs include engineering and
metallurgical studies, drilling and other related costs to
delineate an ore body, the removal of overburden to initially
expose an ore body at open pit surface mines and the building of
access ways, shafts, lateral access, drifts, ramps and other
infrastructure at underground mines. Costs incurred during the
start-up
phase of a mine are expensed as incurred. Costs incurred before
mineralization is classified as proven and probable reserves are
expensed and classified as Exploration or Pre-development
expense. All capitalized costs are amortized using the units of
production method over the estimated life of the ore body based
on recoverable ounces to be mined from proven and probable
reserves. Interest expense allocable to the cost of developing
mining properties and to construct new facilities is capitalized
until assets are ready for their intended use. Gains or losses
from sales or retirements of assets are included in other income
or expense.
Drilling and related costs incurred at the Companys
operating mines are expensed as incurred as exploration expense,
unless the Company can conclude with a high degree of
confidence, prior to the commencement of a drilling program,
that the drilling costs will result in the conversion of a
mineral resource into proven and probable reserves. The
Companys assessment is based on the following factors:
results from previous drill programs; results from geological
models; results from a mine scoping study confirming economic
viability of the resource; and preliminary estimates of mine
inventory, ore grade, cash flow and mine life. In addition, the
Company must have all permitting
and/or
contractual requirements necessary to have the right to
and/or
control of the future benefit from the targeted ore body. The
costs of a drilling program that meet these criteria are
capitalized as mine development costs. All other drilling and
related costs, including those beyond the boundaries of the
development and production stage properties, are expensed as
incurred.
Drilling and related costs of approximately $3.7 million
and $2.8 million, respectively, at December 31, 2010
and December 31, 2009, met the criteria for capitalization
listed above at the Companys properties that are in the
development and production stages.
The cost of removing overburden and waste materials to access
the ore body at an open pit mine prior to the production phase
are referred to as pre-stripping costs.
Pre-stripping costs are capitalized during the development of an
open pit mine. Stripping costs incurred during the production
phase of a mine are variable production costs that are included
as a component of inventory to be recognized in production costs
applicable to sales in the same period as the revenue from the
sale of inventory.
Mineral Interests: Significant payments related to the
acquisition of land and mineral rights are capitalized as
incurred. Prior to acquiring such land or mineral rights, the
Company generally makes a preliminary evaluation to determine
that the property has significant potential to develop an
economic ore body. The time between initial acquisition and full
evaluation of a propertys potential is variable and is
determined by many factors including: location relative to
existing infrastructure, the propertys stage of
development, geological controls and metal prices. If a mineable
ore body is discovered, such costs are amortized when production
begins using the
units-of-production
method based on recoverable ounces to be mined from proven and
probable reserves. If no mineable ore body is discovered, such
costs are expensed in the period in which it is determined the
property has no future economic value. The Company amortizes its
mineral interests in the Endeavor mine using the units of
production method.
Asset Impairment: Management reviews and evaluates its
long-lived assets for impairment when events and changes in
circumstances indicate that the related carrying amounts of its
assets may not be recoverable. Impairment is considered to exist
if the total probability-weighted estimate of future cash flows
on an undiscounted
F-11
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
basis are less than the carrying amount of the assets, including
property plant and equipment, mineral property, development
property, and any deferred costs. An impairment loss is measured
and recorded based on the difference between book value and fair
value of the asset group, as determined through the application
of present value technique to estimate fair value in the absence
of a market price. Future cash flows include estimates of
recoverable ounces, gold and silver prices (considering current
and historical prices, price trends and related factors),
production levels and required capital investment, all based on
life-of-mine
plans and projections. Assumptions underlying future cash flow
estimates are subject to risks and uncertainties. Any
differences between these assumptions and actual market
conditions or the Companys actual operating performance
could have a material effect on the Companys determination
of its ability to recover the carrying amounts of its long-lived
assets resulting in impairment charges. In estimating future
cash flows, assets are grouped at the lowest level for which
there are identifiable cash flows that are largely independent
of cash flows from other asset groups. Generally, in estimating
future cash flows, all assets are grouped at a particular mine
for which there is identifiable cash flow.
As of December 31, 2010, continued suspension of mining
operations above the 4,400 meter level at the
San Bartolomé mine and declining ore reserves at the
Martha mine prompted an impairment review of the carrying value
of these mines. The review determined that there were no
impairments for the San Bartolome and Martha mines. The
impairment assessment compared the cumulative undiscounted
prospective cash flows of each mine to the sum of the carrying
values of the long-lived assets at San Bartolomé and
Martha mines as of December 31, 2010.
Restricted Assets: The Company, under the terms of its
credit facility, self insurance, and bonding agreements with
certain banks, lending institutions and regulatory agencies, is
required to collateralize certain portions of its obligations.
The Company has collateralized these obligations by assigning
certificates of deposit that have maturity dates ranging from
three months to a year, to the respective institutions or
agencies. At December 31, 2010 and December 31, 2009,
the Company held certificates of deposit and cash under these
agreements of $29.1 million and $28.8 million,
respectively, restricted for these purposes. The ultimate timing
of the release of the collateralized amounts is dependent on the
timing and closure of each mine and repayment of the facility.
In order to release the collateral, the Company must seek
approval from certain government agencies responsible for
monitoring the mine closure status. Collateral could also be
released to the extent the Company is able to secure alternative
financial assurance satisfactory to the regulatory agencies. The
Company believes there is a reasonable probability that the
collateral will remain in place beyond a twelve-month period and
has therefore classified these investments as long-term. Under
the terms of the Companys Kensington Term Facility, the
Company is required to reserve cash for 66.6% of the next
payment of principal. At December 31, 2010, the Company had
debt service costs reserved under this facility of
$3.3 million, which were included in the long-term
restricted cash amount of $29.0 million.
Reclamation and Remediation Costs: The Company recognizes
obligations for the retirement of tangible long-lived assets and
other associated asset retirement costs. These legal obligations
are associated with the retirement of long-lived assets that
result from the acquisition, construction, development and
normal use of the asset. The fair value of a liability for an
asset retirement obligation will be recognized in the period in
which it is incurred if a reasonable estimate of fair value can
be made. The fair value of the liability is added to the
carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. An
accretion cost, representing the increase over time in the
present value of the liability, is recorded each period in
depreciation, depletion and amortization expense. As reclamation
work is performed or liabilities are otherwise settled, the
recorded amount of the liability is reduced.
Future remediation costs for inactive mines are accrued based on
managements best estimate at the end of each period of the
undiscounted costs expected to be incurred at the site. Such
cost estimates include, where applicable, ongoing care and
maintenance and monitoring costs. Changes in estimates are
reflected in earnings in the period an estimate is revised.
F-12
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Foreign Currency: The assets and liabilities of the
Companys foreign subsidiaries are measured using
U.S. dollars as their functional currency. Revenues and
expenses are translated at the average exchange rate for the
period. Foreign currency transaction gains and losses are
included in the determination of net loss.
Derivative Financial Instruments: The Company recognizes
all derivatives as either assets or liabilities on the balance
sheet and measures those instruments at fair value. Changes in
the value of derivative instruments are recorded each period in
fair value adjustments, net.
Stock-based Compensation Plans: The Company estimates the
fair value of stock options and stock appreciation rights
(SARs) awards using the Black-Scholes option pricing
model. The Company estimates the fair value of performance share
and performance unit grants using a Monte Carlo simulation
valuation model. The Company estimates forfeitures of
stock-based awards based on historical data and periodically
adjusts the forfeiture rate. The adjustment of the forfeiture
rate is recorded as a cumulative adjustment in the period the
forfeiture estimate is changed. Compensation costs related to
stock based compensation are included in administrative and
general expenses, production costs applicable to sales and the
cost of self-constructed property, plant and equipment as deemed
appropriate.
Restricted stock and restricted stock units granted under the
Companys incentive plans are accounted for based on the
market value of the underlying shares on the date of grant and
vest in equal installments annually over three years. Restricted
stock awards are accounted for as equity-based awards and
restricted stock unit awards are accounted for as
liability-based awards. Restricted stock units are remeasured at
each reporting date. Holders of the restricted stock are
entitled to vote the shares and to receive any dividends
declared on the shares. Restricted stock units are settled in
cash based on the number of vested restricted stock units
multiplied by the current market price of the common shares when
vested.
Income Taxes: The Company uses an asset and liability
approach which results in the recognition of deferred tax
liabilities and assets for the expected future tax consequences
or benefits of temporary differences between the financial
reporting basis and the tax basis of assets and liabilities, as
well as operating loss and tax credit carryforwards, using
enacted tax rates in effect in the years in which the
differences are expected to reverse.
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of its deferred tax assets will not be
realized. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and
tax planning strategies in making this assessment. A valuation
allowance has been provided for the portion of the
Companys net deferred tax assets for which it is more
likely than not that they will not be realized.
The Company and its subsidiaries are subject to
U.S. federal income tax as well as income tax of multiple
state and foreign jurisdictions. The Company has substantially
concluded all U.S. federal income tax matters for years
through 1999. Federal income tax returns for 2000 through 2009
are subject to examination. The Companys practice is to
recognize interest
and/or
penalties related to income tax matters in income tax expense.
There were no significant accrued interest or penalties at
December 31, 2010.
Comprehensive Loss: Comprehensive loss includes net loss
as well as changes in stockholders equity that result from
transactions and events other than those with stockholders.
Items of comprehensive loss include the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net loss
|
|
$
|
(91,308
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(627
|
)
|
Unrealized loss on marketable securities
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
Other
|
|
|
(5
|
)
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(91,313
|
)
|
|
$
|
(27,066
|
)
|
|
$
|
(1,261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-13
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Net Income Per Share: Basic earnings per share is
computed by dividing net loss available to common shareholders
by the weighted average number of common shares outstanding
during each period. Diluted earnings per share reflect the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock. The effect of potentially dilutive stock options
and convertible senior notes outstanding as of December 31,
2010, 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
|
(In thousands except for EPS)
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(83,184
|
)
|
|
|
87,185
|
|
|
$
|
(0.95
|
)
|
|
$
|
(43,002
|
)
|
|
|
71,565
|
|
|
$
|
(0.60
|
)
|
|
$
|
(8,163
|
)
|
|
|
55,073
|
|
|
$
|
(0.15
|
)
|
Income (loss) from discontinued operations
|
|
|
(8,124
|
)
|
|
|
87,185
|
|
|
$
|
(0.10
|
)
|
|
|
15,936
|
|
|
|
71,565
|
|
|
$
|
0.22
|
|
|
|
7,536
|
|
|
|
55,073
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(91,308
|
)
|
|
|
87,185
|
|
|
$
|
(1.05
|
)
|
|
$
|
(27,066
|
)
|
|
|
71,565
|
|
|
$
|
(0.38
|
)
|
|
$
|
(627
|
)
|
|
|
55,073
|
|
|
$
|
(0.01
|
)
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(83,184
|
)
|
|
|
87,185
|
|
|
$
|
(0.95
|
)
|
|
$
|
(43,002
|
)
|
|
|
71,565
|
|
|
$
|
(0.60
|
)
|
|
$
|
(8,163
|
)
|
|
|
55,073
|
|
|
$
|
(0.15
|
)
|
Income (loss) from discontinued operations
|
|
|
(8,124
|
)
|
|
|
87,185
|
|
|
$
|
(0.10
|
)
|
|
|
15,936
|
|
|
|
71,565
|
|
|
$
|
0.22
|
|
|
|
7,536
|
|
|
|
55,073
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(91,308
|
)
|
|
|
87,185
|
|
|
$
|
(1.05
|
)
|
|
$
|
(27,066
|
)
|
|
|
71,565
|
|
|
$
|
(0.38
|
)
|
|
$
|
(627
|
)
|
|
|
55,073
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2010, 1,296,231 shares
of common stock equivalents related to convertible debt and
496,291 equity based awards have not been included in the
diluted per share calculation as the Company has recorded a net
loss from continuing operations for the period and therefore
they would be anti-dilutive. The options outstanding at
December 31, 2010 expire between 2011 and 2020. For the
year ended December 31, 2009, 1,514,460 common stock
equivalents, related to convertible debt and 663,365 options
were not included in the computation of diluted per share
calculations as the Company had recorded a net loss from
continuing operations for the period. For the year ended
December 31, 2008, 2,368,421 common stock equivalents,
related to convertible debt and 371,224 options were not
included in the computation of diluted per share calculations as
the Company had recorded a net loss from continuing operations
for the period. Potentially dilutive shares issuable upon
conversion of the 3.25% Convertible Senior Notes were not
included in the computation of diluted EPS for the years ended
December 31, 2010, 2009, and 2008 because there is no
excess conversion value over the principal amount of the notes.
Supplemental Cash Flow Information: The following table
sets forth non-cash financing and investing activities and other
cash flow information for the years ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash financing and
investing activities:
|
|
2010
|
|
2009
|
|
2008
|
|
Capital expenditures(1)
|
|
$
|
(2,589
|
)
|
|
$
|
(22,501
|
)
|
|
$
|
15,287
|
|
Capital lease obligations
|
|
|
23,437
|
|
|
|
20,421
|
|
|
|
(938
|
)
|
Non-cash capitalized interest
|
|
|
3,778
|
|
|
|
6,765
|
|
|
|
6,477
|
|
Non-cash interest paid with stock
|
|
|
1,756
|
|
|
|
2,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
12,676
|
|
|
|
12,809
|
|
|
|
9,361
|
|
Capitalized interest
|
|
|
9,885
|
|
|
|
22,839
|
|
|
|
12,247
|
|
Income taxes paid
|
|
|
9,998
|
|
|
|
8,963
|
|
|
|
13,071
|
|
|
|
|
(1) |
|
Accrued capital expenditures are recognized in the consolidated
statements of cash flows in the period in which they are paid. |
F-14
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Debt Issuance Costs: Costs associated with the issuance
of debt are included in other noncurrent assets and are
amortized over the term of the related debt using the effective
interest method.
Use of Estimates: The preparation of the Companys
consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that
affect the amounts reported in their consolidated financial
statements and accompanying notes. The areas requiring the use
of managements estimates and assumptions relate to
recoverable ounces from proven and probable reserves that are
the basis of future cash flow estimates and
units-of-production
depreciation and amortization calculations; useful lives
utilized for depreciation, depletion and amortization; estimates
of future cash flows for long lived assets; estimates of
recoverable gold and silver ounces in ore on leach pad; the
amount and timing of reclamation and remediation costs;
valuation allowance for deferred tax assets; and other employee
benefit liabilities.
