-----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, MXVIeoHpkbMvlvrBjEWfmgsf/DrwROfsC/nlYIzZ5CZHXIeJohmwt5FHxT/w34dI DGoc/vhJQJxN03+Evxmu/w== 0000904456-99-000077.txt : 19990816 0000904456-99-000077.hdr.sgml : 19990816 ACCESSION NUMBER: 0000904456-99-000077 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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: 99687633 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 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, 1999 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 21,900,579 shares were issued and outstanding as of August 9, 1999. COEUR D'ALENE MINES CORPORATION INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- 3 June 30, 1999 and December 31, 1998 Consolidated Statements of Operations -- 5 Six Months Ended June 30, 1999 and 1998 Consolidated Statements of Cash Flows -- 6 Six Months Ended June 30, 1999 and 1998 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of 10 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure of Market Risk 24 PART II. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 SIGNATURES
2 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
June 30, December 31, 1999 1998 ---------- ------------ ASSETS (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 102,297 $ 127,335 Short-term investments 4,310 1,753 Receivables 9,919 11,647 Inventories 49,398 43,675 ---------- ---------- TOTAL CURRENT ASSETS 165,924 184,410 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 78,883 79,173 Less accumulated depreciation 39,233 37,304 ---------- ---------- 39,650 41,869 MINING PROPERTIES Operational mining properties 82,527 82,018 Less accumulated depletion 48,827 46,149 ---------- ---------- 33,700 35,869 Developmental properties 28,943 25,898 ---------- ---------- 62,643 61,767 OTHER ASSETS Investments in unconsolidated affiliates 64,126 66,914 Notes receivable 312 1,627 Debt issuance costs, net of accumulated amortization 6,043 6,625 Other 3,073 2,768 ---------- ---------- 73,554 77,934 ---------- ---------- $ 341,771 $ 365,980 ========== ==========
3 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
June 30, December 31, 1999 1998 ---------- ------------ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,729 $ 3,512 Accrued liabilities 11,284 12,700 Accrued interest payable 4,038 5,412 Accrued salaries and wages 4,400 5,642 Current portion of remediation costs 2,081 3,052 Current portion of obligations under capital leases 222 255 ---------- ---------- TOTAL CURRENT LIABILITIES 24,754 30,573 LONG-TERM LIABILITIES 6% subordinated convertible debentures due 2002 45,753 45,803 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 13,020 11,888 ---------- ---------- TOTAL LONG-TERM LIABILITIES 259,422 258,340 SHAREHOLDERS' EQUITY Mandatory Adjustable Redeemable Convertible Securities (MARCS), par value $1.00 per share,(a class of preferred stock) - authorized 7,500,000 shares, 7,077,833 issued and outstanding 7,078 7,078 Common Stock, par value $1.00 per share- authorized 60,000,000 shares, issued 22,959,790 and 22,957,835 shares in 1998 and 1997 (including 1,059,211 shares held in treasury) 22,960 22,958 Capital surplus 373,962 379,180 Accumulated deficit (333,048) (318,796) Repurchased and nonvested shares (13,190) (13,190) Accumulated other comprehensive loss: Unrealized losses on short-term investments (167) (163) ---------- ---------- 57,595 77,067 ---------- ---------- $ 341,771 $ 365,980 ========== ==========
See notes to consolidated financial statements. 4 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Three Months Ended June 30, 1999 and 1998 Six Months Ended June 30, 1999 and 1998
3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 --------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ----------- (In thousands except for per share data) REVENUES Product sales $ 20,448 $ 32,256 $ 38,707 $ 53,422 Interest and other 1,227 2,307 2,312 5,896 ------------ ------------ ------------ ----------- Total Revenues 21,675 34,563 41,019 59,318 COSTS AND EXPENSES Production 14,436 22,348 27,749 33,630 Depreciation and amortization 4,951 7,691 9,447 16,223 Administrative and general 2,333 2,971 4,801 5,667 Exploration 2,084 2,557 3,947 4,373 Interest 4,138 3,653 8,327 7,468 Write down of mining properties and other 631 81 845 54,665 ------------ ------------ ------------ ----------- Total Cost and Expenses 28,573 39,301 55,116 122,026 ------------ ------------ ------------ ----------- NET LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (6,898) (4,738) (14,097) (62,708) Income tax (benefit) provision 81 428 155 418 ------------ ------------ ------------ ----------- NET LOSS $ (6,979) $ (5,166) $ (14,252) $ (63,126) ============ ============ ============ =========== NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (9,612) $ (7,799) $ (19,518) $ (68,392) ============ ============ ============ =========== BASIC AND DILUTED LOSS PER SHARE DATA Weighted average number of shares of Common Stock and equivalents used in calculation 21,900 21,899 21,899 21,899 ============ ============ ============ =========== Net Loss per share attributable to Common Shareholders $ (0.44) $ (0.36) $ (0.89)$ (3.12) ============ ============ ============ ===========
