COEUR MINING, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________
FORM 10-Q
___________________________________________
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þ
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended
September 30, 2015
OR
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from
to
Commission file number 001-08641
____________________________________________
COEUR MINING, INC.
(Exact name of registrant as specified in its charter)
____________________________________________
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Delaware
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82-0109423
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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104 S. Michigan Ave., Suite 900 Chicago, Illinois
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60603
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(Address of principal executive offices)
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(Zip Code)
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(312) 489-5800
(Registrant’s telephone number, including area code)
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
þ
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes
þ
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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þ
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Accelerated filer
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¨
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||
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
¨
No
þ
The Company has 300,000,000 shares of common stock, par value of $0.01, authorized of which 136,957,701 shares were issued and outstanding as of October 30, 2015.
COEUR MINING, INC.
INDEX
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Page
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Part I.
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||
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Item 1.
Financial Statements
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||
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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
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||
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Condensed Consolidated Statements of Cash Flows (Unaudited)
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||
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Condensed Consolidated Balance Sheets
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Condensed Consolidated Statement of Changes in Stockholders' Equity
|
||
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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||
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Consolidated Financial Results
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Results of Operations
|
||
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Liquidity and Capital Resources
|
||
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Non-GAAP Financial Performance Measures
|
||
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Item 4.
Controls and Procedures
|
||
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Part II.
|
||
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Item 1.
Legal Proceedings
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Item 1A.
Risk Factors
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Item 4.
Mine Safety Disclosures
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Item 5. Other Information
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Item 6.
Exhibits
|
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Signatures
|
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2
COEUR MINING, INC. AND SUBSIDIARIES
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Three months ended September 30,
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Nine months ended September 30,
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||||||||||||||
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2015
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2014
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2015
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2014
|
||||||||||||
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Notes
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In thousands, except share data
|
||||||||||||||
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Revenue
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3
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$
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162,552
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$
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170,938
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$
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481,770
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$
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495,133
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|||
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COSTS AND EXPENSES
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||||||||||||||||
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Costs applicable to sales
(1)
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3
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120,237
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125,910
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354,397
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351,492
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|||||||
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Amortization
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35,497
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41,985
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107,560
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123,834
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||||||||
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General and administrative
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6,694
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8,515
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23,979
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31,809
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||||||||
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Exploration
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2,112
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6,587
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9,957
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15,957
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||||||||
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Pre-development, reclamation, and other
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4,938
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4,244
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13,968
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20,019
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||||||||
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Total costs and expenses
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169,478
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187,241
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509,861
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543,111
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||||||||
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OTHER INCOME (EXPENSE), NET
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||||||||||||||||
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Fair value adjustments, net
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9
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5,786
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16,105
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3,657
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(3,611
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)
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|||||||
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Interest expense, net of capitalized interest
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17
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(12,446
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)
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(11,616
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)
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(33,945
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)
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(36,980
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)
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|||||||
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Other, net
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(8,893
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)
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(1,303
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)
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(14,257
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)
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(6,927
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)
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||||||||
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Total other income (expense), net
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(15,553
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)
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3,186
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(44,545
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)
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(47,518
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)
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||||||||
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Income (loss) before income and mining taxes
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(22,479
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)
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(13,117
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)
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(72,636
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)
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(95,496
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)
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||||||||
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Income and mining tax (expense) benefit
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7
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8,260
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16,583
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8,451
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18,650
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NET INCOME (LOSS)
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$
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(14,219
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)
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$
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3,466
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$
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(64,185
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)
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$
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(76,846
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)
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||||
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OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
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||||||||||||||||
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Unrealized gain (loss) on equity securities, net of tax of $686 and $939 for the three and nine months ended September 30, 2014, respectively
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(931
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)
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(1,086
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)
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(3,744
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)
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(1,487
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)
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Reclassification adjustments for impairment of equity securities, net of tax of $(423) and $(1,768) for the three and nine months ended September 30, 2014, respectively
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483
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669
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2,028
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2,828
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Reclassification adjustments for realized loss on sale of equity securities, net of tax of $(140) and $(150) for the three and nine months ended September 30, 2014, respectively
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—
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221
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904
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238
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||||||||
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Other comprehensive income (loss)
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(448
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)
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(196
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)
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(812
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)
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1,579
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||||||||
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COMPREHENSIVE INCOME (LOSS)
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$
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(14,667
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)
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$
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3,270
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$
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(64,997
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)
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$
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(75,267
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)
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||||
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NET INCOME (LOSS) PER SHARE
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8
|
|||||||||||||||
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Basic
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$
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(0.11
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)
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$
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0.03
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$
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(0.52
|
)
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$
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(0.75
|
)
|
||||
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Diluted
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$
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(0.11
|
)
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$
|
0.03
|
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$
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(0.52
|
)
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$
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(0.75
|
)
|
||||
(1) Excludes amortization.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
COEUR MINING, INC. AND SUBSIDIARIES
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
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2015
|
2014
|
2015
|
2014
|
||||||||||||
|
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Notes
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In thousands
|
||||||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||
|
Net income (loss)
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$
|
(14,219
|
)
|
$
|
3,466
|
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$
|
(64,185
|
)
|
(76,846
|
)
|
|||||
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Adjustments:
|
||||||||||||||||
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Amortization
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35,497
|
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41,985
|
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107,560
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123,834
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||||||||
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Accretion
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3,629
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3,868
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10,305
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12,961
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|
||||||||
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Deferred income taxes
|
(1,233
|
)
|
(23,437
|
)
|
(8,470
|
)
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(39,142
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)
|
||||||||
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Loss on termination of revolving credit facility
|
—
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—
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—
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3,035
|
|
||||||||
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Fair value adjustments, net
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9
|
(5,786
|
)
|
(16,105
|
)
|
(3,657
|
)
|
3,611
|
|
|||||||
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Stock-based compensation
|
5
|
1,639
|
|
2,505
|
|
6,393
|
|
7,455
|
|
|||||||
|
Impairment of equity securities
|
12
|
483
|
|
1,092
|
|
2,028
|
|
4,614
|
|
|||||||
|
Foreign exchange and other
|
8,541
|
|
1,683
|
|
13,845
|
|
815
|
|
||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||||||
|
Receivables
|
11,011
|
|
7,446
|
|
11,225
|
|
18,297
|
|
||||||||
|
Prepaid expenses and other current assets
|
(2,055
|
)
|
3,871
|
|
(3,222
|
)
|
(687
|
)
|
||||||||
|
Inventory and ore on leach pads
|
5,380
|
|
9,698
|
|
10,713
|
|
(5,821
|
)
|
||||||||
|
Accounts payable and accrued liabilities
|
(6,650
|
)
|
(4,806
|
)
|
(13,407
|
)
|
311
|
|
||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
36,237
|
|
31,266
|
|
69,128
|
|
52,437
|
|
||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Capital expenditures
|
(23,861
|
)
|
(16,784
|
)
|
(65,158
|
)
|
(44,076
|
)
|
||||||||
|
Acquisitions, net of cash acquired
|
11
|
(122
|
)
|
(13,829
|
)
|
(111,290
|
)
|
(16,079
|
)
|
|||||||
|
Other
|
340
|
|
74
|
|
(1,338
|
)
|
61
|
|
||||||||
|
Purchase of short-term investments and equity securities
|
(3
|
)
|
(2,089
|
)
|
(1,876
|
)
|
(50,423
|
)
|
||||||||
|
Sales and maturities of short-term investments
|
60
|
|
2,856
|
|
529
|
|
3,413
|
|
||||||||
|
CASH USED IN INVESTING ACTIVITIES
|
(23,586
|
)
|
(29,772
|
)
|
(179,133
|
)
|
(107,104
|
)
|
||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
|
Issuance of notes and bank borrowings
|
17
|
—
|
|
—
|
|
153,500
|
|
153,000
|
|
|||||||
|
Payments on debt, capital leases, and associated costs
|
(2,618
|
)
|
(13,274
|
)
|
(77,838
|
)
|
(20,236
|
)
|
||||||||
|
Gold production royalty payments
|
(10,159
|
)
|
(11,351
|
)
|
(30,281
|
)
|
(38,379
|
)
|
||||||||
|
Other
|
(34
|
)
|
(77
|
)
|
(529
|
)
|
(483
|
)
|
||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(12,811
|
)
|
(24,702
|
)
|
44,852
|
|
93,902
|
|
||||||||
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(160
|
)
|
(23,208
|
)
|
(65,153
|
)
|
39,235
|
|
||||||||
|
Cash and cash equivalents at beginning of period
|
205,868
|
|
269,133
|
|
270,861
|
|
206,690
|
|
||||||||
|
Cash and cash equivalents at end of period
|
$
|
205,708
|
|
$
|
245,925
|
|
$
|
205,708
|
|
$
|
245,925
|
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
|
September 30, 2015
(Unaudited)
|
December 31,
2014 |
||||||||
|
ASSETS
|
Notes
|
In thousands, except share data
|
|||||||
|
CURRENT ASSETS
|
|||||||||
|
Cash and cash equivalents
|
$
|
205,708
|
|
$
|
270,861
|
|
|||
|
Receivables
|
13
|
93,599
|
|
116,921
|
|
||||
|
Inventory
|
14
|
98,109
|
|
114,931
|
|
||||
|
Ore on leach pads
|
14
|
68,695
|
|
48,204
|
|
||||
|
Deferred tax assets
|
|
7,197
|
|
7,364
|
|
||||
|
Prepaid expenses and other
|
18,431
|
|
15,523
|
|
|||||
|
491,739
|
|
573,804
|
|
||||||
|
NON-CURRENT ASSETS
|
|||||||||
|
Property, plant and equipment, net
|
15
|
261,043
|
|
227,911
|
|
||||
|
Mining properties, net
|
16
|
851,590
|
|
501,192
|
|
||||
|
Ore on leach pads
|
14
|
39,685
|
|
37,889
|
|
||||
|
Restricted assets
|
8,003
|
|
7,037
|
|
|||||
|
Equity securities
|
12
|
3,213
|
|
5,982
|
|
||||
|
Receivables
|
13
|
27,507
|
|
21,686
|
|
||||
|
Deferred tax assets
|
|
64,359
|
|
60,151
|
|
||||
|
Other
|
11,534
|
|
9,915
|
|
|||||
|
TOTAL ASSETS
|
$
|
1,758,673
|
|
$
|
1,445,567
|
|
|||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||
|
CURRENT LIABILITIES
|
|||||||||
|
Accounts payable
|
$
|
49,690
|
|
$
|
49,052
|
|
|||
|
Accrued liabilities and other
|
38,329
|
|
51,513
|
|
|||||
|
Debt
|
17
|
11,775
|
|
17,498
|
|
||||
|
Royalty obligations
|
9
|
33,440
|
|
43,678
|
|
||||
|
Reclamation
|
4
|
3,310
|
|
3,871
|
|
||||
|
Deferred tax liabilities
|
|
8,078
|
|
8,078
|
|
||||
|
144,622
|
|
173,690
|
|
||||||
|
NON-CURRENT LIABILITIES
|
|||||||||
|
Debt
|
17
|
534,211
|
|
451,048
|
|
||||
|
Royalty obligations
|
9
|
6,781
|
|
27,651
|
|
||||
|
Reclamation
|
4
|
88,009
|
|
66,943
|
|
||||
|
Deferred tax liabilities
|
|
222,809
|
|
111,006
|
|
||||
|
Other long-term liabilities
|
47,856
|
|
29,911
|
|
|||||
|
899,666
|
|
686,559
|
|
||||||
|
STOCKHOLDERS’ EQUITY
|
|||||||||
|
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 136,962,174 at September 30, 2015 and authorized 150,000,000 shares, issued and outstanding 103,384,408 at December 31, 2014
|
1,370
|
|
1,034
|
|
|||||
|
Additional paid-in capital
|
2,983,423
|
|
2,789,695
|
|
|||||
|
Accumulated other comprehensive income (loss)
|
(3,620
|
)
|
(2,808
|
)
|
|||||
|
Accumulated deficit
|
(2,266,788
|
)
|
(2,202,603
|
)
|
|||||
|
714,385
|
|
585,318
|
|
||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,758,673
|
|
$
|
1,445,567
|
|
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
|
In thousands
|
Common
Stock
Shares
|
Common
Stock Par
Value
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
|
||||||||||||||||
|
Balances at December 31, 2014
|
103,384
|
|
$
|
1,034
|
|
$
|
2,789,695
|
|
$
|
(2,202,603
|
)
|
$
|
(2,808
|
)
|
$
|
585,318
|
|
|||||
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
(64,185
|
)
|
—
|
|
(64,185
|
)
|
||||||||||
|
Other comprehensive income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
(812
|
)
|
(812
|
)
|
||||||||||
|
Common stock issued for the acquisition of Paramount Gold and Silver Corp.
|
32,667
|
|
327
|
|
188,490
|
|
—
|
|
—
|
|
188,817
|
|
||||||||||
|
Common stock issued under stock-based compensation plans, net
|
911
|
|
9
|
|
5,238
|
|
—
|
|
—
|
|
5,247
|
|
||||||||||
|
Balances at September 30, 2015 (Unaudited)
|
136,962
|
|
$
|
1,370
|
|
$
|
2,983,423
|
|
$
|
(2,266,788
|
)
|
$
|
(3,620
|
)
|
$
|
714,385
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
NOTE 1 -
|
BASIS OF PRESENTATION
|
The interim condensed consolidated financial statements of Coeur Mining, Inc. and its subsidiaries (collectively "Coeur" or "the Company") are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results which will be reported for the year ending
December 31, 2015
. The condensed consolidated
December 31, 2014
balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2014
.
Recent Accounting Standards
In September 2015, the FASB issued ASU 2015-16,
"Simplifying the Accounting for Measurement-Period Adjustments,"
which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. These changes become effective for the Company's fiscal year beginning January 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
In August 2015, the FASB issued ASU 2015-14,
"Deferral of the Effective Date"
, which defers the effective date of ASU 2014-09,
"Revenue from Contracts with Customers"
to January 1, 2018. The Company is currently evaluating the potential impact of the prescribed changes on the Company's consolidated financial position, results of operations, and cash flows.
In July 2015, the FASB issued ASU 2015-11, "
Simplifying the Measurement of Inventory,"
which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
In April 2015, the FASB issued ASU 2015-03,
"Simplifying the Presentation of Debt Issuance Costs,"
which requires that debt issuance costs related to a recognized debt liability be presented as a reduction to the carrying amount of that debt liability, not as an asset. The updated guidance became effective under early adoption for the Company's fiscal year beginning January 1, 2015, and resulted in a reclassification of amounts from
Other Non-current Assets
to
Debt
in the current and prior periods.
