-----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, WOJQQcQx2hGj8Fktb3tA6DBnx7RoCXuoCQIi9htRV2rI0uw+3n2q8XQln73lt/tq SAa/Ejuu+eLcPDP/baSRrA== /in/edgar/work/0000950133-00-004518/0000950133-00-004518.txt : 20001115 0000950133-00-004518.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950133-00-004518 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COEUR D ALENE MINES CORP CENTRAL INDEX KEY: 0000215466 STANDARD INDUSTRIAL CLASSIFICATION: [1040 ] IRS NUMBER: 820109423 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08641 FILM NUMBER: 764466 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 w42650e10-q.txt 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ----------------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- ------------------- Commission File Number: 1-8641 ------- COEUR D'ALENE MINES CORPORATION (Exact name of registrant as specified 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 38,109,279 shares were issued and outstanding as of November 14, 2000. 2 COEUR D'ALENE MINES CORPORATION INDEX
Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- 3 September 30, 2000 and December 31, 1999 Consolidated Statements of Operations -- 5 Three Months and Nine Months Ended September 30, 2000 and 1999 Consolidated Statements of Cash Flows -- 6 Three Months and Nine Months Ended September 30, 2000 and 1999 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of 14 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosure of Market Risk 25 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K 26 SIGNATURES 27
2 3 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
September 30, December 31, 2000 1999 ------------- ------------ ASSETS (In Thousands) CURRENT ASSETS Cash and cash equivalents $ 51,383 $ 86,935 Short-term investments 18,869 22,978 Receivables 13,317 15,376 Inventories 55,406 53,769 --------- --------- TOTAL CURRENT ASSETS 138,975 179,058 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 97,169 96,592 Less accumulated depreciation (59,461) (54,265) --------- --------- 37,708 42,327 MINING PROPERTIES Operational mining properties 111,449 106,455 Less accumulated depletion (68,907) (62,431) --------- --------- 42,542 44,024 Developmental properties 54,565 50,781 --------- --------- 97,107 94,805 OTHER ASSETS Investments in unconsolidated affiliates 28,071 29,008 Debt issuance costs, net of accumulated amortization of 4,487 5,378 Other 3,546 3,471 --------- --------- 36,104 37,857 --------- --------- $ 309,894 $ 354,047 ========= =========
3 4 CONSOLIDATED BALANCE SHEETS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
September 30, December 31, 2000 1999 ------------- ------------ (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,970 $ 4,693 Accrued liabilities 7,022 6,411 Accrued interest payable 4,847 5,064 Accrued salaries and wages 5,207 5,005 --------- --------- TOTAL CURRENT LIABILITIES 21,046 21,173 LONG-TERM LIABILITIES 6% subordinated convertible debentures due 2002 27,991 35,582 6 3/8% subordinated convertible debentures due 2004 93,372 93,372 7 1/4% subordinated convertible debentures due 2005 107,277 107,277 Other long-term liabilities 25,127 28,478 --------- --------- TOTAL LONG-TERM LIABILITIES 253,767 264,709 SHAREHOLDERS' EQUITY Mandatory Adjustable Redeemable Convertible Securities (MARCS), par value $1.00 per share,(a class of preferred stock) - authorized 7,500,000 shares, issued zero and 7,077,833 shares in 2000 and 1999 -- 7,078 Common Stock, par value $1.00 per share- authorized 125,000,000 shares, issued 38,109,279 and 30,240,428 shares in 2000 and 1999 (including 1,059,211 shares held in treasury) 38,109 30,240 Capital surplus 387,625 391,031 Accumulated deficit (375,872) (347,119) Repurchased and nonvested shares (13,190) (13,190) Accumulated other comprehensive loss: Unrealized (loss) gain on investments (1,591) 125 --------- --------- 35,081 68,165 --------- --------- $ 309,894 $ 354,047 ========= =========
4 5 CONSOLIDATED STATEMENTS OF OPERATIONS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ---------------------- 2000 1999 2000 1999 --------- --------- --------- --------- (In thousands, except for per share data) REVENUES Product sales $ 26,490 $ 21,986 $ 69,352 $ 60,693 Interest and other 3,234 16,453 7,764 18,765 --------- --------- --------- --------- Total Revenues 29,724 38,439 77,116 79,458 COSTS AND EXPENSES Production 24,440 17,720 63,516 45,469 Depreciation and amortization 4,810 2,719 15,619 12,166 Administrative and general 2,320 2,040 7,536 6,841 Exploration 1,846 1,408 6,427 5,355 Interest 3,761 4,079 11,598 12,406 Other 995 3,361 2,158 4,206 --------- --------- --------- --------- Total Costs and Expenses 38,172 31,327 106,854 86,443 --------- --------- --------- --------- NET (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EXTRAORDINARY ITEM (8,448) 7,112 (29,738) (6,985) Income tax provision (110) (92) (315) (247) --------- --------- --------- --------- NET (LOSS) INCOME BEFORE EXTRAORDIANARY ITEM (8,558) 7,020 (30,053) (7,232) Extraordinary item - early Retirement of debt (net of taxes) 102 2,590 1,300 2,590 --------- --------- --------- --------- NET (LOSS) INCOME $ (8,456) $ 9,610 $ (28,753) $ (4,642) Unrealized holding (loss) gain on securities (68) 3,288 (1,717) 3,284 --------- --------- --------- --------- COMPREHENSIVE (LOSS) INCOME $ (8,524) $ 12,898 $ (30,470) $ (1,358) ========= ========= ========= ========= NET (LOSS) INCOME $ (8,456) $ 9,610 $ (28,753) $ (4,642) Preferred stock dividends -- (2,633) (2,180) (7,899) --------- --------- --------- --------- NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (8,456) $ 6,977 $ (30,933) $ (12,541) ========= ========= ========= ========= BASIC AND DILUTED (LOSS) INCOME PER SHARE DATA Weighted average number of shares of Common Stock 37,050 23,987 34,898 22,502 ========= ========= ========= ========= Net (Loss) Income before extraordinary item $ (0.23) $ 0.18 $ (0.92) $ (0.67) Extraordinary item - early Retirement of debt(net of taxes) 0.00 0.11 0.03 0.11 --------- --------- --------- --------- Net (Loss) Income per share Attributable to Common Shareholders $ (0.23) $ 0.29 $ (0.89) $ (0.56) ========= ========= ========= =========
5 6 CONSOLIDATED STATEMENTS OF CASH FLOWS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ---------------------- ----------------------- 2000 1999 2000 1999 -------- ---------- --------- -------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $ (8,456) $ 9,610 $ (28,753) $ (4,642) Add (deduct) noncash items: Depreciation, depletion, and amortization 4,810 2,719 15,619 12,166 Gain on early retirement of debt (net of taxes) (100) (2,590) (1,300) (2,590) Other 2,038 1,122 4,583 2,928 Writedown of mining properties -- 2,492 -- 2,492 Undistributed (earnings) loss on investment in unconsolidated subsidiary (319) 189 (879) 751 Unrealized (gain)loss on written calls (2,146) 5,826 (3,189) 5,826 Changes in Operating Assets and Liabilities: Receivables (3,112) (6,026) 2,059 (3,098) Inventories 1,317 (2,570) (1,637) (8,293) Accounts payable and accrued liabilities (211) 4,244 (3,567) (670) --------- --------- --------- --------- NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (6,179) 15,016 (17,064) 4,870 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of short-term investments (2,327) (9,359) (10,790) (13,094) Proceeds from sales of short-term investments 1,700 1,866 13,773 3,044 Purchases of property, plant and equipment (425) (193) (1,411) (833) Proceeds from sale of assets 110 86 800 955 Expenditures on operational mining properties (2,702) (1,800) (7,139) (3,318) Expenditures on developmental properties (1,721) (3,639) (4,651) (7,498) Other (11) 2,816 72 1,194 --------- --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (5,376) (10,223) (9,346) (19,550) CASH FLOWS FROM FINANCING ACTIVITIES Retirement of long-term debt (241) (1,624) (6,240) (1,624) Payment of cash dividends -- (2,633) (2,180) (7,899) Other (111) (173) (269) (472) --------- --------- --------- --------- NET CASH USED IN FINANCING ACTIVITIES (352) (4,430) (9,142) (9,995) --------- --------- --------- --------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,907) 363 (35,552) (24,675) Cash and cash equivalents at beginning of period 63,290 102,297 86,935 127,335 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 51,383 $ 102,660 $ 51,383 $ 102,660 ========= ========= ========= =========
