10-Q 1 sdc182a.txt 10-Q QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549' ----------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE --- ACT OF 1934 For the quarterly period ended June 30, 2002 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: 1-8641 ------ COEUR D'ALENE MINES CORPORATION (Exact name of registrant as specified on its charter) IDAHO 82-0109423 ------------------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer Ident. No.) incorporation or organization) P. O. Box I, Coeur d'Alene, Idaho 83816-0316 --------------------------------- ---------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code:(208) 667-3511 ------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last report 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 X NO ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of Issuer's classes of common stock, as of the latest practicable date: Common stock, par value $1.00, of which 84,918,645 shares were issued and outstanding as of August 15, 2002. COEUR D'ALENE MINES CORPORATION INDEX Page No. PART I. Financial Information (unaudited) Item 1. Financial Statements Consolidated Balance Sheets -- June 30, 2002 and December 31, 2001 3 Consolidated Statements of Operations and Comprehensive Loss -- Three Months and Six Months Ended June 30, 2002 and 2001 5 Consolidated Statements of Cash Flows -- Three Months and Six Months Ended June 30, 2002 and 2001 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 PART II. Other Information Item 2. Changes in Securities and Use of Proceeds 34 Item 3. Quantitative and Qualitative Disclosure about Market Risk 35 Item 6. Exhibits and Reports on Form 8-K 37 SIGNATURES 38 2 COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2002 2001 ---------- ------------ ASSETS (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 11,955 $ 14,714 Short-term investments 763 3,437 Receivables and prepaid expenses 6,217 5,902 Inventories 47,636 46,286 --------- --------- TOTAL CURRENT ASSETS 66,571 70,339 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 100,580 99,096 Less accumulated depreciation (69,390) (65,422) --------- --------- 31,190 33,674 MINING PROPERTIES Operational mining properties 121,410 117,555 Less accumulated depletion (82,936) (79,697) --------- --------- 38,474 37,858 Developmental properties 46,724 46,685 --------- --------- 85,198 84,543 OTHER ASSETS Restricted investments 11,591 11,219 Debt issuance costs, net of accumulated amortization 3,585 3,262 Other 4,537 7,343 --------- --------- 19,713 21,824 --------- --------- $ 202,672 $ 210,380 ========= ========= See notes to consolidated financial statements. 3 COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2002 2001 ---------- ------------ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 5,637 $ 3,721 Accrued liabilities 8,044 7,561 Accrued interest payable 2,274 2,720 Accrued salaries and wages 3,947 4,542 6% convertible subordinated debentures due 2002 - 23,171 --------- --------- TOTAL CURRENT LIABILITIES 19,902 41,715 LONG-TERM LIABILITIES 13 3/8% convertible senior subordinated notes due December 2003 (Series I) 25,327 41,399 13 3/8% convertible senior subordinated notes due December 2003 (Series II) (net of discount of $5,175) 16,304 - 6 3/8% convertible subordinated debentures due January 2004 65,457 66,270 7 1/4% convertible subordinated debentures due October 2005 14,394 14,650 Reclamation and mine closure 13,696 14,462 Other long-term liabilities 5,663 5,096 --------- --------- TOTAL LONG-TERM LIABILITIES 140,841 141,877 SHAREHOLDERS' EQUITY Common Stock, par value $1.00 per share- authorized 125,000,000 shares, issued 80,090,060 and 49,278,232 shares at June 30, 2002 and December 31, 2001 (including 1,059,211 shares held in treasury), respectively 80,090 49,278 Capital surplus 395,607 388,050 Accumulated deficit (420,750) (397,999) Shares held in treasury (13,190) (13,190) Accumulated other comprehensive income 172 649 --------- --------- 41,929 26,788 --------- --------- $ 202,672 $ 210,380 ========= ========= See notes to consolidated financial statements. 4 COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) 3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 -------------------- -------------------- 2002 2001 2002 2001 -------- -------- -------- -------- (In thousands except for per share data) REVENUES Product sales $ 19,565 $ 18,213 $ 36,034 $ 36,219 Interest and other 2,564 1,838 3,092 1,854 -------- -------- -------- -------- Total Revenues 22,129 20,051 39,126 38,073 COSTS AND EXPENSES Production 16,262 17,836 34,276 36,093 Depreciation and amortization 3,533 2,549 5,411 5,366 Administrative and general 2,464 2,163 4,569 4,440 Exploration 983 1,882 1,611 3,274 Prefeasibility 960 555 1,782 1,121 Interest 5,447 3,638 9,848 7,382 Other 667 856 1,460 1,073 Loss (gain) on retirement of debt 2,668 (5,791) 2,920 (8,972) -------- -------- -------- -------- Total Costs and Expenses 32,984 23,688 61,877 49,777 -------- -------- -------- -------- LOSS BEFORE INCOME TAXES (10,855) (3,637) (22,751) (11,704) Income tax provision - - - 1 -------- -------- -------- -------- NET LOSS (10,855) (3,637) (22,751) (11,705) Unrealized holding gain (loss) on securities (578) 296 (477) 711 -------- -------- -------- -------- COMPREHENSIVE LOSS $(11,433) $ (3,341) $(23,228) $(10,994) ======== ======== ======== ======== BASIC AND DILUTED LOSS PER SHARE DATA Weighted average number of shares of Common Stock 67,654 43,100 60,008 39,729 ======== ======== ======== ======== Net Loss per share attributable to Common Shareholders $ (0.16) $ (0.08) $ (0.38) $ (0.29) ======== ======== ======== ======== See notes to consolidated financial statements. 5 COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three and Six Months Ended June 30, 2002 and 2001 (Unaudited) 3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 -------------------- -------------------- 2002 2001 2002 2001 -------- -------- -------- -------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(10,855) $ (3,637) $(22,751) $(11,705) Add (deduct) noncash items: Depreciation, depletion, and amortization 3,533 2,549 5,411 5,366 (Gain) loss on early retirement of debt 2,920 (5,791) 2,920 (8,972) Other 100 622 917 2,811 Non-cash interest expense 4,185 - 5,388 - Unrealized loss (gain) on written calls - 158 - (221) Changes in Operating Assets and Liabilities: Receivables 864 3,108 (435) 3,927 Inventories (1,348) 1 600 1,374 2,640 Accounts payable and accrued liabilities 698 (8,603) 1,754 (9,811) -------- -------- -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 97 (9,994) (5,422) (15,965) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments (782) (468) (782) (1,723) Proceeds from sales of short- term investments 2,420 337 3,684 5,603 Proceeds from sale of assets 6 - 6 14,733 Expenditures on mining assets (3,177) (1,908) (4,731) (3,885) Other 115 (303) (22) (562) -------- -------- -------- -------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,418) (2,342) (1,845) 14,166 CASH FLOWS FROM FINANCING ACTIVITIES Retirement of debt (9,427) - (9,427) - Proceeds from issuance of long-term debt, net of issuance costs 14,050 - 14,050 - Other (54) (75) (115) (371) -------- -------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,569 (75) 4,508 (371) -------- -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,248 (12,411) (2,759) (2,170) Cash and cash equivalents at beginning of period 8,707 45,468 14,714 35,227 -------- -------- -------- -------- Cash and cash equivalents at end of period $ 11,955 $ 33,057 $ 11,955 $ 33,057 ======== ======== ======== ======== See notes to consolidated financial statements. 6 Coeur d'Alene Mines Corporation and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE A: Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and six month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Coeur d'Alene Mines Corporation ("Coeur" or the "Company") Annual Report on Form 10-K for the year ended December 31, 2001. NOTE B: Summary of Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the wholly-owned subsidiaries of the Company, the most significant of which are Coeur Rochester, Inc., Coeur Silver Valley, Inc., Coeur Alaska, Inc., CDE Cerro Bayo Ltd., Compania Minera CDE Petorca, Coeur Australia and Empressa Minera Manquiri S.R.L. The consolidated financial statements also include all entities in which voting control of more than 50% is held by the Company. The Company has no investments in entities in which it has greater than 50% ownership interest accounted for using the equity method. Intercompany balances and transactions have been eliminated in consolidation. Investments in corporate joint ventures where the Company has ownership of 50% or less and funds its proportionate share of expenses are accounted for under the equity method. The Company has no investments in entities in which it has greater than 20% ownership interest accounted for using the cost method. Revenue Recognition: Revenue is recognized when title to silver and gold passes at the shipment or delivery point to the buyer. The effects of forward sales contracts and purchased put contracts are reflected in revenue at the date the related precious 7 metals are delivered or the contracts expire. All by-product sales and third party smelting and refining costs are recorded as revenue product sales. By-product sales are primarily derived from copper which is produced as part of the silver recovery process at Coeur Silver Valley. On an annual basis, by-product sales represent less than 5% of revenues recognized as product sales. Cash and Cash Equivalents: Cash and cash equivalents include all highly-liquid investments with a maturity of three months or less at the date of purchase. The Company minimizes its credit risk by investing its cash and cash equivalents