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 June 30, 2016
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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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 162,364,657 shares were issued and outstanding as of July 25, 2016.
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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Condensed Consolidated Balance Sheets (Unaudited)
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Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited)
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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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 6.
Exhibits
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Signatures
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2
Item 1.
Financial Statements
COEUR MINING, INC. AND SUBSIDIARIES
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Three months ended June 30,
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Six months ended
June 30,
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||||||||||||||
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2016
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2015
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2016
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2015
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||||||||||||
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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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182,007
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$
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166,263
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$
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330,394
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$
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319,219
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|||
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COSTS AND EXPENSES
|
||||||||||||||||
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Costs applicable to sales
(1)
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3
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100,465
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119,097
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202,020
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234,160
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|||||||
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Amortization
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37,505
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38,974
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65,470
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72,064
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||||||||
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General and administrative
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7,400
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8,451
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15,676
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17,286
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Exploration
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2,233
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3,579
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3,963
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7,845
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||||||||
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Write-downs
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—
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—
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4,446
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—
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||||||||
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Pre-development, reclamation, and other
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4,364
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2,267
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8,568
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9,030
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||||||||
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Total costs and expenses
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151,967
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172,368
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300,143
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340,385
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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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10
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(3,579
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)
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2,754
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(12,274
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)
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(2,130
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)
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|||||||
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Interest expense, net of capitalized interest
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18
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(10,875
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)
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(10,734
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)
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(21,995
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)
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(21,499
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)
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|||||||
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Other, net
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7
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(1,857
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)
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(2,852
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)
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(543
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)
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(5,362
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)
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|||||||
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Total other income (expense), net
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(16,311
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)
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(10,832
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)
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(34,812
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)
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(28,991
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)
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||||||||
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Income (loss) before income and mining taxes
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13,729
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(16,937
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)
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(4,561
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)
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(50,157
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)
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||||||||
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Income and mining tax (expense) benefit
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8
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768
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260
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(1,338
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)
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192
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NET INCOME (LOSS)
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$
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14,497
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$
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(16,677
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)
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$
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(5,899
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)
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$
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(49,965
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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 $(1,164) and $(2,174) for the three and six months ended June 30, 2016, respectively, and $7 for the three months June 30, 2015
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2,103
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(1,312
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)
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3,146
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(2,813
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)
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||||||||
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Reclassification adjustments for impairment of equity securities
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20
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31
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20
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1,545
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Reclassification adjustments for realized (gain) loss on sale of equity securities
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(314
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904
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273
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904
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Other comprehensive income (loss)
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1,809
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(377
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)
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3,439
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(364
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)
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||||||||
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COMPREHENSIVE INCOME (LOSS)
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$
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16,306
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$
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(17,054
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)
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$
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(2,460
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)
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$
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(50,329
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)
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||||
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NET INCOME (LOSS) PER SHARE
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9
|
|||||||||||||||
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Basic
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$
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0.09
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$
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(0.12
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)
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$
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(0.04
|
)
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$
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(0.42
|
)
|
||||
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Diluted
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$
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0.09
|
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$
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(0.12
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)
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$
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(0.04
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)
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$
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(0.42
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)
|
||||
(1) Excludes amortization.
The accompanying notes are an integral part of these consolidated financial statements.
3
COEUR MINING, INC. AND SUBSIDIARIES
|
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Three months ended June 30,
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Six months ended June 30,
|
|||||||||||||||
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2016
|
2015
|
2016
|
2015
|
|||||||||||||
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Notes
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In thousands
|
|||||||||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||||||||||
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Net income (loss)
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$
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14,497
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$
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(16,677
|
)
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$
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(5,899
|
)
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(49,965
|
)
|
||||||
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Adjustments:
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|
||||||||||||||||
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Amortization
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37,505
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38,974
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65,470
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72,064
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|||||||||
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Accretion
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2,848
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3,526
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6,017
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6,676
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|||||||||
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Deferred income taxes
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(15,170
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)
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(5,053
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)
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(17,275
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)
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(7,237
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)
|
|||||||||
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Fair value adjustments, net
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10
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3,579
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(2,754
|
)
|
12,274
|
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2,130
|
|
||||||||
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Stock-based compensation
|
5
|
2,307
|
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2,604
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5,222
|
|
4,754
|
|
||||||||
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Impairment of equity securities
|
13
|
20
|
|
31
|
|
20
|
|
1,545
|
|
||||||||
|
Write-downs
|
—
|
|
—
|
|
4,446
|
|
—
|
|
|||||||||
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Other
|
1,910
|
|
4,224
|
|
474
|
|
5,303
|
|
|||||||||
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Changes in operating assets and liabilities:
|
|
||||||||||||||||
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Receivables
|
(12,402
|
)
|
(2,342
|
)
|
(8,921
|
)
|
214
|
|
|||||||||
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Prepaid expenses and other current assets
|
(898
|
)
|
160
|
|
381
|
|
(1,167
|
)
|
|||||||||
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Inventory and ore on leach pads
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(7,686
|
)
|
4,649
|
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(15,508
|
)
|
5,333
|
|
|||||||||
|
Accounts payable and accrued liabilities
|
19,429
|
|
9,662
|
|
5,855
|
|
(6,095
|
)
|
|||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
45,939
|
|
37,004
|
|
52,556
|
|
33,555
|
|
|||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||||||||||
|
Capital expenditures
|
(23,288
|
)
|
(23,677
|
)
|
(45,460
|
)
|
(41,297
|
)
|
|||||||||
|
Acquisitions, net
|
12
|
—
|
|
(9,152
|
)
|
—
|
|
(111,170
|
)
|
||||||||
|
Proceeds from the sale assets
|
7,293
|
|
8
|
|
11,302
|
|
165
|
|
|||||||||
|
Purchase of investments
|
(92
|
)
|
(1,597
|
)
|
(99
|
)
|
(1,873
|
)
|
|||||||||
|
Sales and maturities of investments
|
648
|
|
399
|
|
1,645
|
|
469
|
|
|||||||||
|
Other
|
(1,446
|
)
|
(111
|
)
|
(2,919
|
)
|
(1,841
|
)
|
|||||||||
|
CASH USED IN INVESTING ACTIVITIES
|
(16,885
|
)
|
(34,130
|
)
|
(35,531
|
)
|
(155,547
|
)
|
|||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||||||
|
Issuance of common stock
|
73,071
|
|
—
|
|
73,071
|
|
—
|
|
|||||||||
|
Issuance of notes and bank borrowings
|
18
|
—
|
|
100,000
|
|
—
|
|
153,500
|
|
||||||||
|
Payments on debt, capital leases, and associated costs
|
(6,712
|
)
|
(66,626
|
)
|
(12,683
|
)
|
(75,220
|
)
|
|||||||||
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Gold production royalty payments
|
(10,461
|
)
|
(9,754
|
)
|
(19,592
|
)
|
(20,122
|
)
|
|||||||||
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Other
|
(448
|
)
|
(72
|
)
|
(728
|
)
|
(495
|
)
|
|||||||||
|
CASH PROVIDED (USED IN) BY FINANCING ACTIVITIES
|
55,450
|
|
23,548
|
|
40,068
|
|
57,663
|
|
|||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
(302
|
)
|
(141
|
)
|
(216
|
)
|
(664
|
)
|
|||||||||
|
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
84,202
|
|
26,281
|
|
56,877
|
|
(64,993
|
)
|
|||||||||
|
Cash and cash equivalents at beginning of period
|
173,389
|
|
179,587
|
|
200,714
|
|
270,861
|
|
|||||||||
|
Cash and cash equivalents at end of period
|
$
|
257,591
|
|
$
|
205,868
|
|
$
|
257,591
|
|
$
|
205,868
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
|
June 30, 2016
|
December 31, 2015
|
||||||||
|
ASSETS
|
Notes
|
In thousands, except share data
|
|||||||
|
CURRENT ASSETS
|
|||||||||
|
Cash and cash equivalents
|
$
|
257,591
|
|
$
|
200,714
|
|
|||
|
Receivables
|
14
|
79,932
|
|
85,992
|
|
||||
|
Inventory
|
15
|
84,074
|
|
81,711
|
|
||||
|
Ore on leach pads
|
15
|
76,335
|
|
67,329
|
|
||||
|
Prepaid expenses and other
|
11,614
|
|
10,942
|
|
|||||
|
509,546
|
|
446,688
|
|
||||||
|
NON-CURRENT ASSETS
|
|||||||||
|
Property, plant and equipment, net
|
16
|
217,345
|
|
195,999
|
|
||||
|
Mining properties, net
|
17
|
552,035
|
|
589,219
|
|
||||
|
Ore on leach pads
|
15
|
52,885
|
|
44,582
|
|
||||
|
Restricted assets
|
14,792
|
|
11,633
|
|
|||||
|
Equity securities
|
13
|
11,250
|
|
2,766
|
|
||||
|
Receivables
|
14
|
39,739
|
|
24,768
|
|
||||
|
Deferred tax assets
|
|
1,370
|
|
1,942
|
|
||||
|
Other
|
12,893
|
|
14,892
|
|
|||||
|
TOTAL ASSETS
|
$
|
1,411,855
|
|
$
|
1,332,489
|
|
|||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||||
|
CURRENT LIABILITIES
|
|||||||||
|
Accounts payable
|
$
|
49,219
|
|
$
|
48,732
|
|
|||
|
Accrued liabilities and other
|
50,169
|
|
53,953
|
|
|||||
|
Debt
|
18
|
108,809
|
|
10,431
|
|
||||
|
Royalty obligations
|
10
|
12,915
|
|
24,893
|
|
||||
|
Reclamation
|
4
|
1,790
|
|
2,071
|
|
||||
|
222,902
|
|
140,080
|
|
||||||
|
NON-CURRENT LIABILITIES
|
|||||||||
|
Debt
|
18
|
402,257
|
|
479,979
|
|
||||
|
Royalty obligations
|
10
|
7,069
|
|
4,864
|
|
||||
|
Reclamation
|
4
|
85,048
|
|
83,197
|
|
||||
|
Deferred tax liabilities
|
|
131,459
|
|
147,132
|
|
||||
|
Other long-term liabilities
|
66,961
|
|
55,761
|
|
|||||
|
692,794
|
|
770,933
|
|
||||||
|
STOCKHOLDERS’ EQUITY
|
|||||||||
|
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 162,370,864 at June 30, 2016 and 151,339,136 at December 31, 2015
|
1,624
|
|
1,513
|
|
|||||
|
Additional paid-in capital
|
3,101,493
|
|
3,024,461
|
|
|||||
|
Accumulated other comprehensive income (loss)
|
(283
|
)
|
(3,722
|
)
|
|||||
|
Accumulated deficit
|
(2,606,675
|
)
|
(2,600,776
|
)
|
|||||
|
496,159
|
|
421,476
|
|
||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,411,855
|
|
$
|
1,332,489
|
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
|
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, 2015
|
151,339
|
|
$
|
1,513
|
|
$
|
3,024,461
|
|
$
|
(2,600,776
|
)
|
$
|
(3,722
|
)
|
$
|
421,476
|
|
|||||
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
(5,899
|
)
|
—
|
|
(5,899
|
)
|
||||||||||
|
Other comprehensive income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
3,439
|
|
3,439
|
|
||||||||||
|
Issuance of common stock
|
9,253
|
|
93
|
|
72,978
|
|
—
|
|
—
|
|
73,071
|
|
||||||||||
|
Common stock issued under stock-based compensation plans, net
|
1,779
|
|
18
|
|
4,054
|
|
—
|
|
—
|
|
4,072
|
|
||||||||||
|
Balances at June 30, 2016
|
162,371
|
|
$
|
1,624
|
|
$
|
3,101,493
|
|
$
|
(2,606,675
|
)
|
$
|
(283
|
)
|
$
|
496,159
|
|
|||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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, 2016. The condensed consolidated December 31, 2015 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 year ended December 31, 2015.
Recent Accounting Standards
In March 2016, the FASB issued ASU 2016-09,
"Improvements to Employee Share-Based Payment Accounting,"
which amends several aspects of the accounting for share-based payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.
In February 2016, the FASB issued ASU 2016-02,
"Leases,"
which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company's fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.
In November 2015, the FASB issued ASU 2015-17,
"Balance Sheet Classification of Deferred Taxes,"
which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. 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
Current deferred tax assets
to
Non-current deferred tax assets
and
Current deferred tax liabilities
to
Non-current deferred tax liabilities
in the current and prior periods.
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's adoption had no impact 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 adopting 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 implementing 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's adoption had no impact on the Company's consolidated financial position, results of operations, and cash flows.
