UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________
FORM 10-Q
___________________________________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the quarterly period ended June 30, 2019
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the transition period from to
Commission file number 001-08641
____________________________________________
(Exact name of registrant as specified in its charter)
____________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) | |||
(312 ) 489-5800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☑ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | |||
Emerging growth company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The Company has 300,000,000 shares of common stock, par value of $0.01, authorized of which 222,163,463 shares were issued and outstanding as of August 5, 2019.
COEUR MINING, INC.
INDEX
Condensed Consolidated Balance Sheets | Page | |
Part I. | ||
Item 1. Financial Statements | ||
Condensed Consolidated Balance Sheets | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | ||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||
Condensed Consolidated Statement of Changes in Stockholders’ Equity | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | ||
Consolidated Financial Results | ||
Results of Operations | ||
Liquidity and Capital Resources | ||
Non-GAAP Financial Performance Measures | ||
Item 4. Controls and Procedures | ||
Part II. | ||
Item 1. Legal Proceedings | ||
Item 1A. Risk Factors | ||
Item 4. Mine Safety Disclosures | ||
Item 5. Other Information | ||
Item 6. Exhibits | ||
Signatures | ||
3
PART I
Item 1. Financial Statements and Supplementary Data
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2019 (unaudited) | December 31, 2018 | |||||||
ASSETS | Notes | In thousands, except share data | ||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Receivables | 4 | |||||||
Inventory | 5 | |||||||
Ore on leach pads | 5 | |||||||
Prepaid expenses and other | ||||||||
NON-CURRENT ASSETS | ||||||||
Property, plant and equipment, net | ||||||||
Mining properties, net | ||||||||
Ore on leach pads | 5 | |||||||
Restricted assets | ||||||||
Equity and debt securities | 6 | |||||||
Receivables | 4 | |||||||
Other | ||||||||
TOTAL ASSETS | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities and other | 19 | |||||||
Debt | 8 | |||||||
Reclamation | 9 | |||||||
NON-CURRENT LIABILITIES | ||||||||
Debt | 8 | |||||||
Reclamation | 9 | |||||||
Deferred tax liabilities | ||||||||
Other long-term liabilities | ||||||||
COMMITMENTS AND CONTINGENCIES | 17 | |||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, par value $0.01 per share; authorized 300,000,000 shares, 221,858,660 issued and outstanding at June 30, 2019 and 203,310,443 at December 31, 2018 | ||||||||
Additional paid-in capital | ||||||||
Accumulated other comprehensive income (loss) | ( | ) | ||||||
Accumulated deficit | ( | ) | ( | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Notes | In thousands, except share data | |||||||||||||||
Revenue | 3 | $ | $ | $ | $ | |||||||||||
COSTS AND EXPENSES | ||||||||||||||||
Costs applicable to sales(1) | 3 | |||||||||||||||
Amortization | ||||||||||||||||
General and administrative | ||||||||||||||||
Exploration | ||||||||||||||||
Pre-development, reclamation, and other | ||||||||||||||||
Total costs and expenses | ||||||||||||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||||||
Fair value adjustments, net | 12 | ( | ) | ( | ) | |||||||||||
Interest expense, net of capitalized interest | 8 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other, net | 14 | |||||||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income (loss) before income and mining taxes | ( | ) | ( | ) | ||||||||||||
Income and mining tax (expense) benefit | 10 | ( | ) | ( | ) | |||||||||||
Income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Income (loss) from discontinued operations | 18 | |||||||||||||||
NET INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | ||||||||||||||||
Unrealized gain (loss) on debt and equity securities | ( | ) | ( | ) | ||||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
NET INCOME (LOSS) PER SHARE | 15 | |||||||||||||||
Basic income (loss) per share: | ||||||||||||||||
Net income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Net income (loss) from discontinued operations | ||||||||||||||||
Basic(2) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Diluted income (loss) per share: | ||||||||||||||||
Net income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Net income (loss) from discontinued operations | ||||||||||||||||
Diluted(2) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
(1) Excludes amortization.
(2) Due to rounding, the sum of net income per share from continuing operations and discontinued operations may not equal net income per share.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Notes | In thousands | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
(Income) loss from discontinued operations | ( | ) | ( | ) | ||||||||||||
Adjustments: | ||||||||||||||||
Amortization | ||||||||||||||||
Accretion | ||||||||||||||||
Deferred taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Fair value adjustments, net | 12 | ( | ) | ( | ) | |||||||||||
Stock-based compensation | 11 | |||||||||||||||
Inventory write-downs | 5 | |||||||||||||||
Other | ||||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Prepaid expenses and other current assets | ( | ) | ( | ) | ||||||||||||
Inventory and ore on leach pads | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF CONTINUING OPERATIONS | ( | ) | ||||||||||||||
CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS | ( | ) | ||||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Proceeds from the sale of assets | ||||||||||||||||
Purchase of investments | ( | ) | ( | ) | ||||||||||||
Sale of investments | ||||||||||||||||
Proceeds from notes receivable | ||||||||||||||||
Other | ( | ) | ( | ) | ||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
CASH USED IN INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS | ( | ) | ||||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Issuance of common stock | 15 | |||||||||||||||
Issuance of notes and bank borrowings, net of issuance costs | 8 | |||||||||||||||
Payments on debt, finance leases, and associated costs | 8 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Other | ( | ) | ( | ) | ( | ) | ||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF CONTINUING OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
CASH USED IN FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS | ( | ) | ||||||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ||||||||||||||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Less net cash used in discontinued operations(1) | ( | ) | ||||||||||||||
( | ) | ( | ) | ( | ) | ( | ) | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | ||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | $ | ||||||||||||
(1) Less net cash used in discontinued operations includes the following cash transactions: net subsidiary payments to parent company of $1,748 , during the six months ended June 30, 2018.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
The following table summarizes the changes in stockholders’ deficit for the six months ended June 30, 2019:
In thousands | Common Stock Shares | Common Stock Par Value | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||
Balances at December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||
Net income (loss) | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ||||||||||||||||||
Common stock issued under stock-based compensation plans, net | ( | ) | — | — | ( | ) | ||||||||||||||||
Balances at March 31, 2019 (Unaudited) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) | — | — | — | (36,764 | ) | — | ( | ) | ||||||||||||||
Common stock issued under "at the market" stock offering | — | — | ||||||||||||||||||||
Common stock issued under stock-based compensation plans, net | — | — | ||||||||||||||||||||
Balances at June 30, 2019 (Unaudited) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
The following table summarizes the changes in stockholders’ deficit for the six months ended June 30, 2018:
In thousands | Common Stock Shares | Common Stock Par Value | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||
Balances at December 31, 2017 | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Net income (loss) | — | — | — | — | ||||||||||||||||||
Reclassification of unrealized gain (loss) on equity securities for ASU 2016-01 | — | — | — | ( | ) | |||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Common stock issued under stock-based compensation plans, net | ( | ) | — | — | ( | ) | ||||||||||||||||
Balances at March 31, 2018 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||
Net income (loss) | — | $ | — | $ | — | $ | $ | — | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Common stock issued under stock-based compensation plans, net | — | — | ||||||||||||||||||||
Balances at June 30, 2018 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The interim condensed consolidated financial statements of Coeur Mining, Inc. and its subsidiaries (collectively, “Coeur” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results which will be reported for the year ending December 31, 2019. The condensed consolidated December 31, 2018 balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 10-K”).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
Please see Note 2 -- Summary of Significant Accounting Policies contained in the 2018 10-K.
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842, Leases. Changes to the Company’s accounting policy as a result of adoption are discussed below.
From time to time, the Company enters into contractual agreements to lease mining equipment and facilities. Based upon the Company’s assessment of the terms of a specific lease agreement, the Company will classify a lease as either finance or operating. Right-of-use (“ROU”) assets and lease liabilities related to finance leases are presented in Property, plant and equipment, net and Debt on the Condensed Consolidated Balance Sheet. ROU assets and lease liabilities related to operating leases that are subject to the ASC 842 measurement requirements such as operating leases with lease terms greater than twelve months are presented in Other asset, non-current, Accrued liabilities and other, and Other long-term liabilities on the Condensed Consolidated Balance Sheet.
Operating and finance lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments, is the rate implicit in the lease unless that rate cannot be readily determined, in that case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. Operating lease ROU assets may also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. The Company has lease arrangements with lease and non-lease components which are accounted for separately. Non-lease components of the lease payments are expenses as incurred and are not included in determining the present value.
Accounting Standards Recently Implemented
In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes became effective for the Company’s fiscal year beginning January 1, 2019 and the Company adopted it using the cumulative-effect adjustment transition method approved by the FASB in July 2018, which does not require the Company to recast the comparative periods presented when transitioning to the new guidance on January 1, 2019. The Company elected to utilize the transition related practical expedients permitted by the new standard. In addition to existing finance leases and other financing obligations, the adoption of the new standard resulted in the recognition of additional ROU assets and lease liabilities related to operating leases of approximately $65.0 million. There was no material impact to the Consolidated Statements of Comprehensive Income (Loss) or the Consolidated Statements of Cash Flows or an impact on the Company’s debt covenant calculations as a result of the adoption of ASU 2016-02. See Note 7 -- Leases for additional qualitative and quantitative disclosures related to leasing arrangements.
Accounting Standards Recently Issued
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The guidance is effective for interim and annual periods for the Company on January 1, 2020, with early adoption permitted. The Company is currently evaluating the
8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
impact of the new standard, but it does not expect this update to have a material impact to the Company's consolidated net income, financial position or cash flows.
NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, and the Rochester, Kensington, Wharf and Silvertip mines. Except for the Silvertip mine, all operating segments are engaged in the discovery, mining, and production of gold and/or silver. The Silvertip mine is engaged in the discovery, mining, and production of silver, zinc and lead. Other includes the Sterling/Crown Block and La Preciosa projects, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended June 30, 2019 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||
Gold sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Silver sales | |||||||||||||||||||||||||||
Zinc sales | |||||||||||||||||||||||||||
Lead sales | |||||||||||||||||||||||||||
Metal sales | |||||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||||
Exploration | |||||||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||
Fair value adjustments, net | ( | ) | ( | ) | |||||||||||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income (loss) from continuing operations | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
Income (loss) from discontinued operations | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Segment assets(2) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Capital expenditures | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Three months ended June 30, 2018 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||
Gold sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Silver sales | |||||||||||||||||||||||||||
Metal sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||||
Exploration | |||||||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||
Fair value adjustments, net | ( | ) | ( | ) | |||||||||||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Income (loss) from discontinued operations | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Segment assets(2) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Six months ended June 30, 2019 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||
Gold sales | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Silver sales | |||||||||||||||||||||||||||
Zinc sales | |||||||||||||||||||||||||||
Lead sales | |||||||||||||||||||||||||||
Metal sales | |||||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||||
Exploration | |||||||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||
Fair value adjustments, net | |||||||||||||||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Income (loss) from continuing operations | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||
Income (loss) from discontinued operations | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Segment assets(2) | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Capital expenditures | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interest s
10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Six months ended June 30, 2018 | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Other | Total | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||
Gold sales | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Silver sales | |||||||||||||||||||||||||||
Metal sales | |||||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||||||||||
Amortization | |||||||||||||||||||||||||||
Exploration | |||||||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||
Fair value adjustments, net | |||||||||||||||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Income (loss) from continuing operations | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Income (loss) from discontinued operations | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Segment assets(2) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Capital expenditures | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Assets | June 30, 2019 | December 31, 2018 | |||||
Total assets for reportable segments | $ | $ | |||||
Cash and cash equivalents | |||||||
Other assets | |||||||
Total consolidated assets | $ | $ | |||||
Geographic Information
Long-Lived Assets | June 30, 2019 | December 31, 2018 | |||||
Mexico | $ | $ | |||||
United States | |||||||
Canada | |||||||
Other | |||||||
Total | $ | $ | |||||
Revenue | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
United States | $ | $ | $ | $ | |||||||||||
Mexico | |||||||||||||||
Canada | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 4 – RECEIVABLES
Receivables consist of the following:
In thousands | June 30, 2019 | December 31, 2018 | |||||
Current receivables: | |||||||
Trade receivables | $ | $ | |||||
Value added tax receivable | |||||||
Income tax receivable | |||||||
Manquiri Notes Receivable | |||||||
Other | |||||||
$ | $ | ||||||
Non-current receivables: | |||||||
Value added tax (“VAT”) receivable(1) | $ | $ | |||||
RMC Receivable(2) | |||||||
Total receivables | $ | $ | |||||
(1) Represents VAT that was paid to the Mexican Government associated with Coeur Mexicana’s prior royalty agreement with a subsidiary of Franco-Nevada Corporation. The Company continues to pursue recovery from the Mexican government (including through ongoing litigation).