6 7 Coeur d'Alene Mines Corporation and Subsidiaries Notes to Consolidated Financial Statements NOTE A: Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date. The consolidated financial statements and footnotes thereto included in the Coeur d'Alene Mines Corporation Annual Report on Form 10-K for the year ended December 31, 1999 should be reviewed in connection with these condensed consolidated financial statements. NOTE B: Inventories Inventories are comprised of the following:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (In Thousands) In process and on leach pads $ 44,649 $ 43,494 Concentrate and dore' inventory 5,681 5,594 Supplies 5,076 4,681 --------- --------- $ 55,406 $ 53,769 ========= =========
Inventories of ore on leach pads and in the milling process are valued based on actual costs incurred, less costs allocated to minerals recovered through the leaching and milling processes. Inherent in this valuation is an estimate of the percentage of the minerals on leach pads and in process that will ultimately be recovered. All other inventories are stated at the lower-of-cost or market, with cost being determined using first-in, first-out and weighted-average-cost methods. Dore inventory includes product at the mine site and product held by refineries. The Handy and Harmon refinery, to which Rochester Mine has historically sent approximately 50% of its dore, filed for Chapter 11 Bankruptcy during the first quarter of 2000. The Company had in inventory, at the refinery, approximately 67,000 ounces of silver and approximately 5,000 ounces of gold being held pending resolution of the Bankruptcy proceeding. At this time, the Company anticipates that litigation may be required to recover its dore and believes it has a basis for recovery. 7 8 NOTE C: Income Taxes The Company has reviewed its net deferred tax asset for the nine-month period ended September 30, 2000, together with net operating loss carryforwards, and is not recognizing any 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 for all periods presented. NOTE D: Conversion of MARCS to Common Stock On March 15, 2000, the Company mandatorily converted its 7,077,833 outstanding shares of Mandatory Adjustable Redeemable Convertible Securities (MARCS) into 7,863,000 common shares. The final payment of dividends of $2,633,000 on the MARCS was paid out as of that date. NOTE E: Investments The Company, under the terms of its lease, self insurance, and bonding agreements with certain banks, lending institutions and regulator agencies, is required to collateralize certain portions of the Company's obligations. The Company has collaterized these obligations by assigning certificates of deposit that have maturity dates ranging from 3 months to a year, to the respective institution or agency. At September 30, 2000 and December 31, 1999, the Company had certificates of deposit under these agreements of $9.8 million and $6.6 million, respectively, restricted for this purpose. In the second quarter of 2000, the Company sold its royalty interest in the Quiruvilca mine in northeren Peru to Pan American Silver Corporation ("Pan American") for 140,000 shares of Pan American capital stock, warrants to purchase an additional 100,000 shares of Pan American capital stock at $5 per share and $50,000 cash. During the first quarter of 2000, the Company sold 245,000 shares of Pan American capital stock for approximately $1.2 million, and recorded a realized loss of approximately $66,000. The Company continues to hold approximately one million shares of Pan American capital stock which is being marked-to-market through other comprehensive income. NOTE F: Long-Term Debt During the third quarter 2000, the Company repurchased approximately $342,000 principal amount of its outstanding 6% Subordinated Convertible Debentures due 2002 (the "6% Debentures") for a total purchase price of approximately $239,000, excluding 8 9 purchased interest of approximately $6,000. Associated with this transaction, the Company eliminated $2,000 of capitalized bond issuance costs. As a result of the buyback of these debentures, the Company recorded an extraordinary gain of approximately $102,000, net of taxes of zero, during the thrid quarter of 2000 on the reduction of its indebtedness. On June 14, 2000, the Company repurchased $7,001,000 principal amount of 6% Debentures pursuant to a cash tender offer that commenced on May 9, 2000 and expired as scheduled on June 8, 2000. The price paid by the Company for the repurchased 6% Debentures was $5,040,720 (or $720 per $1,000 principal amount) plus accrued and unpaid interest of $3,500 (or $.50 per $1,000 principal amount) from June 10, 2000 to, but not including, the date of payment on June 14, 2000. As a result of the cash tender offer, the Company reduced the outstanding principal amount of 6% Debentures from $35,334,000 to $28,333,000, thereby reducing the annual amount of its future interest expense by $420,060. The Company recorded an extraordinary gain of $1,111,000, net of tender offer expenses, in the quarter ended June 30, 2000. During the first quarter 2000, the Company repurchased approximately $248,000 principal amount of outstanding 6% Debentures for a total purchase price of approximately $159,000, excluding purchased interest of approximately $12,000. Associated with this transaction, the Company eliminated $2,000 of capitalized bond issuance costs. As a result of the buyback of these debentures, the Company recorded an extraordinary gain of approximately $87,000, net of taxes of zero, during the first quarter of 2000 on the reduction of its indebtedness. NOTE G: Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision making group is comprised of the Chief Executive Officer, Chief Financial Officer and the Chief Operating Officer. The operating segments are managed separately because each segment represents a distinct use of Company resources and contribution to company cash flows in its respective geographic area. The Company's reportable operating segments include the Rochester, Coeur Silver Valley, Fachinal, and Petorca (previously named El Bronce) mining properties, Coeur Australia (50% owner of Gasgoyne Gold Mines NL), the Kensington development property, and the Company's exploration program. All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of these precious metals. Intersegment revenues consist of precious metal sales to the 9 10 Company's metals marketing division and are transferred at the market value of the respective metal on the date of the transfer. The Other segment includes earnings (loss) from unconsolidated subsidiaries accounted for by the equity method such as the Company's 50% interest in Gasgoyne, the corporate headquarters, elimination of intersegment transactions and other items necessary to reconcile to consolidated amounts. Revenues in the Other segment are generated principally from interest received from the Company's cash and investments that are not allocated to the operating segments. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the Company's Annual Report on 10-K. The Company evaluates performance and allocates resources based on profit or loss before interest, income taxes, depreciation and amortization, unusual and infrequent items, and extraordinary items.