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The Company’s operating segments include the Palmarejo complex, Rochester, Kensington, Wharf, and San Bartolomé 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, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
|
Three months ended June 30, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
48,272
|
|
$
|
35,761
|
|
$
|
36,469
|
|
$
|
34,005
|
|
$
|
25,185
|
|
$
|
505
|
|
$
|
—
|
|
$
|
180,197
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,810
|
|
—
|
|
1,810
|
|
|||||||||||||||
|
48,272
|
|
35,761
|
|
36,469
|
|
34,005
|
|
25,185
|
|
2,315
|
|
|
—
|
|
182,007
|
|
|||||||||||||||
|
Costs and Expenses
|
|
|
|||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
22,865
|
|
21,721
|
|
22,611
|
|
14,342
|
|
18,645
|
|
281
|
|
—
|
|
100,465
|
|
|||||||||||||||
|
Amortization
|
14,765
|
|
5,437
|
|
9,808
|
|
5,128
|
|
1,853
|
|
100
|
|
414
|
|
37,505
|
|
|||||||||||||||
|
Exploration
|
562
|
|
188
|
|
977
|
|
—
|
|
—
|
|
85
|
|
421
|
|
2,233
|
|
|||||||||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||||
|
Other operating expenses
|
278
|
|
700
|
|
257
|
|
688
|
|
1,076
|
|
38
|
|
8,727
|
|
11,764
|
|
|||||||||||||||
|
Other income (expense)
|
|
|
|||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
(840
|
)
|
(2,687
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(52
|
)
|
(3,579
|
)
|
|||||||||||||||
|
Interest expense, net
|
(425
|
)
|
(181
|
)
|
(34
|
)
|
(27
|
)
|
(7
|
)
|
—
|
|
(10,201
|
)
|
(10,875
|
)
|
|||||||||||||||
|
Other, net
|
(4,360
|
)
|
(3,860
|
)
|
1
|
|
204
|
|
411
|
|
1,460
|
|
4,287
|
|
(1,857
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
3,153
|
|
8
|
|
—
|
|
(352
|
)
|
848
|
|
(2,275
|
)
|
(614
|
)
|
768
|
|
|||||||||||||||
|
Net income (loss)
|
$
|
7,330
|
|
$
|
995
|
|
$
|
2,783
|
|
$
|
13,672
|
|
$
|
4,863
|
|
$
|
996
|
|
$
|
(16,142
|
)
|
$
|
14,497
|
|
|||||||
|
Segment assets
(2)
|
$
|
427,938
|
|
$
|
207,764
|
|
$
|
196,403
|
|
$
|
113,821
|
|
$
|
83,814
|
|
$
|
9,158
|
|
$
|
75,061
|
|
$
|
1,113,959
|
|
|||||||
|
Capital expenditures
|
$
|
8,863
|
|
$
|
3,885
|
|
$
|
7,536
|
|
$
|
1,511
|
|
$
|
1,317
|
|
$
|
—
|
|
$
|
176
|
|
$
|
23,288
|
|
|||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interest
|
Three months ended June 30, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
38,875
|
|
$
|
36,340
|
|
$
|
42,468
|
|
$
|
20,373
|
|
$
|
23,366
|
|
$
|
3,083
|
|
$
|
—
|
|
$
|
164,505
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,758
|
|
—
|
|
1,758
|
|
|||||||||||||||
|
38,875
|
|
36,340
|
|
42,468
|
|
20,373
|
|
23,366
|
|
4,841
|
|
—
|
|
166,263
|
|
||||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
30,112
|
|
24,392
|
|
27,452
|
|
16,632
|
|
19,157
|
|
1,352
|
|
—
|
|
119,097
|
|
|||||||||||||||
|
Amortization
|
9,046
|
|
5,387
|
|
12,684
|
|
3,491
|
|
5,271
|
|
2,619
|
|
476
|
|
38,974
|
|
|||||||||||||||
|
Exploration
|
1,837
|
|
501
|
|
432
|
|
—
|
|
43
|
|
75
|
|
691
|
|
3,579
|
|
|||||||||||||||
|
Other operating expenses
|
324
|
|
307
|
|
526
|
|
506
|
|
241
|
|
13
|
|
8,801
|
|
10,718
|
|
|||||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
429
|
|
1,137
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,188
|
|
2,754
|
|
|||||||||||||||
|
Interest expense, net
|
(844
|
)
|
(205
|
)
|
(57
|
)
|
—
|
|
(293
|
)
|
—
|
|
(9,335
|
)
|
(10,734
|
)
|
|||||||||||||||
|
Other, net
|
(505
|
)
|
—
|
|
(14
|
)
|
37
|
|
420
|
|
(924
|
)
|
(1,866
|
)
|
(2,852
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
837
|
|
(350
|
)
|
(994
|
)
|
(274
|
)
|
195
|
|
(623
|
)
|
1,469
|
|
260
|
|
|||||||||||||||
|
Net income (loss)
|
$
|
(2,527
|
)
|
$
|
6,335
|
|
$
|
309
|
|
$
|
(493
|
)
|
$
|
(1,024
|
)
|
$
|
(765
|
)
|
$
|
(18,512
|
)
|
$
|
(16,677
|
)
|
|||||||
|
Segment assets
(2)
|
$
|
657,448
|
|
$
|
190,704
|
|
$
|
197,241
|
|
$
|
131,990
|
|
$
|
173,451
|
|
$
|
55,896
|
|
$
|
78,395
|
|
$
|
1,485,125
|
|
|||||||
|
Capital expenditures
|
$
|
10,723
|
|
$
|
5,915
|
|
$
|
4,714
|
|
$
|
1,244
|
|
$
|
994
|
|
$
|
—
|
|
$
|
87
|
|
$
|
23,677
|
|
|||||||
(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
|
Six months ended June 30, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
78,085
|
|
$
|
65,743
|
|
$
|
72,212
|
|
$
|
61,934
|
|
$
|
46,463
|
|
$
|
2,396
|
|
$
|
—
|
|
$
|
326,833
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,561
|
|
—
|
|
3,561
|
|
|||||||||||||||
|
78,085
|
|
|
65,743
|
|
|
72,212
|
|
|
61,934
|
|
|
46,463
|
|
|
5,957
|
|
|
—
|
|
|
330,394
|
|
|||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
43,903
|
|
44,206
|
|
47,029
|
|
29,803
|
|
36,142
|
|
937
|
|
—
|
|
202,020
|
|
|||||||||||||||
|
Amortization
|
22,054
|
|
10,750
|
|
18,157
|
|
9,179
|
|
3,607
|
|
881
|
|
842
|
|
65,470
|
|
|||||||||||||||
|
Exploration
|
1,363
|
|
297
|
|
930
|
|
—
|
|
—
|
|
206
|
|
1,167
|
|
3,963
|
|
|||||||||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,446
|
|
—
|
|
4,446
|
|
|||||||||||||||
|
Other operating expenses
|
593
|
|
1,381
|
|
509
|
|
1,181
|
|
1,367
|
|
175
|
|
19,038
|
|
24,244
|
|
|||||||||||||||
|
Other income (expense)
|
|
|
|||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
(5,704
|
)
|
(4,936
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,634
|
)
|
(12,274
|
)
|
|||||||||||||||
|
Interest expense, net
|
(1,159
|
)
|
(352
|
)
|
(77
|
)
|
(27
|
)
|
(10
|
)
|
—
|
|
(20,370
|
)
|
(21,995
|
)
|
|||||||||||||||
|
Other, net
|
(5,595
|
)
|
(3,857
|
)
|
(19
|
)
|
214
|
|
726
|
|
3,742
|
|
4,246
|
|
(543
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
3,251
|
|
(415
|
)
|
—
|
|
(236
|
)
|
(723
|
)
|
(3,567
|
)
|
352
|
|
(1,338
|
)
|
|||||||||||||||
|
Net income (loss)
|
$
|
965
|
|
|
$
|
(451
|
)
|
|
$
|
5,491
|
|
|
$
|
21,722
|
|
|
$
|
5,340
|
|
|
$
|
(513
|
)
|
|
$
|
(38,453
|
)
|
$
|
(5,899
|
)
|
|
|
Segment assets
(2)
|
$
|
427,938
|
|
$
|
207,764
|
|
$
|
196,403
|
|
$
|
113,821
|
|
$
|
83,814
|
|
$
|
9,158
|
|
$
|
75,061
|
|
$
|
1,113,959
|
|
|||||||
|
Capital expenditures
|
$
|
17,678
|
|
$
|
7,174
|
|
$
|
15,626
|
|
$
|
2,921
|
|
$
|
1,838
|
|
$
|
—
|
|
$
|
223
|
|
$
|
45,460
|
|
|||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Six months ended June 30, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Coeur Capital
|
Other
|
Total
|
|||||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||||||
|
Metal sales
|
$
|
78,269
|
|
$
|
80,371
|
|
$
|
86,506
|
|
$
|
20,373
|
|
$
|
44,913
|
|
$
|
5,028
|
|
$
|
—
|
|
$
|
315,460
|
|
|||||||
|
Royalties
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,759
|
|
—
|
|
3,759
|
|
|||||||||||||||
|
78,269
|
|
80,371
|
|
86,506
|
|
20,373
|
|
44,913
|
|
8,787
|
|
—
|
|
319,219
|
|
||||||||||||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
64,603
|
|
55,785
|
|
56,871
|
|
16,632
|
|
38,284
|
|
1,985
|
|
—
|
|
234,160
|
|
|||||||||||||||
|
Amortization
|
16,380
|
|
12,230
|
|
24,238
|
|
3,491
|
|
9,961
|
|
4,770
|
|
994
|
|
72,064
|
|
|||||||||||||||
|
Exploration
|
2,960
|
|
1,223
|
|
2,094
|
|
—
|
|
79
|
|
150
|
|
1,339
|
|
7,845
|
|
|||||||||||||||
|
Other operating expenses
|
638
|
|
1,448
|
|
761
|
|
671
|
|
485
|
|
30
|
|
22,283
|
|
26,316
|
|
|||||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||||||
|
Fair value adjustments, net
|
(1,116
|
)
|
(1,155
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
141
|
|
(2,130
|
)
|
|||||||||||||||
|
Interest expense, net
|
(2,184
|
)
|
(430
|
)
|
(120
|
)
|
—
|
|
(574
|
)
|
—
|
|
(18,191
|
)
|
(21,499
|
)
|
|||||||||||||||
|
Other, net
|
(1,608
|
)
|
(40
|
)
|
(18
|
)
|
54
|
|
872
|
|
(2,449
|
)
|
(2,173
|
)
|
(5,362
|
)
|
|||||||||||||||
|
Income and mining tax (expense) benefit
|
(534
|
)
|
(700
|
)
|
(994
|
)
|
412
|
|
(1,211
|
)
|
(24
|
)
|
3,243
|
|
192
|
|
|||||||||||||||
|
Net income (loss)
|
$
|
(11,754
|
)
|
$
|
7,360
|
|
$
|
1,410
|
|
$
|
45
|
|
$
|
(4,809
|
)
|
$
|
(621
|
)
|
$
|
(41,596
|
)
|
$
|
(49,965
|
)
|
|||||||
|
Segment assets
(2)
|
$
|
657,448
|
|
$
|
190,704
|
|
$
|
197,241
|
|
$
|
131,990
|
|
$
|
173,451
|
|
$
|
55,896
|
|
$
|
78,395
|
|
$
|
1,485,125
|
|
|||||||
|
Capital expenditures
|
$
|
19,907
|
|
$
|
9,170
|
|
$
|
8,859
|
|
$
|
1,295
|
|
$
|
1,943
|
|
$
|
—
|
|
$
|
123
|
|
$
|
41,297
|
|
|||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Assets
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
Total assets for reportable segments
|
$
|
1,113,959
|
|
$
|
1,103,310
|
|
|
|
Cash and cash equivalents
|
257,591
|
|
200,714
|
|
|||
|
Other assets
|
40,305
|
|
28,465
|
|
|||
|
Total consolidated assets
|
$
|
1,411,855
|
|
|
$
|
1,332,489
|
|
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Geographic Information
|
Long-Lived Assets
|
June 30, 2016
|
|
December 31, 2015
|
||||
|
Mexico
|
$
|
387,562
|
|
$
|
390,694
|
|
|
|
United States
|
332,007
|
|
336,210
|
|
|||
|
Bolivia
|
31,297
|
|
35,201
|
|
|||
|
Australia
|
3,235
|
|
5,952
|
|
|||
|
Argentina
|
10,227
|
|
10,871
|
|
|||
|
Other
|
5,051
|
|
9,058
|
|
|||
|
Total
|
$
|
769,379
|
|
|
$
|
787,986
|
|
|
Revenue
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
United States
|
$
|
106,236
|
|
$
|
99,180
|
|
$
|
199,890
|
|
$
|
187,249
|
|
|||
|
Mexico
|
48,489
|
|
39,443
|
|
79,011
|
|
79,584
|
|
|||||||
|
Bolivia
|
25,185
|
|
23,366
|
|
46,463
|
|
44,913
|
|
|||||||
|
Australia
|
504
|
|
3,083
|
|
2,395
|
|
5,028
|
|
|||||||
|
Other
|
1,593
|
|
1,191
|
|
2,635
|
|
2,445
|
|
|||||||
|
Total
|
$
|
182,007
|
|
|
$
|
166,263
|
|
|
$
|
330,394
|
|
|
$
|
319,219
|
|
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties. 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 June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Asset retirement obligation - Beginning
|
$
|
83,974
|
|
$
|
86,059
|
|
$
|
82,072
|
|
$
|
67,214
|
|
|||
|
Accretion
|
2,009
|
|
1,990
|
|
3,968
|
|
3,614
|
|
|||||||
|
Additions and changes in estimates
|
(130
|
)
|
—
|
|
121
|
|
18,270
|
|
|||||||
|
Settlements
|
(308
|
)
|
(448
|
)
|
(616
|
)
|
(1,497
|
)
|
|||||||
|
Asset retirement obligation - Ending
|
$
|
85,545
|
|
$
|
87,601
|
|
$
|
85,545
|
|
$
|
87,601
|
|
|||
The Company has accrued
$1.3 million
and
$3.2 million
at
June 30, 2016
and
December 31, 2015
, 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 for the
three and six months ended
June 30, 2016
and
2015
was
$2.3 million
and
$2.6 million
and
$5.2 million
and
$4.8 million
, respectively. At
June 30, 2016
, there was
$9.5 million
of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of
1.5
years. During the
six months ended
June 30, 2016
, the supplemental incentive accrual increased
$0.4 million
to
$1.6 million
.
10
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes the grants awarded during the
six months ended
June 30, 2016
:
|
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
|
|||||||||||||||
|
January 20, 2016
|
1,030,833
|
|
$
|
1.81
|
|
165,479
|
|
$
|
0.86
|
|
1,428,314
|
|
$
|
1.78
|
|
||||||
|
March 21, 2016
|
685,633
|
|
$
|
5.76
|
|
17,772
|
|
$
|
2.84
|
|
8,763
|
|
$
|
3.76
|
|
||||||
The following options and stock appreciation rights were exercisable during the
six months ended
June 30, 2016
:
|
Award Type
|
Number of
Exercised Units
|
Weighted Average
Exercised Price
|
Number of Exercisable Units
|
Weighted Average
Exercisable Price |
||||||||||
|
Stock options
|
—
|
|
$
|
—
|
|
423,706
|
|
$
|
15.15
|
|
||||
|
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 an additional contribution based on an eligible employee's salary. Total plan expenses recognized for the
three and six months ended
June 30, 2016
and 2015 were
$0.9 million
and
$1.6 million
and
$1.9 million
and
$3.2 million
, respectively.
Other, net
consists of the following:
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Impairment of equity securities
|
$
|
(20
|
)
|
$
|
(31
|
)
|
$
|
(20
|
)
|
$
|
(1,545
|
)
|
||||
|
Foreign exchange loss
|
(5,656
|
)
|
(2,056
|
)
|
(5,819
|
)
|
(4,262
|
)
|
||||||||
|
Gain on sale of assets
|
2,812
|
|
107
|
|
4,486
|
|
63
|
|
||||||||
|
Other
|
1,007
|
|
|
(872
|
)
|
|
810
|
|
|
382
|
|
|||||
|
Other, net
|
$
|
(1,857
|
)
|
$
|
(2,852
|
)
|
$
|
(543
|
)
|
$
|
(5,362
|
)
|
||||
The following table summarizes the components of
Income and mining tax (expense) benefit
for the
three and six months ended
June 30, 2016
and
2015
by significant jurisdiction:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||||||||||||||
|
|
2016
|
2015
|
2016
|
2015
|
|||||||||||||||||||||||
|
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
|
$
|
119
|
|
$
|
(1,810
|
)
|
$
|
(9,764
|
)
|
$
|
319
|
|
$
|
(9,242
|
)
|
$
|
(2,342
|
)
|
$
|
(30,471
|
)
|
$
|
2,204
|
|
|||
|
Argentina
|
4,453
|
|
(1,793
|
)
|
(656
|
)
|
(1
|
)
|
3,438
|
|
(250
|
)
|
(1,352
|
)
|
(2
|
)
|
|||||||||||
|
Mexico
|
3,353
|
|
4,316
|
|
(5,582
|
)
|
548
|
|
(4,155
|
)
|
4,333
|
|
(15,255
|
)
|
(716
|
)
|
|||||||||||
|
Bolivia
|
4,016
|
|
848
|
|
(1,219
|
)
|
196
|
|
6,062
|
|
(722
|
)
|
(3,598
|
)
|
(1,211
|
)
|
|||||||||||
|
Other jurisdictions
|
1,788
|
|
(793
|
)
|
284
|
|
(802
|
)
|
(664
|
)
|
(2,357
|
)
|
519
|
|
(83
|
)
|
|||||||||||
|
$
|
13,729
|
|
$
|
768
|
|
$
|
(16,937
|
)
|
$
|
260
|
|
$
|
(4,561
|
)
|
$
|
(1,338
|
)
|
$
|
(50,157
|
)
|
$
|
192
|
|
||||
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. In addition, the Company's consolidated effective income and mining
11
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 more likely than not 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. The statute of limitations remains open from 2012 forward for the U.S. federal jurisdiction and from 2008 forward for certain other foreign jurisdictions. 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
$3.5 million
and
$4.5 million
in the next 12 months.
At
June 30, 2016
and
December 31, 2015
, the Company had
$23.0 million
and
$17.9 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
June 30, 2016
and
December 31, 2015
, the amount of accrued income-tax-related interest and penalties was
$14.7 million
and
$9.2 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 six months ended June 30, 2016
and
2015
,
439,721
and
3,375,337
shares and
1,600,669
and
3,415,129
shares, 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 ("Convertible Notes") were not included in the computation of diluted net income (loss) per share for the
three and six months ended June 30, 2016
and
2015
because there is no excess value upon conversion over the principal amount of the Convertible Notes.
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Net income (loss) available to common stockholders
|
$
|
14,497
|
|
$
|
(16,677
|
)
|
$
|
(5,899
|
)
|
$
|
(49,965
|
)
|
|||
|
Weighted average shares:
|
|||||||||||||||
|
Basic
|
153,972
|
|
135,036
|
|
152,110
|
|
118,897
|
|
|||||||
|
Effect of stock-based compensation plans
|
3,928
|
|
—
|
|
—
|
|
—
|
|
|||||||
|
Diluted
|
157,900
|
|
|
135,036
|
|
|
152,110
|
|
|
118,897
|
|
||||
|
Income (loss) per share:
|
|||||||||||||||
|
Basic
|
$
|
0.09
|
|
$
|
(0.12
|
)
|
$
|
(0.04
|
)
|
$
|
(0.42
|
)
|
|||
|
Diluted
|
$
|
0.09
|
|
$
|
(0.12
|
)
|
$
|
(0.04
|
)
|
$
|
(0.42
|
)
|
|||
During the three months ended June 30, 2016, the Company completed a
$75.0 million
“at the market” stock offering. In connection with the offering, the Company sold
9,253,016
shares of its common stock at an average price of
$8.11
per share.
12
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
(878
|
)
|
$
|
385
|
|
$
|
(5,756
|
)
|
$
|
(1,160
|
)
|
||||
|
Rochester net smelter returns ("NSR") royalty obligation
|
(2,687
|
)
|
1,137
|
|
(4,936
|
)
|
(1,155
|
)
|
||||||||
|
Silver and gold options
|
(14
|
)
|
1,232
|
|
(1,582
|
)
|
185
|
|
||||||||
|
Fair value adjustments, net
|
$
|
(3,579
|
)
|
$
|
2,754
|
|
$
|
(12,274
|
)
|
$
|
(2,130
|
)
|
||||
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).
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 June 30, 2016
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
11,250
|
|
$
|
11,243
|
|
$
|
—
|
|
$
|
7
|
|
|||
|
Other derivative instruments, net
|
655
|
|
—
|
|
655
|
|
—
|
|
|||||||
|
$
|
11,905
|
|
$
|
11,243
|
|
$
|
655
|
|
$
|
7
|
|
||||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
3,317
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,317
|
|
|||
|
Rochester NSR royalty obligation
|
12,559
|
|
—
|
|
—
|
|
12,559
|
|
|||||||
|
$
|
15,876
|
|
$
|
—
|
|
$
|
—
|
|
$
|
15,876
|
|
||||
|
|
Fair Value at December 31, 2015
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
2,766
|
|
$
|
2,756
|
|
$
|
—
|
|
$
|
10
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
4,957
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,957
|
|
|||
|
Rochester NSR royalty obligation
|
9,593
|
|
—
|
|
—
|
|
9,593
|
|
|||||||
|
Other derivative instruments, net
|
508
|
|
—
|
|
508
|
|
—
|
|
|||||||
|
$
|
15,058
|
|
$
|
—
|
|
$
|
508
|
|
$
|
14,550
|
|
||||
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,
2.1
years was used to estimate the fair value of the Rochester NSR royalty obligation at
June 30, 2016
.