See notes to consolidated financial statements. 5 CONSOLIDATED STATEMENTS OF CASH FLOWS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Three and Six Months Ended June 30, 1999 and 1998
3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 --------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ----------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (6,979) $ (5,166) $ (14,252) $ (63,126) Add (deduct) noncash items: Depreciation, depletion, and amortization 4,951 7,691 9,447 16,223 Reclamation 246 183 525 505 Other charges 986 200 1,281 286 Writedown of mining properties 54,506 Undistributed (earnings) loss of investment in unconsolidated subsidiary 91 1,526 562 680 Changes in Operating Assets and Liabilities: Receivables (1,334) 1,479 2,928 2,038 Inventories (2,022) 2,279 (5,723) (8,830) Accounts payable and accrued liabilities (3,172) (6,815) (4,914) (11,257) ------------ ------------ ------------ ----------- NET CASH USED IN OPERATING ACTIVITIES (7,233) 1,377 (10,146) (8,975) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments (1,711) (6,633) (3,735) (17,203) Proceeds from sales of short-term investments 608 25,329 1,178 74,623 Investment in unconsolidated subsidiaries (271) (836) (296) (3,143) Purchases of property, plant and equipment (453) (1,449) (640) (2,365) Proceeds from sale of assets 869 68 869 7,667 Expenditures on operational mining properties (1,415) (705) (1,518) (1,758) Expenditures on developmental properties (2,238) (4,720) (3,859) (8,098) Other (868) (311) (1,326) (645) ------------ ------------ ------------ ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (5,479) 10,743 (9,327) 49,078 CASH FLOWS FROM FINANCING ACTIVITIES Retirement of long-term debt (3,610) (3,610) Payment of cash dividends (2,633) (2,633) (5,266) (5,266) Other (162) (123) (299) (434) ------------ ------------ ------------ ----------- NET CASH USED IN FINANCING ACTIVITIES (2,795) (6,366) (5,565) (9,310) ------------ ------------ ------------ ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,507) 5,754 (25,038) 30,793 Cash and cash equivalents at beginning of year 117,804 139,243 127,335 114,204 ------------ ------------ ------------ ----------- Cash and cash equivalents at June 30, 1999 $ 102,297 $ 144,997 $ 102,297 $ 144,997 ============ ============ ============ ===========
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-and six-month periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 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, 1998. NOTE B: Inventories Inventories are comprised of the following:
JUNE 30, DECEMBER 31, 1999 1998 ------------ ------------ (In Thousands) In process and on leach pads $ 40,688 $ 36,166 Concentrate and dore' inventory 5,101 3,968 Supplies 3,609 3,541 ---------- ---------- $ 49,398 $ 43,675 ========== ==========
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. 7 NOTE C: Income Taxes The Company has reviewed its net deferred tax asset for the six-month period ended June 30, 1999, 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: Segment Reporting In 1997, the Financial Accounting Standards Board issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement replaces Statement No. 14, "Financial Reporting for Segments of a Business Enterprise," and establishes new standards for defining and reporting the Company's operating segments and requires selected information in interim financial reports. 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, Golden Cross, 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 Silver Valley Resources Corporation, 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 8 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 above. 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.
Coeur d'Alene Mines Corporation (In Thousands) Segment Reporting Rochester Golden Coeur Cross Fachinal Petorca Australia Kensington Exploration Other Total ------------------------------------------------------------------------------------------------------ June 30, 1999 Net sales and revenues to external customers $ (139) - $ 4,851 $ 5,330 $ 4,696 - $ (1,124) $ 27,406 $ 41,020 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 $ 41,020 ====================================================================================================== Profit (loss) $ 9,578 - $ (2,357) $ 1,034 $ (437) $ - $ (4,237) $ 487 $ 4,068 Segment assets(A) $ 87,164 $ 4,945 $ 31,986 $ 2,298 $ 598 $ 25,864 $ 1,249 $ 7,508 $161,610 June 30, 1998 Net sales and revenues to external customers $ 73 $ - $ 8,671 $ 6,382 $ 7,963 $ - $ (303) $ 36,532 $ 59,318 Intersegment net sales and revenues 31,113 - - - - - - (31,113) - ------------------------------------------------------------------------------------------------------ Total net sales and revenues $ 31,186 $ - $ 8,671 $ 6,382 $ 7,963 - $ (303) $ 5,418 $ 59,318 ====================================================================================================== Profit (loss) $ 19,682 - $ (1,509) $(2,112) $ 697 - $ (3,645) $ 2,692 $ 15,805 Segment assets(A) $ 79,779 $ 9,229 $ 77,800 $ 2,582 $ 367 $ 134,435 $ 1,588 $ 8,531 $314,310
(A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties.