In February 2015, the FASB issued ASU 2015-02,
"Amendments to the Consolidation Analysis,"
which amends the consolidation requirements in ASC 810. These changes become effective for the Company's fiscal year beginning January 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
The Company’s operating segments include the Palmarejo, San Bartolomé, Rochester, Kensington, and Wharf mines, and Coeur Capital. All operating segments are engaged in the discovery and mining of gold and silver and generate the majority of their revenues from the sale of these precious metals with the exception of Coeur Capital, which holds the Endeavor silver stream and other precious metals royalties. Other includes the La Preciosa project, Joaquin project, Martha mine, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Financial information relating to the Company’s segments is as follows (in thousands):
|
Three months ended September 30, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
49,187
|
|
$
|
34,638
|
|
$
|
30,466
|
|
$
|
27,986
|
|
$
|
17,391
|
|
$
|
1,264
|
|
$
|
—
|
|
$
|
160,932
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,620
|
|
—
|
|
1,620
|
|
|||||||||||||||
|
49,187
|
|
34,638
|
|
30,466
|
|
27,986
|
|
17,391
|
|
2,884
|
|
—
|
|
162,552
|
|
||||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
34,093
|
|
25,436
|
|
24,973
|
|
17,777
|
|
17,483
|
|
475
|
|
—
|
|
120,237
|
|
|||||||||||||||
|
Amortization
|
8,617
|
|
6,731
|
|
8,499
|
|
5,642
|
|
3,526
|
|
1,983
|
|
499
|
|
35,497
|
|
|||||||||||||||
|
Exploration
|
1,087
|
|
49
|
|
217
|
|
—
|
|
54
|
|
(362
|
)
|
1,067
|
|
2,112
|
|
|||||||||||||||
|
Other operating expenses
|
303
|
|
742
|
|
254
|
|
517
|
|
1,059
|
|
(38
|
)
|
8,795
|
|
11,632
|
|
|||||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
2,998
|
|
1,752
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,036
|
|
5,786
|
|
|||||||||||||||
|
Interest expense, net
|
(928
|
)
|
(168
|
)
|
(51
|
)
|
—
|
|
(100
|
)
|
—
|
|
(11,199
|
)
|
(12,446
|
)
|
|||||||||||||||
|
Other, net
|
(7,870
|
)
|
1
|
|
1
|
|
53
|
|
347
|
|
(455
|
)
|
(970
|
)
|
(8,893
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
10,370
|
|
(1,053
|
)
|
406
|
|
(907
|
)
|
(1,029
|
)
|
291
|
|
182
|
|
8,260
|
|
|||||||||||||||
|
Net income (loss)
|
$
|
9,657
|
|
$
|
2,212
|
|
$
|
(3,122
|
)
|
$
|
3,195
|
|
$
|
(5,513
|
)
|
$
|
662
|
|
$
|
(21,310
|
)
|
$
|
(14,219
|
)
|
|||||||
|
Segment assets
(2)
|
$
|
653,501
|
|
$
|
192,348
|
|
$
|
193,712
|
|
$
|
124,754
|
|
$
|
165,931
|
|
$
|
51,553
|
|
$
|
76,860
|
|
$
|
1,458,659
|
|
|||||||
|
Capital expenditures
|
$
|
10,514
|
|
$
|
5,281
|
|
$
|
5,522
|
|
$
|
665
|
|
$
|
1,786
|
|
$
|
—
|
|
$
|
93
|
|
$
|
23,861
|
|
|||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Three months ended September 30, 2014
|
Palmarejo
|
Rochester
|
Kensington
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||
|
Metal sales
|
$
|
61,376
|
|
$
|
32,362
|
|
$
|
45,922
|
|
$
|
28,350
|
|
$
|
2,367
|
|
$
|
—
|
|
$
|
170,377
|
|
||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
561
|
|
—
|
|
561
|
|
|||||||||||||
|
61,376
|
|
32,362
|
|
45,922
|
|
28,350
|
|
2,928
|
|
—
|
|
170,938
|
|
||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
45,988
|
|
23,718
|
|
34,668
|
|
20,447
|
|
1,089
|
|
—
|
|
125,910
|
|
|||||||||||||
|
Amortization
|
16,493
|
|
5,359
|
|
12,887
|
|
5,117
|
|
1,563
|
|
566
|
|
41,985
|
|
|||||||||||||
|
Exploration
|
2,615
|
|
127
|
|
2,638
|
|
(19
|
)
|
150
|
|
1,076
|
|
6,587
|
|
|||||||||||||
|
Other operating expenses
|
340
|
|
(87
|
)
|
202
|
|
180
|
|
342
|
|
11,782
|
|
12,759
|
|
|||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||
|
Fair value adjustments, net
|
8,771
|
|
4,345
|
|
—
|
|
—
|
|
—
|
|
2,989
|
|
16,105
|
|
|||||||||||||
|
Interest expense, net
|
(2,126
|
)
|
(250
|
)
|
(70
|
)
|
(10
|
)
|
—
|
|
(9,160
|
)
|
(11,616
|
)
|
|||||||||||||
|
Other, net
|
284
|
|
39
|
|
—
|
|
583
|
|
(1,480
|
)
|
(729
|
)
|
(1,303
|
)
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
11,562
|
|
(210
|
)
|
—
|
|
(2,969
|
)
|
214
|
|
7,986
|
|
16,583
|
|
|||||||||||||
|
Net income (loss)
|
$
|
14,431
|
|
$
|
7,169
|
|
$
|
(4,543
|
)
|
$
|
229
|
|
$
|
(1,482
|
)
|
$
|
(12,338
|
)
|
$
|
3,466
|
|
||||||
|
Segment assets
(2)
|
$
|
1,111,829
|
|
$
|
208,284
|
|
$
|
315,959
|
|
$
|
304,644
|
|
$
|
67,934
|
|
$
|
539,134
|
|
$
|
2,547,784
|
|
||||||
|
Capital expenditures
|
$
|
5,857
|
|
$
|
4,194
|
|
$
|
3,610
|
|
$
|
2,783
|
|
$
|
—
|
|
$
|
340
|
|
$
|
16,784
|
|
||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
Nine months ended September 30, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
127,455
|
|
$
|
115,010
|
|
$
|
116,971
|
|
$
|
48,359
|
|
$
|
62,304
|
|
$
|
6,292
|
|
$
|
—
|
|
$
|
476,391
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,379
|
|
—
|
|
5,379
|
|
|||||||||||||||
|
127,455
|
|
115,010
|
|
116,971
|
|
48,359
|
|
62,304
|
|
11,671
|
|
—
|
|
481,770
|
|
||||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
98,695
|
|
81,221
|
|
81,844
|
|
34,410
|
|
55,767
|
|
2,460
|
|
—
|
|
354,397
|
|
|||||||||||||||
|
Amortization
|
24,997
|
|
18,962
|
|
32,738
|
|
9,133
|
|
13,487
|
|
6,753
|
|
1,490
|
|
107,560
|
|
|||||||||||||||
|
Exploration
|
4,047
|
|
1,272
|
|
2,311
|
|
—
|
|
132
|
|
(212
|
)
|
2,407
|
|
9,957
|
|
|||||||||||||||
|
Other operating expenses
|
940
|
|
2,190
|
|
1,015
|
|
1,188
|
|
1,544
|
|
(8
|
)
|
31,078
|
|
37,947
|
|
|||||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
1,882
|
|
596
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,179
|
|
3,657
|
|
|||||||||||||||
|
Interest expense, net
|
(3,112
|
)
|
(598
|
)
|
(172
|
)
|
—
|
|
(674
|
)
|
—
|
|
(29,389
|
)
|
(33,945
|
)
|
|||||||||||||||
|
Other, net
|
(9,478
|
)
|
(38
|
)
|
(16
|
)
|
108
|
|
1,219
|
|
(2,904
|
)
|
(3,148
|
)
|
(14,257
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
9,836
|
|
(1,753
|
)
|
(587
|
)
|
(495
|
)
|
(2,240
|
)
|
266
|
|
3,424
|
|
8,451
|
|
|||||||||||||||
|
Net income (loss)
|
$
|
(2,096
|
)
|
$
|
9,573
|
|
$
|
(1,712
|
)
|
$
|
3,241
|
|
$
|
(10,322
|
)
|
$
|
40
|
|
$
|
(62,909
|
)
|
$
|
(64,185
|
)
|
|||||||
|
Segment assets
(2)
|
$
|
653,501
|
|
$
|
192,348
|
|
$
|
193,712
|
|
$
|
124,754
|
|
$
|
165,931
|
|
$
|
51,553
|
|
$
|
76,860
|
|
$
|
1,458,659
|
|
|||||||
|
Capital expenditures
|
$
|
30,421
|
|
$
|
14,451
|
|
$
|
14,380
|
|
$
|
1,959
|
|
$
|
3,729
|
|
$
|
—
|
|
$
|
218
|
|
$
|
65,158
|
|
|||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Nine months ended September 30, 2014
|
Palmarejo
|
Rochester
|
Kensington
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||
|
Metal sales
|
$
|
201,809
|
|
$
|
87,710
|
|
$
|
111,000
|
|
$
|
84,983
|
|
$
|
7,227
|
|
$
|
—
|
|
$
|
492,729
|
|
||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
2,404
|
|
—
|
|
2,404
|
|
|||||||||||||
|
201,809
|
|
87,710
|
|
111,000
|
|
84,983
|
|
9,631
|
|
—
|
|
495,133
|
|
||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
139,113
|
|
62,806
|
|
86,417
|
|
60,042
|
|
3,114
|
|
—
|
|
351,492
|
|
|||||||||||||
|
Amortization
|
53,196
|
|
14,835
|
|
35,162
|
|
14,430
|
|
4,685
|
|
1,526
|
|
123,834
|
|
|||||||||||||
|
Exploration
|
5,257
|
|
2,039
|
|
5,318
|
|
63
|
|
462
|
|
2,818
|
|
15,957
|
|
|||||||||||||
|
Other operating expenses
|
962
|
|
2,102
|
|
591
|
|
515
|
|
868
|
|
46,790
|
|
51,828
|
|
|||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||
|
Fair value adjustments, net
|
(6,454
|
)
|
1,835
|
|
—
|
|
—
|
|
—
|
|
1,008
|
|
(3,611
|
)
|
|||||||||||||
|
Interest expense, net
|
(7,721
|
)
|
(515
|
)
|
(145
|
)
|
(42
|
)
|
—
|
|
(28,557
|
)
|
(36,980
|
)
|
|||||||||||||
|
Other, net
|
(2,489
|
)
|
90
|
|
4
|
|
1,957
|
|
(4,988
|
)
|
(1,501
|
)
|
(6,927
|
)
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
16,734
|
|
(629
|
)
|
—
|
|
(7,937
|
)
|
(304
|
)
|
10,786
|
|
18,650
|
|
|||||||||||||
|
Net income (loss)
|
$
|
3,351
|
|
$
|
6,709
|
|
$
|
(16,629
|
)
|
$
|
3,911
|
|
$
|
(4,790
|
)
|
$
|
(69,398
|
)
|
$
|
(76,846
|
)
|
||||||
|
Segment assets
(2)
|
$
|
1,111,829
|
|
$
|
208,284
|
|
$
|
315,959
|
|
$
|
304,644
|
|
$
|
67,934
|
|
$
|
539,134
|
|
$
|
2,547,784
|
|
||||||
|
Capital expenditures
|
$
|
15,188
|
|
$
|
9,110
|
|
$
|
12,310
|
|
$
|
5,935
|
|
$
|
—
|
|
$
|
1,533
|
|
$
|
44,076
|
|
||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Assets
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
Total assets for reportable segments
|
$
|
1,458,659
|
|
$
|
1,084,257
|
|
|
|
Cash and cash equivalents
|
205,708
|
|
270,861
|
|
|||
|
Other assets
|
94,306
|
|
90,449
|
|
|||
|
Total consolidated assets
|
$
|
1,758,673
|
|
$
|
1,445,567
|
|
|
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Geographic Information
|
Long-Lived Assets
|
September 30, 2015
|
|
December 31, 2014
|
||||
|
United States
|
$
|
349,303
|
|
$
|
275,594
|
|
|
|
Mexico
|
621,960
|
|
298,101
|
|
|||
|
Bolivia
|
98,966
|
|
107,960
|
|
|||
|
Australia
|
17,099
|
|
21,362
|
|
|||
|
Argentina
|
10,925
|
|
10,970
|
|
|||
|
Other
|
14,380
|
|
15,116
|
|
|||
|
Total
|
$
|
1,112,633
|
|
$
|
729,103
|
|
|
|
Revenue
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
United States
|
$
|
93,091
|
|
$
|
78,284
|
|
$
|
280,340
|
|
$
|
198,710
|
|
|||
|
Mexico
|
50,170
|
|
61,684
|
|
129,753
|
|
202,851
|
|
|||||||
|
Bolivia
|
17,391
|
|
28,350
|
|
62,304
|
|
84,983
|
|
|||||||
|
Australia
|
1,264
|
|
2,367
|
|
6,292
|
|
7,227
|
|
|||||||
|
Other
|
636
|
|
253
|
|
$
|
3,081
|
|
$
|
1,362
|
|
|||||
|
Total
|
$
|
162,552
|
|
$
|
170,938
|
|
$
|
481,770
|
|
$
|
495,133
|
|
|||
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties. The Company uses assumptions about future costs, mineral prices, mineral processing recovery rates, production levels, capital costs, and reclamation costs. On an ongoing basis, management evaluates its estimates and assumptions, and future expenditures could differ from current estimates.
Changes to the Company’s asset retirement obligations for operating sites are as follows:
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
In thousands
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
Asset retirement obligation - Beginning
|
$
|
87,601
|
|
$
|
59,795
|
|
$
|
67,214
|
|
$
|
57,454
|
|
|||
|
Accretion
|
2,038
|
|
1,452
|
|
5,652
|
|
4,205
|
|
|||||||
|
Additions and changes in estimates
|
—
|
|
—
|
|
18,270
|
|
—
|
|
|||||||
|
Settlements
|
(2,363
|
)
|
(58
|
)
|
(3,860
|
)
|
(470
|
)
|
|||||||
|
Asset retirement obligation - Ending
|
$
|
87,276
|
|
$
|
61,189
|
|
$
|
87,276
|
|
$
|
61,189
|
|
|||
The increase in asset retirement obligations in the
nine
months ended
September 30, 2015
is due to the acquisition of the Wharf gold mine. The Company has accrued
$4.0 million
and
$3.6 million
at
September 30, 2015
and
December 31, 2014
, respectively, for reclamation liabilities related to former mining activities, which are included in
Reclamation.
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, restricted stock, and performance shares. Stock-based compensation expense was
$1.6 million
and
$2.5 million
for the
three
months ended and
$6.4 million
and
$7.5 million
for the
nine
months ended
September 30, 2015
and
2014
, respectively. At
September 30, 2015
, there was
$9.8 million
of unrecognized stock-based compensation cost expected to be recognized over a period of
1.5
years. During the
nine
months ended
September 30, 2015
, the supplemental incentive accrual increased
$1.2 million
to
$1.8 million
.
10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the grants awarded during the
nine
months ended
September 30, 2015
:
|
Grant date
|
Restricted
stock
|
Grant date fair
value of
restricted stock
|
Stock options
|
Grant date
fair value of
stock
options
|
Performance
shares
|
Grant date fair
value of
performance
shares
|
|||||||||||||||
|
May 13, 2015
|
1,127,814
|
|
$
|
5.57
|
|
310,028
|
|
$
|
2.65
|
|
809,293
|
|
$
|
6.97
|
|
||||||
|
July 1, 2015
|
22,897
|
|
$
|
5.35
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
—
|
|
||||||
The following options and stock appreciation rights were exercisable during the
nine
months ended
September 30, 2015
:
|
Award Type
|
Number of
Exercised Units
|
Weighted Average
Exercised Price
|
Number of Exercisable Units
|
Weighted Average
Exercisable Price |
||||||||||
|
Stock options
|
—
|
|
$
|
—
|
|
322,117
|
|
$
|
19.96
|
|
||||
|
Stock appreciation rights
|
—
|
|
$
|
—
|
|
46,572
|
|
$
|
14.06
|
|
||||
The Company has a 401(k) retirement savings plan that covers all eligible U.S. employees. Eligible employees may elect to contribute up to
75%
of base salary, subject to ERISA limitations. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations. The Company generally makes matching contributions equal to
100%
of the employee’s contribution up to
4%
of the employee's salary. The Company may also provide a voluntary, noncontributory defined contribution based on an eligible employee's salary. Expenses (income) related to retirement savings plan contributions were
$(0.7) million
and
$1.4 million
for the
three
months ended and
$2.8 million
and
$4.4 million
for the
nine
months ended
September 30, 2015
and
2014
, respectively.
The following table summarizes the components of
Income and mining tax (expense) benefit
for the
three
and
nine
months ended
September 30, 2015
and
2014
by significant jurisdiction:
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||||||||||||||
|
|
2015
|
|
2014
|
2015
|
2014
|
||||||||||||||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||||||||||||
|
United States
|
$
|
(16,168
|
)
|
$
|
(1,080
|
)
|
|
$
|
(14,954
|
)
|
$
|
739
|
|
$
|
(46,640
|
)
|
$
|
1,123
|
|
$
|
(75,168
|
)
|
$
|
447
|
|
||
|
Argentina
|
(731
|
)
|
(2
|
)
|
|
(935
|
)
|
1,539
|
|
(2,083
|
)
|
(3
|
)
|
(3,828
|
)
|
5,622
|
|
||||||||||
|
Mexico
|
(1,412
|
)
|
11,951
|
|
|
(283
|
)
|
17,003
|
|
(16,666
|
)
|
11,234
|
|
(28,999
|
)
|
20,831
|
|
||||||||||
|
Bolivia
|
(4,483
|
)
|
(1,029
|
)
|
|
3,199
|
|
(2,969
|
)
|
(8,081
|
)
|
(2,240
|
)
|
11,848
|
|
(7,937
|
)
|
||||||||||
|
Other jurisdictions
|
315
|
|
(1,580
|
)
|
(144
|
)
|
271
|
|
834
|
|
(1,663
|
)
|
651
|
|
(313
|
)
|
|||||||||||
|
|
$
|
(22,479
|
)
|
$
|
8,260
|
|
$
|
(13,117
|
)
|
$
|
16,583
|
|
$
|
(72,636
|
)
|
$
|
8,451
|
|
$
|
(95,496
|
)
|
$
|
18,650
|
|
|||
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions, mining tax expense and uncertain tax position accruals. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in our consolidated effective tax rate.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets. For additional information, see Part II, Item 1A of this Report.
The Company or one of its subsidiaries files income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal income tax examination by tax
11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
authorities for years before 2012 and is no longer subject to examination by certain foreign jurisdictions by tax authorities for years before 2005. As a result of statutes of limitation that will begin to expire within the next 12 months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between
$0.8 million
and
$1.1 million
in the next 12 months.
At September 30, 2015 and December 31, 2014, the Company had
$17.4 million
and
$16.1 million
of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At September 30, 2015 and December 31, 2014, the amount of accrued income-tax-related interest and penalties was
$9.4 million
and
$6.9 million
, respectively.
Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the
three
and
nine
months ended
September 30, 2015
and
2014
,
3,302,701
and
1,387,957
shares and
3,251,347
and
2,008,749
, respectively, of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
The
3.25%
Convertible Senior Notes were not included in the computation of diluted net income (loss) per share for the
three
and
nine
months ended
September 30, 2015
and
2014
because there is no excess value upon conversion over the principal amount of the Notes.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
Net income (loss) available to common stockholders
|
$
|
(14,219
|
)
|
$
|
3,466
|
|
$
|
(64,185
|
)
|
$
|
(76,846
|
)
|
|||
|
Weighted average shares:
|
|||||||||||||||
|
Basic
|
135,247
|
|
102,470
|
|
124,478
|
|
102,427
|
|
|||||||
|
Effect of stock-based compensation plans
|
—
|
|
91
|
|
—
|
|
—
|
|
|||||||
|
Diluted
|
135,247
|
|
102,561
|
|
124,478
|
|
102,427
|
|
|||||||
|
Income (loss) per share:
|
|||||||||||||||
|
Basic
|
$
|
(0.11
|
)
|
$
|
0.03
|
|
$
|
(0.52
|
)
|
$
|
(0.75
|
)
|
|||
|
Diluted
|
$
|
(0.11
|
)
|
$
|
0.03
|
|
$
|
(0.52
|
)
|
$
|
(0.75
|
)
|
|||
The following table presents the components of
Fair value adjustments, net
:
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
In thousands
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
2,983
|
|
$
|
8,736
|
|
$
|
1,823
|
|
$
|
(6,560
|
)
|
||||
|
Rochester net smelter royalty (NSR) royalty obligation
|
1,752
|
|
4,345
|
|
596
|
|
1,835
|
|
||||||||
|
Silver and gold options
|
1,051
|
|
3,081
|
|
1,238
|
|
213
|
|
||||||||
|
Foreign exchange contracts
|
—
|
|
(57
|
)
|
—
|
|
901
|
|
||||||||
|
Fair value adjustments, net
|
$
|
5,786
|
|
$
|
16,105
|
|
$
|
3,657
|
|
$
|
(3,611
|
)
|
||||
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).
12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
|
|
Fair Value at September 30, 2015
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
3,213
|
|
$
|
3,124
|
|
$
|
—
|
|
$
|
89
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
9,024
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9,024
|
|
|||
|
Rochester NSR royalty obligation
|
10,940
|
|
—
|
|
—
|
|
10,940
|
|
|||||||
|
Other derivative instruments, net
|
431
|
|
—
|
|
431
|
|
—
|
|
|||||||
|
$
|
20,395
|
|
$
|
—
|
|
$
|
431
|
|
$
|
19,964
|
|
||||
|
|
Fair Value at December 31, 2014
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
5,982
|
|
$
|
4,603
|
|
$
|
—
|
|
$
|
1,379
|
|
|||
|
Silver and gold options
|
3,882
|
|
—
|
|
3,882
|
|
—
|
|
|||||||
|
$
|
9,864
|
|
$
|
4,603
|
|
$
|
3,882
|
|
$
|
1,379
|
|
||||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
21,912
|
|
$
|
—
|
|
$
|
—
|
|
$
|
21,912
|
|
|||
|
Rochester NSR royalty obligation
|
15,370
|
|
—
|
|
—
|
|
15,370
|
|
|||||||
|
Silver and gold options
|
1,039
|
|
—
|
|
1,039
|
|
—
|
|
|||||||
|
Other derivative instruments, net
|
805
|
|
—
|
|
805
|
|
—
|
|
|||||||
|
$
|
39,126
|
|
$
|
—
|
|
$
|
1,844
|
|
$
|
37,282
|
|
||||
The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate and certain doré sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves, credit spreads, and other unobservable inputs. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The fair values of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation were estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company has classified these obligations as Level 3 financial liabilities. Based on current mine plans, expected royalty durations of
1.0
years and
2.5
years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation, respectively, at
September 30, 2015
.
13
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
No assets or liabilities were transferred between fair value levels in the
nine
months ended
September 30, 2015
.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three and
nine
months ended
September 30, 2015
:
|
Three months ended September 30, 2015
|
|||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Balance at the
end of the period |
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
89
|
|
$
|
—
|
|
$
|
—
|
|
$
|
89
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
15,281
|
|
$
|
(2,983
|
)
|
$
|
(3,274
|
)
|
$
|
9,024
|
|
|||
|
Rochester NSR royalty obligation
|
13,905
|
|
(1,752
|
)
|
(1,213
|
)
|
10,940
|
|
|||||||
|
Nine months ended September 30, 2015
|
|||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Balance at the
end of the
period
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
1,379
|
|
$
|
(904
|
)
|
$
|
(386
|
)
|
$
|
89
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
21,912
|
|
$
|
(1,823
|
)
|
$
|
(11,065
|
)
|
$
|
9,024
|
|
|||
|
Rochester NSR royalty obligation
|
15,370
|
|
(596
|
)
|
(3,834
|
)
|
10,940
|
|
|||||||
The fair value of financial assets and liabilities carried at book value in the financial statements at
September 30, 2015
and
December 31, 2014
is presented in the following table:
|
|
September 30, 2015
|
||||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
|
Liabilities:
|
|
||||||||||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
712
|
|
$
|
696
|
|
$
|
—
|
|
$
|
696
|
|
$
|
—
|
|
||||
|
7.875% Senior Notes due 2021
(1)
|
426,533
|
|
260,016
|
|
—
|
|
260,016
|
|
—
|
|
|||||||||
|
Term Loan due 2020
(2)
|
94,557
|
|
99,750
|
|
—
|
|
99,750
|
|
—
|
|
|||||||||
|
San Bartolomé Lines of Credit
|
9,142
|
|
9,142
|
|
—
|
|
9,142
|
|
—
|
|
|||||||||
|
Palmarejo gold production royalty obligation
|
20,258
|
|
20,991
|
|
—
|
|
—
|
|
20,991
|
|
|||||||||
(1)
Net of unamortized debt issuance costs and premium received of
$6.4 million
.
(2)
Net of unamortized debt issuance costs of
$5.2 million
.
|
|
December 31, 2014
|
||||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
|
Liabilities:
|
|||||||||||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
5,334
|
|
$
|
4,979
|
|
$
|
—
|
|
$
|
4,979
|
|
$
|
—
|
|
||||
|
7.875% Senior Notes due 2021
(1)
|
427,603
|
|
343,305
|
|
—
|
|
343,305
|
|
—
|
|
|||||||||
|
San Bartolomé Lines of Credit
|
14,785
|
|
14,785
|
|
—
|
|
14,785
|
|
—
|
|
|||||||||
|
Palmarejo gold production royalty obligation
|
34,047
|
|
38,290
|
|
—
|
|
—
|
|
38,290
|
|
|||||||||
(1)
Net of unamortized debt issuance costs and premium received of
$7.3 million
.