13
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
No assets or liabilities were transferred between fair value levels in the
six months ended June 30, 2016
.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the
three and six months ended June 30, 2016
:
|
Three Months Ended June 30, 2016
|
|||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Balance at the
end of the
period
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
7
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
6,827
|
|
$
|
878
|
|
$
|
(4,388
|
)
|
$
|
3,317
|
|
|||
|
Rochester NSR royalty obligation
|
$
|
10,877
|
|
$
|
2,687
|
|
$
|
(1,005
|
)
|
$
|
12,559
|
|
|||
|
Six Months Ended June 30, 2016
|
|||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Balance at the
end of the
period
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
10
|
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
7
|
|
|||
|
Liabilities:
|
|||||||||||||||
|
Palmarejo royalty obligation embedded derivative
|
$
|
4,957
|
|
$
|
5,756
|
|
$
|
(7,396
|
)
|
$
|
3,317
|
|
|||
|
Rochester NSR royalty obligation
|
$
|
9,593
|
|
$
|
4,936
|
|
$
|
(1,970
|
)
|
$
|
12,559
|
|
|||
The fair value of financial assets and liabilities carried at book value in the financial statements at
June 30, 2016
and
December 31, 2015
is presented in the following table:
|
|
June 30, 2016
|
||||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
|
Liabilities:
|
|
||||||||||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
712
|
|
$
|
706
|
|
$
|
—
|
|
$
|
706
|
|
$
|
—
|
|
||||
|
7.875% Senior Notes due 2021
(1)
|
373,957
|
|
362,650
|
|
—
|
|
362,650
|
|
—
|
|
|||||||||
|
Term Loan due 2020
(2)
|
94,545
|
|
94,545
|
|
—
|
|
94,545
|
|
—
|
|
|||||||||
|
Palmarejo gold production royalty obligation
|
4,108
|
|
4,144
|
|
—
|
|
—
|
|
4,144
|
|
|||||||||
|
(1)
|
Net of unamortized debt issuance costs and premium received of
$4.8 million
.
|
|
(2)
|
Net of unamortized debt issuance costs of
$4.5 million
.
|
|
|
December 31, 2015
|
||||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
|
Liabilities:
|
|||||||||||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
712
|
|
$
|
693
|
|
$
|
—
|
|
$
|
693
|
|
$
|
—
|
|
||||
|
7.875% Senior Notes due 2021
(1)
|
373,433
|
|
227,487
|
|
—
|
|
227,487
|
|
—
|
|
|||||||||
|
Term Loan due 2020
(2)
|
94,489
|
|
99,500
|
|
—
|
|
99,500
|
|
—
|
|
|||||||||
|
San Bartolomé Lines of Credit
|
4,571
|
|
4,571
|
|
—
|
|
4,571
|
|
—
|
|
|||||||||
|
Palmarejo gold production royalty obligation
|
15,207
|
|
15,580
|
|
—
|
|
—
|
|
15,580
|
|
|||||||||
|
(1)
|
Net of unamortized debt issuance costs and premium received of
$5.3 million
.
|
|
(2)
|
Net of unamortized debt issuance costs of
$5.0 million
.
|
The fair values of the Convertible Notes and
7.875%
Senior Notes due 2021 (the "Senior Notes") outstanding were estimated using quoted market prices. The fair value of the Term Loan due 2020 (the "Term Loan") approximates book value (excluding unamortized debt issuance costs) as the liability is secured, has a variable interest rate, and lacks significant credit
14
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
concerns. 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 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
June 30, 2016
, a total of
8,493
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
8.3%
and
19.9%
at
June 30, 2016
and
December 31, 2015
, respectively. The fair value of the embedded derivative at
June 30, 2016
and
December 31, 2015
was a liability of
$3.3 million
and
$5.0 million
, respectively. For the
three and six months ended June 30, 2016
and
2015
, the mark-to-market adjustments were losses of
$0.9 million
and gains of
$0.4 million
and losses of
$5.8 million
and
$1.2 million
, 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
$416
per ounce, subject to a
1%
annual inflation adjustment. For the
three and six months ended June 30, 2016
and
2015
, realized losses on settlement of the liabilities were
$4.3 million
and
$3.6 million
and
$7.3 million
and
$11.7 million
, 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 some 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 gains of
$0.6 million
and losses of
$0.6 million
and gains of
$1.2 million
and
$0.3 million
in the
three and six months ended June 30, 2016
and
2015
, respectively. At
June 30, 2016
, the Company had outstanding provisionally priced sales of
0.5 million
ounces of silver and
34,876
ounces of gold at prices of
$18.28
and
$1,257
, respectively.
Silver and Gold Options
During the
three and six months ended June 30, 2016
, the Company had
no
unrealized gains or losses and during
2015
, the Company recorded unrealized gains of
$1.2 million
and
$1.0 million
, respectively, related to outstanding options which were included in
Fair value adjustments, net.
The Company recognized realized losses of
$51 thousand
and
no
realized losses or gains during the
three months ended June 30, 2016
and
2015
, respectively, and realized losses of
$1.6 million
and realized gains of
$0.8 million
during the
six months ended June 30, 2016
and
2015
, respectively, from settled contracts. At
June 30, 2016
, the Company had no outstanding gold and silver options contracts.
15
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
At
June 30, 2016
, the Company had the following derivative instruments that settle as follows:
|
In thousands except average prices and notional ounces
|
2016
|
Thereafter
|
|||||
|
Palmarejo gold production royalty
|
$
|
7,487
|
|
$
|
—
|
|
|
|
Average gold price in excess of minimum contractual deduction
|
$
|
882
|
|
$
|
—
|
|
|
|
Notional ounces
|
8,493
|
|
—
|
|
|||
|
Provisional silver sales
|
$
|
10,016
|
|
$
|
—
|
|
|
|
Average silver price
|
$
|
18.28
|
|
$
|
—
|
|
|
|
Notional ounces
|
547,940
|
|
—
|
|
|||
|
Provisional gold sales
|
$
|
43,839
|
|
$
|
—
|
|
|
|
Average gold price
|
$
|
1,257
|
|
$
|
—
|
|
|
|
Notional ounces
|
34,876
|
|
—
|
|
|||
The following summarizes the classification of the fair value of the derivative instruments:
|
|
June 30, 2016
|
||||||||||||||
|
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
|
—
|
|
—
|
|
3,317
|
|
—
|
|
|||||||
|
Provisional silver and gold sales contracts
|
841
|
|
186
|
|
—
|
|
—
|
|
|||||||
|
$
|
841
|
|
$
|
186
|
|
$
|
3,317
|
|
$
|
—
|
|
||||
|
|
December 31, 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
|
—
|
|
—
|
|
4,957
|
|
—
|
|
|||||||
|
Provisional silver and gold sales contracts
|
28
|
|
536
|
|
—
|
|
—
|
|
|||||||
|
$
|
28
|
|
$
|
536
|
|
$
|
4,957
|
|
$
|
—
|
|
||||
The following represent mark-to-market gains (losses) on derivative instruments for the
three and six months ended June 30, 2016
and
2015
(in thousands):
|
|
|
Three months ended June 30,
|
Six months ended June 30, 2016
|
||||||||||||||
|
Financial statement line
|
Derivative
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Revenue
|
Provisional silver and gold sales contracts
|
$
|
597
|
|
$
|
(623
|
)
|
$
|
1,163
|
|
$
|
291
|
|
||||
|
Fair value adjustments, net
|
Palmarejo gold royalty
|
(878
|
)
|
385
|
|
(5,756
|
)
|
(1,160
|
)
|
||||||||
|
Fair value adjustments, net
|
Silver and gold options
|
(14
|
)
|
1,232
|
|
(1,582
|
)
|
185
|
|
||||||||
|
$
|
(295
|
)
|
$
|
994
|
|
$
|
(6,175
|
)
|
$
|
(684
|
)
|
||||||
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 institutions management deems credit worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties.
On February 20, 2015, the Company completed its acquisition of the Wharf gold mine located near Lead, South Dakota, for
$99.4 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).
16
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following table presents the unaudited pro forma summary of the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the
three and six months ended
June 30, 2016
and
2015
, 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 June 30,
|
Six Months Ended June 30, 2016
|
||||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015 (Pro Forma)
|
||||||||||||
|
Revenue
|
$
|
182,007
|
|
$
|
166,263
|
|
$
|
330,394
|
|
$
|
337,219
|
|
||||
|
Income (loss) before income and mining taxes
|
13,729
|
|
(16,937
|
)
|
(4,561
|
)
|
(50,209
|
)
|
||||||||
|
Net income (loss)
|
14,497
|
|
(16,677
|
)
|
(5,899
|
)
|
(50,017
|
)
|
||||||||
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 June 30, 2016
|
|||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||
|
Equity securities
|
6,257
|
|
(180
|
)
|
5,173
|
|
11,250
|
|
|||
|
At December 31, 2015
|
|||||||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||||||
|
Equity securities
|
$
|
3,386
|
|
$
|
(1,179
|
)
|
$
|
559
|
|
$
|
2,766
|
|
|||
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
$1.5 million
in the six months ended June 30,
2015
, in
Other, net
. 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
June 30, 2016
:
|
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
|
$
|
(180
|
)
|
$
|
2,979
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(180
|
)
|
$
|
2,979
|
|
||
|
In thousands
|
June 30, 2016
|
December 31, 2015
|
|||||
|
Current receivables:
|
|||||||
|
Trade receivables
|
$
|
25,791
|
|
$
|
17,878
|
|
|
|
Income tax receivable
|
493
|
|
13,678
|
|
|||
|
Value added tax receivable
|
48,978
|
|
50,669
|
|
|||
|
Other
|
4,670
|
|
3,767
|
|
|||
|
$
|
79,932
|
|
$
|
85,992
|
|
||
|
Non-current receivables:
|
|||||||
|
Value added tax receivable
|
$
|
26,961
|
|
$
|
24,768
|
|
|
|
Income tax receivable
|
12,778
|
|
—
|
|
|||
|
39,739
|
|
24,768
|
|
||||
|
Total receivables
|
$
|
119,671
|
|
$
|
110,760
|
|
|
17
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
|
In thousands
|
June 30, 2016
|
December 31, 2015
|
|||||
|
Inventory:
|
|||||||
|
Concentrate
|
$
|
19,932
|
|
$
|
16,165
|
|
|
|
Precious metals
|
22,505
|
|
21,908
|
|
|||
|
Supplies
|
41,637
|
|
43,638
|
|
|||
|
$
|
84,074
|
|
$
|
81,711
|
|
||
|
Ore on leach pads:
|
|||||||
|
Current
|
$
|
76,335
|
|
$
|
67,329
|
|
|
|
Non-current
|
52,885
|
|
44,582
|
|
|||
|
$
|
129,220
|
|
$
|
111,911
|
|
||
|
Total inventory and ore on leach pads
|
$
|
213,294
|
|
$
|
193,622
|
|
|
|
In thousands
|
June 30, 2016
|
December 31, 2015
|
|||||
|
Land
|
$
|
7,777
|
|
$
|
8,287
|
|
|
|
Facilities and equipment
|
653,966
|
|
654,585
|
|
|||
|
Capital leases
|
54,968
|
|
30,648
|
|
|||
|
716,711
|
|
693,520
|
|
||||
|
Accumulated amortization
|
(510,070
|
)
|
(514,509
|
)
|
|||
|
206,641
|
|
179,011
|
|
||||
|
Construction in progress
|
10,704
|
|
16,988
|
|
|||
|
Property, plant and equipment, net
|
$
|
217,345
|
|
$
|
195,999
|
|
|
18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Mining properties consist of the following (in thousands):
|
June 30, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San
Bartolomé
|
La Preciosa
|
Joaquin
|
Coeur Capital
|
Total
|
||||||||||||||||||||||||||
|
Mine development
|
$
|
161,865
|
|
$
|
153,091
|
|
$
|
251,847
|
|
$
|
33,122
|
|
$
|
39,531
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
639,456
|
|
||||||||
|
Accumulated amortization
|
(135,122
|
)
|
(132,307
|
)
|
(143,840
|
)
|
(8,717
|
)
|
(31,313
|
)
|
—
|
|
—
|
|
|
|
(451,299
|
)
|
|||||||||||||||||
|
26,743
|
|
20,784
|
|
108,007
|
|
24,405
|
|
8,218
|
|
—
|
|
—
|
|
—
|
|
188,157
|
|
||||||||||||||||||
|
Mineral interests
|
629,303
|
|
—
|
|
—
|
|
45,837
|
|
12,868
|
|
49,085
|
|
10,000
|
|
37,272
|
|
784,365
|
|
|||||||||||||||||
|
Accumulated amortization
|
(364,403
|
)
|
—
|
|
—
|
|
(15,384
|
)
|
(11,556
|
)
|
—
|
|
—
|
|
(29,144
|
)
|
(420,487
|
)
|
|||||||||||||||||
|
264,900
|
|
—
|
|
—
|
|
30,453
|
|
1,312
|
|
49,085
|
|
10,000
|
|
8,128
|
|
363,878
|
|
||||||||||||||||||
|
Mining properties, net
|
$
|
291,643
|
|
$
|
20,784
|
|
$
|
108,007
|
|
$
|
54,858
|
|
$
|
9,530
|
|
$
|
49,085
|
|
$
|
10,000
|
|
$
|
8,128
|
|
$
|
552,035
|
|
||||||||
|
December 31, 2015
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San
Bartolomé
|
La Preciosa
|
Joaquin
|
Coeur Capital
|
Total
|
||||||||||||||||||||||||||
|
Mine development
|
$
|
151,828
|
|
$
|
149,756
|
|
$
|
238,786
|
|
$
|
32,318
|
|
$
|
39,474
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
612,162
|
|
||||||||
|
Accumulated amortization
|
(131,055
|
)
|
(126,242
|
)
|
(131,236
|
)
|
(5,784
|
)
|
(30,325
|
)
|
—
|
|
—
|
|
—
|
|
(424,642
|
)
|
|||||||||||||||||
|
20,773
|
|
23,514
|
|
107,550
|
|
26,534
|
|
9,149
|
|
—
|
|
—
|
|
—
|
|
187,520
|
|
||||||||||||||||||
|
Mineral interests
|
629,303
|
|
—
|
|
—
|
|
45,837
|
|
12,868
|
|
49,085
|
|
10,000
|
|
59,343
|
|
806,436
|
|
|||||||||||||||||
|
Accumulated amortization
|
(348,268
|
)
|
—
|
|
—
|
|
(10,551
|
)
|
(11,400
|
)
|
—
|
|
—
|
|
(34,518
|
)
|
(404,737
|
)
|
|||||||||||||||||
|
281,035
|
|
—
|
|
—
|
|
35,286
|
|
1,468
|
|
49,085
|
|
10,000
|
|
24,825
|
|
401,699
|
|
||||||||||||||||||
|
Mining properties, net
|
$
|
301,808
|
|
$
|
23,514
|
|
$
|
107,550
|
|
$
|
61,820
|
|
$
|
10,617
|
|
$
|
49,085
|
|
$
|
10,000
|
|
$
|
24,825
|
|
$
|
589,219
|
|
||||||||
In March 2016, Coeur sold its
2.0%
NSR royalty on the Cerro Bayo mine to the operator, a subsidiary of Mandalay Resources Corporation ("Mandalay"), for total consideration of approximately
$5.7 million
, consisting of
$4.0 million
in cash and
2.5 million
Mandalay shares. The Company recognized a
$1.9 million
pre-tax gain on this sale. The mineral interest associated with the Cerro Bayo mine was included in the Coeur Capital segment.
The operator of the Endeavor mine in Australia, on which the Company has a
100%
silver stream, announced in early 2016 a significant curtailment of production due to low lead and zinc prices. As a result, Coeur recorded a
$2.5 million
write-down of the mineral interest associated with the Endeavor silver stream within the Coeur Capital segment at March 31, 2016.
In April 2016, Coeur sold its tiered NSR royalty on the El Gallo mine to the operator, a subsidiary of McEwen Mining Inc., for total consideration of approximately
$6.3 million
, including
$1 million
in contingent consideration payable in mid-2018. In anticipation of this sale, the Company recorded a
$1.9 million
write-down of the mineral interest within the Coeur Capital segment at March 31, 2016.
In April 2016, Coeur closed the sale of its
2.5%
NSR royalty on the La Cigarra project to Kootenay Silver Inc. for total consideration of approximately
$3.6 million
, consisting of
$500,000
in cash and
9.6 million
Kootenay shares. The Company recognized a
$1.2
pre-tax gain on this sale. The mineral interest associated with La Cigarra was included in the Coeur Capital segment.
In May 2016, Coeur closed on the sale of its Martha assets and related liabilities in Argentina to Hunt Mining Corp. for total cash consideration of
$3.0 million
, including
$1.5 million
received at closing and
$1.5 million
receivable on the one-year anniversary of the closing. The Company recognized a
$5.3 million
pre-tax gain on this sale.
19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
|
|
June 30, 2016
|
December 31, 2015
|
|||||||||||||
|
In thousands
|
Current
|
Non-Current
|
Current
|
Non-Current
|
|||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
712
|
|
$
|
—
|
|
$
|
—
|
|
$
|
712
|
|
|||
|
7.875% Senior Notes due 2021, net
(1)
|
—
|
|
373,957
|
|
—
|
|
373,433
|
|
|||||||
|
Term Loan due 2020, net
(2)
|
94,545
|
|
—
|
|
1,000
|
|
93,489
|
|
|||||||
|
San Bartolomé Lines of Credit
|
—
|
|
—
|
|
—
|
|
4,571
|
|
|||||||
|
Capital lease obligations
|
13,552
|
|
28,300
|
|
9,431
|
|
7,774
|
|
|||||||
|
$
|
108,809
|
|
$
|
402,257
|
|
$
|
10,431
|
|
$
|
479,979
|
|
||||
(1)
Net of unamortized debt issuance costs and premium received of
$4.8 million
and
$5.3 million
at
June 30, 2016
and December 31, 2015, respectively.
(2)
Net of unamortized debt issuance costs of
$4.5 million
and
$5.0 million
at June 30, 2016 and December 31, 2015, respectively.
