10-Q/A 1 pdm61a.txt FORM 10-Q, AMENDMENT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q/A No. 1 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. COEUR D'ALENE MINES CORPORATION -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Idaho 1-8641 82-0109423 ---------------------- ----------------- --------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification Number) 505 Front Avenue, P.O. Box "I" Coeur d'Alene, Idaho 83814 --------------------------------------- ----------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (208) 667-3511 The undersigned registrant hereby includes the following portions of its Annual Report on Form 10-K for the year ended December 31, 2000, as set forth in the pages attached hereto: Part I. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. COEUR D'ALENE MINES CORPORATION Date: May 31, 2001 By: /s/ Geoffrey A. Burns ------------------------------------------------- Geoffrey A. Burns Senior Vice President and Chief Financial Officer COEUR D'ALENE MINES CORPORATION AMENDMENT NO. 1 TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2001 The purpose of this Amendment No. 1 to the Quarterly Report on Form 10-Q of Coeur d'Alene Mines Corporation (the "Company") is to set forth the market prices of silver and gold as of a recent date that were inadvertently not included in the second sentence of the second paragraph of the Management's Discussion and Analysis of Financial Condition and Results of Operations (the "MD&A") on page 14 of the Form 10-Q as filed on May 15, 2001. That sentence has been revised to set forth the $4.35 market price of silver and $269.05 market price of gold as of May 11, 2001. No other revisions to the MD&A are made by this amendment. PART I Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------- General ------- The results of the Company's operations are significantly affected by the market prices of gold and silver which may fluctuate widely and are affected by many factors beyond the Company's control, including, without limitation, interest rates, expectations regarding inflation, currency values, governmental decisions regarding the disposal of precious metals stockpiles, global and regional political and economic conditions, and other factors. The average price of silver and gold in the first quarter of 2001 was $4.56 and $263 per ounce, respectively. The market price of silver (Handy & Harman) and gold (London Final) on May 11, 2001 were $4.35 per ounce and $269.05 per ounce, respectively. The Company's currently operating mines are the Rochester mine in Nevada, the Galena mine in the Coeur d'Alene Mining District of Idaho, and the Petorca mine in Chile. This document contains numerous forward-looking statements relating to the Company's gold and silver mining business. The United States Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward looking statements. Operating, exploration and financial data, and other statements in this document are based on information the company believes reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from the Company's future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. 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. The following table sets forth the amounts of gold and silver produced by the mining properties owned by the Company or in which the Company has an interest, based on the amounts attributable to the Company's ownership interest, and the cash and full costs of such production during the three-month periods ended March 31, 2001 and 2000: THREE MONTHS ENDED March 31, ------------------------ 2001 2000 --------- --------- ROCHESTER MINE Gold ozs. 19,519 15,457 Silver ozs. 1,501,649 1,538,260 Cash Costs per equiv. oz./silver $3.88 $4.27 Full Costs per equiv. oz./silver $4.84 $5.45 Galena Mine Silver ozs. 1,107,941 790,792 Cash Costs per oz./silver $4.36 $5.82 Full Costs per oz./silver $5.01 $6.54 PRIMARY SILVER MINES --------- --------- Consolidated Cash Costs per equivalent oz.of silver $4.02 $4.65 --------- --------- YILGARN STAR MINE (Note A) Gold ozs. N/A 6,120 Cash Costs per oz./gold N/A $268 Full Costs per oz./gold N/A $378 FACHINAL MINE (Note B) Gold ozs. N/A 5,415 Silver ozs. N/A 263,726 Cash Costs per equiv. oz./gold N/A $338 Full Costs per equiv. oz./gold N/A $462 PETORCA MINE Gold ozs. 7,159 5,172 Silver ozs. 22,127 10,642 3 Cash Costs per oz./gold $354 $384 Full Costs per oz./gold $373 $395 PRIMARY GOLD MINES --------- --------- Consolidated Cash Costs per equivalent oz.of gold $354 $365 --------- --------- CONSOLIDATED TOTAL METAL PRODUCTION Gold ozs. 26,678 32,164 Silver ozs. 2,631,717 2,603,390 Note A: On February 7, 2001, the Company sold its interest in the Yilgarn Star Mine, effective December 31, 2000. Note B: The Company placed the Fachinal Mine on temporary standby effective December 7, 2000. OPERATING HIGHLIGHTS -------------------- North America Rochester Mine (Nevada) ---------------------- The Rochester Mine produced 1.5 million ounces of silver and 19,519 ounces of gold in the first quarter of 2001 compared to 1.54 million ounces of silver and 15,457 ounces of gold in the first quarter of the prior year. The increase in gold production was largely anticipated as the planned mining sequence for 2001 concentrated in a gold-rich area of the main pit. Cash costs for the period declined to $3.88 per silver equivalent ounce from $4.27 per ounce in 2000. The decline in cash costs is due in part to the higher gold production but also to the number of operating improvements carried out last year, particularly upgrading the crushing circuit, changing the blasting pattern to increase ore fragmentation and adjusting the leach solution chemistry. Additional modifications to increase crushing capacity at Rochester, will be completed by the end of May. To follow up on last year's very successful mine exploration program, Coeur commenced reverse circulation drilling at Rochester on March 20. By the end of the month, 12 holes comprising 5,200 feet were completed and the data is currently being analyzed. In early April, drilling commenced at the Nevada Packard satellite deposit located to the south of the main pit. Coeur Silver Valley (Idaho) -------------------------- Silver production at Coeur Silver Valley (the Galena mine) increased by more than 40 percent to 1.1 million ounces in 2001 compared to 0.79 million ounces in the first quarter of last year. Total cash costs for the quarter were down in excess of 25 percent at $4.36 per ounce from $5.82 per ounce in 2000. The increase in production and decrease in cash costs was due to comprehensive underground development and optimization programs instituted in the prior year. This has provided greater access to the recently discovered high-grade vein systems at depth. 4 These vein structures also tend to be wider than most of the vein systems mined in the upper levels and this has enabled Coeur to increase mill throughput and further lower costs. As the development of these deeper vein systems progressed, the mine staff completed intensive studies that supported the Company's decision to introduce trackless mining equipment in these areas. To date, trackless mining and drilling equipment have been transported underground, an underground hoist has been installed and ramp construction is well underway. Coeur expects the initial production of ore from trackless mining by the end of June of this year. Exploration drilling is presently underway to extend the high grade 72 vein up dip and to the west of current operations as well as the detailed evaluation of the 117 vein on the 3700 level of the mine. Chile ----- Earlier this year, Coeur formally engaged Macquarie North America Limited to assist with the sale of the Company's gold holdings in Chile. These holdings consist of the Fachinal and Petorca mines, exploration properties and other financial assets. Fachinal Mine ------------- Coeur suspended operations at the Fachinal mine in the fourth quarter of 2000 to evaluate and fully develop the Cerro Bayo gold-silver discovery. Although there was no mining activity in the latest quarter, surface mapping and detailed sampling programs were carried out to extend the limits of the Cerro Bayo zone, and have provided positive results. Petorca ------- At Petorca, gold and silver production increased to 7,159 ounces and 22,127 ounces respectively, compared to 5,172 ounces of gold and 10,642 ounces of silver in the first quarter of 2000. Total cash costs for gold were $354 per ounce compared to $384 per ounce in the prior year's first quarter. Australia Yilgarn Star (Western Australia) -------------------------------- Consistent with the Company's stated strategy to focus primarily on the development of its silver assets, Coeur initiated a program in early 2001 to sell its non-core gold holdings. Consequently, on February 7, 2001, the Company sold its 50% shareholding in Gasgoyne Gold Mines NL ("Gasgoyne") for A$28.1 million (US$15.6 million) in cash. Gasgoyne owns 50% of the Yilgarn Star Mine located in Western Australia and certain other exploration stage properties. The purchaser was Sons of Gwalia Ltd., an Australian corporation who owned the other 50% of Gasgoyne. 