The fair values of the
3.25%
Convertible Senior Notes due 2028 (the "Convertible Notes") and
7.875%
Senior Notes due 2021 (the "Senior Notes") outstanding were estimated using quoted market prices. The Term Loan due 2020 (the "Term Loan") was originated by a third party at June 25, 2015 and, as a result, book value is assumed to approximate fair value. The fair value of the San Bartolomé line of credit approximates book value due to the short-term nature of the liability and absence of significant
14
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
interest rate or credit concerns. The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input.
Palmarejo Gold Production Royalty
On January 21, 2009, the Company's subsidiary, Coeur Mexicana S.A. de C.V. ("Coeur Mexicana"), entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation. The royalty covers
50%
of the life of mine production from the Palmarejo mine and legacy adjacent properties, excluding production from the recently acquired Paramount Gold and Silver Corp ("Paramount") properties. The royalty transaction includes a minimum obligation of
4,167
gold ounces per month and terminates when payments on
400,000
gold ounces have been made. At
September 30, 2015
, a total of
45,996
gold ounces remain outstanding under the obligation.
The price volatility associated with the minimum royalty obligation is considered an embedded derivative. The Company is required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. Unrealized gains are recognized in periods when the gold price has decreased from the previous period and unrealized losses are recognized in periods when the gold price increases. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was
19.5%
and
11.8%
at
September 30, 2015
and
December 31, 2014
, respectively. The fair value of the embedded derivative at
September 30, 2015
and
December 31, 2014
was a liability of
$9.0 million
and
$21.9 million
, respectively. The mark-to-market adjustments were gains of
$3.0 million
and
$8.7 million
for the
three
months ended and gains of
$1.8 million
and losses of
$6.6 million
for the
nine
months ended
September 30, 2015
and
2014
, respectively.
Payments on the royalty obligation decrease the carrying amount of the minimum obligation and the derivative liability. Each monthly payment is an amount equal to the greater of the minimum of
4,167
ounces of gold or
50%
of actual gold production multiplied by the excess of the monthly average market price of gold above
$412
per ounce, subject to a
1%
annual inflation adjustment. Realized losses on settlement of the liabilities were
$3.3 million
and
$5.0 million
for the
three
months ended and
$11.0 million
and
$16.6 million
for the
nine
months ended
September 30, 2015
and
2014
, respectively. The mark-to-market adjustments and realized losses are included in
Fair value adjustments, net
.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in most cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable recorded at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. Changes in silver and gold prices resulted in provisional pricing mark-to-market losses of
$0.1 million
and
$0.7 million
in the
three
months ended and gains of
$0.4 million
and
$0.2 million
in the
nine
months ended
September 30, 2015
and
2014
, respectively. At
September 30, 2015
, the Company had outstanding provisionally priced sales of
0.6 million
ounces of silver and
39,069
ounces of gold at prices of
$14.65
and
$1,147
, respectively.
Silver and Gold Options
At
December 31, 2014
, the Company had outstanding put spread contracts on
1.3 million
ounces of silver and
24,000
ounces of gold, all of which settled in the
nine
months ended
September 30, 2015
. The weighted average high and low strike prices on the silver put spreads were
$18.00
per ounce and
$16.00
per ounce, respectively. The weighted average high and low strike prices on the gold put spreads were
$1,200
and
$1,050
, respectively. During the
three
and
nine
months ended
September 30, 2014
, the Company recorded unrealized gains of
$3.1 million
and
$0.2 million
, respectively, related to outstanding options which were included in
Fair value adjustments, net.
The Company recognized realized gains of
$1.1 million
and realized
losses
of
$0.9 million
during the
three
months ended and realized gains of
$2.7 million
and realized losses of
$1.3 million
during the
nine
months ended
September 30, 2015
and
2014
, respectively, from settled contracts.
15
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
At
September 30, 2015
, the Company had the following derivative instruments that settle in each of the years indicated:
|
In thousands except average prices and notional ounces
|
2015
|
2016
|
Thereafter
|
||||||||
|
Palmarejo gold production royalty
|
$
|
11,760
|
|
$
|
20,543
|
|
$
|
—
|
|
||
|
Average gold price in excess of minimum contractual deduction
|
$
|
706
|
|
$
|
700
|
|
$
|
—
|
|
||
|
Notional ounces
|
16,668
|
|
29,328
|
|
—
|
|
|||||
|
Provisional silver sales
|
$
|
8,234
|
|
$
|
—
|
|
$
|
—
|
|
||
|
Average silver price
|
$
|
14.65
|
|
$
|
—
|
|
$
|
—
|
|
||
|
Notional ounces
|
562,063
|
|
—
|
|
—
|
|
|||||
|
Provisional gold sales
|
$
|
44,812
|
|
$
|
—
|
|
$
|
—
|
|
||
|
Average gold price
|
$
|
1,147
|
|
$
|
—
|
|
$
|
—
|
|
||
|
Notional ounces
|
39,069
|
|
—
|
|
—
|
|
|||||
The following summarizes the classification of the fair value of the derivative instruments:
|
|
September 30, 2015
|
||||||||||||||
|
In thousands
|
Prepaid expenses and other
|
Accrued liabilities and other
|
Current portion of royalty obligation
|
Non-current portion of royalty obligation
|
|||||||||||
|
Palmarejo gold production royalty
|
—
|
|
—
|
|
9,024
|
|
—
|
|
|||||||
|
Concentrate sales contracts
|
120
|
|
551
|
|
—
|
|
—
|
|
|||||||
|
$
|
120
|
|
$
|
551
|
|
$
|
9,024
|
|
$
|
—
|
|
||||
|
|
December 31, 2014
|
||||||||||||||
|
|
Prepaid expenses and other
|
Accrued liabilities and other
|
Current portion of royalty obligation
|
Non-current portion of royalty obligation
|
|||||||||||
|
Palmarejo gold production royalty
|
—
|
|
—
|
|
14,405
|
|
7,507
|
|
|||||||
|
Silver and gold options
|
3,882
|
|
1,039
|
|
—
|
|
—
|
|
|||||||
|
Concentrate sales contracts
|
43
|
|
848
|
|
—
|
|
—
|
|
|||||||
|
$
|
3,925
|
|
$
|
1,887
|
|
$
|
14,405
|
|
$
|
7,507
|
|
||||
The following represent mark-to-market gains (losses) on derivative instruments for the
three
and
nine
months ended
September 30, 2015
, and
2014
(in thousands):
|
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
Financial statement line
|
Derivative
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Revenue
|
Concentrate sales contracts
|
$
|
82
|
|
$
|
(684
|
)
|
$
|
373
|
|
$
|
188
|
|
||||
|
Costs applicable to sales
|
Foreign exchange contracts
|
—
|
|
—
|
|
—
|
|
(924
|
)
|
||||||||
|
Fair value adjustments, net
|
Foreign exchange contracts
|
—
|
|
(57
|
)
|
—
|
|
901
|
|
||||||||
|
Fair value adjustments, net
|
Palmarejo gold royalty
|
2,983
|
|
8,736
|
|
1,823
|
|
(6,560
|
)
|
||||||||
|
Fair value adjustments, net
|
Silver and gold options
|
1,051
|
|
3,081
|
|
2,662
|
|
213
|
|
||||||||
|
$
|
4,116
|
|
$
|
11,076
|
|
$
|
4,858
|
|
$
|
(6,182
|
)
|
||||||
Credit Risk
The credit risk exposure related to any derivative instrument is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with financial institutions management deems credit worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties. In addition, to allow for situations where derivative positions may need to be revised, the Company transacts only in markets that management considers highly liquid.
On
April 17, 2015
, the Company completed the acquisition of Paramount, which held mineral claims adjacent to the Company's Palmarejo mine, including a continuation of the Independencia mineral vein. Upon closing, Paramount became a wholly-owned subsidiary of the Company, and each issued and outstanding share of Paramount common stock was converted into
16
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
0.2016
shares of Coeur common stock, with cash paid in lieu of fractional shares. Immediately prior to completion of the acquisition, Paramount spun off to its existing stockholders a separate, publicly-traded company, Paramount Gold Nevada Corp. ("SpinCo"), which owns the Sleeper Gold Project and other assets in Nevada. SpinCo was capitalized with
$8.5 million
in cash contributed by Coeur, which amount has been included in the total consideration paid for the acquisition of Paramount. The Company also paid
$1.5 million
to acquire
4.9%
of the newly issued and outstanding shares of SpinCo.
The transaction was accounted for as an asset acquisition, as Paramount is an exploration stage project, which requires that the total purchase price be allocated to the assets acquired and liabilities assumed based on their relative fair values. The purchase price and acquired assets and liabilities were as follows (in thousands except share data):
|
Common shares issued (32,667,327 at $5.78)
|
$
|
188,817
|
|
|
Cash
|
8,530
|
|
|
|
Transaction advisory fees and other acquisition costs
|
4,020
|
|
|
|
Total purchase price
|
201,367
|
|
|
|
Assets:
|
|||
|
Cash
|
118
|
|
|
|
Receivables and other current assets
|
1,685
|
|
|
|
Property, plant, and equipment
|
215
|
|
|
|
Mining properties, net
|
305,175
|
|
|
|
307,193
|
|
||
|
Liabilities:
|
|||
|
Accounts payable and accrued liabilities
|
2,737
|
|
|
|
Deferred income taxes
|
103,089
|
|
|
|
105,826
|
|
||
|
Net assets acquired
|
$
|
201,367
|
|
The assets acquired and liabilities assumed have been assigned to the Palmarejo reportable operating segment.
On February 20, 2015, the Company completed its acquisition of the Wharf gold mine located near Lead, South Dakota, from a subsidiary of Goldcorp in exchange for
$99.8 million
in cash. The transaction was accounted for as a business combination which requires that assets acquired and liabilities assumed be recognized at their respective fair values at the acquisition date. The Company incurred
$2.1 million
of acquisition costs, which are included in
Pre-development, reclamation, and other
on the Condensed Consolidated Statements of Comprehensive Income (Loss).
17
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The purchase price allocation was based on the fair value of acquired assets and liabilities as follows (in thousands):
|
Assets:
|
|||
|
Cash
|
$
|
982
|
|
|
Receivables
|
3,061
|
|
|
|
Inventory
|
2,147
|
|
|
|
Ore on leach pads
|
12,710
|
|
|
|
Other current assets
|
2,924
|
|
|
|
Property, plant, and equipment
|
30,055
|
|
|
|
Mining properties, net
|
81,189
|
|
|
|
Other non-current assets
|
3,966
|
|
|
|
137,034
|
|
||
|
Liabilities:
|
|||
|
Accounts payable and accrued liabilities
|
5,494
|
|
|
|
Reclamation
|
18,270
|
|
|
|
Deferred income taxes
|
9,680
|
|
|
|
Other non-current liabilities
|
3,750
|
|
|
|
37,194
|
|
||
|
Net assets acquired
|
$
|
99,840
|
|
The following table presents the unaudited pro forma summary of the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the
three
and
nine
months ended
September 30, 2015
and
2014
, as if the acquisition had occurred on January 1, 2015. The following unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations as they would have been had the transaction occurred on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, potential synergies, and cost savings from operating efficiencies.
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
In thousands
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Revenue
|
$
|
162,552
|
|
$
|
190,323
|
|
$
|
499,770
|
|
$
|
555,344
|
|
||||
|
Income (loss) before income and mining taxes
|
(22,479
|
)
|
(9,125
|
)
|
(72,688
|
)
|
(79,190
|
)
|
||||||||
|
Net income (loss)
|
(14,219
|
)
|
7,383
|
|
(64,237
|
)
|
(60,554
|
)
|
||||||||
The Company invests in equity securities of silver and gold exploration and development companies. These investments are classified as available-for-sale and are measured at fair value in the financial statements with unrealized gains and losses recorded in
Other comprehensive income (loss)
.
|
At September 30, 2015
|
|||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||
|
Equity securities
|
3,730
|
|
(1,196
|
)
|
679
|
|
3,213
|
|
|||
|
At December 31, 2014
|
|||||||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||||||
|
Equity securities
|
$
|
5,687
|
|
$
|
(8
|
)
|
$
|
303
|
|
$
|
5,982
|
|
|||
18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the gross unrealized losses on equity securities for which other-than-temporary impairments have not been recognized and the fair values of those securities, aggregated by the length of time the individual securities have been in a continuous unrealized loss position, at
September 30, 2015
:
|
Less than twelve months
|
Twelve months or more
|
Total
|
||||||||||||||||||
|
In thousands
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
||||||||||||||
|
Equity securities
|
$
|
(1,196
|
)
|
$
|
1,017
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1,196
|
)
|
$
|
1,017
|
|
||
The Company performs a quarterly assessment on each of its equity securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded pre-tax other-than-temporary impairment losses of
$0.5 million
and
$1.1 million
in the
three
months ended and
$2.0 million
and
$4.6 million
in the
nine
months ended
September 30, 2015
and
2014
, respectively, in
Other, net
.
Receivables consist of the following:
|
In thousands
|
September 30, 2015
|
December 31, 2014
|
|||||
|
Current receivables:
|
|||||||
|
Trade receivables
|
$
|
14,884
|
|
$
|
20,448
|
|
|
|
Income tax receivable
|
27,397
|
|
30,045
|
|
|||
|
Value added tax receivable
|
47,621
|
|
63,805
|
|
|||
|
Other
|
3,697
|
|
2,623
|
|
|||
|
$
|
93,599
|
|
$
|
116,921
|
|
||
|
Non-current receivables:
|
|||||||
|
Value added tax receivable
|
$
|
27,507
|
|
$
|
21,686
|
|
|
|
Total receivables
|
$
|
121,106
|
|
$
|
138,607
|
|
|
Inventory consists of the following:
|
In thousands
|
September 30, 2015
|
December 31, 2014
|
|||||
|
Inventory:
|
|||||||
|
Concentrate
|
$
|
12,621
|
|
$
|
23,563
|
|
|
|
Precious metals
|
36,871
|
|
40,870
|
|
|||
|
Supplies
|
48,617
|
|
50,498
|
|
|||
|
$
|
98,109
|
|
$
|
114,931
|
|
||
|
Ore on leach pads:
|
|||||||
|
Current
|
$
|
68,695
|
|
$
|
48,204
|
|
|
|
Non-current
|
39,685
|
|
37,889
|
|
|||
|
$
|
108,380
|
|
$
|
86,093
|
|
||
|
Total inventory and ore on leach pads
|
$
|
206,489
|
|
$
|
201,024
|
|
|
19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Property, plant and equipment consist of the following:
|
In thousands
|
September 30, 2015
|
December 31, 2014
|
|||||
|
Land
|
$
|
8,287
|
|
$
|
1,752
|
|
|
|
Facilities and equipment
|
706,198
|
|
647,181
|
|
|||
|
Capital leases
|
26,338
|
|
28,680
|
|
|||
|
740,823
|
|
677,613
|
|
||||
|
Accumulated amortization
|
(502,466
|
)
|
(464,852
|
)
|
|||
|
238,357
|
|
212,761
|
|
||||
|
Construction in progress
|
22,686
|
|
15,150
|
|
|||
|
Property, plant and equipment, net
|
$
|
261,043
|
|
$
|
227,911
|
|
|
Mining properties consist of the following (in thousands):
|
September 30, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San
Bartolomé
|
La Preciosa
|
Joaquin
|
Coeur Capital
|
Total
|
||||||||||||||||||||||||||
|
Mine development
|
$
|
159,604
|
|
$
|
156,097
|
|
$
|
231,230
|
|
$
|
32,580
|
|
$
|
49,491
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
629,002
|
|
||||||||
|
Accumulated amortization
|
(129,872
|
)
|
(123,085
|
)
|
(124,090
|
)
|
(3,676
|
)
|
(29,389
|
)
|
—
|
|
—
|
|
|
|
(410,112
|
)
|
|||||||||||||||||
|
29,732
|
|
33,012
|
|
107,140
|
|
28,904
|
|
20,102
|
|
—
|
|
—
|
|
—
|
|
218,890
|
|
||||||||||||||||||
|
Mineral interests
|
822,036
|
|
—
|
|
—
|
|
49,601
|
|
17,560
|
|
49,085
|
|
10,000
|
|
81,461
|
|
1,029,743
|
|
|||||||||||||||||
|
Accumulated amortization
|
(345,199
|
)
|
—
|
|
—
|
|
(8,240
|
)
|
(11,157
|
)
|
—
|
|
—
|
|
(32,447
|
)
|
(397,043
|
)
|
|||||||||||||||||
|
476,837
|
|
—
|
|
—
|
|
41,361
|
|
6,403
|
|
49,085
|
|
10,000
|
|
49,014
|
|
632,700
|
|
||||||||||||||||||
|
Mining properties, net
|
$
|
506,569
|
|
$
|
33,012
|
|
$
|
107,140
|
|
$
|
70,265
|
|
$
|
26,505
|
|
$
|
49,085
|
|
$
|
10,000
|
|
$
|
49,014
|
|
$
|
851,590
|
|
||||||||
|
December 31, 2014
|
Palmarejo
|
Rochester
|
Kensington
|
San
Bartolomé
|
La Preciosa
|
Joaquin
|
Coeur Capital
|
Total
|
|||||||||||||||||||||||
|
Mine development
|
$
|
137,821
|
|
$
|
153,535
|
|
$
|
217,138
|
|
$
|
49,305
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
557,799
|
|
|||||||
|
Accumulated amortization
|
(121,906
|
)
|
(113,533
|
)
|
(106,865
|
)
|
(26,106
|
)
|
—
|
|
—
|
|
—
|
|
(368,410
|
)
|
|||||||||||||||
|
15,915
|
|
40,002
|
|
110,273
|
|
23,199
|
|
—
|
|
—
|
|
—
|
|
189,389
|
|
||||||||||||||||
|
Mineral interests
|
521,349
|
|
—
|
|
—
|
|
17,560
|
|
49,059
|
|
10,000
|
|
81,461
|
|
679,429
|
|
|||||||||||||||
|
Accumulated amortization
|
(332,032
|
)
|
—
|
|
—
|
|
(10,143
|
)
|
—
|
|
—
|
|
(25,451
|
)
|
(367,626
|
)
|
|||||||||||||||
|
189,317
|
|
—
|
|
—
|
|
7,417
|
|
49,059
|
|
10,000
|
|
56,010
|
|
311,803
|
|
||||||||||||||||
|
Mining properties, net
|
$
|
205,232
|
|
$
|
40,002
|
|
$
|
110,273
|
|
$
|
30,616
|
|
$
|
49,059
|
|
$
|
10,000
|
|
$
|
56,010
|
|
$
|
501,192
|
|
|||||||
20
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Long-term debt and capital lease obligations at
September 30, 2015
and
December 31, 2014
are as follows:
|
|
September 30, 2015
|
December 31, 2014
|
|||||||||||||
|
In thousands
|
Current
|
Non-Current
|
Current
|
Non-Current
|
|||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
—
|
|
$
|
712
|
|
$
|
5,334
|
|
$
|
—
|
|
|||
|
7.875% Senior Notes due 2021, net
(1)
|
—
|
|
426,533
|
|
—
|
|
427,603
|
|
|||||||
|
Term Loan due 2020, net
(2)
|
1,000
|
|
93,557
|
|
—
|
|
—
|
|
|||||||
|
San Bartolomé Lines of Credit
|
1,723
|
|
7,419
|
|
4,481
|
|
10,304
|
|
|||||||
|
Capital lease obligations
|
9,052
|
|
5,990
|
|
7,683
|
|
13,141
|
|
|||||||
|
$
|
11,775
|
|
$
|
534,211
|
|
$
|
17,498
|
|
$
|
451,048
|
|
||||
(1)
Net of unamortized debt issuance costs and premium received of
$6.4 million
and
$7.3 million
at September 30, 2015 and December 31, 2014, respectively.
