-----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, KJ1EnDO2gT6ANwP3iPBP4AKytiL7vU7Z5j4YWGZsgMmd4iZCmT3DITCnmyozvkDm jV6i3wVsKUerXiNDR+9GYA== 0000908634-96-000249.txt : 19961107 0000908634-96-000249.hdr.sgml : 19961107 ACCESSION NUMBER: 0000908634-96-000249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961106 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-08641 FILM NUMBER: 96654901 BUSINESS ADDRESS: STREET 1: 400 COEUR D ALENE MINES BLDG STREET 2: 505 FRONT AVE CITY: COEUR D ALENE STATE: ID ZIP: 83814 BUSINESS PHONE: 2086673511 MAIL ADDRESS: STREET 1: 400 COEUR D ALENE MINES BLDG STREET 2: 505 FRONT AVE CITY: COEUR D'ALENE STATE: ID ZIP: 83814 10-Q 1 SECURITIES AND EXCHANGE 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 September 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ___________________ Commission File Number: 1-8641 ------ COEUR D'ALENE MINES CORPORATION (Exact name of registrant as specified on its charter) IDAHO 82-0109423 ---------------------------------- -------------------------------- (State or other jurisdiction of (I.R.S. Employer Ident.No.) incorporation or organization) P. O. Box I, Coeur d'Alene, Idaho 83816-0316 ---------------------------------- -------------------------------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (208) 667-3511 -------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- ------------------------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of Issuer's classes of common stock, as of the latest practicable date: Common stock, par value $1.00, of which 21,890,971 shares were issued and outstanding as of November 1, 1996. COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES INDEX Page No. PART I. Financial Information: Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets -- 3-4 September 30, 1996 and December 31, 1995 Consolidated Statements of Operations -- 5-6 Three Months Ended September 30, 1996 and 1995 Nine Months Ended September 30, 1996 and 1995 Consolidated Statements of Cash Flows -- 7-8 Nine Months Ended September 30, 1996 and 1995 Notes to Consolidated Financial Statements 9-12 Item 2. Management's Discussion and Analysis of 12-21 Financial Condition and Results of Operations PART II. Other Information. Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 2 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31, 1996 1995 ------------- ------------ (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 33,211 $ 16,485 Funds held in escrow 2,271 2,271 Short-term investments 115,316 63,076 Receivables 30,332 13,809 Inventories 33,686 30,981 ---------- ---------- Total Current Assets 214,816 126,622 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 118,623 118,083 Less accumulated depreciation (50,734) (34,152) ---------- ---------- 67,889 83,931 MINING PROPERTIES Operational mining properties 170,455 150,656 Less accumulated depletion (36,640) (38,529) ---------- ---------- 133,815 112,127 Developmental properties 107,491 108,820 ---------- ---------- 241,306 220,947 OTHER ASSETS Investment in mining company 47,660 Debt issuance costs, net of accumulated amortization 4,236 4,703 Notes receivable 4,000 5,000 Marketable securities and other 62 4,443 ---------- ---------- 55,958 14,146 ---------- ---------- $ 579,969 $ 445,646 ========== ==========
3 UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, December 31, 1996 1995 ------------- ------------ (In Thousands) CURRENT LIABILITIES Accounts payable $ 4,136 $ 5,743 Accrued liabilities 5,056 3,525 Accrued interest payable 2,537 4,526 Accrued salaries and wages 4,923 5,039 Bank Loans 23,962 Current portion of remediation 6,000 Current portion of obligations under capital leases 593 2,193 ---------- ---------- Total Current Liabilities 47,207 21,026 LONG-TERM LIABILITIES 6% Subordinated Convertible Debentures 49,840 50,000 6 3/8% Subordinated Convertible Debentures 100,000 100,000 Limited recourse project financing 24,000 24,000 Other liabilities 10,506 9,386 Deferred income taxes 1,402 ---------- ---------- Total Long-Term Liabilities 184,346 184,788 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Mandatory Adjustable Redeemable Convertible Securities (MARCS), par value $1.00 per share, (a class of preferred stock)- authorized 10,000,000 shares, 7,077,833 issued and outstanding 7,078 Common Stock, par value $1.00 per share- authorized 60,000,000 shares, issued 22,950,182 and 21,524,093 shares (including 1,059,211 shares held in treasury stock) 22,950 21,524 Capital surplus 402,820 247,100 Accumulated deficit (70,759) (15,889) Unrealized gains (losses) on short-term investments (455) 361 Repurchased and Nonvested Shares (13,218) (13,264) ---------- ---------- 348,416 239,832 ---------- ---------- $ 579,969 $ 445,646 ========== ========== See notes to consolidated financial statements
4 UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