7.875% Senior Notes due 2021
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
In accordance with the indenture governing the 3.25% Convertible Senior Notes due 2028 (the “Convertible Notes”), the Company announced on February 12, 2015 that it was offering to repurchase all of the Convertible Notes. At June 30, 2016,
$0.7 million
of the Convertible Notes remained outstanding. The Convertible Notes are classified as current liabilities at June 30, 2016 as a result of the Company's intent to repurchase the notes in the next twelve months.
Term Loan due 2020
On June 23, 2015, the Company and certain of its subsidiaries entered into a credit agreement for 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 were used to be used for general corporate purposes. The Term Loan contains no financial maintenance covenants and at June 30, 2016 bears interest at
9.0%
on
$24.75 million
of principal based on a 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) and at a U.S. Prime Rate-based rate equal to
10.5%
on
$74.25 million
of principal. 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 required 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. At
June 30, 2016
, the Company has made amortization payments totaling
$1.0 million
. 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.
Lines of Credit
San Bartolomé had
two
available lines of credit for an aggregate amount of
$27.0 million
, both of which were undrawn at
June 30, 2016
.
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.
20
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Capital Lease Obligations
From time to time, the Company acquires mining equipment under capital lease agreements. During the six months ended June 30, 2016, the Company entered into new lease financing arrangements primarily for a haul truck fleet at its Rochester mine and mining equipment to support the continued underground mine expansion at the Palmarejo complex. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments.
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 the Palmarejo silver and gold mine in Mexico. This royalty excludes 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
$416
per ounce, subject to a
1%
annual inflation compounding adjustment. Payments under the royalty agreement are made in cash or gold bullion. During the
three months ended
June 30, 2016
and
2015
, the Company paid
$10.5 million
and
$9.8 million
, respectively and the Company paid
$19.6 million
and
$20.1 million
during the
six months ended June 30, 2016
and
2015
, respectively. At
June 30, 2016
, payments had been made on a total of
391,507
ounces of gold with further payments to be made on an additional
8,493
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 for the
three months ended
June 30, 2016
and
2015
of
$0.4 million
and
$1.8 million
, respectively, and
$1.2 million
and
$3.8 million
for the
six months ended June 30, 2016
and
2015
, respectively. At
June 30, 2016
and
December 31, 2015
, the remaining minimum obligation under the royalty agreement was
$4.1 million
and
$15.2 million
, respectively.
Interest Expense
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
3.25% Convertible Senior Notes due 2028
|
$
|
6
|
|
$
|
6
|
|
$
|
12
|
|
$
|
43
|
|
|||
|
7.875% Senior Notes due 2021
|
7,457
|
|
8,523
|
|
14,913
|
|
17,085
|
|
|||||||
|
Short-term Loan
|
—
|
|
326
|
|
—
|
|
326
|
|
|||||||
|
Term Loan due 2020
|
2,258
|
|
148
|
|
4,521
|
|
148
|
|
|||||||
|
San Bartolomé Lines of Credit
|
—
|
|
293
|
|
15
|
|
565
|
|
|||||||
|
Capital lease obligations
|
416
|
|
272
|
|
680
|
|
570
|
|
|||||||
|
Other debt obligations
|
15
|
|
—
|
|
29
|
|
—
|
|
|||||||
|
Accretion of Palmarejo gold production royalty obligation
|
397
|
|
1,771
|
|
1,162
|
|
3,802
|
|
|||||||
|
Amortization of debt issuance costs
|
631
|
|
508
|
|
1,262
|
|
913
|
|
|||||||
|
Accretion of debt premium
|
(91
|
)
|
(104
|
)
|
(182
|
)
|
(209
|
)
|
|||||||
|
Capitalized interest
|
(214
|
)
|
(1,009
|
)
|
(417
|
)
|
(1,744
|
)
|
|||||||
|
Total interest expense, net of capitalized interest
|
$
|
10,875
|
|
$
|
10,734
|
|
$
|
21,995
|
|
$
|
21,499
|
|
|||
21
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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.
22
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED
JUNE 30, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
106,207
|
|
$
|
75,800
|
|
$
|
—
|
|
$
|
182,007
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
58,674
|
|
41,791
|
|
—
|
|
100,465
|
|
||||||||||
|
Amortization
|
413
|
|
20,374
|
|
16,718
|
|
—
|
|
37,505
|
|
||||||||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
General and administrative
|
7,096
|
|
203
|
|
101
|
|
—
|
|
7,400
|
|
||||||||||
|
Exploration
|
479
|
|
1,249
|
|
505
|
|
—
|
|
2,233
|
|
||||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||||
|
Pre-development, reclamation, and other
|
934
|
|
1,446
|
|
1,984
|
|
—
|
|
4,364
|
|
||||||||||
|
Total costs and expenses
|
8,922
|
|
81,946
|
|
61,099
|
|
—
|
|
151,967
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Fair value adjustments, net
|
(53
|
)
|
(2,686
|
)
|
(840
|
)
|
—
|
|
(3,579
|
)
|
||||||||||
|
Other, net
|
1,341
|
|
(2,193
|
)
|
143
|
|
(1,148
|
)
|
(1,857
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(10,241
|
)
|
(243
|
)
|
(1,539
|
)
|
1,148
|
|
(10,875
|
)
|
||||||||||
|
Total other income (expense), net
|
(8,953
|
)
|
(5,122
|
)
|
(2,236
|
)
|
—
|
|
(16,311
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(17,875
|
)
|
19,139
|
|
12,465
|
|
—
|
|
13,729
|
|
||||||||||
|
Income and mining tax (expense) benefit
|
(248
|
)
|
(1,595
|
)
|
2,611
|
|
—
|
|
768
|
|
||||||||||
|
Total loss after income and mining taxes
|
(18,123
|
)
|
17,544
|
|
15,076
|
|
—
|
|
14,497
|
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
32,620
|
|
(674
|
)
|
—
|
|
(31,946
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
14,497
|
|
$
|
16,870
|
|
$
|
15,076
|
|
$
|
(31,946
|
)
|
$
|
14,497
|
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
2,103
|
|
2,103
|
|
—
|
|
(2,103
|
)
|
2,103
|
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
20
|
|
20
|
|
—
|
|
(20
|
)
|
20
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of equity securities, net of tax
|
(314
|
)
|
(314
|
)
|
—
|
|
314
|
|
(314
|
)
|
||||||||||
|
Other comprehensive income (loss)
|
1,809
|
|
1,809
|
|
—
|
|
(1,809
|
)
|
1,809
|
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
16,306
|
|
$
|
18,679
|
|
$
|
15,076
|
|
$
|
(33,755
|
)
|
$
|
16,306
|
|
|||||
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED
JUNE 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
99,635
|
|
$
|
66,628
|
|
$
|
—
|
|
$
|
166,263
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
68,477
|
|
50,620
|
|
—
|
|
119,097
|
|
||||||||||
|
Amortization
|
496
|
|
21,772
|
|
16,706
|
|
—
|
|
38,974
|
|
||||||||||
|
General and administrative
|
8,377
|
|
7
|
|
67
|
|
—
|
|
8,451
|
|
||||||||||
|
Exploration
|
591
|
|
1,008
|
|
1,980
|
|
—
|
|
3,579
|
|
||||||||||
|
Pre-development, reclamation, and other
|
(838
|
)
|
1,338
|
|
1,767
|
|
—
|
|
2,267
|
|
||||||||||
|
Total costs and expenses
|
8,626
|
|
92,602
|
|
71,140
|
|
—
|
|
172,368
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Fair value adjustments, net
|
1,188
|
|
1,138
|
|
428
|
|
—
|
|
2,754
|
|
||||||||||
|
Other, net
|
611
|
|
(904
|
)
|
(1,614
|
)
|
(945
|
)
|
(2,852
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(9,336
|
)
|
(263
|
)
|
(2,080
|
)
|
945
|
|
(10,734
|
)
|
||||||||||
|
Total other income (expense), net
|
(7,537
|
)
|
(29
|
)
|
(3,266
|
)
|
—
|
|
(10,832
|
)
|
||||||||||
|
Income (Loss) before income and mining taxes
|
(16,163
|
)
|
7,004
|
|
(7,778
|
)
|
—
|
|
(16,937
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
1,945
|
|
(1,618
|
)
|
(67
|
)
|
—
|
|
260
|
|
||||||||||
|
Income (Loss) after income and mining taxes
|
(14,218
|
)
|
5,386
|
|
(7,845
|
)
|
—
|
|
(16,677
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
(2,460
|
)
|
(649
|
)
|
—
|
|
3,109
|
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(16,678
|
)
|
$
|
4,737
|
|
$
|
(7,845
|
)
|
$
|
3,109
|
|
$
|
(16,677
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on equity securities, net of tax
|
(1,312
|
)
|
(486
|
)
|
—
|
|
486
|
|
(1,312
|
)
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
31
|
|
31
|
|
—
|
|
(31
|
)
|
31
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of equity securities, net of tax
|
904
|
|
904
|
|
—
|
|
(904
|
)
|
904
|
|
||||||||||
|
Other comprehensive income (loss)
|
(377
|
)
|
449
|
|
—
|
|
(449
|
)
|
(377
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(17,055
|
)
|
$
|
5,186
|
|
$
|
(7,845
|
)
|
$
|
2,660
|
|
$
|
(17,054
|
)
|
|||||
(1) Excludes amortization.
23
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
JUNE 30, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
25,384
|
|
$
|
31,117
|
|
$
|
21,384
|
|
$
|
(31,946
|
)
|
45,939
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(88
|
)
|
(12,932
|
)
|
(10,268
|
)
|
—
|
|
(23,288
|
)
|
||||||||||
|
Proceeds from the sale of long-lived assets
|
—
|
|
41
|
|
7,252
|
|
—
|
|
7,293
|
|
||||||||||
|
Purchase of investments
|
(92
|
)
|
—
|
|
—
|
|
—
|
|
(92
|
)
|
||||||||||
|
Sales and maturities of investments
|
—
|
|
648
|
|
—
|
|
—
|
|
648
|
|
||||||||||
|
Other
|
(1,601
|
)
|
196
|
|
(41
|
)
|
—
|
|
(1,446
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(24,352
|
)
|
15,981
|
|
—
|
|
8,371
|
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(26,133
|
)
|
3,934
|
|
(3,057
|
)
|
8,371
|
|
(16,885
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Payments on debt, capital leases, and associated costs
|
(250
|
)
|
(5,673
|
)
|
(789
|
)
|
—
|
|
(6,712
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(10,461
|
)
|
—
|
|
(10,461
|
)
|
||||||||||
|
Net intercompany financing activity
|
(5,222
|
)
|
(5,720
|
)
|
(12,633
|
)
|
23,575
|
|
—
|
|
||||||||||
|
Issuance of common stock
|
73,071
|
|
—
|
|
—
|
|
—
|
|
73,071
|
|
||||||||||
|
Other
|
(448
|
)
|
—
|
|
—
|
|
—
|
|
(448
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
67,151
|
|
(11,393
|
)
|
(23,883
|
)
|
23,575
|
|
55,450
|
|
||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
1
|
|
(303
|
)
|
—
|
|
(302
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
66,402
|
|
23,659
|
|
(5,859
|
)
|
—
|
|
84,202
|
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
61,401
|
|
29,889
|
|
82,099
|
|
—
|
|
173,389
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
127,803
|
|
$
|
53,548
|
|
$
|
76,240
|
|
$
|
—
|
|
$
|
257,591
|
|
|||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
JUNE 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
|
$
|
(7,793
|
)
|
$
|
28,679
|
|
$
|
13,009
|
|
$
|
3,109
|
|
37,004
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(75
|
)
|
(11,873
|
)
|
(11,729
|
)
|
—
|
|
(23,677
|
)
|
||||||||||
|
Proceeds from the sale of long-lived assets
|
—
|
|
—
|
|
8
|
|
—
|
|
8
|
|
||||||||||
|
Purchase of investments
|
(1,597
|
)
|
—
|
|
—
|
|
—
|
|
(1,597
|
)
|
||||||||||
|
Sales and maturities of investments
|
13
|
|
386
|
|
—
|
|
—
|
|
399
|
|
||||||||||
|
Acquisitions
|
(8,170
|
)
|
(982
|
)
|
—
|
|
—
|
|
(9,152
|
)
|
||||||||||
|
Other
|
4
|
|
23
|
|
(138
|
)
|
—
|
|
(111
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(27,904
|
)
|
1,634
|
|
116
|
|
26,154
|
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(37,729
|
)
|
(10,812
|
)
|
(11,743
|
)
|
26,154
|
|
(34,130
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
100,000
|
|
—
|
|
—
|
|
—
|
|
100,000
|
|
||||||||||
|
Payments on long-term debt, capital leases, and associated costs
|
(55,286
|
)
|
(1,885
|
)
|
(9,455
|
)
|
—
|
|
(66,626
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(9,754
|
)
|
—
|
|
(9,754
|
)
|
||||||||||
|
Net intercompany financing activity
|
11,703
|
|
5,283
|
|
11,535
|
|
(28,521
|
)
|
—
|
|
||||||||||
|
Other
|
(72
|
)
|
—
|
|
742
|
|
(742
|
)
|
(72
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
56,345
|
|
3,398
|
|
(6,932
|
)
|
(29,263
|
)
|
23,548
|
|
||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
(141
|
)
|
—
|
|
(141
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
10,823
|
|
21,265
|
|
(5,807
|
)
|
—
|
|
26,281
|
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
113,872
|
|
5,994
|
|
59,721
|
|
—
|
|
179,587
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
124,695
|
|
$
|
27,259
|
|
$
|
53,914
|
|
$
|
—
|
|
$
|
205,868
|
|
|||||
24
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED
JUNE 30, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
200,161
|
|
$
|
130,233
|
|
$
|
—
|
|
$
|
330,394
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
121,038
|
|
80,982
|
|
—
|
|
202,020
|
|
||||||||||
|
Amortization
|
836
|
|
38,233
|
|
26,401
|
|
—
|
|
65,470
|
|
||||||||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
General and administrative
|
15,176
|
|
221
|
|
279
|
|
—
|
|
15,676
|
|
||||||||||
|
Exploration
|
1,102
|
|
1,433
|
|
1,428
|
|
—
|
|
3,963
|
|
||||||||||
|
Write-downs
|
—
|
|
—
|
|
4,446
|
|
—
|
|
4,446
|
|
||||||||||
|
Pre-development, reclamation, and other
|
1,386
|
|
2,862
|
|
4,320
|
|
—
|
|
8,568
|
|
||||||||||
|
Total costs and expenses
|
18,500
|
|
163,787
|
|
117,856
|
|
—
|
|
300,143
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Fair value adjustments, net
|
(1,635
|
)
|
(4,935
|
)
|
(5,704
|
)
|
—
|
|
(12,274
|
)
|
||||||||||
|
Other, net
|
1,679
|
|
61
|
|
(110
|
)
|
(2,173
|
)
|
(543
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(20,496
|
)
|
(456
|
)
|
(3,216
|
)
|
2,173
|
|
(21,995
|
)
|
||||||||||
|
Total other income (expense), net
|
(20,452
|
)
|
(5,330
|
)
|
(9,030
|
)
|
—
|
|
(34,812
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(38,952
|
)
|
31,044
|
|
3,347
|
|
—
|
|
(4,561
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
(457
|
)
|
(1,902
|
)
|
1,021
|
|
—
|
|
(1,338
|
)
|
||||||||||
|
Total loss after income and mining taxes
|
(39,409
|
)
|
29,142
|
|
4,368
|
|
—
|
|
(5,899
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
33,510
|
|
(5,153
|
)
|
—
|
|
(28,357
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(5,899
|
)
|
$
|
23,989
|
|
$
|
4,368
|
|
$
|
(28,357
|
)
|
$
|
(5,899
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on equity securities, net of tax
|
3,146
|
|
3,079
|
|
—
|
|
(3,079
|
)
|
3,146
|
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
20
|
|
20
|
|
—
|
|
(20
|
)
|
20
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of equity securities, net of tax
|
273
|
|
(695
|
)
|
—
|
|
695
|
|
273
|
|
||||||||||
|
Other comprehensive income (loss)
|
3,439
|
|
2,404
|
|
—
|
|
(2,404
|
)
|
3,439
|
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(2,460
|
)
|
$
|
26,393
|
|
$
|
4,368
|
|
$
|
(30,761
|
)
|
$
|
(2,460
|
)
|
|||||
(1) Excludes amortization.