(2)
Net of unamortized debt issuance costs of
$5.2 million
at September 30, 2015.
7.875% Senior Notes due 2021
During the first quarter of 2015, the Company repurchased
$2.0 million
in aggregate principal amount of the Senior Notes, resulting in an aggregate principal balance outstanding of
$432.9 million
at
September 30, 2015
.
At any time prior to February 1, 2016, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the Notes, including any permitted additional Notes, at a redemption price equal to 107.875% of the principal amount. At any time prior to February 1, 2017, the Company may redeem all or part of the Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of 100% of the principal amount thereof, a make-whole premium as of the date of redemption, and accrued and unpaid interest and additional interest, if any, thereon, to the date of redemption. In addition, the Company may redeem some or all of the Senior Notes on or after February 1, 2017, at redemption prices set forth in the Indenture for the Senior Notes, together with accrued and unpaid interest.
3.25% Convertible Senior Notes due 2028
Per the indenture governing the Convertible Notes, the Company announced on February 12, 2015 that it was offering to repurchase all of the Convertible Notes. During the first quarter of 2015, the Company repurchased
$4.6 million
in aggregate principal amount, leaving a balance of
$0.7 million
at
September 30, 2015
. The Convertible Notes are classified as non-current liabilities at
September 30, 2015
as a result of the expiration of the holders' option to require the Company to repurchase the notes on March 15, 2015.
Short-term Loan
On March 31, 2015, the Company entered into a credit agreement (the "Short-term Credit Agreement") with The Bank of Nova Scotia. The Short-term Credit Agreement provided for a
$50.0 million
loan (the "Short-term Loan") to the Company. The Short-term Loan generally bore interest at a rate equal to an adjusted Eurocurrency rate plus a margin of
2.50%
. On June 25, 2015, the Short-term Loan was repaid in full, the security for the Short-term Loan was released, and the Short-term Credit Agreement was terminated.
Term Loan due 2020
On June 23, 2015, the Company and certain of its subsidiaries entered into a
five
year Credit Agreement for a senior secured term loan (the "Term Loan") with Barclays Bank PLC, as administrative agent (the “Term Loan Credit Agreement”). The Term Loan Credit Agreement provides for a five year
$100.0 million
term loan to the Company, of which a portion of the proceeds were used to repay the Short-term Loan, and the remaining proceeds are expected to be used for general corporate purposes. The Term Loan contains no financial maintenance covenants and currently bears interest at a rate equal to an adjusted Eurodollar rate plus a margin of
8.00%
(at no time will the adjusted Eurodollar rate be deemed to be less than
1.00%
per annum). Voluntary prepayments of the Term Loan under the Term Loan Credit Agreement are permitted, subject to the payment of a make-whole premium if such prepayment occurs prior to the first anniversary of the closing date, a premium of
105.0%
of the principal amount between the first anniversary and the second anniversary of the closing date and a premium of
103.0%
if such prepayment occurs on or after the second anniversary but prior to the third anniversary of the closing date. The Term Loan Credit Agreement requires amortization payments equal to
1.0%
of the principal amount of the Term Loan per annum and also requires net cash proceeds of debt issuances, excess cash flow, asset sales and casualty insurance recoveries (in each case, subject to certain exceptions) to either be reinvested in long-term assets used in the Company’s business or be applied as a mandatory prepayment of the Term Loan. Amounts repaid on the Term Loan may not be re-borrowed. The obligations under the Term Loan are secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington,
21
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Rochester and Wharf mines, as well as a pledge of the shares of certain of the Company's subsidiaries. The Term Loan Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants.
Lines of Credit
At
September 30, 2015
, San Bartolomé had
two
outstanding lines of credit. The first line of credit is for
$12.0
million bearing interest at
6.0%
per annum, maturing June 30, 2018. The second line of credit is for
$15.0
million bearing interest at
6.0%
per annum, maturing December 29, 2016. Both lines of credit are secured with machinery and equipment. There was an outstanding balance of
$9.1 million
on the second line of credit at
September 30, 2015
.
Palmarejo Gold Production Royalty Obligation
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation under which the subsidiary of Franco-Nevada Corporation purchased a royalty covering
50%
of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico (excluding production from the recently acquired Paramount properties).
The royalty agreement provides for a minimum obligation to be paid monthly on a total of
400,000
ounces of gold, or
4,167
ounces per month over an initial eight year period. Each monthly payment is an amount equal to the greater of
4,167
ounces of gold or
50%
of actual gold production multiplied by the excess of the monthly average market price of gold above
$412
per ounce, subject to a
1%
annual inflation compounding adjustment. Payments under the royalty agreement are made in cash or gold bullion. The Company paid
$10.2 million
and
$11.4 million
in the
three
months ended and
$30.3 million
and
$38.4 million
during the
nine
months ended
September 30, 2015
and
2014
, respectively. At
September 30, 2015
, payments had been made on a total of
354,004
ounces of gold with further payments to be made on an additional
45,996
ounces of gold.
The Company used an implicit interest rate of
30.5%
to discount the original royalty obligation, based on the fair value of the consideration received projected over the expected future cash flows at inception of the obligation. The discounted obligation is accreted to its expected future value over the expected minimum payment period based on the implicit interest rate. The Company recognized accretion expense of
$1.6 million
and
$2.5 million
for the
three
months ended and
$5.4 million
and
$8.6 million
for the
nine
months ended
September 30, 2015
and
2014
, respectively. At
September 30, 2015
and
December 31, 2014
, the remaining minimum obligation under the royalty agreement was
$20.3 million
and
$34.0 million
, respectively.
Interest Expense
Interest expense consists of the following:
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||
|
In thousands
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
6
|
|
$
|
43
|
|
$
|
49
|
|
$
|
130
|
|
|||
|
7.875% Senior Notes due 2021
|
8,523
|
|
8,809
|
|
25,608
|
|
24,132
|
|
|||||||
|
Short-term Loan
|
—
|
|
—
|
|
326
|
|
—
|
|
|||||||
|
Term Loan due 2020
|
2,277
|
|
—
|
|
2,425
|
|
—
|
|
|||||||
|
San Bartolomé Lines of Credit
|
101
|
|
—
|
|
665
|
|
—
|
|
|||||||
|
Revolving Credit Facility
|
—
|
|
—
|
|
—
|
|
179
|
|
|||||||
|
Loss on Revolving Credit Facility
|
—
|
|
—
|
|
—
|
|
3,035
|
|
|||||||
|
Capital lease obligations
|
229
|
|
334
|
|
799
|
|
726
|
|
|||||||
|
Other debt obligations
|
8
|
|
—
|
|
8
|
|
—
|
|
|||||||
|
Accretion of Palmarejo gold production royalty obligation
|
1,642
|
|
2,545
|
|
5,444
|
|
8,639
|
|
|||||||
|
Amortization of debt issuance costs
|
690
|
|
415
|
|
1,604
|
|
1,333
|
|
|||||||
|
Accretion of debt premium
|
(104
|
)
|
(107
|
)
|
(313
|
)
|
(252
|
)
|
|||||||
|
Capitalized interest
|
(926
|
)
|
(423
|
)
|
(2,670
|
)
|
(942
|
)
|
|||||||
|
Total interest expense, net of capitalized interest
|
$
|
12,446
|
|
$
|
11,616
|
|
$
|
33,945
|
|
$
|
36,980
|
|
|||
22
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10 of Regulation S-X resulting from the guarantees by Coeur Alaska, Inc., Coeur Explorations, Inc., Coeur Rochester, Inc., Coeur South America Corp., Wharf Resources (U.S.A.) Inc. and subsidiaries, and Coeur Capital, Inc. (collectively, the “Subsidiary Guarantors”) of the Senior Notes. The following schedules present Condensed Consolidating Financial Statements of (a) Coeur, the parent company; (b) the Subsidiary Guarantors; and (c) certain wholly owned domestic and foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Each of the Subsidiary Guarantors is 100% owned by Coeur and the guarantees are full and unconditional. There are no restrictions on the ability of Coeur to obtain funds from its subsidiaries by dividend or loan.
23
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED
SEPTEMBER 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
93,417
|
|
$
|
69,135
|
|
$
|
—
|
|
$
|
162,552
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
68,187
|
|
52,050
|
|
—
|
|
120,237
|
|
||||||||||
|
Amortization
|
495
|
|
21,083
|
|
13,919
|
|
—
|
|
35,497
|
|
||||||||||
|
General and administrative
|
6,563
|
|
11
|
|
120
|
|
—
|
|
6,694
|
|
||||||||||
|
Exploration
|
642
|
|
(96
|
)
|
1,566
|
|
—
|
|
2,112
|
|
||||||||||
|
Pre-development, reclamation, and other
|
887
|
|
1,476
|
|
2,575
|
|
—
|
|
4,938
|
|
||||||||||
|
Total costs and expenses
|
8,587
|
|
90,661
|
|
70,230
|
|
—
|
|
169,478
|
|
||||||||||
|
Fair value adjustments, net
|
1,036
|
|
1,751
|
|
2,999
|
|
—
|
|
5,786
|
|
||||||||||
|
Other, net
|
1,218
|
|
(436
|
)
|
(8,649
|
)
|
(1,026
|
)
|
(8,893
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(11,198
|
)
|
(220
|
)
|
(2,054
|
)
|
1,026
|
|
(12,446
|
)
|
||||||||||
|
Total other income (expense), net
|
(8,944
|
)
|
1,095
|
|
(7,704
|
)
|
—
|
|
(15,553
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(17,531
|
)
|
3,851
|
|
(8,799
|
)
|
—
|
|
(22,479
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
516
|
|
(1,554
|
)
|
9,298
|
|
—
|
|
8,260
|
|
||||||||||
|
Total loss after income and mining taxes
|
(17,015
|
)
|
2,297
|
|
499
|
|
—
|
|
(14,219
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
2,796
|
|
331
|
|
—
|
|
(3,127
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(14,219
|
)
|
$
|
2,628
|
|
$
|
499
|
|
$
|
(3,127
|
)
|
$
|
(14,219
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(931
|
)
|
(769
|
)
|
—
|
|
769
|
|
(931
|
)
|
||||||||||
|
Reclassification adjustments for impairment of marketable securities
|
483
|
|
483
|
|
—
|
|
(483
|
)
|
483
|
|
||||||||||
|
Other comprehensive income (loss)
|
(448
|
)
|
(286
|
)
|
—
|
|
286
|
|
(448
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(14,667
|
)
|
$
|
2,342
|
|
$
|
499
|
|
$
|
(2,841
|
)
|
$
|
(14,667
|
)
|
|||||
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED
SEPTEMBER 30, 2014
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
78,468
|
|
$
|
92,470
|
|
$
|
—
|
|
$
|
170,938
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
58,386
|
|
67,524
|
|
—
|
|
125,910
|
|
||||||||||
|
Amortization
|
473
|
|
18,485
|
|
23,027
|
|
—
|
|
41,985
|
|
||||||||||
|
General and administrative
|
8,251
|
|
2
|
|
262
|
|
—
|
|
8,515
|
|
||||||||||
|
Exploration
|
1,056
|
|
2,915
|
|
2,616
|
|
—
|
|
6,587
|
|
||||||||||
|
Pre-development, reclamation, and other
|
180
|
|
115
|
|
3,949
|
|
—
|
|
4,244
|
|
||||||||||
|
Total costs and expenses
|
9,960
|
|
79,903
|
|
97,378
|
|
—
|
|
187,241
|
|
||||||||||
|
Fair value adjustments, net
|
2,990
|
|
4,345
|
|
8,770
|
|
—
|
|
16,105
|
|
||||||||||
|
Other, net
|
1,006
|
|
(1,417
|
)
|
(165
|
)
|
(727
|
)
|
(1,303
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(9,159
|
)
|
(320
|
)
|
(2,864
|
)
|
727
|
|
(11,616
|
)
|
||||||||||
|
Total other income (expense), net
|
(5,163
|
)
|
2,608
|
|
5,741
|
|
—
|
|
3,186
|
|
||||||||||
|
Loss before income and mining taxes
|
(15,123
|
)
|
1,173
|
|
833
|
|
—
|
|
(13,117
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
950
|
|
(210
|
)
|
15,843
|
|
—
|
|
16,583
|
|
||||||||||
|
Total loss after income and mining taxes
|
(14,173
|
)
|
963
|
|
16,676
|
|
—
|
|
3,466
|
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
17,640
|
|
181
|
|
—
|
|
(17,821
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
3,467
|
|
$
|
1,144
|
|
$
|
16,676
|
|
$
|
(17,821
|
)
|
$
|
3,466
|
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(1,087
|
)
|
(1,071
|
)
|
—
|
|
1,072
|
|
(1,086
|
)
|
||||||||||
|
Reclassification adjustments for impairment of marketable securities
|
669
|
|
669
|
|
—
|
|
(669
|
)
|
669
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of marketable securities
|
221
|
|
221
|
|
—
|
|
(221
|
)
|
221
|
|
||||||||||
|
Other comprehensive income (loss)
|
(197
|
)
|
(181
|
)
|
—
|
|
182
|
|
(196
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
3,270
|
|
$
|
963
|
|
$
|
16,676
|
|
$
|
(17,639
|
)
|
$
|
3,270
|
|
|||||
(1) Excludes amortization.
24
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
SEPTEMBER 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(20,565
|
)
|
$
|
28,924
|
|
$
|
31,005
|
|
$
|
(3,127
|
)
|
36,237
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(94
|
)
|
(11,468
|
)
|
(12,299
|
)
|
—
|
|
(23,861
|
)
|
||||||||||
|
Purchase of short-term investments and equity securities
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
||||||||||
|
Sales and maturities of short-term investments
|
—
|
|
60
|
|
—
|
|
—
|
|
60
|
|
||||||||||
|
Acquisitions, net of cash acquired
|
(122
|
)
|
—
|
|
—
|
|
—
|
|
(122
|
)
|
||||||||||
|
Other
|
(1
|
)
|
44
|
|
297
|
|
—
|
|
340
|
|
||||||||||
|
Investments in consolidated subsidiaries
|
1,206
|
|
3,666
|
|
1
|
|
(4,873
|
)
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
986
|
|
(7,698
|
)
|
(12,001
|
)
|
(4,873
|
)
|
(23,586
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Payments on debt, capital leases, and associated costs
|
(711
|
)
|
(1,889
|
)
|
(18
|
)
|
—
|
|
(2,618
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(10,159
|
)
|
—
|
|
(10,159
|
)
|
||||||||||
|
Net intercompany financing activity
|
9,333
|
|
(24,940
|
)
|
7,607
|
|
8,000
|
|
—
|
|
||||||||||
|
Other
|
(34
|
)
|
—
|
|
—
|
|
—
|
|
(34
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
8,588
|
|
(26,829
|
)
|
(2,570
|
)
|
8,000
|
|
(12,811
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(10,991
|
)
|
(5,603
|
)
|
16,434
|
|
—
|
|
(160
|
)
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
124,695
|
|
27,259
|
|
53,914
|
|
—
|
|
205,868
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
113,704
|
|
$
|
21,656
|
|
$
|
70,348
|
|
$
|
—
|
|
$
|
205,708
|
|
|||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
SEPTEMBER 30, 2014
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(7,802
|
)
|
$
|
26,470
|
|
$
|
30,419
|
|
$
|
(17,821
|
)
|
$
|
31,266
|
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(278
|
)
|
(7,805
|
)
|
(8,701
|
)
|
—
|
|
(16,784
|
)
|
||||||||||
|
Purchase of short-term investments and equity securities
|
(2,089
|
)
|
—
|
|
—
|
|
—
|
|
(2,089
|
)
|
||||||||||
|
Sales and maturities of short-term investments
|
—
|
|
2,842
|
|
14
|
|
—
|
|
2,856
|
|
||||||||||
|
Acquisitions, net of cash acquired
|
(12,005
|
)
|
(1,824
|
)
|
—
|
|
—
|
|
(13,829
|
)
|
||||||||||
|
Other
|
—
|
|
—
|
|
74
|
|
—
|
|
74
|
|
||||||||||
|
Investments in consolidated subsidiaries
|
(11,641
|
)
|
(180
|
)
|
—
|
|
11,821
|
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(26,013
|
)
|
(6,967
|
)
|
(8,613
|
)
|
11,821
|
|
(29,772
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Payments on debt, capital leases, and associated costs
|
(12,398
|
)
|
(666
|
)
|
(210
|
)
|
—
|
|
(13,274
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(11,351
|
)
|
—
|
|
(11,351
|
)
|
||||||||||
|
Net intercompany financing activity
|
12,012
|
|
(14,657
|
)
|
(3,355
|
)
|
6,000
|
|
—
|
|
||||||||||
|
Other
|
(77
|
)
|
—
|
|
—
|
|
—
|
|
(77
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(463
|
)
|
(15,323
|
)
|
(14,916
|
)
|
6,000
|
|
(24,702
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(34,278
|
)
|
4,180
|
|
6,890
|
|
—
|
|
(23,208
|
)
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
211,664
|
|
899
|
|
56,570
|
|
—
|
|
269,133
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
177,386
|
|
$
|
5,079
|
|
$
|
63,460
|
|
$
|
—
|
|
$
|
245,925
|
|
|||||
25
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE
MONTHS ENDED
SEPTEMBER 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
281,724
|
|
$
|
200,046
|
|
$
|
—
|
|
$
|
481,770
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
197,475
|
|
156,922
|
|
—
|
|
354,397
|
|
||||||||||
|
Amortization
|
1,493
|
|
61,422
|
|
44,645
|
|
—
|
|
107,560
|
|
||||||||||
|
General and administrative
|
23,690
|
|
25
|
|
264
|
|
—
|
|
23,979
|
|
||||||||||
|
Exploration
|
1,796
|
|
3,370
|
|
4,791
|
|
—
|
|
9,957
|
|
||||||||||
|
Pre-development, reclamation, and other
|
3,437
|
|
4,354
|
|
6,177
|
|
—
|
|
13,968
|
|
||||||||||
|
Total costs and expenses
|
30,416
|
|
266,646
|
|
212,799
|
|
—
|
|
509,861
|
|
||||||||||
|
Fair value adjustments, net
|
1,178
|
|
596
|
|
1,883
|
|
—
|
|
3,657
|
|
||||||||||
|
Other, net
|
3,108
|
|
(2,892
|
)
|
(11,681
|
)
|
(2,792
|
)
|
(14,257
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(29,389
|
)
|
(771
|
)
|
(6,577
|
)
|
2,792
|
|
(33,945
|
)
|
||||||||||
|
Total other income (expense), net
|
(25,103
|
)
|
(3,067
|
)
|
(16,375
|
)
|
—
|
|
(44,545
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(55,519
|
)
|
12,011
|
|
(29,128
|
)
|
—
|
|
(72,636
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
4,011
|
|
(2,836
|
)
|
7,276
|
|
—
|
|
8,451
|
|
||||||||||
|
Total loss after income and mining taxes
|
(51,508
|
)
|
9,175
|
|
(21,852
|
)
|
—
|
|
(64,185
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
(12,677
|
)
|
491
|
|
—
|
|
12,186
|
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(64,185
|
)
|
$
|
9,666
|
|
$
|
(21,852
|
)
|
$
|
12,186
|
|
$
|
(64,185
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(3,744
|
)
|
(2,751
|
)
|
—
|
|
2,751
|
|
(3,744
|
)
|
||||||||||
|
Reclassification adjustments for impairment of marketable securities
|
2,028
|
|
2,028
|
|
—
|
|
(2,028
|
)
|
2,028
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of marketable securities
|
904
|
|
904
|
|
—
|
|
(904
|
)
|
904
|
|
||||||||||
|
Other comprehensive income (loss)
|
(812
|
)
|
181
|
|
—
|
|
(181
|
)
|
(812
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(64,997
|
)
|
$
|
9,847
|
|
$
|
(21,852
|
)
|
$
|
12,005
|
|
$
|
(64,997
|
)
|
|||||
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE
MONTHS ENDED
SEPTEMBER 30, 2014
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
199,716
|
|
$
|
295,417
|
|
$
|
—
|
|
$
|
495,133
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
149,223
|
|
202,269
|
|
—
|
|
351,492
|
|
||||||||||
|
Amortization
|
1,298
|
|
50,565
|
|
71,971
|
|
—
|
|
123,834
|
|
||||||||||
|
General and administrative
|
31,019
|
|
5
|
|
785
|
|
—
|
|
31,809
|
|
||||||||||
|
Exploration
|
2,592
|
|
7,819
|
|
5,546
|
|
—
|
|
15,957
|
|
||||||||||
|
Pre-development, reclamation, and other
|
532
|
|
2,958
|
|
16,529
|
|
—
|
|
20,019
|
|
||||||||||
|
Total costs and expenses
|
35,441
|
|
210,570
|
|
297,100
|
|
—
|
|
543,111
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
.
|
|||||||||||||||||||
|
Fair value adjustments, net
|
1,008
|
|
1,835
|
|
(6,454
|
)
|
—
|
|
(3,611
|
)
|
||||||||||
|
Other, net
|
2,921
|
|
(4,881
|
)
|
(2,886
|
)
|
(2,081
|
)
|
(6,927
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(28,557
|
)
|
(660
|
)
|
(9,844
|
)
|
2,081
|
|
(36,980
|
)
|
||||||||||
|
Total other income (expense), net
|
(24,628
|
)
|
(3,706
|
)
|
(19,184
|
)
|
—
|
|
(47,518
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(60,069
|
)
|
(14,560
|
)
|
(20,867
|
)
|
—
|
|
(95,496
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
1,076
|
|
(629
|
)
|
18,203
|
|
—
|
|
18,650
|
|
||||||||||
|
Total loss after income and mining taxes
|
(58,993
|
)
|
(15,189
|
)
|
(2,664
|
)
|
—
|
|
(76,846
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
(17,853
|
)
|
480
|
|
—
|
|
17,373
|
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(76,846
|
)
|
$
|
(14,709
|
)
|
$
|
(2,664
|
)
|
$
|
17,373
|
|
$
|
(76,846
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(1,487
|
)
|
(1,451
|
)
|
—
|
|
1,451
|
|
(1,487
|
)
|
||||||||||
|
Reclassification adjustments for impairment of marketable securities
|
2,828
|
|
2,828
|
|
—
|
|
(2,828
|
)
|
2,828
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of marketable securities
|
238
|
|
238
|
|
—
|
|
(238
|
)
|
238
|
|
||||||||||
|
Other comprehensive income (loss)
|
1,579
|
|
1,615
|
|
—
|
|
(1,615
|
)
|
1,579
|
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(75,267
|
)
|
$
|
(13,094
|
)
|
$
|
(2,664
|
)
|
$
|
15,758
|
|
$
|
(75,267
|
)
|
|||||
(1) Excludes amortization.
