-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D0w9jICRYmS6Eek+IGWHGucWNi6An/XHujD9+U12j5KeYfnRFHPRzmlrhjK+nsEp rYsnOzSde+AxzwstTuYtFw== 0000904456-00-000026.txt : 20000516 0000904456-00-000026.hdr.sgml : 20000516 ACCESSION NUMBER: 0000904456-00-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COEUR D ALENE MINES CORP CENTRAL INDEX KEY: 0000215466 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 820109423 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08641 FILM NUMBER: 631274 BUSINESS ADDRESS: STREET 1: 400 COEUR D ALENE MINES BLDG STREET 2: 505 FRONT AVE CITY: COEUR D ALENE STATE: ID ZIP: 83814 BUSINESS PHONE: 2086673511 MAIL ADDRESS: STREET 1: 400 COEUR D ALENE MINES BLDG STREET 2: 505 FRONT AVE CITY: COEUR D'ALENE STATE: ID ZIP: 83814 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. ----------------- 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 March 31, 2000 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 in its charter) Idaho 82-0109423 --------------------------- ---------------------------- (State or other jurisdiction (I.R.S. Employer Ident. No.) of incorporation or organization) P.O. Box I, Coeur d'Alene, Idaho 83816-0316 ---------------------------------------- ---------- (Address of principal executive offices) (zip code) 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 38,109,279 shares were issued and outstanding as of May 11, 2000. COEUR D'ALENE MINES CORPORATION INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- 3 March 31, 2000 and December 31, 1999 Consolidated Statements of Operations -- 5 Three Months Ended March 31, 2000 and 1999 Consolidated Statements of Cash Flows -- 6 Three Months Ended March 31, 2000 and 1999 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of 13 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure of Market Risk 20 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 21 SIGNATURES 22
2 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
March 31, December 31, 2000 1999 ---------- ------------ ASSETS (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 80,855 $ 86,935 Short-term investments 13,652 22,978 Receivables 8,105 15,376 Inventories 61,406 53,769 ---------- ---------- TOTAL CURRENT ASSETS 164,018 179,058 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 96,672 96,592 Less accumulated depreciation (55,958) (54,265) ---------- ---------- 40,714 42,327 MINING PROPERTIES Operational mining properties 107,696 106,455 Less accumulated depletion (64,388) (62,431) ---------- ---------- 43,308 44,024 Developmental properties 51,968 50,781 ---------- ---------- 95,276 94,805 OTHER ASSETS Investments in unconsolidated affiliates 28,892 29,008 Debt issuance costs, net of accumulated amortization 5,094 5,378 Other 3,434 3,471 ---------- ---------- 37,420 37,857 ---------- ---------- $ 337,428 $ 354,047 ========== ==========
See notes to consolidated financial statements. 3 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
March 31, December 31, 2000 1999 ---------- ------------ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,584 $ 4,693 Accrued liabilities 6,307 6,411 Accrued interest payable 6,041 5,064 Accrued salaries and wages 4,104 5,005 ---------- ---------- TOTAL CURRENT LIABILITIES 20,036 21,173 LONG-TERM LIABILITIES 6% subordinated convertible debentures due 2002 35,334 35,582 6 3/8% subordinated convertible debentures due 2004 93,372 93,372 7 1/4% subordinated convertible debentures due 2005 107,277 107,277 Other long-term liabilities 27,158 28,478 ---------- ---------- TOTAL LONG-TERM LIABILITIES 263,141 264,709 SHAREHOLDERS' EQUITY Mandatory Adjustable Redeemable Convertible Securities (MARCS), par value $1.00 per share,(a class of preferred stock) - authorized 7,500,000 shares, issued zero and 7,077,833 shares in 2000 and 1999. 0 7,078 Common Stock, par value $1.00 per share- authorized 125,000,000 shares, issued 38,109,279 and 30,240,428 shares in 2000 and 1999 (including 1,059,211 shares held in treasury) 38,109 30,240 Capital surplus 387,625 391,031 Accumulated deficit (356,954) (347,119) Repurchased and nonvested shares (13,190) (13,190) Accumulated other comprehensive loss: Unrealized gain (loss) on short-term investments (1,339) 125 ---------- ---------- 54,251 68,165 ---------- ---------- $ 337,428 $ 354,047 ========== ==========
See notes to consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF OPERATIONS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