Reclassifications: Certain reclassifications of prior
year balances have been made to conform to the current year
presentation. These reclassifications had no material impact on
the Companys consolidated financial position, results of
operations or cash flows for the periods presented. The most
significant reclassifications were to reclassify the Broken Hill
and Cerro Bayo statements of operations from historical
presentation to income (loss) from discontinued operations in
the consolidated statements of operations for all periods
presented. In addition, certain immaterial reclassifications
related to the payment of the Franco-Nevada royalty obligation
and the gold lease facility amounting to $6 million were
reclassified from operating activities to financing activities
in the consolidated statement of cash flows for the year ended
December 31, 2009.
|
|
NOTE D
|
CORRECTION
OF AN IMMATERIAL ERROR
|
In the fourth quarter of 2010, the Company identified an error
in the amount of income tax benefit recognized in 2009. The
Company assessed the materiality of this error in accordance
with Staff Accounting Bulletin No. 108 and determined
that the error was immaterial to previously reported amounts
contained in its periodic reports and the Company intends to
correct this error through subsequent periodic filings. The
effect of recording this immaterial correction in the balance
sheet as of December 31, 2009 and statements of operations
for the fiscal year and quarterly periods impacted during 2009
and 2010 are listed below. Also included in the tables is the
impact of the Cerro Bayo discontinued operation in order to
clearly show the changes to the previously reported
balances see Note G Discontinued
Operations and Assets and Liabilities Held For Sale.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
As of and for the year
|
|
Previously
|
|
Discontinued
|
|
|
|
|
ended December 31, 2009
|
|
Reported
|
|
Operations
|
|
Adjustment
|
|
As Revised
|
|
Income tax benefit (provision)
|
|
|
25,921
|
|
|
|
2,309
|
|
|
|
4,841
|
|
|
|
33,071
|
|
Income (loss) from continuing operations
|
|
|
(64,893
|
)
|
|
|
17,050
|
|
|
|
4,841
|
|
|
|
(43,002
|
)
|
Net income (loss)
|
|
|
(31,907
|
)
|
|
|
|
|
|
|
4,841
|
|
|
|
(27,066
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
516,678
|
|
|
|
|
|
|
|
(4,841
|
)
|
|
|
511,837
|
|
Accumulated deficit
|
|
|
(451,865
|
)
|
|
|
|
|
|
|
4,841
|
|
|
|
(447,024
|
)
|
Total shareholders equity
|
|
|
1,993,205
|
|
|
|
|
|
|
|
4,841
|
|
|
|
1,998,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
As of and for the quarter
|
|
Previously
|
|
Discontinued
|
|
|
|
|
ended March 31, 2009 (unaudited)
|
|
Reported
|
|
Operations
|
|
Adjustment
|
|
As Revised
|
|
Income tax benefit (provision)
|
|
|
85
|
|
|
|
(339
|
)
|
|
|
1,390
|
|
|
|
1,136
|
|
Income (loss) from continuing operations
|
|
|
4,385
|
|
|
|
1,704
|
|
|
|
1,390
|
|
|
|
7,479
|
|
Net income (loss)
|
|
|
6,058
|
|
|
|
|
|
|
|
1,390
|
|
|
|
7,448
|
|
F-15
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
As of and for the quarter
|
|
Previously
|
|
Discontinued
|
|
|
|
|
ended June 30, 2009 (unaudited)
|
|
Reported
|
|
Operations
|
|
Adjustment
|
|
As Revised
|
|
Income tax benefit (provision)
|
|
|
3,893
|
|
|
|
|
|
|
|
1,296
|
|
|
|
5,189
|
|
Income (loss) from continuing operations
|
|
|
9,897
|
|
|
|
|
|
|
|
1,296
|
|
|
|
11,323
|
|
Net income (loss)
|
|
|
11,609
|
|
|
|
|
|
|
|
1,296
|
|
|
|
12,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
As
|
|
|
|
|
|
|
quarter ended
|
|
Previously
|
|
Discontinued
|
|
|
|
|
September 30, 2009 (unaudited)
|
|
Reported
|
|
Operations
|
|
Adjustment
|
|
As Revised
|
|
Income tax benefit (provision)
|
|
|
13,428
|
|
|
|
|
|
|
|
577
|
|
|
|
14,005
|
|
Income (loss) from continuing operations
|
|
|
(36,691
|
)
|
|
|
|
|
|
|
577
|
|
|
|
(36,114
|
)
|
Net income (loss)
|
|
|
(17,283
|
)
|
|
|
|
|
|
|
577
|
|
|
|
(16,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
|
|
|
|
|
|
|
As of and for the quarter
|
|
Previously
|
|
Discontinued
|
|
|
|
|
ended March 31, 2010 (unaudited)
|
|
Reported
|
|
Operations
|
|
Adjustment
|
|
As Revised
|
|
Income tax benefit (provision)
|
|
|
11,495
|
|
|
|
243
|
|
|
|
(4,841
|
)
|
|
|
6,997
|
|
Income (loss) from continuing operations
|
|
|
(8,017
|
)
|
|
|
2,812
|
|
|
|
(4,841
|
)
|
|
|
(10,046
|
)
|
Net income (loss)
|
|
|
(8,017
|
)
|
|
|
|
|
|
|
(4,841
|
)
|
|
|
(12,858
|
)
|
|
|
NOTE E
|
RECENTLY
ADOPTED ACCOUNTING STANDARDS
|
Subsequent
Events
In May 2009, the FASB issued new accounting standards that
established accounting and reporting standards for events that
occur after the balance sheet date but before financial
statements are issued or are available to be issued. The new
standard sets forth (i) a period after the balance sheet
date during which a reporting entitys management should
evaluate events or transactions for possible recognition or
disclosure in financial statements, (ii) the circumstances
under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial
statements, and (iii) the disclosures that an entity should
make about events or transactions occurring after the balance
sheet date in its financial statements. The Company adopted the
provisions of the new accounting standards for the interim
period ended June 30, 2009. The adoption had no impact on
the Companys consolidated financial position, results of
operations or cash flows.
The
Accounting Standards Codification
In June 2009, the FASB issued its accounting standards
codification. The codification is the source of authoritative
U.S. GAAP to be applied by nongovernmental entities. Rules
and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants. The Codification superseded non-SEC accounting and
reporting standards. All accounting literature that is not in
the Codification, not issued by the SEC and not otherwise
grandfathered is non-authoritative. The new standard was
effective for the Companys interim quarterly period
beginning July 1, 2009. The adoption had no impact on the
Companys consolidated financial position, results of
operations or cash flows.
|
|
NOTE F
|
FAIR
VALUE MEASUREMENTS
|
Fair value accounting establishes 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
F-16
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
identical assets or liabilities (Level 1 measurements) and
the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are
described below:
|
|
|
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities;
|
|
|
Level 2
|
Quoted market prices in markets that are not active, or inputs
that are observable, either directly or indirectly, for
substantially the full term of the asset or liability; and
|
|
|
Level 3
|
Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable
(supported by little or no market activity).
|
The following table sets forth the Companys financial
assets and liabilities measured at fair value on a recurring
basis (at least annually) by level within the fair value
hierarchy. As required by accounting guidance, assets and
liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at December 31, 2010
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
|
|
Restricted certificates of deposit
|
|
|
2,965
|
|
|
|
2,965
|
|
|
|
|
|
|
|
|
|
Gold forward contract
|
|
|
425
|
|
|
|
425
|
|
|
|
|
|
|
|
|
|
Put and call options
|
|
|
5,403
|
|
|
|
5,403
|
|
|
|
|
|
|
|
|
|
Silver ounce receivable from Mandalay
|
|
|
1,594
|
|
|
|
|
|
|
|
1,594
|
|
|
|
|
|
Other derivative instruments, net
|
|
|
1,685
|
|
|
|
|
|
|
|
1,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,083
|
|
|
$
|
8,804
|
|
|
$
|
3,279
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold lease facility
|
|
$
|
2,213
|
|
|
$
|
|
|
|
$
|
2,213
|
|
|
$
|
|
|
Royalty obligation embedded derivative
|
|
|
162,003
|
|
|
|
|
|
|
|
162,003
|
|
|
|
|
|
Put and call options
|
|
|
20,151
|
|
|
|
20,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
184,367
|
|
|
$
|
20,151
|
|
|
$
|
164,216
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-17
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at December 31, 2009
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted certificates of deposit
|
|
$
|
5,440
|
|
|
$
|
5,440
|
|
|
$
|
|
|
|
$
|
|
|
Franco-Nevada warrant
|
|
|
3,339
|
|
|
|
|
|
|
|
3,339
|
|
|
|
|
|
Put and call options
|
|
|
9,115
|
|
|
|
9,115
|
|
|
|
|
|
|
|
|
|
Other derivative instruments, net
|
|
|
1,379
|
|
|
|
|
|
|
|
1,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,273
|
|
|
$
|
14,555
|
|
|
$
|
4,718
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold lease facility
|
|
$
|
5,098
|
|
|
$
|
|
|
|
$
|
5,098
|
|
|
$
|
|
|
Royalty obligation embedded derivative
|
|
|
78,013
|
|
|
|
|
|
|
|
78,013
|
|
|
|
|
|
Put and call options
|
|
|
9,958
|
|
|
|
9,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
93,069
|
|
|
$
|
9,958
|
|
|
$
|
83,111
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys cash equivalents are recorded at face value
or cost plus accrued interest, which approximate fair value
because of the short maturity of these investments. These
investments are classified within Level 1 of the fair value
hierarchy.
The Companys short and long term certificates of deposits
and other derivative instruments, are valued using quoted market
prices based on forward curves. Such instruments are classified
within Level 1 of the fair value hierarchy.
The companys derivative instruments related to gold
forward contracts and put and call options are valued using
quoted prices in active markets that are accessible at the
measurement date for identical assets and liabilities. Such
instruments are classified within Level 1 of the fair value
hierarchy.
The Companys derivative instruments related to the silver
ounce receivable from Mandalay, gold lease facility, royalty
obligation embedded derivative, other derivative instruments,
net, which relate to the concentrate sales contracts and foreign
exchange contracts, and the Franco Nevada warrant, are valued
using pricing models which require inputs that are derived from
observable market data, including contractual terms, forward
market prices, yield curves and credit spreads. The model inputs
can generally be verified and do not involve significant
management judgment. Such instruments are classified within
Level 2 of the fair value hierarchy.
The Company had no Level 3 financial assets and liabilities
as of December 31, 2010 and 2009.
|
|
NOTE G
|
DISCONTINUED
OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
|
In August 2010, the Company sold its 100% interest in its
subsidiary Compañía Minera Cerro Bayo Ltd.
(Minera Cerro Bayo), which controls the Cerro Bayo
mine in southern Chile, to Mandalay Resources Corporation
(Mandalay). Under the terms of the agreement,
the Company received the following from Mandalay in exchange for
all of the outstanding shares of Minera Cerro Bayo;
(i) $6.0 million in cash; (ii) 17,857,143 common
shares of Mandalay; (iii) 125,000 ounces of silver to be
delivered in six equal quarterly installments commencing in the
third quarter of 2011 with, which had an estimated fair value of
$2.3 million; (iv) a 2.0% Net Smelter Royalty (NSR) on
production from Minera Cerro Bayo in excess of a cumulative
50,000 ounces of gold and 5,000,000 ounces of silver, which had
an estimated fair value of $5.4 million; and
(v) existing value-added taxes collected from the Chilean
government in excess of $3.5 million, which were valued at
$3.5 million. As part of the transaction, Mandalay agreed
to pay the next $6.0 million of reclamation costs
associated with Minera Cerro Bayos nearby Furioso
F-18
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
property. Any reclamation costs above that amount will be shared
equally by Mandalay and the Company. As a result of the sale,
the Company realized a loss on the sale of approximately
$2.1 million, net of income taxes.
Effective July 1, 2009, the Company sold to Perilya Broken
Hill Ltd. its 100% interest in the silver contained at the
Broken Hill mine for $55.0 million in cash. Coeur
originally purchased this interest from Perilya Broken Hill,
Ltd. in September 2005 for $36.9 million. As a result of
this transaction, the Company realized a gain on the sale of
approximately $25.5 million, net of income taxes in 2009.
The following table details selected financial information
included in income (loss) from discontinued operations for the
years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2010
|
|
|
|
Cerro Bayo Mine
|
|
|
Sales of metal
|
|
$
|
|
|
Production costs applicable to sales
|
|
|
|
|
Depreciation and depletion
|
|
|
(2,194
|
)
|
Administrative and general
|
|
|
(18
|
)
|
Mining exploration
|
|
|
|
|
Care and maintenance and other
|
|
|
(2,351
|
)
|
Other income and expense
|
|
|
(145
|
)
|
Income tax expense
|
|
|
(1,321
|
)
|
|
|
|
|
|
Income from discontinued operations
|
|
|
(6,029
|
)
|
Loss on sale of net assets of discontinued operations, net of
tax of $0.0 million
|
|
|
(2,095
|
)
|
|
|
|
|
|
|
|
$
|
(8,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
Cerro Bayo Mine
|
|
|
Broken Hill
|
|
|
Total
|
|
|
Sales of metal
|
|
$
|
1,673
|
|
|
$
|
10,435
|
|
|
$
|
12,108
|
|
Production costs applicable to sales
|
|
|
(1,211
|
)
|
|
|
(1,652
|
)
|
|
|
(2,863
|
)
|
Depreciation and depletion
|
|
|
(4,195
|
)
|
|
|
(1,570
|
)
|
|
|
(5,765
|
)
|
Administrative and general
|
|
|
(25
|
)
|
|
|
|
|
|
|
(25
|
)
|
Mining exploration
|
|
|
(2,153
|
)
|
|
|
|
|
|
|
(2,153
|
)
|
Care and maintenance and other
|
|
|
(10,430
|
)
|
|
|
|
|
|
|
(10,430
|
)
|
Other income and expense
|
|
|
1,600
|
|
|
|
|
|
|
|
1,600
|
|
Income tax benefit (expense)
|
|
|
(2,309
|
)
|
|
|
236
|
|
|
|
(2,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
(17,050
|
)
|
|
|
7,449
|
|
|
|
(9,601
|
)
|
Gain on sale of net assets of discontinued operations, net of
tax of $6.5 million
|
|
|
|
|
|
|
25,537
|
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,050
|
)
|
|
$
|
32,986
|
|
|
$
|
15,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
Cerro Bayo Mine
|
|
|
Broken Hill
|
|
|
Total
|
|
|
Sales of metal
|
|
$
|
41,589
|
|
|
$
|
18,591
|
|
|
$
|
60,180
|
|
Production costs applicable to sales
|
|
|
(27,930
|
)
|
|
|
(2,755
|
)
|
|
|
(30,685
|
)
|
Depreciation and depletion
|
|
|
(8,356
|
)
|
|
|
(2,506
|
)
|
|
|
(10,863
|
)
|
Administrative and general
|
|
|
(22
|
)
|
|
|
|
|
|
|
(22
|
)
|
Mining exploration
|
|
|
(2,692
|
)
|
|
|
|
|
|
|
(2,693
|
)
|
Write downs and other
|
|
|
(3,031
|
)
|
|
|
|
|
|
|
(3,031
|
)
|
Other income and expense
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
(1,466
|
)
|
Income tax benefit (expense)
|
|
|
113
|
|
|
|
(3,999
|
)
|
|
|
(3,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,795
|
)
|
|
$
|
9,331
|
|
|
$
|
7,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE H
|
INVESTMENTS
AND OTHER MARKETABLE SECURITIES
|
The Company classifies its short-term investments as
available-for-sale
securities. The securities are measured at fair market value in
the financial statements with unrealized gains or losses
recorded in other comprehensive income. At the time securities
are sold or otherwise disposed of, gains or losses are included
in net income. There were no short-term investments on hand as
of December 31, 2010, and 2009.
The Company acquired shares of Mandalay as part of the sale of
the Cerro Bayo mine (see Note G Discontinued
Operations and Assets and Liabilities Held for Sale). These
shares were sold in December 2010. The following is a summary of
the shares acquired and sold in 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Balance at December 31, 2009
|
|
|
|
|
|
$
|
|
|
Acquisitions
|
|
|
17,857
|
|
|
|
4,867
|
|
Unrealized Gain
|
|
|
|
|
|
|
|
|
Realized Gain
|
|
|
|
|
|
|
1,043
|
|
Proceeds
|
|
|
(17,857
|
)
|
|
|
(5,910
|
)
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE I
|
METAL AND
OTHER INVENTORY
|
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Concentrate and dorè inventory
|
|
$
|
81,059
|
|
|
$
|
39,487
|
|
Supplies
|
|
|
37,281
|
|
|
|
28,225
|
|
|
|
|
|
|
|
|
|
|
Metal and other inventory
|
|
$
|
118,340
|
|
|
$
|
67,712
|
|
|
|
|
|
|
|
|
|
|
F-20
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
NOTE J
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Land
|
|
$
|
713
|
|
|
$
|
1,133
|
|
Building improvements
|
|
|
516,792
|
|
|
|
386,780
|
|
Machinery and equipment
|
|
|
242,684
|
|
|
|
232,205
|
|
Capitalized leases for machinery, equipment, and buildings
|
|
|
72,326
|
|
|
|
48,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
832,515
|
|
|
|
668,416
|
|
Accumulated depreciation and amortization
|
|
|
(164,414
|
)
|
|
|
(129,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
668,101
|
|
|
$
|
539,037
|
|
|
|
|
|
|
|
|
|
|
The Companys capital expenditures were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Rochester
|
|
$
|
2,349
|
|
|
$
|
310
|
|
|
$
|
635
|
|
Martha
|
|
|
100
|
|
|
|
1,575
|
|
|
|
4,503
|
|
San Bartolomé
|
|
|
6,159
|
|
|
|
11,091
|
|
|
|
120,872
|
|
Kensington
|
|
|
92,730
|
|
|
|
41,289
|
|
|
|
41,614
|
|
Palmarejo
|
|
|
54,226
|
|
|
|
162,697
|
|
|
|
162,202
|
|
Endeavor
|
|
|
|
|
|
|
|
|
|
|
26,513
|
|
Other
|
|
|
430
|
|
|
|
1,273
|
|
|
|
8,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset additions
|
|
$
|
155,994
|
|
|
$
|
218,235
|
|
|
$
|
365,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, 2009 and 2008, approximately
$11.7 million, $14.2 million and $36.7 million,
respectively, of invoices for capital expenditures remained in
accounts payable and for purposes of the consolidated cash flows
were treated as non-cash transactions.