with major international banks and financial institutions located principally in the United States and Chile with a minimum credit rating of A1 as defined by Standard & Poor's. The Company's management believes that no concentration of credit risk exists with respect to investment of its cash and cash equivalents. Short-term Investments: Short-term investments principally consist of highly-liquid United States, foreign government and corporate securities with original maturities in excess of three months and less than one year. The Company classifies all short-term investments as available-for-sale securities. Unrealized gains and losses on these investments are recorded in accumulated other comprehensive income as a separate component of shareholders' equity. Any decline in market value judged to be other than temporary is recognized in determining net income. Realized gains and losses from the sale of these investments are included in determining net loss. Inventories: Inventories include ore on leach pads, ore in the milling processes, concentrates, dore and ore in stock piles. The classification of inventory is determined by the stage at which the ore is in the production process. The gold and silver content of inventories of ore on leach pads is calculated based on samples taken of the ore prior to placement on the leach pad. The ore on leach pads is then valued based on the lower of actual costs incurred or estimated net realizable value based upon the period ending prices of gold and silver. Material that does not contain a minimum quantity of gold and silver is not placed on the leach pad and is classified as waste with no value. Inventories of ore in stock piles and ore in the milling process are also sampled for gold and silver content and are valued based on the lower of actual costs incurred or estimated net realizable value based upon the period ending prices of gold and silver. Material that does not contain a minimum quantity of gold and silver to cover estimated processing expense to recover the contained gold and silver is not classified as inventory and is assigned no value. Inherent in estimating net realizable value is an estimate of the percentage of the minerals on leach pads and in process that will ultimately be recovered. There have been no adjustments to the recovery rates used in estimated net realizable value for the periods presented in these financial statements. Management evaluates this estimate on an ongoing basis and adjustments are accounted for prospectively. All inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out and weighted average cost methods. Concentrate and dore inventory includes product at the mine site and product held by refineries and are also valued at lower of cost or market. Property, Plant, and Equipment: Expenditures for new facilities, new assets or expenditures that extend the useful lives of existing facilities are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs 8 over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives range from 7 to 31 years for buildings and improvements, 3 to 13 years for machinery and equipment and 3 to 7 years for furniture and fixtures. Certain mining equipment is depreciated using the units-of-production method based upon estimated total proven and probable reserves. Maintenance and repairs are expensed as incurred. Operational Mining Properties and Mine Development: Mineral exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property including costs to further delineate the ore body and remove over burden to initially expose the ore body, are capitalized. Such costs are amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves. Significant payments related to the acquisition of the land and mineral rights are capitalized as incurred. Prior to acquiring such land or mineral rights the Company generally makes a preliminary evaluation to determine that the property has significant potential to develop an economic ore body. The time between initial acquisition and full evaluation of a property's potential is variable and is determined by many factors including: location relative to existing infrastructure, the property's stage of development, geological controls and metal prices. If a mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no mineable ore body is discovered, such costs are expensed in the period in which it is determined the property has no future economic value. Interest expense allocable to the cost of developing mining properties and to construct new facilities is capitalized until assets are ready for their intended use. Gains or losses from sales or retirements of assets are included in other income or expense. Asset Impairment: Management reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company utilizes the methodology set forth in Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of Long Lived Assets and Long Lived Assets to be Disposed Of" to evaluate the recoverability of capitalized mineral property costs. An impairment is considered to exist if total estimated future cash flows or probability-weighted cash flows on an undiscounted basis, is less than the carrying amount of the assets, including property plant and equipment, mineral property, development property, and any deferred costs such as deferred stripping. An impairment loss is measured and recorded based on discounted estimated future cash flows or the application of an expected present value technique to estimate fair value in the absence of a market price. Future cash flows include estimates of proven and probable 9 recoverable ounces, gold and silver prices (considering current and historical prices, price trends and related factors), production levels, capital and reclamation costs, all based on detailed engineering life-of-mine plans. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. Any differences between significant assumptions and market conditions and/or the Company's performance could have material effect on the Company's financial position and results of operations. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of cash flows from other groups. Generally, in estimating future cash flows, all assets are grouped at a particular mine for which there is identifiable cash flow. In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," that established a single accounting model, based on the framework of SFAS No. 121, for long-lived assets to be disposed of by sale. The statement was adopted on January 1, 2002, and there was no impact on the Company upon adoption. Restricted Investments: The Company, under the terms of its lease, self insurance, and bonding agreements with certain banks, lending institutions and regulatory agencies, is required to collateralize certain portions of the Company's obligations. The Company has collateralized these obligations by assigning certificates of deposit that have maturity dates ranging from three months to a year, to the respective institutions or agency. At June 30, 2002 and December 31, 2001, the Company had certificates of deposit under these agreements of $11.6 million and $11.2 million, respectively, restricted for this purpose. The ultimate timing for the release of the colaterallized amounts is dependent on the timing and closure of each mine. In order to release the collateral, the Company must seek approval from certain government agencies responsible for monitoring the mine closure status. Collateral could also be released to the extent the Company was able to secure alternative financial assurance satisfactory to the regulatory agencies. The Company believes there is a reasonable probability that the collateral will remain in place beyond the twelve-month period ending December 31, 2002, and has therefore classified these investments as long-term. Deferred Stripping Costs: Deferred stripping costs are unique to the mining industry and are determined based on the Company's estimates for the life of mine strip ratio for each mine. These costs are capitalized in periods when the life of mine ratio is below the current mining strip ratio, and amortized during periods where the life of mine strip ratio is above the current strip ratio. The Rochester mine is the only mine that has previously capitalized deferred stripping costs. The life of mine strip ratio that was used to accumulate the deferred stripping amounts was 1.8 to 1 (waste to ore) and was based on the estimated average stripping ratio for the life of the mine, compared to the then current ratio of 2.2 to 1 (waste to 10 ore) for the periods presented in the Statements of Operations. The deferred stripping costs have been amortized as waste and ore have been removed from the Rochester mine pit. At present the remaining life of mine plan estimates the future stripping ratio as 1.1 to 1 (waste to ore), and the remaining costs will be amortized over the remaining life of the mine. At June 30, 2002 and December 31, 2001 the carrying amount of the deferred stripping costs were $1.6 million and $1.7 million, respectively, and are included in other assets in the accompanying balance sheet. No additional deferred stripping costs were capitalized during the periods presented. Based on current reserves and current production levels the amortization would be no less than four years. The amounts that were amortized for the six months ended June 30, 2002 and June 30, 2001 were $0.1 million and $0.2 million, respectively which we included in depreciation and depletion in the Statement of Operations. Reclamation and Remediation Costs: Estimated future costs are based principally on legal and regulatory requirements. Such costs related to active mines are accrued and charged over the expected operating lives of the mines using the unit-of-production method. Future remediation costs for