26
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE
MONTHS ENDED
SEPTEMBER 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(73,276
|
)
|
$
|
80,313
|
|
$
|
49,905
|
|
$
|
12,186
|
|
69,128
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(181
|
)
|
(30,791
|
)
|
(34,186
|
)
|
—
|
|
(65,158
|
)
|
||||||||||
|
Purchase of short-term investments and equity securities
|
(1,876
|
)
|
—
|
|
—
|
|
—
|
|
(1,876
|
)
|
||||||||||
|
Sales and maturities of short-term investments
|
12
|
|
446
|
|
71
|
|
—
|
|
529
|
|
||||||||||
|
Acquisitions, net of cash acquired
|
(111,290
|
)
|
—
|
|
—
|
|
—
|
|
(111,290
|
)
|
||||||||||
|
Other
|
(1,767
|
)
|
212
|
|
217
|
|
—
|
|
(1,338
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(14,477
|
)
|
4,490
|
|
117
|
|
9,870
|
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(129,579
|
)
|
(25,643
|
)
|
(33,781
|
)
|
9,870
|
|
(179,133
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
150,000
|
|
—
|
|
3,500
|
|
—
|
|
153,500
|
|
||||||||||
|
Payments on debt, capital leases, and associated costs
|
(62,579
|
)
|
(5,592
|
)
|
(9,667
|
)
|
—
|
|
(77,838
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(30,281
|
)
|
—
|
|
(30,281
|
)
|
||||||||||
|
Net intercompany financing activity
|
19,306
|
|
(33,203
|
)
|
35,953
|
|
(22,056
|
)
|
—
|
|
||||||||||
|
Other
|
(529
|
)
|
—
|
|
—
|
|
—
|
|
(529
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
106,198
|
|
(38,795
|
)
|
(495
|
)
|
(22,056
|
)
|
44,852
|
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(96,657
|
)
|
15,875
|
|
15,629
|
|
—
|
|
(65,153
|
)
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
210,361
|
|
5,781
|
|
54,719
|
|
—
|
|
270,861
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
113,704
|
|
$
|
21,656
|
|
$
|
70,348
|
|
$
|
—
|
|
$
|
205,708
|
|
|||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE
MONTHS ENDED
SEPTEMBER 30, 2014
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(80,218
|
)
|
$
|
35,612
|
|
$
|
79,670
|
|
$
|
17,373
|
|
$
|
52,437
|
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(1,329
|
)
|
(21,420
|
)
|
(21,327
|
)
|
—
|
|
(44,076
|
)
|
||||||||||
|
Purchase of short-term investments and equity securities
|
(49,994
|
)
|
(429
|
)
|
—
|
|
—
|
|
(50,423
|
)
|
||||||||||
|
Sales and maturities of short-term investments
|
—
|
|
3,399
|
|
14
|
|
—
|
|
3,413
|
|
||||||||||
|
Acquisitions, net of cash acquired
|
(12,004
|
)
|
(4,075
|
)
|
—
|
|
—
|
|
(16,079
|
)
|
||||||||||
|
Other
|
—
|
|
4
|
|
57
|
|
—
|
|
61
|
|
||||||||||
|
Investments in consolidated subsidiaries
|
67,353
|
|
(480
|
)
|
—
|
|
(66,873
|
)
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
4,026
|
|
(23,001
|
)
|
(21,256
|
)
|
(66,873
|
)
|
(107,104
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
153,000
|
|
—
|
|
—
|
|
—
|
|
153,000
|
|
||||||||||
|
Payments on debt, capital leases, and associated costs
|
(15,997
|
)
|
(3,209
|
)
|
(1,030
|
)
|
—
|
|
(20,236
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(38,379
|
)
|
—
|
|
(38,379
|
)
|
||||||||||
|
Net intercompany financing activity
|
(20,018
|
)
|
(5,314
|
)
|
(24,168
|
)
|
49,500
|
|
—
|
|
||||||||||
|
Other
|
(483
|
)
|
—
|
|
—
|
|
—
|
|
(483
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
116,502
|
|
(8,523
|
)
|
(63,577
|
)
|
49,500
|
|
93,902
|
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
40,310
|
|
4,088
|
|
(5,163
|
)
|
—
|
|
39,235
|
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
137,076
|
|
991
|
|
68,623
|
|
—
|
|
206,690
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
177,386
|
|
$
|
5,079
|
|
$
|
63,460
|
|
$
|
—
|
|
$
|
245,925
|
|
|||||
27
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
113,704
|
|
$
|
21,656
|
|
$
|
70,348
|
|
$
|
—
|
|
$
|
205,708
|
|
|||||
|
Receivables
|
91
|
|
11,472
|
|
82,036
|
|
—
|
|
93,599
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
68,695
|
|
—
|
|
—
|
|
68,695
|
|
||||||||||
|
Inventory
|
—
|
|
45,123
|
|
52,986
|
|
—
|
|
98,109
|
|
||||||||||
|
Deferred tax assets
|
393
|
|
—
|
|
6,804
|
|
—
|
|
7,197
|
|
||||||||||
|
Prepaid expenses and other
|
2,473
|
|
2,538
|
|
13,420
|
|
—
|
|
18,431
|
|
||||||||||
|
116,661
|
|
149,484
|
|
225,594
|
|
—
|
|
491,739
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
4,844
|
|
133,967
|
|
122,232
|
|
—
|
|
261,043
|
|
||||||||||
|
Mining properties, net
|
—
|
|
218,676
|
|
632,914
|
|
—
|
|
851,590
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
39,685
|
|
—
|
|
—
|
|
39,685
|
|
||||||||||
|
Restricted assets
|
2,669
|
|
381
|
|
4,953
|
|
—
|
|
8,003
|
|
||||||||||
|
Equity securities
|
476
|
|
2,737
|
|
—
|
|
—
|
|
3,213
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
27,507
|
|
—
|
|
27,507
|
|
||||||||||
|
Deferred tax assets
|
33,807
|
|
—
|
|
30,552
|
|
—
|
|
64,359
|
|
||||||||||
|
Net investment in subsidiaries
|
455,689
|
|
42,106
|
|
—
|
|
(497,795
|
)
|
—
|
|
||||||||||
|
Other
|
53,600
|
|
9,412
|
|
2,124
|
|
(53,602
|
)
|
11,534
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
667,746
|
|
$
|
596,448
|
|
$
|
1,045,876
|
|
$
|
(551,397
|
)
|
$
|
1,758,673
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
1,359
|
|
$
|
21,793
|
|
$
|
26,538
|
|
$
|
—
|
|
$
|
49,690
|
|
|||||
|
Accrued liabilities and other
|
9,976
|
|
15,868
|
|
12,485
|
|
—
|
|
38,329
|
|
||||||||||
|
Debt
|
1,000
|
|
8,978
|
|
1,797
|
|
—
|
|
11,775
|
|
||||||||||
|
Royalty obligations
|
—
|
|
4,158
|
|
29,282
|
|
—
|
|
33,440
|
|
||||||||||
|
Reclamation
|
—
|
|
3,957
|
|
504
|
|
(1,151
|
)
|
3,310
|
|
||||||||||
|
Deferred tax liabilities
|
7,142
|
|
848
|
|
88
|
|
—
|
|
8,078
|
|
||||||||||
|
19,477
|
|
55,602
|
|
70,694
|
|
(1,151
|
)
|
144,622
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
520,801
|
|
5,712
|
|
61,300
|
|
(53,602
|
)
|
534,211
|
|
||||||||||
|
Royalty obligations
|
—
|
|
6,781
|
|
—
|
|
—
|
|
6,781
|
|
||||||||||
|
Reclamation
|
—
|
|
64,786
|
|
22,072
|
|
1,151
|
|
88,009
|
|
||||||||||
|
Deferred tax liabilities
|
53,324
|
|
12,643
|
|
156,842
|
|
—
|
|
222,809
|
|
||||||||||
|
Other long-term liabilities
|
3,247
|
|
3,752
|
|
40,857
|
|
—
|
|
47,856
|
|
||||||||||
|
Intercompany payable (receivable)
|
(643,488
|
)
|
397,419
|
|
246,069
|
|
—
|
|
—
|
|
||||||||||
|
(66,116
|
)
|
491,093
|
|
527,140
|
|
(52,451
|
)
|
899,666
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,370
|
|
250
|
|
129,991
|
|
(130,241
|
)
|
1,370
|
|
||||||||||
|
Additional paid-in capital
|
2,983,423
|
|
179,553
|
|
1,896,047
|
|
(2,075,600
|
)
|
2,983,423
|
|
||||||||||
|
Accumulated deficit
|
(2,266,788
|
)
|
(127,424
|
)
|
(1,577,996
|
)
|
1,705,420
|
|
(2,266,788
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(3,620
|
)
|
(2,626
|
)
|
—
|
|
2,626
|
|
(3,620
|
)
|
||||||||||
|
714,385
|
|
49,753
|
|
448,042
|
|
(497,795
|
)
|
714,385
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
667,746
|
|
$
|
596,448
|
|
$
|
1,045,876
|
|
$
|
(551,397
|
)
|
$
|
1,758,673
|
|
|||||
28
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2014
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
210,361
|
|
$
|
5,781
|
|
$
|
54,719
|
|
$
|
—
|
|
$
|
270,861
|
|
|||||
|
Receivables
|
87
|
|
11,151
|
|
105,683
|
|
—
|
|
116,921
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
48,204
|
|
—
|
|
—
|
|
48,204
|
|
||||||||||
|
Inventory
|
—
|
|
54,983
|
|
59,948
|
|
—
|
|
114,931
|
|
||||||||||
|
Deferred tax assets
|
393
|
|
—
|
|
6,971
|
|
—
|
|
7,364
|
|
||||||||||
|
Prepaid expenses and other
|
6,349
|
|
4,557
|
|
4,617
|
|
—
|
|
15,523
|
|
||||||||||
|
217,190
|
|
124,676
|
|
231,938
|
|
—
|
|
573,804
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
6,155
|
|
107,084
|
|
114,672
|
|
—
|
|
227,911
|
|
||||||||||
|
Mining properties, net
|
12,004
|
|
159,124
|
|
330,064
|
|
—
|
|
501,192
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
37,889
|
|
—
|
|
—
|
|
37,889
|
|
||||||||||
|
Restricted assets
|
897
|
|
50
|
|
6,090
|
|
—
|
|
7,037
|
|
||||||||||
|
Equity securities
|
—
|
|
5,982
|
|
—
|
|
—
|
|
5,982
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
21,686
|
|
—
|
|
21,686
|
|
||||||||||
|
Deferred tax assets
|
30,419
|
|
—
|
|
29,732
|
|
—
|
|
60,151
|
|
||||||||||
|
Net investment in subsidiaries
|
128,913
|
|
45,615
|
|
—
|
|
(174,528
|
)
|
—
|
|
||||||||||
|
Other
|
50,813
|
|
5,522
|
|
4,394
|
|
(50,814
|
)
|
9,915
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
446,391
|
|
$
|
485,942
|
|
$
|
738,576
|
|
$
|
(225,342
|
)
|
$
|
1,445,567
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
3,414
|
|
$
|
13,391
|
|
$
|
32,247
|
|
$
|
—
|
|
$
|
49,052
|
|
|||||
|
Accrued liabilities and other
|
22,588
|
|
11,207
|
|
17,718
|
|
—
|
|
51,513
|
|
||||||||||
|
Debt
|
5,334
|
|
7,476
|
|
4,688
|
|
—
|
|
17,498
|
|
||||||||||
|
Royalty obligations
|
—
|
|
5,747
|
|
37,931
|
|
—
|
|
43,678
|
|
||||||||||
|
Reclamation
|
—
|
|
3,401
|
|
1,621
|
|
(1,151
|
)
|
3,871
|
|
||||||||||
|
Deferred tax liabilities
|
7,142
|
|
848
|
|
88
|
|
—
|
|
8,078
|
|
||||||||||
|
38,478
|
|
42,070
|
|
94,293
|
|
(1,151
|
)
|
173,690
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
427,604
|
|
12,806
|
|
61,452
|
|
(50,814
|
)
|
451,048
|
|
||||||||||
|
Royalty obligations
|
—
|
|
9,623
|
|
18,028
|
|
—
|
|
27,651
|
|
||||||||||
|
Reclamation
|
—
|
|
46,792
|
|
19,000
|
|
1,151
|
|
66,943
|
|
||||||||||
|
Deferred tax liabilities
|
53,201
|
|
2,963
|
|
54,842
|
|
—
|
|
111,006
|
|
||||||||||
|
Other long-term liabilities
|
2,582
|
|
469
|
|
26,860
|
|
—
|
|
29,911
|
|
||||||||||
|
Intercompany payable (receivable)
|
(660,792
|
)
|
427,156
|
|
233,636
|
|
—
|
|
—
|
|
||||||||||
|
(177,405
|
)
|
499,809
|
|
413,818
|
|
(49,663
|
)
|
686,559
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,034
|
|
250
|
|
128,299
|
|
(128,549
|
)
|
1,034
|
|
||||||||||
|
Additional paid-in capital
|
2,789,695
|
|
79,712
|
|
1,682,830
|
|
(1,762,542
|
)
|
2,789,695
|
|
||||||||||
|
Accumulated deficit
|
(2,202,603
|
)
|
(133,091
|
)
|
(1,580,664
|
)
|
1,713,755
|
|
(2,202,603
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(2,808
|
)
|
(2,808
|
)
|
—
|
|
2,808
|
|
(2,808
|
)
|
||||||||||
|
585,318
|
|
(55,937
|
)
|
230,465
|
|
(174,528
|
)
|
585,318
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
446,391
|
|
$
|
485,942
|
|
$
|
738,576
|
|
$
|
(225,342
|
)
|
$
|
1,445,567
|
|
|||||
29
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Labor Union Contracts
The Company maintains a labor agreement with Sindicato de Trabajadores Mineros de la Empresa Manquiri S.A. at the San Bartolomé mine in Bolivia. The San Bartolomé mine labor agreement, which became effective January 28, 2010, is currently active and does not have a fixed term. At
September 30, 2015
, approximately
11%
of the Company’s global labor force was covered by this collective bargaining agreement. The Company cannot predict whether this agreement will be renewed on similar terms or at all, whether future labor disruptions will occur or, if disruptions do occur, how long they will last.
Rochester Production Royalties
The Company acquired the Rochester property from ASARCO, a subsidiary of Grupo Mexico S.A. de C.V., in 1983. The Company is obligated to pay a NSR royalty interest to ASARCO when the market price of silver equals or exceeds
$24.50
per ounce up to a maximum rate of
5%
with the condition that Rochester achieves positive cash flow for the applicable year. If cash flow at Rochester is negative in any calendar year, the maximum royalty payable is
$250,000
. Royalty expense was
nil
for the
three
and
nine
months ended
September 30, 2015
and
2014
, respectively.
Commencing January 1, 2014, Coeur Rochester is obligated to pay a
3.4%
net smelter returns royalty on up to
39.4 million
silver equivalent ounces produced and sold from a portion of the Rochester mine, payable on a quarterly basis. For each calendar quarter, the royalty will be payable on the actual sales prices received (exclusive of gains or losses associated with trading activities), less refining costs, of gold and silver produced and sold from the applicable portions of the Rochester mine. Changes in the Company's mine plan and silver and gold prices result in the recognition of mark-to-market gains or losses in
Fair value adjustments, net
. At
September 30, 2015
, a total of
26.2 million
silver equivalent ounces remain outstanding under the obligation.
Palmarejo Gold Production Royalty and Gold Stream
On January 21, 2009, Coeur Mexicana entered into a gold production royalty agreement with a subsidiary of Franco-Nevada Corporation under which the subsidiary of Franco-Nevada Corporation purchased a royalty covering
50%
of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico (excluding production from the recently acquired Paramount properties). The royalty agreement provides for a minimum obligation of
4,167
ounces per month over an initial eight-year period for a total of
400,000
ounces of gold.
On
October 2, 2014
, Coeur Mexicana terminated the Palmarejo gold production royalty in exchange for a termination payment of
$2.0 million
, effective upon completion of the minimum ounce delivery requirement. Subsequently, Coeur Mexicana entered into a gold stream agreement with a subsidiary of Franco-Nevada Corporation whereby Coeur Mexicana will sell
50%
of Palmarejo gold production (excluding production from the recently acquired Paramount properties) upon completion of the gold production royalty minimum ounce delivery requirement for the lesser of
$800
or spot price per ounce. Under the gold stream agreement, Coeur Mexicana will receive a
$22.0 million
deposit toward future deliveries under the gold stream agreement, payable in five quarterly payments. Payments of
$4.0 million
and
$14.0 million
were received in the
three
and
nine
months ended
September 30, 2015
, respectively.
Sites Related to Callahan Mining Corporation
In 1991, the Company acquired all of the outstanding common stock of Callahan Mining Corporation. The Company has received requests for information or notices of potential liability from state or federal agencies with regard to Callahan's operations at sites in Maine, Colorado and Washington. The Company did not make any decisions with respect to generation, transport or disposal of hazardous waste at these sites. Therefore, the Company believes that it is not liable for any potential cleanup costs either directly as an operator or indirectly as a parent. The Company anticipates that further agency interaction may occur with respect to these sites.
Callahan operated a mine and mill in Brooksville, Maine from 1968 until 1972 and subsequently disposed of the property. In 2000, the U.S. Environmental Protection Agency, or EPA, made a formal request to the Company for information regarding the site. The site was placed on the National Priorities List on September 5, 2002, and the Maine Department of Transportation, a partial owner of the property, signed a consent order in 2005. In January 2009, the EPA and the State of Maine made additional formal requests to the Company for information relating to the site, to which the Company responded. The first phase of cleanup at the site began in April 2011.