Minimum future lease payments under capital and operating leases
at December 31, 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital
|
|
|
Operating
|
|
Year Ending December 31,
|
|
Leases
|
|
|
Leases
|
|
|
2011
|
|
$
|
17,663
|
|
|
$
|
2,120
|
|
2012
|
|
|
16,834
|
|
|
|
975
|
|
2013
|
|
|
6,373
|
|
|
|
155
|
|
2014
|
|
|
1,442
|
|
|
|
96
|
|
2015 and thereafter
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments due
|
|
|
42,312
|
|
|
$
|
3,434
|
|
Less: Amount representing interest
|
|
|
(3,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
39,242
|
|
|
|
|
|
Less: Current maturities
|
|
|
(15,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion
|
|
$
|
23,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The Company has entered into various operating lease agreements
which expire over the next year. Total rent expense charged to
net income for all operating lease agreements was
$10.5 million, $5.7 million and $2.5 million for
the years ended December 31, 2010, 2009 and 2008,
respectively.
|
|
NOTE K
|
MINING
PROPERTIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
Bartolomé
|
|
|
Martha
|
|
|
Palmarejo
|
|
|
Rochester
|
|
|
Endeavor
|
|
|
Kensington
|
|
|
Other
|
|
|
Total
|
|
|
Operational mining properties:
|
|
$
|
66,655
|
|
|
$
|
10,096
|
|
|
$
|
128,734
|
|
|
$
|
99,720
|
|
|
$
|
|
|
|
$
|
317,156
|
|
|
$
|
|
|
|
$
|
622,361
|
|
Accumulated depletion
|
|
|
(10,031
|
)
|
|
|
(9,998
|
)
|
|
|
(22,655
|
)
|
|
|
(97,435
|
)
|
|
|
|
|
|
|
(9,092
|
)
|
|
|
|
|
|
|
(149,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,624
|
|
|
|
98
|
|
|
|
106,078
|
|
|
|
2,285
|
|
|
|
|
|
|
|
308,064
|
|
|
|
|
|
|
|
473,150
|
|
Mineral interest
|
|
|
26,642
|
|
|
|
|
|
|
|
1,657,188
|
|
|
|
|
|
|
|
44,033
|
|
|
|
|
|
|
|
|
|
|
|
1,727,863
|
|
Accumulated depletion
|
|
|
(4,027
|
)
|
|
|
|
|
|
|
(68,026
|
)
|
|
|
|
|
|
|
(6,886
|
)
|
|
|
|
|
|
|
|
|
|
|
(78,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,615
|
|
|
|
|
|
|
|
1,589,162
|
|
|
|
|
|
|
|
37,147
|
|
|
|
|
|
|
|
|
|
|
|
1,648,924
|
|
Non-producing and development properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mining properties
|
|
$
|
79,239
|
|
|
$
|
98
|
|
|
$
|
1,695,240
|
|
|
$
|
2,285
|
|
|
$
|
37,147
|
|
|
$
|
308,064
|
|
|
$
|
142
|
|
|
$
|
2,122,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
Bartolomé
|
|
|
Martha
|
|
|
Cerro
Bayo(A)
|
|
|
Palmarejo
|
|
|
Rochester
|
|
|
Endeavor
|
|
|
Kensington
|
|
|
Other
|
|
|
Total
|
|
|
Operational mining properties:
|
|
$
|
67,327
|
|
|
$
|
10,000
|
|
|
$
|
43,554
|
|
|
$
|
113,167
|
|
|
$
|
97,435
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
331,483
|
|
Accumulated depletion
|
|
|
(5,793
|
)
|
|
|
(8,968
|
)
|
|
|
(25,679
|
)
|
|
|
(7,232
|
)
|
|
|
(97,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(145,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,534
|
|
|
|
1,032
|
|
|
|
17,875
|
|
|
|
105,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,376
|
|
Mineral interest
|
|
|
26,642
|
|
|
|
|
|
|
|
|
|
|
|
1,657,188
|
|
|
|
|
|
|
|
44,033
|
|
|
|
|
|
|
|
|
|
|
|
1,727,863
|
|
Accumulated depletion
|
|
|
(2,284
|
)
|
|
|
|
|
|
|
|
|
|
|
(24,171
|
)
|
|
|
|
|
|
|
(4,897
|
)
|
|
|
|
|
|
|
|
|
|
|
(31,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,358
|
|
|
|
|
|
|
|
|
|
|
|
1,633,017
|
|
|
|
|
|
|
|
39,136
|
|
|
|
|
|
|
|
|
|
|
|
1,696,511
|
|
Non-producing and development properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357,027
|
|
|
|
142
|
|
|
|
357,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mining properties
|
|
$
|
85,892
|
|
|
$
|
1,032
|
|
|
$
|
17,875
|
|
|
$
|
1,738,952
|
|
|
$
|
|
|
|
$
|
39,136
|
|
|
$
|
357,027
|
|
|
$
|
142
|
|
|
$
|
2,240,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
In August 2010, the Company sold its 100% interest in
Compañía Minera Cerro Bayo (Minera Cerro
Bayo) to Mandalay Resources Corporation
(Mandalay). |
Operational
Mining Properties
Palmarejo: Palmarejo is located in the State
of Chihuahua in northern Mexico, and its principal silver and
gold properties are collectively referred to as the
Palmarejo mine. The Palmarejo mine commenced
production in April 2009.
San Bartolomé Mine: The
San Bartolomé mine is a silver mine located near the
city of Potosi, Bolivia. The mineral rights for the
San Bartolomé project are held through long-term joint
venture/lease agreements with several local independent mining
co-operatives and the Bolivian state owned mining organization,
(COMIBOL). The Company commenced commercial
production at San Bartolomé in June 2008.
Kensington: The Kensington mine is an
underground gold mine and consists of the Kensington and
adjacent Jualin properties located on the east side of the Lynn
Canal about 45 miles north-northwest of Juneau, Alaska. The
Company commenced commercial production July 3, 2010.
F-22
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Rochester Mine: The Company has conducted
operations at the Rochester mine, located in Western Nevada,
since September 1986. The mine utilizes the heap-leaching
process to extract both silver and gold from ore mined using
open pit methods. Rochesters primary product is silver
with gold produced as a by-product.
Martha Mine: The Martha mine is an underground
silver mine located in Argentina. Coeur acquired a 100% interest
in the Martha mine in April 2002. In December 2007, the Company
completed a 240 tonne per day flotation mill, which produces a
flotation concentrate.
Mineral
Interests
Endeavor Mine: On May 23, 2005, CDE
Australia Pty. Ltd., a wholly-owned subsidiary of Coeur
(CDE Australia) acquired all of the silver
production and reserves, up to a maximum 17.7 million
payable ounces, contained at the Endeavor mine in Australia,
which is owned and operated by Cobar Operations Pty. Limited
(Cobar), a wholly-owned subsidiary of CBH Resources
Ltd. (CBH), for $44.0 million, including
transaction fees. Under the terms of the original agreement, CDE
Australia paid Cobar $15.4 million of cash at the closing.
In addition, CDE Australia agreed to pay Cobar approximately
$26.5 million upon the receipt of a report confirming that
the reserves at the Endeavor mine are equal to or greater than
the reported ore reserves for 2004. In addition to these upfront
payments, CDE Australia originally committed to pay Cobar an
operating cost contribution of $1.00 for each ounce of payable
silver plus a further increment when the silver price exceeds
$5.23 per ounce. This further increment was to have begun on the
second anniversary of this agreement and was 50% of the amount
by which the silver price exceeded $5.23 per ounce. A cost
contribution of $0.25 per ounce is also payable by CDE Australia
in respect of new ounces of proven and probable silver reserves
as they are developed. During the first quarter of 2007,
$2.1 million was paid for additional ounces of proven and
probable silver reserves under the terms of the contract. This
amount was capitalized as a cost of the mineral interest
acquired and is being amortized using the units of production
method.
On March 28, 2006, CDE Australia reached an agreement with
CBH to modify the terms of the original silver purchase
agreement. Under the modified terms, CDE Australia owns all
silver production and reserves up to a total of
20.0 million payable ounces, up from 17.7 million
payable ounces in the original agreement. The silver
price-sharing provision was deferred until such time as CDE
Australia had received approximately 2 million cumulative
ounces of silver from the mine or June 2007, whichever was
later. In addition, the silver price-sharing threshold increased
to $7.00 per ounce, from the previous level of $5.23 per ounce.
The conditions relating to the second payment were also modified
and tied to certain paste fill plant performance criteria and
mill throughput tests. In January 2008, the mine met the
criteria for payment of the additional $26.2 million. This
amount was paid on April 1, 2008, plus accrued interest at
the rate of 7.5% per annum from January 24, 2008. During
late November 2008, the mine exceeded the 2.0 million
cumulative ounce threshold and therefore, CDE Australia began
realizing reductions in revenues in the fourth quarter of 2008
as a result of the silver price sharing provision. CDE Australia
has received approximately 3.0 million payable ounces
to-date and the current ore reserve contains approximately
7.9 million payable ounces based on current metallurgical
recovery and current smelter contract terms. Expansion of the
ore reserve will be required to achieve the maximum payable
ounces of silver production as set forth in the modified
contract. It is expected that future expansion to the ore
reserve will occur as a result of the conversion of portions of
the propertys existing inventory of mineralized material
and future exploration discoveries. CBH conducts regular
exploration to discover new mineralization and to define
reserves from surface and underground drilling platforms.
Non-Producing
and Development Properties
The Company has no significant non-producing or development
properties as of December 31, 2010.
F-23
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
NOTE L DEBT
AND ROYALTY OBLIGATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
Current
|
|
|
Non-Current
|
|
|
3.25% Convertible Senior Notes due March 2028
|
|
$
|
|
|
|
$
|
43,220
|
|
|
$
|
|
|
|
$
|
125,323
|
|
1.25% Convertible Senior Notes due January 2024
|
|
|
1,859
|
|
|
|
|
|
|
|
|
|
|
|
22,232
|
|
Senior Term Notes due December 2012
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
Kensington Term Facility
|
|
|
25,908
|
|
|
|
48,322
|
|
|
|
|
|
|
|
15,464
|
|
Capital lease obligations
|
|
|
15,759
|
|
|
|
23,483
|
|
|
|
11,102
|
|
|
|
19,204
|
|
Bank loans
|
|
|
4,791
|
|
|
|
42
|
|
|
|
4,301
|
|
|
|
3,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63,317
|
|
|
$
|
130,067
|
|
|
$
|
15,403
|
|
|
$
|
185,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.25% Convertible
Senior Notes
As of December 31, 2010, the outstanding balance of the
3.25% Convertible Senior Notes was $48.7 million, or
$43.2 million net of debt discount.
On March 18, 2008, the Company completed an offering of
$230 million in aggregate principal amount of
3.25% Convertible Senior Notes due 2028. The notes are
unsecured and bear interest at a rate of 3.25% per year, payable
on March 15 and September 15 of each year, beginning on
September 15, 2008. The notes mature on March 15,
2028, unless earlier converted, redeemed or repurchased by the
Company.
Each holder of the notes may require that the Company repurchase
some or all of the holders notes on March 15, 2013,
March 15, 2015, March 15, 2018 and March 15, 2023
at a repurchase price equal to 100% of the principal amount of
the notes to be repurchased, plus accrued and unpaid interest,
in cash, shares of common stock or a combination of cash and
shares of common stock, at the Companys election. Holders
will also have the right, following certain fundamental change
transactions, to require the Company to repurchase all or any
part of their notes for cash at a repurchase price equal to 100%
of the principal amount of the notes to be repurchased plus
accrued and unpaid interest. The Company may redeem the notes
for cash in whole or in part at any time on or after
March 22, 2015 at 100% of the principal amount of the notes
to be redeemed plus accrued and unpaid interest.
The notes provide for net share settlement of any
conversions. Pursuant to this feature, upon conversion of the
notes, the Company (1) will pay the note holder an amount
in cash equal to the lesser of the conversion obligation or the
principal amount of the notes and (2) will settle any
excess of the conversion obligation above the notes
principal amount in the Companys common stock, cash or a
combination thereof, at the Companys election.
The notes are convertible under certain circumstances, as
defined in the indenture agreement, at the holders option,
at an initial conversion rate of 17.60254 shares of the
Companys common stock per $1,000 principal amount of
notes, which is equivalent to an initial conversion price of
approximately $56.81 per share, subject to adjustment in certain
circumstances.
During the year ended December 31, 2010, $99.7 million
of the 3.25% Convertible Senior Notes due 2028 were
repurchased in exchange for 6.5 million shares of the
Companys common stock which reduced the principal amount
of the notes outstanding to $48.7 million
($43.2 million net of debt discount).
During the year ended December 31, 2009, $81.6 million
of the 3.25% Convertible Senior Notes due 2028 were
repurchased in exchange for 4.5 million shares of the
Companys common stock which reduced the principal amount
of the notes outstanding to $148.4 million
($125.3 million net of debt discount).
F-24
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The fair value of the notes outstanding, as determined by market
transactions at December 31, 2010, and 2009, was
$48.2 million and $131.3 million, respectively. The
carrying value of the equity component at December 31, 2010
and 2009 was $10.9 million and $33.4 million,
respectively.
During the year ended December 31, 2008, the Company
recorded $45.0 million of debt discount and the effective
interest rate on the notes increased to 8.9%, including the
accretion of the debt discount.
For the years ended December 31, 2010 and 2009 interest
expense recognized was $2.4 million and $5.9 million,
respectively, and accretion of the debt discount was
$3.0 million and $7.1 million, respectively. The debt
discount remaining at December 31, 2010 was
$5.4 million, which will be amortized through
March 15, 2013. The effective interest rate on the notes
was 8.9%.
1.25% Convertible
Senior Notes
As of December 31, 2010 the balance of the
1.25% Convertible Senior Notes was $1.9 million.
The remaining $1.9 million principal amount of
1.25% Convertible Notes due 2024 outstanding at
December 31, 2010 are convertible into shares of common
stock at the option of the holder on January 15, 2011,
2014, and 2019, unless previously redeemed, at a conversion
price of $76.00 per share, subject to adjustment in certain
circumstances.
The Company is required to make semi-annual interest payments.
The notes are redeemable at the option of the Company before
January 18, 2011, if the closing price of the
Companys common stock over a specified number of trading
days has exceeded 150% of the conversion price, and anytime
thereafter. Before January 18, 2011, the redemption price
is equal to 100% of the principal amount of the notes, plus an
amount equal to 8.75% of the principal amount of the notes, less
the amount of any interest actually paid on the notes on or
prior to the redemption date. The notes are due on
January 15, 2024.
Each holder of the notes may require that the Company repurchase
some or all of the holders notes on January 15, 2011,
January 15, 2014 and January 15, 2019 at a repurchase
price equal to 100% of the principal amount of the notes to be
repurchased, plus accrued and unpaid interest, in cash, shares
of common stock or a combination of cash and shares of common
stock, at the Companys election. Holders will also have
the right, following certain fundamental change transactions, to
require the Company to repurchase all or any part of their notes
for cash at a repurchase price equal to 100% of the principal
amount of the notes to be repurchased plus accrued and unpaid
interest.
During the year ended December 31, 2010, $20.4 million
of the 1.25% Convertible Senior Notes due 2024 were
repurchased in exchange for an aggregate 1.2 million shares
of the Companys common stock.
During the year ended December 31, 2009,
$157.8 million of the 1.25% Convertible Senior Notes
due 2024 were repurchased in exchange for an aggregate
10.4 million shares of the Companys common stock.