inactive mines are accrued based on management's best estimate at the end of each period of the undiscounted costs expected to be incurred at the site. Such cost estimates include, where applicable, ongoing care and maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised. In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which established a uniform methodology for accounting for estimated reclamation and abandonment costs. The statement will be adopted January 1, 2003, when the Company will record the estimated present value of reclamation liabilities and change the carrying amount of the related asset. Subsequently, the reclamation costs will be allocated to expense over the life of the related assets and will be adjusted for changes resulting from the passage of time and revisions to either the timing or amount of the original present value estimate. The Company is in the process of quantifying the effect of adoption. Foreign Currency: Substantially all assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the end of each period. Revenues and expenses are translated at the average exchange rate for the period. Foreign currency transaction gains and losses are included in the determination of net income. Derivative Financial Instruments: The Company uses derivative financial instruments as part of an overall risk-management strategy. These instruments are used as a means of hedging exposure to precious 11 metals prices and foreign currency exchange rates. The Company does not hold or issue derivative financial instruments for trading purposes. Written options do not qualify for hedge accounting and are marked to market each reporting period with corresponding changes in fair value recorded to operations as other income. The Company uses forward sales contracts and combinations of put and call options to fix a portion of its exposure to precious metals prices. The underlying production for forward sales contracts is designated for physical delivery at the inception of the derivative. If the Company enters into derivatives that qualify for hedge accounting, deferral accounting is applied only if the derivatives continue to reduce the price risk associated with the underlying hedged production. Contracted prices on forward sales contracts are recognized in product sales as the designated production is delivered or sold. In the event of early settlement of hedge contracts, gains and losses are deferred and recognized in income at the originally designated delivery date. The Company uses foreign currency contracts to hedge its exposure to movements in the foreign currency translation amounts for anticipated transactions. These contracts are marked-to-market to earnings each reporting period. Income Taxes: The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company's liabilities and assets and the related income tax basis for such liabilities and assets. This method generates a net deferred income tax liability or asset for the Company as of the end of the year, as measured by the statutory tax rates in effect as enacted. The Company derives its deferred income tax charge or benefit by recording the change in the net deferred income tax liability or asset balance for the year. The Company's deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets that it believes will more likely than not fail to be realized. Comprehensive Income: In addition to net loss, comprehensive income includes all changes in equity during a period, except those resulting from investments by and distributions to owners. Items of comprehensive income include foreign currency exchanges, the effective portions of hedges and unrealized gains and losses on investments classified as available-for-sale. Loss Per Share: Loss per share is computed by dividing the net loss attributable to common stock by the weighted average number of common shares outstanding during each period. All stock options outstanding at each period end have been excluded from the weighted 12 average share calculation. The effect of potentially dilutive stock options outstanding was antidilutive in 2001 and 2000. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications: Certain reclassifications of prior year balances have been made to conform to current year presentation. The Company has reclassified restricted investments to long-term restricted investments on December 30, 2001 balance sheet to conform to the June 30, 2002 balance sheet. Note C: Business Acquisitions On April 2, 2002, the Company completed the acquisition of Compania Minera Polimet S.A. ("Polimet") from Yamana Resources Inc. ("Yamana") for $2.5 million in cash. The acquisition of Polimet has been accounted for under the purchase method of accounting in accordance with APB No. 16. The carrying values of assets and liabilities other than the mining properties have been estimated to approximate fair market value. Polimet owns 100% of the Martha Mine and an exploration land package consisting of approximately 202,000 acres located in the western portion of the Santa Cruz Province, Argentina. The results of operations of Polimet has been included in the Company's financial statements for the time period after the date of acquisition, April 2, 2002. Coeur also acquired warrants to purchase 10 million common shares of Yamana for an additional $600,000. The Company purchased 5 million shares in May, and may purchase 2.5 million shares in September, and 2.5 million shares in December. NOTE D: Inventories Inventories are comprised of the following: JUNE 30, DECEMBER 31, 2002 2001 ---------- ------------ (In Thousands) In process, stockpiles and on leach pads $ 36,603 $ 39,794 Concentrate and dore' inventory 5,886 1,567 Supplies 5,147 4,925 -------- -------- $ 47,636 $ 46,286 ======== ======== Long-term in process and on leach pads $ - $ 2,725 ======== ======== Inventories of ore on leach pads and in the milling process are valued based on actual costs incurred or estimated net realized value, 13 less costs allocated to minerals recovered through the leaching and milling processes. Inherent in estimating net realized value is an estimate of the percentage of the minerals on leach pads and in process that will ultimately be recovered. All inventories are stated at the lower-of-cost or market, with cost being determined using the first-in, first-out and weighted-average-cost methods. Concentrate and dore inventory includes product at the mine site and product held by refineries. NOTE E: Income Taxes The Company has reviewed its net deferred tax asset as of June 30, 2002, together with net operating loss carry forwards, and has decided to forego recognition of potential tax benefits arising therefrom. In making this determination, the Company has considered the Company's history of tax losses incurred since 1989, the current level of gold and silver prices and the ability of the Company to use accelerated depletion and amortization methods in the determination of taxable income. As a result, the Company's net deferred tax asset has been fully reserved at June 30, 2002 and December 31, 2001. NOTE F: Long-Term Debt and Supplemental Cash Flow Information In May 2002, The Company issued $21.5 million principal amount of new Series II 13 3/8% Convertible Senior Subordinated Notes ("Series II Notes") due December 2003, for proceeds of approximately $14.1 million, net of discount of $5.5 million and offering costs of approximately $1.9 million. Proceeds from this transaction were used to retire the outstanding $9.4 million of 6% Convertible Subordinated Debentures due June 10, 2002 upon their maturity along with accrued interest and for general corporate purposes. The new Series II Notes were issued on similar terms, subject to certain contingent provisions, as the Company's previously issued, currently outstanding Series I 13 3/8% Convertible Senior Subordinated Notes ("Series I Notes") due December 31, 2003. During the 2nd quarter of 2002, the Company repurchased $10.3 million, $0.8 million and $0.3 million principal amount of its outstanding 6%, 6-3/8% and 7-1/4% Convertible Subordinated Debentures, respectively, in exchange for 11.9 million shares of common stock and recorded a loss on retirement of debt of approximately $2.9 million. In addition, holders of $10.3 million of the Series I Notes voluntarily converted such Notes, under the terms of the indenture, into approximately 7.7 million shares of common stock. The Company also issued 2.7 million shares of common stock as payment of $4.2 million of accrued interest on the 13 3/8% Notes. During the 1st quarter of 2002, the Company repurchased $3.5 million principal amount of its outstanding 6% Convertible Subordinated Debentures in exchange for approximately 3.4 million shares of common stock. In addition, holders of $5.7 million 14 principal amount of Series I Notes voluntarily converted their Notes into 5.1 million shares of common stock. During the 2nd quarter of 2001, the Company repurchased $11.0 million principal amount of its outstanding 7-1/4% Convertible Subordinated Debentures in exchange for 4.3 million shares of common stock. During the 1st quarter of 2001, the Company repurchased $5.0 million principal amount of its outstanding 7-1/4% Convertible Subordinated Debentures in exchange for 1.8 million shares of common stock. NOTE G: Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision making group is comprised of the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer. The operating segments are managed separately because each segment represents a distinct use of Company resources and contribution to the Company's cash flows in its respective geographic area. The Company's reportable operating segments are the Rochester, Coeur Silver Valley and Cerro Bayo mining properties, the Kensington development property, and