Long-Term Debt and Capital Lease Obligations

9 Months Ended

Sep. 30, 2011

Long-Term Debt and Capital Lease Obligations [Abstract]

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

NOTE 10 – DEBT AND CAPITAL LEASE OBLIGATIONS

The current and non-current portions of long-term debt and capital lease obligations as of September 30, 2011 and December 31, 2010 are as follows (in thousands):

	September 30, 2011				December 31, 2010
	Current		Non-Current		Current		Non-Current
3.25% Convertible Senior Notes due March 2028	$	—	$	44,934	$	—	$	43,220
1.25% Convertible Senior Notes due January 2024		—		—		1,859		—
Senior Term Notes due December 31, 2012		15,000		3,750		15,000		15,000
Kensington Term Facility		18,525		64,274		25,908		48,322
Capital lease obligations		17,946		11,524		15,759		23,483
Other		168		—		4,791		42
	$	51,639	$	124,482	$	63,317	$	130,067

3.25% Convertible Senior Notes due 2028

As of September 30, 2011, the outstanding balance of the 3.25% Convertible Senior Notes was $48.7 million, or $44.9 million net of debt discount.

The carrying value of the equity component representing the embedded conversion option at September 30, 2011 and December 31, 2010 was $10.9 million and $10.9 million, respectively.

Interest expense recognized during the three months ended September 30, 2011 and 2010 was $0.4 million and $0.4 million, respectively, and during the nine months ended September 30, 2011 and 2010, was $1.2 million and $2.0 million, respectively. Accretion of the debt discount was $0.6 million and $0.5 million, for the three months ended September 30, 2011 and 2010, respectively, and $1.7 million and $2.5 million for the nine months ended September 30, 2011 and 2010, respectively. The debt discount remaining at September 30, 2011 was $3.8 million, which will be amortized through March 15, 2013. The effective interest rate on the notes was 8.9%.

Each holder of the notes may require that the Company repurchase some or all of the holder’s notes on March 15, 2013, March 15, 2015, March 15, 2018 and March 15, 2023 at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, in cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. Holders will also have the right, following certain fundamental change transactions, to require the Company to repurchase all or any part of their notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased plus accrued and unpaid interest. The Company may redeem the notes for cash in whole or in part at any time on or after March 22, 2015 at 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest.

The notes provide for “net share settlement” of any conversions. Pursuant to this feature, upon conversion of the notes, the Company (1) will pay the note holder an amount in cash equal to the lesser of the conversion obligation or the principal amount of the notes and (2) will settle any excess of the conversion obligation above the notes’ principal amount in the Company’s common stock, cash or a combination thereof, at the Company’s election.

The notes are convertible under certain circumstances, as defined in the indenture agreement, at the holder’s option, at an initial conversion rate of 17.60254 shares of the Company’s common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $56.81 per share, subject to adjustment in certain circumstances.

1.25% Convertible Senior Notes due 2024

As of September 30, 2011, the Company had no outstanding 1.25% Convertible Senior Notes.

On January 18, 2011, the Company repurchased $945,000 in aggregate principal amount of the notes pursuant to a Tender Offer Statement filed on December 10, 2010. The Company repurchased the remaining $914,000 in aggregate principal amount of the notes outstanding on January 21, 2011.

Senior Term Notes due December 31, 2012

As of September 30, 2011 the balance of the Senior Term Notes was $18.8 million.

For the three and nine months ended September 30, 2011 the Company paid in cash $3.8 million and $11.3 million in principal and $0.4 million and $1.3 million in interest, respectively, in connection with the quarterly payments due under the notes. A loss of $0.8 million and $1.6 million for the three and nine months ended September 30, 2011, respectively, was recognized in connection with quarterly debt payments as a result of the Company’s election to make required principal and interest payments entirely in cash.

The Company elected to pay the September 30, 2010 payment on the notes all in cash. For the three and nine months ended September 30, 2010, the Company paid $8.3 million and $25.0 million, respectively, in principal and $1.4 million and $3.9 million, respectively, in interest. For the nine months ended September 30, 2010, the Company also issued 1,060,413 shares of the Company’s stock in connection with the quarterly payments. In addition, $0.8 million and $2.4 million were paid and recognized as a loss in connection with quarterly debt payments in the three and nine months ended September 30, 2010, respectively. The loss is recorded in debt extinguishments.