The fair value of the notes outstanding, as determined by market
transactions on December 31, 2010, and 2009, was
$1.8 million and $22.8 million, respectively.
Interest on the notes for the year ended December 31, 2010
was $28.1 thousand. Interest on the notes for the year ended
December 31, 2009 was $1.5 million.
Senior
Term Notes due December 31, 2012
As of December 31, 2010 the balance of the Senior Term
Notes was $30.0 million.
On February 5, 2010 the Company completed the sale of
$100 million of Senior Term Notes due in quarterly payments
through December 31, 2012. In conjunction with the sale of
these notes, the Company also issued
F-25
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
297,455 shares of its common stock valued at
$4.2 million as financing costs. The principal of the notes
is payable in twelve equal quarterly installments, with the
first such installment paid on March 31, 2010. The Company
has the option of paying amounts due on the notes in cash,
shares of common stock or a combination of cash and shares of
common stock. The stated interest rate on the notes is 6.5%, but
the payments for principal and interest due on any payment date
are computed to give effect to recent share prices, valuing the
shares of common stock at 90% of a weighted average share price
over a pricing period ending shortly before the payment date.
In December 2010, pursuant to privately-negotiated purchase
agreements, the Company re-purchased $36.7 million
aggregate principal amount of the Notes for approximately
$43.4 million.
For the twelve months ended December 31, 2010, the Company
paid in cash $57.5 million in principal and
$3.3 million in interest and issued 1,060,413 shares
of its common stock, valued at $15.8 million, in connection
with the quarterly payments. In addition, a loss of
$10.0 million for twelve months ended December 31,
2010 realized in connection with quarterly debt payments and
early payoff premiums. The loss is recorded in Gain (loss) on
debt extinguishments.
Kensington
Term Facility
As of December 31, 2010 the balance of the Kensington Term
Facility was $74.2 million.
On October 27, 2009, Coeur Alaska Inc. (Coeur
Alaska), a wholly-owned subsidiary of the Company, entered
into a $45.0 million secured term facility to finance
construction at the Companys Kensington mine located north
of Juneau, Alaska. On December 20, 2010, the agreement was
amended and restated to allow borrowings up to $100 million
and to define a payment schedule through December 31, 2015.
Coeur Alaskas obligations under the Kensington term
facility are secured by all of Coeur Alaskas assets and
the land mineral rights and infrastructure at the Kensington
mine, as well as a pledge of the shares of Coeur Alaska owned by
the Company, and are guaranteed by the Company. In connection
with the amendment of the credit facility, the guarantee was
amended to provide that the Company will limit borrowings or
asset dispositions by its Bolivian subsidiary Empresa Minera
Manquiri S.A.
Borrowings under the amended Credit Facility bear interest at a
rate equal to LIBOR plus 4.5% per year. Interest of
$1.7 million was capitalized into the loan balance for the
year ended December 31, 2010.
The Company is also subject to financial covenants including
(i) guarantor tangible net worth; (ii) borrower
tangible net worth; (iii) debt to equity ratio; and
(iv) debt service coverage. Events of default in the
Kensington term facility include (i) a cross-default of
other indebtedness; (ii) a material adverse effect;
(iii) loss of or failure to obtain applicable permits; or
(iv) failure to achieve final completion date.
As a condition to the Kensington term facility with Credit
Suisse noted above, the Company agreed to enter into a gold
hedging program which protects a minimum of 187,500 ounces of
gold production over the life of the facility against the risk
associated with fluctuations in the market price of gold. This
program consists of a series of zero cost collars which consist
of a floor price and a ceiling price of gold. One contract with
collars protecting 182,500 ounces of gold were outstanding at
December 31, 2010. The weighted average put feature of each
collar is $911.99 and the weighted average call feature of each
collar is $1,795.18. One contract with collars protecting
125,000 ounces of gold were outstanding at December 31,
2009. The weighted average put feature of each collar is $862.50
and the weighted average call feature of each collar is
$1,688.50.
Voluntary prepayments of the loans and voluntary reductions of
the unutilized portion of the commitments under the Kensington
term facility are permissible, subject to certain conditions
pertaining to minimum notice and minimum reduction amounts. In
addition, voluntary prepayments and reductions are subject to
payment of customary break costs. The Kensington term facility
requires Coeur Alaska to maintain accounts for a debt service
reserve and project proceeds. Coeur Alaska has pledged each of
these accounts to Credit Suisse under account pledge agreements.
F-26
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The Amended Credit Facility contains affirmative and negative
covenants that the Company believes are usual and customary,
including financial covenants that Coeur Alaskas debt to
equity ratio shall not exceed 40%, the ratio of project cash
flow to debt service shall be at least 125%, and the tangible
net worth of the Borrower is not less than $325 million and
the tangible net worth of the Guarantor is no less than
$1.0 billion. Project covenants include covenants as to
performance of sales contracts, maintenance and management.
Bank
Loans
On September 1, 2010, Empresa Minera Manquiri borrowed
$0.5 million pursuant to a short-term bank loan from Banco
Bisa bearing interest at 4% to fund working capital
requirements. The short-term loan was scheduled to mature on
February 23, 2011. As of December 31, 2010, there were
no amounts outstanding with Banco Bisa.
On July 6, 2010, the Company entered into a short-term
financing agreement with AFCO Credit Corporation of
$2.4 million bearing interest at 2.9% to finance insurance
premiums. Installments of $0.2 million are paid monthly
with the final payment to be made on June 1, 2011. As of
December 31, 2010 the outstanding balance was
$1.1 million.
On April 14, 2010, Empresa Minera Manquiri borrowed
$2.5 million pursuant to a short-term bank loan from Banco
de Credito de Bolivia bearing interest at rates ranging from
4.5% to 5.25% to fund working capital requirements. The
short-term borrowings mature and renew every 60 days. As of
December 31, 2010, there were no amounts outstanding with
Banco de Credito de Bolivia.
On March 3, 2010, the Companys wholly owned Mexican
subsidiary, Coeur Mexicana, S.A. de C.V. (Coeur
Mexicana) entered into three bank loans in the aggregate
amount of $5.2 million with Fideicomiso de Fomento Minero
(FIFOMI). These loans are intended to fund working capital
requirements guaranteed by the Company and are secured by
certain machinery and equipment. The bank loans bear interest at
13.45% and mature after 36 to 60 months. At
December 31, 2010, there were no amounts outstanding with
FIFOMI.
On November 27, 2009, Empresa Minera Manquiri borrowed
$5.0 million pursuant to a bank loan from Banco Bisa
bearing an interest rate of 6.5% to fund working capital
requirements. As of December 31, 2010, the outstanding
balance was $2.5 million. The bank loan matures on
November 17, 2011.
On July 15, 2009, to fund equipment purchases, Coeur
Mexicana entered into an equipment financing agreement bearing
interest at 8.26% with Atlas Copco. This agreement is secured by
certain machinery and equipment. Twenty-four monthly
installments will be made on the loans with the final payment
being made on January 31, 2012. As of December 31,
2010, the outstanding balance was $1.2 million.
Palmarejo
Gold Production Royalty Obligation
On January 21, 2009, the Companys wholly-owned
subsidiary, Coeur Mexicana SA de CV, entered into a gold
production royalty transaction with Franco-Nevada Corporation
under which Franco-Nevada purchased a royalty covering 50% of
the life of mine gold to be produced from its Palmarejo silver
and gold mine in Mexico. Coeur Mexicana received total
consideration of $78.0 million consisting of
$75.0 million in cash plus a warrant to acquire
Franco-Nevada Common Shares (the Franco-Nevada
warrant), which was valued at $3 million at closing
of the Franco-Nevada transaction. In September, 2010, the
warrant was exercised and the related shares were sold for
$10.0 million.
The royalty agreement provides for a minimum obligation to be
paid in monthly payments 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 per month
multiplied by the excess of the monthly average market price of
gold above $400 per ounce (which $400 floor is subject to a 1%
annual inflation compounding adjustment beginning on
January 21, 2013). As of December 31, 2010, payments
had
F-27
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
been made on a total of 79,879 ounces of gold with further
payments to be made on an additional 320,121 ounces of gold.
After payments have been made on a total of 400,000 ounces of
gold, the royalty obligation is payable in the amount of 50% of
actual gold production per month multiplied by the excess of the
monthly average market price of gold above $400 per ounce,
adjusted as described above. Payments under the royalty
agreement are to be made in cash or gold bullion. During the
twelve months ended December 31, 2010, the Company paid
$43.1 million in royalty payments to Franco-Nevada
Corporation. Payments made during the minimum obligation period
will result in a reduction to the remaining minimum obligation.
Payments made beyond the minimum obligation period will be
recognized as other cash operating expenses and result in an
increase to Coeur Mexicanas reported cash cost per ounce
of silver.
The Company used an implicit interest rate of 27.8% to discount
the original 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 twelve months ended
December 31, 2010 and 2009, of $20.5 million and
$19.1 million, respectively. As of December 31, 2010
and 2009, the remaining minimum obligation under the royalty
agreement was $80.3 million and $84.8 million,
respectively.
The price volatility associated with the minimum royalty
obligation is considered an embedded derivative under
U.S. GAAP. Fluctuations in the market price of gold since
inception of the agreement have resulted in the recognition of
additional fair value adjustments and resulted in higher
payments to date. Please see Note Q Derivative
Financial Instruments and Fair Value of Financial Instruments,
Palmarejo Gold Production Royalty, for further discussion of the
embedded derivative feature of the royalty agreement.
Interest
Expense
The Company expenses interest incurred on its various debt
instruments as a cost of operating its properties. For the
twelve months ended December 31, 2010, 2009 and 2008, the
Company expensed interest of $30.9 million,
$18.1 million and $4.7 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
3.25% Convertible Senior Notes due March 2028
|
|
$
|
2,394
|
|
|
$
|
5,875
|
|
|
$
|
5,856
|
|
1.25% Convertible Senior Notes due January 2024
|
|
|
28
|
|
|
|
1,454
|
|
|
|
2,250
|
|
Senior Term Notes due December 2012
|
|
|
5,074
|
|
|
|
|
|
|
|
|
|
Kensington Term Facility
|
|
|
2,017
|
|
|
|
85
|
|
|
|
|
|
Senior Secured Floating Rate Convertible Notes due 2012
|
|
|
|
|
|
|
887
|
|
|
|
1,136
|
|
Capital lease obligations
|
|
|
2,122
|
|
|
|
1,149
|
|
|
|
2,071
|
|
Bank loans
|
|
|
1,423
|
|
|
|
818
|
|
|
|
1,374
|
|
Gold Lease Facility
|
|
|
677
|
|
|
|
1,522
|
|
|
|
60
|
|
Accretion of Franco Nevada royalty obligation
|
|
|
20,502
|
|
|
|
19,054
|
|
|
|
|
|
Amortization of debt issuance costs
|
|
|
4,047
|
|
|
|
989
|
|
|
|
1,477
|
|
Accretion of debt discount
|
|
|
2,543
|
|
|
|
9,094
|
|
|
|
2,749
|
|
Capitalized interest
|
|
|
(9,885
|
)
|
|
|
(22,825
|
)
|
|
|
(12,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
30,942
|
|
|
|
18,102
|
|
|
|
4,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Capitalized
Interest
The Company capitalizes interest incurred on its various debt
instruments as a cost of properties under development. For the
twelve months ended December 31, 2010, 2009 and 2008, the
Company capitalized interest of $9.9 million,
$22.8 million and $12.2 million, respectively.
Minimum
Debt Repayments
The following is the Companys scheduled minimum debt
repayments at December 31, 2010:
|
|
|
|
|
|
|
Minimum
|
|
December 31,
|
|
Debt
Repayments(1)
|
|
|
2011
|
|
$
|
103,375
|
|
2012
|
|
|
82,537
|
|
2013
|
|
|
78,749
|
|
2014
|
|
|
62,975
|
|
2015
|
|
|
58,287
|
|
Thereafter
|
|
|
130,061
|
|
|
|
|
|
|
|
|
|
515,984
|
|
Debt discount
|
|
|
(119,527
|
)
|
Present value of net scheduled lease payments (See Note I)
|
|
|
39,242
|
|
|
|
|
|
|
|
|
$
|
435,699
|
|
|
|
|
|
|
|
|
(1) |
Includes gold production royalty obligation payments due to
Franco-Nevada Corporation for royalty covering 50% of the life
of mine gold to be produced from its Palmarejo silver and gold
mine in Mexico.
|
|
|
NOTE M
|
RECLAMATION
AND MINE CLOSURE COSTS
|
Reclamation and remediation costs are based principally on legal
and regulatory requirements. Management estimates costs
associated with reclamation of mining properties as well as
remediation cost for inactive properties. The Company uses
assumptions about future costs, mineral prices, mineral
processing recovery rates, production levels and capital and
reclamation costs. Such assumptions are based on the
Companys current mining plan and the best available
information for making such estimates. On an ongoing basis,
management evaluates its estimates and assumptions; however,
actual amounts could differ from those based on such estimates
and assumptions.
The asset retirement obligation is measured using the following
factors: 1) Expected labor costs, 2) Allocated
overhead and equipment charges, 3) Contractor markup,
4) Inflation adjustment, and 5) Market risk premium.
The sum of the expected costs by year is discounted, using the
Companys credit adjusted risk-free interest rate from the
time it expects to pay the retirement obligation to the time it
incurs the obligation. The measurement objective is to determine
the amount a third party would demand to assume the asset
retirement obligation.
Upon initial recognition of a liability for an asset retirement
obligation, the Company capitalizes the asset retirement cost as
an increase in the carrying amount of the related long-lived
asset. The Company depletes this amount using the
units-of-production
method. The Company is not required to re-measure the obligation
at fair value each period, but the Company is required to
evaluate the cash flow estimates at the end of each reporting
period to determine whether the estimates continue to be
appropriate. Upward revisions in the amount of undiscounted cash
flows are discounted using a current credit-adjusted risk-free
rate. Downward revisions are
F-29
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
discounted using the credit-adjusted risk-free rate that existed
when the original liability was recorded, or, if not readily
determinable, at the weighted average discount rate used to
record the liability.
At December 31, 2010 and 2009, $27.3 million and
$38.2 million, respectively, was accrued for reclamation
obligations related to currently producing and developmental
mineral properties. These amounts are included in reclamation
and mine closure liabilities.
The following is a description of the changes to the
Companys asset retirement obligations for the years ended
December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
2010
|
|
|
2009
|
|
|
Asset retirement obligation January 1
|
|
$
|
38,193
|
|
|
$
|
34,662
|
|
Adjustment to remove Cerro Bayo Disc.
Operations(A)
|
|
|
(13,081
|
)
|
|
|
|
|
Accretion
|
|
|
2,334
|
|
|
|
3,018
|
|
Additions and changes in estimates
|
|
|
(104
|
)
|
|
|
1,490
|
|
Settlements
|
|
|
(40
|
)
|
|
|
(977
|
)
|
|
|
|
|
|
|
|
|
|
Asset retirement obligation December 31
|
|
$
|
27,302
|
|
|
$
|
38,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
In August 2010, the Company sold its 100% interest in
Compañía Minera Cerro Bayo (Cerro Bayo) to
Mandalay Resources Corporation (Mandalay). |
In addition, the Company has accrued $1.8 million and
$1.7 million as of December 31, 2010 and 2009,
respectively, for environmental remediation liabilities related
to former mining operations. These amounts are also included in
reclamation and mine closure liabilities.