the Company's exploration programs, which includes the San Bartolome silver development property. All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of precious metal concentrates and/or refined precious metals. The Coeur Silver Valley and Cerro Bayo mines sell precious metal concentrates, typically under long term contracts to smelters located in Canada (Noranda Inc. and Cominco Ltd.), in the United States (Asarco Inc.) and Japan (Sumitomo Ltd. and DOWA Mining Company). Refined gold and silver produced by the Rochester mine is primarily sold on a spot basis to precious metal trading banks such as Goldman Sachs, Morgan Stanley, Mitsui and N.M. Rothschild. Intersegment revenues consist of precious metal sales to the Company's metals marketing division and are transferred at the market value of the respective metal on the date of the transfer. The other segment includes earnings from unconsolidated subsidiaries accounted for by the equity method, the corporate headquarters, elimination of intersegment transactions and other items necessary to reconcile to consolidated amounts. Revenues in the other segment are generated principally from interest received from the Company's cash and investments that are not allocated to the operating segments. The 15 accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the Company's Annual Report on Form 10-K. The Company evaluates performance and allocates resources based on each segments profit or loss before interest, income taxes, depreciation and amortization, unusual and infrequent items, and extraordinary items. Segment Reporting (In Thousands)
Rochester Galena Cerro Bayo Petorca Exploration Other Total -------------------------------------------------------------------------------------- Six Months Ended June 30, 2002 Total net sales and revenues $ 24,992 $ 13,275 $ - $ - $ - $ 859 $ 39,126 =================================================================================================================================== Depreciation and depletion 2,137 1,629 1,407 - 9 229 5,411 Interest income - - - - - 181 181 Interest expense - - 776 - - 9,072 9,848 Gain on forward sale contracts - - - - - 62 62 Write-down of mine property and other 245 396 819 1,460 Loss on early retirement of debt - - - - - (2,920) (2,920) Profit (loss) (1,420) 4,004 1,193 - (375) (6,451) (3,049) Investments in non-consolidated affiliates - - - - - - - Segment assets (A) 63,144 27,642 28,641 501 35 51,863 171,826 Capital expenditures for property 300 582 2,164 - - 1,685 4,731 Six Months Ended June 30, 2001 Total net sales and revenues $ 24,409 $ 8,531 $ 160 $ 3,451 $ - $ 1,522 $ 38,073 =================================================================================================================================== Depreciation and depletion 3,775 1,154 - 265 11 161 5,366 Interest income - - 1 2 - 1,148 1,151 Interest expense - - - - - 7,382 7,382 Gain on forward sale contracts - - - - - 221 221 Income tax (credit) expense - 1 - - - - 1 Gain on early retirement of debt - - - - - 8,972 8,972 Profit (loss) 1,976 (1,723) (1,528) (1,050) (810) (4,941) (7,076) Investments in non-consolidated affiliates - - - - - 12 12 Segment assets (A) 76,437 27,526 23,296 2,885 183 57,003 187,330 Capital expenditures for property 611 1,730 801 - 30 713 3,885 Notes: (A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
16 Segment Reporting Cont. (In Thousands) Six Months Ended June 30, 2002 2001 ---------- ---------- (Loss) Total loss from reportable segments $ (3,049) $ (7,076) Depreciation, depletion and amortization expense (5,411) (5,366) Interest expense (9,848) (7,382) (Loss) gain on early retirement of debt (2,920) 8,972 Other (1,523) (852) --------- --------- Loss before income taxes $ (22,751) $ (11,704) ========= ========= June 30, 2002 2001 ---------- ---------- Assets Total assets for reportable segments $ 171,826 $ 187,330 Cash and cash equivalents 11,955 33,057 Short-term investments 763 3,951 Other assets 18,128 17,340 --------- --------- Total consolidated assets $ 202,672 $ 241,678 ========= ========= Geographic Information (In thousands) Long-Lived June 30, 2002 Revenues Assets ---------- ---------- United States $ 39,419 $ 75,080 Chile (293) 21,922 Bolivia - 18,850 Other Foreign Countries - 2,121 --------- --------- Consolidated Total $ 39,126 $ 117,973 ========= ========= Long-Lived June 30, 2001 Revenues Assets ---------- ---------- United States $ 36,016 $ 88,394 Chile 1,857 21,406 Bolivia - 18,850 Other Foreign Countries 200 559 --------- --------- Consolidated Total $ 38,073 $ 129,209 ========= ========= Revenues are geographically separated based upon the country in which operations and the underlying assets generating those revenues reside. NOTE H: Hedging For the first half of 2001 the Company recorded a realized loss of approximately $0.2 million in connection with its hedge program. The Company has 14,000 ounces in forward sales in its gold protection program, whereby over the next six months the Company will receive an average price of $320. 17 The following table summarizes the information at June 30, 2002 associated with the Company's financial and derivative financial instruments that are sensitive to changes in interest rates, commodity prices and foreign exchange rates. For long-term debt obligations, the table presents principal cash flows and related average interest rates. For gold call options and amortizing forward sales, the table presents ounces contracted to be delivered and the related average price per ounce in U.S. dollars. For foreign currency exchange contracts, the table presents the notional amount in Chilean Peso's to be purchased along with the average foreign exchange rate.
Fair Value (dollars in thousands) 2002 2003 2004 2005 2006 Thereafter Total 6/30/02 ------------------------------------------------------------------------------------------------------------------- Liabilities Long Term Debt (prior to exchange) $128,820 Fixed Rate $ - $46,806 $ 65,457 $ 14,394 $ - $ - $126,657 Average Interest Rate 10.668% 9.061% 7.006% 7.250% Derivative Financial Instruments Gold Forward Sales - USD $ 21 Ounces 14,000 - - - - - - Price Per Ounce $320.00 - - - - - - Foreign Currency Contracts Chilean Peso - USD $ 1,500 $ 2,100 - - - - - $-(A) Exchange Rate 705 705 - - - - - (CLP to USD) (A. Entered into August 1, 2002)
Fair value is determined by trading information on or near the balance sheet date. Long term debt represents the face amount of the outstanding convertible debentures and timing of when these become due. Interest rates presented in the table are calculated using the weighted average of the outstanding face amount of each debenture for the period remaining in each period presented. All long term debt is denominated in US dollars. NOTE I: New Accounting Standards and Requirements In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). Under SFAS 145, most gains and losses from extinguishments of debt will not be classified as extraordinary items unless they meet much more narrow criteria in Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a 18 Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB 30"). SFAS 145 may be early adopted, but is otherwise effective for fiscal years beginning after May 15, 2002, and must be adopted with retroactive effect. The Company has not yet adopted such standard and will adopt such standard in fiscal 2003 in accordance with the effective date and transition guidance provided for in SFAS 145. The Company is currently evaluating the potential impact, if any, the adoption of SFAS 145 will have on its financial position and results of operations. The adoption of SFAS No. 145 will require the disclosure for gains or losses on the extinguishment of debt to not be extraordinary if they do not meet the criteria in APB Option No. 30. NOTE J: Litigation and Other Events 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 to settle the lawsuit. Pursuant to the terms of the Consent Decree dated May 14, 2001, the Company has paid the U.S. Government a total of approximately $3.9 million, of which $3.3 million was paid in May 2001 and the remaining $.6 million was paid in June 2001. 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 effectiveness of the settlement. Noranda Smelter Strike On June 18, 2002 we received notification from Noranda that the employees working at the smelter in Quebec were on strike. This 19 smelter is where Coeur Silver Valley ships essentially 100% of its concentrate. Under the terms of our contract with Noranda, they have declared a "Force Majure" and do not have to accept the concentrate sent to them by the Company's Galena Mine. Noranda has agreed to accept 650 tonnes of the Galena concentrate, which represents almost 100% of the concentrate produced by Coeur Silver Valley. Although there is no written contract for Noranda to continue to accept this amount, the Company is currently looking for alternative purchasers of the concentrate, and has been able to spot sell 400 tonnes to an alternative purchaser. Management believes that Noranda will continue to purchase all produced concentrate from Coeur Silver Valley. However, the Company would see a significant decrease in product sales from Coeur Silver Valley in the event Noranda does not continue to do so. Lawsuit to Recover Inventory During the first quarter of 2000, Handy & Harman Refining Group, Inc.("Handy & Harman"), to which the Rochester Mine had historically sent approximately 50% of its dore, filed for Chapter 11 bankruptcy. The Company had 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 & Harman. On February 27, 2001 the Company commenced a lawsuit against Handy & Harman and certain others in the U.S. Bankruptcy Court for the District of Connecticut seeking recovery of the metals and/or damages. Handy & Harman's Chapter 11 liquidation plan was confirmed by the Bankruptcy Court in August 2001 and on November 3, 2001, the Company received approximately $294,000 from Handy & Harman as a partial payment under the plan. The liquidating custodian of Handy & Harman under the liquidation plan recently advised the Company that Handy & Harman intends to file suit against the Company prior to March 28, 2002 for the value of 100,000 ounces of silver (i.e., approximately $500,000) as a preference based on the Company's draw-down of its account at Handy & Harman in mid-March 2000. Based on this more recent legal action, the Company has determined that the recovery of any additional amounts would be remote. As a result the Company has recorded a $1.4 million write-down of the carrying amount in the fourth quarter of 2001. Management of the Company and legal counsel believe that the threatened claims are without merit, and will vigorously defend any such suit. Bunker Hill Action On January 7, 2002, a private class action suit captioned Baugh vs. Asarco, et al., was filed in the Idaho District Court for the First District (Lawsuit No. 2002131) in Kootenai County, Idaho against the companies that have been defendants in the prior Bunker Hill and natural resources litigation in the Coeur d'Alene Basin, including the Company, by eight northern Idaho residents seeking medical benefits and property compensation from the mining companies involved in the Bunker Hill Superfund site. At this early stage of the litigation, the Company cannot predict the outcome of this suit. 20 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis includes references to total cash costs per ounce of gold and silver produced both on an individual mine basis and on a consolidated basis. Total cash costs per ounce represent a non- U.S. GAAP measurement that management uses to monitor and evaluate the performance of its mining operations. A reconciliation of total cash costs per ounce to U.S. GAAP "Production Expenses" is also provided here-in and should be referred to when reading the total cash cost per ounce measurement. General The results of the Company's operations are significantly affected by the market prices of silver and gold 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 prices of silver(Handy & Harmon)and gold(London Final)for the first half of 2002 were $4.63 and $301 per ounce, respectively. The market prices of silver and gold on August 9, 2002 were $4.67 per ounce and $312.95 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, the Cerro Bayo and Furioso Mines in Chile, and the Mina Martha mine in Argentina. 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. 21 The following table sets forth the amounts of silver and gold 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 and six-month periods ended June 30, 2001 and 2002: Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2002 2001 2002 2001 --------- --------- --------- --------- ROCHESTER MINE Gold ozs. 17,132 20,504 33,555 40,023 Silver ozs. 1,637,443 1,488,598 3,053,210 2,990,247 *Cash Costs per oz./silver $2.81 $3.15 $3.30 $3.25 Full Costs per oz./silver $3.65 $4.32 $4.15 $4.68 Galena Mine Silver ozs. 1,383,449 1,032,966 2,856,991 2,140,907 *Cash Costs per oz./silver $4.14 $4.61 $4.05 $4.48 Full Costs per oz./silver $4.86 $5.30 $4.74 $5.15 CERRO BAYO MINE Gold ozs. 5,919 N/A 5,919 N/A Silver ozs. 260,543 N/A 260,543 N/A *Cash Costs per oz./silver $2.34 N/A $2.34 N/A Full Costs per oz./silver $6.01 N/A $6.01 N/A PRIMARY SILVER MINES *Consolidated Cash Cost per ounce of silver $3.34 $3.75 $3.61 $3.77 PETORCA MINE Gold ozs. N/A 6,772 N/A 13,931 Silver ozs. N/A 35,610 N/A 57,737 *Cash Costs per oz./gold N/A $319 N/A $330 Full Costs per oz./gold N/A $338 N/A $349 PRIMARY GOLD MINES *Consolidated Cash Cost per ounce of gold N/A $319 N/A $330 CONSOLIDATED PRODUCTION TOTALS Gold ozs. 23,051 27,276 39,474 53,954 Silver ozs. 3,281,435 2,557,174 6,170,744 5,188,891 * See reconciliation of non-GAAP cash costs to GAAP production costs below under "Costs and Expenses". Note: "Cash Costs per Ounce" are calculated by dividing the cash costs computed for each of the Company's mining properties for a specified period by the amount of gold ounces or silver ounces produced by that property during that same period. Management uses cash costs per ounce produced as a key indicator of the profitability of each of its mining properties. Gold and silver are sold and priced in the world financial markets on a US dollar per ounce basis. 22 By calculating the cash costs from each of the Company's mines on the same unit basis, management can easily determine the gross margin that each ounce of gold and silver produced is generating. "Cash Costs" are costs directly related to the physical activities of producing silver and gold and include mining, processing and other plant costs, deferred mining adjustments, third-party refining and smelting costs, marketing expense, on-site general and administrative costs, royalties, in-mine drilling expenditures that are related to production and other direct costs. Sales of by-product metals are deducted from the above in computing cash costs. Cash costs exclude depreciation, depletion and amortization, corporate general and administrative expense, exploration, interest, and pre-feasibility costs and accruals for mine reclamation. Cash costs are calculated and presented using the "Gold Institute Production Cost Standard" applied consistently for all periods presented. Total cash costs per ounce is a non-GAAP measurement and investors are cautioned not to place undue reliance on it and are urged to read all GAAP accounting disclosures presented in the consolidated financial statements and accompanying footnotes, In addition, see the reconciliation of "cash costs" to production costs under the "Costs and Expenses" set forth below: Operating Highlights South America Cerro Bayo (Chile) o Commenced production on April 18, 2002 o 260,500 ounces of silver and 6,000 ounces of gold produced o Cash costs of $2.34 per silver ounce* o Projecting 3.6 million ounces of silver and 52,000 ounces of gold production during 2002 at an average cash cost of under $0.50 per silver ounce* Operations commenced at Cerro Bayo on April 18, 2002, approximately one month ahead of schedule. During the quarter, mining took place primarily from the main Lucero and Luz Eliana veins, which are proving to be wider than originally anticipated. Cash costs during the quarter were $2.34 per silver ounce*. However, the Company expects these operating costs to decrease during the third and fourth quarters as grades and tons to the mill increase. During underground ramp development, Coeur intersected several significant vein structures that contain high-grade mineralization. Positive results were generated from Coeur's surface exploration work * See reconciliation of non-GAAP cash costs to GAAP production costs below under "Costs and Expenses." 23 during the first six months of 2002, which was focused on expanding the ore reserves within the immediate area of operation. As a result of the Company's continued exploration success, it will be conducting an aggressive $1.2 million exploration program at Cerro Bayo throughout the remainder of 2002. The objectives of this program are to (i) increase existing reserves by focusing on the known and newly identified vein structures located within the immediate area of operations; and to (ii) establish the presence of non-reserve mineral material and confirm the geological potential along strike extensions of the known vein structures 500 to 600 meters to the north and south of the existing operations. Thus far this year, Coeur has spent $268,000 on exploration at Cerro Bayo, which resulted in the discovery of 2.2 million silver equivalent ounces, representing a 15% increase in reserves. Since commencing exploration at Cerro Bayo in 2000, the Company's average discovery cost per ounce has averaged approximately $0.09 per ounce of silver. Martha (Argentina) o Acquisition of Martha was completed during the second quarter o Began trucking ore to Cerro Bayo for blending and processing o Projected to contribute 1.6 million ounces of silver production to Cerro Bayo during 2002 Coeur completed the acquisition of 100% of the Martha high-grade silver mine on April 3, 2002 for $2.5 million in cash. The first truck left Martha for Cerro Bayo during the last week of June, and 37 trucks were sent from Martha in July containing a total of 900 tons of high-grade ore. Mine development continues and an exploration program designed to identify deeper and lateral extensions of the Martha vein began August 6, 2002. This program will also drill into a new parallel vein located approximately 30 meters away from the Martha vein. Finally, these exploration efforts during the second half of 2002 will include a review of the 202,000 acres of prospective property Coeur acquired as part of its transaction. At the time Coeur acquired Martha, the Company estimated total reserves of 19,000 tons at an average silver equivalent grade of 143 ounces per ton. North America Rochester Mine (Nevada) o 1.6 million ounces of silver and 17,000 ounces of gold produced during the second quarter 24 o 3.1 million ounces of silver and 33,500 ounces of gold produced during the first six months of 2002 o Cash costs of $2.81 per ounce of silver* during the second quarter - a 24% decrease from first quarter o Projecting approximately 6.5 million ounces of silver and 50,000 ounces of gold production for 2002 at an average cash cost of approximately $3.70 per ounce of silver* After a slow start to the year, Rochester rebounded with an improved second quarter, reducing cash operating costs by over 24% to $2.81 per ounce* and increasing silver production 16% to 1.6 million ounces compared to the first quarter of 2001. Mine management made several modifications to the mine plan, plant and heaps during the first six months of the year in order to generate the efficiencies reflected in these second quarter results. Mining at the Nevada Packard satellite deposit, located one and one-half miles to the south of Rochester, is expected to commence late in the third quarter. Road construction and development of access to the pit is currently underway. Coeur Silver Valley - Galena Mine (Idaho) o 1.4 million ounces of silver produced during the quarter, representing a 34% increase over 2001 second quarter production levels o Cash costs of $4.14 per ounce* during the second quarter - an 11% decrease from last year's second quarter o Projecting 5.0 million ounces of silver production for 2002 at an average cash cost of approximately $3.92 per ounce - a 15% decrease from 2001 levels* Coeur Silver Valley continued to exceed anticipated levels of production at historically low cash operating costs during the second quarter. Mechanized mining continues to be the primary reason for these significant operational improvements. Year to date, Silver Valley has realized silver grades that are 3 to 4 ounces per ton higher than historical levels. In addition, several compilation studies that were implemented over the past two years have allowed Coeur to mine old areas of the mine that contain higher-grade mineralization that were not reflected in the mine's 2002 mine plan. * See reconciliation of non-GAAP cash costs to GAAP production costs below under "Costs and Expenses." 25 Development and Exploration Projects San Bartolome (Bolivia) o Feasibility study expected to be completed during the fourth quarter o Expect to make a financing decision by year-end o Impact of tin continues to be studied. Preliminary results indicate that 80% of the deposit can yield an economic tin concentrate Puchuldiza (Chile) o Consistent with Coeur's focus on silver, the Company signed an exploration agreement with Barrick Gold Corporation late in 2001 covering Coeur's Puchuldiza gold property located in northern Chile. o During the second quarter, Barrick reported encouraging results from initial field work at Puchuldiza and believes that there are positive implications for the potential for a significant mineralized gold system at depth. RESULTS OF OPERATIONS Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001. Revenues Product sales in the second quarter of 2002 increased by $1.4 million, or 7%, from the second quarter of 2001 to $19.6 million. The increase in sales is attributable to an increase in realized silver and gold prices of $4.82 and $304 per ounce, respectively in the second quarter of 2002 compared to $4.37 and $273 in the same quarter of 2001. The change in metal prices amounted to $1.9 million of the change between periods. This increase was offset by increased smelting and refining costs and reduced by-product sales which amounted to a decrease of $0.5 million. In the second quarter of 2002, the Company produced a total of 3,281,435 ounces of silver and 23,051 ounces of gold compared to 2,557,175 ounces of silver and 27,276 ounces of gold in the second quarter of 2001. Interest and other income in the second quarter of 2002 increased by $0.7 million compared with the second quarter of 2001. The increase is due to a gain recorded for the receipt of insurance proceeds at the Galena mine of $1.5 million for a business interruption claim offset by less interest income received as a result of decreased interest rates and lower cash balances resulting in $0.8 million of the decrease. 26 Costs and Expenses Production costs in the second quarter of 2002 decreased by $1.6 million, or 9%, from the second quarter of 2001 to $16.3 million. The decrease in production costs is a result of efficiencies gained earlier this year at both Rochester and Galena mines. The following tables are a reconciliation between the non-GAAP measure cash costs and production costs reported in the Statement of Operations:
Three months ended June 30, 2002 Rochester Galena Cerro Bayo Total ---------------------------------------------------- Production of Silver (ounces) 1,637,443 1,383,449 260,543 3,281,435 Cash Costs per ounce $ 2.81 $ 4.14 $ 2.34 ---------------------------------------------------- Total Cash Costs (thousands) $ 4,601 $ 5,728 $ 609 $ 10,938 Add/Subtract: Third Party Smelting Costs (243) (1,991) (195) (2,429) By-Product Credit 5,765 845 1,553 8,163 Accrued Reclamation Costs 309 164 - 473 Inventory Variations 1,520 (436) (1,967) (883) ---------------------------------------------------- Production Costs $ 11,952 $ 4,310 $ - $ 16,262 Three months ended June 30, 2001 Rochester Galena Petorca Total ---------------------------------------------------- Production of Silver (ounces) 1,488,598 1,032,966 2,521,564 Production of Gold (ounces) 6,772 6,772 Cash Costs per ounce $ 3.15 $ 4.61 $ 319 ---------------------------------------------------- Total Cash Costs (thousands) $ 4,689 $ 4,762 $ 2,158 $ 11,609 Add/Subtract: Third Party Smelting Costs (198) (1,964) (735) (2,896) By-Product Credit 5,697 627 865 7,188 Accrued Reclamation Costs 297 167 - 464 Inventory Variations 350 242 878 1,470 ---------------------------------------------------- Production Costs $ 10,836 $ 3,834 $ 3,166 $ 17,836
Depreciation and amortization increased in the second quarter of 2002 by $1.0 million, or 39%, from the prior year's second quarter, due to increased depletion taken at the Rochester and Galena mines due to increased production of silver at the mines. Exploration expenses decreased in the second quarter of 2002 compared to the same period in 2001 by $0.9 million as exploration was temporarily slowed down due to cash conservation efforts in the first half of 2002. These expenses are expected to increase in the third and fourth quarters. 27 Pre-feasibility expenses on the San Bartolome project were $0.4 million higher in the second quarter of 2002 over the same quarter of 2001 as the feasibility study started in late 2001 continued. Interest expense increased in the second quarter of 2002 over the second quarter of 2001 to $5.4 million from $3.6 million due to make whole interest payments on conversions of the Series I 13 3/8% Convertible Senior Subordinated Notes of $4.2 million, which requires payment of the interest portion through December 2003, as a provision of the conversion. The loss on retirement of debt amounted to $2.9 million in the second quarter ending June 30, 2002 compared to a gain on retirement of debt of $5.8 million in the same quarter of 2001. Refer to Debt Reduction Program discussion for more detail. Net Loss As a result of the above mentioned factors, the Company's net loss amounted to $10.9 million in the second quarter of 2002 compared to a net loss of $3.6 million in the second quarter of 2001. The net loss attributable to common shareholders was $0.16 per share for the second quarter of 2002, compared to $0.08 per share for the second quarter of 2001. Debt Reduction Program During the second quarter of 2002, the Company exchanged a total of 11.9 million common shares for a principal amount of $10.3 million, $0.8 million and $0.3 million of its 6%, 6 3/8% and 7 1/4% Convertible Subordinated Debentures, respectively. As a consequence of these transactions, the Company recorded a loss on the early retirement of debt of $2.9 million in the second quarter of 2002. In three privately negotiated transactions completed in the second quarter of 2001, the Company repurchased in aggregate, $11.0 million principal amount of its outstanding 7 1/4% Convertible Subordinated Debentures due 2005 in exchange for 4.3 million shares of common stock. As a result of the transactions, the Company recorded a gain in the second quarter ending June 30, 2001 of approximately $5.8 million, net of deferred offering costs. Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001. Revenues Product sales in the first half of 2002 decreased by $0.2 million, or 1%, from the first half of 2001 to $36.0 million. The decrease in sales is attributable to the decreased production of gold in the six months ended June 30, 2002, compared to the six months 28 ended June 30, 2001. The decrease amounted to 14,500 ounces of gold resulting in a $4.5 million decrease in product sales. This was offset by an increase in silver ounces sold of approximately 982,000 ounces and higher prices realized for the first half of 2002 over 2001 of $4.7 million. In the first half of 2002, the Company produced a total of 6,170,744 ounces of silver and 39,474 ounces of gold compared to 5,188,892 ounces of silver and 53,954 ounces of gold in the first half of 2001. In the first half of 2001, the Company realized average silver and gold prices of $4.64 and $298, respectively, compared with realized average prices of $4.45 and $272, respectively, in the prior year's first half. The decline in gold production was due primarily to the closure of the Company's Petorca mine in August 2001, as well as the reduced production from Rochester. This decreased production was offset by gold production at Cerro Bayo in 2002. Interest and other income in the first half of 2002 increased by $1.2 million compared with the first half of 2001. The increase is due to income received for insurance proceeds at the Galena mine of $1.5 million for a business interruption claim offset by less interest income received as a result of decreased interest rates and lower cash balances of $0.3 million. Costs and Expenses Production costs in the first half of 2002 decreased by $1.8 million, or 5%, from the first half of 2001 to $34.3 million. The decrease in production costs is a result of the closure of the Petorca mine in August 2001. The following tables are a reconciliation between the non-GAAP measure cash costs to GAAP production costs reported in the Statement of Operations:
Six months ended June 30, 2002 Rochester Galena Cerro Bayo Total ---------------------------------------------------- Production of Silver (ounces) 3,053,210 2,856,991 260,543 6,170,744 Cash Costs per ounce $ 3.30 $ 4.05 $ 2.34 ---------------------------------------------------- Total Cash Costs (thousands) $ 10,076 $ 11,571 $ 610 $ 22,256 Add/Subtract: Third Party Smelting Costs (484) (4,053) (195) 4,731) By-Product Credit 10,417 1,736 1,553 13,706 Accrued Reclamation Costs 573 324 - 897 Inventory Variations 4,422 (307) (1,967) 2,148 ---------------------------------------------------- Production Costs $ 5,004 $ 9,272 $ - $ 34,276
29
Six months ended June 30, 2001 Rochester Galena Petorca Total ---------------------------------------------------- Production of Silver (ounces) 2,990,247 2,140,907 5,131,154 Production of Gold (ounces) 13,931 13,931 Cash Costs per ounce $ 3.25 $ 4.48 $ 329.70 ---------------------------------------------------- Total Cash Costs (thousands) $ 9,718 $ 9,591 $ 4,594 $ 23,903 Add/Subtract: Third Party Smelting Costs (416) (2,563) (1,403) (4,382) By-Product Credit 10,646 1,050 1,214 12,910 Accrued Reclamation Costs 726 283 - 1,009 Inventory Variations 2,188 649 (184) 2,653 ---------------------------------------------------- Production Costs $ 22,862 $ 9,010 $ 4,221 $ 36,093
Depreciation and amortization increased slightly in the first half of 2002 to $5.4 million, from the prior year's first half, due to additional depletion taken at the Rochester and Galena mines based on increased silver production. Exploration expense decreased in the first half of 2002 by $1.7 million to $1.6 million as a result of a concerted effort to conserve cash in the first half of 2002. These costs are expected to increase during the second half of 2002. Pre-feasibility expenses increased $0.7 million in the first half of 2002 over the first half of 2001 as the San Bartolome feasibility study started in late 2001 continues, and is estimated to be completed in the last quarter of 2002. Interest expenses increased $2.5 million in the first half of 2002 compared to 2001 due to make whole interest payments made to holders of the Series I 13 3/8% Convertible Senior Subordinated Notes that converted to common stock during 2002. Loss on retirement of debt amounted to $2.9 million for the six months ending June 30, 2002 compared to a gain on retirement of debt of $9.0 million in the same period in 2001. Refer to Debt Reduction Program discussion below for additional detail. Net Loss As a result of the above mentioned factors, the Company's net loss amounted to $22.8 million in the first half of 2002 compared to a net loss of $11.7 million in the first half of 2001. The net loss attributable to common shareholders was $0.38 per share for the first half of 2002, compared to $0.29 per share for the first half of 2001. 30 Debt Reduction Program During the first half of 2002 the Company repurchased $13.8 million, $0.8 million and $1.3 million amount of its outstanding 6%, 6 3/8% and 7 1/4% Convertible Subordinated Debentures, respectively in exchange for 17.6 million shares of common stock and recorded a loss of approximately $2.9 million. In addition, holders of $16.0 million principal amount of the Series I 13 3/8% Convertible Senior Subordinated Notes voluntarily converted their Notes into approximately 12.8 million shares of common stock. In May 2002, the Company issued $21.5 million principal amount of new Series II 13 3/8% Convertible Senior Subordinated Notes due December 2003, for proceeds of $14.1 million, net of discount of $5.5 million and offering costs of approximately $1.9 million. In three privately negotiated transactions completed in the second quarter of 2001, the Company repurchased in aggregate, $11 million principal amount of its outstanding 7 1/4% Convertible Subordinated Debentures due 2005 in exchange for 4,257,618 shares of common stock. As a result of the transactions, the Company recorded an extraordinary gain in the second quarter ending June 30, 2001 of approximately $5.8 million, net of deferred offering costs and taxes. LIQUIDITY AND CAPITAL RESOURCES Working Capital; Cash and Cash Equivalents The Company's working capital at June 30, 2002 increased by $18.1 million to approximately $46.7 million compared to $28.6 million at December 31, 2001. The increase is a result of retirement of the Company's 6% Convertible Subordinated Debentures Due 2002. The ratio of current assets to current liabilities was 3.3 to 1.0 at June 30, 2002 compared to 1.7 to 1.0 at December 31, 2001. Net cash provided by operating activities in the three months ended June 30, 2002 was $0.1 million compared to net cash used in operating activities of $10.0 million in the three months ended June 30, 2001, as a result of reduced liabilities in the second quarter of 2001. Net cash used in investing activities in the 2002 period was $1.4 million compared to net cash used in investing activities of $2.3 million in the prior year's comparable period. The decrease primarily resulted from an increase in proceeds from short-term investments of $2.1 million offest in part by an increase in capital expenditures of $1.6 million. Net cash provided by financing activities was $4.6 million in the second quarter of 2002, compared to $0.1 million used in the second quarter of 2001. The increase was primarily a result of $14.1 million of proceeds received for the issuance of new Series II 13 3/8% Convertible Senior Subordinated Notes offset by the retirement of $9.4 million of 6% Debentures due June 2002. As a result of the above, cash and cash equivalents 31 increased by $3.2 million in the second quarter of 2002 compared to a decrease of $12.4 million for the comparable period in 2001. Net cash used in operating activities in the six months ended June 30, 2002 was $5.4 million compared to $16.0 million in the six months ended June 30, 2001 primarily resulting from a decrease in current liabilities of $9.8 million in the first half of 2001. Net cash used in investing activities in the 2002 period was $1.8 million compared to net cash provided by investing activities of $14.2 million in the prior year's comparable period. The decrease primarily resulted from the proceeds received in the prior year of $14.7 million from the sale of the Company's 50% interest in Gasgoyne Gold Mines and offset in part by an increase in capital expenditures of $0.8 million. Net cash provided by financing activities was $4.5 million in the six months of 2002, compared to $0.4 million used in the six months of 2001. The increase was primarily a result of $14.1 million from the proceeds received for the issuance of new Series II 13 3/8% Convertible Senior Subordinated Notes offset by the retirement of 6% Debentures due June 2002, of $9.4 million. As a result of the above, cash and cash equivalents decreased by $2.8 million in the six months of 2002 compared to a decrease of $2.2 million for the comparable period in 2001. The Company has improved its working capital position since December 31, 2001 by extinguishing $23.2 million of its 6% Convertible Subordinated Debentures originally due June, 2002, with (a) the proceeds from the issuance in May 2002 of the Series II 13 3/8% Convertible Senior Subordinated Notes due December 2003 and (b) exchanges of common shares. The Company believes it may be able to further reduce its debt obligations by converting additional debt to common equity during the remainder of this year. Capital expenditures for the balance of the year are somewhat discretionary. Management believes that its existing cash and cash flow generated from operations will allow it to meet its obligations for the next twelve months. 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 to settle the lawsuit. Pursuant to the terms of the Consent Decree dated May 14, 2001, the Company has paid the U.S. 32 Government a total of approximately $3.9 million, of which $3.3 million was paid in May 2001 and the remaining $.6 million was paid in June 2001. 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 effectiveness of the settlement. Noranda Smelter Strike On June 18, 2002 we received notification from Norada that the employees working at the smelter in Quibec were on strike. This smelter is where Coeur Silver Valley ships essentially 100% of its concentrate under the terms of our contract with Noranda they have declared a "Force Majure" and do not have to accept the concentrate sent to them by the Company's Galena Mine. Noranda has agreed to accept 650 tonnes of the Galena concentrate, which represents almost 100% of the concentrate produced by Coeur Silver Valley. Although there is no written contract for Noranda to continue to accept this amount. The Company is currently looking for alternative purchaser's of the concentrate, and have been able to spot sale 400 tonnes to an alternative purchaser. Management believes that Noranda will continue to purchase all produced concentrate from Coeur Silver Valley, if they don't, the Company would see a significant decrease in produce sales from Coeur Silver Valley. Lawsuit to Recover Inventory During the first quarter of 2000, Handy & Harman Refining Group, Inc.