3 MONTHS ENDED MARCH 31, ----------------------------- 2000 1999 ---------- ---------- (In thousands except per share amounts) REVENUES Product sales $ 14,841 $ 18,259 Interest and other 3,063 1,085 ---------- ---------- Total Revenues 17,904 19,344 COSTS and Expenses Production 13,467 13,637 Depreciation and depletion 4,907 4,205 Administrative and general 3,121 2,606 Exploration 2,140 1,832 Interest 3,956 4,189 Other 135 74 ---------- ---------- Total Costs and Expenses 27,726 26,543 ---------- ---------- NET LOSS FROM CONTINUING OPERATIONS BEFORE TAXES AND EXTRAORDINARY ITEM (9,822) (7,199) Income tax provision 100 74 ---------- ---------- Net loss before extraordinary item (9,922) (7,273) Extraordinary item - early retirement of debt (net of taxes) 87 0 ---------- ---------- NET LOSS (9,835) (7,273) Unrealized holding loss on securities (1,339) (171) ---------- ---------- COMPREHENSIVE LOSS $ (11,174) $ (7,444) ========== ========== NET LOSS $ (9,835) $ (7,273) Preferred stock dividends 2,180 2,633 ---------- ---------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (12,015) $ (9,906) ========== ========== BASIC AND DILUTED EARNINGS PER SHARE: Weighted average number of shares of Common Stock 30,569 21,899 ========== ========== Loss before extraordinary item $ (.39) $ (.45) Extraordinary item - early retirement of debt (net of taxes) .00 .00 ---------- ---------- Net loss per share attributable to common shareholders $ (.39) $ (.45) ========== ==========
See notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
3 MONTHS ENDED MARCH 31, ----------------------------- 2000 1999 ---------- ---------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (9,835) $ (7,273) Add (deduct) noncash items: Depreciation and depletion 4,907 4,205 Gain on early retirement of debt (net of tax) (87) Other 1,589 865 Undistributed (earnings) loss of investment in unconsolidated subsidiary (482) 471 Unrealized gain on written call options (1,554) Changes in Operating Assets and Liabilities: Receivables 7,271 4,262 Inventories (7,637) (3,701) Accounts payable and accrued liabilities (1,965) (1,742) ---------- ---------- NET CASH USED IN OPERATING ACTIVITIES (7,793) (2,913) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments (4,276) (2,024) Proceeds from sales of short-term investments 12,073 570 Purchases of property, plant and equipment (742) (187) Proceeds from sale of assets 591 Expenditures on operational mining properties (1,917) (103) Expenditures on developmental properties (1,288) (1,621) Other 103 (483) ---------- ---------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 4,544 (3,848) CASH FLOWS FROM FINANCING ACTIVITIES Payment of cash dividends (2,633) (2,633) Other (198) (137) ---------- ---------- NET CASH USED IN FINANCING ACTIVITIES (2,831) (2,770) ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (6,080) (9,531) Cash and cash equivalents at beginning of period 86,935 127,335 ---------- ---------- Cash and cash equivalents at period ending March 31, 2000 $ 80,855 $ 117,804 ========== ==========
See notes to consolidated financial statements. 6 Coeur d'Alene Mines Corporation and Subsidiaries Notes to Consolidated Financial Statements NOTE A: Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with 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 generally accepted accounting principles 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 period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Coeur d'Alene Mines Corporation Annual Report on Form 10-K for the year ended December 31, 1999. NOTE B: Inventories Inventories are comprised of the following:
March 31, December 31, 2000 1999 ---------- ------------ (In Thousands) In process and on leach pads $ 43,770 43,494 Concentrate and dore' inventory 12,869 5,594 Supplies 4,767 4,681 --------- --------- 61,406 $ 53,769 ========= =========
Inventories of ore on leach pads and in the milling process are valued based on actual costs incurred, less costs allocated to minerals recovered through the leaching and milling processes. Inherent in this valuation is an estimate of the percentage of the minerals on leach pads and in process that will ultimately be recovered. All other inventories are stated at the lower-of-cost or market, with cost being determined using first-in, first-out and weighted-average-cost methods. Dore' inventory includes product at the mine site and product held by refineries. The Handy and Harmon refinery, to which Rochester Mine sends approximately 50% of its dore, filed for Chapter 11 Bankruptcy during the first quarter of 2000. The Company has in inventory, at the refinery, 7 approximately 67,000 ounces of silver and approximately 5,000 ounces of gold, being held pending resolution of the Bankruptcy proceeding. At this time, the Company anticipates that litigation may be required and believes it has a basis to recover all the inventory being held. NOTE C: Income Taxes The Company has reviewed