The components of loss from continuing operations before income
taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
(37,710
|
)
|
|
$
|
25,650
|
|
|
$
|
(125
|
)
|
Foreign
|
|
|
(54,955
|
)
|
|
|
(101,723
|
)
|
|
|
(25,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(92,665
|
)
|
|
$
|
(76,073
|
)
|
|
$
|
(25,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The components of the consolidated income tax benefit
(provision) from continuing operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Alternative minimum tax
|
|
$
|
(482
|
)
|
|
$
|
(2,249
|
)
|
|
$
|
(644
|
)
|
United States Foreign withholding tax
|
|
|
(1,009
|
)
|
|
|
(1,509
|
)
|
|
|
(1,498
|
)
|
Argentina
|
|
|
(7,094
|
)
|
|
|
(6,284
|
)
|
|
|
(2,047
|
)
|
Australia
|
|
|
(251
|
)
|
|
|
592
|
|
|
|
(1,085
|
)
|
Mexico
|
|
|
(316
|
)
|
|
|
(124
|
)
|
|
|
(623
|
)
|
Bolivia
|
|
|
(20,268
|
)
|
|
|
(2,673
|
)
|
|
|
|
|
Canada
|
|
|
|
|
|
|
(53
|
)
|
|
|
(34
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
|
|
|
|
|
|
|
|
(1,410
|
)
|
Australia
|
|
|
(541
|
)
|
|
|
200
|
|
|
|
1,115
|
|
Bolivia
|
|
|
(1,388
|
)
|
|
|
(6,221
|
)
|
|
|
(2,480
|
)
|
Mexico
|
|
|
24,371
|
|
|
|
37,681
|
|
|
|
(27,753
|
)
|
United States
|
|
|
16,459
|
|
|
|
13,711
|
|
|
|
53,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
|
|
$
|
9,481
|
|
|
$
|
33,071
|
|
|
$
|
17,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Companys effective tax rate with
the federal statutory tax rate for the periods indicated is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Tax benefit from continuing operations
|
|
$
|
32,433
|
|
|
$
|
26,625
|
|
|
$
|
8,942
|
|
State tax provision from continuing operations
|
|
|
4,726
|
|
|
|
2,282
|
|
|
|
766
|
|
Percentage depletion and related deductions
|
|
|
3,093
|
|
|
|
2,726
|
|
|
|
3,890
|
|
Change in valuation allowance
|
|
|
2,734
|
|
|
|
20,303
|
|
|
|
6,417
|
|
Non-deductible imputed interest
|
|
|
(1,718
|
)
|
|
|
(1,986
|
)
|
|
|
(2,168
|
)
|
Uncertain tax positions
|
|
|
(299
|
)
|
|
|
898
|
|
|
|
(2,665
|
)
|
U.S. and foreign non-deductible expenses
|
|
|
(9,052
|
)
|
|
|
(3,619
|
)
|
|
|
(2,642
|
)
|
Partially reinvested
|
|
|
|
|
|
|
|
|
|
|
19,886
|
|
Foreign exchange rates
|
|
|
(7,066
|
)
|
|
|
2,339
|
|
|
|
(6,663
|
)
|
Foreign inflation and indexing
|
|
|
(3,352
|
)
|
|
|
(2,635
|
)
|
|
|
1,425
|
|
Foreign tax rate differences
|
|
|
(9,861
|
)
|
|
|
(11,993
|
)
|
|
|
(6,684
|
)
|
Foreign withholding taxes
|
|
|
(2,986
|
)
|
|
|
(1,509
|
)
|
|
|
(1,604
|
)
|
Other, net
|
|
|
829
|
|
|
|
(360
|
)
|
|
|
(1,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,481
|
|
|
$
|
33,071
|
|
|
$
|
17,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
As of December 31, 2010 and 2009, the significant
components of the Companys deferred tax assets and
liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Mineral properties
|
|
$
|
450,902
|
|
|
$
|
458,204
|
|
Foreign subsidiaries unremitted earnings
|
|
|
154,610
|
|
|
|
136,783
|
|
Property, plant and equipment, net
|
|
|
73,168
|
|
|
|
41,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
678,680
|
|
|
|
636,224
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
167,281
|
|
|
|
166,234
|
|
Foreign subsidiaries future tax credits
|
|
|
61,724
|
|
|
|
18,115
|
|
Royalty and other long-term debt
|
|
|
51,134
|
|
|
|
23,335
|
|
Capital loss carryforwards
|
|
|
42,830
|
|
|
|
8,558
|
|
Asset retirement obligation
|
|
|
9,003
|
|
|
|
9,327
|
|
Unrealized foreign currency loss and other
|
|
|
4,857
|
|
|
|
5,550
|
|
Accrued expenses
|
|
|
19,929
|
|
|
|
8,561
|
|
Tax credit carryforwards
|
|
|
11,127
|
|
|
|
9,518
|
|
Inventory
|
|
|
3,050
|
|
|
|
593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370,935
|
|
|
|
249,791
|
|
Valuation allowance
|
|
|
(165,955
|
)
|
|
|
(123,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
204,980
|
|
|
|
126,742
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(473,700
|
)
|
|
$
|
(509,482
|
)
|
|
|
|
|
|
|
|
|
|
The Company has evaluated the amount of taxable income and
periods over which it must be earned to allow for realization of
the deferred tax assets. Based upon this analysis, the Company
has recorded valuation allowances as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31
|
|
|
|
2010
|
|
|
2009
|
|
|
U.S.
|
|
$
|
121,159
|
|
|
$
|
76,904
|
|
Argentina
|
|
|
7,591
|
|
|
|
4,760
|
|
Canada
|
|
|
6,720
|
|
|
|
6,727
|
|
New Zealand
|
|
|
28,790
|
|
|
|
28,516
|
|
Other
|
|
|
1,695
|
|
|
|
1,440
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
165,955
|
|
|
$
|
118,347
|
|
|
|
|
|
|
|
|
|
|
The Company continues to monitor the valuation allowance
quarterly, and will make the appropriate adjustments as
necessary should circumstances change.
U.S. GAAP requires the criteria that an individual tax
position must satisfy for some or all of the benefits of that
position to be recognized in a Companys financial
statements. U.S. GAAP prescribes a recognition threshold of
more likely than not, and a measurement attribute for all tax
positions taken or expected to be taken on a return.
F-32
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
A reconciliation of the beginning and ending amount related to
unrecognized tax benefits is as follows:
|
|
|
|
|
Unrecognized tax benefits at January 1, 2010
|
|
$
|
748
|
|
Gross increase to current period tax positions
|
|
|
328
|
|
Gross decrease to prior period tax positions
|
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits at December 31, 2010
|
|
$
|
1,076
|
|
|
|
|
|
|
The Company has decided to classify interest and penalties
associated with these uncertain tax positions as a component of
income tax expense and has recorded approximately
$0.04 million during 2010.
The Company files income tax returns in various
U.S. federal and state jurisdictions, in all identified
foreign jurisdictions and various others. To the extent there
are loss carryovers in any such jurisdictions, the statute of
limitations generally remains open.
The Company has previously determined the earnings from certain
foreign jurisdictions were not indefinitely reinvested.
Accordingly, the Company has recognized deferred taxes and
withholding taxes related to those jurisdictions. In 2010, the
Company retained its position established in 2008 when it was
determined that it was reasonable, appropriate and prudent that
a portion of the anticipated future cash flows from Mexico would
be indefinitely reinvested to fund ongoing capital improvements
and additional exploration activities within and around the
Palmarejo operating site.
The Company intends to indefinitely reinvest a portion of its
earnings from its Palmarejo operations in Mexico. Accordingly,
U.S. and
non-U.S. income
and withholding taxes for which deferred taxes might otherwise
be required, have not been provided on a cumulative amount of
temporary differences (including, for this purpose, any
difference between the tax basis in the stock of a consolidated
subsidiary and the amount of the subsidiarys net equity
determined for financial reporting purposes) related to
investments in foreign subsidiaries of approximately
$170 million for the years ended December 31, 2010 and
2009. The additional U.S. and
non-U.S. income
and withholding tax that would arise on the reversal of the
temporary differences could be offset in part, by tax credits.
Because the determination of the amount of available tax credits
and the limitations imposed on the annual utilization of such
credits are subject to a highly complex series of calculations
and expense allocations, it is impractical to estimate the
amount of net income and withholding tax that might be payable
if a reversal of temporary differences occurred.
During 2007, the Company incurred an ownership change which
generally limits the availability of existing tax attributes,
including net operating loss carryforwards to reduce future
taxable income. The Company has the following tax attribute
carryforwards as of December 31, 2010, by jurisdiction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Australia
|
|
Bolivia
|
|
Canada
|
|
Chile
|
|
Mexico
|
|
New Zealand
|
|
Other
|
|
Total
|
|
Regular net operating losses
|
|
$
|
81,567
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,793
|
|
|
$
|
|
|
|
$
|
370,357
|
|
|
$
|
95,965
|
|
|
$
|
5,651
|
|
|
$
|
557,333
|
|
Capital losses
|
|
|
105,304
|
|
|
|
|
|
|
|
|
|
|
|
3,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,133
|
|
Alternative minimum tax credits
|
|
|
5,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,707
|
|
Foreign tax credits
|
|
|
8,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,544
|
|
The U.S. net operating losses expire from 2017 through 2028
and the Canada net operating losses expire from 2028 through
2029. The Mexico net operating losses expire from 2017 to 2019,
while the remaining net operating losses from the foreign
jurisdictions have an indefinite carryforward period. The
U.S. capital losses expire in 2012 while the Canada capital
losses generally have an indefinite carryforward period.
Alternative minimum tax credits do not expire and foreign tax
credits expire if unused by 2019.
F-33
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
NOTE O
|
STOCK-BASED
COMPENSATION PLANS
|
The Company has an annual incentive plan and a long-term
incentive plan. The Companys shareholders approved the
Amended and restated 2003 Long-Term Incentive Plan of Coeur
dAlene Mines Corporation at the 2010 annual shareholders
meeting. Total employee compensation charged to operations and
capital projects under these plans was $10.6 million and
$7.1 million and $5.1 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Stock options and Stock Appreciation Rights (SARs) granted under
the Companys incentive plans vest over three years and are
exercisable over a period not to exceed ten years from the grant
date. The exercise price of the stock options and SARs is equal
to the greater of the par value of the shares or the fair market
value of the shares on the date of the grant. The value of each
stock option award and SAR is estimated on the date of grant
using the Black-Scholes option pricing model. Stock options
granted are accounted for as equity-based awards and SARs are
accounted for as liability-based awards. The value of the SARs
is remeasured at each reporting date. SARs, when vested, provide
the participant the right to receive cash equal to the excess of
the market price of the shares over the exercise price when
exercised.
Restricted stock and restricted stock units granted under the
Companys incentive plans are accounted for based on the
market value of the underlying shares on the date of grant and
vest in equal installments annually over three years. Restricted
stock awards are accounted for as equity-based awards and
restricted stock unit awards are accounted for as
liability-based awards. Restricted stock units are remeasured at
each reporting date. Holders of the restricted stock are
entitled to vote the shares and to receive any dividends
declared on the shares. Restricted stock units are settled in
cash based on the number of vested restricted stock units
multiplied by the current market price of the common shares when
vested.
Performance shares and performance units granted under the
Companys incentive plans are accounted for at fair value.
Performance share awards are accounted for as equity-based
awards and performance units are accounted for as
liability-based awards. Performance shares and performance units
are valued using a Monte Carlo simulation valuation model on the
date of grant. The value of the performance units is remeasured
each reporting date. Vesting is contingent on meeting certain
market conditions based on relative total shareholder return.
The performance shares and units vest at the end of the
three-year service period if the market conditions are met and
the employee remains an employee of the Company. The existence
of a market condition requires recognition of compensation cost
for the performance share awards over the requisite period
regardless of whether the market condition is ever satisfied.
Performance units are cash-based awards and are settled in cash
based on the current market price of the common shares when
vested.
The compensation expense recognized in the Companys
consolidated financial statements for the year ended
December 31, 2010, 2009 and 2008 for stock based
compensation awards was $7.2 million, $4.9 million and
$2.9 million, respectively. The SARs, restricted
stock units and performance units are liability-based awards and
are required to be remeasured at the end of each reporting
period with corresponding adjustments to previously recognized
and future stock-based compensation expense. As of
December 31, 2010, there was $2.9 million of total
unrecognized compensation cost (net of estimated forfeitures)
related to unvested stock options, SARs, restricted stock,
restricted stock units, performance shares and performance units
which is expected to be recognized over a weighted-average
remaining vesting period of 1.6 years.
F-34
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The following table sets forth the weighted average fair value
of stock options on the date of grant and the weighted average
fair value of the SARs at December 31, 2010. The
assumptions used to estimate the fair value of the stock options
and SARs using the Black-Scholes option valuation model are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of Grant
|
|
As of December 31,
|
|
|
|
|
|
|
SARs and
|
|
|
|
|
|
|
Stock
|
|
|
|
Stock
|
|
|
|
|
|
|
Options
|
|
SARs
|
|
Options
|
|
SARs
|
|
SARs
|
|
|
2010
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Weighted average fair value of stock options granted and SARs
outstanding
|
|
$9.96
|
|
$10.19
|
|
$3.90
|
|
$19.98
|
|
$21.26
|
Expected volatility
|
|
73.0%
|
|
73.7%
|
|
70.8%
|
|
75.3%
|
|
80.1%
|
Expected life
|
|
6.0 years
|
|
6.0 years
|
|
6.0 years
|
|
5.2 years
|
|
4.1 years
|
Risk-free interest rate
|
|
2.0%
|
|
2.7%
|
|
2.1%
|
|
2.1%
|
|
1.6%
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
The expected volatility is determined using historical
volatilities based on historical stock prices. The Company
estimated the expected life of the options and SARs granted
using the midpoint between the vesting date and the original
contractual term. The risk free rate was determined using the
yield available on U.S. Treasury zero-coupon issues with a
remaining term equal to the expected life of the option or SAR.
The Company has not paid dividends on its common stock since
1996.
The following table summarizes stock option and SARs activity
for the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
SARs
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise
|
|
|
Shares
|
|
|
Exercise
|
|
|
Stock options outstanding at December 31, 2007
|
|
|
228,198
|
|
|
$
|
34.20
|
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
55,021
|
|
|
|
42.70
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(905
|
)
|
|
|
39.20
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(38,944
|
)
|
|
|
48.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options outstanding at December 31, 2008
|
|
|
243,370
|
|
|
|
33.80
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
163,720
|
|
|
|
10.00
|
|
|
|
112,471
|
|
|
|
10.00
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled/forfeited
|
|
|
(14,412
|
)
|
|
|
44.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
392,678
|
|
|
|
23.48
|
|
|
|
112,471
|
|
|
|
10.00
|
|
Granted
|
|
|
4,089
|
|
|
|
15.30
|
|
|
|
151,287
|
|
|
|
15.40
|
|
Exercised
|
|
|
(29,104
|
)
|
|
|
9.81
|
|
|
|
(16,639
|
)
|
|
|
10.00
|
|
Canceled/forfeited
|
|
|
(36,823
|
)
|
|
|
23.31
|
|
|
|
(16,556
|
)
|
|
|
11.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
330,840
|
|
|
$
|
24.60
|
|
|
|
230,563
|
|
|
|
13.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Options to purchase 225,310 shares were exercisable at
December 31, 2010 at a weighted average exercise price of
$29.73.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
Range of
|
|
Number
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Number
|
|
|
Exercise
|
|
|
Contractual Life
|
|
Exercise Price
|
|
Outstanding
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Exercisable
|
|
|
Price
|
|
|
(Years)
|
|
|
$ 0.00-$10.00
|
|
|
160,004
|
|
|
$
|
9.48
|
|
|
|
6.50
|
|
|
|
69,746
|
|
|
$
|
8.81
|
|
|
|
4.45
|
|
$10.00-$20.00
|
|
|
36,133
|
|
|
$
|
17.28
|
|
|
|
2.57
|
|
|
|
32,044
|
|
|
$
|
17.53
|
|
|
|
1.68
|
|
$20.00-$30.00
|
|
|
18,888
|
|
|
$
|
22.28
|
|
|
|
4.42
|
|
|
|
16,143
|
|
|
$
|
21.96
|
|
|
|
3.89
|
|
$30.00-$40.00
|
|
|
54,802
|
|
|
$
|
39.40
|
|
|
|
5.02
|
|
|
|
54,802
|
|
|
$
|
39.40
|
|
|
|
5.02
|
|
$40.00-$50.00
|
|
|
25,326
|
|
|
$
|
48.50
|
|
|
|
7.03
|
|
|
|
16,888
|
|
|
$
|
48.50
|
|
|
|
7.03
|
|
$50.00-$60.00
|
|
|
16,727
|
|
|
$
|
51.40
|
|
|
|
5.14
|
|
|
|
16,727
|
|
|
$
|
51.40
|
|
|
|
5.14
|
|
$60.00-$70.00
|
|
|
3,219
|
|
|
$
|
66.60
|
|
|
|
3.02
|
|
|
|
3,219
|
|
|
$
|
66.60
|
|
|
|
3.02
|
|
$70.00-$80.00
|
|
|
15,741
|
|
|
$
|
70.90
|
|
|
|
3.14
|
|
|
|
15,741
|
|
|
$
|
70.90
|
|
|
|
3.14
|
|
As of December 31, 2010, there was $0.8 million of
unrecognized compensation cost related to non-vested stock
options and SARs to be recognized over a weighted average period
of 1.4 years.