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED
JUNE 30, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
188,307
|
|
$
|
130,912
|
|
$
|
—
|
|
$
|
319,219
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
129,288
|
|
104,872
|
|
—
|
|
234,160
|
|
||||||||||
|
Amortization
|
998
|
|
40,339
|
|
30,727
|
|
—
|
|
72,064
|
|
||||||||||
|
General and administrative
|
17,127
|
|
14
|
|
145
|
|
—
|
|
17,286
|
|
||||||||||
|
Exploration
|
1,154
|
|
3,466
|
|
3,225
|
|
—
|
|
7,845
|
|
||||||||||
|
Pre-development, reclamation, and other
|
2,550
|
|
2,878
|
|
3,602
|
|
—
|
|
9,030
|
|
||||||||||
|
Total costs and expenses
|
21,829
|
|
175,985
|
|
142,571
|
|
—
|
|
340,385
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Fair value adjustments, net
|
142
|
|
(1,155
|
)
|
(1,117
|
)
|
—
|
|
(2,130
|
)
|
||||||||||
|
Other, net
|
1,891
|
|
(2,457
|
)
|
(3,030
|
)
|
(1,766
|
)
|
(5,362
|
)
|
||||||||||
|
Interest expense, net of capitalized interest
|
(18,191
|
)
|
(551
|
)
|
(4,523
|
)
|
1,766
|
|
(21,499
|
)
|
||||||||||
|
Total other income (expense), net
|
(16,158
|
)
|
(4,163
|
)
|
(8,670
|
)
|
—
|
|
(28,991
|
)
|
||||||||||
|
Income (Loss) before income and mining taxes
|
(37,987
|
)
|
8,159
|
|
(20,329
|
)
|
—
|
|
(50,157
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
3,495
|
|
(1,282
|
)
|
(2,021
|
)
|
—
|
|
192
|
|
||||||||||
|
Income (Loss) after income and mining taxes
|
(34,492
|
)
|
6,877
|
|
(22,350
|
)
|
—
|
|
(49,965
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
(15,473
|
)
|
160
|
|
—
|
|
15,313
|
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(49,965
|
)
|
$
|
7,037
|
|
$
|
(22,350
|
)
|
$
|
15,313
|
|
$
|
(49,965
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on equity securities, net of tax
|
(2,813
|
)
|
(1,982
|
)
|
—
|
|
1,982
|
|
(2,813
|
)
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
1,545
|
|
1,545
|
|
—
|
|
(1,545
|
)
|
1,545
|
|
||||||||||
|
Reclassification adjustments for realized loss on sale of equity securities, net of tax
|
904
|
|
904
|
|
—
|
|
(904
|
)
|
904
|
|
||||||||||
|
Other comprehensive income (loss)
|
(364
|
)
|
467
|
|
—
|
|
(467
|
)
|
(364
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(50,329
|
)
|
$
|
7,504
|
|
$
|
(22,350
|
)
|
$
|
14,846
|
|
$
|
(50,329
|
)
|
|||||
(1) Excludes amortization.
25
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(3,258
|
)
|
$
|
52,577
|
|
$
|
31,594
|
|
$
|
(28,357
|
)
|
52,556
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(134
|
)
|
(25,722
|
)
|
(19,604
|
)
|
—
|
|
(45,460
|
)
|
||||||||||
|
Proceeds from the sale of long-lived assets
|
—
|
|
4,041
|
|
7,261
|
|
—
|
|
11,302
|
|
||||||||||
|
Purchase of investments
|
(99
|
)
|
—
|
|
—
|
|
—
|
|
(99
|
)
|
||||||||||
|
Sales and maturities of investments
|
500
|
|
1,145
|
|
—
|
|
—
|
|
1,645
|
|
||||||||||
|
Other
|
(3,139
|
)
|
302
|
|
(82
|
)
|
—
|
|
(2,919
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(20,932
|
)
|
24,160
|
|
—
|
|
(3,228
|
)
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(23,804
|
)
|
3,926
|
|
(12,425
|
)
|
(3,228
|
)
|
(35,531
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Payments on debt, capital leases, and associated costs
|
(500
|
)
|
(6,503
|
)
|
(5,680
|
)
|
—
|
|
(12,683
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(19,592
|
)
|
—
|
|
(19,592
|
)
|
||||||||||
|
Net intercompany financing activity
|
(13,101
|
)
|
(30,685
|
)
|
12,201
|
|
31,585
|
|
—
|
|
||||||||||
|
Issuance of common stock
|
73,071
|
|
—
|
|
—
|
|
—
|
|
73,071
|
|
||||||||||
|
Other
|
(728
|
)
|
|
|
—
|
|
—
|
|
(728
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
58,742
|
|
(37,188
|
)
|
(13,071
|
)
|
31,585
|
|
40,068
|
|
||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
5
|
|
(221
|
)
|
—
|
|
(216
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
31,680
|
|
19,320
|
|
5,877
|
|
—
|
|
56,877
|
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
96,123
|
|
34,228
|
|
70,363
|
|
—
|
|
200,714
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
127,803
|
|
$
|
53,548
|
|
$
|
76,240
|
|
$
|
—
|
|
$
|
257,591
|
|
|||||
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 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
|
$
|
(52,711
|
)
|
$
|
51,389
|
|
$
|
19,564
|
|
$
|
15,313
|
|
33,555
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(87
|
)
|
(19,323
|
)
|
(21,887
|
)
|
—
|
|
(41,297
|
)
|
||||||||||
|
Proceeds from the sale of long-lived assets
|
—
|
|
145
|
|
20
|
|
—
|
|
165
|
|
||||||||||
|
Purchase of investments
|
(1,873
|
)
|
—
|
|
—
|
|
—
|
|
(1,873
|
)
|
||||||||||
|
Sales and maturities of investments
|
12
|
|
386
|
|
71
|
|
—
|
|
469
|
|
||||||||||
|
Acquisitions
|
(111,170
|
)
|
—
|
|
—
|
|
—
|
|
(111,170
|
)
|
||||||||||
|
Other
|
(1,764
|
)
|
23
|
|
(100
|
)
|
—
|
|
(1,841
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(15,683
|
)
|
824
|
|
116
|
|
14,743
|
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(130,565
|
)
|
(17,945
|
)
|
(21,780
|
)
|
14,743
|
|
(155,547
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
150,000
|
|
—
|
|
3,500
|
|
—
|
|
153,500
|
|
||||||||||
|
Payments on long-term debt, capital leases, and associated costs
|
(61,868
|
)
|
(3,703
|
)
|
(9,649
|
)
|
—
|
|
(75,220
|
)
|
||||||||||
|
Gold production royalty payments
|
—
|
|
—
|
|
(20,122
|
)
|
—
|
|
(20,122
|
)
|
||||||||||
|
Net intercompany financing activity
|
9,973
|
|
(8,263
|
)
|
26,811
|
|
(28,521
|
)
|
—
|
|
||||||||||
|
Other
|
(495
|
)
|
—
|
|
1,535
|
|
(1,535
|
)
|
(495
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
97,610
|
|
(11,966
|
)
|
2,075
|
|
(30,056
|
)
|
57,663
|
|
||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
(664
|
)
|
—
|
|
(664
|
)
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
(85,666
|
)
|
21,478
|
|
(805
|
)
|
—
|
|
(64,993
|
)
|
||||||||||
|
Cash and cash equivalents at beginning of period
|
210,361
|
|
5,781
|
|
54,719
|
|
—
|
|
270,861
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
124,695
|
|
$
|
27,259
|
|
$
|
53,914
|
|
$
|
—
|
|
$
|
205,868
|
|
|||||
26
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
127,803
|
|
$
|
53,548
|
|
$
|
76,240
|
|
$
|
—
|
|
$
|
257,591
|
|
|||||
|
Receivables
|
26
|
|
12,454
|
|
67,452
|
|
—
|
|
79,932
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
76,335
|
|
—
|
|
—
|
|
76,335
|
|
||||||||||
|
Inventory
|
—
|
|
46,484
|
|
37,590
|
|
—
|
|
84,074
|
|
||||||||||
|
Prepaid expenses and other
|
2,314
|
|
2,313
|
|
6,987
|
|
—
|
|
11,614
|
|
||||||||||
|
130,143
|
|
191,134
|
|
188,269
|
|
—
|
|
509,546
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
3,844
|
|
144,514
|
|
68,987
|
|
—
|
|
217,345
|
|
||||||||||
|
Mining properties, net
|
—
|
|
183,649
|
|
368,386
|
|
—
|
|
552,035
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
52,885
|
|
—
|
|
—
|
|
52,885
|
|
||||||||||
|
Restricted assets
|
8,901
|
|
185
|
|
5,706
|
|
—
|
|
14,792
|
|
||||||||||
|
Equity securities
|
—
|
|
11,250
|
|
—
|
|
—
|
|
11,250
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
39,739
|
|
—
|
|
39,739
|
|
||||||||||
|
Deferred tax assets
|
—
|
|
—
|
|
1,370
|
|
—
|
|
1,370
|
|
||||||||||
|
Net investment in subsidiaries
|
151,006
|
|
10,850
|
|
—
|
|
(161,856
|
)
|
—
|
|
||||||||||
|
Other
|
218,195
|
|
9,352
|
|
3,540
|
|
(218,194
|
)
|
12,893
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
512,089
|
|
$
|
603,819
|
|
$
|
675,997
|
|
$
|
(380,050
|
)
|
$
|
1,411,855
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
1,481
|
|
$
|
19,431
|
|
$
|
28,307
|
|
$
|
—
|
|
$
|
49,219
|
|
|||||
|
Accrued liabilities and other
|
16,958
|
|
12,718
|
|
20,493
|
|
—
|
|
50,169
|
|
||||||||||
|
Debt
|
95,257
|
|
8,288
|
|
5,264
|
|
—
|
|
108,809
|
|
||||||||||
|
Royalty obligations
|
—
|
|
5,490
|
|
7,425
|
|
—
|
|
12,915
|
|
||||||||||
|
Reclamation
|
—
|
|
1,402
|
|
388
|
|
—
|
|
1,790
|
|
||||||||||
|
113,696
|
|
47,329
|
|
61,877
|
|
—
|
|
222,902
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
373,956
|
|
17,848
|
|
228,647
|
|
(218,194
|
)
|
402,257
|
|
||||||||||
|
Royalty obligations
|
—
|
|
7,069
|
|
—
|
|
—
|
|
7,069
|
|
||||||||||
|
Reclamation
|
—
|
|
64,334
|
|
20,714
|
|
—
|
|
85,048
|
|
||||||||||
|
Deferred tax liabilities
|
28,430
|
|
6,778
|
|
96,251
|
|
—
|
|
131,459
|
|
||||||||||
|
Other long-term liabilities
|
2,070
|
|
4,731
|
|
60,160
|
|
—
|
|
66,961
|
|
||||||||||
|
Intercompany payable (receivable)
|
(502,222
|
)
|
392,069
|
|
110,153
|
|
—
|
|
—
|
|
||||||||||
|
(97,766
|
)
|
492,829
|
|
515,925
|
|
(218,194
|
)
|
692,794
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,624
|
|
250
|
|
163,455
|
|
(163,705
|
)
|
1,624
|
|
||||||||||
|
Additional paid-in capital
|
3,101,493
|
|
179,553
|
|
1,863,739
|
|
(2,043,292
|
)
|
3,101,493
|
|
||||||||||
|
Accumulated deficit
|
(2,606,675
|
)
|
(115,859
|
)
|
(1,928,999
|
)
|
2,044,858
|
|
(2,606,675
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(283
|
)
|
(283
|
)
|
—
|
|
283
|
|
(283
|
)
|
||||||||||
|
496,159
|
|
63,661
|
|
98,195
|
|
(161,856
|
)
|
496,159
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
512,089
|
|
$
|
603,819
|
|
$
|
675,997
|
|
$
|
(380,050
|
)
|
$
|
1,411,855
|
|
|||||
27
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2015
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
96,123
|
|
$
|
34,228
|
|
$
|
70,363
|
|
$
|
—
|
|
$
|
200,714
|
|
|||||
|
Receivables
|
11
|
|
12,773
|
|
73,208
|
|
—
|
|
85,992
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
67,329
|
|
—
|
|
—
|
|
67,329
|
|
||||||||||
|
Inventory
|
—
|
|
45,491
|
|
36,220
|
|
—
|
|
81,711
|
|
||||||||||
|
Prepaid expenses and other
|
3,496
|
|
1,075
|
|
6,371
|
|
—
|
|
10,942
|
|
||||||||||
|
99,630
|
|
160,896
|
|
186,162
|
|
—
|
|
446,688
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
4,546
|
|
138,706
|
|
52,747
|
|
—
|
|
195,999
|
|
||||||||||
|
Mining properties, net
|
—
|
|
199,303
|
|
389,916
|
|
—
|
|
589,219
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
44,582
|
|
—
|
|
—
|
|
44,582
|
|
||||||||||
|
Restricted assets
|
5,755
|
|
381
|
|
5,497
|
|
—
|
|
11,633
|
|
||||||||||
|
Equity securities
|
434
|
|
2,332
|
|
—
|
|
—
|
|
2,766
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
24,768
|
|
—
|
|
24,768
|
|
||||||||||
|
Deferred tax assets
|
—
|
|
—
|
|
1,942
|
|
—
|
|
1,942
|
|
||||||||||
|
Net investment in subsidiaries
|
127,671
|
|
27,657
|
|
—
|
|
(155,328
|
)
|
—
|
|
||||||||||
|
Other
|
54,578
|
|
9,197
|
|
5,695
|
|
(54,578
|
)
|
14,892
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
292,614
|
|
$
|
583,054
|
|
$
|
666,727
|
|
$
|
(209,906
|
)
|
$
|
1,332,489
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
1,743
|
|
$
|
18,535
|
|
$
|
28,454
|
|
$
|
—
|
|
$
|
48,732
|
|
|||||
|
Accrued liabilities and other
|
20,555
|
|
14,598
|
|
18,800
|
|
—
|
|
53,953
|
|
||||||||||
|
Debt
|
1,000
|
|
8,120
|
|
1,311
|
|
—
|
|
10,431
|
|
||||||||||
|
Royalty obligations
|
—
|
|
4,729
|
|
20,164
|
|
—
|
|
24,893
|
|
||||||||||
|
Reclamation
|
—
|
|
1,401
|
|
1,821
|
|
(1,151
|
)
|
2,071
|
|
||||||||||
|
23,298
|
|
47,383
|
|
70,550
|
|
(1,151
|
)
|
140,080
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
467,634
|
|
4,947
|
|
61,976
|
|
(54,578
|
)
|
479,979
|
|
||||||||||
|
Royalty obligations
|
—
|
|
4,864
|
|
—
|
|
—
|
|
4,864
|
|
||||||||||
|
Reclamation
|
—
|
|
61,924
|
|
20,122
|
|
1,151
|
|
83,197
|
|
||||||||||
|
Deferred tax liabilities
|
28,600
|
|
6,927
|
|
111,605
|
|
—
|
|
147,132
|
|
||||||||||
|
Other long-term liabilities
|
2,171
|
|
3,838
|
|
49,752
|
|
—
|
|
55,761
|
|
||||||||||
|
Intercompany payable (receivable)
|
(650,565
|
)
|
411,103
|
|
239,462
|
|
—
|
|
—
|
|
||||||||||
|
(152,160
|
)
|
493,603
|
|
482,917
|
|
(53,427
|
)
|
770,933
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,513
|
|
250
|
|
130,885
|
|
(131,135
|
)
|
1,513
|
|
||||||||||
|
Additional paid-in capital
|
3,024,461
|
|
179,553
|
|
1,896,047
|
|
(2,075,600
|
)
|
3,024,461
|
|
||||||||||
|
Accumulated deficit
|
(2,600,776
|
)
|
(135,049
|
)
|
(1,913,672
|
)
|
2,048,721
|
|
(2,600,776
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(3,722
|
)
|
(2,686
|
)
|
—
|
|
2,686
|
|
(3,722
|
)
|
||||||||||
|
421,476
|
|
42,068
|
|
113,260
|
|
(155,328
|
)
|
421,476
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
292,614
|
|
$
|
583,054
|
|
$
|
666,727
|
|
$
|
(209,906
|
)
|
$
|
1,332,489
|
|
|||||
28
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Labor Union Contract
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
June 30, 2016
, 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 Royalty
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 is payable on the actual sales prices received (exclusive of gains or losses associated with trading activities), less refining and related 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
June 30, 2016
, a total of
22.1 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. At
June 30, 2016
, a total of
8,493
gold ounces remain outstanding under the obligation.
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 received a
$22.0 million
deposit toward future deliveries under the gold stream agreement.
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.
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.
29
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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 Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives that hold their rights under contract themselves with COMIBOL. The stability studies have been completed and officially submitted to the Bolivian mining technical authorities. Accordingly, the COMIBOL suspension has expired in accordance with the terms of the resolution. As a result of the resolution, 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 whom 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. Despite the fact that the COMIBOL suspension has expired, the Company has not resumed mining in other areas above the
4,400
meter level due to community relations concerns and the current political climate in Bolivia.
While the COMIBOL suspension has expired, it is uncertain at this time how long the Company will continue to suspend its mining operations in areas above the
4,400
meter level other than at Huacajchi and Huacajchi Sur. If COMIBOL decides to affirmatively adopt a new resolution to restrict access above the
4,400
meter level on a permanent basis, the Company may need to further write down the carrying value of the asset. While a portion of the Company's proven and probable reserves relate to material above the
4,400
meter level at San Bartolomé, so long as operations remain suspended, there is a risk that silver may not be produced from this material at expected levels or at all, particularly given the remaining anticipated mine life of this asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.
On July 15, 2016, the Company voluntarily terminated the Term Loan due 2020 for
$103.4 million
including the
$99.0 million
remaining principal balance and a
$4.4 million
prepayment premium.
All of the outstanding Convertible Notes were redeemed on July 25, 2016 for
$0.7 million
.
On July 25, 2016, the Company completed the sale of its NSR royalty on the Correnso mine in New Zealand to the operator, a subsidiary of OceanaGold Corporation, for total consideration of
$5.2 million
, including
$0.7 million
in contingent consideration payable in 2017.
On July 26, 2016, the remaining minimum obligation under the Palmarejo royalty agreement was satisfied and the termination of the Palmarejo royalty agreement became effective.
30
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
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 Management's Discussion and Analysis ("MD&A") such as costs applicable to sales, all-in sustaining costs, adjusted net income (loss), EBITDA, and adjusted EBITDA. 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 year ended December 31, 2015 (the "2015 10-K"), as well as other information we file with the Securities and Exchange Commission.
We provide certain operational and financial data on a silver equivalent basis, converting gold to silver at a 60:1 ratio of silver ounces to gold ounces. We also provide silver equivalent data using a ratio determined by average realized silver and gold prices during the relevant period. Silver and gold equivalence are stated at a 60:1 ratio unless otherwise noted.
