-----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, Ki6+f1E8l1E41QiVxQ0dExkXpCG0/G00yMpjB0DW2Aot7flITvhiBKNf8wQPR3zz rqABWCFIujp69Gcta0Ob5g== /in/edgar/work/20000814/0000904456-00-000044/0000904456-00-000044.txt : 20000921 0000904456-00-000044.hdr.sgml : 20000921 ACCESSION NUMBER: 0000904456-00-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COEUR D ALENE MINES CORP CENTRAL INDEX KEY: 0000215466 STANDARD INDUSTRIAL CLASSIFICATION: [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: 698592 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 0001.txt UNITED STATES 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 June 30, 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 August 11, 2000. COEUR D'ALENE MINES CORPORATION INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- 3 June 30, 2000 and December 31, 1999 Consolidated Statements of Operations -- 5 Three Months and Six Months Ended June 30, 2000 and 1999 Consolidated Statements of Cash Flows -- 6 Three Months and Six Months Ended June 30, 2000 and 1999 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of 15 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure of Market Risk 23 PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders 24 Item 6. Exhibits and Reports on Form 8-K 25 SIGNATURES 26
3 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
June 30, December 31, 2000 1999 ---------- ------------ ASSETS (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 63,290 $ 86,935 Short-term investments 18,309 22,978 Receivables 10,204 15,376 Inventories 56,723 53,769 ---------- ---------- TOTAL CURRENT ASSETS 148,526 179,058 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 96,743 96,592 Less accumulated depreciation (57,634) (54,265) ---------- ---------- 39,109 42,327 MINING PROPERTIES Operational mining properties 109,541 106,455 Less accumulated depletion (66,698) (62,431) ---------- ---------- 42,843 44,024 Developmental properties 52,922 50,781 ---------- ---------- 95,765 94,805 OTHER ASSETS Investments in unconsolidated affiliates 28,389 29,008 Debt issuance costs, net of accumulated amortization 4,765 5,378 Other 3,475 3,471 ---------- ---------- 36,629 37,857 ---------- ---------- $ 320,029 $ 354,047 ========== ==========
3 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
June 30, December 31, 2000 1999 ---------- ------------ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,097 $ 4,693 Accrued liabilities 7,320 6,411 Accrued interest payable 3,971 5,064 Accrued salaries and wages 4,505 5,005 ---------- ---------- TOTAL CURRENT LIABILITIES 19,893 21,173 LONG-TERM LIABILITIES 6% subordinated convertible debentures due 2002 28,333 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 27,550 28,478 ---------- ---------- TOTAL LONG-TERM LIABILITIES 256,532 264,709 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 (367,416) (347,119) Repurchased and nonvested shares (13,190) (13,190) Accumulated other comprehensive loss: Unrealized gain (loss) on short-term investments (1,524) 125 ---------- ---------- 43,604 68,165 ---------- ---------- $ 320,029 $ 354,047 ========== ==========
4 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Three and Six Months Ended June 30, 2000 and 1999
3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 --------------------------- -------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ----------- (In thousands except for per share data) REVENUES Product sales $ 28,021 $ 20,448 $ 42,862 $ 38,707 Interest and other 1,467 1,227 4,530 2,312 ------------ ------------ ------------ ----------- Total Revenues 29,488 21,675 47,392 41,019 COSTS AND EXPENSES Production 25,609 14,436 39,076 27,749 Depreciation and amortization 5,902 4,951 10,809 9,447 Administrative and general 2,095 2,333 5,216 4,801 Exploration 2,441 2,084 4,581 3,947 Interest 3,881 4,138 7,837 8,327 Other 1,028 631 1,163 845 ------------ ------------ ------------ ----------- Total Costs and Expenses 40,956 28,573 68,682 55,116 ------------ ------------ ------------ ----------- NET LOSS FROM CONTINUING OPERATIONS BEFORE TAXES AND EXTRAORDINARY ITEM (11,468) (6,898) (21,290) (14,097) Income tax provision 105 81 205 155 ------------ ------------ ------------ ----------- NET LOSS BEFORE EXTRAORDIANARY ITEM (11,573) (6,979) (21,495) (14,252) Extraordinary item - early Retirement of debt (net of taxes) 1,111 1,198 ------------ ------------ ------------ ----------- NET LOSS $ (10,462) $ (6,979) $ (20,297) $ (14,252) Unrealized holding gain (loss) on securities (185) 4 (1,649) (4) COMPREHENSIVE LOSS (10,647) (6,975) (21,946) (14,256) ============ ============ ============ =========== NET LOSS (10,462) (6,979) (20,297) (14,252) Preferred