The following table summarizes restricted stock and restricted
stock units activity for the years ended December 31, 2010,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
|
Restricted Stock Units
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Units
|
|
|
Fair Value
|
|
|
Outstanding at December 31, 2007
|
|
|
60,337
|
|
|
$
|
42.00
|
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
56,095
|
|
|
|
41.60
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(26,571
|
)
|
|
|
42.20
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(16,774
|
)
|
|
|
42.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
73,087
|
|
|
|
41.50
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
98,983
|
|
|
|
6.90
|
|
|
|
67,485
|
|
|
|
6.90
|
|
Vested
|
|
|
(32,084
|
)
|
|
|
41.65
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(5,597
|
)
|
|
|
42.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
134,389
|
|
|
|
15.95
|
|
|
|
67,485
|
|
|
|
18.06
|
|
Granted
|
|
|
2,363
|
|
|
|
15.30
|
|
|
|
91,378
|
|
|
|
15.40
|
|
Vested
|
|
|
(57,926
|
)
|
|
|
21.90
|
|
|
|
(22,500
|
)
|
|
|
15.24
|
|
Cancelled/Forfeited
|
|
|
(14,203
|
)
|
|
|
12.43
|
|
|
|
(9,947
|
)
|
|
|
15.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
64,623
|
|
|
$
|
11.37
|
|
|
|
126,416
|
|
|
$
|
27.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $0.7 million of
total unrecognized compensation cost related to restricted stock
and restricted stock unit awards to be recognized over a
weighted-average period of 1.4 years.
F-36
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The following table summarizes performance shares and
performance units activity for the years-ended
December 31, 2010, 2009, and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares
|
|
|
Performance Units
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Grant Date
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Units
|
|
|
Fair Value
|
|
|
Outstanding at December 31, 2007
|
|
|
42,060
|
|
|
$
|
44.50
|
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
28,241
|
|
|
|
52.50
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(15,534
|
)
|
|
|
48.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
54,767
|
|
|
|
47.40
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
98,233
|
|
|
|
8.60
|
|
|
|
67,485
|
|
|
|
8.60
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(16,702
|
)
|
|
|
46.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
136,298
|
|
|
|
16.59
|
|
|
|
67,485
|
|
|
|
27.53
|
|
Granted
|
|
|
2,363
|
|
|
|
18.65
|
|
|
|
91,378
|
|
|
|
19.94
|
|
Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled/Forfeited
|
|
|
(37,833
|
)
|
|
|
17.53
|
|
|
|
(13,840
|
)
|
|
|
20.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2010
|
|
|
100,828
|
|
|
$
|
16.29
|
|
|
|
145,023
|
|
|
$
|
35.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, there was $1.4 million of
total unrecognized compensation cost related to performance
shares and performance units to be recognized over a weighted
average period of 1.8 years.
|
|
NOTE P
|
DEFINED
CONTRIBUTION AND 401(k) PLANS
|
Defined
Contribution Plan
The Company provides a noncontributory defined contribution
retirement plan for all eligible U.S. employees. Total
contributions charged were $1.0 million, $0.7 million
and $0.7 million for 2010, 2009 and 2008, respectively,
which is based on a percentage of the salary of eligible
employees.
401(k)
Plan
The Company maintains a retirement savings plan (which qualifies
under Section 401(k) of the U.S. Internal Revenue
code) covering all eligible U.S. employees. Under the plan,
employees may elect to contribute up to 100% of their cash
compensation, subject to ERISA limitations. The Company adopted
a Safe Harbor Tiered Match and is required to make matching
contributions equal to 100% of the employees contribution
up to 3% of the employees compensation plus matching
contributions equal to 50% of the employees contribution
up to an additional 2% of the employees compensation.
Employees have the option of investing in twelve different types
of investment funds. Total plan expenses recognized in the
Companys consolidated financial statements were
$0.9 million, $0.5 million and $0.6 million in
2010, 2009 and 2008, respectively and plan expenses charged to
operations were $0.7 million, $0.3 million and
$0.4 million, respectively.
F-37
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
NOTE Q
|
DERIVATIVE
FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
|
Palmarejo
Gold Production Royalty
On January 21, 2009, the Company entered into the gold
production royalty transaction with Franco-Nevada Corporation
described in Note L Debt and Royalty
Obligation, Palmarejo Gold Production Royalty Obligation. The
minimum royalty obligation ends when payments have been made on
a total of 400,000 ounces of gold. As of December 31, 2010,
a total of 320,121 ounces of gold remain outstanding under the
minimum royalty obligation. The price volatility associated with
the minimum royalty obligation is considered an embedded
derivative financial instrument under U.S. GAAP. The fair
value of the embedded derivative at December 31, 2010 and
December 31, 2009 was a liability of $162.0 million
and $78.0 million, respectively. The Franco-Nevada warrant
was a contingent option to acquire 316,436 common shares of
Franco-Nevada for no additional consideration, once the mine
satisfied certain completion tests stipulated in the agreement.
On September 19, 2010, the Company exercised these warrants
and received the related shares, which were sold for net
proceeds to the Company of $10.0 million. The Franco-Nevada
warrant was considered a derivative instrument. The fair value
of the warrant at December 31, 2009 was $6.3 million.
These derivative instruments are recorded in prepaid expenses
and other and current or non-current portion of royalty
obligation on the balance sheet and are adjusted to fair value
through current earnings. During the twelve months ended
December 31, 2010,
mark-to-market
adjustments for the embedded derivative amounted to a loss of
$84.0 million and
mark-to-market
adjustments for the warrant was a gain of $3.5 million. For
the same period in 2009, a loss of $78.0 million was
recorded for
mark-to-market
adjustments for the embedded derivative and a gain of
$3.3 million was recorded for the warrant. For the twelve
months ended December 31, 2010, realized losses on
settlement of the liabilities were $18.2 million. For the
twelve months ended December 31, 2009, realized losses on
settlements of liabilities were $3.5 million. The
mark-to-market
adjustments and realized losses are included in Fair value
adjustments, net in the consolidated statements of operations.
Forward
Foreign Exchange Contracts
The Company periodically enters into forward foreign currency
contracts to reduce the foreign exchange risk associated with
forecasted Mexican peso (MXP) operating costs at its
Palmarejo mine. At December 31, 2010, the Company had MXP
foreign exchange contracts of $28.8 million in
U.S. dollars. These contracts require the Company to
exchange U.S. dollars for MXP at a weighted average
exchange rate of 12.63 MXP to each U.S. dollar and had a
fair value of $4,000 at December 31, 2010. The Company
recorded
mark-to-market
gains (losses) of ($1.3) million, $1.3 million, and
$3.5 million for the twelve months ended December 31,
2010, 2009, and 2008 respectively, which is reflected in the
consolidated statement of operations in Fair value adjustments,
net. The Company recorded realized gains (losses) of
$1.6 million, $1.5 million, and $(0.6) million in
Production costs applicable to sales during the twelve months
ended December 31, 2010, 2009, and 2008 respectively.
Gold
Lease Facility
On December 12, 2008, the Company entered into a gold lease
facility with Mitsubishi International Corporation
(MIC). Pursuant to this facility, the Company may
lease amounts of gold from MIC and is obligated to deliver the
same amounts back to MIC and to pay specified lease fees to MIC
that are equivalent to interest at current market rates on the
value of the gold leased. Pursuant to a Second Amended and
Restated Collateral Agreement, the Companys obligations
under the facility are secured by certain collateral. The
collateral agreement specifies the maximum amount of gold the
Company may lease from MIC, as well as the amount and type of
collateral.
On December 23, 2010, the Company entered into an Amendment
No. 5 to the second Amended and Restated Collateral
Agreement, lowering the value of the collateral required to
secure its obligations to 30% of the outstanding amount,
including lease fees. The Company is not obligated to enter into
any additional leases as of December 31, 2010.
F-38
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
As of December 31, 2010, the Company had 10,000 ounces of
gold leased from MIC. The Company has committed to deliver this
number of ounces of gold to MIC on a scheduled delivery date in
the first quarter of 2011. As of December 31, 2010, the
Company is required to pledge certain metal inventory held by a
refiner as collateral under the facility. The Company accounts
for the gold lease facility as a derivative instrument, which is
recorded in accrued liabilities and other in the balance sheet.
As of December 31, 2010 and December 31, 2009, based
on the current futures metals prices for each of the delivery
dates and using a 3.1% and 5.7% discount rate, respectively, the
fair value of the instrument was a liability of
$14.1 million and $28.5 million, respectively. The
pre-credit risk adjusted fair value of the net derivative
liability as of December 31, 2010 was $14.2 million. A
credit risk adjustment of $0.1 million to the fair value of
the derivative reduced the reported amount of the net derivative
liability on the Companys consolidated balance sheet to
$14.1 million.
Mark-to-market
adjustments for the gold lease facility amounted to a gain of
$2.9 million for the twelve months ended December 31,
2010, a loss of $6.3 million for the twelve months ended
December 31, 2009, and a gain of $1.2 million for the
twelve months ended December 31, 2008. The Company recorded
realized losses of $10.1 million and $0.2 million for
the twelve months ended December 31, 2010 and 2009,
respectively. The
mark-to-market
adjustments and realized losses are included in fair value
adjustments, net.
Concentrate
Sales Contracts
The Company enters into concentrate sales contracts with
third-party smelters. The contracts, in general, provide for a
provisional payment based upon provisional assays and quoted
metal prices and the provisionally priced sales contain an
embedded derivative that is required to be separated from the
host contract for accounting purposes. The host contract is the
receivable from the sale of concentrates at the forward price at
the time of sale. The embedded derivative, which is the final
settlement based on a future price, does not qualify for hedge
accounting. These embedded derivatives are recorded as
derivative assets (in Prepaid expenses and other), or derivative
liabilities (in Accrued liabilities and other), on the balance
sheet and are adjusted to fair value through earnings each
period until the date of final settlement. At December 31,
2010, the Company had outstanding provisionally priced sales of
$35.7 million consisting of 0.6 million ounces of
silver and 12,758 ounces of gold, which had a fair value of
approximately $37.4 million including the embedded
derivative. At December 31, 2009, the Company had
outstanding provisionally priced sales of $19.1 million
consisting of 1.0 million ounces of silver and 1,227 ounces
of gold, which had a fair value of approximately
$19.1 million including the embedded derivative.
Commodity
Derivatives
During 2009, the Company purchased silver put options to reduce
the risk associated with potential decreases in the market price
of silver. The cost of these put options was largely offset by
proceeds received from the sale of gold call options. As of
December 31, 2010, these contracts have expired.
During the twelve months ended December 31, 2010,
outstanding put options allowing the Company to deliver
5.4 million ounces of silver at an average strike price of
$9.21 per ounce expired. The Company recorded realized losses of
$2.1 million for the twelve months ended December 31,
2010, which are included in Fair value adjustments, net. During
the twelve months ended December 31, 2009, the Company
recorded realized gains of $0.9 million, which are included
in Fair value adjustments, net.
The Company purchases gold contracts to reduce the risk
associated with potential decreases in the market price of gold.
During the fourth quarter of 2010, the Company settled two
outstanding gold contracts of 10,000 ounces each for a gain of
$2.0 million. At December 31, 2010, the Company had
one outstanding forward gold contract of 10,000 ounces at a
fixed price of $1,380.00. The Company recorded an unrealized
gain of $0.5 million associated with this outstanding
contract. The fair value of this contract at December 31,
2010 was a net asset of $0.4 million.
F-39
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
In connection with the Kensington Term Facility described in the
Note L Debt and Royalty Obligation, at
December 31, 2010, the Company had written outstanding call
options requiring it to deliver 182,500 ounces of gold at a
weighted average strike price of $1,795.18 per ounce if the
market price of gold exceeds the strike price. At
December 31, 2010, the Company had outstanding put options
allowing it to sell 182,500 ounces of gold at a weighted average
strike price of $911.99 per ounce if the market price of gold
were to fall below the strike price. The contracts will expire
over the next five years. As of December 31, 2010, the fair
market value of these contracts was a net liability of
$14.7 million. During the twelve months ended
December 31, 2010, 5,000 ounces of gold call options at a
weighted average strike price of $1,688.50 per ounce expired
resulting in a realized gain of $0.4 million and 5,000
ounces of gold put options at a weighted average strike price of
$862.50 per ounce expired resulting in a realized loss of
$0.4 million.
In connection with the sale of the Cerro Bayo mine to Mandalay
Resources Corporation, Coeur received 125,000 ounces of silver
to be delivered in six equal quarterly installments commencing
in the third quarter of 2011. The Company recognized a mark to
market gain of $1.6 million associated with this silver
which had a fair value of $3.9 million at December 31,
2010.
As of December 31, 2010, the Company had the following
derivative instruments that settle in each of the years
indicated in the table (in thousands except average rates,
ounces and per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2012
|
|
2013
|
|
Thereafter
|
|
Palmarejo gold production royalty
|
|
$
|
26,176
|
|
|
$
|
24,865
|
|
|
$
|
25,097
|
|
|
$
|
81,622
|
|
Average gold price in excess of minimum contractual deduction
|
|
$
|
480
|
|
|
$
|
497
|
|
|
$
|
502
|
|
|
$
|
493
|
|
Notional ounces
|
|
|
54,548
|
|
|
|
50,004
|
|
|
|
50,004
|
|
|
|
165,564
|
|
Mexican peso forward purchase contracts
|
|
$
|
28,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average rate (MXP/$)
|
|
$
|
12.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mexican peso notional amount
|
|
|
363,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold lease facility
|
|
$
|
11,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average gold forward price
|
|
$
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ounces
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold forward contracts
|
|
$
|
13,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average gold forward price
|
|
$
|
1,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ounces
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces receivable Mandalay
|
|
$
|
764
|
|
|
$
|
1,535
|
|
|
|
|
|
|
|
|
|
Average silver forward price
|
|
$
|
18.33
|
|
|
$
|
18.42
|
|
|
|
|
|
|
|
|
|
Notional ounces
|
|
|
41,667
|
|
|
|
83,333
|
|
|
|
|
|
|
|
|
|
Silver concentrate sales agreements
|
|
$
|
18,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average silver price
|
|
$
|
28.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ounces
|
|
|
647,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold concentrate sales agreements
|
|
$
|
17,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average gold price
|
|
$
|
1,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional ounces
|
|
|
12,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold put options purchased
|
|
$
|
3,240
|
|
|
$
|
2,880
|
|
|
$
|
1,800
|
|
|
$
|
720
|
|
Average gold strike price
|
|
$
|
877
|
|
|
$
|
900
|
|
|
$
|
904
|
|
|
$
|
974
|
|
Notional ounces
|
|
|
50,000
|
|
|
|
54,000
|
|
|
|
35,000
|
|
|
|
43,500
|
|
Gold call options sold
|
|
$
|
3,240
|
|
|
$
|
2,880
|
|
|
$
|
1,800
|
|
|
$
|
720
|
|
Average gold strike price
|
|
$
|
1,720
|
|
|
$
|
1,769
|
|
|
$
|
1,778
|
|
|
$
|
1,928
|
|
Notional ounces
|
|
|
50,000
|
|
|
|
54,000
|
|
|
|
35,000
|
|
|
|
43,500
|
|
F-40
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The following summarizes classification of the fair value of the
derivative instruments as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
|
Prepaid
|
|
|
Other
|
|
|
Accrued
|
|
|
Other Long-
|
|
|
Portion of
|
|
|
Portion of
|
|
|
|
Expenses
|
|
|
Non-Current
|
|
|
Liabilities and
|
|
|
Term
|
|
|
Royalty
|
|
|
Royalty
|
|
|
|
and Other
|
|
|
Assets
|
|
|
Other
|
|
|
Liabilities
|
|
|
Obligation
|
|
|
Obligation
|
|
|
Gold lease facility
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,213
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Gold forward contract
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver ounces receivable Mandalay
|
|
|
531
|
|
|
|
1,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign exchange contracts
|
|
|
328
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty obligation embedded derivative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,745
|
|
|
|
133,258
|
|
Put and call options
|
|
|
|
|
|
|
|
|
|
|
1,471
|
|
|
|
13,277
|
|
|
|
|
|
|
|
|
|
Concentrate sales contracts
|
|
|
1,703
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,987
|
|
|
$
|
1,063
|
|
|
$
|
4,030
|
|
|
$
|
13,277
|
|
|
$
|
28,745
|
|
|
$
|
133,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
Non-Current
|
|
|
|
Prepaid
|
|
|
Other
|
|
|
Accrued
|
|
|
Other Long
|
|
|
Portion of
|
|
|
Portion of
|
|
|
|
Expenses
|
|
|
Non-Current
|
|
|
Liabilities and
|
|
|
Term
|
|
|
Royalty
|
|
|
Royalty
|
|
|
|
and Other
|
|
|
Assets
|
|
|
Other
|
|
|
Liabilities
|
|
|
Obligation
|
|
|
Obligation
|
|
|
Gold lease facility
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,098
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Forward foreign exchange contracts
|
|
|
1,490
|
|
|
|
|
|
|
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty obligation embedded derivative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,174
|
|
|
|
65,839
|
|
Franco-Nevada warrant
|
|
|
3,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put and call options
|
|
|
121
|
|
|
|
|
|
|
|
964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrate sales contracts
|
|
|
624
|
|
|
|
|
|
|
|
580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,574
|
|
|
$
|
|
|
|
$
|
6,797
|
|
|
$
|
|
|
|
$
|
12,174
|
|
|
$
|
65,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The following represent unrealized
mark-to-market
gains (losses) on derivative instruments as of December 31,
2010, 2009, and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Gold lease facility
|
|
$
|
2,885
|
|
|
$
|
(6,292
|
)
|
|
$
|
1,194
|
|
Forward foreign exchange contracts
|
|
|
(1,330
|
)
|
|
|
1,335
|
|
|
|
3,467
|
|
Forward gold contract
|
|
|
425
|
|
|
|
|
|
|
|
|
|
Silver ounces receivable
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
Palmarejo gold royalty
|
|
|
(83,989
|
)
|
|
|
(78,014
|
)
|
|
|
|
|
Franco-Nevada warrant
|
|
|
3,451
|
|
|
|
3,340
|
|
|
|
(402
|
)
|
Put and call options
|
|
|
(11,795
|
)
|
|
|
(2,953
|
)
|
|
|
(2,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(88,759
|
)
|
|
$
|
(82,584
|
)
|
|
$
|
1,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the years ended December 31, 2010 and 2009 the Company
recorded realized gains (losses) of ($28.3) million and
$0.4 million, net and a gain (loss) of $1.6 million
and $1.5 million recorded in production costs applicable to
sales related to forward foreign exchange contracts.