5 The sale was effective as at December 31, 2000, and as a result Coeur did not have an interest in the Yilgarn Star Mine's production in the first quarter of 2001. DEVELOPMENT PROJECTS -------------------- San Bartolome (Bolivia) ----------------------- Late last year, Coeur completed a comprehensive prefeasibility study at its San Bartolome silver development project near the town of Potosi, Bolivia. The San Bartolome project is located adjacent to Cerro Rico mountain, one of world's historic and most prolific silver producing regions. The prefeasibility study defined a resource of 122 million contained ounces of silver of which 93 percent was classified as measured and indicated. In addition, a detailed process flow sheet design and site plan layout was completed as well as comprehensive estimates of all operating and capital costs. All data has been checked and verified by third-party engineering and geological consulting firms. During this year's first quarter, work continued primarily to expand the existing resource and carry out further metallurgical studies to optimize silver recoveries and possibly recover tin as a by-product. Alternate tailings disposal sites were also examined and additional baseline environmental data was collected. Coeur intends to commence a formal feasibility study during 2001. RESULTS OF OPERATIONS --------------------- Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000. -------------------- Revenues -------- Despite sharply lower realized gold and silver prices, product sales in the first quarter of 2001 increased by $3.2 million, or 21%, from the first quarter of 2000 to $18.0 million. The increase in sales is primarily attributable to increased production of silver and concentrate inventory sales from the Galena and Petorca mines. In the first quarter of 2001, the Company produced a total of 2,631,717 ounces of silver and 26,678 ounces of gold compared to 2,603,390 ounces of silver and 32,164 ounces of gold in the first quarter of 2000. In the first quarter of 2001, the Company realized average silver and gold prices of $4.52 and $270, respectively, compared with realized average prices of $5.19 and $342, respectively, in the prior year's first quarter. The decline in gold production was due primarily to the sale of the Company's interest in Gasgoyne, as well as the lack of production from Fachinal. This was partially offset by higher gold production at Rochester and Petorca. Interest and other income in the first quarter of 2001 decreased by $3.0 million compared with the first quarter of 2000. The decrease is primarily due to a $1.2 million decrease in gains recorded on the mark to market adjustment for the call option portion of the Company's hedge 6 program and $.7 million less interest income received as a result of lower interest rates and lower cash balances. Costs and Expenses ------------------ Production costs in the first quarter of 2001 increased by $4.8 million, or 36%, from the first quarter of 2000 to $18.3 million. The increase in production costs is primarily a result of increased sales for the first quarter of 2001 over the first quarter of 2000. Depreciation and amortization decreased in the first quarter of 2001 by $2.1 million, or 43%, from the prior year's first quarter, primarily due to no depletion or amortization taken at the Fachinal mine due to temporary suspension of operations, resulting in no production, and no depletion associated with the Yilgarn Star mine due to sale of the Company's interest in early February 2001. Administrative and general expenses decreased $.8 million in the first quarter of 2001 compared to 2000, due to decreased annual incentive awards in 2001. Net Loss -------- As a result of the above mentioned factors, as well as debt retirement discussed below, the Company's net loss amounted to $8.1 million in the first quarter of 2001 compared to a net loss of $9.8 million in the first quarter of 2000. The net loss attributable to common shareholders was $8.1 million for the first quarter of 2001, or $.22 per share, compared to $12.0 million for the first quarter of 2000, or $.39 per share. Debt Reduction Program ---------------------- One of the Company's major objectives over the past three years has been to reduce the level of its long-term debt and consequent interest payments. To the end of April 2001, Coeur had reduced its long-term debt by more than $100 million, recognizing extraordinary gains of approximately $41 million over the past three years. On March 19, 2001, the Company exchanged 1,787,500 of its common shares for $5 million principal value of its 7 1/4 percent Convertible Subordinated Debentures due 2005, recording an extraordinary gain of $3.0 million in the first quarter of 2001. On April 30, 2001, the Company announced that it completed three similar transactions, exchanging a total of 4,257,618 common shares for a principal amount of $11 million of its 7 1/4 percent Convertible Subordinated Debentures due 2005. As a consequence of these latest transactions, Coeur's total outstanding convertible debt had been reduced to $188.1 million at April 30, 2001, and annual interest expense will be decreased by approximately $1.2 million. 