3 MONTHS ENDED 9 MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------------------- ----------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In Thousands) (In Thousands) INCOME Sales of concentrates and dore' $ 21,559 $ 24,802 $ 62,920 $ 66,314 Less cost of mine operations 18,480 19,151 56,622 53,123 ---------- ---------- ---------- ---------- Gross profits 3,079 5,651 6,298 13,191 OTHER INCOME Interest, dividends and other 5,004 4,218 9,158 8,665 ---------- ---------- ---------- ---------- Total income 8,083 9,869 15,456 21,856 EXPENSES Administration 952 844 3,007 2,810 Accounting and legal 487 348 1,130 1,205 General corporate 1,873 1,496 5,273 4,697 Mining exploration 2,488 1,529 5,183 3,521 Interest 1,016 2,177 2,476 7,794 Idle facilities 357 1,481 Write down of mining properties 33 54,415 ---------- ---------- ---------- ---------- Total expenses 6,849 6,751 71,484 21,508 ---------- ---------- ---------- ---------- Net income (loss) from continuing operations before taxes 1,234 3,118 (56,028) 348 Provision (benefit) for income taxes (644) 1,079 (1,158) 437 ---------- ---------- ---------- ---------- Net income (loss) from continuing operations 1,878 2,039 (54,870) (89) Income from discontinued operations 2,360 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ 1,878 $ 2,039 $ (54,870) $ 2,271 ========== ========== ========== ==========
5 UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
3 MONTHS ENDED 9 MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------------------- ----------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In thousands except for per share data) EARNINGS PER SHARE DATA Earnings per share data: Weighted average number of shares of Common Stock and equivalents used in calculation 21,893 15,613 21,327 15,602 ========== ========== ========== ========== Net income (loss) from continuing operations $ .09 $ .13 $ (2.57) $ .00 Net income from discontinued operations .15 ---------- ---------- ---------- ---------- Net income (loss) per share $ .09 $ .13 $ (2.57) .15 ========== ========== ========== ========== Net income (loss) per share attributed to Common Shareholders: Income (loss) from continuing operations $ (.03) $ .13 $ (2.84) $ .00 Income (loss) from discontinued operations .15 ---------- ---------- ---------- ---------- Net Income (Loss) $ (.03) $ .13 $ (2.84) $ .15 ========== ========== ========== ========== Fully Diluted Earnings Per Share: Weighted average number of shares of Common Stock outstanding 34,800 26,315 ========== ========== NET INCOME(LOSS) $ .06 $ .12 ========== ========== Cash Dividends per share of Common Stock $ .15 $ .15 ========== ========== See notes to consolidated financial statements.
6 UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1996 and 1995
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 ----------- ----------- (In Thousands) Net loss from continuing operations $ (54,870) $ (89) Add (less) noncash items: Depreciation, depletion and amortization 9,234 12,767 Deferred income taxes (1,402) (1,541) (Gain) loss on disposition of property, plant and equipment (51) 273 (Gain) loss on foreign currency transactions 73 (36) (Gain) loss on disposition of marketable securities (1,262) 877 Write down of mining property 54,382 Changes in operating assets and liabilities: Receivables (360) (3,201) Inventories 130 2,033 Accounts payable and accrued liabilities (5,452) 279 Accrued interest payable (1,989) (934) ----------- ----------- (1,567) 10,428 Income from discontinued operations 2,360 Add (less) noncash items: Depreciation, depletion and amortization 86 Gain on disposition of discontinued operations (3,878) Deferred income taxes 1,574 Change in operating assets and liabilities: Receivables 601 Inventories (31) Accounts payable and accrued liabilities (109) ----------- ----------- 603 ----------- ----------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $ (1,567) $ 11,031
7 UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1996 and 1995
CASH FLOWS FROM INVESTING ACTIVITIES 1996 1995 ----------- ----------- (In Thousands) Purchase of El Bronce (net of cash received) $ (14,208) $ Investment in mining company (20,057) Purchase of property, plant and equipment (2,503) (2,913) Purchase of short-term investments (118,697) (2,423) Proceeds from sale of short-term investments and marketable securities 51,136 68,367 Proceeds from sale of discontinued operations 2,566 3,133 Expenditures on operational mining properties (25,026) (14,889) Expenditures on developmental properties (9,085) (80,302) Proceeds from other assets 603 3 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (135,271) (29,024) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowing 19,227 23,585 Retirement of obligations under capital leases (1,688) (1,517) Proceeds from MARCS issuance 144,626 Retirement of other long-term liabilities (156) Payment of cash dividend (8,395) (2,339) Payment for issuance of common stock (50) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 153,564 19,729 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,726 1,736 Cash and cash equivalents at beginning of year 16,485 15,148 ----------- ----------- Cash and cash equivalents at September 30, 1996 and 1995 $ 33,211 $ 16,884 =========== =========== See notes to consolidated financial statements.
8 UNAUDITED 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 to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of 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 accruals) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. NOTE B: Acquisition of El Bronce On September 4, 1996, the Company purchased the remaining 49% of the shares of Compania Minera CDE El Bronce, bringing its total ownership interest to 100%. In July 1994, the Company had made an agreement pursuant to which the Company acquired operating control, a 51% interest in operating profits and an option to acquire a 51% equity interest in the producing El Bronce Mine. With this acquisition, the Company owns 100% of the mine. The terms of the purchase are the payment of $10,500,000 in cash, prepayment of the remainder of the option price in the approximate amount of $3,800,000 and a net smelter return royalty of 3% to be paid quarterly, commencing on January 1, 1997. The acquisition has been accounted for as a purchase. Had the acquisition taken place as of January 1, 1996, management estimates that consolidated sales of concentrates would have been $74.7 million, consolidated net income (loss) would have been $(57.8) million and pro forma consolidated net income (loss) per share would have been $(2.71) for the nine months ended September 30, 1996. Had the acquisition taken place as of January 1, 1995, pro forma consolidated sales of concentrates would have been $78.4 million, pro forma consolidated net income (loss) would have been $(1.3) million and pro forma net income (loss) per share would have been $(.08) for the nine months ended September 30, 1995. 9 NOTE C: Inventories are comprised of the following:
SEPTEMBER 30, DECEMBER 31, 1996 1995 (In Thousands) Ore in process and on leach pads $ 22,579 $ 25,727 Dore' inventory 2,702 2,052 Concentrate inventory 1,913 Supplies 6,492 3,202 -------- -------- $ 33,686 $ 30,981 ======== ========
Inventories of ore on leach pads and in the milling process are valued based on actual costs incurred to place such ore into production, 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. Management evaluates this estimate on an ongoing basis. Adjustments to the recovery are accounted for prospectively. 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. NOTE D: Income Taxes The Company's income tax benefit for the three month and nine month periods ended September 30, 1996 results primarily from the recognition of tax benefits associated with operating losses. NOTE E: Shareholders' Equity On March 8, 1996, the Company completed a public preferred stock offering of $140.0 million of Mandatory Adjustable Redeemable Convertible Securities (MARCS). The Company issued 6,588,235 shares of MARCS which were offered at a public offering price of $21.25 per share. Each share of MARCS is mandatorily convertible four years after issuance into 1.111 shares of Common Stock of the Company, subject to adjustment in certain events, unless earlier converted by the holder into Common Stock or redeemed for Common Stock by the Company. The annual dividend payable on the MARCS will be $1.488 per share, payable quarterly. The dividends are deducted in computing net income (loss) attributable to Common Shareholders. On April 8, 1996, the Company sold an additional 489,598 shares of MARCS to the underwriters as a result of their exercise of an overallotment option granted to them in connection with the public offering. With the exercise of the overallotment option, the Company has sold a total of 7,077,833 shares of MARCS for a total offering price of $150.4 million which resulted in net proceeds to the Company of $144.6 million. 10 NOTE F: Acquisition of Australian Mining Company In May 1996, Coeur acquired approximately 35% of the outstanding shares of a publicly listed Australian gold producer, Gasgoyne Gold Mines NL ("Gasgoyne") by issuing a total of 1,419,832 shares of the Company's Common Stock and paying a total of approximately $15.4 million to Gasgoyne shareholders. Coeur cash payments to Gasgoyne shareholders were financed by a loan facility with Rothschild Australia Ltd. which provided for a maximum of US$50 million of borrowings at an annual interest rate equal to LIBOR plus 1.5%. Borrowings under the agreement were $18.9 million as of September 30, 1996. During the second quarter ended June 30, 1996, Coeur began reporting its proportionate share of Gasgoyne's net results of operations pursuant to the equity method of accounting for investments. Such amounts are reflected as a component of interest and other income. The following table sets forth a condensed summary of the results of operations of Gasgoyne for the nine-month period ended September 30, 1996.
(In thousands - US$) September 30, 1996 ------------------ Total Revenues $25,632 Operating profit $8,719 Net Income from continuing operations $4,325
The following pro forma information reflects the Company's results of operations as if the Gasgoyne transaction, that occurred in April 1996, had occurred at the beginning of the periods presented.