The Van Stone Mine in Stevens County, Washington consists of several parcels of land and was mined from 1926 until 1993 by multiple owners. Callahan sold its parcel in 1990. In February 2010, the State of Washington Department of Ecology notified Callahan that it, among others, is a potentially liable person (PLP) under Washington law.
30
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Under lease and option agreements with several owners, Callahan was involved with the Akron Mine located in Gunnison County, Colorado from 1937-1960. The United States Forest Service (“USFS”) made formal requests for information to Callahan regarding the site in December 2003, February 2007, March 2013, and November 2013. Callahan timely responded to each request. In August 2014, Callahan received a notice of potential CERCLA liability from the USFS regarding environmental contamination at the Akron Mine. Callahan and the USFS are currently in discussions regarding this matter.
Bolivian Temporary Restriction on Mining above 4,400 Meters
On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of
4,400
meters above sea level while stability studies of Cerro Rico mountain are undertaken. The referenced studies have been completed and officially submitted to the Bolivian mining technical authorities. The Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives. The Company temporarily adjusted its mine plan to confine mining activities to the ore deposits below
4,400
meters above sea level and timely notified COMIBOL of the need to lift the restriction. The Cooperative Reserva Fiscal, with which the Company has one of those contracts, subsequently interpreted the COMIBOL resolution and determined that the Huacajchi deposit was not covered by such resolution. In March 2010, the Cooperative Reserva Fiscal notified COMIBOL that, based on its interpretation, it was resuming mining of high grade material above the 4,400 meter level in the Huacajchi deposit. In December 2011, the Cooperative Reserva Fiscal sent a similar notification to COMIBOL with respect to a further area above the 4,400 meter level known as Huacajchi Sur. Based on these notifications and on the absence of any objection from COMIBOL, the Company resumed limited mining operations at the San Bartolomé mine on the Huacajchi deposit and Huacajchi Sur. Mining in other areas above the
4,400
meter level continues to be suspended.
The suspension may reduce production until the Company is able to resume mining above
4,400
meters. It is uncertain at this time how long the suspension will remain in place, although the COMIBOL resolution explicitly provides for the conclusion of the stability studies as the milestone for lifting the restriction and the Company has engaged with COMIBOL to find the appropriate time to resume mining activities. If COMIBOL decides to restrict access above the
4,400
meter level on a permanent basis, the Company may need to write down the carrying value of the asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.
Paramount Transaction Litigation
Since the announcement of the Company’s acquisition of Paramount, six lawsuits have been filed related to the merger agreement in the Court of Chancery of the State of Delaware. The lawsuits assert a variety of causes of action concerning the transaction, including
claims
against Paramount’s directors for alleged breaches of fiduciary duty in connection with the proposed transaction, and claims against the Company for allegedly aiding and abetting such breaches of fiduciary duty. On February 18, 2015, the court entered an order consolidating the lawsuits and providing that the consolidated case shall be captioned
In re Paramount Gold and Silver Corp. Stockholders Litigation
, Consolidated C.A. No. 10499-VCN. Although the Company completed the acquisition of Paramount on April 17, 2015, the consolidated lawsuits remain pending. The Company cannot predict the outcome of these lawsuits, nor can the Company predict the amount of time and expense that will be required to resolve these lawsuits. The Company intends to defend vigorously against these consolidated actions.
On November 2, 2015, the Company and certain of the Term Loan lenders entered into a Consent under Credit Agreement.
On November 2, 2015, the Company entered into a privately-negotiated agreement to exchange approximately
$54.0 million
aggregate principal amount of its Senior Notes for an estimated
14.4 million
shares, but no more than
14.7 million
shares, of its common stock.
31
The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively "the Company", "our", or "we"). We use certain non-GAAP financial performance measures in our MD&A such as costs applicable to sales, all-in sustaining costs, and adjusted net income (loss). For a detailed description of each of these non-GAAP measures, please see "Non-GAAP Financial Performance Measures" at the end of this item. We believe it is important to read this item in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report and our Annual Report on Form 10-K for the fiscal year ended
December 31, 2014
(the "2014 10-K"), as well as other information we file with the Securities and Exchange Commission.
Overview
We are a large silver producer with significant gold production from mines located in the United States, Mexico, and Bolivia; exploration projects in Mexico and Argentina; and streaming and royalty interests in Australia, Mexico, Ecuador, Chile, and New Zealand. The Palmarejo, San Bartolomé, Kensington, Rochester, and Wharf mines, each of which is operated by the Company, and Coeur Capital, primarily comprised of the Endeavor silver stream, constitute our principal sources of revenue. The Company also owns other precious metal royalties.
Our strategy is to discover, acquire, develop and operate low-cost silver and gold mines and acquire precious metal streams and royalty interests that together produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders. Management focuses on maximizing net cash flow through identifying and implementing revenue enhancement opportunities, reducing operating and non-operating costs, consistent capital discipline, and efficient management of working capital.
Third
Quarter Highlights
|
•
|
Metal sales of
$160.9 million
and royalty revenue of
$1.6 million
|
|
•
|
Production of
9.0 million
silver equivalent ounces, consisting of
3.8 million
silver ounces and
85,769
gold ounces
|
|
•
|
Costs applicable to sales were
$12.22
per silver equivalent ounce (
$11.14
per silver equivalent ounce using average realized price equivalency) and
$808
per gold equivalent ounce (see "Non-GAAP Financial Performance Measures")
|
|
•
|
All-in sustaining costs were
$15.41
per silver equivalent ounce (
$13.35
per silver equivalent ounce using average realized price equivalency) (see "Non-GAAP Financial Performance Measures")
|
|
•
|
Raised 2015 production guidance and lowered 2015 cost guidance
|
|
•
|
General and administrative expenses reduced to
$6.7 million
|
|
•
|
Adjusted net loss of
$21.8 million
or
$0.16
per share (see "Non-GAAP Financial Performance Measures")
|
|
•
|
Capital expenditures of
$23.9 million
, including $4.1 million of development capital at Guadalupe and $5.3 million for tunnel development to the high-grade Independencia underground mine at Palmarejo
|
|
•
|
Cash and cash equivalents of
$205.7 million
|
Consolidated Performance
Net loss
was
$14.2 million
for the
three
months ended
September 30, 2015
compared to
Net income
of
$3.5 million
for the
three
months ended
September 30, 2014
. The
Net loss
in the
three
months ended
September 30, 2015
is primarily due to lower silver ounces sold, lower average realized silver and gold prices and less favorable fair value adjustments, partially offset by lower costs applicable to sales per silver and gold ounce, higher gold ounces sold, and lower exploration costs.
The Company produced
3.8 million
ounces of silver and
85,769
ounces of gold in the
three
months ended
September 30, 2015
, compared to
4.3 million
ounces of silver and
64,989
ounces of gold in the
three
months ended
September 30, 2014
. Silver production
decreased
due to lower throughput at Palmarejo and San Bartolomé, partially offset by higher grade and tons placed at Rochester. Gold production
increased
in the
three
months ended
September 30, 2015
due to the acquisition of Wharf and higher throughput at Kensington.
Costs applicable to sales were
$12.22
per silver equivalent ounce and
$808
per gold equivalent ounce in the
three
months ended
September 30, 2015
, compared to
$14.71
per silver equivalent ounce and
$937
per gold equivalent ounce in the
three
months ended
September 30, 2014
. Costs applicable to sales per silver equivalent ounce
decreased
in the
three
months ended
September 30, 2015
due to lower unit costs at Palmarejo and Rochester. Costs applicable to sales per gold equivalent ounce
decreased
in the
three
months ended
September 30, 2015
due to lower unit costs at Kensington and the addition of Wharf.
32
Net
loss
was
$64.2 million
for the
nine
months ended
September 30, 2015
compared to
Net
loss
of
$76.8 million
for the
nine
months ended
September 30, 2014
. The
lower
Net loss
in the
nine
months ended
September 30, 2015
is primarily due to higher gold ounces sold, lower costs applicable to sales per silver and gold ounce, lower general and administrative expenses, lower pre-development expenses related to La Preciosa, and favorable fair value adjustments, partially offset by lower silver ounces sold and lower average realized silver and gold prices.
The Company produced
11.9 million
ounces of silver and
236,358
ounces of gold in the
nine
months ended
September 30, 2015
, compared to
12.9 million
ounces of silver and
184,850
ounces of gold in the
nine
months ended
September 30, 2014
. Silver production
decreased
due to lower throughput at Palmarejo and San Bartolomé, partially offset by higher grade and tons placed at Rochester. Gold production
increased
in the
nine
months ended
September 30, 2015
due to the acquisition of Wharf and higher throughput at Kensington.
Costs applicable to sales were
$13.11
per silver equivalent ounce and
$810
per gold equivalent ounce in the
nine
months ended
September 30, 2015
, compared to
$14.10
per silver equivalent ounce and
$977
per gold ounce in the
nine
months ended
September 30, 2014
. Costs applicable to sales per silver equivalent ounce
decreased
in the
nine
months ended
September 30, 2015
due to lower unit costs at Rochester and Palmarejo. Costs applicable to sales per gold equivalent ounce
decreased
in the
nine
months ended
September 30, 2015
due to lower unit costs at Kensington and the addition of Wharf.
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Silver ounces produced
|
3,826,439
|
|
4,338,484
|
|
11,928,961
|
|
12,876,643
|
|
|||||||
|
Gold ounces produced
|
85,769
|
|
64,989
|
|
236,358
|
|
184,850
|
|
|||||||
|
Silver equivalent ounces produced
(1)
|
8,972,579
|
|
8,237,824
|
|
26,110,441
|
|
23,967,643
|
|
|||||||
|
Silver ounces sold
|
4,045,357
|
|
4,251,904
|
|
12,142,892
|
|
12,716,919
|
|
|||||||
|
Gold ounces sold
|
91,118
|
|
69,541
|
|
243,851
|
|
189,869
|
|
|||||||
|
Silver equivalent ounces sold
(1)
|
9,512,459
|
|
8,424,364
|
|
26,773,958
|
|
24,109,059
|
|
|||||||
|
Average realized price per silver ounce
|
$
|
14.66
|
|
$
|
19.46
|
|
$
|
15.89
|
|
$
|
19.76
|
|
|||
|
Average realized price per gold ounce
|
$
|
1,116
|
|
$
|
1,260
|
|
$
|
1,162
|
|
$
|
1,272
|
|
|||
|
Costs applicable to sales per silver equivalent ounce
(1)(3)
|
$
|
12.22
|
|
$
|
14.71
|
|
$
|
13.11
|
|
$
|
14.10
|
|
|||
|
Costs applicable to sales per realized silver equivalent ounce
(2)(3)
|
$
|
11.14
|
|
$
|
14.35
|
|
$
|
12.22
|
|
$
|
13.77
|
|
|||
|
Costs applicable to sales per gold equivalent ounce
(1)(3)
|
$
|
808
|
|
$
|
937
|
|
$
|
810
|
|
$
|
977
|
|
|||
|
All-in sustaining costs per silver equivalent ounce
(1)(3)
|
$
|
15.41
|
|
$
|
18.86
|
|
$
|
16.50
|
|
$
|
19.33
|
|
|||
|
All-in sustaining costs per realized silver equivalent ounce
(2)(3)
|
$
|
13.35
|
|
$
|
18.14
|
|
$
|
14.74
|
|
$
|
18.68
|
|
|||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio.
|
|
(2)
|
Equivalent ounces calculated using average realized prices.
|
|
(3)
|
See "Non-GAAP Financial Performance Measures."
|
2015 Outlook Update
For 2015, the Company raised its production expectation to 33.7 - 36.4 million silver equivalent ounces, consisting of 15.2 - 16.1 million silver ounces and 309,000 - 338,000 gold ounces, compared to 2015 original guidance of 31.8 - 34.8 million silver equivalent ounces or 14.8 -16.0 million ounces of silver and 284,000 - 313,000 ounces of gold. We now expect lower 2015 all-in sustaining costs of $16.50 - $17.00 per silver equivalent ounce compared to original 2015 guidance of $17.50 - $18.50 per silver equivalent ounce. Capital spending guidance is expected to be $95 - $105 million compared to original 2015 guidance of $90 - $105 million. General and administrative expense guidance, including share-based compensation, is expected to be $33 - $35 million, compared to original 2015 guidance of $36 - $39 million. Exploration expense is expected to be $13 - $16 million compared to original 2015 guidance of $10 - $12 million.
Consolidated Financial Results
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Revenue
Metal sales
decreased
$8.4 million
, as lower average realized silver and gold prices and lower silver ounces sold were partially offset by higher gold ounces sold. The Company realized average silver and gold prices of
$14.66
per ounce and
$1,116
33
per ounce, respectively, compared with average realized prices of
$19.46
per ounce and
$1,260
per ounce, respectively. The Company sold
4.0 million
silver ounces and
91,118
gold ounces, compared to sales of
4.3 million
silver ounces and
69,541
gold ounces. Silver contributed 37% of sales and gold contributed 63%, compared to 49% of sales from silver and 51% from gold. Royalty revenue increased $1.0 million, primarily due to commencement of production at the Correnso mine in New Zealand.
Costs Applicable to Sales
Costs applicable to sales
decreased
$5.7 million
, primarily due to lower unit costs at Palmarejo, partially offset by higher gold ounces sold. For a complete discussion of costs applicable to sales, see
Results of Operations
below.
Amortization
Amortization
decreased
by
$6.5 million
, or
15.5%
, due to lower amortizable mineral interests and mining equipment, partially offset by the Wharf acquisition.
Expenses
General and administrative expenses
decreased
$1.8 million
, or
21.4%
, primarily due to lower compensation and professional services costs.
Exploration expense
decreased
$4.5 million
, or
67.9%
, due to lower spending at Kensington and Palmarejo.
Pre-development, reclamation, and other expenses
increased
$0.7 million
, or
16.4%
, primarily due to the Wharf acquisition.
Other Income and Expenses
Non-cash fair value adjustments, net, were a
gain
of
$5.8 million
compared to a
gain
of
$16.1 million
, primarily due to the impact of changes in future metal prices on the Palmarejo gold production royalty and the Rochester 3.4% NSR royalty obligation, as well as changes in current metal prices impacting silver put spreads in 2014.
Interest expense (net of capitalized interest of
$0.9 million
)
increased
7.1%
to
$12.4 million
primarily due to interest expense associated with additional borrowings.
Other, net was a loss of
$8.9 million
, compared to a loss of
$1.3 million
, primarily due to changes in foreign currency exchange rates.
Income and Mining Taxes
During the third quarter of 2015, the Company reported estimated income and mining tax benefit of
$8.3 million
, for an effective tax rate of 36.7%. Estimated income and mining tax benefit during the third quarter of 2014 was
$16.6 million
, for an effective tax rate of 126.0%. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit by significant jurisdiction:
|
|
Three months ended September 30, 2015
|
Three months ended September 30, 2014
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
(16,168
|
)
|
$
|
(1,080
|
)
|
$
|
(14,954
|
)
|
$
|
739
|
|
|
|
Argentina
|
(731
|
)
|
(2
|
)
|
(935
|
)
|
1,539
|
|
|||||
|
Mexico
|
(1,412
|
)
|
11,951
|
|
(283
|
)
|
17,003
|
|
|||||
|
Bolivia
|
(4,483
|
)
|
(1,029
|
)
|
3,199
|
|
(2,969
|
)
|
|||||
|
Other jurisdictions
|
315
|
|
(1,580
|
)
|
(144
|
)
|
271
|
|
|||||
|
$
|
(22,479
|
)
|
$
|
8,260
|
|
$
|
(13,117
|
)
|
$
|
16,583
|
|
||
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions, mining tax expense and uncertain tax position accruals. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in our consolidated effective tax rate.
34
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Revenue
Metal sales
decreased
by
$16.3 million
, or
3.3%
, to
$476.4 million
due to lower average realized silver and gold prices and lower silver ounces sold, partially offset by higher gold ounces sold. The Company realized average silver and gold prices of
$15.89
per ounce and
$1,162
per ounce, respectively, compared with average realized prices of
$19.76
per ounce and
$1,272
per ounce, respectively. The Company sold
12.1 million
silver ounces and
243,851
gold ounces, compared to sales of
12.7 million
silver ounces and
189,869
gold ounces. Silver contributed 40% of sales and gold contributed 60%, compared to 51% of sales from silver and 49% from gold. Royalty revenue
increased
$3.0 million
due to commencement of production at the Correnso mine, as well as higher production from the Cerro Bayo and El Gallo mines.
Costs Applicable to Sales
Costs applicable to sales
increased
by
$2.9 million
, or
0.8%
, to
$354.4 million
. The
increase
in costs applicable to sales is primarily due to higher gold ounces sold. For a complete discussion of costs applicable to sales, see
Results of Operations
below.
Amortization
Amortization
decreased
by
$16.3 million
, or
13.1%
, primarily due to lower amortizable mineral interests and mining equipment, partially offset by higher silver equivalent production.
Expenses
General and administrative expenses
decreased
$7.8 million
, or
24.6%
, primarily due to lower compensation and professional services costs.
Exploration expense
decreased
$6.0 million
, or
37.6%
, due to lower spending at Kensington, Rochester, and Palmarejo.
Pre-development, reclamation, and other expenses
decreased
30.2%
to
$14.0 million
, primarily due to La Preciosa feasibility study costs in 2014.
Other Income and Expenses
Non-cash fair value adjustments, net, were a
gain
of
$3.7 million
compared to a
loss
of
$3.6 million
, primarily due to the impact of changes in future metal prices on the Palmarejo gold production royalty, the Rochester 3.4% NSR royalty obligation, and an other-than-temporary impairment of strategic equity investments in 2014.
Interest expense (net of capitalized interest of
$2.7 million
)
decreased
to
$33.9 million
from
$37.0 million
primarily due to the write-off of costs associated with the termination of a former revolving credit facility in 2014, lower accretion of the Palmarejo gold production royalty obligation, and higher capitalized interest, partially offset by interest expense associated with additional borrowings.
Other, net
increased
by
$7.3 million
to
expense
of
$14.3 million
, compared to
expense
of
$6.9 million
, primarily due to changes in foreign currency exchange rates.
Income and Mining Taxes
During the first nine months of 2015, the Company reported estimated income and mining tax
benefit
of approximately
$8.5 million
, for an effective tax rate of 11.6%. Estimated income and mining tax
benefit
during the first nine months of 2014 was
$18.7 million
, for an effective tax rate of 19.5%. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
|
|
Nine months ended September 30, 2015
|
Nine months ended September 30, 2014
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
(46,640
|
)
|
$
|
1,123
|
|
$
|
(75,168
|
)
|
$
|
447
|
|
|
|
Argentina
|
(2,083
|
)
|
(3
|
)
|
(3,828
|
)
|
5,622
|
|
|||||
|
Mexico
|
(16,666
|
)
|
11,234
|
|
(28,999
|
)
|
20,831
|
|
|||||
|
Bolivia
|
(8,081
|
)
|
(2,240
|
)
|
11,848
|
|
(7,937
|
)
|
|||||
|
Other jurisdictions
|
834
|
|
(1,663
|
)
|
651
|
|
(313
|
)
|
|||||
|
|
$
|
(72,636
|
)
|
$
|
8,451
|
|
$
|
(95,496
|
)
|
$
|
18,650
|
|
|
35
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions, mining tax expense and uncertain tax position accruals. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in its consolidated effective tax rate.
A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.
Likewise, there are a number of factors that can potentially impact the Company’s effective tax, including the geographic distribution of income, the non-recognition of tax assets, changes in tax laws, and the impact of specific transactions. For a complete discussion of the factors that influence our effective tax rate, see the MD&A included in the 2014 10-K.