("Handy & Harman"), to which the Rochester Mine had historically sent approximately 50% of its dore, filed for Chapter 11 bankruptcy. The Company had 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 & Harman. On February 27, 2001 the Company commenced a lawsuit against Handy & Harman and certain others in the U.S. Bankruptcy Court for the District of Connecticut seeking recovery of the metals and/or damages. Handy & Harman's Chapter 11 liquidation plan was confirmed by the Bankruptcy Court in August 2001 and on November 3, 2001, the Company received approximately $294,000 from Handy & Harman as a partial payment under the plan. The liquidating custodian of Handy & Harman under the liquidation plan 33 recently advised the Company that Handy & Harman intends to file suit against the Company prior to March 28, 2002 for the value of 100,000 ounces of silver (i.e., approximately $500,000) as a preference based on the Company's draw-down of its account at Handy & Harman in mid-March 2000. Based on this more recent legal action, the Company has determined that the recovery of any additional amounts would be remote. As a result the Company has recorded a $1.4 million write-down of the carrying amount in the fourth quarter of 2001. Management of the Company and legal counsel believe that the threatened claims are without merit, and will vigorously defend any such suit. Bunker Hill Action On January 7, 2002, a private class action suit captioned Baugh vs. Asarco, et al., was filed in the Idaho District Court for the First District (Lawsuit No. 2002131) in Kootenai County, Idaho against the companies that have been defendants in the prior Bunker Hill and natural resources litigation in the Coeur d'Alene Basin, including the Company, by eight northern Idaho residents seeking medical benefits and property compensation from the mining companies involved in the Bunker Hill Superfund site. At this early stage of the litigation, the Company cannot predict the outcome of this suit. PART II. Other Information Item 2. Changes in Securities and Use of Proceeds. (c) Sale of Unregistered Securities On May 31, 2002, the Company issued $21.5 million principal amount of a new second series of 13 3/8% Convertible Senior Subordinated Notes due December 31, 2003 (the "Series II Notes") to eight institutional investors (the "Investors") for an aggregate purchase price of 16.0 million. The sale was effected without registration under the Securities Act of 1933 (the "Act") in reliance upon Section 4(2) thereof. The notes were issued pursuant to an Indenture, dated May 31, 2002, (the "Indenture") between the Company and the Bank of New York, as trustee. The terms of the Series II Notes and the Indenture are substantially similar, subject to certain contingent provisions, to the terms of the previously issued 13 3/8% Convertible Senior Subordinated Notes due December 31, 2003 and related Indenture, dated August 1, 2001, between the Company and the Bank of New York, as trustee, relating thereto. Each of the Investors qualified as an "accredited investor" within the meaning of Rule 501(a) under the Act. 34 The Series II Notes are convertible at any time prior to their maturity on December 31, 2003 at a conversion price of $1.35 per share, subject to adjustment. The Company may elect to automatically convert the Series II Notes at any time prior to maturity if the closing sale price of the Company's common stock exceeds 200% of the conversion price for at least 20 trading days during a 30-day trading day period ending within five trading days prior to the notice of automatic conversion. If an automatic conversion occurs prior to maturity, the Company will make a payment to holders in cash or, at the Company's option, in common stock, equal to $211.77 for each $1,000 principal amount of notes, less any interest actually paid prior to automatic conversion. If paid in common stock, the shares of common stock will be valued at 90% of the average of the closing price of the Company's common stock for the five trading days immediately preceding the second trading day prior to the automatic conversion date. If holders elect to convert their Series II Notes prior to maturity and prior to notice of automatic conversion, they will have the right to receive a payment upon conversion equal to $211.77 for each $1,000 principal amount of notes, less interest actually paid, payable in cash or in common stock at the Company's option. If paid in common stock, the shares will be valued at 90% of the average of the closing price of the Company's common stock for the five trading days immediately preceding the second trading day prior to the voluntary conversion date, subject to a minimum valuation equal to the conversion price. Pursuant to the terms of the Purchase Agreement and related Registration Rights Agreement, dated as of May 15, 2002, entered into by and among the Company and the Investors, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission on June 4, 2002, in order to register the Series II Notes and underlying shares of common stock for resale in the future by the holders thereof under the Act. Of the approximately $16.0 million of proceeds from the sale of the Series II Notes, the Company used approximately $10.0 million to pay the entire $9.4 million principal amount of the Company's 6% Convertible Subordinated Debentures due 2002 when they matured on June 10, 2002, plus accrued interest thereon, and the balance for general corporate purposes. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to various market risks as a part of its operations. As an effort to mitigate losses associated with these risks, the Company may, at times, enter into derivative financial instruments. These may take the form of forward sales contracts, foreign currency exchange contracts and interest rate swaps. The Company does not actively engage in the practice of trading derivative securities for profit. This discussion of the Company's 35 market risk assessments contains "forward looking statements" that contain risks and uncertainties. Actual results and actions could differ materially from those discussed below. The Company's operating results are substantially dependent upon the world market prices of silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely and are affected by numerous factors, such as supply and demand and investor sentiment. In order to mitigate some of the risk associated with these fluctuations, the Company will at times, enter into forward sale contracts. The Company continually evaluates the potential benefits of engaging in these strategies based on the then current market conditions. The Company may be exposed to nonperformance by counterparties as a result of its hedging activities. This exposure would be limited to the amount that the spot price of the metal falls short of the contract price. The Company operates in several foreign countries, specifically Bolivia, Argentina and Chile, which exposes it to risks associated with fluctuations in the exchange rates of the currencies involved. As part of its program to manage foreign currency risk, the Company will enter into foreign currency forward exchange contracts. These contracts enable the Company to purchase a fixed amount of foreign currencies. Gains and losses on foreign exchange contracts that are related to firm commitments are designated and effective as hedges and are deferred and recognized in the same period as the related transaction. All other contracts that do not qualify as hedges are marked-to-market and the resulting gains or losses are recorded in income. The Company continually evaluates the potential benefits of entering into these contracts to mitigate foreign currency risk and proceeds when it believes that the exchange rates are most beneficial. All of the Company's long-term debt at June 30, 2002 is fixed-rate based. The Company's exposure to interest rate risk, therefore, is limited to the amount it could pay at current market rates. The Company currently does not have any derivative financial instruments to offset the fluctuations in the market interest rate. It may choose to use instruments, such as interest rate swaps, in the future to manage the risk associated with interest rate changes.
Fair Value (dollars in thousands) 2002 2003 2004 2005 2006 Thereafter Total 6/30/02 ------------------------------------------------------------------------------------------------------------------- Liabilities Long Term Debt (prior to exchange) $128,820 Fixed Rate $ - $46,806 $ 65,457 $ 14,394 $ - $ - $126,657 Average Interest Rate 10.668% 9.061% 7.006% 7.250% Derivative Financial Instruments Gold Forward Sales - USD $ 21 Ounces 14,000 - - - - - - Price Per Ounce $320.00 - - - - - -
36
Fair Value (dollars in thousands) 2002 2003 2004 2005 2006 Thereafter Total 6/30/02 ------------------------------------------------------------------------------------------------------------------- Foreign Currency Contracts Chilean Peso - USD $ 1,500 $ 2,100 $-(A) Exchange Rate 705 705 (CLP to USD) (A. Entered into August 1, 2002)
Fair value is determined by trading information on or near the balance sheet date. Long term debt represents the face amount of the outstanding convertible debentures and timing of when these become due. Interest rates presented in the table are calculated using the weighted average of the outstanding face amount of each debenture for the period remaining in each period presented. All long term debt is denominated in US dollars. Item 6. Exhibits and Reports on Form 8-K a) Exhibits. 99.1 Letter of Certification of the CEO 99.2 Letter of Certification of the CFO b) Form 8-K. The Company filed a Report on Form 8-K on July 23, 2002 (reporting the Company's determination on July 22, 2002 that the firm of Arthur Andersen LLP would no longer serve as the Company's independent accounting firm and the Company's engagement of KPMG LLP to serve as the Company's independent accounting firm). 37 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 D'ALENE MINES CORPORATION (Registrant) Dated August 19, 2002 /S/ Dennis E. Wheeler --------------------------------------- DENNIS E. WHEELER Chairman, President and Chief Executive Officer Dated August 19, 2002 /s/ Geoffrey A. Burns --------------------------------------- GEOFFREY A. BURNS Vice President and Chief Financial Officer 38