For the Nine Months Ended (In thousands - US$) September 30, 1996 September 30, 1995 ------------------ ------------------ Total Income $17,142 $23,225 Net Income (Loss) $(53,465) $2,926 Net Income (Loss) per share $(2.51) $ .19
NOTE G: Marketable Securities On January 26, 1996, for a total consideration of approximately US$10.7 million, the Company acquired 5.5 million shares and options to acquire an additional 5.0 million shares of Orion Resources NL, an Australian gold mining company ("Orion"). Prior to 1996, Coeur had 11 acquired a total of 3.33 million shares of Orion for a total cost of US$3.8 million. On March 27, 1996, the Company exercised its option to acquire the additional 5.0 million shares of Orion. As a result, Coeur then held approximately 19.2% of Orion's outstanding shares. On September 28, 1996, the Company sold its holdings of Orion of 13,830,000 shares at A$1.80 per share for A$24,894,000, or US$ 19.6 million that is included in Receivables at September 30, 1996. As a result, the Company recorded a gain on the sale of approximately $1.3 million during the third quarter. NOTE H: Write Off of Golden Cross Mine During the second quarter of 1996, the Company determined that certain adjustments were required to properly reflect the estimated net realizable values of certain mining properties in accordance with FASB statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Golden Cross Mine was written down by approximately $53 million due to increased expenditure requirements related to remediation of ground movement which impacts the tailings impoundment area. An engineering evaluation is continuing to determine the full extent and cost of the remedial measures required to stabilize the on-site land movement. The write-down included accrual of the anticipated remediation costs. The Faride property write down of $1.1 million was necessary due to management's decision not to exercise its final option payment on the project. NOTE I: Reclassifications 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 Company's currently operating mines are the Rochester Mine in Nevada, which it wholly owns and operates; the Golden Cross Mine in New Zealand, in which the Company has an 80% operating interest and the operation of which is not expected to continue after the end of 1997; the El Bronce Mine, a Chilean gold mine of which the Company completed its purchase of 100% in September 1996; and the Fachinal Mine, a Chilean gold mine wholly-owned by the Company at which initial production commenced in late October 1995. In addition, the Company owns 50% of Silver Valley Resources ("Silver Valley") which owns and operates the Coeur and Galena silver mines which commenced operation in June 1996; and 35% of Gasgoyne Gold Mines NL ("Gasgoyne"), which has a 50% non-operating interest in the Yilgarn Star gold mine in Australia 12 and Coeur's proportionate interest in which is accounted for by the equity method of accounting for investments. In February of 1996, Silver Valley announced reopening of the Coeur and Galena Mines. Silver Valley began shipping concentrates in June 1996 and 50% of Silver Valley's results of operations are consolidated in Coeur's Statement of Operations. Silver Valley estimates that during the mines' first full year of operations of 1997, it will produce a total of approximately 3,000,000 ounces of silver. Silver Valley is also conducting a development and exploration program at the properties in connection with which it is expanding the existing workings, improving infrastructure and conducting diamond drilling to further increase reserves and mine life. Construction of the new Fachinal mine was completed at a total cost of approximately $41.1 million and initial production commenced in October 1995. The mine, while currently producing gold and silver, has not reached commercial production and was in the developmental stage as of the end of 1996's third quarter. During the second quarter of 1996, the Company determined that certain adjustments were required to properly reflect the estimated net realizable values of certain mining properties. The Golden Cross Mine was written down by approximately $53 million due to increased expenditure requirements related to remediation of ground movement which impacts the tailings impoundment area. An engineering evaluation is continuing to determine the full extent and costs of the remedial measures required to stabilize the on-site land movement. The write-down included accrual of the anticipated remediation costs. Based upon the engineering evaluation by independent experts, the progress of remedial measures and the approval by New Zealand regulatory authorities on October 31, 1996 of the Company's application to raise the height of the tailings impoundment at the Golden Cross Mine, the Company expects that it will be able to continue the mine's operations through the end of 1997. However, on October 31, 1996, an environmental group in New Zealand filed a statement of claim in the High Court of New Zealand against the permit issuing authority and the Company is seeking to invalidate the permit. The Company believes the claim is without merit and that the legal action will not succeed in preventing continued operation, but no assurances can be given as to the outcome of the litigation at this time. During 1997, the Company expects the mine to produce approximately 100,000 ounces of gold and provide operating cash flow of approximately $9 million. The Company also believes that continued operations will have a beneficial impact on the end-of-mine-life reclamation requirements. At the same time, the Company wrote down its investment of $1.1 million in the Faride property due to management's decision not to exercise its final option payment on the project. A production decision at the Kensington Property is subject to completion of an updated feasibility study, a market price of gold 13 of at least $400 per ounce and the receipt of certain required permits. The market price of gold (London final) on October 31, 1996 was $379.50 per ounce. The Company expects to receive the results of the updated feasibility study during the fourth quarter of 1996. With respect to the permits, the Company is unable to control the timing of their issuance; however, it is expected that all permits will be received by early 1997. The Company's business plan is to continue to acquire 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 gold and/or silver production. 