Results of Operations
Palmarejo
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Tons milled
|
427,635
|
|
518,212
|
|
1,315,394
|
|
1,624,275
|
|
|||||||
|
Silver ounces produced
|
1,422,066
|
|
1,532,607
|
|
4,023,077
|
|
5,114,237
|
|
|||||||
|
Gold ounces produced
|
22,974
|
|
22,514
|
|
56,596
|
|
71,436
|
|
|||||||
|
Silver equivalent ounces produced
|
2,800,506
|
|
2,883,447
|
|
7,418,837
|
|
9,400,397
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
11.66
|
|
$
|
15.22
|
|
$
|
13.61
|
|
$
|
14.18
|
|
|||
|
Costs applicable to sales/oz
(2)
|
$
|
10.25
|
|
$
|
14.67
|
|
$
|
12.38
|
|
$
|
13.72
|
|
|||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio. See Non-GAAP Financial Performance Measures.
|
|
(2)
|
Equivalent ounces calculated using average realized prices. See Non-GAAP Financial Performance Measures.
|
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Silver equivalent production
decreased
3%
due to lower mill throughput mostly offset by higher silver and gold grades. Metal sales were
$49.2 million
, or
31%
of Coeur's metal sales, compared with
$61.4 million
, or
36%
of Coeur's metal sales, due to lower production and the addition of Wharf. Costs applicable to sales per ounce
decreased
as a result of lower waste mining, diesel, backfill, and other consumables costs, as well as favorable U.S. dollar exchange rates. Amortization decreased to
$8.6 million
compared to
$16.5 million
due to lower amortizable mineral interests and mining equipment. Capital expenditures increased to
$10.5 million
compared to
$5.9 million
due to underground development of the Guadalupe and Independencia deposits.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Silver equivalent production
decreased
21%
due to lower mill throughput as the mine continues its transition to a lower tonnage, high grade underground operation. Metal sales were
$127.5 million
, or
27%
of Coeur's metal sales, compared with
$201.8 million
, or
41%
of Coeur's metal sales due to lower production and the addition of Wharf. Costs applicable to sales per ounce
decreased
as a result of lower waste mining, diesel, backfill, and other consumables costs, as well as favorable U.S. dollar exchange rates. Amortization decreased to
$25.0 million
compared to
$53.2 million
due to lower production and amortizable mineral interests and mining equipment. Capital expenditures increased to
$30.4 million
compared to
$15.2 million
due to underground development of the Guadalupe and Independencia deposits.
36
Rochester
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Tons placed
|
4,128,868
|
|
3,892,421
|
|
12,002,712
|
|
10,862,864
|
|
|||||||
|
Silver ounces produced
|
1,086,189
|
|
1,156,060
|
|
3,524,130
|
|
3,018,660
|
|
|||||||
|
Gold ounces produced
|
10,892
|
|
11,702
|
|
41,024
|
|
29,124
|
|
|||||||
|
Silver equivalent ounces produced
|
1,739,709
|
|
1,858,180
|
|
5,985,570
|
|
4,766,100
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
12.02
|
|
$
|
14.80
|
|
$
|
12.39
|
|
$
|
14.58
|
|
|||
|
Costs applicable to sales/oz
(2)
|
$
|
10.90
|
|
$
|
14.41
|
|
$
|
11.33
|
|
$
|
14.21
|
|
|||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio. See Non-GAAP Financial Performance Measures.
|
|
(2)
|
Equivalent ounces calculated using average realized prices. See Non-GAAP Financial Performance Measures.
|
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Silver equivalent production
decreased
6%
as a result of timing of recoveries and lower gold grades, partially offset by higher silver grades and higher tons placed. Metal sales were
$34.6 million
, or
22%
of Coeur’s metal sales, compared with
$32.4 million
, or
19%
of Coeur's metal sales. Costs applicable to sales per ounce
decreased
due to lower diesel and maintenance costs. Amortization was
$6.7 million
compared to
$5.4 million
. Capital expenditures were
$5.3 million
compared to
$4.2 million
.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Silver equivalent production
increased
26%
as a result of higher tons placed, higher silver grades, and timing of recoveries. Metal sales were
$115.0 million
, or
24%
of Coeur’s metal sales, compared with
$87.7 million
, or
18%
of Coeur's metal sales. Costs applicable to sales per ounce
decreased
due to higher production, lower diesel costs, and lower consumption of other materials and supplies. Amortization was
$19.0 million
compared to
$14.8 million
due to higher production. Capital expenditures were
$14.5 million
compared to
$9.1 million
due to crusher expansion and Stage III buttress construction.
Kensington
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Tons milled
|
165,198
|
|
145,097
|
|
500,798
|
|
468,543
|
|
|||||||
|
Gold ounces produced
|
28,799
|
|
30,773
|
|
92,553
|
|
84,290
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
889
|
|
$
|
937
|
|
$
|
806
|
|
$
|
977
|
|
|||
(1)
See Non-GAAP Financial Performance Measures
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Gold production
decreased
6%
due to lower grade, partially offset by higher mill throughput. Metal sales were
$30.5 million
, or
19%
of Coeur's metal sales, compared to
$45.9 million
, or
27%
of Coeur’s metal sales due to the addition of Wharf. Costs applicable to sales per ounce
decreased
due to lower diesel and processing costs. Amortization was
$8.5 million
compared to
$12.9 million
due to lower amortizable mineral interests and mining equipment and lower production. Capital expenditures were
$5.5 million
compared to
$3.6 million
.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Gold production
increased
10%
due to higher grade and mill throughput. Metal sales were
$117.0 million
, or
25%
of Coeur's metal sales, compared to
$111.0 million
, which represented
23%
of Coeur’s metal sales. Costs applicable to sales per ounce
decreased
due to higher production and lower diesel and processing costs. Amortization was
$32.7 million
compared to
$35.2 million
due to lower amortizable mineral interests and mining equipment, partially offset by higher production. Capital expenditures were
$14.4 million
compared to
$12.3 million
.
Wharf
37
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Tons placed
|
1,149,744
|
|
—
|
|
2,453,149
|
|
—
|
|
|||||||
|
Silver ounces produced
|
19,365
|
|
—
|
|
38,701
|
|
—
|
|
|||||||
|
Gold ounces produced
|
23,104
|
|
—
|
|
46,185
|
|
—
|
|
|||||||
|
Gold equivalent ounces produced
|
23,427
|
|
—
|
|
46,830
|
|
—
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
716
|
|
$
|
—
|
|
$
|
820
|
|
$
|
—
|
|
|||
(1)
See Non-GAAP Financial Performance Measures
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Gold equivalent production was
23,427
ounces at costs applicable to sales per gold equivalent ounce of
$716
. Metal sales were
$28.0 million
, or
17%
of Coeur's metal sales.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Gold equivalent production was
46,830
ounces in the post-acquisition period to
September 30, 2015
at costs applicable to sales per gold equivalent ounce of
$820
. Metal sales were
$48.4 million
, or
10%
of Coeur's metal sales.
San Bartolomé
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Tons milled
|
373,201
|
|
471,938
|
|
1,237,384
|
|
1,295,287
|
|
|||||||
|
Silver ounces produced
|
1,177,986
|
|
1,509,007
|
|
3,885,789
|
|
4,345,436
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
14.55
|
|
$
|
14.22
|
|
$
|
14.19
|
|
$
|
14.00
|
|
|||
(1)
See Non-GAAP Financial Performance Measures
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
Silver production
decreased
22%
due to a three-week shutdown in July as a result of political protests in Potosi, Bolivia. Silver sales were
$17.4 million
, or
11%
of Coeur's metal sales, compared with
$28.4 million
, or
17%
of Coeur's metal sales. Costs applicable to sales per ounce
increased
as a result of lower production and higher maintenance costs. The Company recently began purchasing high-grade supplemental ore from local sources to increase production and reduce costs per ounce. Amortization was
$3.5 million
compared to
$5.1 million
due to lower production. Capital expenditures were
$1.8 million
compared to
$2.8 million
.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Silver production
decreased
11%
due to a three-week shutdown in July as a result of political protests and lower grade. Silver sales were
$62.3 million
, or
13%
of Coeur's metal sales, compared with
$85.0 million
, or
17%
of Coeur's metal sales. Costs applicable to sales per ounce were generally consistent. Amortization was
$13.5 million
compared to
$14.4 million
due to lower production. Capital expenditures were
$3.7 million
compared to
$5.9 million
.
Coeur Capital
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
Endeavor Silver Stream
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
Tons milled
|
191,913
|
|
199,757
|
|
568,387
|
|
578,514
|
|
|||||||
|
Silver ounces produced
|
120,833
|
|
140,810
|
|
457,264
|
|
398,310
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
4.99
|
|
$
|
7.71
|
|
$
|
5.83
|
|
$
|
7.90
|
|
|||
(1)
See Non-GAAP Financial Performance Measures
Three
Months Ended
September 30, 2015
compared to
Three
Months Ended
September 30, 2014
38
Silver production
decreased
due to lower mill throughput and grade, resulting in metal sales of
$1.3 million
compared to
$2.4 million
. Costs applicable to sales per ounce decreased due to the impact of lower silver prices on the Company's silver price sharing agreement with the Endeavor mine operator. Royalty revenue was
$1.6 million
compared to
$0.6 million
primarily due to production from Correnso in 2015. Amortization was
$2.0 million
compared to
$1.6 million
.
Nine
Months Ended
September 30, 2015
compared to
Nine
Months Ended
September 30, 2014
Silver production
increased
due to higher grade, partially offset by lower throughput, resulting in metal sales of
$6.3 million
compared to
$7.2 million
. Costs applicable to sales per ounce
decreased
due to the impact of lower silver prices on the Company's silver price sharing agreement with the Endeavor mine operator. Royalty revenue was
$5.4 million
compared to
$2.4 million
primarily due to commencement of production from Correnso, as well as higher production from the Cerro Bayo and El Gallo. Amortization was
$6.8 million
compared to
$4.7 million
due to higher production.
Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the
three
and
nine
months ended
September 30, 2015
was
$36.2 million
and
$69.1 million
, compared to
$31.3 million
and
$52.4 million
for the
three
and
nine
months ended
September 30, 2014
, and was impacted by the following key factors:
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2015
|
2014
|
2015
|
2014
|
||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,512,459
|
|
|
8,424,364
|
|
26,773,958
|
|
24,109,059
|
|
||||||
|
Average realized price per silver equivalent ounce
(1)
|
$
|
17.09
|
|
$
|
20.29
|
|
$
|
17.99
|
|
$
|
20.54
|
|
|||
|
Costs applicable to sales per consolidated silver equivalent ounce
(1)
|
(12.64
|
)
|
(14.95
|
)
|
(13.24
|
)
|
(14.58
|
)
|
|||||||
|
Operating margin per silver equivalent ounce
|
$
|
4.45
|
|
$
|
5.34
|
|
$
|
4.75
|
|
$
|
5.96
|
|
|||
(1)
Silver equivalent ounces calculated using a 60:1 silver to gold ratio. See Non-GAAP Financial Performance Measures.
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||
|
In thousands
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
Cash flow before changes in operating assets and liabilities
|
$
|
28,551
|
|
$
|
15,057
|
|
$
|
63,819
|
|
$
|
40,337
|
|
|||
|
Changes in operating assets and liabilities:
|
|||||||||||||||
|
Receivables and other current assets
|
11,011
|
|
7,446
|
|
11,225
|
|
18,297
|
|
|||||||
|
Prepaid expenses and other
|
(2,055
|
)
|
3,871
|
|
(3,222
|
)
|
(687
|
)
|
|||||||
|
Inventories
|
5,380
|
|
9,698
|
|
10,713
|
|
(5,821
|
)
|
|||||||
|
Accounts payable and accrued liabilities
|
(6,650
|
)
|
(4,806
|
)
|
(13,407
|
)
|
311
|
|
|||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
$
|
36,237
|
|
$
|
31,266
|
|
$
|
69,128
|
|
$
|
52,437
|
|
|||
Cash provided by operating activities increased
$5.0 million
in the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
due to higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by lower average realized price per silver equivalent ounce. Metal sales for the
three
months ended
September 30, 2015
compared to the
three
months ended
September 30, 2014
were $30.4 million lower due to lower average realized prices, partially offset by a $21.0 million increase due to higher silver equivalent ounces sold. The
$7.7 million
working capital decrease for the
three
months ended
September 30, 2015
was primarily due to collection of accounts receivable, compared to the
$16.2 million
working capital decrease for the
three
months ended
September 30, 2014
, which was primarily due to collection of accounts receivable and a reduction in inventory.
Cash provided by operating activities increased
$16.7 million
in the
nine
months ended
September 30, 2015
compared to the
nine
months ended
September 30, 2014
due to higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by lower average realized prices. Metal sales for the
nine
months ended
September 30, 2015
compared to the
nine
months ended
September 30, 2014
were $70.1 million lower due to lower average realized price per silver equivalent ounce, partially offset by $53.6 million due to higher silver equivalent ounces sold. The
$5.3 million
working capital decrease for the
nine
months ended
September 30, 2015
was primarily due to a reduction of inventory, compared to the
$12.1 million
working capital decrease for the
nine
months ended
September 30, 2014
, which was primarily due to collection of accounts receivable, partially offset by an increase in inventory.
39
Cash Used in Investing Activities
Net cash
used in
investing activities for the
three
months ended
September 30, 2015
was
$23.6 million
compared to
$29.8 million
in the
three
months ended
September 30, 2014
, primarily due to the purchase of a pre-existing net smelter royalty on La Preciosa in 2014, partially offset by higher capital expenditures. The Company spent
$23.9 million
on capital expenditures in the
three
months ended
September 30, 2015
, compared with
$16.8 million
in the
three
months ended
September 30, 2014
. Capital expenditures in the
three
months ended
September 30, 2015
were primarily related to underground development of the Guadalupe and Independencia deposits at Palmarejo as well as crusher expansion and Stage III buttress construction at Rochester, compared to underground development at Palmarejo and Kensington in the
three
months ended
September 30, 2014
.
Net cash
used in
investing activities for the
nine
months ended
September 30, 2015
was
$179.1 million
compared to
$107.1 million
in the
nine
months ended
September 30, 2014
, primarily due to the acquisition of the Wharf gold mine and higher capital expenditures in 2015, partially offset by purchases of short-term investments in 2014. The Company spent
$65.2 million
on capital expenditures in the
nine
months ended
September 30, 2015
, compared with
$44.1 million
in the
nine
months ended
September 30, 2014
. Capital expenditures in the
nine
months ended
September 30, 2015
were primarily related to underground development of the Guadalupe deposit at Palmarejo as well as crusher expansion and Stage III buttress construction at Rochester, compared to underground development at Palmarejo and Kensington in the
nine
months ended
September 30, 2014
.
Cash Used in (Provided by) Financing Activities
Net cash used in financing activities for the
three
months ended
September 30, 2015
was
$12.8 million
compared to net cash used in financing activities of
$24.7 million
for the
three
months ended
September 30, 2014
. The decrease in cash used by financing activities in the
three
months ended
September 30, 2015
is due to debt repurchases in 2014 and lower Palmarejo gold production royalty payments.
Net cash
provided by
financing activities for the
nine
months ended
September 30, 2015
was
$44.9 million
compared to
$93.9 million
for the
nine
months ended
September 30, 2014
. During the
nine
months ended
September 30, 2015
, the Company entered into a $50 million Short-term Loan which was subsequently repaid upon entering into the $100 million Term Loan. In the
nine
months ended
September 30, 2014
, the Company completed the follow-on offering of $150 million of Senior Notes.
On March 31, 2015, the Company entered into the Short-term Credit Agreement with The Bank of Nova Scotia. The Short-term Credit Agreement provided for the
$50.0 million
loan to the Company. On June 25, 2015, the loan was repaid in full and terminated.
On June 23, 2015, the Company and certain of its subsidiaries entered into the Term Loan Credit Agreement for the Term Loan. The Term Loan Credit Agreement provides for a five year, $100 million term loan to the Company, of which a portion of the proceeds were used to repay the Short-term Loan, and the remaining proceeds are expected to be used for general corporate purposes. The Term Loan contains no financial maintenance covenants and currently bears interest at a rate equal to an adjusted Eurodollar rate plus a margin of 8.00% (at no time will the adjusted Eurodollar rate be deemed to be less than 1.00% per annum). Voluntary prepayments of the Term Loan under the Term Loan Credit Agreement are permitted, subject to the payment of a make-whole premium if such prepayment occurs prior to the first anniversary of the closing date, a premium of 105.0% of the principal amount between the first anniversary and the second anniversary of the closing date and a premium of 103.0% if such prepayment occurs on or after the second anniversary but prior to the third anniversary of the closing date. The Term Loan Credit Agreement requires amortization payments equal to 1.0% of the principal amount of the Term Loan per annum and also requires net cash proceeds of debt issuances, excess cash flow, asset sales and casualty insurance recoveries (in each case, subject to certain exceptions) to either be reinvested in long-term assets used in the Company’s business or be applied as a mandatory prepayment of the Term Loan. Amounts repaid on the Term Loan may not be re-borrowed. The obligations under the Term Loan are secured by substantially all of the assets of the Company and its domestic subsidiaries, including the land, mineral rights and infrastructure at the Kensington, Rochester and Wharf mines, as well as a pledge of the shares of certain of the Company's subsidiaries. The Term Loan Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants.
On November 2, 2015, the Company and certain of the Term Loan lenders entered into a Consent under Credit Agreement (the “Consent”). Additional information regarding the Consent is contained in Part II, Item 5 of this Report and is incorporated herein by reference. On November 2, 2015, the Company entered into a privately-negotiated agreement to exchange approximately $54.0 million aggregate principal amount of its Senior Notes for an estimated 14.4 million shares, but no more than 14.7 million shares, of its common stock (the "Exchange"). Additional information regarding the Exchange is contained in Part II, Item 5 of this Report and is incorporated herein by reference.
40
Other Liquidity Matters
The Company asserts that its earnings from the Mexican operations are indefinitely reinvested. Therefore, no provision has been made for United States federal and state income taxes on the Company's tax basis differences in Mexico, which primarily relate to accumulated foreign earnings that have been reinvested and are expected to be reinvested outside the United States indefinitely. The Company does not believe that the amounts reinvested will have a material impact on liquidity.
The Company may elect to defer some capital investment activities or to secure additional capital to ensure it maintains sufficient liquidity. In addition, if the Company decides to pursue the acquisition of additional mineral interests, new capital projects, or acquisitions of new properties, mines or companies, additional financing activities may be necessary. There can be no assurances that such financing will be available when or if needed upon acceptable terms, or at all.
Critical Accounting Policies and Accounting Developments
Please see Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contained in the Company’s Form 10-K for the year ended December 31, 2014 for the Company's critical accounting policies and estimates.
Cautionary Statement Concerning Forward-Looking Statements
This report contains numerous forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) relating to the Company’s gold and silver mining business, including statements regarding strategies to produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders, maximizing net cash flow, reducing operating and non-operating costs, demonstrating consistent capital discipline, efficient management of working capital, liquidity maintenance efforts, identifying and implementing revenue enhancement opportunities, the transition to a lower tonnage, high grade underground operation at Palmarejo, tax positions, capital requirements, anticipated production, costs, and expenses, and estimated number of shares to be issued in the exchange transaction. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “plan,” “projected,” “contemplates,” “anticipates” or similar words. Actual results 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) the risk factors set forth in the "Risk Factors" section of the 2014 10-K and the risks and uncertainties discussed in this MD&A, (ii) the risk that the anticipated benefits of recent acquisitions are not realized, (iii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iv) changes in the market prices of gold and silver and a sustained lower price environment, including the resulting impact on cash flows and debt covenant compliance, (v) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions and grade variability, (vi) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vii) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (viii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (ix) the absence of control over and reliance on third parties to operate mines in which the Company or any of its subsidiaries holds royalty or streaming interests and risks related to these mining operations (including results of mining and exploration activities, environmental, economic and political risks, and changes in mine plans and project parameters); (x) the loss of access to any third-party smelter to which the Company markets silver and gold, (xi) the effects of environmental and other governmental regulations, (xii) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xiii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt. 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.
41
Non-GAAP Financial Performance Measures
Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles ("GAAP"). These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
Adjusted Net Income (Loss)
Management uses
Adjusted net income (loss)
to evaluate the Company's operating performance, and to plan and forecast its operations. The Company believes the use of
Adjusted net income (loss)
reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Management's determination of the components of
Adjusted net income (loss)
are evaluated periodically and are based, in part, on a review of non-GAAP financial measures used by mining industry analysts.