Coeur d'Alene Mines Corp. Segment Reporting - ------------------------------- Nine Months Ended September Silver Coeur Exploration 30, 2000 Rochester Valley Fachinal Petorca Australia & Development Other Total - ----------------------------------------------------------------------------------------------------------------------------------- Total net sales and revenues $ 38,810 $ 12,293 $ 8,357 $ 4,851 $ 6,842 $ (270) $ 6,233 $ 77,116 Depreciation and Amortization(B) $ 11,192 $ 2,013 $ 3,843 $ 171 $ 1,668 $ 64 $ 1,082 $ 20,033 Interest income - - $ 13 $ 5 $ 100 $ 10 $ 3,412 $ 3,540 Interest expense - - $ 14 $ 1 - - $ 11,583 $ 11,598 Gain on Metal Hedging - - - - - - $ 3,189 $ 3,189 Income tax expense - $ 1 - - $ 42 - $ 272 $ 315 Earnings(losses)from non- Consolidated affiliates - - - - $ 1,237 - - $ 1,237 Gain on early retirement of Debt - - - - - - $ 1,300 $ 1,300 Income(loss) $ 10,957 $ 209 $ (3,825) $(1,251) $ 1,083 $ (3,959) $(4,510) $ (1,296) Investments in Unconsolidated Affiliates - - - - $28,071 - - $ 28,071 Segment assets(A) $ 83,552 $ 26,770 $ 28,492 $ 3,740 $ 377 $ 53,767 $ 6,840 $ 203,538 Expenditures for property $ 1,669 $ 4,305 $ 2,281 $ 387 - $ 4,518 $ 42 $ 13,202 - ------------------------------- Nine Months Ended September Silver Coeur Exploration 30, 2000 Rochester Valley Fachinal Petorca Australia & Development Other Total - ---------------------------------------------------------------------------------------------------------------------------------- Total net sales and revenues $ 37,071 $ 1,388 $ 5,094 $8,040 $ 7,450 $(1,167) $ 21,582 $ 79,458 Depreciation and Amortization(B) $ 6,977 $ 167 $ 2,255 $ 268 $ 3,438 $ 84 $ 1,626 $ 14,815 Interest income - - $ 57 $ 15 $ 43 $ 10 $ 4,139 $4,264 Interest expense - - $ 24 $ 2 - - $ 12,380 $ 12,406 Gain on Cyprus Settlement - - - - - - $ 21,140 $ 21,140 Loss on Metal Hedging - - - - - - $(5,826) $(5,826) Write down of Mine Property - - - - - - $(2,492) $(2,492) Income tax expense - - - - $ 14 - $ 233 $ 247 Earnings(losses) from - - - - $ (835) - $ 84 $ (751) Unconsolidated Affiliates Gain on early retirement of Debt - - - - - - $ 2,590 $ 2,590 Income(loss) $ 13,962 $ 202 $(1,092) $1,169 $ 91 $(5,389) $(1,529) $ 7,414 Investments in non- Consolidated Affiliates - - - - $46,006 - - $ 46,006 Segment assets(A) $ 89,942 $23,703 $ 30,686 $3,203 $ 432 $ 49,066 $ 16,735 $213,767 Expenditures for property $ 3,615 $ 255 $ 476 $ 169 - $ 6,603 $ 531 $ 11,649
Notes: (A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties. (B) Depreciation and Amortization includes accruals for Reclaimation. 10 11
Coeur d'Alene Mines Corporation Segment Reporting Nine Months Ended Reconciliation to Consolidated Totals September 30, 2000 1999 ------------------------------- Income(loss) - ------------ Total income or loss for reportable segments $ (1,296) $ 7,414 Gain on Cyprus settlement - 21,140 Gain(Loss) on Metal Hedging 3,189 (5,826) Depreciation and Amortization (20,033) (14,815) Interest expense (11,598) (12,406) Writedown of mine property - (2,492) ------------------------------- Loss before income taxes $(29,738) $ (6,985) ===============================
September 30, Assets 2000 1999 - ------ ------------------------------- Total assets for reportable segments $203,538 $213,767 Cash and cash equivalents 51,383 102,660 Short-term investments 18,869 22,847 Other assets 36,104 55,164 ------------------------------- Total consolidated assets $309,894 $394,438 ===============================
Coeur d'Alene Mines Corporation Segment Reporting
Geographic Information - ---------------------- (In Thousands) Nine Months Ended September 30, Revenues 2000 1999 ------------------------------- United States $57,337 $ 60,042 Chile 12,937 11,966 Australia 6,842 7,450 ------------------------------- Consolidated Total $77,116 $134,815 ===============================
As of September 30, Long-Lived Assets 2000 1999 ------------------------------- United States $ 93,948 $ 94,505 Chile 21,467 24,177 New Zealand 539 998 Bolivia 18,853 19,554 Other Foreign Countries 8 12 ------------------------------- Consolidated Total $134,815 $139,246 ===============================
Revenues are geographically seperated based upon the country in which operations and the underlying assets generating those revenues reside. 11 12 NOTE H: Hedging For the nine months ending September 30, 2000, the Company recorded a $2.9 million realized gain in connection with the hedge program. In the third quarter of 2000 the Company placed Chilean peso hedges of $10.8 million at an average exchange of $564.80 pesos per US$1, which represents approximately 75% of the Company's Chilean peso requirements over the next 12 months. The following table summarizes the information at September 30, 2000 associated with the Company's financial and derivative financial instruments that are sensitive to changes in interest rates, commodity prices and foreign exchange rates. For long term debt obligations, the table presents principal cash flows and related average interest rates. The fair values were derived from dealer quotes. For gold put and call options and amortizing forward sales, the table presents ounces expected to be delivered and the related average price per ounce in Australian dollars. For foreign currency exchange contracts, the table presents the notional amount in New Zealand dollars to be purchased along with the average foreign exchange rate. Qualitative and Quantitative Disclosures About Market Risk
(dollars and peso's in thousands) 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------------------------------- LIABILITIES Long Term Debt Fixed Rate $ - $ - $ 27,991 $ - $ 93,372 Average Interest Rate 6.740% 6.740% 6.794% 6.843% 7.190% DERIVATIVE FINANCIAL INSTRUMENTS Gold Forward Sales - AUD Ounces 3,900 - - - - Price Per Ounce $ 612.10 $ - $ - $ - $ - Gold Put Options Purchased - AUD Ounces 3,600(1) 30,000(1) 30,000(1) 30,000(1) - Price Per Ounce $ 597.00 $ 597.00 $ 597.00 $ 597.00 $ - Gold Forward Sales - USD Ounces 7,500 12,000 12,000 - - Price Per Ounce $ 306.82 $ 316.51 $ 331.84 $ - $ - Gold Call Options Sold - USD Ounces - - - - - Price Per Ounce $ - $ - $ - $ - $ - Amortizing Forward Sales - USD Ounces 5,000 22,560(2) 22,560(2) 22,560(2) 22,560(2) Price Per Ounce $ 338.58 $ 348.50 $ 348.50 $ 348.50 $ 348.50 Foreign Currency Contracts New Zealand Dollar $ 900 $ - $ - $ - $ - Exchange Rate (NZ$ to US$) 2.118 - - - - Chilean Pesos $1,509,690 $ 4,590,150 $ - $ - $ - Exchange Rate(Peso to US$) 559.14 566.69 - - - Fair Value (dollars and peso's in thousands) Thereafter Total 09/30/00 - ---------------------------------------------------------------------------- LIABILITIES Long Term Debt $97,326 Fixed Rate $ 107,277 $228,640 Average Interest Rate 7.250% DERIVATIVE FINANCIAL INSTRUMENTS Gold Forward Sales - AUD $ 228 Ounces - 3,900 Price Per Ounce $ - Gold Put Options Purchased - AUD $ 4,712 Ounces - 93,600 Price Per Ounce $ - Gold Forward Sales - USD $ 1,461 Ounces - 31,500 Price Per Ounce $ - Gold Call Options Sold - USD $ - Ounces 56,000(2) 56,000 Price Per Ounce $ 345.00 Amortizing Forward Sales - USD $ 325 Ounces 78,960(2) 174,200 Price Per Ounce $ 348.50 Foreign Currency Contracts $ (56) New Zealand Dollar $ - $ 900 Exchange Rate (NZ$ to US$) - $ 20 Chilean Pesos $ - $6,099,840 Exchange Rate(Peso to US$) -