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 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 report contains certain forward-looking statements relating to the Company's gold and silver mining business, including estimated production data, expected operating schedules and other operating data. Actual production, operating schedules and results of operations could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include (i) changes in the market prices of gold and silver, (ii) the uncertainties inherent in the Company's exploratory and developmental activities, (iii) the uncertainties inherent in the estimation of gold and silver ore reserves, (iv) changes that could result from the Company's future acquisition of new mining properties or businesses, (v) the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), (vi) the effects of environmental and other governmental regulations, and (vii) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries. 14 RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1995. SALES AND GROSS PROFITS Sales of concentrates and dore' decreased by $3,243,000, or 13%, for the third quarter of 1996 from the same quarter of 1995 and is primarily attributable to decreased production at Golden Cross. While overall production for the Company increased, revenue decreased due to the fact that revenues attributable to the Fachinal Mine from 496,266 ounces of silver and 5,039 ounces of gold are not reflected in the sales of concentrates due to the fact that the Fachinal Mine has not achieved commercial production; therefore, it continues to be treated as a development stage property. As a result, the revenues generated from these pre-production metal sales have been offset against the capital cost of the mine. The Company has implemented various programs designed to rectify certain start-up inefficiencies at Fachinal. During the third quarter, a second underground mine was brought into production and a third underground mine is currently being developed to help offset lower ore grades in the open pit. Silver and gold prices averaged $5.05 and $384.65 per ounce, respectively, in the third quarter of 1996 compared with $5.33 and $384.31 per ounce, respectively, in the third quarter of 1995. In the third quarter of 1996, the Company produced 2,432,794 ounces of silver and 56,138 ounces of gold compared to 1,873,605 ounces of silver and 43,791 ounces of gold in the third quarter of 1995. The cost of mine operations for the third quarter of 1996 decreased by $671,000, or 4%, below the prior year's comparable quarter. The decrease is primarily attributable to decreased costs at the Golden Cross Mine as a result of a decision to write down the investment in the mine in the second quarter of 1996. (See Note G of the Notes to Consolidated Financial Statements.) As a result, depreciation and depletion charged to mine operations decreased from $1,448,000 in the third quarter of 1995 to $2,300 in the third quarter of 1996. Because of the changes stated above, gross profits from mine operations decreased by $2,572,000. Mine operations gross profit as a percent of sales decreased from 23% in the quarter ended September 30, 1995 to 14% in the quarter ended September 30, 1996. The cash costs of production per ounce of silver on a silver equivalent basis at the Rochester Mine amounted to $3.25 in the quarter ended September 30, 1996, compared to $3.29 per ounce in the quarter ended September 30, 1995. The cash costs of production per ounce of gold at the El Bronce Mine were $247.29 during the third quarter of 1996 compared to $334.21 in 1995's same quarter. The cash costs of production per ounce of gold at the Golden Cross Mine 15 amounted to $327.71 per ounce in the quarter ended September 30, 1996, compared to $222.27 per ounce in the prior year's comparable quarter. The increase in Golden Cross costs of production is primarily attributable to decreased ore grades and lower ore throughput associated with the land stabilization program. In addition, the land stabilization issue has prevented the Company from implementing a mill optimization program which was designed to increase mill throughput and decrease operating costs. INTEREST AND OTHER INCOME Interest and other income increased by $786,000, or 19%, in the third quarter of 1996 compared to the third quarter of 1995. The increase is primarily the result of the gain on the sale of the Orion marketable securities of approximately $1.3 million and increased interest income resulting from a higher level of short-term investments. The third quarter of 1995 included a gain of $3.2 million arising from the sale of gold and silver purchased on the open market which was delivered pursuant to fixed-price forward contracts. TOTAL INCOME As a result of the above, the Company's total income decreased by $786,000, or 19%, in the third quarter of 1996 compared to the third quarter of 1995. EXPENSES For the third quarter of 1996, total expenses increased by $98,000, or 1%, above the prior year's comparable quarter. The increase is primarily due to increases in mining exploration of $959,000 and general corporate expenses of $377,000 which is partially offset by decreases in interest expense of $1,161,000 and idle facilities expense of $357,000. NET INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES As a result of the above, the Company's income from continuing operations before income taxes amounted to $1,234,000 for the third quarter of 1996 compared to income from continuing operations before income taxes of $3,118,000 for the third quarter of 1995. The Company reported an income tax benefit for the third quarter of 1996 of $644,000 compared to a tax provision of $1,079,000 for the same period of 1995. As a result, the Company reported net income from continuing operations of $1,878,000, or $.09 per primary share, for the third quarter of 1996 compared to income from continuing operations of $2,039,000, or $.13 per primary share, for 1995's comparable quarter. 16 NET INCOME (LOSS) As a result of the above, the Company reported net income of $1,878,000, or $.09 per primary share (net loss of $.03 attributable to common shareholders and net income of $.06 per fully diluted share), for the third quarter of 1996 compared with $2,039,000, or $.13 per primary share attributable to common shareholders ($.12 per fully diluted share), for the third quarter of 1995. NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1995 SALES AND GROSS PROFITS Sales of concentrates and dore' decreased by $3,394,000, or 5%, for the nine months ended September 30, 1996 compared with the same period of 1995 and was primarily attributable to decreased production at Golden Cross in 1996 compared to the same period in 1995. While overall production for the Company increased substantially, revenues decreased due to the fact that revenues from 1,564,261 ounces of silver and 16,871 ounces of gold attributable to the Fachinal Mine are not reflected in the sales of concentrates due to the fact that the Fachinal Mine has not achieved commercial production; therefore, it continues to be treated as a development stage property. As a result, revenues generated from pre-production metals sales have been offset against the capital cost of the mine. The Company has implemented various programs designed to rectify certain start-up inefficiencies at Fachinal. During the third quarter, a second underground mine was brought into production and a third underground mine is currently being developed to help offset lower ore grades in the open pit. Silver and gold prices averaged $5.29 and $391.60 per ounce, respectively, in the first nine months of 1996 compared to $5.17 and $383.78 per ounce, respectively, in the same period in 1995. During the first nine months of 1996, the Company produced 6,732,763 ounces of silver and 145,604 ounces of gold compared to 5,082,236 ounces of silver and 122,184 ounces of gold in the first nine months of 1995. The cost of mine operations in the first nine months of 1996 increased by $3,499,000, or 7%, over the first nine months of 1995. The increase is primarily attributable to an increase in the costs of Golden Cross operations. As a result, gross profit from mine operations decreased by $6,893,000, or 52%, in the first nine months of 1996 from 1995's comparable period. Mine operations gross profit as a percent of sales decreased from 20% in the nine months ended September 30, 1995 to 10% in the nine months ended September 30, 1996. The cash costs of production per ounce of gold at the Golden Cross Mine amounted to $374.62 per ounce in the nine months ended September 30, 1996, compared to $219.07 in the prior year's comparable nine- 17 month period. The increase is primarily attributable to decreased mine ore grades and costs associated with the land stabilization program. In addition, the land stabilization issue has prevented the Company from implementing a mill optimization program which was designed to increase mill throughput and decrease operating costs. The cash costs of production per ounce of silver on a silver equivalent basis at the Rochester Mine amounted to $3.49 per ounce in the nine months ended September 30, 1996, compared to $3.70 in the nine months ended September 30, 1995. The cash costs of production per ounce of gold at the El Bronce Mine were $250.21 for the nine months ended September 30, 1996 compared to $314.23 for the nine months ended September 30, 1995. INTEREST AND OTHER INCOME Interest and other income in the nine months ended September 30, 1996 increased by $493,000, or 6%, compared to the prior year's comparable nine-month period. The increase is primarily a result of the gain on the sale of Orion marketable securities amounting to approximately $1.3 million and increased interest income resulting from a higher level of short-term investments. The third quarter of 1995 included a gain of $3.2 million arising from the sale of gold and silver purchased on the open market which was delivered pursuant to fixed-price forward contracts. TOTAL INCOME As a result of the above, the Company's total income decreased by $6,400,000, or 29%, in the nine months ended September 30, 1996, compared with the prior year's comparable period. EXPENSES Total expenses in the nine months ended September 30, 1996, prior to the write-down of mining properties, decreased by $4,439,000, or 21%, compared with the prior year's nine-month period. The decrease is primarily attributable to decreases of $5,318,000 in interest expense resulting from reduced long-term debt and the effect of capitalized interest and $1,481,000 in idle facilities expense. As discussed in Note G of the Notes to Consolidated Financial Statements in Part I, in the second quarter of 1996, the Company reported total write-downs of mining properties of $54,415,000 related to the Golden Cross Mine and the Faride property. INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES As a result of the above, the Company's loss from continuing operations before income taxes amounted to $56,028,000 in the first nine months of 1996 compared to income of $348,000 in the first nine months of 1995. The Company reported an income tax benefit of $1,158,000 for the first nine months of 1996, compared to a provision 18 for taxes of $437,000 in the first nine months of 1995. As a result, the Company reported a net loss from continuing operations of $54,870,000, or $2.57 per share, in the first nine months of 1996, compared to a net loss of $89,000, or $.01 per share, in the first nine months of 1995. INCOME FROM DISCONTINUED OPERATIONS On May 2, 1995, the Company sold the Flexaust division, a manufacturer of flexible hose and tubing. In the nine months ended September 30, 1995, the Company reported income from discontinued operations (net of taxes) of $2,360,000, or $.15 per share. NET INCOME (LOSS) As a result of the above, the Company reported a net loss of $54,870,000, or $2.57 per share ($2.84 attributable to common shareholders), in the first nine months of 1996, compared to net income of $2,271,000, or $.15 per share, in the prior year's comparable nine-month period. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL; CASH AND CASH EQUIVALENTS The Company's working capital at September 30, 1996 was approximately $167.6 million compared to approximately $105.6 million at December 31, 1995. The ratio of current assets to current liabilities was 4.6 to 1 at September 30, 1996, compared with 6.0 to 1 at December 31, 1995. The increase in the Company's working capital at September 30, 1996 compared to December 31, 1995 is primarily attributable to cash proceeds from the issuance of $150 million of mandatory adjustable convertible securities during the first half of 1996. Net cash consumed by operating activities for the first nine months of 1996 was $1.6 million compared with $11.0 million provided by operating activities during the first nine months of 1995. A total of $135.3 million of cash was used in investing activities in the nine months of 1996 compared to $29.0 million used in investing activities in the first nine months of 1995. Of the $135.3 million used in investing activities during the first nine months of 1995, $118.7 million relates to the purchase of investment grade short-term investments. The Company's financing activities provided $153.6 million of cash during the first nine months of 1996 compared with $19.7 million for the first nine months of 1995. As a result of the above, the Company's net cash increase for the first nine months of 1996 was $16.7 million compared with a net cash increase of $1.7 million for the first nine months of 1995. 19 For the years ended September 30, 1996 and 1995, the Company expended $2.0 million and $2.9 million, respectively, in connection with environmental compliance activities at its operating properties. At September 30, 1996, the Company had expended a total of approximately $9.3 million on environmental and permitting activities at the Kensington property, which expenditures have been capitalized as part of its development cost. ACQUISITION OF REMAINING EL BRONCE INTEREST On September 4, 1996, the Company exercised its option to purchase 51% of the shares of Compania Minera CDE El Bronce, and also purchased the remaining 49% of the shares of Compania Minera CDE El Bronce, bringing its total ownership interest to 100%. In July 1994, the Company had made an agreement pursuant to which the Company acquired operating control, a 51% interest in operating profits and an option to acquire a 51% equity interest in the producing El Bronce Mine. With this acquisition, the Company owns 100% of the mine. The terms of the purchase are the payment of $10,500,000 in cash, prepayment of the remainder of the option price in the approximate amount of $3,800,000 and a net smelter return royalty of 3% to be paid quarterly, commencing on January 1, 1997. PUBLIC OFFERING OF MARCS On March 8, 1996, the Company completed a public offering of $140.0 million of Mandatory Adjustable Redeemable Convertible Securities (MARCS). The Company issued 6,588,235 shares of MARCS which were offered at a public offering price of $21.25 per share. Each share of MARCS is mandatorily convertible four years after issuance into 1.111 shares of Common Stock of the Company, subject to adjustment in certain events, unless earlier converted by the holder into Common Stock or redeemed for Common Stock by the Company. The annual dividend payable on the MARCS will be $1.488 per share, payable quarterly. On April 8, 1996, the Company sold an additional 489,598 shares of MARCS to the underwriters as a result of their exercise of an overallotment option granted to them in connection with the public offering. With the exercise of the overallotment option, the Company sold a total of 7,077,833 shares of MARCS for a total offering price of $150.4 million which resulted in net proceeds to the Company of $144.6 million. ACQUISITIONS OF INTERESTS IN AUSTRALIAN GOLD MINING COMPANIES GASGOYNE. Coeur's Offer for outstanding Gasgoyne shares was conducted on the basis of seven Coeur shares of Common Stock plus A$96 in exchange for each 100 Gasgoyne shares, Coeur issued a total of 1,419,832 shares of Common Stock and paid a total of approximately A$19.5 (or US$15.4 based on then prevailing currency exchange rates) to accepting Gasgoyne shareholders, and acquired a total of 20,293,691 Gasgoyne shares constituting approximately 35% of Gasgoyne's 20 outstanding shares. Coeur's cash payments to Gasgoyne shareholders were financed by a loan facility with Rothschild Australia Limited, which provides for a maximum of US$50 million of borrowings at an annual interest rate equal to LIBOR plus 1.5%. ORION. On January 24, 1996, at a cost of US$10.7 million, Coeur acquired from Homestake Mining Company ("Homestake") 5.5 million shares of and an option to acquire an additional 5.0 million shares of Orion held by Homestake. (Earlier in January 1995 and in the last quarter of 1994, Coeur had acquired 3.3 million outstanding Orion shares for a total cost of approximately US$3.8 million.) On March 26, 1996, Coeur exercised the options previously acquired from Homestake for the additional 5.0 million Orion shares for a purchase price of US$3.8 million. As a result of the above acquisitions of Orion shares, which were funded by Coeur's own cash resources, Coeur then held approximately 19.2% of Orion's outstanding shares. On September 30. 1996, the Company sold its shares of Orion and recorded a gain of approximately $1.3 million on the transaction. FEDERAL NATURAL RESOURCES ACTION On March 22, 1996, an action was filed in the United States District Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States against various defendants, including the Company, asserting claims under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 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 releases of hazardous substances from mining activities conducted in the area since the late 1800s. No specific monetary damages are identified in the complaint. However, in July 1996, the government indicated 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 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 and at an appropriate stage will seek to be dismissed from this action. At this initial stage of the proceedings it is not possible to predict its ultimate outcome. 21 PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Statement regarding computation of per share earnings (b) REPORTS ON FORM 8-K On November 5, 1996, the Company filed a Form 8-K reporting the purchase of the remaining 49% of the shares of Compania Minera CDE El Bronce, bringing its total ownership interest to 100%. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COEUR D'ALENE MINES CORPORATION ------------------------------- (Registrant) Dated November 5, 1996 /s/Dennis E. Wheeler -------------------- DENNIS E. WHEELER Chairman, President and Chief Executive Officer Dated November 5, 1996 /s/James A. Sabala ------------------ JAMES A. SABALA Senior Vice President (Principal Financial and Accounting Officer) EX-27 2
5 1,000 0000215466 COEUR D'ALENE CORPORATION 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 33,211 117,587 30,332 0 33,686 214,816 396,569 87,374 579,969 47,207 149,840 7,078 0 22,950 402,820 579,969 62,920 72,078 56,622 56,622 69,008 0 2,476 (56,028) (1,158) (54,870) 0 0 0 (54,870) (2.57) 0
EX-11 3 COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
3 MONTHS ENDED 9 MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------------------- ----------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In thousands except for per share amounts) Weighted average shares outstanding 21,891 15,599 21,327 15,592 Net effect of dilutive stock options-based on the treasury stock method using average market price 2 14 10 ---------- ---------- ---------- ---------- 21,893 15,613 21,327 15,602 ========== ========== ========== ========== Income (Loss) from continuing operations $ 1,878 $ 2,039 $ (54,870) $ (89) Income from discontinued operations ---------- ---------- ---------- ---------- 2,360 Net income (Loss) 1,878 2,039 (54,870) 2,271 ========== ========== ========== ========== Per share amounts: Income (loss) from continuing operations $ .09 $ .13 $ (2.57) $ .00 Income from discontinued operations .15 ---------- ---------- ---------- ---------- Net income (loss) per share $ .09 $ .13 $ (2.57) $ .15 ========== ========== ========== ========== Net income (loss) $ 1,878 $ 2,039 $ (54,870) $ 2,271 Less preferred dividends 2,632 5,764 ---------- ---------- ---------- ---------- Net income (loss) attributable to common shareholders $ (754) $ 2,039 $ (60,634) $ 2,271 ========== ========== ========== ========== Per share amounts attributable to common shareholders: Net income (loss) from continuing operations $ (.03) $ .13 $ (2.84) $ .00 Income from discontinued operations .15 ---------- ---------- ---------- ---------- Net income (loss) per share attributable to common shareholders $ (.03) $ .13 $ (2.84) $ .15 ========== ========== ========== ==========
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (continued)
3 MONTHS ENDED 9 MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ----------------------------- ----------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- (In thousands except for per share amounts) Fully diluted earnings per share: Average shares outstanding 21,891 15,599 Net effect of dilutive stock options-based on the treasury stock method using average market price 2 14 Assumed conversion of 6% convertible bonds 1,949 1,955 Assumed conversion of 7% convertible bonds 4,866 Assumed conversion of 6 3/8% convertible bonds 3,880 3,880 Assumed conversion of MARCS 7,078 ---------- ---------- 34,800 26,315 ========== ========== Net income $ 1,878 $ 2,039 Add 6% convertible bond interest net of federal income tax effect 513 514 Add 7% convertible bond interest net of federal income tax effect 911 Add 6 3/8% convertible bond interest net of federal income tax effect 1,104 1,104 Less adjustment for capitalized interest (1,442) (1,395) ---------- ---------- Income from continuing operations $ 2,052 $ 3,173 ========== ========== Per share amounts: Earnings from continuing operations $ .06 $ .12 ========== ==========
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