Overview
We are a gold and silver producer with mines located in the United States, Mexico, and Bolivia and exploration projects in the United States, Mexico and Argentina. The Palmarejo complex, Rochester, Kensington, Wharf, and San Bartolomé mines constitute our principal sources of revenue. The Company also owns Coeur Capital, which is primarily comprised of the Endeavor silver stream.
The Company's strategy is to discover, acquire, develop and operate low-cost silver and gold mines that 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, exercising consistent capital discipline, and efficient working capital management.
Second Quarter Highlights
|
•
|
Net income of
$14.5 million
(
$0.09
per share) and adjusted net income of
$17.3 million
(
$0.11
per share) (see "Non-GAAP Financial Performance Measures")
|
|
•
|
Metal sales of
$180.2 million
|
|
•
|
Production of
9.6 million
silver equivalent ounces, consisting of
4.0 million
silver ounces and
92,727
gold ounces
|
|
•
|
Costs applicable to sales were
$10.82
per silver equivalent ounce (
$10.15
per realized silver equivalent ounce) and
$649
per gold equivalent ounce (see "Non-GAAP Financial Performance Measures")
|
|
•
|
All-in sustaining costs were
$14.92
per silver equivalent ounce (
$13.36
per realized silver equivalent ounce) (see "Non-GAAP Financial Performance Measures")
|
|
•
|
General and administrative expenses reduced
12%
from 2015 to
$7.4 million
|
|
•
|
Capital expenditures of
$23.3 million
, primarily for the development of the Jualin deposit at Kensington and Guadalupe and Independencia underground deposits at Palmarejo
|
|
•
|
Received regulatory approval for the construction of an additional 120 million tons of leach capacity at Rochester
|
|
•
|
Completed a
$75.0 million
“at the market” stock offering
|
|
•
|
Sale of non-core assets completed for total consideration of $12.9 million
|
|
•
|
Cash and cash equivalents of
$257.6 million
at
June 30, 2016
|
31
Selected Financial and Operating Results
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Metal sales
|
$
|
180,197
|
|
$
|
164,505
|
|
$
|
326,833
|
|
$
|
315,460
|
|
|||
|
Net income (loss)
|
$
|
14,497
|
|
$
|
(16,677
|
)
|
$
|
(5,899
|
)
|
$
|
(49,965
|
)
|
|||
|
Net income (loss) per share, basic
|
$
|
0.09
|
|
$
|
(0.12
|
)
|
$
|
(0.04
|
)
|
$
|
(0.42
|
)
|
|||
|
Adjusted net income (loss)
(1)
|
$
|
17,262
|
|
$
|
(18,058
|
)
|
$
|
6,215
|
|
$
|
(42,450
|
)
|
|||
|
Adjusted net income (loss) per share, basic
(1)
|
$
|
0.11
|
|
$
|
(0.13
|
)
|
$
|
0.04
|
|
$
|
(0.36
|
)
|
|||
|
EBITDA
(1)
|
$
|
62,109
|
|
$
|
32,771
|
|
$
|
82,904
|
|
$
|
43,406
|
|
|||
|
Adjusted EBITDA
(1)
|
$
|
72,355
|
|
$
|
36,442
|
|
$
|
108,138
|
|
$
|
63,092
|
|
|||
|
Silver ounces produced
|
4,029,976
|
|
4,258,941
|
|
7,402,450
|
|
8,102,522
|
|
|||||||
|
Gold ounces produced
|
92,727
|
|
80,855
|
|
170,799
|
|
150,589
|
|
|||||||
|
Silver equivalent ounces produced
|
9,593,596
|
|
|
9,110,241
|
|
|
17,650,390
|
|
17,137,862
|
|
|||||
|
Silver ounces sold
|
3,973,475
|
|
4,008,894
|
|
7,502,977
|
|
8,097,519
|
|
|||||||
|
Gold ounces sold
|
88,543
|
|
84,312
|
|
167,634
|
|
152,733
|
|
|||||||
|
Silver equivalent ounces sold
|
9,286,033
|
|
9,067,614
|
|
17,561,045
|
|
17,261,499
|
|
|||||||
|
Average realized price per silver ounce
|
$
|
17.38
|
|
$
|
16.23
|
|
$
|
16.34
|
|
$
|
16.50
|
|
|||
|
Average realized price per gold ounce
|
$
|
1,255
|
|
$
|
1,179
|
|
$
|
1,218
|
|
$
|
1,191
|
|
|||
|
Costs applicable to sales per silver equivalent ounce
(1)
|
$
|
10.82
|
|
$
|
12.84
|
|
$
|
11.53
|
|
$
|
13.59
|
|
|||
|
Costs applicable to sales per realized silver equivalent ounce
(1)
|
$
|
10.15
|
|
$
|
12.01
|
|
$
|
10.72
|
|
$
|
12.77
|
|
|||
|
Costs applicable to sales per gold equivalent ounce
(1)
|
$
|
649
|
|
$
|
820
|
|
$
|
688
|
|
$
|
811
|
|
|||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
14.92
|
|
$
|
16.80
|
|
$
|
15.56
|
|
$
|
17.18
|
|
|||
|
All-in sustaining costs per realized silver equivalent ounce
(1)
|
$
|
13.36
|
|
$
|
14.99
|
|
$
|
13.66
|
|
$
|
15.51
|
|
|||
|
(1)
|
See "Non-GAAP Financial Performance Measures."
|
Consolidated Financial Results
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Net Income (Loss)
Net
income
was
$14.5 million
(
$0.09
per share) compared to
Net
loss
of
$16.7 million
(
$(0.12)
per share). The increase in
Net income
is primarily due to higher gold production, higher average realized silver and gold prices, lower costs applicable to sales per silver and gold ounce, and lower general and administrative expenses, partially offset by lower silver production and unfavorable fair value adjustments.
Revenue
Metal sales
increased
10%
due to higher average realized silver and gold prices and higher gold ounces sold. The Company's average realized silver and gold prices increased by
7%
and
6%
, respectively. The Company sold
4.0 million
silver ounces and
88,543
gold ounces, compared to sales of
4.0 million
silver ounces and
84,312
gold ounces. Gold contributed
62%
of sales and silver contributed
38%
, compared to
60%
of sales from gold and
40%
from silver. Royalty revenue was consistent as higher attributable production and metal prices were offset by the divestiture of several royalties.
Costs Applicable to Sales
Costs applicable to sales were lower due to lower unit costs at all mine sites and lower silver ounces sold, partially offset by higher gold ounces sold. For a complete discussion of costs applicable to sales, see
Results of Operations
below.
32
Amortization
Amortization
decreased
by
$1.5 million
, or
4%
, primarily due to lower silver production and lower amortizable mineral interests and mining equipment.
Expenses
General and administrative expenses
decreased
12%
due to lower compensation and professional services costs.
Exploration expense
decreased
$1.3 million
, or
38%
, due to less drilling activity at Palmarejo and Rochester.
Pre-development, reclamation, and other expenses
increased
93%
to
$4.4 million
due to higher legal and transaction related costs.
Other Income and Expenses
Non-cash fair value adjustments, net, were a
loss
of
$3.6 million
compared to a
gain
of
$2.8 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.
Interest expense (net of capitalized interest of
$0.2 million
)
increased
to
$10.9 million
from
$10.7 million
primarily due to interest expense associated with additional borrowings, partially offset by lower accretion of the Palmarejo gold production royalty obligation.
Other, net
decreased
by
$1.0 million
, primarily due to the
$5.3 million
gain on the sale of Martha assets and the
$1.2 million
gains on the sale of non-core royalty assets, partially offset by higher foreign exchange losses
Income and Mining Taxes
During the second quarter of 2016, the Company reported estimated income and mining tax
benefit
of approximately
$0.8 million
, for an effective tax rate of
5.6%
. Estimated income and mining tax
benefit
during the second quarter of 2015 was
$0.26 million
, for an effective tax rate of
1.5%
. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
|
|
Three months ended June 30, 2016
|
Three months ended June 30, 2015
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
119
|
|
$
|
(1,810
|
)
|
$
|
(9,764
|
)
|
$
|
319
|
|
|
|
Argentina
|
4,453
|
|
(1,793
|
)
|
(656
|
)
|
(1
|
)
|
|||||
|
Mexico
|
3,353
|
|
4,316
|
|
(5,582
|
)
|
548
|
|
|||||
|
Bolivia
|
4,016
|
|
848
|
|
(1,219
|
)
|
196
|
|
|||||
|
Other jurisdictions
|
1,788
|
|
(793
|
)
|
284
|
|
(802
|
)
|
|||||
|
$
|
13,729
|
|
$
|
768
|
|
|
$
|
(16,937
|
)
|
$
|
260
|
|
|
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. 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 more likely than not 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.
33
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Net Income (Loss)
Net
loss
was
$5.9 million
(
$(0.04)
per share) compared to
$50.0 million
(
$(0.42)
per share). The
lower
Net loss
is primarily due to higher gold production, higher average realized gold prices, lower costs applicable to sales per silver and gold ounce, lower exploration costs, and lower general and administrative expenses, partially offset by lower average realized silver prices, lower silver production, and more unfavorable fair value adjustments.
Revenue
Metal sales
increased
4%
due to higher average realized gold prices and higher gold ounces sold as a result of a full six months of Wharf production in the current period, partially offset by lower average realized silver prices and lower silver ounces sold. The Company's average realized silver and gold prices decreased by
1%
and increased by
2%
, respectively. The Company sold
7.5 million
silver ounces and
167,634
gold ounces, compared to sales of
8.1 million
silver ounces and
152,733
gold ounces. Gold contributed
62%
of sales and silver contributed
38%
, compared to
58%
of sales from gold and
42%
from silver. Royalty revenue was consistent with the prior year as higher attributable production and higher metal prices were offset by the divestitures of several royalties.
Costs Applicable to Sales
Costs applicable to sales were lower due to lower unit costs at all mine sites and lower silver ounces sold 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
$6.6 million
, or
9%
, due to lower silver production and lower amortizable mineral interests and mining equipment.
Expenses
General and administrative expenses
decreased
$1.6 million
, or
9%
, due to lower compensation and professional services costs.
Exploration expense
decreased
$3.9 million
, or
49%
, due to less drilling activity at Palmarejo, Kensington, and Rochester.
Pre-development, reclamation, and other expenses
decreased
5%
to
$8.6 million
, primarily due to prior year Wharf acquisition costs.
Write-downs were
$4.4 million
($3.9 million net of tax) related to the Company's silver stream on the Endeavor mine in Australia as a result of the decision by the mine operator to significantly curtail production due to low lead and zinc prices. In addition, the anticipated sale of the Company's NSR royalty on the El Gallo mine contributed to the write-down.
Other Income and Expenses
Non-cash fair value adjustments, net, were a
loss
of
$12.3 million
compared to a
loss
of
$2.1 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.
Interest expense (net of capitalized interest of
$0.4 million
)
increased
to
$22.0 million
from
$21.5 million
primarily due to interest expense associated with additional borrowings, partially offset by lower accretion of the Palmarejo gold production royalty obligation.
Other, net
increased
by
$4.8 million
, primarily due to the
$5.3 million
gain on the sale of Martha assets and the
$3.1 million
gain on the sale of non-core royalty assets, partially offset by changes in higher foreign exchange losses.
Income and Mining Taxes
During the first half of 2016, the Company reported estimated income and mining tax
expense
of approximately
$1.3 million
, for an effective tax rate of
29.3%
. Estimated income and mining tax
benefit
during the first half of 2015 was
$0.2 million
, for an effective tax rate of
0.4%
.
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
34
|
|
Six months ended June 30, 2016
|
Six months ended June 30, 2015
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
(9,242
|
)
|
$
|
(2,342
|
)
|
$
|
(30,471
|
)
|
$
|
2,204
|
|
|
|
Argentina
|
3,438
|
|
(250
|
)
|
(1,352
|
)
|
(2
|
)
|
|||||
|
Mexico
|
(4,155
|
)
|
4,333
|
|
(15,255
|
)
|
(716
|
)
|
|||||
|
Bolivia
|
6,062
|
|
(722
|
)
|
(3,598
|
)
|
(1,211
|
)
|
|||||
|
Other jurisdictions
|
(664
|
)
|
(2,357
|
)
|
519
|
|
(83
|
)
|
|||||
|
$
|
(4,561
|
)
|
$
|
(1,338
|
)
|
|
$
|
(50,157
|
)
|
$
|
192
|
|
|
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. 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 more likely than not 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.
Results of Operations
The Company produced
4.0 million
ounces of silver and
92,727
ounces of gold in the
three months ended
June 30, 2016
, compared to
4.3 million
ounces of silver and
80,855
ounces of gold in the
three months ended
June 30, 2015
. Silver production
decreased
due to timing of leach pad recoveries at Rochester, lower mill throughput at San Bartolomé, and lower silver production at Endeavor, partially offset by higher grades and recovery at Palmarejo. Gold production
increased
15%
in the
three months ended
June 30, 2016
, primarily due to higher grade and recovery at Wharf.
The Company produced
7.4 million
ounces of silver and
170,799
ounces of gold in the
six months ended
June 30, 2016
, compared to
8.1 million
ounces of silver and
150,589
ounces of gold in the
six months ended
June 30, 2015
. Silver production
decreased
9%
due to lower mill throughput at Palmarejo as the mine completed its transition to a lower tonnage, higher grade underground operation, timing of leach pad recoveries at Rochester, and lower silver production at Endeavor. Gold production
increased
13%
in the
six months ended
June 30, 2016
primarily due to a full six months of production of Wharf and higher grade at Kensington.
Costs applicable to sales were
$10.82
per silver equivalent ounce and
$649
per gold ounce in the
three months ended
June 30, 2016
compared to
$12.84
per silver equivalent ounce and
$820
per gold ounce in the
three months ended
June 30, 2015
. Costs applicable to sales per silver equivalent ounce
decreased
16%
in the
three months ended
June 30, 2016
due to lower unit costs at Palmarejo, Rochester, and San Bartolomé. Costs applicable to sales per gold equivalent ounce
decreased
21%
in the
three months ended
June 30, 2016
due to lower unit costs at Wharf and Kensington.
Costs applicable to sales were
$11.53
per silver equivalent ounce and
$688
per gold ounce in the
six months ended
June 30, 2016
compared to
$13.59
per silver equivalent ounce and
$811
per gold ounce in the
six months ended
June 30, 2015
. Costs applicable to sales per silver equivalent ounce
decreased
15%
in the
six months ended
June 30, 2016
due to lower unit costs at Palmarejo and San Bartolomé. Costs applicable to sales per gold equivalent ounce
decreased
15%
in the
six months ended
June 30, 2016
due to lower unit costs at Kensington and Wharf.
All-in sustaining costs
were
$14.92
per silver equivalent ounce in the
three months ended
June 30, 2016
compared to
$16.80
per silver equivalent ounce in the
three months ended
June 30, 2015
. The
11%
reduction in all-in sustaining costs per silver equivalent ounce in the
three months ended
June 30, 2016
was primarily due to higher production, lower costs applicable to sales per Company-wide silver equivalent ounce, and lower general and administrative expenses, partially offset by higher sustaining capital expenditures.
35
All-in sustaining costs were
$15.56
per silver equivalent ounce in the
six months ended
June 30, 2016
compared to
$17.18
per silver equivalent ounce in the
six months ended
June 30, 2015
. The
9%
reduction in all-in sustaining costs per silver equivalent ounce in the
six months ended
June 30, 2016
was primarily due to higher production and lower costs applicable to sales per Company-wide silver equivalent ounce, lower general and administrative expenses and exploration expenses, partially offset by higher sustaining capital expenditures.
Palmarejo
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Tons milled
|
270,142
|
|
435,841
|
|
516,675
|
|
887,759
|
|
|||||||
|
Silver ounces produced
|
1,307,097
|
|
1,247,011
|
|
2,240,466
|
|
2,601,011
|
|
|||||||
|
Gold ounces produced
|
18,731
|
|
18,127
|
|
33,399
|
|
33,622
|
|
|||||||
|
Silver equivalent ounces produced
|
2,430,957
|
|
2,334,631
|
|
4,244,406
|
|
4,618,331
|
|
|||||||
|
Costs applicable to sales per silver equivalent oz
(1)
|
$
|
9.14
|
|
$
|
13.88
|
|
$
|
10.44
|
|
$
|
14.93
|
|
|||
|
Costs applicable to sales per realized silver equivalent oz
(1)
|
$
|
8.35
|
|
$
|
12.68
|
|
$
|
9.40
|
|
$
|
13.78
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Silver equivalent production
increased
4%
due to significantly higher silver and gold grades and higher recoveries. Metal sales were
$48.3 million
, or
27%
of Coeur's metal sales, compared with
$38.9 million
, or
24%
of Coeur's metal sales. Costs applicable to sales per ounce
decreased
34%
as a result of lower waste tons mined, lower milling, diesel, and consumables costs, favorable currency exchange rates, and lower maintenance costs. Amortization increased to
$14.8 million
compared to
$9.0 million
, primarily due to the ramp-up of production at Guadalupe and Independencia. Capital expenditures remained comparable at
$8.9 million
as the Company continues to develop the Guadalupe and Independencia underground operations.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Silver equivalent production
decreased
8%
due to planned lower mill throughput primarily sourced from underground operations, partially offset by higher silver and gold grades and recovery. Metal sales were
$78.1 million
, or
24%
of Coeur's metal sales, compared with
$78.3 million
, or
26%
of Coeur's metal sales. Costs applicable to sales per ounce
decreased
30%
as a result of reduced mining and ore haulage costs, lower waste tons mined, lower milling, diesel, and consumables costs, favorable currency exchange rates, and lower maintenance costs. Amortization increased to
$22.1 million
, primarily due to the ramp-up of production at Guadalupe and Independencia. Capital expenditures remained comparable at
$17.7 million
as the Company continues to develop the underground operations.