its net deferred tax asset for the three-month period ended March 31, 2000, together with net operating loss carryforwards, 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. NOTE D: Conversion of MARCS to Common On March 15, 2000, the Company mandatorily converted its 7,077,833 outstanding shares of Mandatory Adjustable Redeemable Convertible Securities (MARCS) into 7,863,000 common shares. The final payment of dividends of $2,633,000 on the MARCS was paid out as of that date. NOTE E: Short-Term Investments During the first quarter of 2000, the Company sold 245,000 shares of Pan American Silver Corporation stock for approximately $1.2 million, and recorded a realized loss of approximately $66,000. The Company continues to hold approximately one million shares. NOTE F: Long-Term Debt During the first quarter 2000, the Company repurchased approximately $248,000 principal amount of its outstanding 6% Subordinated Convertible Debentures due 2002 for a total purchase price of approximately $159,000, excluding purchased interest of approximately $12,000. Associated with this transaction, the Company eliminated $2,000 of capitalized bond issuance costs. As a result of the buyback of these debentures, the Company has recorded an extraordinary gain of approximately $87,000, net of taxes of zero, during the first quarter of 2000 on the reduction of its indebtedness. NOTE G: Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly 8 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, 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 company cash flows in its respective geographic area. The Company's reportable operating segments include the Rochester, Coeur Silver Valley, Fachinal, and Petorca (previously named El Bronce) mining properties, Coeur Australia (50% owner of Gasgoyne Gold Mines NL), the Kensington development property, and the Company's exploration program. All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of these precious metals. 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 (loss) from unconsolidated subsidiaries accounted for by the equity method such as the Company's 50% interest in Gasgoyne, 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 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 10-K. The Company evaluates performance and allocates resources based on profit or loss before interest, income taxes, depreciation and amortization, unusual and infrequent items, and extraordinary items. 9 COEUR D'ALENE MINES CORPORATION SEGMENT REPORTING (In thousands)
Golden Coeur Silver Rochester Cross Fachinal Petorca Australia Valley Kensington Manquiri Exploration ------------------------------------------------------------------------------------------- MARCH 31, 2000 Net sales and revenues to external customers $ - - $ 188 $ 586 $ 2,176 $ 3,577 - - $ 73 Intersegment net sales And revenues 12,036 - - - - - - - - ------------------------------------------------------------------------------------------- Total net sales and revenues $ 12,036 - $ 188 586 2,176 3,577 - - $ 73 =========================================================================================== Depreciation and amortization $ 3,507 - $ 1,256 $ 52 $ 531 $ 572 $ - - $ 21 Interest income - - 5 2 19 - - - 8 Interest expense - - - - - - - - - Income tax expense - - - - 8 1 - - - Earnings (losses) from Unconsolidated affiliates - - - - 482 - - - - Gain on early retirement of debt - - - - - - - - - Profit (loss) 3,169 - (242) (471) 401 (882) - - (1,551) Investments in Unconsolidated affiliates - - - - 28,892 - - - - Segment assets 87,369 1,154 30,165 2,656 603 23,591 31,094 19,554 20,087 Expenditures for property 294 - 1,324 49 - 974 1,287 - - MARCH 31, 1999 Net sales and revenues to external customers $ 2 - $ (341) $ 4,050 $ 1,976 - - - $ (291) Intersegment net sales And revenues 13,426 - - - - - - - - ------------------------------------------------------------------------------------------- Total net sales and revenues $ 13,428 - $ (341) $ 4,050 $ 1,976 - - - $ (291) =========================================================================================== Depreciation and amortization $ 2,343 - $ 867 $ 76 $ 815 - $ 67 - $ 30 Interest income - 29 9 10 - - - 2 Interest expense - - 14 2 - - - - - Income tax expense - - - - 4 - - - - Earnings (losses) from Unconsolidated affiliates - - - - (625) - - - - Gain on early retirement of debt - - - - - - - - - Profit (loss) 5,391 - (1,874) 511 (467) - - - (1,735) Investments in Non-consolidated affiliates - - - - 49,061 - - - - Segment assets 86,166 6,014 32,842 1,208 136 - 23,751 - 942 Expenditures for property 132 - 137 - - - 1,618 - 14 Notes: (A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties.