7 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Working Capital; Cash and Cash Equivalents The Company's working capital at March 31, 2001 was approximately $98.5 million compared to $93.0 million at December 31, 2000. The ratio of current assets to current liabilities was 5.1 to 1.0 at March 31, 2001 compared to 4.7 to 1.0 at December 31, 2000. Net cash used in operating activities in the three months ended March 31, 2001 was $6.0 million compared to $7.8 million in the three months ended March 31, 2000. Net cash provided from investing activities in the 2001 period was $16.5 million compared to net cash provided in investing activities of $4.5 million in the prior year's comparable period. The cash provided in the 2001 period was attributable to net proceeds of $14.7 million received from the sale of the Company's interest in Gasgoyne and proceeds from sale of short-term investments and marketable securities of $4.0 million net of purchases in the first three months of 2001, offset by capital expenditures primarily at the Fachinal and Galena Mines, and the Kensington Development property. Net cash used in financing activities was $.3 million in the first three months of 2001, compared to $2.8 million used in the first three months of 2000. As a result of the above, cash and cash equivalents increased by $10.2 million in the first three months of 2001 compared to a decrease of $6.1 million for the comparable period in 2000. Federal Natural Resources Action On March 22, 1996, an action was filed in the United States District Court for the District of Idaho by the United States against various defendants, including the Company, asserting claims under CERCLA and the Clean Water Act for alleged damages to federal natural resources in the Coeur d'Alene River Basin of Northern Idaho as a result of alleged releases of hazardous substances from mining activities conducted in the area since the late 1800s. On March 16, 2001, the Company and representatives of the U.S. Government, including the Environmental Protection Agency, the Department of Interior and the Department of Agriculture, reached an agreement in principle to settle the lawsuit, which represents the only suit in which the Company has been named a party. Effectiveness of the settlement and related dismissal of the lawsuit against the Company is subject to final Justice Department and Court approval. Pursuant to the terms of the proposed settlement, the Company will pay the U.S. Government a total of approximately $3.9 million, of which $3.3 million will be paid within 15 days after effectiveness of the settlement and the remaining $.6 million will be paid within 45 days after effectiveness of the settlement. In addition, the Company will (i) pay the United States 50% of any future recoveries from insurance companies for claims for defense and indemnification coverage under general liability insurance policies in excess of $600,000, (ii) accomplish certain cleanup work on the Mineral Point property (i.e., the former Coeur Mine site) and Calladay property, and (iii) make available certain real property to be used as a waste repository. Finally, commencing five years after effectiveness of the settlement, the Company will be obligated to pay net smelter royalties on its operating properties, up to a maximum of $3 million, amounting to a 2% net smelter royalty on silver production if the price of silver exceeds $6.50 per ounce, and a $5.00 per ounce net smelter royalty on gold production if the price of gold exceeds $325 per ounce. The royalty would run for 15 years commencing five years after 8 effectiveness of the settlement. When the settlement agreement becomes effective, the Court will issue a consent decree dismissing the action against the Company. As a result of the settlement, the Company recorded a charge to other expense of $4.2 million in the fourth quarter of 2000 which includes $3.9 million of settlement payments, the land transfer expenses and related legal fees. Lawsuit to Recover Inventory During the first quarter of 2000, Handy and Harmon Refining Group, Inc., to which the Rochester Mine had historically sent approximately 50% of its dore, filed for Chapter 11 bankruptcy. The Company had an inventory at the refinery of approximately 67,000 ounces of silver and 5,000 ounces of gold that has been delivered to certain creditors of Handy and Harmon. The dore inventory has a cost basis of $1.8 million. On February 27, 2001, the Company commenced a lawsuit against Handy and Harmon and certain others in the U.S. Bankruptcy Court for the District of Connecticut seeking recovery of the metals and/or damages. Although the Company believes it has a basis for full recovery, it is premature to predict the outcome of the lawsuit. 9