Rochester
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Tons placed
|
6,402,013
|
|
3,859,965
|
|
10,776,472
|
|
7,873,844
|
|
|||||||
|
Silver ounces produced
|
1,197,013
|
|
1,294,371
|
|
2,125,915
|
|
2,437,941
|
|
|||||||
|
Gold ounces produced
|
13,940
|
|
16,411
|
|
24,401
|
|
30,132
|
|
|||||||
|
Silver equivalent ounces produced
|
2,033,413
|
|
2,279,031
|
|
3,589,975
|
|
4,245,861
|
|
|||||||
|
Costs applicable to sales per silver equivalent oz
(1)
|
$
|
11.36
|
|
$
|
12.05
|
|
$
|
11.98
|
|
$
|
12.56
|
|
|||
|
Costs applicable to sales per realized silver equivalent oz
(1)
|
$
|
10.49
|
|
$
|
10.98
|
|
$
|
10.92
|
|
$
|
11.52
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
36
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Silver equivalent production
decreased
11%
due to the timing of recoveries and lower silver grade, partially offset by higher tons placed. Metal sales were
$35.8 million
, or
20%
of Coeur’s metal sales, compared with
$36.3 million
, or
22%
of Coeur's metal sales, due to lower production. Costs applicable to sales per silver equivalent ounce
decreased
6%
due to lower diesel, maintenance, and processing costs. Amortization was
$5.4 million
in both periods. Capital expenditures decreased to
$3.9 million
compared to
$5.9 million
.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Silver equivalent production
decreased
15%
due to the timing of recoveries and lower silver grade, partially offset by higher tons placed. Metal sales were
$65.7 million
, or
20%
of Coeur’s metal sales, compared with
$80.4 million
, or
25%
of Coeur's metal sales, due to lower production. Costs applicable to sales per silver equivalent ounce
decreased
5%
due to lower diesel, maintenance and processing costs. Amortization was
$10.8 million
compared to
$12.2 million
due to lower production. Capital expenditures decreased to
$7.2 million
compared to
$9.2 million
.
Kensington
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Tons milled
|
157,117
|
|
170,649
|
|
316,477
|
|
335,600
|
|
|||||||
|
Gold ounces produced
|
32,210
|
|
29,845
|
|
64,183
|
|
63,754
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
749
|
|
$
|
750
|
|
$
|
761
|
|
$
|
774
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Gold production
increased
8%
due to
22%
higher grade, partially offset by lower mill throughput. Metal sales were
$36.5 million
, or
20%
of Coeur's metal sales, compared to
$42.5 million
, or
26%
of Coeur’s metal sales due to fewer gold ounces sold. Costs applicable to sales per ounce were mostly unchanged. Amortization was
$9.8 million
compared to
$12.7 million
due to higher pebble reject production. Capital expenditures were
$7.5 million
compared to
$4.7 million
, due to the continued development of the high-grade Jualin deposit.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Gold production
increased
due to higher grade, partially offset by lower mill throughput. Metal sales were
$72.2 million
, or
22%
of Coeur's metal sales, compared to
$86.5 million
, or
27%
of Coeur’s metal sales, due to lower gold ounces sold. Costs applicable to sales per ounce
decreased
2%
due to lower mining and equipment rental costs. Amortization was
$18.2 million
compared to
$24.2 million
due to due to higher pebble reject production. Capital expenditures were
$15.6 million
compared to
$8.9 million
, due to the underground development of the high-grade Jualin deposit.
Wharf
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
(1)
|
||||||||||||
|
Tons placed
|
915,631
|
|
887,409
|
|
1,890,294
|
|
1,303,405
|
|
|||||||
|
Gold ounces produced
|
27,846
|
|
16,472
|
|
48,816
|
|
23,081
|
|
|||||||
|
Silver ounces produced
|
35,201
|
|
19,336
|
|
48,180
|
|
19,336
|
|
|||||||
|
Gold equivalent ounces produced
(2)
|
28,433
|
|
|
16,794
|
|
|
49,619
|
|
|
23,403
|
|
||||
|
Costs applicable to sales per gold equivalent oz
(2)
|
$
|
535
|
|
$
|
971
|
|
$
|
597
|
|
$
|
971
|
|
|||
|
(1)
|
Amounts are post-acquisition (February 20, 2015).
|
|
(2)
|
See Non-GAAP Financial Performance Measures.
|
37
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Gold equivalent production
increased
69%
due to timing of recoveries and higher gold grade. Metal sales were
$34.0 million
, or
19%
of Coeur's metal sales compared to
$20.4 million
, or
12%
of Coeur's metal sales, due to higher gold ounces sold. Costs applicable to sales per gold equivalent ounce
decreased
primarily due to lower mining and diesel costs. Amortization was
$5.1 million
compared to
$3.5 million
due to higher production. Capital expenditures were
$1.5 million
compared to
$1.2 million
.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Gold equivalent production
increased
112%
due to a full six-months of production, higher gold grade and timing of recoveries. Metal sales were
$61.9 million
, or
19%
of Coeur's metal sales, compared to
$20.4 million
, or
6%
of Coeur's metal sales, due to higher gold ounces sold. Costs applicable to sales per gold equivalent ounce
decreased
primarily due to lower mining and diesel costs. Amortization was
$9.2 million
compared to
$3.5 million
due to higher production. Capital expenditures were
$2.9 million
compared to
$1.3 million
.
San Bartolomé
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Tons milled
|
440,441
|
|
457,232
|
|
848,247
|
|
864,183
|
|
|||||||
|
Silver ounces produced
|
1,457,944
|
|
1,494,550
|
|
2,839,857
|
|
2,707,803
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
13.14
|
|
$
|
13.31
|
|
$
|
12.89
|
|
$
|
14.03
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Silver production
decreased
2%
due to lower mill throughput partially offset by higher grade supplemental ore purchases. Silver sales were
$25.2 million
, or
14%
of Coeur's metal sales, compared with
$23.4 million
, or
14%
of Coeur's metal sales. Costs applicable to sales per ounce declined to
$13.14
due to the supplemental ore purchases and lower processing costs. Amortization was
$1.9 million
compared to
$5.3 million
due to lower amortizable mineral interest and mining equipment. Capital expenditures were
$1.3 million
compared to
$1.0 million
.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Silver production
increased
5%
primarily due to higher recovery rates and higher grade supplemental ore purchases. Silver sales were
$46.5 million
, or
14%
of Coeur's metal sales, compared with
$44.9 million
, or
14%
of Coeur's metal sales. Costs applicable to sales per ounce declined
8%
to
$12.89
due to the supplemental ore purchases and lower processing costs. Amortization was
$3.6 million
compared to
$10.0 million
due to lower amortizable mineral interest and mining equipment. Capital expenditures were
$1.8 million
compared to
$1.9 million
.
Coeur Capital
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
Endeavor Silver Stream
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Tons milled
|
37,521
|
|
191,175
|
|
124,384
|
|
376,474
|
|
|||||||
|
Silver ounces produced
|
32,721
|
|
203,673
|
|
148,032
|
|
336,431
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
7.94
|
|
$
|
6.46
|
|
$
|
5.93
|
|
$
|
6.07
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2016
compared to
Three Months Ended June 30, 2015
Silver production at Endeavor
decreased
as a result of the mine operator's decision to significantly curtail production due to low lead and zinc prices. Costs applicable to sales per ounce
increased
due to the impact of silver prices on the Company's silver price sharing agreement with the Endeavor mine operator. Royalty revenue was
$1.8 million
in both periods. Amortization was
38
$0.1 million
compared to
$2.6 million
due to lower production and the impact of lower amortizable mineral interest. In the second quarter of 2016, Coeur completed the sale of non-core royalty assets for total consideration of
$9.9 million
. The Company recognized a gain of
$1.2 million
, which is recorded in
Other, net,
related to the sale of these non-core assets.
Six Months Ended June 30, 2016
compared to
Six Months Ended June 30, 2015
Silver production at Endeavor
decreased
as a result of the mine operator's decision to significantly curtail production due to low lead and zinc prices. Costs applicable to sales per ounce was mostly consistent. Royalty revenue was
$3.6 million
compared to
$3.8 million
. Amortization was
$0.9 million
compared to
$4.8 million
due to lower production, and the impact of lower amortizable mineral interest. In the first half of 2016, Coeur completed the sale of non-core royalty assets for total consideration of
$15.6 million
. The Company recognized a gain of
$3.1 million
, which is recorded in
Other, net,
related to the sale of these non-core assets.
Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the
three and six months ended June 30, 2016
was
$45.9 million
and
$52.6 million
, respectively, compared to net cash provided by operating activities of
$37.0 million
and
$33.6 million
, respectively, for the
three and six months ended June 30, 2015
, and was impacted by the following key factors:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,286,033
|
|
9,067,614
|
|
17,561,045
|
|
17,261,499
|
|
|||||||
|
Average realized price per silver equivalent ounce
|
$
|
19.41
|
|
$
|
18.14
|
|
$
|
18.61
|
|
$
|
18.28
|
|
|||
|
Costs applicable to sales per consolidated silver equivalent ounce
(1)
|
(10.82
|
)
|
(13.13
|
)
|
(11.50
|
)
|
(13.57
|
)
|
|||||||
|
Operating margin per consolidated silver equivalent ounce
|
$
|
8.59
|
|
$
|
5.01
|
|
$
|
7.11
|
|
$
|
4.71
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Cash flow before changes in operating assets and liabilities
|
$
|
47,496
|
|
$
|
24,875
|
|
$
|
70,749
|
|
$
|
35,270
|
|
|||
|
Changes in operating assets and liabilities:
|
|||||||||||||||
|
Receivables
|
(12,402
|
)
|
(2,342
|
)
|
(8,921
|
)
|
214
|
|
|||||||
|
Prepaid expenses and other
|
(898
|
)
|
160
|
|
381
|
|
(1,167
|
)
|
|||||||
|
Inventories
|
(7,686
|
)
|
4,649
|
|
(15,508
|
)
|
5,333
|
|
|||||||
|
Accounts payable and accrued liabilities
|
19,429
|
|
9,662
|
|
5,855
|
|
(6,095
|
)
|
|||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
$
|
45,939
|
|
$
|
37,004
|
|
$
|
52,556
|
|
$
|
33,555
|
|
|||
Cash provided by operating activities
increased
$8.9 million
for the
three months ended June 30, 2016
compared to the
three months ended June 30, 2015
due to higher average realized prices, higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by unfavorable working capital adjustments. Metal sales for the
three months ended June 30, 2016
increased
$15.7 million
of which
$11.0 million
was due to higher average realized prices and
$4.7 million
was due to higher silver equivalent ounces sold. The
$1.6 million
working capital
increase
for the
three months ended June 30, 2016
was primarily due to an increase in trade receivables and ore on leach pads, partially offset by an increase in accounts payable, compared to the
$12.1 million
working capital
decrease
for the
three months ended June 30, 2015
, primarily due to an increase in accrued interest, payroll, and other benefits.
Cash provided by operating activities
increased
$19.0 million
for the
six months ended June 30, 2016
compared to the
six months ended June 30, 2015
due to higher average realized prices, higher silver equivalent ounces sold and lower costs applicable to sales per silver equivalent ounce, partially offset by unfavorable working capital adjustments. Metal sales for the
six months ended June 30, 2016
increased
$11.2 million
of which
$2.8 million
was due to higher average realized prices and
$8.4 million
was due to higher silver equivalent ounces sold. The
$18.2 million
working capital
increase
for the
six months ended June
39
30, 2016
was primarily due to an increase in ore on leach pads and trade receivables, partially offset by an increase in accounts payable, compared to the
$1.7 million
working capital
increase
for the
six months ended June 30, 2015
, primarily due to payment of payroll and other benefits.
Cash Used in Investing Activities
Net cash
used in
investing activities in the
three months ended June 30, 2016
was
$16.9 million
compared to
$34.1 million
in the
three months ended June 30, 2015
, primarily due to proceeds from the sale of non-core assets in 2016 and the acquisition of Paramount in 2015. The Company had capital expenditures of
$23.3 million
for the
three months ended June 30, 2016
compared with
$23.7 million
in the
three months ended June 30, 2015
. Capital expenditures in both periods were primarily related to underground development at Palmarejo and Kensington.
Net cash
used in
investing activities in the
six months ended June 30, 2016
was
$35.5 million
compared to
$155.5 million
in the
six months ended June 30, 2015
, primarily due to proceeds from the sale of non-core assets in 2016 and the acquisition of the Wharf gold mine for
$99.4 million
in February 2015. The Company had capital expenditures of
$45.5 million
for the
six months ended June 30, 2016
compared with
$41.3 million
in the
six months ended June 30, 2015
. Capital expenditures in both periods were primarily related to underground development at Palmarejo and Kensington.
Cash Provided by Financing Activities
Net cash
provided by
financing activities for the
three months ended June 30, 2016
was
$55.5 million
compared to
$23.5 million
in the
three months ended June 30, 2015
. During the
three months ended June 30, 2016
, the Company received net proceeds of
$73.1 million
from the sale of
9.3 million
shares of its common stock in connection with
$75.0 million
“at the market” stock offering. During the
three months ended June 30, 2015
, the Company entered into the $100.0 million Term Loan due 2020, partially offset by the simultaneous repayment of a $50.0 million short-term loan entered into in connection with the Wharf acquisition and $9.4 million of debt repayment at San Bartolome.
Net cash
provided by
financing activities for the
six months ended June 30, 2016
was
$40.1 million
compared to
$57.7 million
in the
six months ended June 30, 2015
. During the
six months ended June 30, 2016
, the Company received net proceeds of approximately
$73.1 million
from the sale of
9.3 million
shares of its common stock. During the
six months ended June 30, 2015
, the Company entered into a $50.0 million Short-term Loan which was subsequently repaid upon entering into the $100.0 million Term Loan due 2020 and $9.4 million of debt repayment at San Bartolome.
On July 15, 2016, the Company voluntarily terminated the Term Loan due 2020 for
$103.4 million
including the
$99.0 million
remaining principal balance and a
$4.4 million
prepayment premium.
Other Liquidity Matters
The Company has asserted indefinite reinvestment of certain foreign subsidiary earnings as determined by management’s judgment about and intentions concerning the future operations of the Company. The Company does not believe that the amounts reinvested will have a material impact on liquidity.
We believe that our liquidity and capital resources are adequate to fund our operations and corporate activities.
In order to reduce future cash interest payments, and/or amounts due at maturity or upon redemption, from time to time we may repurchase certain of our debt securities for cash or in exchange for other securities, which may include secured or unsecured notes or equity, in each case in open market or privately negotiated transactions. We regularly engage in conversations with our bondholders and evaluate any such transactions in light of prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be significant and any such transactions may occur at a substantial discount to the debt securities' face amount.
40
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, 2015 for the Company's critical accounting policies and estimates.
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.
Adjusted net income (loss)
is reconciled to
Net income (loss)
in the table below:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Net income (loss)
|
$
|
14,497
|
|
$
|
(16,677
|
)
|
$
|
(5,899
|
)
|
$
|
(49,965
|
)
|
|||
|
Fair value adjustments
|
3,579
|
|
(2,754
|
)
|
12,274
|
|
2,130
|
|
|||||||
|
Impairment of marketable securities
|
20
|
|
31
|
|
20
|
|
1,545
|
|
|||||||
|
Write-downs
|
—
|
|
—
|
|
4,446
|
|
—
|
|
|||||||
|
Gain on sale of assets
|
(2,812
|
)
|
(107
|
)
|
(4,486
|
)
|
(63
|
)
|
|||||||
|
(Gain) loss on debt extinguishments
|
—
|
|
524
|
|
—
|
|
271
|
|
|||||||
|
Transaction-related costs
|
792
|
|
38
|
|
1,172
|
|
2,013
|
|
|||||||
|
Tax effect of adjustments
|
3,996
|
|
136
|
|
2,621
|
|
(409
|
)
|
|||||||
|
Foreign exchange (gain) loss
|
(2,810
|
)
|
751
|
|
(3,933
|
)
|
2,028
|
|
|||||||
|
Adjusted net income (loss)
|
$
|
17,262
|
|
$
|
(18,058
|
)
|
$
|
6,215
|
|
$
|
(42,450
|
)
|
|||
|
Adjusted net income (loss) per share
|
$
|
0.11
|
|
$
|
(0.13
|
)
|
$
|
0.04
|
|
$
|
(0.36
|
)
|
|||
41
EBITDA and Adjusted EBITDA
Management uses
EBITDA
to evaluate the Company's operating performance, to plan and forecast its operations, and assess leverage levels and liquidity measures. The Company believes the use of
EBITDA
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. In addition,
Adjusted EBITDA
is a measure used in the Company's Senior Notes due 2021 indenture to determine our ability to make certain payments and incur additional indebtedness.
EBITDA
and
Adjusted EBITDA
do not represent, and should not be considered an alternative to,
Net income (Loss)
or
Cash Flow from Operations
as determined under GAAP.
Other companies may calculate
Adjusted EBITDA
differently and those calculations may not be comparable to our presentation.