Other Total -------------------- MARCH 31, 2000 Net sales and revenues to external customers 11,304 $ 17,904 Intersegment net sales And revenues (12,036) - -------------------- Total net sales and revenues $ 732 $ 17,904 ==================== Depreciation and amortization $ 368 $ 6,308 Interest income 1,340 1,374 Interest expense 3,956 3,956 Income tax expense 92 101 Earnings (losses) from Unconsolidated affiliates - 482 Gain on early retirement of debt 87 87 Profit (loss) 19 422 Investments in Unconsolidated affiliates - 28,892 Segment assets 8,782 205,501 Expenditures for property 20 3,948 MARCH 31, 1999 Net sales and revenues to external customers $ 13,949 $ 19,344 Intersegment net sales And revenues (13,427) - -------------------- Total net sales and revenues $ 522 $ 19,344 ==================== Depreciation and amortization $ 577 $ 4,775 Interest income 1,477 1,526 Interest expense 4,173 4,189 Income tax expense 71 75 Earnings (losses) from Unconsolidated affiliates 154 (471) Gain on early retirement of debt - - Profit (loss) (128) 1,698 Investments in Non-consolidated affiliates 16,400 65,461 Segment assets 6,052 157,110 Expenditures for property 9 1,910 Notes: (A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties.
10
GEOGRAPHIC INFORMATION (In thousands) Long-Lived 2000: Revenues Assets --------------------------------------------- United States $ 14,881 $ 93,165 Chile 845 22,570 Australia 2,176 - New Zealand - 691 Bolivia - 19,564 Other Foreign Countries 1 - --------------------------------------------- Consolidated Total $ 17,904 $135,990 ============================================= Long-Lived 1999: Revenues Assets --------------------------------------------- United States $ 13,950 $ 72,592 Chile 3,418 24,568 Australia 1,976 - New Zealand - 5,176 Bolivia - - Other Foreign Countries - 14 --------------------------------------------- Consolidated Total $ 19,344 $102,349 =============================================
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 quarter of 2000 the Company recorded a $1.6 million gain in connection with the hedge program. The Company also added 54,000 ounces in forward sales to its gold protection program (2000-30,000 ounces, 2001-12,000 ounces, 2002-12,000 ounces), whereby over the next three years the Company will receive an average price of $311.44. The following table summarizes the information at March 31, 2000 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 put and call options and amortizing forward sales, the table presents ounces expected to be delivered and the related average price per ounce in Australian dollars. For foreign currency exchange contracts, the table presents the notional amount in New Zealand dollars to be purchased along with the average foreign exchange rate. 11
Fair Value (dollars in thousands) 2000 2001 2002 2003 2004 Thereafter Total 3/31/99 ----------------------------------------------------------------------------------------------------------------------- LIABILITIES Long Term Debt $ 122,891 Fixed Rate $ - $ - $ 35,334 $ - $ 93,372 $107,277 $235,983 Average Interest Rate 6.717% 6.717% 6.782% 6.843% 7.190% 7.250% DERIVATIVE FINANCIAL INSTRUMENTS Gold Forward $ 1,109 Sales - AUD Ounces (1) 11,700 - - - - - 11,700 Price Per Ounce $ 612.10 $ - $ - $ - $ - $ - Gold Put Options Purchased - AUD $ 8,631 Ounces 10,800 30,000 30,000 30,000 - - 100,800 Price Per Ounce $ 597.00 $ 597.00 $ 597.00 $ 597.00 $ - $ - Gold Forward Sales - USD $ 1,841 Ounces 27,600 12,000 12,000 - - - 51,600 Price Per Ounce $ 302.21 $ 316.51 $ 331.84 $ - $ - $ - Gold Call Options Sold - USD $ - Ounces (2) - - - - - 56,000 56,000 Price Per Ounce $ - - $ - $ - $ - $ 345.00 Amortizing Forward Sales $ 927 Ounces (2) 15,000 22,560 22,560 22,560 22,560 78,960 184,200 Price Per Ounce $ 338.58 $ 348.50 $ 348.50 $ 348.50 $ 348.50 $ 348.50 Foreign Currency Contracts $ 71 New Zealand Dollar $ 2,700 $ - $ - $ - $ - $ 2,700 Exchange Rate (NZ$ to US$) 2.126 - - - - - (1) Of the put options purchased, 100,800 ounces have a knock-out provision whereby the options will terminate if gold trades above $350 per ounce prior to the exercise date. (2) The majority of the call options sold have a knock-out provision whereby calls for 56,000 ounces will terminate if gold trades below $300 per ounce after March 31, 2001, and calls for 169,200 ounces will terminate if gold trades below $310 per ounce at any time after March 31, 2001.