12 13 (1) Of the put options purchased, 93,600 ounces have a knock-out provision whereby the options will terminate if gold trades above approximately $289 per ounce prior to the exercise date, based on a US dollar to Australian dollar exchange rate of 1.89. (2) The majority of the call options sold have a knock-out provision whereby calls for 56,000 ounces will terminate if gold trades below $300 per ounce at any time after December 27, 2002, and calls for 169,200 ounces will terminate if gold trades below $310 per ounce at any time after December 29, 2000. NOTE I: New Accounting Standard In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), which was amended by FASB Statement 138 "Accounting for Hedging Activities" (SFAS 138), which establishes accounting and reporting standards for derivative instruments and hedging activities. Effective for all fiscal quarters in years beginning after June 15, 2000, SFAS 133 requires the Company to recognize all derivative instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value on an on-going basis. The Company is currently assessing the effect of adopting SFAS No. 133 on its financial statements and will adopt the statement on January 1, 2001. NOTE J: Litigation On March 22, 1996, an action was filed in the United States District Court for the District of Idaho by the United States against various defendants, including the Company, asserting claims under CERCLA and the Clean Water Act for alleged damages to federal natural resources in the Coeur d'Alene River Basin of Northern Idaho as a result of alleged releases of hazardous substances from mining activities conducted in the area since the late 1800s. No specific monetary damages were identified in the complaint. However, in July 1996, the government indicated that damages may approximate $982 million and as a result of pretrial discovery, it appears the United States believes it can prove damages over $1 billion. The United States asserts that the defendants are jointly and severally liable for costs and expenses incurred by the United States in connection with the investigation, removal and remedial action and the restoration or replacement of affected natural resources. In 1986 and 1992, the Company had settled similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe, respectively, and believes that those prior settlements exonerate it of further involvement with alleged natural resource damage in the Coeur d'Alene River Basin. Accordingly, the Company intends to vigorously defend this matter. In March 1997, the Company filed a motion for partial summary judgement relating to the issue of trusteeship, essentially arguing that the United States does not have authority to sue for damages to state natural resources and that the settlements with the state and Tribe bars the federal claims. That motion remains pending. On March 31, 1998, the Court entered an order denying the plaintiffs' motion to allow the United States to prove a portion of its case pursuant to an administrative record, and requiring the parties to 13 14 submit further facts as to the issue of trusteeship. Furthermore, in March 1998, the EPA announced its intent to perform a remedial investigation/feasibility study upon all or parts of the Coeur d'Alene Basin and, thereby, to apparently focus upon response costs rather than natural resource damages. In September 1998, the Company filed an additional motion for partial summary judgment asserting that CERCLA as applied to the Company in the action is not constitutional under the takings and due process provisions of the United States Constitution. The court denied this motion on the grounds that further facts must be developed at trial before the issue can be decided. With respect to the natural resource damage litigation referred to above, in June 2000 Governor Kempthorne of the State of Idaho asked the defendants to give him a proposal for settlement which he could take to the plaintiffs in the suit. The defendants outlined such a proposal. The defendants would contribute a total of $250 million over 30 years, of which $154 million would be in fixed annual payments, without interest. The remaining $96 million would be paid from royalties based on the price of silver, copper, gold and zinc as provided in an index and schedule to be agreed upon. Coeur advised the Governor, defendants and the U.S. that its share of this proposal would be, without admission of liability and with appropriate release, the sum of $3,750,000, which would be paid in annual installments over 25 years without interest and an additional $1,250,000 in years 26-30 based on the royalty concept described above. It is not known whether the proposal put forth by the Governor to the plaintiffs will be accepted, although the Coeur d'Alene Tribe, one of the plaintiffs with whom the Company has already settled (in 1992), indicated it viewed the proposal "optimistically". Trial is set to commence on January 22, 2001. NOTE K: 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. 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 14 15 provides a "safe harbor" for certain forward looking statements. Operating, exploration and financial data, and other statements in this document are based on information the company believes reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from the Company's future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise. The Company's currently operating mines are the Rochester mine in Nevada, the Galena mine (also known as Silver Valley) in the Coeur d'Alene Mining District of Idaho (in which the Company increased its ownership to 100% in September of 1999) and the Fachinal and Petorca mines in Chile, all of which are wholly-owned and operated by the Company. The Company also owns 50% of Gasgoyne Gold Mines NL ("Gasgoyne"), an Australian gold mining company, that owns 50% of the Yilgarn Star gold mine in Australia. The average price of silver and gold in the third quarter of 2000 was $4.96 and $277 per ounce, respectively. The market price of silver (Handy & Harman) and gold (London Final) on November 10, 2000 was $4.69 per ounce and $264.75 per ounce, respectively. The following table sets forth the amounts of gold and silver produced by the mining properties owned by the Company or in which the Company has an interest, based on the amounts attributable to the Company's ownership interest, and the cash and full costs of such production during the three-month and nine-month periods ended September 30, 2000 and 1999: 15 16
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ----------------------- 2000 1999 2000 1999 ---------- --------- ---------- --------- ROCHESTER MINE Gold ozs 19,334 19,609 53,694 52,432 Silver ozs 1,649,567 1,520,043 4,948,039 4,540,061 Cash Costs per oz./silver $4.01 $3.27 $4.01 $3.94 Full Costs per oz./silver $5.12 $3.98 $5.15 $4.77 GALENA MINE (SEE NOTE) Silver ozs 1,156,262 577,579 2,853,617 1,448,589 Cash Costs per oz./silver $3.93 $4.74 $4.73 $4.76 Full Costs per oz./silver $4.56 $5.74 $5.43 $5.82 PRIMARY SILVER MINES Consolidated Cash Costs per oz $3.99 $3.67 $4.20 $4.08 YILGARN STAR MINE Gold ozs 6,628 7,014 19,221 20,568 Cash Costs per oz./gold $232 $252 $233 $285 Full Costs per oz./gold $346 $458 $350 $482 FACHINAL MINE Gold ozs 4,449 6,081 13,868 19,664 Silver ozs 240,226 276,402 799,655 878,185 Cash Costs per oz./gold $413 $277 $375 $293 Full Costs per oz./gold $561 $337 $511 $354 PETORCA MINE Gold ozs 7,437 7,946 19,077 23,341 Silver ozs 14,251 18,308 42,190 44,926 Cash Costs per oz./gold $337 $287 $350 $272 Full Costs per oz./gold $345 $287 $359 $272 PRIMARY GOLD MINES Consolidated Cash Costs per oz $336 $273 $327 $285 CONSOLIDATED TOTALS Gold ozs 37,848 40,650 105,860 116,005 Silver ozs 3,060,306 2,392,332 8,643,501 6,911,791
Note: The Company increased its ownership of the Galena Mine to 100% from 50% in September 1999. NOTES TO SIGNIFICANT CHANGES IN PRODUCTION AND/OR COST PER OUNCE DATA Rochester Mine Coeur's Rochester mine produced 1.6 million ounces of silver and 19,300 ounces of gold during the third quarter of 2000 compared to 1.5 million ounces of silver and 19,600 ounces of gold in the third quarter of the previous year. Total cash costs for the latest three-month period were $4.01 per silver equivalent ounce as opposed to $3.27 per silver equivalent ounce in 1999. The increase in cash costs was due almost entirely to the planned treatment of lower-grade ore in the current mining sequence. This was offset to a large degree by operating improvements that included increasing the capacity of the conveyor system and the crushing circuit as well as increasing the solution flow on the leach pad by approximately 15 percent. 16 17 After the completion of the first phase of a major reverse circulation drilling program within and around the perimeter of the Rochester pit, drilling commenced at the nearby Nevada Packard deposit on September 5. A total of 32 reverse circulation holes comprising approximately 10,000 feet have been completed at Nevada Packard and analysis of this data along with that from the main pit is nearing completion. Drilling has since recommenced at selected areas around the Rochester pit. Results to date have been very encouraging and Coeur is confident that it will be able to announce a significant increase to reserves and resources at its flagship operation by the end of the year. Silver Valley Resources - Galena Mine In the third quarter, Coeur's share of silver production from the Galena mine increased to 1.2 million ounces compared to 578,000 ounces of silver in the third quarter of the prior year. The significant increase reflects the Company's increased ownership of Coeur Silver Valley and record silver production from the Galena mine. Record production was the result of improved ore grades from the more productive vein structures at depth and an increase in mill throughput. Consequently, total cash costs for the period were $3.93 per ounce compared to $4.74 per ounce in the previous year, a decline of over 17 percent. Furthermore, the rapid pace of underground development continues to provide greater access to the wider, higher-grade vein systems, ensuring that the recent improvement in performance will continue and that our goal to reach annual production of 5 million ounces of silver should be achieved. Additional cost-saving measures are being studied including the possible implementation of trackless mining at the lower levels of the mine. The initial phase of the district-wide exploration program has also been successful. A diamond drill hole intersected an 11-foot section of the 294 vein in the West Argentine area of the property that graded 23.9 ounces of silver and 1.4 percent copper. This ore grade intercept was encountered 280 feet west of any previously known mineralization. In addition, the same hole intercepted a second mineralized zone contained within the Polaris fault of 20.6 feet grading 6.6 ounces of silver per ton and 1.1 percent copper including 5.9 feet at a grade of 10.4 ounces of silver per ton and 2.2 percent copper. This second zone is similar in many respects to the high-grade 72 vein that is currently one of the mine's most productive sources of silver ore. Coeur has believed for some time that there was considerable potential for further discoveries of economic silver mineralization at Coeur Silver Valley and this was a key factor in the Company's decision to purchase Asarco's silver assets in 1999. Fachinal Mine At Fachinal, gold and silver production in the third quarter of 2000 declined to 4,450 ounces and 240,200 ounces respectively from 6,100 ounces of gold and 276,000 ounces of silver in the third 17 18 quarter of the previous year. Total cash costs for the quarter increased to $413 per gold equivalent ounce compared to $277 per gold equivalent ounce in 1999. The shortfall in production and the corresponding increase in cash costs were partially due to lower ore grades and a reduction in tons milled but mainly to the continuation of severe winter weather conditions that affected most of southern Chile. This restricted development and access to the most productive areas of the mine. Once the weather improved, Coeur continued its exploration program designed primarily to convert resources to reserves. This resulted in the discovery of the new Cerro Bayo zone approximately 9 miles east of the processing facilities. This zone includes a vein structure named Lucero that has a greater strike length, width and grade than anything previously encountered in the district. The Cerro Bayo zone, which consists of multiple veins and veinlets show a surface expression of at least 8,200 feet along strike and is up to 3,300 feet in width. To date, the Lucero vein appears to be the primary ore shoot within this zone and has been traced for more than 2,600 feet along strike and to approximately 250 feet at depth. The Lucero vein is open in all directions and contains sections that are characterized by high-grade gold and silver mineralization. Some of the best drill intersections to date are as follows:
- ------------------------------------------------------------------------ Hole # Drill Interval Gold Equivalent Grade - ------------------------------------------------------------------------ BJH-199 22 feet 3.28 oz./ton - ------------------------------------------------------------------------ BJH-204 17 feet 2.29 oz./ton - ------------------------------------------------------------------------ BJH-147 20 feet 1.35 oz./ton - ------------------------------------------------------------------------ BJH-145 30 feet 0.61 oz./ton - ------------------------------------------------------------------------
Based on a 30 percent allowance for dilution and a further 20 percent ore loss, a preliminary resource of 210,000 gold equivalent ounces has been calculated at an average grade of 0.22 gold equivalent ounces per ton. All high grade assays were cut to 0.44 ounces per ton gold and 25 ounces per ton silver. Coeur is temporarily suspending milling operations at Fachinal while it continues its evaluation of this new zone and formulates detailed development and mining plans. Petorca Petorca's production during the third quarter of 2000 was 7,400 ounces of gold and 14,300 ounces of silver compared to 7,900 ounces of gold and 18,300 ounces of silver in the third quarter of the prior year. Total cash costs per equivalent ounce of gold were $337 per ounce compared to $287 per ounce in 1999. The rise in cash costs is attributable to the mining of lower-grade ore, partially offset by increases in tons mined and in mill throughput. As at Fachinal, operations were adversely affected by difficult winter weather conditions but are expected to return to normal in the fourth quarter. In addition, mill throughput is expected to increase as a result of the surface mining of the San Lorenzo satellite deposit. 18 19 Yilgarn Star Mine Coeur's 25 percent share of gold production from the Yilgarn Star mine was 6,600 ounces in the third quarter of 2000 compared to 7,000 ounces in the third quarter of 1999. Total cash costs for the period declined to $232 per ounce as opposed to $252 per ounce in the prior year. The reduction in cash costs was achieved in spite of the scheduled mining of lower-grade ore. Operating improvements, especially to the crushing circuit, and a weaker Australian dollar contributed to the $20 per ounce decline in cash costs. An exploration drilling program to the south of the mine is now underway. San Bartolome Coeur acquired the San Bartolome silver property in September of last year as part of the purchase of Asarco's silver assets. The property is located adjacent to Cerro Rico mountain, one of the world's historic and most prolific silver producing regions. Asarco calculated an initial resource estimate of 106 million ounces of silver contained principally in three main deposits, Haucajchi, Santa Rosa and Diablo located along the flanks of the mountain. Since Coeur obtained the property, the Company has completed an intensive field program, which included detailed exploration, bulk sampling, definition drilling, metallurgical studies and environmental baseline data collection. Coeur retained a third party geological consulting firm to incorporate the new data in an updated resource estimate. The Company is pleased to report that as a result of its efforts, the resource has increased 15%, to 41.1 million tons with an average grade of 2.98 ounces of silver per ton or 122 million ounces of contained silver. Equally important is the fact that 93% of the new resource is classified as measured and indicated. The Company is continuing with the preparation of a pre-feasibility study. A third party engineering firm has been engaged to assist with the design of the progress flow sheet, site plan layout and estimation of operating and capital costs. A formal pre-feasibility study is expected to be completed in early 2001. RESULTS OF OPERATIONS Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999. Revenues Product sales in the third quarter of 2000 increased by $4.5 million, or 20%, from the third quarter of 1999 to $26.5 million. The increase in sales is primarily attributable to the acquisition of 50% additional ownership of the Galena Mine in the third quarter of 1999, and an increase in the sale of silver at the Rochester Mine in the 19 20 third quarter of 2000, offset in part by lower prices realized on both silver and gold and a decrease in the amount of gold processed. In the third quarter of 2000, the Company produced a total of 3,060,306 ounces of silver and 37,848 ounces of gold compared to 2,392,332 ounces of silver and 40,650 ounces of gold in the third quarter of 1999. In the third quarter of 2000, the Company realized average silver and gold prices of $4.93 and $302, respectively, compared with realized average prices of $5.22 and $329, respectively, in the prior year's third quarter. The increase in the produced ounces of silver in the third quarter ended September 30, 2000 over the same period last year was primarily due to the increase in ownership of the Galena mine from 50% to 100% in September 1999 and increased production at the Rochester mine. The decrease in the ounces of gold produced during the third quarter of 2000 is primarily attributable to reduced gold grades at the Fachinal Mine. Interest and other income in the third quarter of 2000 decreased by $13.2 million, or 80%, compared with the third quarter of 1999. The decrease was primarily due to a $21 million gain recorded for the settlement of the Cyprus suit, reduced by the unrealized loss recorded for the mark to market loss on the Company's hedging program of $5.8 million in the third quarter of 1999, compared to a hedging program gain of $2.1 million unrealized gain recorded in the third quarter of 2000. Costs and Expenses Production costs in the third quarter of 2000 increased by $6.7 million, or 38%, from the third quarter of 1999 to $24.4 million. The increase is primarily a result of the increase in ownership of the Galena Mine and increased production costs at the Fachinal and Petorca mines. Depreciation and amortization increased in the third quarter of 2000 by $2.1 million, or 77%, over the prior year's third quarter, primarily due to the increased ownership of the Galena Mine from 50% to 100% in September of 1999 and decreased ore reserve estimates at the Fachinal Mine, as of December 31, 1999, thereby increasing the rate of depletion in 2000. Administrative and general expenses increased $.3 million in the third quarter of 2000 compared to 1999. Other expenses decreased $2.4 million in the third quarter ended September 30, 2000 compared to the third quarter of 1999, primarily due to the settlement of the Cyprus lawsuit in 1999. Extraordinary Item During the quarter ended September 30, 2000, the Company recorded an extraordinary gain of $102,000, net of taxes, as a result of its repurchase of $342,000 principal amount of 6% Convertible Subordinated Debentures due 2002 for a purchase price of $239,000 plus accrued and unpaid interest of $6,000. 20 21 Net Loss As a result of the above mentioned factors, the Company's net loss amounted to $8.5 million in the third quarter of 2000 compared to net income of $7.0 million in the third quarter of 1999. In the third quarter of 2000, the loss attributable to common shareholders was $8.5 million, or $.23 per share, compared to net income attributable to common shareholders of $7.0 million, or $ .29 per share, for the third quarter of 1999. No perferred stock dividends were paid in the quarter ended September 30, 2000 as a result of the mandatory conversion on March 15, 2000 of the Company's outstanding MARCS. The increase in the weighted average number of shares of Common Stock outstanding in the quarter ended September 30, 2000 as compared to the comparable quarter of the prior year is primarily attributable to the Company's issuance of 7,125,000 shares on September 9, 1999 in connection with its acquisition of certain silver properties and assets from Asarco, Inc. Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999. Revenues Product sales in the nine months ended September 30, 2000, increased by $8.7 million, or 14%, from the nine months ended September 30, 1999 to $69.4 million. The increase in sales is primarily attributable to the acquisition of 50% additional ownership of the Galena Mine in the third quarter of 1999 and increases in the sale of gold and silver from all of the operations, offset in part by decreases in silver and gold prices. In the nine months ended September 30, 2000, the Company produced a total of 8,643,501 ounces of silver and 105,860 ounces of gold compared to 6,911,791 ounces of silver and 116,005 ounces of gold in the nine months ended September 30, 1999. In the nine months ended September 30, 2000, the Company realized average silver and gold prices of $5.05 and $310, respectively, compared with realized average prices of $5.20 and $321, respectively, in the prior year's comparable period. The increase in the produced ounces of silver in the nine months ended September 30, 2000 over the same period last year was primarily due to the increase in ownership of the Galena mine from 50% to 100% in September 1999. The increase in silver production at the Rochester and Galena Mines was partially offset by lower silver production from the Company's Fachinal mine. The decrease in the ounces of gold produced during the nine months ended September 30, 2000 is primarily attributable to reduced gold grades at the Yilgarn, Fachinal and Petorca Mines. Interest and other income for the nine months ended September 30, 2000, decreased by $10.6 million, or 58%, compared with the nine months ended September 30, 1999. The decrease is primarily due to the $3.1 million gain on the mark to market adjustment for the nine months ended September 30, 2000, on the call option portion of the Company's hedge program, compared with a $21.1 million gain on the settlement of the Cyprus suit, offset in part by a $5.8 million mark 21 22 to market loss on the Company's call option portion of the hedge program, in the nine months ended September 30, 1999. Costs and Expenses Production costs in the nine months ended September 30, 2000 increased by $18 million, or 40%, over the nine months ended September 30, 1999 to $63.5 million. The increase in production costs is primarily a result of the increase in ownership of the Galena Mine to 100% from 50% in September 1999 and increased production costs at the Fachinal and Petorca mines. Depreciation and amortization increased in the nine month period ended September 30, 2000 by $3.5 million, or 28%, over the prior year's comparable period, primarily due to decreased ore reserve estimates at the Fachinal Mine as of December 31, 1999, and increased depletion taken at the Galena Mine as a result of the increase in ownership to 100% from 50% in September 1999. Administrative and general expenses increased $.7 million in the nine months ended September 30, 2000 compared to the comparable period in 1999, due to increased annual incentive awards relating to 1999 that were paid in the first quarter of 2000. Other expenses decreased $2 million in the nine month period ended September 30, 2000, compared to the comparable period in 1999, due to expenses incurred for the settlement of the Cyprus lawsuit in 1999 and additional expenses recognized on the mine closure in New Zealand of $.9 million in 2000. Extraordinary Item During the nine months ended September 30, 2000, the Company recorded an extraordinary gain of $1.3 million as a result of its repurchase of 6% Convertible Subordinated Debentures due 2000 that is discussed above. Net Loss As a result of the above mentioned factors, the Company's net loss amounted to $28.8 million for the nine month period ended September 30, 2000 compared to a net loss of $4.6 million in the comparable period ended September 30, 1999. For the nine months ended September 30, 2000, the loss attributable to common shareholders was $30.9 million, or $.89 per share, compared to a loss attributable to common shareholders of $12.5 million, or $.56 per share, for the nine months ended September 30, 1999. The decrease in perferred stock dividends paid in the nine months ended September 30, 2000 as compared to the comparable period of the prior year resulted from the Company's mandatory conversion on March 15, 2000 of its outstanding MARCS. The increase in the weighted average number of shares of Common Stock outstanding in the nine months ended September 30, 2000 as compared to the prior year's comparable period resulted from the Company's issuance on September 9, 1999 of 7,125,000 shares 22 23 in connection with its acquisition of certain silver properties and assets from Asarco, Inc. LIQUIDITY AND CAPITAL RESOURCES Working Capital; Cash and Cash Equivalents The Company's working capital at September 30, 2000 was approximately $117.9 million compared to $157.9 million at December 31, 1999. The ratio of current assets to current liabilities was 6.6 to 1.0 at September 30, 2000 compared to 8.5 to 1.0 at December 31, 1999. Net cash used in operating activities in the nine months ended September 30, 2000 was $17.1 million compared to net cash provided by operating activities of $4.9 million in the nine months ended September 30, 1999. Net cash used in investing activities in the 2000 period was $9.3 million compared to net cash used in investing activities of $19.6 million in the prior year's comparable period. Net cash used in financing activities was $9.1 million in the nine months ending September 30, 2000, as compared to $10 million for the nine months ending September 30, 1999. As a result of the above, cash and cash equivalents decreased by $35.6 million in the nine months ending September 30, 2000 compared to a $24.7 million decrease for the comparable period in 1999. Conversion of MARCS to Common Shares On March 15, 2000, the Company mandatorily converted its 7,077,833 outstanding shares of MARCS into 7,863,000 shares of common stock, and the final dividend payment of $2.6 million on the MARCS was made as of that date. Federal Natural Resources Action On March 22, 1996, an action was filed in the United States District Court for the District of Idaho by the United States against various defendants, including the Company, asserting claims under CERCLA and the Clean Water Act for alleged damages to federal natural resources in the Coeur d'Alene River Basin of Northern Idaho as a result of alleged releases of hazardous substances from mining activities conducted in the area since the late 1800s. No specific monetary damages were identified in the complaint. However, in July 1996, the government indicated that damages may approximate $982 million and as a result of pretrial discovery, it appears the United States believes it can prove damages over $1 billion. The United States asserts that the defendants are jointly and severally liable for costs and expenses incurred by the United States in connection with the investigation, removal and remedial action and the restoration or replacement of affected natural resources. In 1986 and 1992, the Company had settled similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe, respectively, and believes that those prior settlements exonerate it of further involvement with 23 24 alleged natural resource damage in the Coeur d'Alene River Basin. Accordingly, the Company intends to vigorously defend this matter. In March 1997, the Company filed a motion for partial summary judgement relating to the issue of trusteeship, essentially arguing that the United States does not have authority to sue for damages to state natural resources and that the 1986 settlement with the state bars the federal claims. That motion remains pending. In September 1997, the Company filed an additional motion for partial summary judgement raising the statute of limitations as to natural resource damages. That motion was granted by the Court on September 30, 1998. The Court's granting of that motion limits the United States' natural resource damage claims to the 21 square mile Bunker Hill Superfund site area rather than the entire Coeur d'Alene Basin. Although that ruling limits the geographic coverage of the United States' action, the ruling does not prohibit the EPA from attempting to utilize its hazard ranking system which could potentially broaden the scope of the United States' allegations. The United States appealed this decision to the United States Court of Appeals for the 9th Circuit. The Appeal has been argued but not decided. On March 31, 1998, the Court entered an order denying the plaintiffs' motion to allow the United States to prove a portion of its case pursuant to an administrative record, and requiring the parties to submit further facts as to the issue of trusteeship. Furthermore, in March 1998, the EPA announced its intent to perform a remedial investigation/feasibility study upon all or parts of the Coeur d'Alene Basin and, thereby, to apparently focus upon response costs rather than natural resource damages. In September 1998, the Company filed an additional motion for partial summary judgment asserting that CERCLA as applied to the Company in the action is not constitutional under the takings and due process provisions of the United States Constitution. The court denied this motion on the grounds that further facts must be developed at trial before the issue can be decided. With respect to the natural resource damage litigation referred to above, in June 2000 Governor Kempthorne of the State of Idaho asked the defendants to give him a proposal for settlement which he could take to the plaintiffs in the suit. The defendants outlined such a proposal. The defendants would contribute a total of $250 million over 30 years, of which $154 million would be in fixed annual payments, without interest. The remaining $96 million would be paid from royalties based on the price of silver, copper, gold and zinc as provided in an index and schedule to be agreed upon. Coeur advised the Governor, defendants and the U.S. that its share of this proposal would be, without admission of liability and with appropriate release, the sum of $3,750,000 in annual installments over 25 years without interest and an additional $1,250,000 in years 26-30 based on the royalty concept described above. It is not known whether the proposal put forth by the Governor to the plaintiffs will be accepted, although the Coeur d'Alene Tribe, one of the plaintiffs with whom the Company has already settled (in 1992), indicated it viewed the proposal "optimistically". 24 25 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. The Company operates in several foreign countries, specifically Australia, Bolivia, New Zealand and Chile, which exposes it to risks associated with fluctuations in the exchange rates of the currencies involved. As part of its program to manage foreign currency risk, the Company will enter into foreign currency forward exchange contracts. These contracts enable the Company to purchase a fixed amount of foreign currencies. Gains and losses on foreign exchange contracts that are related to firm commitments are designated and effective as hedges and are deferred and recognized in the same period as the related transaction. All other contracts that do not qualify as hedges are marked-to-market and the resulting gains or losses are recorded in income. The Company continually evaluates the potential benefits of entering into these contracts to mitigate foreign currency risk and proceeds when it believes that the exchange rates are most beneficial. All of the Company's long term debt at September 30, 2000 is fixed-rate based. The Company's exposure to interest rate risk, therefore, is limited to the amount it could pay at current market rates. The Company currently does not have any derivative financial instruments to offset the fluctuations in the market interest rate. It may choose to use instruments, such as interest rate swaps, in the future to manage the risk associated with interest rate changes. See Note H - Hedging, to the consolidated financial statements for a table which summarizes the Company's gold and foreign exchange hedging activities at September 30, 2000. 25 26 PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed herewith:
Exhibit No. Document ----------- -------- 27 Financial Data Schedule
26 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 November 14, 2000 /s/ Dennis E. Wheeler ------------------------- DENNIS E. WHEELER Chairman, President and Chief Executive Officer Dated November 14, 2000 /s/ Geoffrey A. Burns ------------------------- GEOFFREY A. BURNS Vice President and Chief Financial Officer 27 EX-27 2 w42650ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS DEC-31-2000 DEC-31-1999 JAN-01-2000 JAN-01-1999 SEP-30-2000 SEP-30-1999 51,383 86,935 18,869 22,978 13,317 15,376 0 0 55,406 53,769 138,975 179,058 263,183 253,828 128,368 116,696 309,894 354,047 21,046 21,173 228,640 236,231 0 7,078 0 0 38,109 30,240 387,625 391,031 309,894 354,047 69,352 60,693 77,116 79,458 79,135 57,635 79,135 57,635 16,121 16,402 0 0 11,548 12,406 (29,738) (6,985) 315 247 (30,053) (7,232) 0 0 1,300 2,590 0 0 (28,753) (4,642) (.89) (.56) (.89) (.56)
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