NOTE 5 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following:
In thousands | June 30, 2019 | December 31, 2018 | |||||
Inventory: | |||||||
Concentrate | $ | $ | |||||
Precious metals | |||||||
Supplies | |||||||
Ore on leach pads: | |||||||
Current | |||||||
Non-current | |||||||
Total inventory and ore on leach pads | $ | $ | |||||
In the first half of 2019, Silvertip recognized a $27.3 million write-down of metal inventory as a result of lower than expected production levels, grades and recovery rates as well as reduced process plant availability. It is possible that additional write-downs will be required as the Company works to optimize operations at Silvertip.
NOTE 6 – INVESTMENTS
Equity and Debt Securities
The Company makes strategic investments in equity and debt securities of silver and gold exploration and development companies.
At June 30, 2019 | |||||||||||||||
In thousands | Cost | Gross Unrealized Losses | Gross Unrealized Gains | Estimated Fair Value | |||||||||||
Equity Securities | |||||||||||||||
Metalla Royalty & Streaming Ltd. | $ | $ | $ | $ | |||||||||||
Rockhaven Resources, Ltd. | ( | ) | |||||||||||||
Other | ( | ) | |||||||||||||
Equity securities | $ | $ | ( | ) | $ | $ | |||||||||
12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
At December 31, 2018 | |||||||||||||||
In thousands | Cost | Gross Unrealized Losses | Gross Unrealized Gains | Estimated Fair Value | |||||||||||
Equity Securities | |||||||||||||||
Metalla Royalty & Streaming Ltd. | $ | $ | $ | $ | |||||||||||
Rockhaven Resources, Ltd. | ( | ) | |||||||||||||
Other | ( | ) | |||||||||||||
Equity securities | $ | $ | ( | ) | $ | $ | |||||||||
Debt Securities | |||||||||||||||
Metalla Royalty & Streaming Ltd. | $ | $ | ( | ) | $ | $ | |||||||||
Equity and debt securities | $ | $ | ( | ) | $ | $ | |||||||||
The Company performs a quarterly assessment on its debt securities with unrealized losses to determine if the securities are other than temporarily impaired. At June 30, 2019, the Company had no remaining investments in debt securities.
NOTE 7 – LEASES
ROU Assets and Liabilities
The following table summarizes quantitative information pertaining to the Company’s finance and operating leases.
Three Months Ended | Six Months Ended | ||||||
In thousands | June 30, 2019 | June 30, 2019 | |||||
Lease Cost | |||||||
ROU operating lease cost | $ | $ | |||||
Short-term operating lease cost | $ | $ | |||||
Finance Lease Cost: | |||||||
Amortization of ROU assets | $ | $ | |||||
Interest on lease liabilities | |||||||
Total finance lease cost | $ | $ | |||||
Supplemental cash flow information related to leases was as follows:
Three Months Ended | Six Months Ended | ||||||
In thousands | June 30, 2019 | June 30, 2019 | |||||
Other Information | |||||||
Cash paid for amounts included in the measurement of lease liabilities | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Operating cash flows from finance leases | $ | $ | |||||
Financing cash flows from finance leases | $ | $ | |||||
13
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Supplemental balance sheet information related to leases was as follows:
In thousands | June 30, 2019 | ||
Operating Leases | |||
Other assets, non-current | $ | ||
Accrued liabilities and other | $ | ||
Other long-term liabilities | |||
Total operating lease liabilities | $ | ||
Finance Leases | |||
Property and equipment, gross | $ | ||
Accumulated depreciation | ( | ) | |
Property and equipment, net | $ | ||
Debt, current | $ | ||
Debt, non-current | |||
Total finance lease liabilities | $ | ||
Weighted Average Remaining Lease Term | |||
Weighted-average remaining lease term - finance leases | |||
Weighted-average remaining lease term - operating leases | |||
Weighted Average Discount Rate | |||
Weighted-average discount rate - finance leases | % | ||
Weighted-average discount rate - operating leases | % | ||
Minimum future lease payments under finance and operating leases with terms longer than one year are as follows:
At June 30, (In thousands) | ||||||
Operating leases | Finance leases | |||||
2019 | $ | $ | ||||
2020 | ||||||
2021 | ||||||
2022 | ||||||
2023 | ||||||
Thereafter | ||||||
Total | $ | $ | ||||
Less: imputed interest | ( | ) | ( | ) | ||
Net lease obligation | $ | $ | ||||
NOTE 8 – DEBT
June 30, 2019 | December 31, 2018 | ||||||||||||||
In thousands | Current | Non-Current | Current | Non-Current | |||||||||||
2024 Senior Notes, net(1) | $ | $ | $ | $ | |||||||||||
Revolving Credit Facility(2) | |||||||||||||||
Finance lease obligations | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
(1) Net of unamortized debt issuance costs of $3.8 million and $4.1 million at June 30, 2019 and December 31, 2018, respectively.
(2) Unamortized debt issuance costs of $2.7 million and $2.2 million at June 30, 2019 and December 31, 2018, respectively, included in Other Non-Current Assets.
2024 Senior Notes
In May 2017, the Company completed an offering of $250.0 million in aggregate principal amount of 5.875% Senior
14
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Notes due 2024 (“2024 Senior Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, for net proceeds of approximately $245.0 million, followed by an exchange offer for publicly-traded 2024 Senior Notes. For more details, please see Note 18 -- Debt contained in the 2018 10-K.
Revolving Credit Facility
At June 30, 2019, the Company had $197.0 million available under its $250.0 million revolving credit facility (the “RCF”). At June 30, 2019, the interest rate on the outstanding principal of the RCF was 5.9 %. The Company has entered into interest rate swap derivative instruments that swap $75.0 million of variable rate debt to fixed rate debt (see Note 13 -- Derivative Financial Instruments).
On April 30, 2019, the Company and Bank of America, N.A., as administrative agent for the RCF lenders, entered into the Second Amendment to Credit Agreement (the “Amendment”). Among other items, the Amendment (1) modifies the financial covenants to (A) provide greater flexibility under the consolidated net leverage ratio requirement through the September 30, 2019 test date, with the ratio returning to the original level as outlined in the RCF starting with the December 31, 2019 test date, and (B) include an additional financial covenant tied to senior secured leverage and (2) increases the interest rate on borrowings under the RCF by 0.75% during periods of elevated consolidated net leverage. On August 6, 2019, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”). The Third Amendment, among other items, modifies the financial covenants to provide greater flexibility under the consolidated interest coverage ratio requirement as of the June 30, 2019 test date, with the ratio returning to the original level as outlined in the RCF starting with the September 30, 2019 test date.
Finance Lease Obligations
From time to time, the Company acquires mining equipment and facilities under finance lease agreements. In the six months ended June 30, 2019 the Company entered into new lease financing arrangements primarily for mining equipment at Silvertip and Wharf. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments. See Note 7 -- Leases for additional qualitative and quantitative disclosures related to finance leasing arrangements.
Interest Expense
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
2024 Senior Notes | $ | $ | $ | $ | |||||||||||
Revolving Credit Facility | |||||||||||||||
Finance lease obligations | |||||||||||||||
Amortization of debt issuance costs | |||||||||||||||
Accretion of Silvertip contingent consideration | |||||||||||||||
Other debt obligations | |||||||||||||||
Capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total interest expense, net of capitalized interest | $ | $ | $ | $ | |||||||||||
15
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 9 – RECLAMATION
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties. On an ongoing basis, management evaluates its estimates and assumptions, and future expenditures could differ from current estimates.
Changes to the Company’s asset retirement obligations for its operating sites are as follows:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
Asset retirement obligation - Beginning | $ | $ | $ | $ | |||||||||||
Accretion | |||||||||||||||
Settlements | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Asset retirement obligation - Ending | $ | $ | $ | $ | |||||||||||
NOTE 10 - INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and six months ended June 30, 2019 and 2018 by significant jurisdiction:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||||||||||||
United States | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Canada | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Mexico | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
Other jurisdictions | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
$ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||
During the second quarter of 2019, the Company reported estimated income and mining tax benefit of approximately $5.6 million, resulting in an effective tax rate of 13.1%. This compares to income tax expense of $3.7 million for an effective tax rate of 55.9% during the second quarter of 2018. The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) foreign exchange rates; (iv) mining taxes and (v) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company ultimately will be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the section titled “Risk Factors” in the 2018 10-K.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The statute of limitations remains open from 2015 forward for the U.S. federal jurisdiction and from 2011 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next twelve months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $2.5 million and $3.5 million in the next twelve months.
At June 30, 2019 and December 31, 2018, the Company had $2.7 million and $3.8 million of total gross unrecognized tax benefits from continuing operations, respectively, that, if recognized, would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits
16
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
as part of its income tax expense. At June 30, 2019 and December 31, 2018, the amount of accrued income-tax-related interest and penalties was $2.2 million and $3.7 million, respectively.
NOTE 11 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives, directors and eligible employees. Stock awards include performance shares, restricted stock and stock options. Stock-based compensation expense for the three and six months ended June 30, 2019 was $2.0 million and $4.2 million, respectively, compared to $1.8 million and $4.6 million for the three and six months ended June 30, 2018, respectively. At June 30, 2019, there was $9.3 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.7 years.
The following table summarizes the grants awarded during the six months ended June 30, 2019:
Grant date | Restricted stock | Grant date fair value of restricted stock | Performance shares | Grant date fair value of performance shares | ||||||||||
February 5, 2019 | $ | $ | ||||||||||||
February 19, 2019 | $ | $ | ||||||||||||
May 1, 2019 | $ | |||||||||||||
June 12, 2019 | $ | |||||||||||||
NOTE 12 – FAIR VALUE MEASUREMENTS
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
Unrealized gain (loss) on equity securities | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||
Realized gain (loss) on equity securities | |||||||||||||||
Zinc options | |||||||||||||||
Interest rate swap, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Fair value adjustments, net | $ | ( | ) | $ | ( | ) | $ | $ | |||||||
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
Fair Value at June 30, 2019 | |||||||||||||||
In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Equity securities | $ | $ | $ | $ | |||||||||||
Other derivative instruments, net | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities: | |||||||||||||||
Silvertip contingent consideration | $ | $ | $ | $ | |||||||||||
Other derivative instruments, net | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
17
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Fair Value at December 31, 2018 | |||||||||||||||
In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Equity and debt securities | $ | $ | $ | $ | |||||||||||
Other derivative instruments, net | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
Liabilities: | |||||||||||||||
Silvertip contingent consideration | $ | $ | $ | $ | |||||||||||
Other derivative instruments, net | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain debt securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s other derivative instruments, net, include concentrate and certain doré sales contracts, zinc hedges, and an interest rate swap which are valued using pricing models with inputs derived from observable market data, including contractual terms, forward market prices, yield curves, credit spreads, and other unobservable inputs. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
In July 2017, the Company sold the Endeavor Silver Stream and remaining non-core royalties to Metalla Royalty & Streaming Ltd. (“Metalla”) for total consideration of $13.0 million, including a $6.7 million convertible debenture. The convertible debenture was due to mature in June 30, 2027, however, through a combination of principal repayments and conversions into Metalla shares, the convertible debenture was extinguished in February 2019.
In October 2017, the Company acquired the Silvertip mine from shareholders of JDS Silver Holdings Ltd (the “Silvertip Acquisition”). The consideration for the Silvertip Acquisition includes two $25.0 million contingent payments, which are payable in cash and common stock upon reaching a future permitting milestone and resource declaration milestone, respectively. The fair value of the Silvertip contingent consideration is estimated based on an estimated discount rate of 2.5 % for the contingent permitting payment and 2.9 % for the contingent resource declaration payment and is classified within Level 3 of the fair value hierarchy.
No assets or liabilities were transferred between fair value levels in the six months ended June 30, 2019.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three and six months ended June 30, 2019:
Three Months Ended June 30, 2019 | |||||||||||||||||||
In thousands | Balance at the beginning of the period | Revaluation | Settlements | Accretion | Balance at the end of the period | ||||||||||||||
Liabilities: | |||||||||||||||||||
Silvertip contingent consideration | $ | $ | $ | $ | $ | ||||||||||||||
Six Months Ended June 30, 2019 | |||||||||||||||||||
In thousands | Balance at the beginning of the period | Revaluation | Settlements | Accretion | Balance at the end of the period | ||||||||||||||
Assets: | |||||||||||||||||||
Equity and debt securities | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Liabilities: | |||||||||||||||||||
Silvertip contingent consideration | $ | $ | $ | $ | $ | ||||||||||||||
18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2019 | |||||||||||||||||||
In thousands | Book Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Liabilities: | |||||||||||||||||||
2024 Senior Notes(1) | $ | $ | $ | $ | $ | ||||||||||||||
RCF(2) | $ | $ | $ | $ | $ | ||||||||||||||
(1) Net of unamortized debt issuance costs of $3.8 million.
(2) Unamortized debt issuance costs of $2.7 million included in Other Non-Current Assets.
December 31, 2018 | |||||||||||||||||||
In thousands | Book Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets: | |||||||||||||||||||
Manquiri Notes Receivable | $ | $ | $ | $ | $ | ||||||||||||||
Liabilities: | |||||||||||||||||||
2024 Senior Notes(1) | $ | $ | $ | $ | $ | ||||||||||||||
RCF(2) | $ | $ | $ | $ | $ | ||||||||||||||
(1) Net of unamortized debt issuance costs of $4.1 million.
(2) Unamortized debt issuance costs of $2.2 million included in Other Non-Current Assets.
The fair value of the 2024 Senior Notes was estimated using quoted market prices. The fair value of the RCF approximates book value as the liability is secured, has a variable interest rate, and lacks significant credit concerns.
NOTE 13 – DERIVATIVE FINANCIAL INSTRUMENTS
Provisional Metal Sales
The Company enters into sales contracts with third-party smelters, refiners and off-take customers which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement.
Interest Rate Swap
The Company enters into interest rate swap contracts in which it receives variable-rate interest and pays fixed-rate interest. The Company uses these instruments to manage its exposure to changes in interest rates related to its RCF (see Note 8-- Debt) and does not designate the instruments as hedges from an accounting standpoint and does not apply hedge accounting. The notional amount is used to measure interest to be paid or received.
During the second quarter, an interest rate swap derivative instrument, with a notional amount of $50.0 million, expired and was replaced with an instrument with a notional amount of $75.0 million, which became effective in June 2019 and covers a contractual term of six months and net settles monthly.
19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
At June 30, 2019, the Company had the following derivative instruments that settle as follows:
In thousands except average prices and notional ounces | 2019 | Thereafter | |||||
Provisional silver sales contracts | $ | $ | |||||
Average silver price per ounce | $ | $ | |||||
Notional ounces | |||||||
Provisional gold sales contracts | $ | $ | |||||
Average gold price per ounce | $ | $ | |||||
Notional ounces | |||||||
Provisional zinc sales contracts | $ | $ | |||||
Average zinc price per pound | $ | $ | |||||
Notional pounds | |||||||
Provisional lead sales contracts | $ | $ | |||||
Average lead price per pound | $ | $ | |||||
Notional pounds | |||||||
Fixed interest rate swap payable | $ | $ | |||||
Fixed Interest rate | % | ||||||
Notional dollars | $ | $ | |||||
Variable interest rate swap receivable | $ | $ | |||||
Average variable interest rate | % | $ | |||||
Notional dollars | $ | $ | |||||
The following summarizes the classification of the fair value of the derivative instruments:
June 30, 2019 | |||||||
In thousands | Prepaid expenses and other | Accrued liabilities and other | |||||
Provisional metal sales contracts | $ | $ | |||||
Interest rate swaps | — | ||||||
$ | $ | ||||||
December 31, 2018 | |||||||
In thousands | Prepaid expenses and other | Accrued liabilities and other | |||||
Provisional metal sales contracts | $ | $ | |||||
Zinc options | — | ||||||
Interest rate swaps | — | ||||||
$ | $ | ||||||
20
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following represent mark-to-market gains (losses) on derivative instruments for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Financial statement line | Derivative | 2019 | 2018 | 2019 | 2018 | |||||||||||
Revenue | Provisional metal sales contracts | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Fair value adjustments, net | Zinc options | |||||||||||||||
Fair value adjustments, net | Interest rate swaps | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
$ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||
Credit Risk
NOTE 14 - OTHER, NET
Other, net consists of the following:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
Foreign exchange gain (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Mexico inflation adjustment | |||||||||||||||
Interest income on notes receivable | |||||||||||||||
Gain (loss) on sale of assets and investments | ( | ) | ( | ) | |||||||||||
Other | |||||||||||||||
Other, net | $ | $ | $ | $ | |||||||||||
21
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 15 – NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the three and six months ended June 30, 2019, 3,241,533 common stock equivalents, respectively, related to equity-based awards were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly,1,528,162 and 1,563,841 common stock equivalents were excluded in the diluted earnings per share calculation for the three and six months ended June 30, 2018, respectively.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) available to common stockholders: | |||||||||||||||
Income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Income (loss) from discontinued operations | |||||||||||||||
$ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Weighted average shares: | |||||||||||||||
Basic | |||||||||||||||
Effect of stock-based compensation plans | |||||||||||||||
Diluted | |||||||||||||||
Basic income (loss) per share: | |||||||||||||||
Income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Income (loss) from discontinued operations | |||||||||||||||
Basic(1) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Diluted income (loss) per share: | |||||||||||||||
Income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Income (loss) from discontinued operations | |||||||||||||||
Diluted(1) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
(1) Due to rounding, the sum of net income per share from continuing operations and discontinued operations may not equal net income per share.
NOTE 16 - SUPPLEMENTAL GUARANTOR INFORMATION
The following Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10 of Regulation S-X resulting from the guarantees by Coeur Alaska, Inc., Coeur Explorations, Inc., Coeur Rochester, Inc., Coeur South America Corp., Wharf Resources (U.S.A.), Inc. and its subsidiaries, Coeur Capital, Inc., Coeur Sterling, Inc., Sterling Intermediate Holdco, Inc., and Coeur Sterling Holdings LLC (collectively, the “Subsidiary Guarantors”) of the 2024 Senior Notes. The following schedules present Consolidating Financial Statements of (a) Coeur, the parent company; (b) the Subsidiary Guarantors; and (c) certain wholly-owned domestic and foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Each of the Subsidiary Guarantors is 100% owned by Coeur and the guarantees are full and unconditional and joint and several obligations. There are no restrictions on the ability of Coeur to obtain funds from the Subsidiary Guarantors by dividend or loan.
22
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2019
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
ASSETS | |||||||||||||||||||
CURRENT ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Receivables | ( | ) | |||||||||||||||||
Ore on leach pads | |||||||||||||||||||
Inventory | |||||||||||||||||||
Prepaid expenses and other | |||||||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||||
Property, plant and equipment, net | |||||||||||||||||||
Mining properties, net | |||||||||||||||||||
Ore on leach pads | |||||||||||||||||||
Restricted assets | |||||||||||||||||||
Equity and debt securities | |||||||||||||||||||
Receivables | |||||||||||||||||||
Net investment in subsidiaries | ( | ) | ( | ) | |||||||||||||||
Other | ( | ) | |||||||||||||||||
TOTAL ASSETS | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||||
Accounts payable | $ | $ | $ | $ | $ | ||||||||||||||
Other accrued liabilities | |||||||||||||||||||
Debt | |||||||||||||||||||
Reclamation | |||||||||||||||||||
NON-CURRENT LIABILITIES | |||||||||||||||||||
Debt | ( | ) | |||||||||||||||||
Reclamation | |||||||||||||||||||
Deferred tax liabilities | |||||||||||||||||||
Other long-term liabilities | |||||||||||||||||||
Intercompany payable (receivable) | ( | ) | |||||||||||||||||
( | ) | ||||||||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Common stock | ( | ) | |||||||||||||||||
Additional paid-in capital | ( | ) | |||||||||||||||||
Accumulated deficit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Accumulated other comprehensive income (loss) | |||||||||||||||||||
( | ) | ||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
23
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2018
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
ASSETS | |||||||||||||||||||
CURRENT ASSETS | |||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | ||||||||||||||
Receivables | |||||||||||||||||||
Ore on leach pads | |||||||||||||||||||
Inventory | |||||||||||||||||||
Prepaid expenses and other | |||||||||||||||||||
Assets held for sale | |||||||||||||||||||
NON-CURRENT ASSETS | |||||||||||||||||||
Property, plant and equipment, net | |||||||||||||||||||
Mining properties, net | |||||||||||||||||||
Ore on leach pads | |||||||||||||||||||
Restricted assets | |||||||||||||||||||
Equity and debt securities | |||||||||||||||||||
Receivables | |||||||||||||||||||
Net investment in subsidiaries | ( | ) | |||||||||||||||||
Other | ( | ) | |||||||||||||||||
TOTAL ASSETS | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||||
Accounts payable | $ | $ | $ | $ | |||||||||||||||
Other accrued liabilities | |||||||||||||||||||
Debt | |||||||||||||||||||
Reclamation | |||||||||||||||||||
NON-CURRENT LIABILITIES | |||||||||||||||||||
Debt | ( | ) | |||||||||||||||||
Reclamation | |||||||||||||||||||
Deferred tax liabilities | |||||||||||||||||||
Other long-term liabilities | |||||||||||||||||||
Intercompany payable (receivable) | ( | ) | |||||||||||||||||
( | ) | ||||||||||||||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||
Common stock | ( | ) | |||||||||||||||||
Additional paid-in capital | ( | ) | |||||||||||||||||
Accumulated deficit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Accumulated other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||||||
( | ) | ||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
24
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2019
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Revenue | $ | $ | $ | $ | $ | ||||||||||||||
COSTS AND EXPENSES | |||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||
Amortization | |||||||||||||||||||
General and administrative | |||||||||||||||||||
Exploration | |||||||||||||||||||
Pre-development, reclamation, and other | |||||||||||||||||||
Total costs and expenses | |||||||||||||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||||||
Fair value adjustments, net | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||
Interest expense, net of capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Income (loss) from continuing operations before income and mining taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Equity income (loss) in consolidated subsidiaries | ( | ) | ( | ) | ( | ) | |||||||||||||
NET INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | |||||||||||||||||||
Other comprehensive income (loss) | |||||||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
(1) Excludes amortization.
25
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2018
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Revenue | $ | $ | $ | $ | $ | ||||||||||||||
COSTS AND EXPENSES | |||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||
Amortization | |||||||||||||||||||
General and administrative | |||||||||||||||||||
Exploration | |||||||||||||||||||
Pre-development, reclamation, and other | |||||||||||||||||||
Total costs and expenses | |||||||||||||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||||||
Fair value adjustments, net | ( | ) | ( | ) | ( | ) | |||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||
Interest expense, net of capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | |||||||||||||
Income (loss) from continuing operations before income and mining taxes | ( | ) | |||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Income (loss) from continuing operations | ( | ) | |||||||||||||||||
Equity income (loss) in consolidated subsidiaries | ( | ) | ( | ) | ( | ) | |||||||||||||
NET INCOME (LOSS) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | |||||||||||||||||||
Unrealized gain (loss) on marketable securities, net of tax | ( | ) | ( | ) | |||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
(1) Excludes amortization.