Coeur d'Alene Mines Corporation Segment Reporting Six Months Ended June 30, (In Thousands) 1999 1998 ------------------------ PROFIT (LOSS) Total profit or loss for reportable segments $ 4,068 15,805 Depreciation expense (9,838) (16,539) Interest expense (8,327) (7,468) Writedown of mining properties - (54,506) ------------------------ Loss before income taxes $ (14,097) $ (62,708) ======================== June 30, June 30, ASSETS 1999 1998 ------------------------ Total assets for reportable segments $ 161,610 $ 314,310 Cash and cash equivalents 102,297 145,397 Short-term investments 4,310 41,025 Other assets 73,554 82,169 ------------------------ Total consolidated assets $ 341,771 582,901 ========================
9 NOTE E: 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, 1999, 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, 2000. In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-up Activities." The SOP is effective beginning on January 1, 1999, and requires that start-up costs capitalized prior to January 1, 1999 be written-off and any future start-up costs to be expensed as incurred. The Company has adopted SOP 98-5 and has determined that this has no effect on the Company's financial condition or results of operations. NOTE F: 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 and the Fachinal and Petorca (or El Bronce) mines in Chile, all of which are wholly-owned and operated by the Company. The Company also has significant interests in other companies that operate gold and silver mines. The Company owns 50% of Silver Valley Resources Corporation ("Silver Valley"), which owns and operates the Coeur Mine (where 10 operations resumed in June 1996 and continued until April 1998) and the Galena Mine (where operations resumed in May 1997) in the Coeur d'Alene Mining District of Idaho. 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 market price of gold has declined to levels that are the lowest since 1985. The average price of gold in the second quarter of 1999 was $273.46 per ounce. The market price of silver (Handy & Harman) and gold (London Final) on August 9, 1999 were $5.38 per ounce and $256.50 per ounce, respectively. If the current gold price continues, the Company will need to reduce production costs and/or expand minable ore reserves at its Fachinal Mine in Chile to operate the mine profitably. Alternatively, if such prices continue, the Company may elect to place the mine on temporary standby to conserve ore reserves until gold prices increase. The Company is required by Financial Accounting Standards Statement No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of", to review the valuations of its mining properties. Such a review was recently completed with respect to all of the Company's properties. In 1998, the Company had writedowns totaling $219 million with respect to its Petorca and Fachinal Mines and its Kensington development property. Should current gold prices continue for an extended period of time and/or if the Company is unable to reduce production costs or expand commercial ore reserves at the Company's mining properties, the Company may need to effect additional asset writedowns. In December 1998, the Company announced the completion of an optimization study relating to the Kensington property, a wholly-owned developmental gold property in Alaska, designed to improve the economic viability of the project. A new mine plan was formulated as a result of the optimization study, which will require extensive permit modifications. Based on the results of the study, the Company estimates that the project's cash operating costs per ounce should be reduced to approximately $190 and total capital costs to develop the mine should be reduced to approximately $192 million. The Company does not intend to develop Kensington unless the optimization study and development program demonstrate results required to make Kensington an economically viable project. Based on current mine design and market price of gold, there can be no assurances at this time that the Company will proceed to place the Kensington project into commercial production. 11 The Company's business plan is to continue to acquire competitive, low-cost mining properties and/or businesses that are operational or expected to become operational in the near future so that they can reasonably be expected to contribute to the Company's near-term cash flow from operations and expand the Company's silver production. 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. As announced by the Company on August 2, 1999, the firm of Ernst & Young ceased to serve as the Company's independent accountants on July 27, 1999. The Company expects to engage a new independent accounting firm in the near future. 12 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- and six-month periods ended June 30, 1999 and 1998:
Three Months Ended Six Months Ended June 30 June 30 --------------------------- -------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ----------- ROCHESTER MINE Gold ozs. 16,518 20,453 32,824 45,647 Silver ozs. 1,355,955 1,658,257 3,020,018 3,241,216 Cash Costs per oz./silver $4.02 $4.26 $4.26 $4.37 Full Costs per oz./silver $4.94 $4.86 $5.15 $4.38 GALENA MINE Silver ozs. 411,542 385,313 871,007 764,923 Cash Costs per oz./silver $5.07 $4.45 $4.77 $4.45 Full Costs per oz./silver $6.26 $5.52 $5.90 $5.52 COEUR MINE Silver ozs. N/A 51,298 N/A 130,633 Cash Costs per oz./silver N/A $6.13 N/A $5.34 Full Costs per oz./silver N/A $7.19 $6.37 YILGARN STAR MINE Gold ozs. 7,377 11,175 13,554 23,744 Cash Costs per oz./gold $314.46 $242.66 $301.75 $222.29 Full Costs per oz./gold $536.59 $437.97 $494.20 $415.42 FACHINAL MINE Gold ozs. 6,911 6,837 13,584 13,804 Silver ozs. 314,618 389,494 601,783 857,914 Cash Costs per oz./gold $266.35 $306.82 $299.61 $316.71 Full Costs per oz./gold $320.14 $517.77 $362.36 $514.12 PETORCA MINE Gold ozs. 7,790 10,862 15,395 23,582 Silver ozs. 15,478 23,481 26,617 47,309 Cash Costs per oz./gold $263.63 $428.57 $264.83 $346.89 Full Costs per oz./gold $263.63 $491.96 $264.83 $409.06 GOLDEN CROSS MINE Gold ozs. N/A 6,945 N/A 38,682 Silver ozs. N/A 22,124 N/A 144,123 Cash Costs per oz./gold N/A $195.14 N/A $271.22 Full Costs per oz./gold N/A $195.14 N/A $319.80 CONSOLIDATED TOTALS Gold ozs. 38,596 56,272 75,357 134,016 Silver ozs. 2,097,593 2,529,967 4,519,425 5,258,855
13 NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA ROCHESTER MINE For the quarter ended June 30, 1999, the mine produced 1,355,955 ounces of silver and 16,518 ounces of gold compared to 1,658,257 ounces of silver and 20,453 ounces of gold produced in the second quarter of 1998. The decrease in the gold production was primarily a result of lower gold grade. In the second quarter of 1999, cash costs were $4.02 per silver equivalent ounce compared to $4.26 per silver equivalent ounce in the second quarter of 1998. Depreciation and depletion was $.72 and the reclamation reserve was $.20 per ounce for a total cost of $4.94 per ounce. Coeur Rochester has purchased the mineral rights of the Nevada Packard property adjacent to the Rochester Mine, in Nevada, for a sum of $2,070,800, consisting of $1.4 million in cash and 155,638 shares of common stock of Coeur equal in value to $670,800. The total acquisition will add 6.5 million tons of ore containing 8.5 million ounces of silver and 17,000 ounces of gold. This results in an acquisition cost of approximately $.22 per equivalent contained ounce. The estimated production cost estimated to mine the Nevada Packard area is approximately $3.47 per equivalent silver ounce. Acquisition of the Nevada Packard property is expected to enhance Rochester's production by approximately 5.4 million equivalent ounces over the period 2001-2004. SILVER VALLEY RESOURCES Silver Valley Resources is the operator of the Coeur unit and Galena mines. Silver Valley Resources discontinued operations at the Coeur unit in July 1998 and has concentrated its efforts on the Galena mine. Silver Valley Resources produced 411,542 ounces of silver in the second quarter of 1999 compared to 436,611 ounces of silver produced in the second quarter of 1998. The second quarter consolidated cash cost of production per ounce of silver produced at Silver Valley Resources was $5.07 compared to $4.65 in the prior year's second quarter. Depreciation and reclamation in the second quarter of 1999 was $.99 per ounce for a full cost of $6.26 per ounce compared to $5.71 per ounce for the second quarter of 1998. YILGARN STAR MINE Coeur's share of production for the second quarter of 1999 from the Yilgarn Star Mine amounted to 7,377 ounces of gold compared to 11,175 ounces of gold for the second quarter of 1998. Cash cost of production amounted to $314.46 per ounce compared to $242.66 per ounce during the same period of 14 1998. Noncash costs were $222.13 per ounce for a full cost of $536.59 per ounce in the second quarter of 1999 compared to $437.97 per ounce reported in the same period of 1998. The increase is primarily due to ground control problems and flooding that occurred due to heavy rainfall, forcing the operation to mine ore that had lower grade than anticipated. FACHINAL MINE Fachinal produced 314,618 ounces of silver and 6,911 ounces of gold in the second quarter of 1999 compared with 389,494 ounces of silver and 6,837 ounces of gold in the second quarter of 1998. Cash costs, including smelting and refining, were $266.35 per gold equivalent ounce compared to $306.82 in the second quarter of 1998. Depreciation was $46 per equivalent gold ounce and the reserve for reclamation was $7.79 per equivalent gold ounce for a full cost of $320.14 per equivalent gold ounce in the second quarter of 1999. This compares with a full cost for the second quarter of 1998 of $517.77 per equivalent gold ounce. The lower full cost was due to the reduction of the carrying amount associated with the write-down taken in the fourth quarter of 1998. PETORCA In the second quarter of 1999, the mine produced 7,790 ounces of gold compared to 10,862 ounces reported in the second quarter of 1998. Cash costs in the second quarter of 1999 were $428.57 per ounce compared to $263.63 per ounce in the second quarter of 1998. The decreased costs were primarily due to operating efficiencies and improvements gained in the mining process during 1998. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998. REVENUES Product sales in the second quarter of 1999 decreased by $11.8 million, or 36.6%, from the second quarter of 1998. The decrease in sales is primarily attributable to lower gold and silver prices and decreased production at the company's operations. In the second quarter of 1999, the Company produced a total of 2,097,593 ounces of silver and 38,596 ounces of gold compared to 2,529,967 ounces of silver and 56,272 ounces of gold in the second quarter of 1998. In the second quarter of 1999, the Company realized average silver and gold prices of $5.14 and $321.65, respectively, compared with realized average 15 prices of $5.84 and $315.61, respectively, in the prior year's second quarter. The decreases in the ounces of silver and gold produced during the second quarter of 1999 are primarily attributable to (i) a reduction in the gold grade at the Rochester Mine, (ii) the discontinuation of operations at the Coeur Mine in July 1998, (iii) the mining of lower-than-anticipated grade of gold at the Yilgarn Star Mine due to ground control problems and flooding resulting from heavy rainfall, (iv) the discontinuation of operations at the Golden Cross Mine in April 1998 and (v) a planned reduction in production at the Petorca Mine. COSTS AND EXPENSES Production costs in the second quarter of 1999 decreased by $7.9 million, or 35.4%, from the second quarter of 1998. The decrease in production costs is primarily a result of the lower production discussed above. Depreciation and amortization decreased in the second quarter of 1999 by $2.7 million, or 35.6%, from the prior year's second quarter, primarily due to the decreased depreciation and depletion from the Petorca Mine after it was written off in the first quarter of 1998. Administrative and general expenses decreased $638,000 in the second quarter of 1999 compared to 1998, due to cost savings plans initiated at the corporate office. Writedown of mining properties and other costs and expenses increased in the second quarter of 1999 by $550,000 from the second quarter of 1998 due to company-wide severance payouts for reduction in workforce and due to increased legal expenses incurred in the Company's lawsuit against Cyprus Amax Minerals Company. Interest and other income in the second quarter of 1999 decreased by $1.1 million, or 46.8%, compared with the second quarter of 1998. The decrease is due primarily to a $1.2 million decrease in interest and dividend income due to a substantially lower short-term investment balance. NET LOSS As a result of the above mentioned factors, the Company's net loss amounted to $7.0 million in the second quarter of 1999 compared to a net loss of $5.2 million in the second quarter of 1998. In the second quarter of 1999, the Company paid dividends of $2.6 million on its Manditorily Adjustable Redeemable Convertible Securities (MARCS). As a result, the loss attributable to common shareholders was $9.6 million, or $.44 per share, for the second 16 quarter 1999, compared to a loss of $7.8 million, or $.36 per share, for the second quarter of 1998. SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998 REVENUES Product sales for the six months ended June 30, 1999 decreased by $14.7 million, or 27.5%, from the second quarter of 1998. The decrease in sales is primarily attributable to lower gold and silver prices and decreased production at the company's operations. For the six months ended June 30, 1999, the Company produced a total of 4,519,425 ounces of silver and 75,357 ounces of gold compared to 5,258,855 ounces of silver and 134,016 ounces of gold in the six months ended June 30, 1998. For the six months ended June 30, 1999, the Company realized average silver and gold prices of $5.16 and $317.40, respectively, compared with realized average prices of $5.97 and $320.47, respectively, in the prior year. Interest and other income for the six months ended June 30, 1999 decreased by $3.6 million, or 60.8%, compared with the second quarter of 1998. The decrease is due primarily to a $2.6 million decrease in interest and dividend income due to a substantially lower short-term investment balance, and $1.2 million of income recorded in 1998 due to early closure of forward sale contracts. The decreases in the ounces of silver and gold produced during the six months ended June 30, 1999 are primarily attributable to (i) a reduction in the gold grade at the Rochester Mine, (ii) the discontinuation of operations at the Coeur Mine in July 1998, (iii) the mining of lower-than-anticipated grade of gold at the Yilgarn Star Mine due to ground control problems and flooding resulting from heavy rainfall, (iv) the discontinuation of operations at the Golden Cross Mine in April 1998 and (v) a planned reduction in production at the Petorca Mine. COSTS AND EXPENSES Production costs decreased in the six months ended June 30, 1999 by $5.9 million, or 17.5%, from the six months ended June 30, 1998. The decrease was primarily due to the decrease in production at several of the operations as discussed above. Depreciation and amortization decreased in the six months ended June 30, 1999 by $6.8 million, or 41.8%, from the prior six months ended June 30, 1998, 17 primarily due to the decreased depreciation and depletion from the Petorca mine after it was written off in the first quarter of 1998. Administrative and general expenses decreased $866,000 in the six months ended June 30, 1999 compared to the same period in 1998 due to a cost savings plan initiated at the corporate office. Writedown of mining properties and other costs and expenses decreased in the six months ended June 30, 1999 due to the writedown of the Petorca Mine of $54.5 million during the first quarter of 1998, offset by a Company-wide severance payout for reduction in workforce of $.3 million and due to increased legal expenses incurred in the Company's lawsuit against Cyprus of $.2 million in the first half of 1999. NET LOSS As a result of the above mentioned factors, the Company's net loss amounted to $14.3 million for the six months ended June 30, 1999 compared to a net loss of $63.1 million for the six months ended June 30, 1998. For the six months ended June 30, 1999, the Company paid dividends of $5.3 million on its Manditorily Adjustable Redeemable Convertible Securities (MARCS). As a result, the loss attributable to common shareholders was $19.5 million, or $.89 per share, for the six months ended June 30, 1999, compared to a loss of $68.4 million, or $3.12 per share, for the six months ended June 30, 1998. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL; CASH AND CASH EQUIVALENTS The Company's working capital at June 30, 1999 was approximately $141.2 million compared to $153.8 million at December 31, 1998. The ratio of current assets to current liabilities was 6.7 to 1.0 at June 30, 1999 compared to 6.0 to 1.0 at December 31, 1998. Net cash used in operating activities in the six months ended June 30, 1999 was $10.1 million compared to $9.0 million in the six months ended June 30, 1998. The decrease is due to lower metal prices received and lower production in the first half of 1999 compared to the same period in 1998. Net cash used in investing activities in the 1999 period was $9.3 million compared to net cash provided by investing activities of $49.1 million in the prior year's comparable period. The cash provided in the 1998 period was attributable to proceeds received from sales of short-term investments and marketable securities in the first half of 1998. Net cash used in financing 18 activities was $5.6 million in the first half of 1999 and $9.3 million in the first half of 1998. As a result of the above, cash and cash equivalents decreased by $25.0 million in the first half of 1999 compared to a $30.8 million increase for the comparable period in 1998. PROPOSED ACQUISITION OF SILVER PROPERTIES FROM ASARCO INCORPORATED On May 13, 1999, the Company and ASARCO Incorporated ("ASARCO") entered into an agreement providing for the Company's acquisition of most of ASARCO's silver mining assets in exchange for the issuance of 7.125 million shares of the Company's Common Stock. Consummation of the transaction is subject to approval by the Company's shareholders and certain other conditions. The silver mining assets involved include ASARCO's 50% interest in Silver Valley Resources Corporation; ASARCO's wholly-owned subsidiary, Empress Minera Manquiri S.R.L., an early stage silver development property in Bolivia; 1.5 million shares, representing an approximate 5% interest in Pan American Silver Corporation of Vancouver, British Columbia and warrants for an additional 500,000 shares; and a 100% interest in NPMC, Inc., which owns a 20% net profits interest in the Quiruvilca Silver Mine in Peru operated by Pan American Silver Corporation. If the Company's acquisition of ASARCO's silver mining assets is consummated, ASARCO will be entitled to nominate two directors to the Company's Board of Directors. The Company's shareholders will vote on the proposed acquisition at the annual meeting to be held on September 8, 1999. FEDERAL NATURAL RESOURCES ACTION On March 22, 1996, an action was filed in the United States District 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. 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 19 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. 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, 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. At this stage of the proceeding, it is not possible to predict its ultimate outcome. GOLDEN CROSS LAWSUIT On July 15, 1996, the Company filed a complaint against Cyprus Amax Minerals Company ("Cyprus") in the District Court of the State of Idaho, Kootenai County alleging violations by Cyprus of the anti-fraud provisions of the Idaho and Colorado Securities Acts as well as common law fraud in connection with Cyprus' sale in April 1993 to the Company of Cyprus Exploration and Development Corporation, which owned all the shares of Cyprus Gold New Zealand Limited, which, in turn, owned an 80% interest in the Golden Cross Mine in New Zealand. The Company's lawsuit seeks recession and an unspecified amount of damages arising from alleged misrepresentations and failure to disclose material facts alleged to have been known by Cyprus officials regarding ground movement and instability, threatening the integrity of the mine site at the time of Coeur's purchase of the property. In October 1997, Cyprus filed a counterclaim alleging libel by the Company in its press 20 release announcing the write-off of the Golden Cross Mine and seeking an unspecified amount of damages. Trial has been scheduled for October 18, 1999 in Coeur d'Alene, Idaho. On February 3, 1999, the Company filed a second amended complaint which specifies damages in the amount of approximately $54 million together with pre-judgement and post-judgement interest as well as unspecified costs incurred resulting from the violations of law alleged. Cyprus filed, on February 17, 1999, a motion to vacate the trial date and a motion to dismiss the second amended complaint. On July 12, 1999, the Court entered an order denying the motion to dismiss and the motion to vacate the trial date. No assurances can be given at this stage of the action as to its ultimate outcome. CLASS ACTION SECURITIES LAWSUIT On July 2, 1997, a suit was filed by purchasers of the Company's Common Stock in Federal District Court for the District of Colorado naming the Company and certain of its officers and its independent auditor as defendants. Plaintiff alleges that the Company violated the Securities Exchange Act of 1934 during the period January 1, 1995 to July 11, 1996, and seeks certification of the law suit as a class action. The class members are alleged to be those persons who purchased publicly traded debt and equity securities of the Company during the time period stated. On September 22, 1997, an amended complaint was filed in the proceeding adding other security holders as additional plaintiffs. The action seeks unspecified compensatory damages, pre-judgment and post-judgment interest, attorney's fees and costs of litigation. The complaint asserts that the defendants knew material adverse non-public information about the Company's financial results which was not disclosed, and which related to the Golden Cross and Fachinal Mines; and that the defendants intentionally and fraudulently disseminated false statements which were misleading and failed to disclose material facts. On April 16, 1998, the Court entered an order dismissing the auditors from the suit and denying the Company's and the individual defendants' motions to dismiss. On October 9, 1998, the Court heard arguments on the question on whether a class should be certified and on December 14, 1998, the Court entered an order certifying a class. In December 1998, the parties to the suit determined that the further conduct of the case would be protracted and expensive and commenced discussions with a view toward settlement of the action. Although the Company continued to deny each of the plaintiffs' claims and allegations, the Company determined it would be in the best interests of 21 the Company to settle the suit and agreed to enter into a Stipulation of Settlement which was filed by the parties with the Court on March 1, 1999. The terms of the proposed settlement provide that (i) the Company's directors and officers liability insurance carrier will pay $7 million to a settlement fund for the benefit of the plaintiffs; and (ii) the plaintiffs will be entitled to 50% of the net proceeds, up to a maximum of $6 million, (after the Company has first recouped its costs and expenses incurred in litigating its above-described lawsuit against Cyprus relating to Golden Cross and after deducting an $8 million reserve against the asserted subrogation claim of the Company's flood insurance carrier) actually received by the Company from its Golden Cross lawsuit against Cyprus. The Stipulation of Settlement contains strong denials of liability by the defendants as well as acknowledgments by the plaintiffs that they were unable to identify significant evidence to support a large portion of their claims. Final consummation of the settlement is subject to Court approval and to dismissal with prejudice of the derivative action described below. On July 15, 1999, the Court gave final approval to the settlement and authorized the submission of the settlement terms to the class action shareholders. DERIVATIVE ACTION On or about August 17, 1998, a purported derivative action was filed on behalf of the Company against Dennis E. Wheeler, James A. Sabala, James J. Curran, Joseph C. Bennett, James A. McClure, Cecil D. Andrus and Duane B. Hagadone in Federal District Court for the District of Idaho. The complaint alleged that the defendant officers and directors breached their fiduciary duties by authorizing the Company to purchase the Golden Cross Mine in New Zealand in 1993 and by allegedly causing or permitting the Company to make statements that the plaintiffs in the class action securities lawsuit described above claim were false or misleading during the period from January 1, 1995 through July 11, 1996. The plaintiff sought unspecified damages on behalf of the Company. On September 9, 1998, the plaintiff voluntarily dismissed the lawsuit without prejudice in light of Idaho Code Sec. 30-1-742, which requires a demand to be served on a company at least 90 days prior to the filing of a derivative action. On September 25, 1998, the plaintiff sent a letter to the Company's Board of Directors demanding that the Company, among other things, commence all reasonable steps to settle the class action securities lawsuit described above, and pursue claims against any officers, directors or third-party professionals who may have known about the potential problems with the Golden Cross Mine before the Company purchased an interest in it. The Board appointed a Special Committee of directors to respond to that demand. On March 9, 1999, the Special Committee recommended that the demand be rejected. The action previously dismissed without prejudice has been dismissed with prejudice. 