stock dividends 0 2,633 2,180 5,266 ------------ ------------ ------------ ----------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (10,462) $ (9,612) $ (22,477) $ (19,518) ============ ============ ============ =========== BASIC AND DILUTED LOSS PER SHARE DATA Weighted average number of shares of Common Stock 37,050 21,900 33,810 21,899 ============ ============ ============ =========== Loss before extraordinary item $ (0.31) $ (0.44) $ (0.70) $ (0.89) Extraordinary item - early Retirement of debt(net of taxes) $ 0.03 $ (0.00) $ 0.04 $ (0.00) ------------ ------------ ------------ ----------- Net Loss per share attributable to Common Shareholders $ (0.28) $ (0.44) $ (0.66) $ (0.89) ============ ============ ============ ===========
5 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Three and Six Months Ended June 30, 2000 and 1999
3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 --------------------------- -------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ----------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (10,462) $ (6,979) $ (20,297) $ (14,252) Add (deduct) noncash items: Depreciation, depletion, and amortization 5,902 4,951 10,809 9,447 Gain on early retirement of debt (net of taxes) (1,113) (1,200) Other 956 1,232 2,545 1,806 Undistributed (earnings) loss of investment in unconsolidated subsidiary (78) 91 (560) 562 Unrealized (gain)loss on written calls 511 (1,043) Changes in Operating Assets and Liabilities: Receivables (2,100) (1,334) 5,171 2,928 Inventories 4,683 (2,022) (2,954) (5,723) Accounts payable and accrued liabilities (1,391) (3,172) (3,356) (4,914) ------------ ------------ ------------ ----------- NET CASH USED IN OPERATING ACTIVITIES (3,092) (7,233) (10,885) (10,146) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments (4,187) (1,711) (8,463) (3,735) Proceeds from sales of short-term investments 608 12,073 1,178 Purchases of property, plant and equipment (244) (453) (986) (640) Proceeds from sale of assets 99 869 690 869 Expenditures on operational mining properties (2,520) (1,415) (4,437) (1,518) Expenditures on developmental properties (1,642) (2,238) (2,930) (3,859) Other (20) (1,139) 83 (1,622) ------------ ------------ ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (8,514) (5,479) (3,970) (9,327) CASH FLOWS FROM FINANCING ACTIVITIES Retirement of long-term debt (5,841) (5,999) Payment of cash dividends (2,633) (2,633) (5,266) Other (118) (162) (158) (299) ------------ ------------ ------------ ----------- NET CASH USED IN FINANCING ACTIVITIES (5,959) (2,795) (8,790) (5,565) ------------ ------------ ------------ ----------- DECREASE IN CASH AND CASH EQUIVALENTS (17,565) (15,507) (23,645) (25,038) Cash and cash equivalents at beginning of period 80,855 117,804 86,935 127,335 ------------ ------------ ------------ ----------- Cash and cash equivalents at June 30 $ 63,290 $ 102,297 $ 63,290 $ 102,297 ============ ============ ============ ===========
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 only 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, 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. 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 should be reviewed in connection with these condensed consolidated financial statements. NOTE B: Inventories Inventories are comprised of the following:
JUNE 30, DECEMBER 31, 2000 1999 ------------ ------------ (In Thousands) In process and on leach pads $ 43,455 $ 43,494 Concentrate and dore' inventory 8,398 5,594 Supplies 4,870 4,681 --------- --------- $ 56,723 $ 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, 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 for recovery. 7 NOTE C: Income Taxes The Company has reviewed its net deferred tax asset for the six-month period ended June 30, 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 Stock 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 The Company, under the terms of its lease, self insurance, and bonding agreements with the Banks, Lending Institutions and Regulator Agencies, is required to collateralize certain portions of the company's obligations. The Company has collaterized these obligations by assigning certificates of deposit, that have maturity dates ranging from 3 months to a year, to the respective institution or agency. At June 30, 2000 and December 31, 1999, the Company had certificates of deposit under these agreements of $9.1 million and $6.6 million, respectively, restricted for this purpose. In the second quarter, the Company sold its royalty interest in the Quiruvilca mine in northeren Peru to Pan American Silver Corporation ("Pan American") for 140,000 shares of Pan American capital stock, warrants to purchase an additional 100,000 shares of Pan American capital stock at $5 per share and $50,000 cash. During the first quarter of 2000, the Company sold 245,000 shares of Pan American capital stock for approximately $1.2 million, and recorded a realized loss of approximately $66,000. The Company continues to hold approximately one million shares of Pan American capital stock. NOTE F: Long-Term Debt On June 14, 2000, the Company repurchased $7,001,000 principal amount of its 6% Convertible Subordinated Debentures due 2002 (the "6% Debentures") pursuant to a cash tender offer that commenced on May 9, 2000 and expired as scheduled on June 8, 2000. The price paid by the Company for the repurchased 6% Debentures was $5,040,720 (or $720 per $1,000 principal amount) plus accrued and unpaid interest of $3,500 (or $.50 per $1,000 principal amount) from June 10, 2000 to, but not including, the date of payment on June 14, 2000. 8 As a result of the cash tender offer, the Company reduced the outstanding principal amount of 6% Debentures from $35,334,000 to $28,333,000, thereby reducing the annual amount of its interest expense by $420,060. The Company recorded extraordinary gain of $1,111,000, net of tender offer expenses, in the quarter ended June 30, 2000. 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 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) Coeur Exploration & Rochester Silver Valley Fachinal Petorca Australia Development Other Total -------------------------------------------------------------------------------------------- June 30, 2000 Net sales and revenues to external customers 6 7,815 4,157 2,703 4,898 (90) 27,901 47,392 Intersegment net sales and revenues 25,279 - - - - - (25,279) - -------------------------------------------------------------------------------------------- Total net sales and revenues 25,285 7,815 4,157 2,703 4,898 (90) 2,622 47,392 ============================================================================================ Depreciation and amortization 7,372 1,289 2,550 108 1,093 44 729 13,185 Interest income - - 8 4 54 9 2,466 2,542 Interest expense - - 14 0 - - 7,824 7,837 Income tax (credit) expense - 1 - - 22 - 182 205 Earnings (losses) from non- consolidated affiliates - - - - 561 - - 561 Gain on early retirement of debt - - - - - - 1,198 1,198 Profit (loss) 6,800 (692) (3,367) (844) (312) (2,593) 742 (267)
10
Coeur d'Alene Mines Corporation Segment Reporting (In Thousands) Coeur Exploration & Rochester Silver Valley Fachinal Petorca Australia Development Other Total -------------------------------------------------------------------------------------------- Investments in nonconsolidated affiliates - - - - 28,389 - - 28,389 Segment assets 84,763 25,361 29,042 2,534 369 52,055 7,677 201,800 Expenditures for property 760 2,508 2,048 129 - 2,873 34 8,353 June 30, 1999 Net sales and revenues to external customers (139) - 4,851 5,330 4,696 (1,124) 27,408 41,017 Intersegment net sales and revenues 24,657 - - - - - (24,657) - -------------------------------------------------------------------------------------------- Total net sales and revenues 24,518 - 4,851 5,330 4,696 (1,124) 2,749 41,019 ============================================================================================ Depreciation and amortization 4,780 - 1,557 152 2,157 191 1,133 9,971 Interest income - - 38 14 19 7 2,860 2,938 Interest expense - - 14 2 - - 8,312 8,327 Income tax (credit) expense - - - - 6 - 148 155 Earnings (losses) from non- consolidated affiliates - - - - (800) - 238 (562) Gain on early retirement of - - - - - - - - dept Profit (loss) 9,578 - (2,357) 1,034 (437) (4,237) 487 4,068 Investments in nonconsolidated affiliates - - - - 47,814 - 16,312 64,126 Segment assets 87,164 - 31,986 2,298 598 27,112 12,453 161,610 Expenditures for property 1,096 - 454 44 - 4,110 313 6,017 Notes: (A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties.
11 Coeur d'Alene Mines Corporation Segment Reporting
GEOGRAPHIC INFORMATION (In Thousands) Long-Lived 2000: Revenues Assets ---------------------------------- United States $ 35,720 $ 93,186 Chile 6,774 22,175 Australia 4,898 - Bolivia - 18,853 Other Foreign Countries (0) 660 ---------------------------------- Consolidated Total $ 47,392 $ 134,874 ================================== Long-Lived 1999: Revenues Assets ---------------------------------- United States $ 27,267 $ 73,433 Chile 9,056 24,487 Australia 4,696 - Other Foreign Countries 1 4,374 ---------------------------------- Consolidated Total $ 41,019 $ 102,294 ================================== Revenues are geographically seperated based upon the country in which operations and the underlying assets generating those revenues reside.
NOTE H: Hedging For the six months ending June 30, 2000 the Company recorded a $1.1 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 June 30, 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. The fair values were derived from dealer quotes. 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. 12
Fair Value (dollars in thousands) 2000 2001 2002 2003 2004 Thereafter Total 3/31/99 ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Long Term Debt $111,254 Fixed Rate $ - $ - $28,333 $ - $93,372 $107,277 $228,982 Average Interest Rate 6.739% 6.739% 6.793% 6.843% 7.190% 7.250% DERIVATIVE FINANCIAL INSTRUMENTS Gold Forward Sales - AUD $ 602 Ounces 7,800 - - - - - 7,800 Price Per Ounce $612.10 $ - $ - $ - $ - $ - Gold Put Options Purchased - AUD(1) $ 6,623 Ounces 7,200 30,000 30,000 30,000 - - 97,200 Price Per Ounce $597.00 $597.00 $597.00 $597.00 $ - $ - Gold Forward Sales - USD $ 1,118 Ounces 15,000 12,000 12,000 - - - 39,000 Price Per Ounce $301.68 $316.51 $331.84 $ - $ - $ - Gold Call Options Sold - USD(2) $ - Ounces - - - - - 56,000 56,000 Price Per Ounce $ - $ - $ - $ - $ - $345.00 Amortizing Forward Sales - USD(2) $ 504 Ounces 10,000 22,560 22,560 22,560 22,560 78,960 179,200 Price Per Ounce $338.58 $348.50 $348.50 $348.50 $348.50 $348.50 Foreign Currency Contracts $ 1 New Zealand Dollar $ 1,800 $ - $ - $ - $ - $ - $ 1,800 Exchange Rate (NZ$ to US$) 2.124 - - - - - ---------------------------------------------------------------------------------------------------------------------------------- Calculation of Avg Int Rate 6% Due 2002 $ 28,333 $ 28,333 $ 28,333 - - - Days of Interest 365 365 161 - - - 6.000% 6.000% 6.000% 6.000% 6.000% 6.000% $ 1,700 $ 1,700 $ 750 - - - 6.375% Due 2004 $ 93,372 $ 93,372 $ 93,372 $ 93,372 $ 93,372 - Days of Interest 365 365 365 365 31 - 6.375% 6.375% 6.375% 6.375% 6.375% 6.375% $ 5,952 $ 5,952 $ 5,952 $ 5,952 $ 506 - 7.25% Due 2005 $107,277 $107,277 $107,277 $107,277 $107,277 $107,277 Days of Interest 365 365 365 365 365 304 7.250% 7.250% 7.250% 7.250% 7.250% 7.250% $ 7,778 $ 7,778 $ 7,778 $ 7,778 $ 7,778 $ 6,478 Total Interest 15,430 15,430 14,480 13,730 8,284 6,478 Weighted Debt 228,982 228,982 213,147 200,649 115,207 89,349 Average Interest 6.739% 6.739% 6.793% 6.843% 7.191% 7.250% 13 (1) Of the put options purchased, 97,200 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),and was amended by FAS 138 "Accounting for Hedging Activities" 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 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: Litigation 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 14 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 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. With respect to the natural resource damage litigation referred to above, in June 2000 Governor Kempthorne of the State of Idaho asked the defendants to give him a proposal for settlement which he could take to the plaintiffs in the suit. The defendants outlined such a proposal. The defendants would contribute a total of $250 million over 30 years, of which $154 million would be in fixed annual payments, without interest. The remaining $96 million would be paid from royalties based on the price of silver, copper, gold and zinc as provided in an index and schedule to be agreed upon. Coeur advised the Governor, defendants and the U.S. that its share of this proposal would be, without admission of liability and with appropriate release, the sum of $3,750,000 in annual installments over 25 years without interest and an additional $1,250,000 in years 26-30 based on the royalty concept described above. It is not known whether the proposal put forth by the Governor to the plaintiffs will be accepted, although the Coeur d'Alene Tribe, one of the plaintiffs with whom the Company has already settled (in 1992), indicated it viewed the proposal "optimistically". NOTE K: Reclassification Certain reclassifications of prior-year balances have been made to conform to current year classifications. 15 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. This document contains numerous forward-looking statements relating to the Company's gold and silver mining business. The United States Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward looking statements. Operating, exploration and financial data, and other statements in this document are based on information the company believes reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from the Company's future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. The 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 increased its ownership by 50% to 100% in September of 1999) 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 ("Gasgoyne"), an Australian gold mining company, that owns 50% of the Yilgarn Star gold mine in Australia. The average price of silver and gold in the second quarter of 2000 was $5.21 and $290 per ounce, respectively. The market price of silver (Handy & Harman) and gold (London Final) on August 9, 2000 were $____ per ounce and $___ per ounce, respectively. 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 and six-month periods ended June 30, 2000 and 1999: 16
Three Months Ended Six Months Ended June 30 June 30 --------------------------- -------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ----------- ROCHESTER MINE Gold ozs. 18,903 16,518 34,360 32,824 Silver ozs. 1,760,212 1,355,955 3,298,472 3,020,018 Cash Costs per oz./silver $3.78 $4.02 $4.00 $4.26 Full Costs per oz./silver $4.91 $4.94 $5.16 $5.15 GALENA MINE Silver ozs. 906,593 411,542 1,697,355 871,007 Cash Costs per oz./silver $4.79 $5.07 $5.27 $4.77 Full Costs per oz./silver $5.57 $6.26 $6.02 $5.90 COEUR MINE Silver ozs. N/A N/A N/A N/A Cash Costs per oz./silver N/A N/A N/A N/A Full Costs per oz./silver N/A N/A N/A N/A YILGARN STAR MINE Gold ozs. 6,474 7,377 12,593 13,554 Cash Costs per oz./gold $201 $314 $234 $302 Full Costs per oz./gold $326 $537 $352 $494 FACHINAL MINE Gold ozs. 4,004 6,911 9,419 13,584 Silver ozs. 295,703 314,618 559,429 601,783 Cash Costs per oz./gold $379 $266 $358 $300 Full Costs per oz./gold $517 $320 $489 $362 PETORCA MINE Gold ozs. 6,468 7,790 11,640 15,395 Silver ozs. 17,297 15,478 27,939 26,617 Cash Costs per oz./gold $339 $264 $359 $265 Full Costs per oz./gold $348 $264 $369 $265 CONSOLIDATED TOTALS Gold ozs. 35,849 38,596 68,012 75,357 Silver ozs. 2,979,805 2,097,593 5,583,195 4,519,425
NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA ROCHESTER MINE Coeur's Rochester mine produced 1.8 million ounces of silver and 18,900 ounces of gold during the second quarter of 2000 compared to 1.4 million ounces of silver and 16,500 ounces of gold in the previous year. Cash costs for the period declined to $3.78 per silver equivalent ounce from $4.02 in 1999 despite the mining of lower-grade ore as part of the planned mining sequence. Operations are benefiting from a number of improvements carried out in the first quarter of this year. The conveyor and crushing circuits have been upgraded to increase capacity and the solution flow on the leach pad was increased by approximately 15 percent. At Rochester, the first phase of a comprehensive in-pit and near-pit ore definition and exploration program consisting of 114 reverse circulation drill holes totaling more than 40,000 feet has been completed. Assays and analysis of data are underway. The second phase of the program will begin shortly and a separate program for the nearby Nevada Packard property will commence in late August or early September. 17 SILVER VALLEY RESOURCES - GALENA MINE The Company increased its ownership interest in Coeur Silver Valley to 100 percent from 50 percent effective as of September 8, 1999. As a result of this, together with higher mill throughput, silver production from the Galena mine attributable to Coeur increased to 906,600 ounces during the latest quarter compared to 411,500 ounces in the comparable quarter of the preceding year. Total cash costs for the second quarter were $4.79 per ounce compared to $5.07 per ounce for the second quarter of 1999. The improved results are expected to continue as underground development work provides greater access to higher-grade areas of the mine. The first hole of a planned 9,000-foot exploration drill program to test the West Argentine area of the Galena mine is well underway and results are currently being analyzed. This is the initial phase of a program designed to increase the capacity at Coeur Silver Valley to approximately 5,000,000 ounces of silver annually. FACHINAL MINE Production at the Fachinal mine during this year's second quarter was 295,700 ounces of silver and 4,000 ounces of gold compared to 314,600 ounces of silver and 6,900 ounces of gold in the prior year's comparable quarter. Total cash costs for the quarter were $379 per equivalent ounce of gold compared to $266 per ounce in the second quarter of 1999. The production shortfall and increased costs were partially the result of lower gold grades but mostly due to severe winter conditions that affected much of Southern Chile. These conditions restricted access to the most productive areas of the mine, resulted in a shortfall in tons mined and at one point led to a temporary suspension of operations altogether. Despite the weather conditions, construction of the road connecting Fachinal to the high-grade Furioso deposit is continuing and initial production is expected to commence late in the fourth quarter of 2000, as scheduled. The recent exploration program to convert resources to reserves proceeded as planned and the mining plan is being revised to incorporate the latest results. Production is expected to improve as slot-cut mining of the recently defined higher grade Lucero vein commenced in July. PETORCA At Petorca, gold production in the second quarter of 2000 declined to 6,500 ounces compared to 7,800 ounces in last year's comparable quarter. Silver output was up marginally to 17,300 ounces from 15,500 ounces in 1999. Total cash costs per equivalent ounce of gold were $339 per ounce compared to $264 per ounce in the second quarter of 1999, although down considerably from the $384 per ounce recorded in the first quarter of 2000. Production is returning to normal after a severe accident restricted access to high-grade areas of the mine during the first quarter. The gold grade was still below 18 projections but this was offset somewhat by higher tons mined and increased mill throughput. The exploration and engineering staff at Petorca has evaluated the recently discovered San Lorenzo gold-copper satellite deposit and surface mining is scheduled to start in the third quarter. YILGARN STAR MINE Coeur's 25 percent share of gold production from the Yilgarn Star mine was 6,500 ounces, down from 7,400 ounces in the second quarter of 1999. Total cash costs for the latest period declined sharply to $201 per ounce compared to $314 per ounce in the prior year's comparable quarter despite lower production and a planned decrease in the gold grade. This was due in large measure to the extensive underground development program carried out in 1999 as well as to several other operating improvements initiated late last year. The Yilgarn Star area is one of the few locations where Coeur is carrying out any grassroots exploration. At present, a preliminary resource model is being calculated at the recently discovered Cheritons Find/Redwing prospect located 20 miles to the south of the minesite. Additional drilling is also planned for later in the year. SAN BARTOLOME In 1999, Coeur acquired the San Bartolome silver prospect located near the historic silver producing area of the Cerro Rico mountain next to the town of Potosi in southern Bolivia. Silver mineralization at San Bartolome is contained in a series of gravel-like paleochannels referred to locally as "sucus" and "pallacos". Deposits of this nature are often difficult to evaluate and the Company designed and completed a very detailed drilling and bulk sampling program to confirm the initial resource estimate of 34.4 million tons at an average grade of 3.1 ounces of silver per ton or 106 million contained ounces. All of the data collected to date is being evaluated to develop a three-dimensional mineral model under the direction of a third party geological/geostatistical firm. Recent metallurgical work has indicated that the ores tested are amenable to conventional cyanide leaching after the silver minerals have been liberated from the host rock and that the finer the ore is crushed, the better the silver extraction. Alternative flowsheets are currently being developed that also include processing by conventional milling. RESULTS OF OPERATIONS Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999. REVENUES Product sales in the second quarter of 2000 increased by $7.6 million, or 37%, from the second quarter of 1999 to $28 million. The increase in sales is primarily attributable to the acquisition of 50% additional ownership of the Galena Mine in the third quarter of 1999, and increases in the sale of 19 gold and silver shipped from the Rochester Mine and an increase in the sale of silver at the Petorca Mine in the second quarter of 2000. In the second quarter of 2000, the Company produced a total of 2,979,805 ounces of silver and 35,849 ounces of gold compared to 2,097,593 ounces of silver and 38,596 ounces of gold in the second quarter of 1999. In the second quarter of 2000, the Company realized average silver and gold prices of $5.04 and $310, respectively, compared with realized average prices of $5.14 and $322, respectively, in the prior year's second quarter. The increase in the produced ounces of silver in the second quarter ended June 30, 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 and increased production at the Rochester mine. The decrease in the ounces of gold produced during the second quarter of 2000 is primarily attributable to reduced gold grades at the Fachinal and Petorca Mines. Interest and other income in the second quarter of 2000 increased by $240,000, or 20%, compared with the second quarter of 1999. COSTS AND EXPENSES Production costs in the second quarter of 2000 increased by $11.2 million, or 77%, from the second quarter of 1999 to $25.6 million. The increase in production costs is primarily a result of the increase in ownership of the Galena Mine and increased production costs at the Fachinal and Petorca mines. Depreciation and amortization increased in the second quarter of 2000 by $1.0 million, or 19%, from the prior year's second quarter, primarily due to decreased ore reserve estimates at the Fachinal Mine, as of December 31, 1999. Administrative and general expenses decreased $238,000 in the second quarter of 2000 compared to 1999, due to cost reduction programs initiated in 1999. EXTRAORDINARY ITEM During the quarter ended June 30, 2000, the Company recorded an extraordinary gain of $1,111,000, net of tender offer expenses, as a result of its repurchase of $7,001,000 principal amount of 6% Convertible Subordinated Debentures due 2002 in a cash tender offer for a purchase price of $5,040,720 plus accrued and unpaid interest of $3,500 from June 10, 2000 to, but not including, the date of payment on June 14, 2000. NET LOSS As a result of the above mentioned factors, the Company's net loss amounted to $10.5 million in the second quarter of 2000 compared to a net loss of $7 million in the second quarter of 1999. In the second quarter of 2000, the loss attributable to common shareholders was $10.5 million, or $.28 per 20 share, for the second quarter 2000, compared to a loss attributable to common shareholders of $9.6 million, or $ .44 per share, for the second quarter of 1999. The decrease in the net loss per share was attributed to the higher weighted average number of shares in the second quarter of 2000. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999. REVENUES Product sales in the six months ended June 30, 2000, increased by $4.2 million, or 11%, from the six months ended June 30, 1999 to $42.9 million. The increase in sales is primarily attributable to the acquisition of 50% additional ownership of the Galena Mine in the third quarter of 1999 and increases in the sale of gold and silver shipped from the Rochester Mine. In the six months ended June 30, 2000, the Company produced a total of 5,583,195 ounces of silver and 68,012 ounces of gold compared to 4,519,425 ounces of silver and 75,357 ounces of gold in the six months ended June 30, 1999. In the second quarter of 2000, the Company realized average silver and gold prices of $5.09 and $319, respectively, compared with realized average prices of $5.16 and $317, respectively, in the prior year's second quarter. The increase in the produced ounces of silver in the six months ended June 30, 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 silver production from the Company's Fachinal mine. The decrease in the ounces of gold produced during the six months ended June 30, 2000 is primarily attributable to reduced gold grades at the Yilgarn, Fachinal and Petorca Mines. Interest and other income in the first quarter of 2000 increased by $2.2 million, or 96%, compared with the second quarter of 1999. The increase is primarily due to the $1.1 million gain on the mark to market adjustment on the call option portion of the Company's hedge program. COSTS AND EXPENSES Production costs in the six months ended June 30, 2000 increased by $11.3 million, or 41%, from the six-months ended June 30,1999 to $39.1 million. The increase in production costs is primarily a result of the increase in ownership of the Galena Mine and increased production costs at the Fachinal and Petorca mines. Depreciation and amortization increased in the six month period ended June 30, 2000 by $1.4 million, or 14%, from the prior year's comparable period, primarily due to decreased ore reserve estimates at the Fachinal Mine as of December 31, 1999. Administrative and general expenses increased $.4 million in the six months ended June 30, 2000 compared to 1999, due to increased annual incentive awards relating to 1999 that were paid in the first quarter of 2000. 21 EXTRAORDINARY ITEM During the six months ended June 30, 2000, the Company recorded an extraordinary gain of $1,111,111 as a result of its repurchase during the three months ended June 30, 2000 of 6% Convertible Subordinated Debentures due 2000 that is discussed above. The Company also recorded an additional extraordinary gain of approximately $87,000, as a result of its repurchase during the first quarter of 2000 of approximately $248,000 principal amount of outstanding 6% Subordinated Convertible Debentures due 2002 for a purchase price of approximately $159,000, excluding purchased interest of approximately $12,000. NET LOSS As a result of the above mentioned factors, the Company's net loss amounted to $20.3 million for the six month period ended June 30, 2000 compared to a net loss of $14.3 million in the comparable period ended June 30, 1999. For the six-months ended June 30, 2000, the loss attributable to common shareholders was $22.5 million, or $.66 per share, compared to a loss attributable to common shareholders of $19.5 million, or $.89 per share, for the six months ended June 30, 1999. The decease in the net loss per share was attributed to the higher weighted average number of shares outstanding in the six months ended June 30, 2000 LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL; CASH AND CASH EQUIVALENTS The Company's working capital at June 30, 2000 was approximately $128.6 million compared to $157.9 million at December 31, 1999. The ratio of current assets to current liabilities was 7.5 to 1.0 at June 30, 2000 compared to 8.5 to 1.0 at December 31, 1999. Net cash used in operating activities in the six months ended June 30, 2000 was $10.9 million compared to $10.2 million in the six months ended June 30, 1999. Net cash used in investing activities in the 2000 period was $4.0 million compared to net cash used in investing activities of $9.3 million in the prior year's comparable period. Net cash used in financing activities was $8.8 million in the six months ending June 30, 2000, as compared to $5.6 for the six months ending June 30, 1999. As a result of the above, cash and cash equivalents decreased by $23.6 million in the six months ending June 30, 2000 compared to a $25.0 million decrease for the comparable period in 1999. CONVERSION OF MARCS TO COMMON SHARES On March 15, 2000, the Company mandatorily converted its 7,077,833 outstanding shares of MARCS into 7,863,000 shares of common stock, and the final dividend payment of $2.6 million on the MARCS was made as of that date. 22 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 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 23 this motion on the grounds that further facts must be developed at trial before the issue can be decided. With respect to the natural resource damage litigation referred to above, in June 2000 Governor Kempthorne of the State of Idaho asked the defendants to give him a proposal for settlement which he could take to the plaintiffs in the suit. The defendants outlined such a proposal. The defendants would contribute a total of $250 million over 30 years, of which $154 million would be in fixed annual payments, without interest. The remaining $96 million would be paid from royalties based on the price of silver, copper, gold and zinc as provided in an index and schedule to be agreed upon. Coeur advised the Governor, defendants and the U.S. that its share of this proposal would be, without admission of liability and with appropriate release, the sum of $3,750,000 in annual installments over 25 years without interest and an additional $1,250,000 in years 26-30 based on the royalty concept described above. It is not known whether the proposal put forth by the Governor to the plaintiffs will be accepted, although the Coeur d'Alene Tribe, one of the plaintiffs with whom the Company has already settled (in 1992), indicated it viewed the proposal "optimistically". 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. 24 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 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, 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 June 30, 2000. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on May 9, 2000. A total of 37,050,068 shares of Common Stock were outstanding and entitled to vote at the Annual Meeting. The first proposal was the election of directors. The following persons were nominated and elected to serve as members of the Board of Directors for one year or until their successors are elected and qualified by the votes indicated: Cecil D Andrus 29,563,210 for and 530,888 withheld, Joseph C. Bennett 29,565,407 for and 528,631 withheld, James J. Curran 29,590,116 for and 503,982 withheld, James A. McClure 29,569,959 for and 524,139 withheld, Robert E. Mellor 29,551,530 for and 542,568 withheld, John H. Robinson 29,559,900 for and 534,198 withheld, Timothy R. Winterer 29,568,467 for and 525,631 withheld, Daniel Tellechea Salido 29,545,246 for and 548,852 withheld, Xavier Garcia de Quevedo Topete 29,543,775 for and 550,323 withheld and Dennis E. Wheeler 29,568,699 for and 525,399 withheld. The second proposal was the proposed ratification of the Board of Directors' selection of Arthur Andersen LLP as the Company's independent accounting firm for the year ended December 31, 2000. The proposal was approved by the holders of more than the required majority of the shares of Common Stock voting at the meeting. The proposal was approved by a vote of 29,774,354 shares for (representing 80.36% of the shares voting), 207,474 shares against with 112,270 shares abstaining. 25 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 26 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 11, 2000 /s/DENNIS E. WHEELER --------------------- Dennis E. Wheeler Chairman, President and Chief Executive Officer Dated August 11, 2000 /s/GEOFFREY A. BURNS -------------------- Geoffrey A. Burns Vice President and Chief Financial Officer 27 EX-27 2 0002.txt
5 0000215466 COEUR D'ALENE MINES CORPORATION 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 63,290 18,309 10,204 0 56,723 148,526 259,206 124,332 320,029 19,893 228,982 0 0 38,109 387,625 320,029 42,862 47,392 49,885 49,885 10,960 0 7,837 (21,290) 205 (21,495) 0 1,198 0 (20,297) (.66) (.66)
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