NOTE I: New Accounting Standard In June 1998, the Financial Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), which establishes accounting and reporting standards for derivative instruments and hedging activities. Effective for all fiscal quarters in years beginning after June 15, 2000, SFAS 133 requires the Company to recognize all derivative instruments as either assets or 12 liabilities in the statement of financial position and measure those instruments at fair value on an on-going basis. The Company is currently assessing the effect of adopting SFAS No. 133 on its financial statements and plans to adopt the statement on January 1, 2001. NOTE J: Reclassification Certain reclassifications of prior-year balances have been made to conform to current year classifications. 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 Company's currently operating mines are the Rochester mine in Nevada, the Galena mine in the Coeur d'Alene Mining District of Idaho (in which the Company has recently increased its ownership by 50% to 100%) and the Fachinal and Petorca mines in Chile, all of which are wholly-owned and operated by the Company. The Company also owns 50% of Gasgoyne Gold Mines NL, an Australian gold mining company, ("Gasgoyne") that owns 50% of the Yilgarn Star gold mine in Australia. The average price of silver and gold in the first quarter of 2000 was $5.21 and $290 per ounce, respectively. The market price of silver (Handy & Harman) and gold (London Final) on May 10, 2000 were $5.09 per ounce and $278 per ounce, respectively. 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 13 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, 2000 and 1999:
Three Months Ended March 31, ------------------------------ 2000 1999 ---------- ---------- ROCHESTER MINE Gold ozs. 15,457 16,306 Silver ozs. 1,538,260 1,664,063 Cash Costs per equiv. oz./silver $4.27 $4.41 Full Costs per equiv. oz./silver $5.45 $5.24 GALENA MINE Silver ozs. 790,792 459,465 Cash Costs per oz./silver $5.82 $4.52 Full Costs per oz./silver $6.54 $5.60 PRIMARY SILVER MINES Consolidated Cash Costs per equivalent oz.of silver $4.65 $4.43 --------- --------- YILGARN STAR MINE Gold ozs. 6,120 6,177 Cash Costs per oz./gold $268 $287 Full Costs per oz./gold $379 $444 FACHINAL MINE Gold ozs. 5,415 6,672 Silver ozs. 263,726 287,165 Cash Costs per equiv. oz./gold $338 $335 Full Costs per equiv. oz./gold $462 $407 PETORCA MINE Gold ozs. 5,172 7,605 Silver ozs. 10,642 11,139 Cash Costs per oz./gold $384 $266 Full Costs per oz./gold $395 $266 PRIMARY GOLD MINES Consolidated Cash Costs per equivalent oz.of gold $365 $300 --------- --------- CONSOLIDATED TOTAL METAL PRODUCTION Gold ozs. 32,163 36,760 Silver ozs. 2,603,390 2,421,832
14 NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA - --------------------------------------------------------------------- ROCHESTER MINE For the quarter ended March 31, 2000, the mine produced 1,538,260 ounces of silver and 15,457 ounces of gold compared to 1,664,063 ounces of silver and 16,306 ounces of gold produced in the first quarter of 1999. The decrease in the gold production was primarily a result of lower gold ore grades. In the first quarter of 2000, cash costs were $4.27 per silver equivalent ounce compared to $4.41 per silver equivalent ounce in the first quarter of 1999. Depreciation, depletion and reclamation was $1.18 per ounce for a total cost of $5.45 per ounce. The decrease in production was due to the mining of lower-grade ore, as part of the planned mining sequence. Modifications to the conveyor and crushing circuits to increase throughput were implemented in the first quarter. Additionally, solution processing capacity has been increased by 14 percent. As a result of these improvements, increased production and lower costs are forecast for the remainder of 2000. SILVER VALLEY RESOURCES - GALENA MINE For the quarter ended March 31, 2000, the Galena Mine produced 790,792 ounces of silver, compared to 459,465 ounces of silver produced in the first quarter of 1999. The increase was due to the 50% increase in the Company's ownership of Silver Valley Resources in September 1999. The first quarter consolidated cash cost of production per ounce of silver produced at the Galena Mine was $5.82 compared to $4.52 in the prior year's first quarter. Depreciation and reclamation in the first quarter of 2000 was $0.72 per ounce for a full cost of $6.54 per ounce compared to $5.60 per ounce for the first quarter of 1999. Lower tons milled and lower grades resulted in a silver production shortfall. These shortfalls were the result of delays in the development of the high-grade 117 vein and ongoing repairs in the utility shaft, which reduced backfill capacity. The second quarter's production is expected to be higher due to increased mining of the higher grade material from the 117 vein. Work on the 72 vein continues to yield encouraging results. An additional development crew has been added and preparations to add a second diamond drill have been completed. 