Net income (loss)
is reconciled to
Adjusted net income (loss)
in the table below, with amounts presented after-tax:
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2015
|
2014
|
2015
|
2014
|
|||||||||||
|
Net income (loss)
|
$
|
(14,219
|
)
|
$
|
3,466
|
|
$
|
(64,185
|
)
|
$
|
(76,846
|
)
|
|||
|
Fair value adjustments, net
|
(3,384
|
)
|
(13,026
|
)
|
(1,664
|
)
|
1,299
|
|
|||||||
|
Stock-based compensation
|
1,541
|
|
2,417
|
|
6,004
|
|
7,175
|
|
|||||||
|
Impairment of marketable securities
|
483
|
|
1,092
|
|
2,028
|
|
4,614
|
|
|||||||
|
Accretion of royalty obligation
|
1,063
|
|
1,374
|
|
3,525
|
|
4,984
|
|
|||||||
|
Loss on debt extinguishment
|
—
|
|
—
|
|
271
|
|
—
|
|
|||||||
|
Inventory adjustments
|
2,280
|
|
4,993
|
|
7,770
|
|
5,770
|
|
|||||||
|
Revolving Credit Facility termination
|
—
|
|
—
|
|
—
|
|
3,035
|
|
|||||||
|
Corporate reorganization costs
|
514
|
|
—
|
|
514
|
|
—
|
|
|||||||
|
Transaction-related costs
|
—
|
|
—
|
|
2,112
|
|
—
|
|
|||||||
|
Deferred tax asset valuation allowance
|
—
|
|
—
|
|
2,013
|
|
—
|
|
|||||||
|
Foreign exchange impact on deferred taxes
|
(10,092
|
)
|
(18,801
|
)
|
(12,326
|
)
|
(18,795
|
)
|
|||||||
|
Adjusted net income (loss)
|
$
|
(21,814
|
)
|
$
|
(18,485
|
)
|
$
|
(53,938
|
)
|
$
|
(68,764
|
)
|
|||
|
Adjusted net income (loss) per share
|
$
|
(0.16
|
)
|
$
|
(0.18
|
)
|
$
|
(0.43
|
)
|
$
|
(0.67
|
)
|
|||
Costs Applicable to Sales and All-in Sustaining Costs
Management uses
Costs applicable to sales
("CAS") and
All-in sustaining costs
("AISC") to evaluate the Company’s current operating performance and life of mine performance from discovery through reclamation. We believe these measures assist analysts, investors and other stakeholders in understanding the costs associated with producing silver and gold and assessing our operating performance and ability to generate free cash flow from operations. These measures may not be indicative of operating profit or cash flow from operations as determined under GAAP. Management believes converting the benefit from selling gold into silver equivalent ounces best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS and AISC differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit rather than converting to silver equivalent ounces, differences in the determination of sustaining capital expenditures, and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards.
42
Three
Months Ended
September 30, 2015
|
Silver
|
Gold
|
Total
|
||||||||||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total
|
Kensington
|
Wharf
|
Total
|
||||||||||||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
42,710
|
|
$
|
33,935
|
|
$
|
20,665
|
|
$
|
1,384
|
|
$
|
99,038
|
|
$
|
33,472
|
|
$
|
23,419
|
|
$
|
56,891
|
|
$
|
155,929
|
|
|||||||||
|
Amortization
|
8,617
|
|
8,499
|
|
3,526
|
|
909
|
|
21,551
|
|
8,499
|
|
5,642
|
|
14,141
|
|
35,692
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
34,093
|
|
$
|
25,436
|
|
$
|
17,483
|
|
$
|
475
|
|
$
|
77,487
|
|
$
|
24,973
|
|
$
|
17,777
|
|
$
|
42,750
|
|
$
|
120,237
|
|
|||||||||
|
Silver equivalent ounces sold
(1)
|
2,924,947
|
|
2,116,353
|
|
1,201,959
|
|
95,260
|
|
6,338,519
|
|
9,512,459
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
(1)
|
28,084
|
|
24,815
|
|
52,899
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
(1)
|
$
|
11.66
|
|
$
|
12.02
|
|
$
|
14.55
|
|
$
|
4.99
|
|
$
|
12.22
|
|
$
|
889
|
|
$
|
716
|
|
$
|
808
|
|
$
|
12.64
|
|
|||||||||
|
Costs applicable to sales per realized ounce
(2)
|
$
|
10.25
|
|
$
|
10.90
|
|
|
|
$
|
11.14
|
|
|
|
|
$
|
10.95
|
|
|||||||||||||||||||
|
Costs applicable to sales
|
$
|
120,237
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
820
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
|
8,565
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
6,694
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
2,112
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
4,493
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
3,648
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
146,569
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
(1)
|
6,338,519
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
(1)
|
3,173,940
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
(1)
|
9,512,459
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
15.41
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
(2)
|
$
|
13.35
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio.
|
|
(2)
|
Equivalent ounces calculated using average realized prices.
|
Three
Months Ended
September 30, 2014
|
Silver
|
Gold
|
|||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total
|
Kensington
|
Total
|
|||||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
62,481
|
|
$
|
29,077
|
|
$
|
25,564
|
|
$
|
1,998
|
|
$
|
119,120
|
|
$
|
47,555
|
|
$
|
166,675
|
|
|||||||
|
Amortization
|
16,493
|
|
5,359
|
|
5,117
|
|
909
|
|
27,878
|
|
12,887
|
|
40,765
|
|
||||||||||||||
|
Costs applicable to sales
|
$
|
45,988
|
|
$
|
23,718
|
|
$
|
20,447
|
|
$
|
1,089
|
|
$
|
91,242
|
|
$
|
34,668
|
|
$
|
125,910
|
|
|||||||
|
Silver equivalent ounces sold
(1)
|
3,021,448
|
|
1,602,676
|
|
1,438,409
|
|
141,291
|
|
6,203,824
|
|
8,424,364
|
|
||||||||||||||||
|
Gold equivalent ounces sold
(1)
|
37,009
|
|
||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
(1)
|
$
|
15.22
|
|
$
|
14.80
|
|
$
|
14.22
|
|
$
|
7.71
|
|
$
|
14.71
|
|
$
|
937
|
|
$
|
14.95
|
|
|||||||
|
Costs applicable to sales per realized ounce
(2)
|
$
|
14.67
|
|
$
|
14.41
|
|
|
|
$
|
14.35
|
|
|
$
|
14.38
|
|
|||||||||||||
|
Costs applicable to sales
|
$
|
125,910
|
|
|||||||||||||||||||||||||
|
Treatment and refining costs
|
1,425
|
|
||||||||||||||||||||||||||
|
Sustaining capital
|
12,239
|
|
||||||||||||||||||||||||||
|
General and administrative
|
8,515
|
|
||||||||||||||||||||||||||
|
Exploration
|
6,587
|
|
||||||||||||||||||||||||||
|
Reclamation
|
2,041
|
|
||||||||||||||||||||||||||
|
Project/pre-development costs
|
2,154
|
|
||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
158,871
|
|
|||||||||||||||||||||||||
|
Silver equivalent ounces sold
(1)
|
6,203,824
|
|
||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
(1)
|
2,220,540
|
|
||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
(1)
|
8,424,364
|
|
||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
18.86
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
(2)
|
$
|
18.14
|
|
|||||||||||||||||||||||||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio.
|
|
(2)
|
Equivalent ounces calculated using average realized prices.
|
43
Nine
Months Ended
September 30, 2015
|
Silver
|
Gold
|
Total
|
||||||||||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total
|
Kensington
|
Wharf
|
Total
|
||||||||||||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
123,692
|
|
$
|
100,183
|
|
$
|
69,254
|
|
$
|
6,479
|
|
$
|
299,608
|
|
$
|
114,582
|
|
$
|
43,543
|
|
$
|
158,125
|
|
$
|
457,733
|
|
|||||||||
|
Amortization
|
24,997
|
|
18,962
|
|
13,487
|
|
4,019
|
|
61,465
|
|
32,738
|
|
9,133
|
|
41,871
|
|
103,336
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
98,695
|
|
$
|
81,221
|
|
$
|
55,767
|
|
$
|
2,460
|
|
$
|
238,143
|
|
$
|
81,844
|
|
$
|
34,410
|
|
$
|
116,254
|
|
$
|
354,397
|
|
|||||||||
|
Silver equivalent ounces sold
(1)
|
7,252,519
|
|
6,557,312
|
|
3,931,214
|
|
422,253
|
|
18,163,298
|
|
26,773,958
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
(1)
|
101,565
|
|
41,946
|
|
143,511
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
(1)
|
$
|
13.61
|
|
$
|
12.39
|
|
$
|
14.19
|
|
$
|
5.83
|
|
$
|
13.11
|
|
$
|
806
|
|
$
|
820
|
|
$
|
810
|
|
$
|
13.24
|
|
|||||||||
|
Costs applicable to sales per realized ounce
(2)
|
$
|
12.38
|
|
$
|
11.33
|
|
|
|
$
|
12.22
|
|
|
|
|
$
|
11.82
|
|
|||||||||||||||||||
|
Costs applicable to sales
|
$
|
354,397
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
3,837
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
|
33,110
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
23,979
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
9,957
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
11,806
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
4,769
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
441,855
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
(1)
|
18,163,298
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
(1)
|
8,610,660
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
(1)
|
26,773,958
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
16.50
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
(2)
|
$
|
14.74
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio.
|
|
(2)
|
Equivalent ounces calculated using average realized prices.
|
Nine
Months Ended
September 30, 2014
|
Silver
|
Gold
|
|||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total
|
Kensington
|
Total
|
|||||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
192,309
|
|
$
|
77,641
|
|
$
|
74,472
|
|
$
|
5,835
|
|
$
|
350,257
|
|
$
|
121,579
|
|
$
|
471,836
|
|
|||||||
|
Amortization
|
53,196
|
|
14,835
|
|
14,430
|
|
2,721
|
|
85,182
|
|
35,162
|
|
120,344
|
|
||||||||||||||
|
Costs applicable to sales
|
$
|
139,113
|
|
$
|
62,806
|
|
$
|
60,042
|
|
$
|
3,114
|
|
$
|
265,075
|
|
$
|
86,417
|
|
$
|
351,492
|
|
|||||||
|
Silver equivalent ounces sold
(1)
|
9,811,669
|
|
4,307,934
|
|
4,289,817
|
|
394,259
|
|
18,803,679
|
|
24,109,059
|
|
||||||||||||||||
|
Gold equivalent ounces sold
(1)
|
88,423
|
|
||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
(1)
|
$
|
14.18
|
|
$
|
14.58
|
|
$
|
14.00
|
|
$
|
7.90
|
|
$
|
14.10
|
|
$
|
977
|
|
$
|
14.58
|
|
|||||||
|
Costs applicable to sales per realized ounce
(2)
|
$
|
13.72
|
|
$
|
14.21
|
|
|
|
$
|
13.77
|
|
$
|
14.10
|
|
||||||||||||||
|
Costs applicable to sales
|
$
|
351,492
|
|
|||||||||||||||||||||||||
|
Treatment and refining costs
|
3,943
|
|
||||||||||||||||||||||||||
|
Sustaining capital
|
42,642
|
|
||||||||||||||||||||||||||
|
General and administrative
|
31,809
|
|
||||||||||||||||||||||||||
|
Exploration
|
15,957
|
|
||||||||||||||||||||||||||
|
Reclamation
|
5,918
|
|
||||||||||||||||||||||||||
|
Project/pre-development costs
|
14,153
|
|
||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
465,914
|
|
|||||||||||||||||||||||||
|
Silver equivalent ounces sold
(1)
|
18,803,679
|
|
||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
(1)
|
5,305,380
|
|
||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
(1)
|
24,109,059
|
|
||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
19.33
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
(2)
|
$
|
18.68
|
|
|||||||||||||||||||||||||
|
(1)
|
Equivalent ounces calculated using a 60:1 silver to gold ratio.
|
|
(2)
|
Equivalent ounces calculated using average realized prices.
|
44
The Company is exposed to various market risks as a part of its operations and engages in risk management strategies to mitigate these risks. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company does not actively engage in the practice of trading derivative instruments for profit. This discussion of the Company's market risk assessments contains "forward looking statements" that contain risks and uncertainties. For additional information regarding forward-looking statements and risks and uncertainties that could impact the Company, please refer to Part I, Item 2 of this Report - Cautionary Statement Concerning Forward-Looking Statements. Actual results and actions could differ materially from those discussed below.
Gold and Silver Price
Gold and silver prices may fluctuate widely due to numerous factors such as U.S. dollar strength or weakness, demand, investor sentiment, inflation or deflation, and global mine production. The Company's profitability and cash flow may be significantly impacted by changes in the market price of gold and silver.
Gold and Silver Hedging
To mitigate the risks associated with gold and silver price fluctuations, the Company may enter into option contracts to hedge future production. At
September 30, 2015
, the Company had no outstanding option contracts.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in most cases, provide for a provisional payment based upon preliminary assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract. Depending on the difference between the price at the time of sale and the final settlement price, embedded derivatives are recorded as either a derivative asset or liability. The embedded derivatives do not qualify for hedge accounting and, as a result, are marked to the market gold and silver price at the end of each period from the provisional sale date to the date of final settlement. The mark-to-market gains and losses are recorded in earnings. Changes in silver and gold pricing resulted in provisional pricing mark-to-market gains of
$0.4 million
in the three months ended
September 30, 2015
.
At
September 30, 2015
, the Company had outstanding provisionally priced sales of
0.6 million
ounces of silver and
39,069
ounces of gold at prices of
$14.65
and
$1,147
, respectively. A 10% change in realized silver price would cause revenue to vary
$0.8 million
and a 10% change in realized gold price would cause revenue to vary
$4.5 million
.
Palmarejo Gold Production Royalty
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties and includes a minimum obligation of 4,167 gold ounces per month which terminates when payments in respect of 400,000 gold ounces have been made. The minimum royalty obligation is considered an embedded derivative financial instrument due to the impact of fluctuating gold prices on the underlying gold ounces.
As of
September 30, 2015
, a total of
45,996
ounces of gold remain outstanding under the minimum royalty obligation. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was
19.5%
at
September 30, 2015
. The fair value of the embedded derivative at
September 30, 2015
was a liability of
$9.0 million
. A 10% change in the price of gold would result in a change in the fair value of the net derivative liability at
September 30, 2015
to vary by
$4.7 million
.
Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Australia, Bolivia, Chile, Mexico, Argentina, Ecuador, and New Zealand, which exposes it to foreign currency exchange rate risks. Foreign currency exchange rates are influenced by world market factors beyond the Company's control such as supply and demand for U.S. and foreign currencies. Fluctuations in local currency exchange rates in relation to the U.S. dollar may significantly impact profitability and cash flow.
Foreign Currency Hedging
To manage foreign currency risk, the Company may enter into forward foreign currency contracts and option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at
September 30, 2015
.
Additional information about the Company’s derivative financial instruments may be found in Note 10 -- Derivative Financial Instruments in the notes to the consolidated financial statements.
45
|
(a)
|
Disclosure Controls and Procedures
|
As of the end of the period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management’s control objectives. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by it in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
|
(b)
|
Management’s Report on Internal Control Over Financial Reporting
|
Based on an evaluation by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that there was no change in the Company’s internal control over financial reporting during the
three
months ended
September 30, 2015
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
46
The information contained in Note 19 -- Commitments and Contingencies in the notes to the consolidated financial statements included in this quarterly report is incorporated herein by reference.
Item 1A -- Risk Factors of the 2014 10-K sets forth information relating to important risks and uncertainties that could materially adversely affect the Company's business, financial condition or operating results. Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.
Information pertaining to mine safety matters is reported in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act in Exhibit 95.1 attached to this Quarterly Report on Form 10-Q.
(a) On November 2, 2015, the Company and certain lenders of the Term Loan entered into a Consent under Credit Agreement (the “Consent”), which granted a consent under the Term Loan Credit Agreement to permit the redemption, prepayment, acquisition and cancellation of Senior Notes, in one or more transactions from time to time, with the proceeds from, or directly in exchange (including exchanges pursuant to Section 3(a)(9) of the Securities Act) for, the issuance of up to $100 million of the Company’s common stock during a period of twelve (12) months commencing on November 2, 2015 (collectively, the “Transactions”). Pursuant to the Consent, the lenders agreed that no default or event of default in respect of a breach of the Term Loan Credit Agreement would occur as a result of the Transactions. A copy of the Consent is filed as Exhibit 10.1 to this Report and is incorporated herein by reference.
Pursuant to a privately-negotiated agreement dated November 2, 2015, the Company agreed to exchange approximately $54.0 million aggregate principal amount of its Senior Notes for no more than 14.7 million shares of its common stock, par value $0.01 the (“Shares”). The Company expects to issue the Shares in two tranches by the end of November 2015, and it will issue the Shares pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.
In April 2013, the Company issued four-year warrants (the “Warrants”) to purchase approximately 1.6 million shares of the Company's common stock at an exercise price of $30 per share. At the time of issuance, the Company listed the Warrants on the New York Stock Exchange (“NYSE”). On October 28, 2015, the Company received a notice from NYSE indicating that the Warrants are not in compliance with the NYSE's continued listing standard requiring the security to maintain an aggregate market value of not less than $1.0 million. Consequently, NYSE notified the Company that it has determined to commence proceedings to delist the Warrants pursuant to Section 802.01D of the NYSE Listed Company Manual and has suspended trading in the Warrants. To effect the delisting, NYSE will apply to the SEC to delist the Warrants pending completion of applicable procedures. Based on recent trading prices, the Company estimates the aggregate market value of the Warrants to be approximately $0.3 million.
47
|
10.1
|
Consent under Credit Agreement dated November 2, 2015 (Filed herewith).
|
|
31.1
|
Certification of the CEO (Filed herewith).
|
|
31.2
|
Certification of the CFO (Filed herewith).
|
|
32.1
|
CEO Section 1350 Certification (Filed herewith).
|
|
32.2
|
CFO Section 1350 Certification (Filed herewith).
|
|
95.1
|
Mine Safety Disclosure (Filed herewith).
|
|
101.INS
|
XBRL Instance Document**
|
|
101.SCH
|
XBRL Taxonomy Extension Schema**
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase**
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase**
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase**
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase**
|
* Management contract or compensatory plan or arrangement.
** The following financial information from Coeur Mining, Inc.'s Quarterly Report on Form 10-Q for the
three
and
nine
months ended
September 30, 2015
, formatted in XBRL (Extensible Business Reporting Language): Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, Condensed Consolidated Statement of Changes in Stockholders' Equity
48
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 MINING, INC.
|
|
|
(Registrant)
|
|||
|
Dated
|
November 2, 2015
|
/s/ Mitchell J. Krebs
|
|
|
MITCHELL J. KREBS
|
|||
|
President and Chief Executive Officer (Principal Executive Officer)
|
|||
|
Dated
|
November 2, 2015
|
/s/ Peter C. Mitchell
|
|
|
PETER C. MITCHELL
|
|||
|
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
|
|||
|
Dated
|
November 2, 2015
|
/s/ Mark Spurbeck
|
|
|
MARK SPURBECK
|
|||
|
Vice President, Finance (Principal Accounting Officer)
|
|||
49
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsNote 1 - Basis Of PresentationNote 2 - Summary Of Significant Accounting PoliciesNote 3 Segment ReportingNote 4 ReclamationNote 5 Stock-based CompensationNote 6 Retirement Savings PlanNote 7 Income and Mining TaxesNote 8 Net Income (loss) Per ShareNote 9 Fair Value MeasurementsNote 10 Derivative Financial InstrumentsNote 11 AcquisitionsNote 12 InvestmentsNote 13 ReceivablesNote 14 Inventory and Ore on Leach PadsNote 15 Property, Plant and EquipmentNote 16 Mining PropertiesNote 17 DebtNote 18 - Supplemental Guarantor InformationNote 19 Commitments and ContingenciesNote 20 Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosure About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits