Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Mexico Litigation Matters

As of September 30, 2022, $26.0 million in principal amount is due from the Mexican government associated with VAT that was paid under Coeur Mexicana, S.A. de C.V.’s (“Coeur Mexicana’s”) prior royalty agreement with a subsidiary of Franco-Nevada Corporation, which was terminated in 2016. Coeur Mexicana applied for and initially received VAT refunds associated with the royalty payments in the normal course; however, in 2011 the Mexican tax authorities began denying Coeur Mexicana’s VAT refunds based on the argument that VAT was not legally due on the royalty payments. Accordingly, Coeur Mexicana began to request refunds of the VAT as undue payments, which the Mexican tax authorities also denied. The Company has since been engaged in ongoing efforts to recover the VAT from the Mexican government (including through litigation and potential arbitration as well as refiling VAT refund requests). Despite a favorable ruling from Mexican tax courts in this matter in 2018, litigation has continued at the administrative, appeals court and supreme court levels, most of which has been determined unfavorably to Coeur based on interpretations of applicable law and prior court decisions which the Company and its counsel believe are contrary to legal precedent, conflicting and erroneous. While the Company believes that it remains legally entitled to be refunded the full amount of the VAT receivable and intends to rigorously continue its VAT recovery efforts, based on the continued failure to recover the VAT receivable and recent unfavorable Mexican court decisions, the Company determined to write down the carrying value of the VAT receivable at September 30, 2021. In September 2022, the Company and Coeur Mexicana filed a request for arbitration under Chapter 11 of the North American Free Trade Agreement, or NAFTA, in connection with this dispute. Outcomes in NAFTA arbitration and the process for recovering funds even if there is a successful outcome in NAFTA arbitration can be lengthy and unpredictable.

In addition, ongoing litigation with the Mexican government associated with enforcement of water rights in Mexico, if unsuccessful, may impact Coeur Mexicana’s ability to access new sources of water to provide sufficient supply for its operations at Palmarejo and, if material, may have a material adverse impact on the Company’s operations and financial results.

Palmarejo Gold Stream

Coeur Mexicana 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 2016, 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 September 30, 2022 the remaining unamortized balance was $7.6 million, which is included in Accrued liabilities and other and Other long-term liabilities on the Consolidated Balance Sheet.

Kensington Prepayment

In June 2019, Coeur amended its existing sales and purchase contract with a metal sales counterparty for gold concentrate from its Kensington mine (the “Amended Sales Contract”). From time to time thereafter, the Amended Sales Contract has been further amended to allow for additional prepayments, including in June 2021, to provide options for Coeur to receive up to two additional prepayments of up to $15.0 million each. The Company exercised these options and received $15.0 million both in June 2021 (the "June 2021 Prepayment") and in December 2021 (the "December 2021 Prepayment"). The June 2021 Prepayment was repaid in full before the December 2021 Prepayment was received. In March 2022, the Amended Sales Contract was further amended to allow for an additional $10.0 million prepayment which was made in March 2022 (the “March 2022 Prepayment”). The Amended Sales Contract was further amended in June 2022 to consolidate the remaining deliveries of $15.0 million and $10.0 million under the December 2021 Prepayment and March 2022 Prepayment (the “June 2022 Consolidated Prepayment”), to extend the repayment period for the June 2022 Consolidated Prepayment, and to provide for future prepayments of up to $25.0 million on a semi-annual basis through the end of 2024, provided all prior outstanding prepayment amounts are paid before such future prepayments are made. The remaining deliveries of the June 2022 Consolidated Prepayment are recognized as a deferred revenue liability and are presented in Accrued liabilities and other on the Consolidated Balance Sheet. Under the relevant terms of the Amended Sales Contract, Coeur maintains its exposure to the price of gold and expects to recognize the remaining value of the accrued liability by December 2022.

POA 11 Expansion Project

Coeur achieved several key milestones at the Rochester expansion during the quarter, notably, (i) completion of major concrete work in all areas except the primary crusher pocket and the pre-screens, both of which are in progress, (ii) continuation of structural, mechanical, piping, electrical and instrumentation construction work throughout the project, (iii) commencement of final major high-voltage electrical distribution and substation construction, and (iv) completion of the majority of commitments for the pre-screens.

Progress of the Merrill-Crowe plant continued on schedule during the third quarter, including (i) continuation of mechanical equipment setting, (ii) completion of building and process plant steel pipe rack erection, (iii) continuation of piping and cable tray installation, and (iv) rough setting of electrical switchgear.

Further work on the crusher corridor has also advanced, including (i) civil work on the primary crusher area with a focus on the primary crusher foundation and commencement of conveyor component installation, (ii) setting of the secondary cone crushers and commencement of piping, cable tray and lighting installation in the secondary crusher area, and (iii) setting of the tertiary HPGR crushers and cable tray and lighting installation in the tertiary crusher area.

During the quarter, Coeur successfully aligned the construction of the pre-screens with the completion of the new crusher to maintain a mid-2023 mechanical completion target. Ramp-up and commissioning is anticipated to take place during the second half of next year.

Coeur also completed a review of the total capital costs necessary to complete the expansion, resulting in a 9 - 12% increase in the capital estimate to $650 - $670 million. The estimate reflects the finalization of cost estimates for pre-screens, higher prices and quantities of steel and concrete, and additional contingency.

As of September 30, 2022, the Company had committed approximately $575 million of capital since the inception of the project and approximately $443 million of the estimated project cost had been incurred.

Other Commitments and Contingencies

As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit, bank guarantees and, in some cases, cash as financial support for various purposes, including environmental remediation, reclamation, collateral for gold hedges and other general corporate purposes. As of September 30, 2022 and December 31, 2021, the Company had surety bonds totaling $326.7 million and $315.1 million, respectively, in place as financial support for future reclamation and closure costs. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations and from time-to-time, the Company may be required to post collateral, including cash or letters of credit which reduce availability under its revolving credit facility, to support these instruments. As the specific requirements are met, the beneficiary of the associated instrument

cancels and/or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements through existing or alternative means, as they arise.