Credit
Risk
The credit risk exposure related to any potential derivative
instruments is limited to the unrealized gains, if any, on
outstanding contracts based on current market prices. To reduce
counter-party credit exposure, the Company deals only with a
group of large credit-worthy financial institutions and limits
credit exposure to each. The Company does not anticipate
non-performance by any of its counterparties. In addition, to
allow for situations where positions may need to be revised, the
Company deals only in markets that it considers highly liquid.
|
|
NOTE R
|
COMMITMENTS
AND CONTINGENCIES
|
Labor
Union Contract
The Company maintains two labor agreements in South America with
Associacion Obrera Minera Argentina at its Martha mine in
Argentina and Sindicato de la Empresa Minera Manquiri at the
San Bartolomé mine in Bolivia. The Martha mine labor
agreement is effective from June 12, 2006 to June 30,
2011. The San Bartolomé mine labor agreement, which
became effective October 11, 2007, does not have a fixed
term. As of December 31, 2010, approximately 17% of the
Companys worldwide labor force was covered by collective
bargaining agreements.
Termination
Benefits
The Company established a termination benefit program for its
employees at the Rochester mine in 2005. The program provides a
financial benefit in the form of severance pay to terminated
employees if their employment is terminated due to curtailment
of operations. The individual benefit is based on the
employees service time and rate of pay at the time of
termination. The Rochester mine is currently preparing to resume
mining and crushing operations and will employ upwards of
200 employees when at its full production level. This
termination benefit program has been extended to include newly
hired employees. As of December 31, 2010, the total benefit
expected to be incurred under this plan is approximately
$5.7 million. The liability is recognized ratably over the
minimum future service period.
F-42
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
The amount accrued as of December 31, 2010, 2009 and 2008
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Beginning Balance
|
|
$
|
589
|
|
|
$
|
445
|
|
|
$
|
820
|
|
Accruals
|
|
|
516
|
|
|
|
144
|
|
|
|
12
|
|
Payments
|
|
|
|
|
|
|
|
|
|
|
(387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
1,105
|
|
|
$
|
589
|
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company does not have a written severance plan for any of
its foreign operations including Chile, Argentina, Bolivia and
Mexico. However, laws in these foreign jurisdictions require
payment of certain minimum statutory termination benefits.
Accordingly, in situations where minimum statutory termination
benefits must be paid to the affected employees, the Company
records employee severance costs in accordance with
U.S. GAAP. The Company has accrued obligations for
postemployment benefits in these locations of approximately
$4.9 million and $3.9 million as of December 31,
2010 and 2009, respectively.
Kensington
Production Royalty
On July 7, 1995, Coeur, through its wholly-owned
subsidiary, Coeur Alaska, Inc. (Coeur Alaska),
acquired the 50% ownership interest of Echo Bay Exploration Inc.
(Echo Bay) in the Kensington property from Echo Bay
and Echo Bay Alaska, Inc., giving Coeur 100% ownership of the
Kensington property. Coeur Alaska is obligated to pay Echo Bay a
scaled net smelter return royalty on 1.0 million ounces of
future gold production after Coeur Alaska recoups the
$32.5 million purchase price and its construction and
development expenditures incurred after July 7, 1995 in
connection with placing the property into commercial production.
The royalty ranges from 1% at $400 gold prices to a maximum of
21/2%
at gold prices above $475, with the royalty to be capped at
1.0 million ounces of production.
Rochester
Production Royalty
The Company acquired the Rochester property from ASARCO in 1983.
The Company is obligated to pay a net smelter royalty interest
only when the market price of silver equals or exceeds $22.87
per ounce up to a maximum rate of 5% to ASARCO, the prior owner.
Royalty expense was $0.2 million for the year ended
December 31, 2010.
|
|
NOTE S
|
SIGNIFICANT
CUSTOMERS
|
The Company markets its refined metal and doré to credit
worthy bullion trading houses, market makers and members of the
London Bullion Market Association, industrial companies and
sound financial institutions. The refined metals are sold to end
users for use in electronic circuitry, jewelry, silverware, and
the pharmaceutical and technology industries. The Company
currently has seven trading counterparties (International
Commodities, JP Morgan, Mitsui, Mitsubishi, Standard Bank,
Valcambi and Auramet) and the sales of metals to these companies
amounted to approximately 83%, 83% and 66% of total metal sales
in 2010, 2009 and 2008, respectively. Generally, the loss of a
single bullion trading counterparty would not adversely affect
the Company due to the liquidity of the markets and the
availability of alternative trading counterparties.
The Company refines and markets its precious metals doré
and concentrates using a geographically diverse group of third
party smelters and refiners, including clients located in
Mexico, Switzerland, Australia, China, and the United States
(Penoles, Valcambi, Nyrstar, China National Gold, and Johnson
Matthey). Sales of silver concentrates to third-party smelters
amounted to approximately 17%, 17% and 34% of total metal sales
for the years ended December 31, 2010, 2009, and 2008,
respectively. The loss of any one smelting and refining client
may have
F-43
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
a material adverse effect if alternate smelters and refiners are
not available. The Company believes there is sufficient global
capacity available to address the loss of any one smelter.
|
|
NOTE T
|
SEGMENT
REPORTING
|
Operating segments are defined as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and
in assessing performance. The Companys chief operating
decision-making group is comprised of the Chief Executive
Officer, Chief Financial Officer, the Senior Vice President of
Operations and the President of South American Operations.
The operating segments are managed separately because each
segment represents a distinct use of company resources and a
separate contribution to the Companys cash flows. The
Companys reportable operating segments include the
Palmarejo, San Bartolomé, Martha, Rochester,
Kensington, and Endeavor mining properties. As of July 30,
2009, the Company completed the sale of its interest in the
Broken Hill mine (See Note G). As of August 9, 2010,
the Company completed the sale of its Cerro Bayo mine (See
Note G). All operating segments are engaged in the
discovery
and/or
mining of gold and silver and generate the majority of their
revenues from the sale of these precious metal concentrates
and/or
refined precious metals. The Martha mine sells precious metal
concentrates, typically under long-term contracts, to smelters
located in Mexico. The Kensington mine sells precious metals and
concentrates, typically under long-term contracts to smelters in
China. Refined gold and silver produced by the Rochester,
Palmarejo, and San Bartolomé, mines are principally
sold on a spot basis to precious metals trading banks, such as
Standard Bank, Mitsubishi, Auramet and Mitsui. Concentrates
produced at the Endeavor mine are sold to Nyrstar (formerly
Zinifex), an Australia smelter. The Companys exploration
programs are reported in its other segment. The other segment
also includes the corporate headquarters, elimination of
intersegment transactions and other items necessary to reconcile
to consolidated amounts. The accounting policies of the
operating segments are the same as those described in the
summary of significant accounting policies above. The Company
evaluates performance and allocates resources based on profit or
loss before interest, income taxes, depreciation and
amortization, unusual and infrequent items, and extraordinary
items.
Revenues from silver sales were $356.9 million,
$238.4 million and $107.9 million in 2010, 2009, and
2008, respectively. Revenues from gold sales were
$158.5 million, $61.9 million and $21.4 million
in 2010, 2009, and 2008, respectively.
F-44
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
Financial information relating to the Companys segments is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Palmarejo
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Other(3)
|
|
|
Total
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
54,323
|
|
|
$
|
53,875
|
|
|
$
|
10,618
|
|
|
$
|
142,989
|
|
|
$
|
23,628
|
|
|
$
|
230,024
|
|
|
$
|
|
|
|
$
|
515,457
|
|
|
|
|
|
Productions costs applicable to sales
|
|
|
24,760
|
|
|
|
27,040
|
|
|
|
4,112
|
|
|
|
60,023
|
|
|
|
14,043
|
|
|
|
127,658
|
|
|
|
|
|
|
|
257,636
|
|
|
|
|
|
Depreciation and depletion
|
|
|
1,890
|
|
|
|
8,525
|
|
|
|
1,989
|
|
|
|
19,650
|
|
|
|
17,487
|
|
|
|
91,505
|
|
|
|
573
|
|
|
|
141,619
|
|
|
|
|
|
Exploration expense
|
|
|
190
|
|
|
|
5,791
|
|
|
|
|
|
|
|
9
|
|
|
|
659
|
|
|
|
4,658
|
|
|
|
2,942
|
|
|
|
14,249
|
|
|
|
|
|
Other operating expenses
|
|
|
1,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
|
352
|
|
|
|
24,987
|
|
|
|
27,053
|
|
|
|
|
|
Interest and other income
|
|
|
681
|
|
|
|
(3,974
|
)
|
|
|
|
|
|
|
(373
|
)
|
|
|
(26
|
)
|
|
|
914
|
|
|
|
3,549
|
|
|
|
771
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
(325
|
)
|
|
|
(1,591
|
)
|
|
|
(21,567
|
)
|
|
|
(7,369
|
)
|
|
|
(30,942
|
)
|
|
|
|
|
Loss on debt extinguishment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,300
|
)
|
|
|
(20,300
|
)
|
|
|
|
|
Fair value adjustments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,783
|
)
|
|
|
(98,707
|
)
|
|
|
(4,604
|
)
|
|
|
(117,094
|
)
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
|
|
|
(8,523
|
)
|
|
|
|
|
|
|
(21,655
|
)
|
|
|
(8
|
)
|
|
|
16,901
|
|
|
|
22,766
|
|
|
|
9,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
26,620
|
|
|
|
(68
|
)
|
|
|
4,517
|
|
|
|
40,954
|
|
|
|
(24,139
|
)
|
|
|
(96,608
|
)
|
|
|
(34,460
|
)
|
|
|
(83,184
|
)
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,029
|
)
|
|
|
(6,029
|
)
|
|
|
|
|
Loss on sale of net assets of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,095
|
)
|
|
|
(2,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
26,620
|
|
|
$
|
(68
|
)
|
|
$
|
4,517
|
|
|
$
|
40,954
|
|
|
$
|
(24,139
|
)
|
|
$
|
(96,608
|
)
|
|
$
|
(42,584
|
)
|
|
$
|
(91,308
|
)
|
|
|
|
|
Segment assets(1)
|
|
$
|
29,734
|
|
|
$
|
21,290
|
|
|
$
|
39,530
|
|
|
$
|
260,653
|
|
|
$
|
512,401
|
|
|
$
|
2,119,367
|
|
|
$
|
17,414
|
|
|
$
|
3,000,389
|
|
|
|
|
|
Capital expenditures(2)
|
|
$
|
2,349
|
|
|
$
|
100
|
|
|
$
|
|
|
|
$
|
6,159
|
|
|
$
|
92,730
|
|
|
$
|
54,226
|
|
|
$
|
430
|
|
|
$
|
155,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Palmarejo
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Other(3)
|
|
|
Total
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of metals
|
|
$
|
45,472
|
|
|
$
|
44,820
|
|
|
$
|
5,808
|
|
|
$
|
113,701
|
|
|
$
|
|
|
|
$
|
90,560
|
|
|
$
|
|
|
|
$
|
300,361
|
|
|
|
|
|
Productions costs applicable to sales
|
|
|
24,206
|
|
|
|
17,896
|
|
|
|
2,069
|
|
|
|
80,878
|
|
|
|
|
|
|
|
66,262
|
|
|
|
|
|
|
|
191,311
|
|
|
|
|
|
Depreciation and depletion
|
|
|
1,852
|
|
|
|
7,410
|
|
|
|
1,269
|
|
|
|
18,510
|
|
|
|
|
|
|
|
52,043
|
|
|
|
292
|
|
|
|
81,376
|
|
|
|
|
|
Exploration expense
|
|
|
|
|
|
|
3,119
|
|
|
|
|
|
|
|
34
|
|
|
|
297
|
|
|
|
5,615
|
|
|
|
3,991
|
|
|
|
13,056
|
|
|
|
|
|
Other operating expenses
|
|
|
912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
968
|
|
|
|
21,619
|
|
|
|
23,538
|
|
|
|
|
|
Interest and other income
|
|
|
(168
|
)
|
|
|
(1,953
|
)
|
|
|
|
|
|
|
1,075
|
|
|
|
3
|
|
|
|
1,075
|
|
|
|
1,616
|
|
|
|
1,648
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(401
|
)
|
|
|
|
|
|
|
(125
|
)
|
|
|
(16
|
)
|
|
|
(14,213
|
)
|
|
|
(3,347
|
)
|
|
|
(18,102
|
)
|
|
|
|
|
Gain on debt extinguishment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,528
|
|
|
|
31,528
|
|
|
|
|
|
Fair value adjustments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(965
|
)
|
|
|
(78,148
|
)
|
|
|
(3,114
|
)
|
|
|
(82,227
|
)
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
|
|
|
(6,284
|
)
|
|
|
|
|
|
|
(8,894
|
)
|
|
|
5
|
|
|
|
45,063
|
|
|
|
3,181
|
|
|
|
33,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
18,334
|
|
|
|
7,757
|
|
|
|
2,470
|
|
|
|
6,335
|
|
|
|
(1,309
|
)
|
|
|
(80,551
|
)
|
|
|
3,962
|
|
|
|
(43,002
|
)
|
|
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,601
|
)
|
|
|
(9,601
|
)
|
|
|
|
|
Gain on sale of net assets of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,537
|
|
|
|
25,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
18,334
|
|
|
$
|
7,757
|
|
|
$
|
2,470
|
|
|
$
|
6,335
|
|
|
$
|
(1,309
|
)
|
|
$
|
(80,551
|
)
|
|
$
|
19,898
|
|
|
$
|
(27,066
|
)
|
|
|
|
|
Segment assets(1)
|
|
$
|
31,232
|
|
|
$
|
33,024
|
|
|
$
|
39,852
|
|
|
$
|
276,926
|
|
|
$
|
397,457
|
|
|
$
|
2,129,024
|
|
|
$
|
46,948
|
|
|
$
|
2,954,463
|
|
|
|
|
|
Capital expenditures(2)
|
|
$
|
310
|
|
|
$
|
1,575
|
|
|
$
|
|
|
|
$
|
11,091
|
|
|
$
|
41,289
|
|
|
$
|
162,697
|
|
|
$
|
1,273
|
|
|
$
|
218,235
|
|
|
|
|
|
F-45
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rochester
|
|
|
Martha
|
|
|
Endeavor
|
|
|
Bartolomé
|
|
|
Kensington
|
|
|
Palmarejo
|
|
|
|
|
|
|
|
|
|
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Mine
|
|
|
Other(3)
|
|
|
Total
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
67,831
|
|
|
$
|
31,445
|
|
|
$
|
12,434
|
|
|
$
|
17,575
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
129,285
|
|
|
|
|
|
Productions costs applicable to sales
|
|
|
42,246
|
|
|
|
17,599
|
|
|
|
1,060
|
|
|
|
17,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,652
|
|
|
|
|
|
Depreciation and depletion
|
|
|
2,353
|
|
|
|
4,853
|
|
|
|
1,971
|
|
|
|
5,835
|
|
|
|
|
|
|
|
930
|
|
|
|
557
|
|
|
|
16,499
|
|
|
|
|
|
Exploration expense
|
|
|
599
|
|
|
|
5,426
|
|
|
|
|
|
|
|
66
|
|
|
|
166
|
|
|
|
7,686
|
|
|
|
3,895
|
|
|
|
17,838
|
|
|
|
|
|
Other operating expenses
|
|
|
150
|
|
|
|
17
|
|
|
|
|
|
|
|
27
|
|
|
|
1,796
|
|
|
|
15,759
|
|
|
|
25,150
|
|
|
|
42,899
|
|
|
|
|
|
Interest and other income
|
|
|
3,176
|
|
|
|
(977
|
)
|
|
|
|
|
|
|
2,541
|
|
|
|
54
|
|
|
|
(44
|
)
|
|
|
(727
|
)
|
|
|
4,023
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
(43
|
)
|
|
|
(10
|
)
|
|
|
298
|
|
|
|
(4,914
|
)
|
|
|
(4,726
|
)
|
|
|
|
|
Fair value adjustments, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,756
|
|
|
|
1,756
|
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
(2,479
|
)
|
|
|
|
|
|
|
23,844
|
|
|
|
(353
|
)
|
|
|
17,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
25,659
|
|
|
|
(1,109
|
)
|
|
|
9,403
|
|
|
|
(6,081
|
)
|
|
|
(1,918
|
)
|
|
|
(277
|
)
|
|
|
(33,840
|
)
|
|
|
(8,163
|
)
|
|
|
|
|
Income from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,536
|
|
|
|
7,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
25,659
|
|
|
$
|
(1,109
|
)
|
|
$
|
9,403
|
|
|
$
|
(6,081
|
)
|
|
$
|
(1,918
|
)
|
|
$
|
(277
|
)
|
|
$
|
(26,304
|
)
|
|
$
|
(627
|
)
|
|
|
|
|
Segment assets(1)
|
|
$
|
39,049
|
|
|
$
|
36,089
|
|
|
$
|
41,003
|
|
|
$
|
293,216
|
|
|
$
|
344,919
|
|
|
$
|
2,005,595
|
|
|
$
|
54,194
|
|
|
$
|
2,814,065
|
|
|
|
|
|
Capital expenditures(2)
|
|
$
|
635
|
|
|
$
|
4,503
|
|
|
$
|
26,513
|
|
|
$
|
120,872
|
|
|
$
|
41,614
|
|
|
$
|
162,202
|
|
|
$
|
8,680
|
|
|
$
|
365,019
|
|
|
|
|
|
|
|
|
(1) |
|
Segment assets consist of receivables, prepaids, inventories,
property, plant and equipment, and mining properties |
|
(2) |
|
Balances represent cash flow amounts |
|
(3) |
|
Includes discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for reportable segments
|
|
$
|
3,000,389
|
|
|
$
|
2,954,463
|
|
|
$
|
2,814,065
|
|
Cash and cash equivalents
|
|
|
66,118
|
|
|
|
22,782
|
|
|
|
20,760
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
7,881
|
|
Other assets
|
|
|
91,020
|
|
|
|
76,790
|
|
|
|
85,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
3,157,527
|
|
|
$
|
3,054,035
|
|
|
$
|
2,928,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Long Lived Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
487,961
|
|
|
$
|
401,177
|
|
|
$
|
349,423
|
|
Australia
|
|
|
37,147
|
|
|
|
39,136
|
|
|
|
64,802
|
|
Chile
|
|
|
14
|
|
|
|
25,628
|
|
|
|
29,083
|
|
Argentina
|
|
|
1,882
|
|
|
|
12,392
|
|
|
|
18,587
|
|
Bolivia
|
|
|
234,306
|
|
|
|
248,667
|
|
|
|
263,491
|
|
Mexico
|
|
|
2,028,864
|
|
|
|
2,051,950
|
|
|
|
1,952,509
|
|
Other countries
|
|
|
143
|
|
|
|
143
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,790,317
|
|
|
$
|
2,779,093
|
|
|
$
|
2,678,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-46
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
77,951
|
|
|
$
|
45,473
|
|
|
$
|
67,831
|
|
Australia
|
|
|
10,618
|
|
|
|
5,807
|
|
|
|
12,434
|
|
Argentina
|
|
|
53,875
|
|
|
|
44,820
|
|
|
|
31,445
|
|
Bolivia
|
|
|
142,988
|
|
|
|
113,701
|
|
|
|
17,575
|
|
Mexico
|
|
|
230,025
|
|
|
|
90,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
515,457
|
|
|
$
|
300,361
|
|
|
$
|
129,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE U
|
LITIGATION
AND OTHER EVENTS
|
States
of Maine, Idaho and Colorado Superfund Sites Related to Callahan
Mining Corporation
During 1991, the Company acquired all of the outstanding common
stock of Callahan Mining Corporation.
During 2001, the Forest Service made a formal request for
information regarding the Deadwood mine site located in central
Idaho. Callahan Mining Corporation had operated at this site
during the 1940s. The Forest Service believes that some cleanup
action is required at the location. However, the Company did not
acquire Callahan until 1991, more than 40 years after
Callahan disposed of its interest in the Deadwood property. The
Company did not make any decisions with respect to generation,
transport or disposal of hazardous waste at the site. Therefore,
the Company believes that it is not liable for any cleanup, and
if Callahan might be liable, it has no substantial assets with
which to satisfy any such liability. To date, no claim has been
made by the United States for any cleanup costs against either
the Company or Callahan.
During 2002, the U.S. Environmental Protection Agency, or
EPA, made a formal request for information regarding a Callahan
mine site in the State of Maine. Callahan operated there in the
late 1960s, shut the operations down in the early 1970s and
disposed of the property. The EPA contends that some cleanup
action is warranted at the site, and listed it on the National
Priorities List in late 2002. In 2009, the EPA and the State of
Maine made additional formal requests for information relating
to the Maine Callahan mine site. The Company believes that
because it made no decisions with respect to generation,
transport or disposal of hazardous waste at this location, it is
not liable for any cleanup costs. If Callahan might have
liability, it has no substantial assets with which to satisfy
such liability. To date, no claim has been made for any cleanup
costs against either the Company or Callahan.
In January 2003, the Forest Service made a formal request for
information regarding a Callahan mine site in the State of
Colorado known as the Akron mine site. Callahan operated there
in approximately the late 1930s through the 1940s, and, to the
Companys knowledge, disposed of the property. The Company
is not aware of what, if any, cleanup action the Forest Service
is contemplating. However, the Company did not make decisions
with respect to generation, transport or disposal of hazardous
waste at this location, and therefore believes it is not liable
for any cleanup costs. If Callahan might have liability, it has
no substantial assets with which to satisfy such liability. To
date, no claim has been made for any cleanup costs against
either the Company or Callahan.
By a letter dated February 25, 2010, the State of
Washington Department of Ecology notified Callahan Mining
Corporation that it found credible evidence supporting a
conclusion that Callahan is a potentially liable person for a
release of a hazardous substance at the Van Stone mine located
approximately 21 miles northeast of Colville, Washington.
The rights and liabilities of a potentially liable
person are described under Washington law. The Department
of Ecology alleges that Callahan sold the property in 1990. This
is prior to Coeurs acquisition of Callahan, and therefore
Coeur has no knowledge of the facts and circumstances
surrounding Washingtons allegations. The Company did not
make decisions with respect to generation, transport or disposal
of hazardous
F-47
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
waste at this location. If Callahan might have liability, it has
no substantial assets with which to satisfy it. To date no claim
has been made for any cleanup costs against Callahan.
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 backed by Supreme
Decree with COMIBOL as well as contracts with local mining
cooperatives that hold their rights through COMIBOL. The Company
temporarily adjusted its San Bartolomé 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.
In March 2010, the San Bartolomé mine began mining
operations in high grade material located in the Huacajchi
deposit above the 4,400 meter level under an agreement with the
Cooperative Reserva Fiscal. Although restriction on mining above
the 4,400 meter level continues, the Huacajchi deposit was
confirmed to be excluded from the October 2009 resolution. The
mine plan adjustment may reduce production until the Company is
able to resume mining above 4,400 meters. It is uncertain at
this time how long the temporary suspension will remain in
place. If the restriction is not lifted, the Company may need to
write down the carrying value of the asset.
|
|
NOTE V
|
SUMMARY
OF QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
The following table sets forth a summary of the quarterly
results of operations for the years ended December 31, 2010
and 2009 (In thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3(2)
|
|
|
Q4
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
88,289
|
|
|
$
|
101,018
|
|
|
$
|
118,564
|
|
|
$
|
207,586
|
|
Loss from continuing operations
|
|
|
(10,046
|
)
|
|
|
(44,801
|
)
|
|
|
(23,259
|
)
|
|
|
(5,078
|
)
|
Income (loss) from discontinued operations
|
|
|
(2,812
|
)
|
|
|
(5,943
|
)
|
|
|
631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(12,858
|
)
|
|
$
|
(50,744
|
)
|
|
$
|
(22,628
|
)
|
|
$
|
(5,078
|
)
|
Depreciation, depletion, and amortization
|
|
|
28,773
|
|
|
|
29,983
|
|
|
|
37,801
|
|
|
|
45,062
|
|
Production costs
|
|
|
51,019
|
|
|
|
58,590
|
|
|
|
60,402
|
|
|
|
87,625
|
|
Explorations
|
|
|
2,520
|
|
|
|
3,161
|
|
|
|
3,804
|
|
|
|
4,764
|
|
Other operating expenses
|
|
|
8,180
|
|
|
|
7,424
|
|
|
|
6,045
|
|
|
|
3,417
|
|
Cash provided by operating activities
|
|
|
(9,231
|
)
|
|
|
32,456
|
|
|
|
12,939
|
|
|
|
129,399
|
|
Capital expenditures
|
|
|
47,189
|
|
|
|
45,467
|
|
|
|
36,783
|
|
|
|
26,555
|
|
Basic net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(0.12
|
)
|
|
|
(0.51
|
)
|
|
|
(0.26
|
)
|
|
|
(0.06
|
)
|
Income (loss) from discontinued operations(2)
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.16
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(0.12
|
)
|
|
|
(0.51
|
)
|
|
|
(0.26
|
)
|
|
|
(0.06
|
)
|
Income (loss) from discontinued operations(2)
|
|
|
(0.04
|
)
|
|
|
(0.07
|
)
|
|
|
0.01
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.16
|
)
|
|
$
|
(0.58
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
COEUR
DALENE MINES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(Dollar amounts in thousands, unless otherwise specified)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3(1)
|
|
|
Q4
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of metals
|
|
$
|
43,369
|
|
|
$
|
67,857
|
|
|
$
|
90,305
|
|
|
$
|
98,830
|
|
Loss from continuing operations
|
|
|
7,479
|
|
|
|
11,323
|
|
|
|
(36,114
|
)
|
|
|
(25,690
|
)
|
Income (loss) from discontinued operations
|
|
|
(31
|
)
|
|
|
1,582
|
|
|
|
19,408
|
|
|
|
(5,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
7,448
|
|
|
$
|
12,905
|
|
|
$
|
(16,706
|
)
|
|
$
|
(30,713
|
)
|
Depreciation, depletion, and amortization
|
|
|
7,465
|
|
|
|
19,226
|
|
|
|
27,591
|
|
|
|
27,094
|
|
Production costs
|
|
|
24,719
|
|
|
|
48,850
|
|
|
|
59,693
|
|
|
|
58,049
|
|
Explorations
|
|
|
3,088
|
|
|
|
3,182
|
|
|
|
2,362
|
|
|
|
4,424
|
|
Other operating expenses
|
|
|
7,726
|
|
|
|
5,428
|
|
|
|
4,779
|
|
|
|
5,605
|
|
Cash provided by operating activities
|
|
|
3,046
|
|
|
|
15,039
|
|
|
|
28,938
|
|
|
|
13,124
|
|
Capital expenditures
|
|
|
78,130
|
|
|
|
42,349
|
|
|
|
54,370
|
|
|
|
43,386
|
|
Basic net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
0.11
|
|
|
|
0.17
|
|
|
|
(0.47
|
)
|
|
|
(0.33
|
)
|
Income (loss) from discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations(2)
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.25
|
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
0.12
|
|
|
$
|
0.18
|
|
|
$
|
(0.22
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
0.11
|
|
|
|
0.17
|
|
|
|
(0.47
|
)
|
|
|
(0.33
|
)
|
Income (loss) from discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations(2)
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.25
|
|
|
|
(0.06
|
)
|
Net income (loss)
|
|
$
|
0.12
|
|
|
$
|
0.18
|
|
|
$
|
(0.22
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Effective July 1, 2009, the Company sold to Perilya Broken
Hill Ltd. its 100% interest in silver contained at the Broken
Hill mine for $55.0 million in cash. |
|
(2) |
|
In August 2010, the Company sold its 100% interest in
Compañía Minera Cerro Bayo to Mandalay Resources
Corporation. |
|
|
NOTE W
|
SUBSEQUENT
EVENTS
|
1.25% Convertible
Notes due 2024
On December 10, 2010, the Company filed a Tender Offer
Statement relating to the Companys 1.25% Convertible
Senior Notes due 2024. The tender offer, made pursuant to a
provision in the governing indenture giving each noteholder a
put right on certain calendar dates, specified that the Company
would repurchase notes at the option of each noteholder on
January 18, 2011 for 100% of the principal amount of the
notes, plus any accrued and unpaid interest to, but not
including, January 15, 2011, subject to the terms and
conditions of the indenture, the notes and the tender offer.
Based on final information provided to the Company by The Bank
of New York Mellon, the trustee and paying agent, $945,000 in
aggregate principal amount of the notes was validly surrendered
for purchase and not withdrawn prior to 5:00 p.m., New York
City time, on January 14, 2011. Accordingly, the Company
purchased $945,000 in aggregate principal amount of the notes
pursuant to the tender offer. The Company elected to redeem the
remaining $914,000 in aggregate principal amount of notes
outstanding on January 21, 2011 at a redemption price equal
to 100% of the principal amount of the notes, plus any accrued
and unpaid interest to, but not including, January 21, 2011.
As a result of the tender offer and subsequent redemption, the
entire $1.9 million in outstanding principal was
repurchased or redeemed for an aggregate of $1.9 million in
cash plus accrued interest subsequent to December 31, 2010.
Kensington
Term Facility
During January and February of 2011, the Company drew down an
additional $27.5 million on the Kensington Term Facility.
F-49