26
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
THREE MONTHS ENDED JUNE 30, 2019
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Proceeds from the sale of assets | |||||||||||||||||||||
Sales of investments | |||||||||||||||||||||
Proceeds from notes receivable | |||||||||||||||||||||
Other | ( | ) | |||||||||||||||||||
Investments in consolidated subsidiaries | ( | ) | |||||||||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||||
Issuance of common stock | |||||||||||||||||||||
Payments on debt, capital leases, and associated costs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Net intercompany financing activity | ( | ) | 1 | ( | ) | 1 | |||||||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ( | ) | ( | ) | |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | |||||||||||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | $ | $ | ||||||||||||||||
27
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2018
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Proceeds from the sale of assets | ||||||||||||||||||||
Purchase of investments | ( | ) | ( | ) | ||||||||||||||||
Sales of investments | ||||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Investments in consolidated subsidiaries | ( | ) | ||||||||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||
Payments on debt, capital leases, and associated costs | ( | ) | ( | ) | ( | ) | ||||||||||||||
Net intercompany financing activity | ( | ) | ||||||||||||||||||
Other | ( | ) | ( | ) | ||||||||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ( | ) | ||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ( | ) | ||||||||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ( | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | ||||||||||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | $ | $ | |||||||||||||||
28
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2019
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Revenue | $ | $ | $ | $ | $ | ||||||||||||||
COSTS AND EXPENSES | |||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||
Amortization | |||||||||||||||||||
General and administrative | |||||||||||||||||||
Exploration | |||||||||||||||||||
Pre-development, reclamation, and other | |||||||||||||||||||
Total costs and expenses | |||||||||||||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||||||
Fair value adjustments, net | ( | ) | |||||||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||
Interest expense, net of capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | |||||||||||||
Income (loss) from continuing operations before income and mining taxes | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Equity income (loss) in consolidated subsidiaries | ( | ) | ( | ) | |||||||||||||||
Income (loss) from discontinued operations | |||||||||||||||||||
NET INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | |||||||||||||||||||
Unrealized gain (loss) on debt securities, net of tax | |||||||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
29
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2018
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Revenue | $ | $ | $ | $ | $ | ||||||||||||||
COSTS AND EXPENSES | |||||||||||||||||||
Costs applicable to sales(1) | |||||||||||||||||||
Amortization | |||||||||||||||||||
General and administrative | |||||||||||||||||||
Exploration | |||||||||||||||||||
Pre-development, reclamation, and other | |||||||||||||||||||
Total costs and expenses | |||||||||||||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||||||
Fair value adjustments, net | ( | ) | |||||||||||||||||
Other, net | ( | ) | ( | ) | |||||||||||||||
Interest expense, net of capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | |||||||||||||
Income (loss) from continuing operations before income and mining taxes | ( | ) | |||||||||||||||||
Income and mining tax (expense) benefit | ( | ) | ( | ) | ( | ) | |||||||||||||
Income (loss) from continuing operations | ( | ) | |||||||||||||||||
Equity income (loss) in consolidated subsidiaries | ( | ) | ( | ) | ( | ) | |||||||||||||
Income (loss) from discontinued operations | ( | ) | ( | ) | |||||||||||||||
NET INCOME (LOSS) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | |||||||||||||||||||
Unrealized gain (loss) on debt securities, net of tax | ( | ) | ( | ) | |||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||
30
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2019
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | ( | ) | $ | $ | ( | ) | $ | $ | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Proceeds from the sale of assets | |||||||||||||||||||
Sales of investments | |||||||||||||||||||
Proceeds from notes receivable | |||||||||||||||||||
Other | ( | ) | |||||||||||||||||
Investments in consolidated subsidiaries | ( | ) | |||||||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||
Issuance of common stock | |||||||||||||||||||
Issuance of notes and bank borrowings, net of issuance costs | |||||||||||||||||||
Payments on debt, capital leases, and associated costs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Net intercompany financing activity | ( | ) | ( | ) | |||||||||||||||
Other | ( | ) | ( | ) | |||||||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ( | ) | ( | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | ||||||||||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | $ | $ | ||||||||||||||
31
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2018
In thousands | Coeur Mining, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||||
Cash provided by (used in) activities of continuing operations | $ | $ | $ | $ | ( | ) | |||||||||||||
Cash provided by (used in) activities of discontinued operations | ( | ) | ( | ) | |||||||||||||||
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | |||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Proceeds from the sale of assets | |||||||||||||||||||
Purchase of investments | ( | ) | ( | ) | |||||||||||||||
Sales of investments | |||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | |||||||||||||
Investments in consolidated subsidiaries | ( | ) | |||||||||||||||||
Cash provided by (used in) activities of continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Cash provided by (used in) activities of discontinued operations | ( | ) | ( | ) | |||||||||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||||
Issuance of notes and bank borrowings, net of issuance costs | |||||||||||||||||||
Payments on debt, capital leases, and associated costs | ( | ) | ( | ) | ( | ) | |||||||||||||
Net intercompany financing activity | ( | ) | ( | ) | |||||||||||||||
Other | ( | ) | ( | ) | |||||||||||||||
Cash provided by (used in) activities of continuing operations | ( | ) | ( | ) | ( | ) | |||||||||||||
Cash provided by (used in) activities of discontinued operations | ( | ) | ( | ) | |||||||||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ( | ) | ( | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | |||||||||||||||||
Less net cash provided by (used in) discontinued operations | ( | ) | ( | ) | |||||||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | $ | $ | ||||||||||||||
32
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Palmarejo Gold Stream
Coeur Mexicana, S.A. de C.V. (“Coeur Mexicana”), a subsidiary of Coeur, sells 50 % of Palmarejo gold production (excluding production from certain properties acquired in 2015) to a subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) under a gold stream agreement for the lesser of $800 or spot price per ounce. In 2015, Coeur Mexicana received a $22.0 million deposit toward future deliveries under the gold stream agreement. In accordance with generally accepted accounting principles, although Coeur Mexicana has satisfied its contractual obligation to repay the deposit to Franco-Nevada, the deposit is accounted for as deferred revenue and is recognized as revenue on a units of production basis as ounces are sold to Franco-Nevada. At June 30, 2019 the remaining unamortized balance was $12.2 million, which is included in Accrued liabilities and other and Other long-term liabilities on the Condensed Consolidated Balance Sheet.
Kensington Prepayment
In June 2019, Coeur entered into a transaction with an existing metal sales counterparty whereby it amended its existing sales and purchase contract for gold concentrate from its Kensington mine (the “Amended Sales Contract”) to allow for a $25.0 million prepayment for deliveries of gold concentrate from the Kensington mine. The $25.0 million is recognized as a deferred revenue liability and is presented in Accrued liabilities and other on the Condensed Consolidated Balance Sheet. Under the terms of the prepayment, Coeur maintains its exposure to the price of gold and expects to recognize the full value of the accrued liability by the end of 2019.
Silvertip Contingent Consideration
NOTE 18 – DISCONTINUED OPERATIONS
In December 2017, the Company and certain of its subsidiaries entered into a definitive agreement (as amended, the “Manquiri Agreement”) to sell all of the outstanding capital stock of Empresa Minera Manquiri S.A. (“Manquiri”), which is the operator of the San Bartolomé mine and processing facility (the “Manquiri Divestiture”). On February 28, 2018, the Manquiri Divestiture was completed, and, in accordance with the Manquiri Agreement, the capital stock in Manquiri was sold to Ag-Mining Investments, AB, a privately-held Swedish company (the “Buyer”), in exchange for, among other items, (A) 2.0% net smelter returns royalty on all metals processed through the San Bartolomé mine’s processing facility (the “NSR”) and (B) promissory notes payable by the Buyer with an aggregate principal amount equal to $27.6 million (the “Manquiri Notes Receivable”). In September 2018, the Company entered into a letter agreement (“Letter Agreement”) with the Buyer pursuant to which the total aggregate principal amount of the Manquiri Notes Receivable (as described in the 2018 10-K) was reduced to $25.0 million, and the Buyer made a concurrent cash payment of $15.0 million to the Sellers in respect of the Manquiri Notes Receivable. In addition, the Company also agreed to suspend the quarterly payments in respect of the NSR until October 15, 2019 and to forgo any rights to any value added tax refunds collected or received by Manquiri.
On February 28, 2019, the parties executed a letter agreement (the “February Letter Agreement”), which amended certain terms of the Manquiri Agreement. Pursuant to the February Letter Agreement, the Buyer agreed to accelerate repayment of the remaining aggregate $6.0 million owed under the Manquiri Notes Receivable, by making a concurrent cash payment of $2.0 million to the Company in respect of the Manquiri Notes Receivable and agreeing to pay the remaining $4.0 million outstanding principal amount in two equal installments on March 31, 2019 and April 30, 2019, both of which were received. As of the date of the entry into the February Letter Agreement, the remaining obligations under the Manquiri Agreement (including post-closing
33
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
indemnification obligations) terminated. The Company recorded a $5.7 million gain on the sale Manquiri following the release of the indemnification liability (associated with termination of post-closing indemnification obligations) pursuant to the February Letter Agreement.
In addition, pursuant to the February Letter Agreement, until October 31, 2019 (the “Option Period”) the Buyer has a non-exclusive option (the “Option”) to either purchase or terminate its obligations to pay the NSR, by making a payment to Coeur of $4.8 million (the “NSR Payment Amount”). During the Option Period, the Company’s rights in respect of receipt of the NSR are suspended. If the Buyer does not exercise the Option and pay the NSR Payment Amount to Coeur during the Option Period, or if Coeur transfers the NSR to a third party, Buyer’s obligations to pay the NSR will resume for the quarterly period beginning on July 1, 2019 and ending September 30, 2019, and such payment shall be payable by the expiration of the Option Period.
The sale of Manquiri and the San Bartolomé mine had a significant effect on the Company's results and operations. Accordingly, San Bartolomé’s operations for the three and six months ended June 30, 2019 and 2018 are classified on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as Income (loss) from discontinued operations. The major classes of line items constituting the pretax profit or loss for the three and six months ended June 30, 2019 and 2018 are as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||
COSTS AND EXPENSES | |||||||||||||||
Costs applicable to sales(1) | |||||||||||||||
General and administrative | |||||||||||||||
Pre-development, reclamation, and other | |||||||||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||
Interest expense, net of capitalized interest | ( | ) | |||||||||||||
Other, net | ( | ) | |||||||||||||
Pretax profit (loss) on discontinued operations related to major classes of pretax profit (loss) | ( | ) | |||||||||||||
Pretax gain on the disposal of the discontinued operation | |||||||||||||||
Total pretax gain or loss on discontinued operations | |||||||||||||||
Income and mining tax (expense) benefit | ( | ) | |||||||||||||
Income (loss) from discontinued operations | $ | $ | $ | $ | |||||||||||
(1) Excludes amortization.
Net cash used in operating activities from San Bartolomé were $2.7 million for the six months ended June 30, 2018. Net cash used in investing activities from San Bartolomé were $28.5 million for the six months ended June 30, 2018.
NOTE 19 – ADDITIONAL BALANCE SHEET DETAIL AND SUPPLEMENTAL CASH FLOW INFORMATION
Accrued liabilities and other consist of the following:
In thousands | June 30, 2019 | December 31, 2018 | |||||
Accrued salaries and wages | $ | $ | |||||
Silvertip contingent consideration | |||||||
Deferred revenue (1) | |||||||
Income and mining taxes | |||||||
Accrued operating costs | |||||||
Taxes other than income and mining | |||||||
Accrued interest payable | |||||||
Operating lease liabilities | |||||||
Accrued liabilities and other | $ | $ | |||||
(1) See Note 17 -- Commitments and Contingencies for additional details on deferred revenue liabilities
34
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows for the three and six months ended June 30, 2019 and 2018:
In thousands | June 30, 2019 | June 30, 2018 | |||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash equivalents | |||||||
Total cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | $ | |||||
35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively the “Company”, “our”, or “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of these measures, please see “Non-GAAP Financial Performance Measures” at the end of this item. We provide Costs applicable to sales (“CAS”) split, referred to as the co-product method, based on revenue contribution for Palmarejo, Rochester and Silvertip and based on the primary metal, referred to as the by-product method, for Wharf. Revenue from secondary metal, silver at Wharf, is treated as a cost credit.
Overview
We are primarily a gold and silver producer with five operating mines located in the United States, Canada and Mexico and several exploration projects in North America.
Second Quarter 2019 Highlights
• | Palmarejo recovery rates increased for gold and silver, which led to an increase in production of 22% and 36%, respectively, compared to the first quarter of 2019. On a year over year basis, lower gold and silver grades attributable to mine sequencing contributed to lower gold and silver production and higher costs applicable to sales per gold and silver ounce. Production began at the La Nación deposit, located between the Independencia and Guadalupe underground mines, shortly after the end of the second quarter. Production at La Nación is anticipated to continue ramping up during the third quarter as infrastructure projects are completed, adding approximately 400 tons per day of additional mill feed. Installation of a new thickener remains on budget and on schedule with commissioning activities currently underway. The project is expected to increase metallurgical recoveries for both gold and silver by approximately 2% and has an estimated one-year payback. Full-year 2019 gold and silver production guidance for Palmarejo remains unchanged. |
• | Rochester gold and silver production decreased and costs applicable to sales per gold and silver ounce increased driven by lower ore placement rates due to the commissioning of the new crusher configuration. The Company successfully commissioned the enhanced crushing circuit, including the HPGR unit, and recommenced full mining and processing activities in early August 2019. Preliminary metallurgical test work from newly crushed and placed material indicate results in-line with expectations. The new crushing circuit is expected to improve silver recoveries and lower operating costs during the remainder of the year. The Company is maintaining full-year 2019 silver and gold production guidance for Rochester. |
• | Kensington gold production increased and costs applicable to sales per gold ounce decreased driven by additional ore feed from the high-grade Jualin deposit. Ore from Jualin accounted for approximately 17% of Kensington’s gold production during the quarter. Jualin is expected to account for approximately 20% of Kensington’s total production in 2019. Increased production from Jualin is expected to contribute to higher production levels and lower unit costs for the remainder of 2019. |
• | Wharf gold production decreased largely driven by lower grades, inclement weather, which diluted leach pad solutions, as well as lower crusher throughput. Costs applicable to sales per gold ounce increased due to lower production and higher outside services and processing costs. The Company has engaged a third-party contractor to crush an additional 300,000 tons of ore primarily during the third quarter to supplement operating activities. Production is anticipated to increase for the remainder of 2019 due to the placement of higher-grade ore late in the second quarter, which is expected to continue during the third and fourth quarters. The Company is maintaining full-year 2019 gold production guidance for Wharf. In June 2019, Coeur entered into a purchase option agreement (the “Option Agreement”) with Barrick for the Richmond Hill Project (the “Project”), which is located adjacent to Coeur’s Wharf mine in South Dakota. The option to acquire the Project provides a potential opportunity for Coeur to leverage existing infrastructure to further expand Wharf’s footprint and extend its mine life. |
36
• | Production at Silvertip, which commenced commercial production in September 2018, was higher driven by higher tons milled, feed grades and recovery rates. Second quarter results at Silvertip represented the best period of operational performance since acquisition as silver, zinc and lead production increased 44%, 43% and 62%, respectively, compared to the first quarter of 2019 driven by significantly higher feed grades and recovery rates across all metals. The Company continues to execute key projects targeting mill availability, which are expected to drive further operational improvements throughout the remainder of the year. Recovery rates continue to trend upward, with recoveries averaging approximately 81%, 63% and 82% for silver, zinc and lead, respectively, during June. The permit amendment application to operate at a year-round mining and milling rate of 1,100 tons (1,000 metric tonnes) per day is expected to be received during the third quarter, which is later than originally expected, but does not have an impact on planned operations. The Company is maintaining full-year 2019 silver, zinc and production guidance for Silvertip. |
• | On June 4, 2019, the Company completed its previously announced $50.0 million at-the-market common stock offering program, raising net proceeds (after sales commissions) of $48.9 million. The Company also amended an existing sales arrangement with a metal sales counterparty covering a portion of its gold concentrate from the Kensington mine in consideration for a $25.0 million prepayment. Together with cash and cash equivalents and proceeds from these transactions the Company repaid a total of $82.0 million of outstanding amounts under its Revolving Credit Facility (the “RCF”) and as of June 30, 2019 had $53.0 million outstanding. |
37
Selected Financial and Operating Results
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
Financial Results from Continuing Operations: | |||||||||||||||
Gold sales | $ | 110,326 | $ | 117,213 | $ | 217,090 | $ | 227,687 | |||||||
Silver sales | $ | 44,963 | $ | 52,774 | $ | 85,077 | $ | 105,567 | |||||||
Zinc sales | $ | 2,604 | $ | — | $ | 8,238 | $ | — | |||||||
Lead sales | $ | 4,230 | $ | — | $ | 6,588 | $ | — | |||||||
Consolidated Revenue | $ | 162,123 | $ | 169,987 | $ | 316,993 | $ | 333,254 | |||||||
Net income (loss) | $ | (36,764 | ) | $ | 2,930 | $ | (61,658 | ) | $ | 3,621 | |||||
Net income (loss) per share, diluted | $ | (0.18 | ) | $ | 0.02 | $ | (0.30 | ) | $ | 0.02 | |||||
Adjusted net income (loss)(1) | $ | (22,985 | ) | $ | 1,061 | $ | (45,942 | ) | $ | 1,403 | |||||
Adjusted net income (loss) per share, diluted(1) | $ | (0.11 | ) | $ | 0.01 | $ | (0.22 | ) | $ | 0.01 | |||||
EBITDA(1) | $ | 7,719 | $ | 42,124 | $ | 22,497 | $ | 91,506 | |||||||
Adjusted EBITDA(1) | $ | 30,609 | $ | 48,431 | $ | 51,174 | $ | 97,157 | |||||||
Operating Results from Continuing Operations: | |||||||||||||||
Gold ounces produced | 86,584 | 94,052 | 164,920 | 179,435 | |||||||||||
Silver ounces produced | 3,061,493 | 3,203,899 | 5,551,927 | 6,386,009 | |||||||||||
Zinc pounds produced | 5,321,714 | — | 9,040,727 | — | |||||||||||
Lead pounds produced | 4,979,730 | — | 8,056,575 | — | |||||||||||
Gold ounces sold | 86,385 | 94,455 | 171,711 | 181,608 | |||||||||||
Silver ounces sold | 3,048,365 | 3,202,804 | 5,683,380 | 6,363,717 | |||||||||||
Zinc pounds sold | 5,302,508 | — | 10,025,577 | — | |||||||||||
Lead pounds sold | 5,185,634 | — | 7,933,481 | — | |||||||||||
Average realized price per gold ounce | $ | 1,277 | $ | 1,241 | $ | 1,264 | $ | 1,254 | |||||||
Average realized price per silver ounce | $ | 14.75 | $ | 16.48 | $ | 14.97 | $ | 16.59 | |||||||
Average realized price per zinc pound, gross | $ | 0.83 | $ | — | $ | 1.15 | $ | — | |||||||
Average realized price per lead pound, gross | $ | 0.87 | $ | — | $ | 0.89 | $ | — | |||||||
Financial and Operating Results from Discontinued Operations:(2) | |||||||||||||||
Income (loss) from discontinued operations | $ | — | $ | — | $ | 5,693 | $ | 550 | |||||||
Silver ounces produced | — | — | — | 643,078 | |||||||||||
Gold ounces produced | — | — | — | 78 | |||||||||||
Silver ounces sold | — | — | — | 704,479 | |||||||||||
Gold ounces sold | — | — | — | 292 | |||||||||||
(1)See “Non-GAAP Financial Performance Measures.”
(2)Reported production and financial results for the three months ended March 31, 2018 include operations through February 28, 2018.
38
Consolidated Financial Results
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
Revenue
Revenue decreased by $7.9 million as a result of fewer gold (9%) and silver (5%) ounces sold coupled with a 10% decrease in average realized silver prices, partially offset by a 3% increase in average realized gold prices and the inclusion of sales from Silvertip, which commenced commercial production in September 2018. The Company sold 86,385 gold ounces, 3.0 million silver ounces, 5.3 million zinc pounds and 5.2 million lead pounds compared to 94,455 gold ounces and 3.2 million silver ounces in the prior year. Gold contributed 68% of sales, silver contributed 28%, zinc contributed 2% and lead contributed less than 2%, compared to 69% of sales from gold and 31% from silver.
The following table summarizes consolidated metal sales:
Three Months Ended June 30, | Increase | Percent | ||||||||||||
In thousands | 2019 | 2018 | (Decrease) | Change | ||||||||||
Gold sales | $ | 110,326 | $ | 117,213 | $ | (6,887 | ) | (6 | )% | |||||
Silver sales | 44,963 | 52,774 | (7,811 | ) | (15 | )% | ||||||||
Zinc sales | 2,604 | — | 2,604 | 100 | % | |||||||||
Lead sales | 4,230 | — | 4,230 | 100 | % | |||||||||
Metal sales | $ | 162,123 | $ | 169,987 | $ | (7,864 | ) | (5 | )% | |||||
Costs Applicable to Sales
Costs applicable to sales increased primarily due to the inclusion of sales from Silvertip, an $11.9 million write-down of inventory at Silvertip and higher unit costs at Palmarejo, Rochester and Wharf, primarily due to lower production. Full year 2019 unit costs are expected to remain within the guidance ranges disclosed in the 2018 10-K. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization increased $13.7 million, or 47%, resulting from the inclusion of Silvertip and higher sales at Kensington.
Expenses
General and administrative expenses remained comparable at $7.8 million.
Exploration expense decreased $0.7 million, or 11%, as a result of lower near-mine exploration costs at Palmarejo and Kensington, as well as lower greenfields explorations expense in the United States and Mexico, partially offset by exploration expense at the Sterling and Crown deposits located in southern Nevada. The Company completed 108,384 feet (33,035 meters) of resource expansion drilling and 42,769 feet (13,036 meters) of resource infill drilling in the second quarter of 2019 compared to 100,210 feet (30,544 meters) of resource expansion drilling and 152,078 feet (46,353 meters) of resource infill drilling in the second quarter of 2018. Exploration activities in the second quarter of 2019 focused on targets at Palmarejo, Kensington, Silvertip and the Sterling Gold Project. Drill programs at Rochester, Wharf and Silvertip are scheduled to commence in the third quarter.
Pre-development, reclamation, and other expenses increased $0.7 million, or 20%, stemming from higher asset retirement obligation accretion expense at Silvertip and pre-development expenses at the Sterling deposit.
Other Income and Expenses
Fair value adjustments, net, increased to a loss of $5.3 million from a loss of $2.5 million as a result of unfavorable fair value adjustments related to the Company’s equity investment in Metalla Royalty & Streaming Ltd. (“Metalla”), which has an estimated fair value of $17.5 million at June 30, 2019.
Interest expense (net of capitalized interest of $0.5 million) increased to $6.8 million from $6.0 million, due to higher average debt levels related to the RCF.
39
Income and Mining Taxes
During the second quarter of 2019, the Company reported estimated income and mining tax benefit of approximately $5.5 million resulting in an effective tax rate of 13.1%. This compares to income tax expense of $3.7 million or an effective tax rate of 55.9% during the second quarter of 2018.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
Three Months Ended June 30, | |||||||||||||
2019 | 2018 | ||||||||||||
In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||
United States | $ | (16,835 | ) | $ | (1,399 | ) | $ | (11,334 | ) | $ | (2,309 | ) | |
Canada | (27,568 | ) | 7,547 | (2,155 | ) | 1,199 | |||||||
Mexico | 2,292 | (600 | ) | 20,542 | (2,499 | ) | |||||||
Other jurisdictions | (199 | ) | (2 | ) | (406 | ) | (108 | ) | |||||
$ | (42,310 | ) | $ | 5,546 | $ | 6,647 | $ | (3,717 | ) | ||||
The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) foreign exchange rates; (iv) mining taxes and (v) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the section titled “Risk Factors” in the 2018 10-K.
Net Income (Loss) from Continuing Operations
Net loss from continuing operations was $36.8 million, or $0.18 per share, compared to net income of $2.9 million, or $0.02 per share. The decrease in net income from continuing operations was driven by lower sales and higher operating costs which included a write-down of $11.9 million of Silvertip metal inventory as a result of lower than expected production levels. Adjusted net loss was $23.0 million, or $0.11 per share, compared to adjusted net income of $1.1 million, or $0.01 per share (see “Non-GAAP Financial Performance Measures”).
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Revenue
Revenue decreased by $16.3 million as a result of fewer gold (5%) and silver (11%) ounces sold coupled with a 10% decrease in average realized gold and silver prices, respectively, partially offset by the inclusion of sales from Silvertip, which commenced commercial production in September 2018. The Company sold 171,711 gold ounces, 5.7 million silver ounces, 10.0 million zinc pounds and 7.9 million lead pounds compared to 181,608 gold ounces and 6.4 million silver ounces in the prior year. Gold contributed 67% of sales, silver contributed 27%, zinc contributed 3% and lead contributed less than 3%, compared to 68% of sales from gold and 32% from silver.
The following table summarizes consolidated metal sales:
Six Months Ended June 30, | Increase | Percent | ||||||||||||
In thousands | 2019 | 2018 | (Decrease) | Change | ||||||||||
Gold sales | $ | 217,090 | $ | 227,687 | $ | (10,597 | ) | (5 | )% | |||||
Silver sales | 85,077 | 105,567 | (20,490 | ) | (19 | )% | ||||||||
Zinc sales | 8,238 | — | 8,238 | 100 | % | |||||||||
Lead sales | 6,588 | — | 6,588 | 100 | % | |||||||||
Metal sales | $ | 316,993 | $ | 333,254 | $ | (16,261 | ) | (5 | )% | |||||
40
Costs Applicable to Sales
Costs applicable to sales increased primarily due to the inclusion of sales from Silvertip, a $27.3 million write-down of inventory at Silvertip and higher unit costs at Palmarejo, Rochester and Wharf, primarily due to lower production. Full year 2019 unit costs are expected to remain within the guidance ranges disclosed in the 2018 10-K. For a complete discussion of costs applicable to sales, see Results of Operations below.
Amortization
Amortization increased $24.8 million, or 41%, resulting from the inclusion of Silvertip and higher sales at Kensington.
Expenses
General and administrative expenses increased $0.8 million, or 5%, primarily due to higher legal fees.
Exploration expense decreased $3.7 million, or 28%, as a result of lower near-mine exploration costs at Palmarejo and Kensington, as well as lower greenfields explorations expense in the United States and Mexico, partially offset by exploration expense at the Sterling and Crown deposits located in southern Nevada. The Company completed 153,248 feet (46,710 meters) of resource expansion drilling and 105,171 feet (32,056 meters) of resource infill drilling in the first half of 2019 compared to 210,193 feet (64,067 meters) of resource expansion drilling and 237,136 feet (72,279 meters) of resource infill drilling in the first half of 2018. Exploration activities in the first half of 2019 focused on targets at Palmarejo, Kensington, Silvertip and the Sterling Gold Project. Drill programs at Rochester, Wharf and Silvertip are scheduled to commence in the third quarter.
Pre-development, reclamation, and other expenses increased $0.9 million, or 12%, stemming from higher asset retirement obligation accretion expense at Silvertip pre-development expenses at the Sterling deposit.
Other Income and Expenses
Fair value adjustments, net, increased to a gain of $3.8 million from a gain of $2.2 million as a result of favorable fair value adjustments related to the Company’s equity investment in Metalla, which has an estimated fair value of $17.5 million at June 30, 2019.
Interest expense (net of capitalized interest of $1.2 million) increased to $13.3 million from $12.0 million, due to higher average debt levels related to the RCF.
Income and Mining Taxes
During the first half of 2019, the Company reported estimated income and mining tax benefit of approximately $14.2 million resulting in an effective tax rate of 18.7%. This compares to income tax expense of $15.7 million or an effective tax rate of 81.2% during the first half of 2018.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
Six Months Ended June 30, | |||||||||||||
2019 | 2018 | ||||||||||||
In thousands | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||
United States | $ | (22,882 | ) | $ | (3,561 | ) | $ | (10,147 | ) | $ | (1,792 | ) | |
Canada | (54,093 | ) | 17,339 | (3,909 | ) | 2,044 | |||||||
Mexico | 1,521 | 424 | 33,669 | (15,821 | ) | ||||||||
Other jurisdictions | (408 | ) | 2 | (326 | ) | (97 | ) | ||||||
$ | (75,862 | ) | $ | 14,204 | $ | 19,287 | $ | (15,666 | ) | ||||
The comparability of the Company’s income and mining tax (expense) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) variations in our income before income taxes; (ii) geographic distribution of that income; (iii) foreign exchange rates; (iv) mining taxes and (v) the non-recognition of tax assets. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the
41
Company’s ability to realize its deferred tax assets. For additional information, please see the section titled “Risk Factors” in the 2018 10-K.
Net Income (Loss) from Continuing Operations
Net loss from continuing operations was $61.7 million, or $0.30 per share, compared to net income of $3.6 million, or $0.02 per share. The decrease in net income from continuing operations was driven by lower sales and higher operating costs which included a write-down of $27.3 million at Silvertip of metal inventory as a result of lower than expected production levels. Adjusted net loss was $45.9 million, or $0.22 per share, compared to adjusted net income of $1.4 million, or $0.01 per share (see “Non-GAAP Financial Performance Measures”).
Net Income (loss) from Discontinued Operations
In respect of San Bartolomé’s operating results, income increased $5.1 million. In February 2019, the Company recorded an adjustment to the gain from the Manquiri Divestiture following the release of a liability associated with the Company’s post-closing indemnification obligations which were extinguished pursuant to the February Letter Agreement.
2019 Guidance Framework
The Company’s 2019 production and CAS guidance remains unchanged from its original guidance disclosed in the 2018 10-K.
Results of Continuing Operations
Palmarejo
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Tons milled | 447,727 | 344,073 | 826,714 | 703,966 | ||||||||||
Average gold grade (oz/t) | 0.07 | 0.11 | 0.07 | 0.11 | ||||||||||
Average silver grade (oz/t) | 4.74 | 6.86 | 4.69 | 6.87 | ||||||||||
Average recovery rate – Au | 87.7 | % | 89.9 | % | 85.7 | % | 85.2 | % | ||||||
Average recovery rate – Ag | 81.8 | % | 87.5 | % | 77.7 | % | 84.4 | % | ||||||
Gold ounces produced | 28,246 | 33,702 | 51,451 | 63,598 | ||||||||||
Silver ounces produced | 1,734,772 | 2,065,523 | 3,013,055 | 4,078,762 | ||||||||||
Gold ounces sold | 28,027 | 31,207 | 55,421 | 62,095 | ||||||||||
Silver ounces sold | 1,709,406 | 2,091,788 | 3,114,815 | 4,122,491 | ||||||||||
Costs applicable to sales per gold ounce(1) | $ | 742 | $ | 495 | $ | 730 | $ | 504 | ||||||
Costs applicable to sales per silver ounce(1) | $ | 9.18 | $ | 7.10 | $ | 9.40 | $ | 7.30 | ||||||
(1)See Non-GAAP Financial Performance Measures.
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
Gold and silver production decreased 16% resulting from lower gold and silver grades. Metal sales were $59.3 million, or 37.0% of Coeur’s metal sales, compared with $70.7 million, or 41% of Coeur’s metal sales. Lower production and higher consumable costs resulted in a 50% and 28% increase in costs applicable to sales per gold and silver ounce, respectively. Amortization remained comparable at $14.2 million. Capital expenditures decreased to $7.6 million due to lower mining equipment expenditures and lower resource conversion drilling.
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Gold and silver production decreased 19% and 26%, respectively, resulting from lower gold and silver grades. Metal sales were $112.5 million, or 36% of Coeur’s metal sales, compared with $140.8 million, or 42% of Coeur’s metal sales. Lower production and higher consumable costs resulted in a 45% and 29% increase in costs applicable to sales per gold and silver ounce, respectively. Amortization decreased to $28.7 million primarily due to lower ounces sold. Capital expenditures decreased to $16.2 million due to lower mining equipment expenditures and lower resource conversion drilling.
42
Rochester
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Tons placed | 2,786,287 | 4,083,028 | 5,453,846 | 8,434,159 | ||||||||||
Average gold grade (oz/t) | 0.003 | 0.004 | 0.003 | 0.003 | ||||||||||
Average silver grade (oz/t) | 0.45 | 0.53 | 0.46 | 0.53 | ||||||||||
Gold ounces produced | 8,609 | 12,273 | 16,865 | 23,760 | ||||||||||
Silver ounces produced | 970,673 | 1,125,074 | 1,930,578 | 2,282,100 | ||||||||||
Gold ounces sold | 8,642 | 12,030 | 17,153 | 23,193 | ||||||||||
Silver ounces sold | 961,634 | 1,097,272 | 1,962,087 | 2,216,499 | ||||||||||
Costs applicable to sales per gold ounce(1) | $ | 1,257 | $ | 935 | $ | 1,182 | $ | 946 | ||||||
Costs applicable to sales per silver ounce(1) | $ | 14.38 | $ | 12.03 | $ | 13.70 | $ | 12.10 | ||||||
(1)See Non-GAAP Financial Performance Measures.
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
Gold and silver production decreased 30% and 14%, respectively, due to reduced placement rates caused by the planned commissioning of the new crusher configuration and lower gold and silver grades. Metal sales were $25.5 million, or 16% of Coeur’s metal sales, compared with $33.7 million, or 20% of Coeur’s metal sales. Costs applicable to sales per gold and silver ounce increased 34% and 20%, respectively, due to lower production. Amortization decreased to $4.0 million from $4.8 million due to lower ounces sold. Capital expenditures increased to $2.8 million from $0.7 million due to the commissioning of the new crusher configuration, including the HPGR unit and Plan of Operations Amendment 11 (“POA 11”) capital expenditures.
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Gold and silver production decreased 29% and 15%, respectively, due to reduced placement rates caused by adverse weather conditions and the planned commissioning of the new crusher configuration. Metal sales were $51.8 million, or 16% of Coeur’s metal sales, compared with $67.2 million, or 20% of Coeur’s metal sales. Costs applicable to sales per gold and silver ounce increased 25% and 13%, respectively, due to lower production. Capital expenditures increased to $7.4 million from $3.3 million due to the commissioning of the new crusher configuration, including the HPGR unit and POA 11 capital expenditures.
Kensington
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Tons milled | 160,510 | 168,751 | 324,842 | 327,457 | ||||||||||
Average gold grade (oz/t) | 0.23 | 0.16 | 0.22 | 0.17 | ||||||||||
Average recovery rate | 93.0 | % | 92.6 | % | 91.6 | % | 93.3 | % | ||||||
Gold ounces produced | 34,049 | 25,570 | 64,022 | 51,634 | ||||||||||
Gold ounces sold | 34,415 | 28,165 | 65,750 | 55,928 | ||||||||||
Costs applicable to sales per gold ounce(1) | $ | 847 | $ | 1,215 | $ | 932 | $ | 1,124 | ||||||
(1) | See Non-GAAP Financial Performance Measures. |
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
Gold production increased 33% due to higher ore feed from the high-grade Jualin deposit, which in turn contributed to a 30% decrease in costs applicable to sales per gold ounce. Metal sales were $45.2 million, or 28.0% of Coeur’s metal sales, compared to $35.7 million, or 21% of Coeur’s metal sales. Amortization increased to $12.5 million from $6.4 million due to significantly higher ounces sold. Capital expenditures decreased to $4.9 million from $10.7 million due to lower underground development at Kensington and Raven, resource expansion drilling and mining equipment expenditures.
43
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Gold production increased 24% due to higher ore feed from the high-grade Jualin deposit,which in turn contributed to a 17% decrease in costs applicable to sales per gold ounce. Metal sales were $85.4 million, or 27% of Coeur’s metal sales, compared to $72.0 million, or 22% of Coeur’s metal sales. Amortization increased to $24.3 million from $13.2 million due to higher ounces sold. Capital expenditures decreased to $14.2 million due to lower underground development at Kensington and Raven, resource expansion drilling and mining equipment expenditures.
Wharf
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Tons placed | 919,435 | 1,075,820 | 2,009,945 | 2,152,215 | ||||||||||
Average gold grade (oz/t) | 0.023 | 0.023 | 0.021 | 0.022 | ||||||||||
Gold ounces produced | 15,680 | 22,507 | 32,582 | 40,443 | ||||||||||
Silver ounces produced | 12,379 | 13,302 | 25,863 | 25,147 | ||||||||||
Gold ounces sold | 15,301 | 23,053 | 33,387 | 40,392 | ||||||||||
Silver ounces sold | 12,364 | 13,744 | 26,416 | 24,727 | ||||||||||
Costs applicable to sales per gold ounce(1) | $ | 998 | $ | 826 | $ | 972 | $ | 846 | ||||||
(1) | See Non-GAAP Financial Performance Measures. |
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
Gold production decreased 30% largely driven by inclement weather, which diluted leach pad solutions, as well as lower crusher throughput. Metal sales were $20.2 million, or 12.0% of Coeur’s metal sales, compared to $29.8 million, or 18% of Coeur’s metal sales. Costs applicable to sales per gold ounce increased 21% due to lower production and higher outside services costs. Amortization decreased to $2.2 million from $3.4 million due to lower ounces sold. Capital expenditures were $0.2 million.
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Gold production decreased 19% largely driven by lower grades, inclement weather, which diluted leach pad solutions, as well as lower crusher throughput during the second quarter. Metal sales were $44.3 million, or 14% of Coeur’s metal sales, compared to $53.3 million, or 16% of Coeur’s metal sales. Costs applicable to sales per gold ounce increased 15% due to lower production and higher outside services and processing costs. Amortization decreased to $4.9 million due to lower ounces sold. Capital expenditures decreased to $0.6 million due to lower resource conversion drilling.
44
Silvertip
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Tons milled | 59,689 | — | 121,740 | — | |||||||||||
Average silver grade (oz/t) | 7.48 | — | 6.47 | — | |||||||||||
Average zinc grade (%) | 7.5 | % | — | 6.7 | % | — | |||||||||
Average lead grade (%) | 5.4 | % | — | 4.5 | % | — | |||||||||
Average recovery rate – Ag | 77.0 | % | — | 73.9 | % | — | |||||||||
Average recovery rate – Zn | 59.1 | % | — | 55.2 | % | — | |||||||||
Average recovery rate – Pb | 77.3 | % | — | 72.9 | % | — | |||||||||
Silver ounces produced | 343,669 | — | 582,431 | — | |||||||||||
Zinc pounds produced | 5,321,714 | — | 9,040,727 | — | |||||||||||
Lead pounds produced | 4,979,730 | — | 8,056,575 | — | |||||||||||
Silver ounces sold | 364,961 | — | 580,062 | — | |||||||||||
Zinc pounds sold | 5,302,508 | — | 10,025,577 | — | |||||||||||
Lead pounds sold | 5,185,634 | — | 7,933,481 | — | |||||||||||
Costs applicable to sales per silver ounce(1) | $ | 24.37 | $ | — | $ | 28.99 | $ | — | |||||||
Costs applicable to sales per zinc pound(1) | $ | 1.87 | $ | — | $ | 2.20 | $ | — | |||||||
Costs applicable to sales per lead ounce(1) | $ | 1.41 | $ | — | $ | 1.72 | $ | — | |||||||
(1) | See Non-GAAP Financial Performance Measures. |
Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018
In September 2018, Silvertip commenced commercial production. Metal sales were $11.9 million, or 7% of Coeur’s metal sales. Costs applicable to sales per ounce were impacted by a $11.9 million write-down of metal inventory as a result of lower than expected production levels, grades and recovery rates. Amortization was $9.9 million. Capital expenditures decreased to $5.0 million from $19.0 million due to pre-production capitalization in 2018 and lower resource conversion drilling in 2019.
Six Months Ended June 30, 2019 compared to Six Months Ended June 30, 2018
Metal sales were $22.9 million, or 7% of Coeur’s metal sales. Costs applicable to sales per ounce were impacted by a $27.3 million write-down of metal inventory as a result of lower than expected production levels, grades and recovery rates. Amortization was $18.3 million. Capital expenditures decreased to $9.1 million from $37.7 million due to pre-production capitalization in 2018 and lower resource conversion drilling in 2019.