Kensington Term Facility

As of September 30, 2011, the balance of the Kensington term facility was $82.8 million.

As a condition to the Kensington term facility with Credit Suisse, the Company agreed to enter into a gold hedging program which protects a minimum of 243,750 ounces of gold production over the life of the facility against the risk associated with fluctuations in the market price of gold. This program consists of a series of zero cost collars with a floor price and a ceiling price of gold. Collars protecting 182,500 ounces of gold call options were outstanding at September 30, 2011. The weighted average call feature of each collar was $1,889.05. Collars protecting 205,000 ounces of gold put options were outstanding at September 30, 2010. The weighted average put feature of each collar was $947.19.

Capital Leases

As of September 30, 2011, Coeur Mexicana S.A. de C.V. (“Coeur Mexicana”), a wholly owned subsidiary of the Company, had outstanding balances on capital leases of $21.0 million.

Other capital leases for equipment and facilities totaling $8.5 million were outstanding at September 30, 2011 with monthly payments due through May 31, 2016.

Other

On July 6, 2010, the Company entered into a short-term financing agreement with AFCO Credit Corporation in the principal amount of $2.4 million and bearing interest at 2.9%, to finance insurance premiums. Installments of $0.2 million were paid monthly with the final payment made on June 1, 2011. As of September 30, 2011, and December 31, 2010, the outstanding balance was nil and $1.1 million, respectively.

On July 15, 2009, to fund equipment purchases, Coeur Mexicana entered into an equipment financing agreement bearing interest at 8.26% with Atlas Copco. This agreement is secured by certain machinery and equipment. The agreement calls for twenty-four monthly installments with the final payment due on January 31, 2012. As of September 30, 2011, and December 31, 2010, the outstanding balance was $0.2 million and $1.2 million, respectively.

On November 27, 2009, Empresa Minera Manquiri borrowed $5.0 million pursuant to a bank loan from Banco Bisa bearing an interest rate of 6.5% to fund working capital requirements. As of September 30, 2011 and December 31, 2010, the outstanding balance was nil and $2.5 million, respectively.

Palmarejo Gold Production Royalty Obligation

The Company recognized accretion expense on the Palmarejo gold production royalty obligation of $5.4 million and $5.4 million for the three months ended September 30, 2011 and 2010, respectively, and $16.4 million and $15.4 million for the nine months ended September 30, 2011 and 2010, respectively. As of September 30, 2011 and December 31, 2010, the remaining minimum obligation under the royalty agreement was $74.2 million and $80.3 million, respectively.

Interest Expense

The Company expenses interest incurred on its various debt instruments as a cost of operating its properties. For the three months ended September 30, 2011 and 2010, the Company expensed interest of $8.0 million and $10.0 million, respectively, and for the nine months ended September 30, 2011 and 2010, $26.6 million and $21.4 million, respectively.

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
	(in thousands)						(in thousands)
3.25% Convertible Senior Notes due March 2028	$	395		$	395		$	1,186		$	1,999
1.25% Convertible Senior Notes due January 2024		—			6			1			22
Senior Term Notes due December 2012		366			1,354			1,280			3,855
Kensington Term Facility		1,086			576			3,353			1,330
Capital lease obligations		416			573			1,353			1,578
Other debt obligations		144			849			800			1,425
Gold Lease Facility		—			155			107			492
Accretion of Franco Nevada royalty obligation		5,370			5,395			16,407			15,360
Amortization of debt issuance costs		504			834			1,646			1,952
Accretion of debt discount		585			536			1,722			2,486
Capitalized interest		(886	)		(722	)		(1,302	)		(9,097	)
Total interest expense	$	7,980		$	9,951		$	26,553		$	21,402

Capitalized Interest

The Company capitalizes interest incurred on its various debt instruments as a cost of properties under development. For the three months ended September 30, 2011 and 2010, the Company capitalized interest of $0.9 million and $0.7 million, respectively, and for the nine months ended September 30, 2011 and 2010, $1.3 million and $9.1 million, respectively.