22 YEAR 2000 ISSUE Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. Actual costs associated with implementation of the Company's Year 2000 program are expected to be insignificant to the Company's operations and financial condition. As of June 30, 1999, the Company has incurred approximately $190,000 of costs related to the Y2K issue. The Company presently estimates that the remaining projected costs, primarily for professional consulting services, will be less than $100,000. The Company currently has a program underway to ensure that all significant computer systems are substantially Year 2000 compliant by the year ended December 31, 1999. The program is divided into three major components: (1) identification of all information technology systems ("IT Systems") and non-information technology systems ("Non-IT Systems") that are not Year 2000 compliant; (2) repair or replacement of the identified non-compliant systems; and (3) testing of the repaired or replaced systems. The Company has no "in house" developed or proprietary IT Systems. The Company uses commercially-developed software, the majority of which is regularly upgraded through existing maintenance contracts. Parts (1), (2) and (3) of the Year 2000 program are currently underway. Part (1), identification and review of non-compliant accounting and financial reporting systems is finished and the Company is continuing to review Non-IT Systems that have embedded microprocessors in various types of equipment. Part (2), repairing and replacing, currently continues. Software vendors have made Year 2000 compliant software revisions available, which the Company is installing under maintenance agreements. The Company estimates that approximately 65% of its IT systems and approximately 3% of its non-IT systems have completed Part (2). Parts (1) and (2) of the process are scheduled to be completed in the Company's third quarter ended September 30, 1999. Part (3), testing currently continues and is scheduled to finish in October 1999. The Company began contacting key suppliers and business partners about the Year 2000 issue during the third quarter of 1998 and continues to survey these parties. While no assurance can be given that key suppliers and business partners will remedy their own Year 2000 issues, the Company, to date, has not identified any material impact on its ability to continue normal business operations with suppliers or other third parties who fail to address the issue. 23 The Company will continue to monitor and evaluate the impact of the Year 2000 issue on its operations. Until the Company is into the final testing stages of its program, the risks from potential Year 2000 failures cannot be fully assessed. Due to this situation, the Company cannot at this stage begin final contingency plans. These plans will be developed as potential Year 2000 failures are identified in the final testing stages. As noted above, the Company has not yet completed all necessary phases of the Year 2000 program. In the event that the Company does not complete any additional phases, sales functions and other processes could be impacted. In addition, disruptions in the economy generally resulting from Year 2000 issues could also materially adversely affect the Company. The Company could be subject to litigation for computer systems' failure to properly date business records. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. 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, 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, 1999 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. The following table summarizes the information at June 30, 1999 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. 25
Fair Value (dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 3/31/99 ----------------------------------------------------------------------------------------------------------------------- LIABILITIES Long Term Debt $151,897 Fixed Rate $ - $ - $ - $45,753 $ - $200,649 $ 246,402 Average Interest Rate 6.686% 6.686% 6.686% 6.766% 6.843% 7.190% DERIVATIVE FINANCIAL INSTRUMENTS Gold Put Options Sold - AUD $ 18,798 Ounces 15,000 30,000 30,000 30,000 30,000 - 135,500 Price Per Ounce $ 604.85 $604.85 $597.00 $597.00 $597.00 $ - Gold Call Options Purchased - AUD $ 224 Ounces 20,000 36,000 - - - - 56,000 Price Per Ounce $ 265.00 $265.00 $ - $ - $ - $ - Amortizing Forward Gold Sales $ 5,255 Ounces 20,000 40,000 - - - - 60,000 Price Per Ounce $ 348.58 $348.58 - - - - Foreign Currency Contracts $ 371 New Zealand Dollar $ 3,000 $ 3,600 $ - $ - $ - $ - $ 6,600 Exchange Rate (NZ$ to US$) 2.095 2.124 - - - - Chilean Pesos $4,723,573 - - - - - 4,723,573 (174) Exchange Rate (Peso to US$) 509.006 - - - - -
26 PART II. Other Information ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS No. 27 Financial Data Schedule (b) REPORTS ON FORM 8-K On May 14, 1999, the Company filed a Form 8-K relating to its proposed acquisition of certain ASARCO Inc.'s silver mining assets. On August 2, 1999, the Company filed a Form 8-K reporting that the firm of Ernst & Young ceased to serve as the Company's independent accountants on July 27, 1999. 27 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 13, 1999 /s/DENNIS E. WHEELER --------------------- Dennis E. Wheeler Chairman, President and Chief Executive Officer Dated August 13, 1999 /s/GEOFFREY A. BURNS -------------------- Geoffrey A. Burns Vice President and Chief Financial Officer 28 EX-27 2
5 0000215466 COEUR D'ALENE MINES CORPORATION 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 102,297 4,310 9,919 0 49,398 165,924 263,907 88,060 341,771 24,754 246,402 7,078 0 22,960 373,962 341,771 38,707 41,019 27,749 37,196 9,593 0 8,327 (14,097) 155 (14,252) 0 0 0 (14,252) (0.89) (0.89)
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