15 FACHINAL MINE Fachinal produced 263,726 ounces of silver and 5,415 ounces of gold in the first quarter of 2000 compared with 287,165 ounces of silver and 6,672 ounces of gold in the first quarter of 1999. Cash costs, including smelting and refining, were $338 per gold equivalent ounce compared to $335 in the first quarter of 1999. Depreciation, depletion and reclamation was $124 per equivalent gold ounce for a full cost of $462 per equivalent gold ounce in the first quarter of 2000. This compares with a full cost for the first quarter of 1999 of $407 per equivalent gold ounce. The higher full cost was due primarily to the increase in estimated reclamation closure costs for the remaining life of mine. Ore grades were below plan from both underground and surface operations, and the mill throughput was supplemented with ore from the medium grade stockpile which contributed to the ore grade shortfall. The Company has been working to evaluate several options to immediately convert resources to reserves for mining. In addition, the mining plan is being reviewed to focus on developing and mining the most economic production on an equivalent gold ounce basis. The work on the road connecting the high-grade Furioso deposit to Fachinal is progressing as scheduled and is nearing completion. Fachinal is expected to commence mining the high-grade Furioso deposit in late 2000. PETORCA In the first quarter of 2000, the mine produced 5,172 ounces of gold compared to 7,605 ounces reported in the first quarter of 1999. Cash costs in the first quarter of 2000 were $384 per ounce compared to $266 per ounce in the first quarter of 1999. Both throughput and grade were negatively affected by the investigation following a scoop tram accident at the mine that resulted in a fatality in January, which restricted access to higher grade production stopes. In addition, a small mill fire near the end of February required the mill operations to shift to the secondary circuit which further reduced throughput. The primary circuit was repaired in late March and processing recommenced. Also, a plan to convert resources to reserves will be implemented in May, which should improve operating performance. YILGARN STAR MINE Coeur's share of production for the first quarter of 2000 from the Yilgarn Star Mine amounted to 6,120 ounces of gold compared to 6,177 ounces of gold for the first quarter of 1999. Cash cost of production for the latest period declined by $19 per ounce to $268 compared to $287 per ounce during the same period of 1999. After a difficult fourth quarter of 1999, production has started to increase and the implemenation during 1999 of operating improvemens 16 contributed to the lower cash costs realized. Further reductions in cash costs are expected as the year progresses. Noncash costs were $111 per ounce for a full cost of $379 per ounce in the first quarter of 2000 compared to $444 per ounce reported in the same period of 1999. Above plan recovery only partially offset a shortfall in both tons and grade. Unusually heavy rainfall caused significant water inflows into the underground mine, which temporarily cut-off access to the 10 and 11 levels, adversely affecting tons mined and ore grades. An additional longhole drill has been mobilized to the site to help alleviate the backlog of drilling that built up while the mine was being de-watered. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999. REVENUES Product sales in the first quarter of 2000 decreased by $3.4 million, or 19%, from the first quarter of 1999 to $14.8 million. The decrease in sales is primarily attributable to decreased production of gold and inventory buildup at the Fachinal and Petorca mines. In the first quarter of 2000, the Company produced a total of 2,605,390 ounces of silver and 32,163 ounces of gold compared to 2,421,832 ounces of silver and 36,760 ounces of gold in the first quarter of 1999. In the first quarter of 2000, the Company realized average silver and gold prices of $5.19 and $342, respectively, compared with realized average prices of $5.16 and $313, respectively, in the prior year's first quarter. The increase in the produced ounces of silver in the first quarter ended March 31, 2000 over the same period last year was primarily due to the increase in ownership of the Galena mine from 50% to 100% in September 1999. The increase in silver production was partially offset by lower gold production from the Company's Rochester and Fachinal mines. The decrease in the ounces of gold produced during the first quarter of 2000 is primarily attributable to reduced gold grades at the Rochester, Fachinal and Petorca Mines. Interest and other income in the first quarter of 2000 increased by $2.0 million, or 182.3%, compared with the first quarter of 1999. The increase is due primarily to the $1.5 million gain on the mark to market adjustment on the call option portion of the Company's hedge program. 17 COSTS AND EXPENSES Production costs in the first quarter of 2000 decreased by $0.5 million, or 3.6%, from the first quarter of 1999 to $13.5 million. The decrease in production costs is primarily a result of cost reduction programs initiated in 1999 at the Company's operations. Depreciation and amortization increased in the first quarter of 2000 by $0.7 million, or 17%, from the prior year's first quarter, primarily due to decreased ore reserve estimates at the Fachinal Mine, as of January 1, 2000. Administrative and general expenses increased $441,000 in the first quarter of 2000 compared to 1999, due to increased annual incentive awards paid relating to 1999, which were paid in 2000. NET LOSS As a result of the above mentioned factors, the Company's net loss amounted to $9.8 million in the first quarter of 2000 compared to a net loss of $7.3 million in the first quarter of 1999. In the first quarter of 2000, the Company paid dividends of $2.6 million on its Mandatory Adjustable Redeemable Convertible Securities (MARCS). As a result, the loss attributable to common shareholders was $12.0 million, or $.39 per share, for the first quarter 2000, compared to a loss of $9.9 million, or $.45 per share, for the first quarter of 1999. The decrease in the net loss per share was attributed to the higher weighted average number of shares in the first quarter of 2000. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL; CASH AND CASH EQUIVALENTS The Company's working capital at March 31, 2000 was approximately $144.0 million compared to $157.9 million at December 31, 1999. The ratio of current assets to current liabilities was 8.2 to 1.0 at March 31, 2000 compared to 8.5 to 1.0 at December 31, 1999. Net cash used in operating activities in the three months ended March 31, 2000 was $7.8 million compared to $2.9 million in the three months ended March 31, 1999. Net cash provided from investing activities in the 2000 period was $4.5 million compared to net cash used in investing activities of $3.8 million in the prior year's comparable period. The cash provided in the 2000 period was attributable to net proceeds received from sales and purchases of short-term investments and marketable securities of $7.8 million in the first three months of 2000, offset by capital expenditures primarily at Fachinal and Galena Mines, and the Kensington Development property of $3.2 million. Net cash used in financing activities was $2.8 million in the first three months of 2000, as well as in the first three months of 1999. As a result of the above, cash and cash equivalents decreased by $6.1 million in the first three 18 months of 2000 compared to a $9.5 million decrease for the comparable period in 1999. CONVERSION OF MARCS TO COMMON SHARES On March 15, 2000, the Company mandatorily converted its 7,078,000 outstanding shares of MARCS into $7,863,000 shares of common stock, and final the dividend payment of $2.6 million on the MARCS was made as of that date. 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. No specific monetary damages were identified in the complaint. However, in July 1996, the government indicated that damages may approximate $982 million and as a result of pretrial discovery, it appears the United States believes it can prove damages over $1 billion. The United States asserts that the defendants are jointly and severally liable for costs and expenses incurred by the United States in connection with the investigation, removal and remedial action and the restoration or replacement of affected natural resources. In 1986 and 1992, the Company had settled similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe, respectively, and believes that those prior settlements exonerate it of further involvement with alleged natural resource damage in the Coeur d'Alene River Basin. Accordingly, the Company intends to vigorously defend this matter. In March 1997, the Company filed a motion for partial summary judgement relating to the issue of trusteeship, essentially arguing that the United States does not have authority to sue for damages to state natural resources and that the 1986 settlement with the state bars the federal claims. That motion remains pending. In September 1997, the Company filed an additional motion for partial summary judgement raising the statute of limitations as to natural resource damages. That motion was granted by the Court on September 30, 1998. The Court's granting of that motion limits the United States' natural resource damage claims to the 21 square mile Bunker Hill Superfund site area rather than the entire Coeur d'Alene Basin. Although that ruling limits the geographic coverage of the United States' action, the ruling does not prohibit the EPA from attempting to utilize its hazard ranking system which could potentially broaden the scope of the United States' allegations. The United States appealed this decision to the United States Court of Appeals for the 9th Circuit. The Appeal has been argued but not decided. On March 31, 1998, the Court entered an order denying the plaintiffs' motion to allow the 19 United States to prove a portion of its case pursuant to an administrative record, and requiring the parties to submit further facts as to the issue of trusteeship. Furthermore, in March 1998, the EPA announced its intent to perform a remedial investigation/feasibility study upon all or parts of the Coeur d'Alene Basin and, thereby, to apparently focus upon response costs rather than natural resource damages. In September 1998, the Company filed an additional motion for partial summary judgment asserting that CERCLA as applied to the Company in the action is not constitutional under the takings and due process provisions of the United States Constitution. The court denied this motion on the grounds that further facts must be developed at trial before the issue can be decided. CASH TENDER OFFER FOR 6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002 On May 9, 2000, the Company commenced a cash tender offer for up to $27.8 million principal amount of its 6% Convertible Subordinated Debentures due 2002 (the "Debentures") at a purchase price not greater than $720 or less than $640 per $1000 principal amount of Debentures. The tender offer is being conducted on a so-called "Dutch Auction" basis, in connection with which holders will be able to specify the price at which they are willing to sell their Debentures within the $640 to $720 price range and the Company will select the lowest purchase price that will allow it to buy $27.8 million principal amount of Debentures or such lesser principal amount as are properly tendered and not withdrawn. The Company is not obligated to purchase any Debentures if less than a minimum of $10 million principal amount are tendered. It reserves the right, however, to purchase less than the $10 million principal amount if it chooses to do so. The tender offer will expire on June 8, 2000, unless the offer is extended by the Company. All Debentures acquired in the tender offer will be acquired at the same purchase price. The Company has the right to purchase more than $27.8 principal amount of Debentures pursuant to the tender offer. The terms of the tender offer are fully set forth in the Offer to Purchase, dated May 9, 2000, of the Company. Copies of the Offer to Purchase and related documents may be obtained from D.F. King & Co., Inc., the Information Agent related to the tender offer, or ABN AMRO Incorporated, the Dealer Manager relating to the tender offer. If the Company purchases the anticipated maximum $27.8 principal amount of Debentures pursuant to the Offer at the maximum specified purchase price of $720 per $1000 principal amount of Debentures, the Company expects the maximum aggregate cost, including fees and expenses applicable to the offer, will be approximately $21 million. The 20 Company's available cash and cash equivalents, which amounted to approximately $80.9 million at March 31,2000, will be the source of funds for the purchase price and related costs. The Company is conducting the tender offer in order to reduce its interest expense and to take advantage of its current liquidity and improve the capital structure of its balance sheet by reducing outstanding indebtedness. Coeur's Board of Directors has approved the offer. However, neither the Board, nor ABN-AMRO Incorporated, the dealer manager, is making any recommendations to the holders of the Debentures whether or not to tender their Debentures or as to the purchase price at which they may choose to tender. 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 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. 21 The Company operates in several foreign countries, specifically Australia, Bolivia, New Zealand 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 mark-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 March 31, 2000 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. See Note G - Hedging, to the consolidated financial statements for a table which summarizes the Company's gold and foreign exchange hedging activities at March 31, 2000. PART II. Other Information Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed herewith: EXHIBIT NO. DOCUMENT 27 Financial Data Schedule 22 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 May 12, 2000 /s/DENNIS E. WHEELER --------------------- Dennis E. Wheeler Chairman, President and Chief Executive Officer Dated May 12, 2000 /s/GEOFFREY A. BURNS -------------------- Geoffrey A. Burns Vice President and Chief Financial Officer EX-27 2
5 0000215466 COEUR D'ALENE MINES CORPORATION 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 80,855 13,652 8,105 0 61,406 164,018 256,336 120,346 337,428 20,036 235,983 0 0 38,109 387,625 337,428 14,841 17,904 18,374 18,374 5,396 0 3,956 (9,822) 100 (9,922) 0 87 0 (9,835) (.39) (.39)
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