45
Liquidity and Capital Resources
At June 30, 2019, the Company had $39.3 million of cash, cash equivalents and restricted cash and $197.0 million available under the RCF. Cash and cash equivalents decreased $77.2 million in the six months ended June 30, 2019, primarily due to lower gold and silver ounces sold, higher Silvertip operating costs and mining tax payments at Palmarejo, partially offset by lower capital expenditures at Silvertip.
Cash Provided by (Used in) Operating Activities from Continuing Operations
Net cash provided by operating activities for the three months ended June 30, 2019 was $26.4 million, compared to net cash used in operating activities for the three months ended June 30, 2018 of $1.3 million. Net cash provided by operating activities for the six months ended June 30, 2019 was $10.6 million, compared to $14.2 million for the six months ended June 30, 2018. Adjusted EBITDA from continuing operations for the three months ended June 30, 2019 was $30.6 million, compared to $48.4 million for the three months ended June 30, 2018. Adjusted EBITDA from continuing operations for the six months ended June 30, 2019 was $51.2 million, compared to $97.2 million for the six months ended June 30, 2018 (see “Non-GAAP Financial Performance Measures”). Net cash provided by (used in) operating activities was impacted by the following key factors for the applicable periods:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands | 2019 | 2018 | 2019 | 2018 | |||||||||||
Cash flow before changes in operating assets and liabilities | $ | 24,175 | $ | 41,496 | $ | 45,641 | $ | 74,936 | |||||||
Changes in operating assets and liabilities: | |||||||||||||||
Receivables | (7,624 | ) | (8,888 | ) | (17,359 | ) | (10,579 | ) | |||||||
Prepaid expenses and other | (834 | ) | 8,126 | (3,518 | ) | 2,491 | |||||||||
Inventories | (14,391 | ) | (2,766 | ) | (33,212 | ) | (11,474 | ) | |||||||
Accounts payable and accrued liabilities | 25,109 | (39,262 | ) | 19,037 | (41,127 | ) | |||||||||
Cash provided by (used in) continuing operating activities | $ | 26,435 | $ | (1,294 | ) | $ | 10,589 | $ | 14,247 | ||||||
Net cash provided by operating activities increased $27.7 million in the three months ended June 30, 2019 compared to the three months ended June 30, 2018, primarily due to the receipt of a $25.0 million prepayment for concentrate deliveries from Kensington and income and mining taxes payments at Palmarejo in 2018, partially offset by lower sales of gold and silver (9% and 5%, respectively). In addition, cash provided by operating activities was impacted by lower than anticipated production at Silvertip that resulted in a $11.9 million write-down of metals inventory. Revenue for the three months ended June 30, 2019 decreased $7.9 million, of which $5.7 million was due to lower volume of sales and $2.1 million was due to lower average realized silver prices.
Net cash provided by operating activities decreased $3.7 million in the six months ended June 30, 2019, in line with the Company’s expectations, compared to the six months ended June 30, 2018, primarily due lower sales of gold and silver (5% and 11%, respectively) partially offset by the receipt of prepayment of deliveries of concentrate of a $25.0 million prepayment for concentrate deliveries from Kensington and income and mining taxes payments at Palmarejo in 2018. In addition, cash provided by (used in) operating activities was impacted by lower than anticipated production at Silvertip that resulted in a $27.3 million write-down of metals inventory as well as the timing of VAT collections. Revenue for the six months ended June 30, 2019 decreased $16.3 million, of which $8.4 million was due to lower average realized prices and $7.8 million was due to lower volume of sales.
Cash Used in Investing Activities from Continuing Operations
Net cash used in investing activities in the three months ended June 30, 2019 was $17.3 million compared to $30.0 million in the three months ended June 30, 2018. Cash used in investing activities decreased primarily due to pre-production capital spending at Silvertip in 2018. The Company had capital expenditures of $20.7 million in the three months ended June 30, 2019 compared with $41.2 million in the three months ended June 30, 2018. Capital expenditures in the three months ended June 30, 2019 were primarily related to underground development at Silvertip, Palmarejo, and Kensington, a new thickener at Palmarejo and the HPGR unit at Rochester. Capital expenditures in the three months ended June 30, 2018 were primarily related to pre-production capital spending at Silvertip and underground development at Silvertip, Palmarejo and Kensington.
46
Net cash used in investing activities in the six months ended June 30, 2019 was $37.0 million compared to $71.1 million in the six months ended June 30, 2018. Cash used in investing activities decreased primarily due to pre-production capital spending at Silvertip in 2018. The Company had capital expenditures of $48.2 million in the six months ended June 30, 2019 compared with $83.5 million in the six months ended June 30, 2018. Capital expenditures in the six months ended June 30, 2019 were primarily related to underground development at Silvertip, Palmarejo, and Kensington, a new thickener at Palmarejo and the HPGR unit at Rochester. Capital expenditures in the six months ended June 30, 2018 were primarily related to pre-production capital spending at Silvertip and underground development at Silvertip, Palmarejo and Kensington.
Cash Provided by (Used in) Financing Activities from Continuing Operations
Net cash used in financing activities in the three months ended June 30, 2019 increased to $41.9 million compared to $4.6 million in the three months ended June 30, 2018. During the three months ended June 30, 2019, the Company repaid $82.0 million under the RCF and received net proceeds of approximately $48.9 million from the sale of 16.6 million shares of its common stock at an average price of $3.00 per share.
Net cash used in financing activities in the six months ended June 30, 2019 increased to $52.6 million compared to $12.7 million in the six months ended June 30, 2018. During the six months ended June 30, 2019, the Company borrowed $15.0 million and repaid $97.0 million under the RCF and received net proceeds of approximately $48.9 million from the sale of 16.6 million shares of its common stock at an average price of $3.00 per share. During the six months ended June 30, 2018, the Company borrowed $15.0 million under the RCF to repay a Silvertip-related debt obligation.
On April 30, 2019, the Company and Bank of America, N.A., as administrative agent for the RCF lenders, entered into the Amendment. Among other items, the Amendment (1) modifies the financial covenants to (A) provide greater flexibility under the consolidated net leverage ratio requirement through the September 30, 2019 test date, with the ratio returning to the original level as outlined in the RCF starting with the December 31, 2019 test date, and (B) include an additional financial covenant tied to senior secured leverage and (2) increases the interest rate on borrowings under the RCF by 0.75% during periods of elevated consolidated net leverage. On August 6, 2019, the Company entered into the Third Amendment to Credit Agreement (the “Third Amendment”). The Third Amendment, among other items, modifies the financial covenants to provide greater flexibility under the consolidated interest coverage ratio requirement as of the June 30, 2019 test date, with the ratio returning to the original level as outlined in the RCF starting with the September 30, 2019 test date.
Critical Accounting Policies and Accounting Developments
Please see Note 2 -- Summary of Significant Accounting Policies contained in the 2018 10-K and in Note 2 - Summary of Significant Accounting Policies contained in this Report for the Company’s critical accounting policies and estimates.
Other Liquidity Matters
We believe that our liquidity and capital resources in the U.S. are adequate to fund our U.S. operations and corporate activities. The Company has asserted indefinite reinvestment of earnings from its Mexican operations as determined by management’s judgment about and intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity.
In order to reduce indebtedness, future cash interest payments and/or amounts due at maturity or upon redemption and for general working capital purposes, from time to time we may (1) issue equity securities for cash in public or private offerings or (2) repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or unsecured notes or equity, in each case in open market or privately negotiated transactions. We evaluate any such transactions in light of prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be significant and any debt repurchase transactions may occur at a substantial discount to the debt securities’ face amount.
Non-GAAP Financial Performance Measures
Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). Unless otherwise noted, we present the Non-GAAP financial measures of our continuing operations in the tables below. For additional information regarding our discontinued operations, see Note 18 -- to the Condensed Consolidated Financial Statements. These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
47
Adjusted Net Income (Loss)
Management uses Adjusted net income (loss) to evaluate the Company’s operating performance, and to plan and forecast its operations. The Company believes the use of Adjusted net income (loss) reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Management’s determination of the components of Adjusted net income (loss) are evaluated periodically and is based, in part, on a review of non-GAAP financial measures used by mining industry analysts. The tax effect of adjustments are based on statutory tax rates and the Company’s tax attributes, including the impact through the Company’s valuation allowance. The combined effective rate of tax adjustments may not be consistent with the statutory tax rates or the Company’s effective tax rate due to jurisdictional tax attributes and related valuation allowance impacts which may minimize the tax effect of certain adjustments and may not apply to gains and losses equally. Adjusted net income (loss) is reconciled to Net income (loss) in the following table:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) | $ | (36,764 | ) | $ | 2,930 | $ | (55,965 | ) | $ | 4,171 | |||||
(Income) loss from discontinued operations, net of tax | — | — | (5,693 | ) | (550 | ) | |||||||||
Fair value adjustments, net | 5,296 | 2,462 | (3,824 | ) | (2,192 | ) | |||||||||
Silvertip start-up write-down | 11,872 | — | 27,319 | — | |||||||||||
(Gain) loss on sale of assets and securities | 72 | (586 | ) | 20 | (345 | ) | |||||||||
Mexico inflation adjustment | — | (1,939 | ) | — | (1,939 | ) | |||||||||
Interest income on notes receivables | (18 | ) | (573 | ) | (198 | ) | (821 | ) | |||||||
Foreign exchange loss (gain) | 889 | (1,233 | ) | 2,145 | 3,079 | ||||||||||
Tax effect of adjustments(1) | (4,332 | ) | — | (9,746 | ) | — | |||||||||
Adjusted net income (loss) | $ | (22,985 | ) | $ | 1,061 | $ | (45,942 | ) | $ | 1,403 | |||||
Adjusted net income (loss) per share - Basic | $ | (0.11 | ) | $ | 0.01 | $ | (0.22 | ) | $ | 0.01 | |||||
Adjusted net income (loss) per share - Diluted | $ | (0.11 | ) | $ | 0.01 | $ | (0.22 | ) | $ | 0.01 | |||||
(1) For the six months ended June 30, 2019, tax effect of adjustments of $4.3 million (-25%) is primarily related to the write-down of Silvertip start-up costs.
(2) For the six months ended June 30, 2019, tax effect of adjustments of $9.7 million (-42%) is primarily related to the write-down of Silvertip start-up costs.
48
EBITDA and Adjusted EBITDA
Management uses EBITDA to evaluate the Company’s operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of EBITDA reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Adjusted EBITDA is a measure used in the 2024 Senior Notes Indenture and the RCF to determine our ability to make certain payments and incur additional indebtedness. EBITDA and Adjusted EBITDA do not represent, and should not be considered an alternative to, Net income (Loss) or Cash Flow from Operations as determined under GAAP. Other companies may calculate Adjusted EBITDA differently and those calculations may not be comparable to our presentation. Adjusted EBITDA is reconciled to Net income (loss) in the following table:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
In thousands except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) | $ | (36,764 | ) | $ | 2,930 | $ | (55,965 | ) | $ | 4,171 | |||||
(Income) loss from discontinued operations, net of tax | — | — | (5,693 | ) | (550 | ) | |||||||||
Interest expense, net of capitalized interest | 6,825 | 6,018 | 13,279 | 11,983 | |||||||||||
Income tax provision (benefit) | (5,546 | ) | 3,717 | (14,204 | ) | 15,666 | |||||||||
Amortization | 43,204 | 29,459 | 85,080 | 60,236 | |||||||||||
EBITDA | 7,719 | 42,124 | 22,497 | 91,506 | |||||||||||
Fair value adjustments, net | 5,296 | 2,462 | (3,824 | ) | (2,192 | ) | |||||||||
Silvertip start-up write-down | 11,872 | — | 27,319 | — | |||||||||||
Foreign exchange (gain) loss | 468 | 3,309 | 1,133 | 3,979 | |||||||||||
(Gain) loss on sale of assets and securities | 72 | (586 | ) | 20 | (345 | ) | |||||||||
Mexico inflation adjustment | — | (1,939 | ) | — | (1,939 | ) | |||||||||
Interest income on notes receivables | (18 | ) | (573 | ) | (198 | ) | (821 | ) | |||||||
Asset retirement obligation accretion | 3,007 | 2,817 | 5,950 | 5,486 | |||||||||||
Inventory adjustments and write-downs | 2,193 | 817 | (1,723 | ) | 1,483 | ||||||||||
Adjusted EBITDA | $ | 30,609 | $ | 48,431 | $ | 51,174 | $ | 97,157 | |||||||
49
Costs Applicable to Sales
Management uses CAS to evaluate the Company’s current operating performance and life of mine performance from discovery through reclamation. We believe these measures assist analysts, investors and other stakeholders in understanding the costs associated with producing gold, silver, zinc and lead, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. These measures may not be indicative of operating profit or cash flow from operations as determined under GAAP. Management believes that allocating CAS to gold, silver, zinc and lead based on gold, silver, zinc and lead metal sales relative to total metal sales best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit, converting to silver equivalent ounces, and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards.
Three Months Ended June 30, 2019
In thousands except per ounce or per pound amounts | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||
Costs applicable to sales, including amortization (U.S. GAAP) | $ | 50,708 | $ | 28,656 | $ | 41,670 | $ | 17,691 | $ | 36,038 | $ | 174,763 | |||||||||||
Amortization | (14,212 | ) | (3,963 | ) | (12,537 | ) | (2,225 | ) | (9,878 | ) | (42,815 | ) | |||||||||||
Costs applicable to sales | $ | 36,496 | $ | 24,693 | $ | 29,133 | $ | 15,466 | $ | 26,160 | $ | 131,948 | |||||||||||
Metal Sales | |||||||||||||||||||||||
Gold ounces | 28,027 | 8,642 | 34,415 | 15,301 | 86,385 | ||||||||||||||||||
Silver ounces | 1,709,406 | 961,634 | 12,364 | 364,961 | 3,048,365 | ||||||||||||||||||
Zinc pounds | 5,302,508 | 5,302,508 | |||||||||||||||||||||
Lead pounds | 5,185,634 | 5,185,634 | |||||||||||||||||||||
Costs applicable to sales | |||||||||||||||||||||||
Gold ($/oz) | $ | 742 | $ | 1,257 | $ | 847 | $ | 998 | |||||||||||||||
Silver ($/oz) | $ | 9.18 | $ | 14.38 | $ | 24.37 | |||||||||||||||||
Zinc ($/lb) | $ | 1.87 | |||||||||||||||||||||
Lead ($/lb) | $ | 1.41 | |||||||||||||||||||||
Three Months Ended June 30, 2018
In thousands except per ounce or per pound amounts | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||
Costs applicable to sales, including amortization (U.S. GAAP) | $ | 44,943 | $ | 29,244 | $ | 40,668 | $ | 22,611 | $ | — | $ | 137,466 | |||||||||||
Amortization | (14,633 | ) | (4,793 | ) | (6,441 | ) | (3,353 | ) | — | (29,220 | ) | ||||||||||||
Costs applicable to sales | $ | 30,310 | $ | 24,451 | $ | 34,227 | $ | 19,258 | $ | — | $ | 108,246 | |||||||||||
Metal Sales | |||||||||||||||||||||||
Gold ounces | 31,207 | 12,030 | 28 | 23,053 | 94 | ||||||||||||||||||
Silver ounces | 2,091,788 | 1,097,272 | 13,744 | — | 3,203 | ||||||||||||||||||
Zinc pounds | — | — | |||||||||||||||||||||
Lead pounds | — | — | |||||||||||||||||||||
Costs applicable to sales | |||||||||||||||||||||||
Gold ($/oz) | $ | 495 | $ | 935 | $ | 1,215 | $ | 826 | |||||||||||||||
Silver ($/oz) | $ | 7.10 | $ | 12.03 | $ | — | |||||||||||||||||
Zinc ($/lb) | $ | — | |||||||||||||||||||||
Lead ($/lb) | $ | — | |||||||||||||||||||||
50
Six Months Ended June 30, 2019
In thousands except per ounce or per pound amounts | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||
Costs applicable to sales, including amortization (U.S. GAAP) | $ | 98,480 | $ | 55,147 | $ | 85,572 | $ | 37,764 | $ | 70,849 | $ | 347,812 | |||||||||||
Amortization | (28,740 | ) | (8,000 | ) | (24,264 | ) | (4,906 | ) | (18,304 | ) | (84,214 | ) | |||||||||||
Costs applicable to sales | $ | 69,740 | $ | 47,147 | $ | 61,308 | $ | 32,858 | $ | 52,545 | $ | 263,598 | |||||||||||
Metal Sales | |||||||||||||||||||||||
Gold ounces | 55,421 | 17,153 | 65,750 | 33,387 | 171,711 | ||||||||||||||||||
Silver ounces | 3,114,815 | 1,962,087 | 26,416 | 580,062 | 5,683,380 | ||||||||||||||||||
Zinc pounds | 10,025,577 | 10,025,577 | |||||||||||||||||||||
Lead pounds | 7,933,481 | 7,933,481 | |||||||||||||||||||||
Costs applicable to sales | |||||||||||||||||||||||
Gold ($/oz) | $ | 730 | $ | 1,182 | $ | 932 | $ | 972 | |||||||||||||||
Silver ($/oz) | $ | 9.40 | $ | 13.70 | $ | 28.99 | |||||||||||||||||
Zinc ($/lb) | $ | 2.20 | |||||||||||||||||||||
Lead ($/lb) | $ | 1.72 | |||||||||||||||||||||
Six Months Ended June 30, 2018
In thousands except per ounce or per pound amounts | Palmarejo | Rochester | Kensington | Wharf | Silvertip | Total | |||||||||||||||||
Costs applicable to sales, including amortization (U.S. GAAP) | $ | 77,731 | $ | 53,587 | $ | 69,574 | $ | 37,224 | $ | — | $ | 238,116 | |||||||||||
Amortization | (16,325 | ) | (4,831 | ) | (6,717 | ) | (2,657 | ) | — | (30,530 | ) | ||||||||||||
Costs applicable to sales | $ | 61,406 | $ | 48,756 | $ | 62,857 | $ | 34,567 | $ | — | $ | 207,586 | |||||||||||
Metal Sales | |||||||||||||||||||||||
Gold ounces | 62,095 | 23,193 | 55,928 | 40,392 | 182 | ||||||||||||||||||
Silver ounces | 4,122,491 | 2,216,499 | 24,727 | — | 6,364 | ||||||||||||||||||
Zinc pounds | — | — | |||||||||||||||||||||
Lead pounds | — | — | |||||||||||||||||||||
Costs applicable to sales | |||||||||||||||||||||||
Gold ($/oz) | $ | 504 | $ | 946 | $ | 1,124 | $ | 846 | |||||||||||||||
Silver ($/oz) | $ | 7.30 | $ | 12.10 | $ | — | |||||||||||||||||
Zinc ($/lb) | $ | — | |||||||||||||||||||||
Lead ($/lb) | $ | — | |||||||||||||||||||||
51
Cautionary Statement Concerning Forward-Looking Statements
This report contains numerous forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the Company’s gold, silver, zinc and lead mining business, including statements regarding operations at the Company’s mines, exploration and development efforts, estimated production, costs, capital expenditures, contingent payments for the Silvertip Acquisition, timing of receipt of permits at Silvertip and impact of commissioning of the new crusher configuration at Rochester, expectations regarding the Option Agreement, sufficiency of assets, ability to discharge liabilities, liquidity management, financing needs, environmental compliance expenditures, and risk management strategies. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plan,” “projected,” “contemplates,” “anticipates” or similar words. Actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include (i) the risk factors set forth in the “Risk Factors” section of the 2018 10-K, the risks set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, (ii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold, silver, zinc and lead and a sustained lower price environment, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays (including the impact of government shutdowns), ground conditions and grade variability, (v) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vi) the uncertainties inherent in the estimation of gold, silver, zinc and lead reserves and mineralized material, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) the loss of access to any third-party smelter to whom the Company markets silver and gold, (ix) the effects of environmental and other governmental regulations, (x) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xi) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks as a part of its operations and engages in risk management strategies to mitigate these risks. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company does not actively engage in the practice of trading derivative instruments for profit. Additional information about the Company’s derivative financial instruments may be found in Note 13 -- Derivative Financial Instruments in the notes to the Consolidated Financial Statements. This discussion of the Company’s market risk assessments contains “forward looking statements”. For additional information regarding forward-looking statements and risks and uncertainties that could impact the Company, please refer to Item 2 of this Report - Cautionary Statement Concerning Forward-Looking Statements. Actual results and actions could differ materially from those discussed below.
Gold, Silver, Zinc and Lead Prices
Gold, silver, zinc, and lead prices may fluctuate widely due to numerous factors, such as U.S. dollar strength or weakness, demand, investor sentiment, inflation or deflation, and global mine production. The Company’s profitability and cash flow may be significantly impacted by changes in the market price of gold, silver, zinc, and lead.
Gold, Silver, Zinc and Lead Hedging
To mitigate the risks associated with gold, silver, zinc and lead price fluctuations, the Company may enter into option contracts to hedge future production. The Company had outstanding Asian put and call option contracts in net-zero-cost collar contracts on zinc at December 31, 2018 that settled in January 2019. The Company had no outstanding gold, silver, zinc or lead hedges at June 30, 2019.
Provisional Gold, Silver, Zinc and Lead Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract. Depending on the difference between the price at the time of sale and the final settlement price, embedded derivatives are recorded as either a derivative asset or liability. The embedded derivatives do not qualify for hedge accounting and, as a result, are marked to the market gold and silver price at the end of each period from the provisional sale date to the date of final settlement. The mark-to-market gains and losses are recorded in earnings. Changes in gold, silver, zinc and lead prices resulted in provisional pricing mark-to-market losses of $1.9 million and $1.7 million in the three and six months ended June 30, 2019 and 2018, respectively.
52
At June 30, 2019, the Company had outstanding provisionally priced sales of 7,424 ounces of gold at an average price of $1,302, 0.7 million ounces of silver at an average price of $15.22, 14.4 million pounds of zinc at an average price of $1.14 and 9.0 million pounds of lead at an average price of $0.89. A 10% change in realized gold, silver, zinc and lead prices would cause revenue to vary by $4.6 million.
Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Canada, Mexico, and New Zealand, which exposes it to foreign currency exchange rate risks. Foreign currency exchange rates are influenced by world market factors beyond the Company’s control such as supply and demand for U.S. and foreign currencies and related monetary and fiscal policies. Fluctuations in local currency exchange rates in relation to the U.S. dollar may significantly impact profitability and cash flow.
Foreign Exchange Hedging
To manage foreign currency risk, the Company may enter into foreign exchange forward and/or option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at June 30, 2019.
Interest Rates
Interest Rate Hedging
We may use financial instruments to manage exposures to changes in interest rates on loans, which exposes us to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not pose credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with what we believe are high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates. The Company had outstanding interest rate swaps whereby the Company receives a variable rate in exchange for a floating rate at June 30, 2019 with a contractual term through December 31, 2019. A 10% change in the 1-month LIBOR would cause Fair value adjustments, net to vary by $0.1 million.
53
Item 4. | Controls and Procedures |
(a) | Disclosure Controls and Procedures |
As of the end of the period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management’s control objectives. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by it in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) | Management’s Report on Internal Control Over Financial Reporting |
Based on an evaluation by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded
that there was no change in the Company’s internal control over financial reporting during the three months ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
Item 1. Legal Proceedings
See Note 17 -- Commitments and Contingencies in the notes to the Consolidated Financial Statements included herein.
Item 1A. Risk Factors
Item 1A -- Risk Factors of the 2018 10-K sets forth information relating to important risks and uncertainties that could materially adversely affect the Company’s business, financial condition or operating results.
Item 4. Mine Safety Disclosures
Information pertaining to mine safety matters is reported in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act in Exhibit 95.1 attached to this Form 10-Q.
Item 5. Other Information
In accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and the Company’s insider trading policy, Casey M. Nault, the Company’s Senior Vice President, General Counsel and Secretary, entered into a selling plan effective May 22, 2019. Under the selling plan, between August 2019 and May 2020, Mr. Nault will sell a total of 75,000 shares of the Company’s common stock so long as the market price of the common stock is higher than the minimum threshold price specified in the plan.
Rule 10b5-1 permits an insider to implement a written prearranged trading plan entered into at a time when the insider is not aware of any material nonpublic information about the Company and allows the insider to trade on a one-time or regularly scheduled basis regardless of any material nonpublic information about the Company thereafter received by the insider.
54
Item 6. Exhibits
10.1 | |
10.2 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
95.1 | |
101.INS | XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.** |
101.SCH | XBRL Taxonomy Extension Schema** |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase** |
101.DEF | XBRL Taxonomy Extension Definition Linkbase** |
101.LAB | XBRL Taxonomy Extension Label Linkbase** |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase** |
* Management contract or compensatory plan or arrangement.
** The following financial information from Coeur Mining, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Cash Flows, Consolidated Balance Sheets, and Consolidated Statement of Changes in Stockholders' Equity
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COEUR MINING, INC. | |||
(Registrant) | |||
Dated | August 7, 2019 | /s/ Mitchell J. Krebs | |
MITCHELL J. KREBS | |||
President and Chief Executive Officer (Principal Executive Officer) | |||
Dated | August 7, 2019 | /s/ Thomas S. Whelan | |
THOMAS S. WHELAN | |||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |||
Dated | August 7, 2019 | /s/ Ken Watkinson | |
KEN WATKINSON | |||
Vice President, Corporate Controller and Chief Accounting Officer (Principal Accounting Officer) | |||
55