Adjusted EBITDA
is reconciled to
Net income (loss)
in the table below:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2016
|
2015
|
2016
|
2015
|
|||||||||||
|
Net income (loss)
|
$
|
14,497
|
|
$
|
(16,677
|
)
|
$
|
(5,899
|
)
|
$
|
(49,965
|
)
|
|||
|
Interest expense, net of capitalized interest
|
10,875
|
|
10,734
|
|
21,995
|
|
21,499
|
|
|||||||
|
Income tax provision (benefit)
|
(768
|
)
|
(260
|
)
|
1,338
|
|
(192
|
)
|
|||||||
|
Amortization
|
37,505
|
|
38,974
|
|
65,470
|
|
72,064
|
|
|||||||
|
EBITDA
|
62,109
|
|
|
32,771
|
|
|
82,904
|
|
|
43,406
|
|
||||
|
Fair value adjustments, net
|
3,579
|
|
(2,754
|
)
|
12,274
|
|
2,130
|
|
|||||||
|
Impairment of equity securities
|
20
|
|
31
|
|
20
|
|
1,545
|
|
|||||||
|
Foreign exchange losses
|
5,655
|
|
2,056
|
|
5,820
|
|
4,262
|
|
|||||||
|
(Gain) loss on sale of assets
|
(2,812
|
)
|
(107
|
)
|
(4,486
|
)
|
(63
|
)
|
|||||||
|
(Gain) loss on debt extinguishment
|
—
|
|
524
|
|
—
|
|
524
|
|
|||||||
|
Transaction-related costs
|
792
|
|
38
|
|
1,172
|
|
2,011
|
|
|||||||
|
Asset retirement obligation accretion
|
2,066
|
|
2,078
|
|
4,125
|
|
3,787
|
|
|||||||
|
Inventory adjustments
|
946
|
|
1,805
|
|
1,863
|
|
5,490
|
|
|||||||
|
Write-downs
|
—
|
|
—
|
|
4,446
|
|
—
|
|
|||||||
|
Adjusted EBITDA
|
$
|
72,355
|
|
|
$
|
36,442
|
|
|
$
|
108,138
|
|
|
$
|
63,092
|
|
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, assessing our operating performance and ability to generate free cash flow from operations and sustaining production. 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 June 30, 2016
|
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)
|
$
|
37,630
|
|
|
$
|
27,158
|
|
$
|
20,498
|
|
$
|
365
|
|
$
|
85,651
|
|
$
|
32,419
|
|
$
|
19,470
|
|
$
|
51,889
|
|
$
|
137,540
|
|
||||||||
|
Amortization
|
14,765
|
|
5,437
|
|
1,853
|
|
84
|
|
22,139
|
|
9,808
|
|
5,128
|
|
14,936
|
|
37,075
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
22,865
|
|
$
|
21,721
|
|
$
|
18,645
|
|
$
|
281
|
|
$
|
63,512
|
|
$
|
22,611
|
|
$
|
14,342
|
|
$
|
36,953
|
|
$
|
100,465
|
|
|||||||||
|
Silver equivalent ounces sold
|
2,502,442
|
|
1,911,885
|
|
1,418,455
|
|
35,411
|
|
5,868,193
|
|
9,286,033
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
30,178
|
|
26,786
|
|
56,964
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
9.14
|
|
|
$
|
11.36
|
|
$
|
13.14
|
|
$
|
7.94
|
|
$
|
10.82
|
|
$
|
749
|
|
$
|
535
|
|
$
|
649
|
|
$
|
10.82
|
|
||||||||
|
Costs applicable to sales per realized ounce
|
$
|
8.35
|
|
$
|
10.49
|
|
|
|
$
|
10.15
|
|
|
|
|
$
|
9.69
|
|
|||||||||||||||||||
|
Costs applicable to sales
|
$
|
100,465
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
1,128
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
21,019
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
7,400
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
2,233
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
4,170
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
2,098
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
138,513
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
5,868,193
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
3,417,840
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,286,033
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
14.92
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
|
$
|
13.36
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Guadalupe, Independencia and Rochester crushing capacity expansion.
|
Three Months Ended June 30, 2015
|
Silver
|
Gold
|
|||||||||||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total
|
Kensington
|
Wharf
|
Total
|
Total
|
|||||||||||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
39,158
|
|
$
|
29,779
|
|
$
|
24,428
|
|
$
|
3,204
|
|
$
|
96,569
|
|
$
|
40,136
|
|
$
|
20,123
|
|
$
|
60,259
|
|
$
|
156,828
|
|
|||||||||
|
Amortization
|
9,046
|
|
5,387
|
|
5,271
|
|
1,852
|
|
21,556
|
|
12,684
|
|
3,491
|
|
16,175
|
|
37,731
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
30,112
|
|
$
|
24,392
|
|
$
|
19,157
|
|
$
|
1,352
|
|
$
|
75,013
|
|
$
|
27,452
|
|
$
|
16,632
|
|
$
|
44,084
|
|
$
|
119,097
|
|
|||||||||
|
Silver equivalent ounces sold
|
2,169,960
|
|
2,024,856
|
|
1,439,388
|
|
209,130
|
|
5,843,334
|
|
9,067,614
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
36,607
|
|
17,131
|
|
53,738
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
13.88
|
|
|
$
|
12.05
|
|
|
$
|
13.31
|
|
|
$
|
6.46
|
|
|
$
|
12.84
|
|
$
|
750
|
|
|
$
|
971
|
|
|
$
|
820
|
|
$
|
13.13
|
|
|||
|
Costs applicable to sales per realized ounce
|
$
|
12.68
|
|
$
|
10.98
|
|
|
|
$
|
12.01
|
|
$
|
11.72
|
|
||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
119,097
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
1,526
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
13,625
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
8,451
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
3,579
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
4,036
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
2,030
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
152,344
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
5,843,334
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
3,224,280
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,067,614
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
16.80
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
|
$
|
14.99
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Independencia and Rochester expansion permitting.
|
43
Six Months Ended June 30, 2016
|
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)
|
$
|
65,957
|
|
$
|
54,956
|
|
$
|
39,749
|
|
$
|
1,320
|
|
$
|
161,982
|
|
$
|
65,186
|
|
$
|
38,982
|
|
$
|
104,168
|
|
$
|
266,150
|
|
|||||||||
|
Amortization
|
22,054
|
|
10,750
|
|
3,607
|
|
383
|
|
36,794
|
|
18,157
|
|
9,179
|
|
27,336
|
|
64,130
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
43,903
|
|
$
|
44,206
|
|
$
|
36,142
|
|
$
|
937
|
|
$
|
125,188
|
|
$
|
47,029
|
|
$
|
29,803
|
|
$
|
76,832
|
|
$
|
202,020
|
|
|||||||||
|
Silver equivalent ounces sold
|
4,204,732
|
|
3,691,261
|
|
2,802,846
|
|
158,106
|
|
10,856,945
|
|
17,561,045
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
61,827
|
|
49,908
|
|
111,735
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
10.44
|
|
|
$
|
11.98
|
|
|
$
|
12.89
|
|
|
$
|
5.93
|
|
|
$
|
11.53
|
|
$
|
761
|
|
|
$
|
597
|
|
|
$
|
688
|
|
$
|
11.50
|
|
|||
|
Costs applicable to sales per realized ounce
|
$
|
9.40
|
|
$
|
10.92
|
|
$
|
10.72
|
|
$
|
10.10
|
|
||||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
202,020
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
2,286
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
37,729
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
15,676
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
3,963
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
7,931
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
3,655
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
273,260
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
10,856,945
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
6,704,100
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
17,561,045
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
15.56
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
|
$
|
13.66
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Guadalupe, Independencia and Rochester crushing capacity expansion and miscellaneous land purchases.
|
Six Months Ended June 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)
|
$
|
80,983
|
|
$
|
68,015
|
|
$
|
48,245
|
|
$
|
5,096
|
|
$
|
202,339
|
|
$
|
81,109
|
|
$
|
20,123
|
|
$
|
101,232
|
|
$
|
303,571
|
|
|||||||||
|
Amortization
|
16,380
|
|
12,230
|
|
9,961
|
|
3,111
|
|
41,682
|
|
24,238
|
|
3,491
|
|
27,729
|
|
69,411
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
64,603
|
|
$
|
55,785
|
|
$
|
38,284
|
|
$
|
1,985
|
|
$
|
160,657
|
|
$
|
56,871
|
|
$
|
16,632
|
|
$
|
73,503
|
|
$
|
234,160
|
|
|||||||||
|
Silver equivalent ounces sold
|
4,327,572
|
|
4,440,959
|
|
2,729,255
|
|
326,993
|
|
11,824,779
|
|
17,261,499
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
73,481
|
|
17,131
|
|
90,612
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
14.93
|
|
|
$
|
12.56
|
|
|
$
|
14.03
|
|
|
$
|
6.07
|
|
|
$
|
13.59
|
|
$
|
774
|
|
|
$
|
971
|
|
|
$
|
811
|
|
$
|
13.57
|
|
|||
|
Costs applicable to sales per realized ounce
|
$
|
13.78
|
|
$
|
11.52
|
|
$
|
12.77
|
|
$
|
12.25
|
|
||||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
234,160
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
3,016
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
24,535
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
17,286
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
7,845
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
7,313
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
2,341
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
296,496
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
11,824,779
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
5,436,720
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
17,261,499
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
17.18
|
|
|||||||||||||||||||||||||||||||||
|
All-in sustaining costs per realized silver equivalent ounce
|
$
|
15.51
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Independencia and Rochester expansion permitting.
|
44
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, tax positions, efforts to mitigate risks associated with gold and silver price and foreign currency fluctuations and the adequacy of liquidity and capital resources. 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 2015 10-K and in this Quarterly Report on Form 10-Q and the risks and uncertainties discussed in this MD&A, (ii) 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), (iii) 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, (iv) 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, (v) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vi) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) 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); (ix) the loss of access to any third-party smelter to which the Company markets silver and gold, (x) the effects of environmental and other governmental regulations, (xi) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xii) 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.
45
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
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. Additional information about the Company’s derivative financial instruments may be found in Note 11 -- Derivative Financial Instruments in the notes to the condensed consolidated financial statements. This discussion of the Company's market risk assessments contains "forward looking statements". For additional information regarding forward-looking statements and risks and uncertainties that could impact the Company, please refer to 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.
If the market price of silver were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period. The Company may be exposed to non-performance risk by counterparties as a result of its hedging activities. This exposure would be limited to the amount that the spot price of the metal falls short of the contract price. The Company had no outstanding gold and silver hedging contracts at
June 30, 2016
.
Provisional Silver and Gold Sales
The Company enters into sales contracts with third-party smelters and refiners which, in some 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
$1.2 million
in the
six months ended June 30, 2016
.
At
June 30, 2016
, the Company had outstanding provisionally priced sales of
0.5 million
ounces of silver and
34,876
ounces of gold at prices of
$18.28
and
$1,257
, respectively. A 10% change in realized silver price would cause revenue to vary by $1.0 million and a 10% change in realized gold price would cause revenue to vary by $4.4 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.
At
June 30, 2016
, a total of
8,493
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
8.3%
at
June 30, 2016
. The fair value of the embedded derivative at
June 30, 2016
was a liability of
$3.3 million
. A 10% change in the price of gold would result in a change in the fair value of the net derivative liability at
June 30, 2016
to vary by
$0.6 million
. On July 26, 2016, payments on the remaining ounces under the minimum royalty obligation were made and termination of the royalty was effective.
46
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 and related monetary and fiscal policies. Fluctuations in local currency exchange rates in relation to the U.S. dollar may significantly impact profitability and cash flow.
Foreign Exchange Hedging
To manage foreign currency risk, the Company may enter into forward foreign exchange contracts and option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at
June 30, 2016
.
47
Item 4.
Controls and Procedures
(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
June 30, 2016
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
48
Item 1.
Legal Proceedings
For a discussion of legal proceedings, see Note 20 -- Commitments and Contingencies in the notes to the condensed consolidated financial statements included herein.
Item 1A.
Risk Factors
Item 1A -- Risk Factors of the 2015 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.Those risk factors have been supplemented and updated in this Form 10-Q. Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.
The Company is an international company and is exposed to political and social risks in the countries in which it has significant operations or interests.
A significant portion of the Company’s revenues are generated by operations outside the United States, and it is subject to significant risks inherent in mineral extraction by foreign companies and contracts with government owned entities. Exploration, development, production and closure activities in many countries are potentially subject to heightened political and social risks that are beyond the Company’s control. These risks include the possible unilateral cancellation or forced renegotiation of contracts, unfavorable changes in foreign laws and regulations, royalty and tax increases, risks associated with the value-added tax (“VAT”) and income tax refund recovery and collection process, claims by governmental entities or indigenous communities, expropriation or nationalization of property and other risks arising out of foreign sovereignty over areas in which operations are conducted. The right to export silver and gold may depend on obtaining certain licenses and quotas, which could be delayed or denied at the discretion of the relevant regulatory authorities. In addition, the Company’s rights under local law may be less secure in countries where judicial systems are susceptible to manipulation and intimidation by government agencies, non-governmental organizations or civic groups.
Any of these developments could require the Company to curtail or terminate operations at its mines, incur significant costs to meet newly-imposed environmental or other standards, pay greater royalties or higher prices for labor or services and recognize higher taxes, or experience significant delays or obstacles in the recovery of VAT or income tax refunds owed, which could materially and adversely affect financial condition, results of operations and cash flows.
These risks may be higher in developing countries in which the Company may expand its exploration for and development of mineral deposits. Potential operations in these areas increase the Company’s exposure to risks of war, local economic conditions, political disruption, civil disturbance and governmental policies that may disrupt its operations.
The Company’s ongoing and future success depends on developing and maintaining productive relationships with the communities, including indigenous peoples, and other stakeholders in its operating locations. The Company believes its operations can provide valuable benefits to surrounding communities, in terms of direct employment, training and skills development and other benefits associated with ongoing payment of taxes. In addition, the Company seeks to maintain its partnerships and relationships with local communities and stakeholders in a variety of ways, including in-kind contributions, volunteer time, sponsorships and donations. Notwithstanding the Company’s ongoing efforts, local communities and stakeholders can become dissatisfied with its activities or the level of benefits provided, which may result in civil unrest, protests, direct action or campaigns against it. Any such occurrences could materially and adversely affect the Company’s financial condition, results of operations and cash flows.
The Company’s future operating performance may not generate cash flows sufficient to meet debt payment obligations.
As of July 26, 2016, the Company had approximately
$420.6 million
of outstanding indebtedness. The Company’s ability to make scheduled debt payments on outstanding indebtedness will depend on future results of operations and cash flows. The Company’s results of operations and cash flows, in part, are subject to economic factors beyond its control, including the market prices of silver and gold. The Company may not be able to generate enough cash flow to meet obligations and commitments under outstanding debt instruments. If the Company cannot generate sufficient cash flow from operations to service debt, it may need to further refinance debt, dispose of assets or issue equity to obtain the necessary funds.
The Company cannot predict whether it would be able to refinance debt, issue equity or dispose of assets to raise funds on a timely basis or on satisfactory terms. In a rising interest rate environment, the costs of borrowing additional funds or refinancing outstanding indebtedness would also be expected to increase.
49
Compliance with environmental regulations and litigation based on environmental regulations could require significant expenditures.
Environmental regulations mandate, among other things, the maintenance of air and water quality standards, land development and land reclamation, and set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner that may require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility (financial and otherwise) for mining companies and their officers, directors and employees. The Company may incur environmental costs that could have a material adverse effect on financial condition and results of operations. Any failure to remedy an environmental problem could require it to suspend operations or enter into interim compliance measures pending completion of the required remedy. The environmental standards that ultimately may be imposed at a mine site affect the cost of remediation and could exceed the financial accruals that the Company has made for such remediation. The potential exposure may be significant and could have a material adverse effect on the Company’s financial condition and results of operations.
Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property and injury to persons resulting from the environmental, health and safety impacts of prior and current operations, including operations conducted by other mining companies many years ago at sites located on properties that the Company currently or formerly owned. These lawsuits could lead to the imposition of substantial fines, remediation costs, penalties and other civil and criminal sanctions. Substantial costs and liabilities, including for restoring the environment after the closure of mines, are inherent in the Company’s operations. The Company cannot assure that any such law, regulation, enforcement or private claim would not have a material adverse effect on its financial condition, results of operations or cash flows.
Some of the mining wastes from the Company’s U.S. mines currently are exempt to a limited extent from the extensive set of EPA regulations governing hazardous waste under the RCRA. If the EPA were to repeal this exemption, and designate these mining wastes as hazardous under RCRA, the Company would be required to expend additional amounts on the handling of such wastes and to make significant expenditures to construct hazardous waste storage or disposal facilities. In addition, if any of these wastes causes contamination in or damage to the environment at a U.S. mining facility, that facility could be designated as a “Superfund” site under CERCLA. Under CERCLA, any present owner or operator of a Superfund site or the owner or operator at the time of contamination may be held jointly and severally liable regardless of fault, and may be forced to undertake extensive remedial cleanup action or to pay for the cleanup efforts. The owner or operator also may be liable to federal, state and tribal governmental entities for the cost of damages to natural resources, which could be substantial. Additional regulations or requirements also are imposed on the Company’s tailings and waste disposal areas in Alaska under the federal Clean Water Act (“CWA”), in Nevada under the Nevada Water Pollution Control Law which implements the CWA, and in South Dakota under the South Dakota Water Pollution Control Act and the Administrative Rules of the State of South Dakota.
Airborne emissions are subject to controls under air pollution statutes implementing the Clean Air Act in Nevada, Alaska and South Dakota. In addition, there are numerous legislative and regulatory proposals related to climate change, including legislation pending in the U.S. Congress to require reductions in greenhouse gas emissions. Adoption of these proposals could have a material adverse effect on results of operations and cash flows.
The Company is required to obtain and renew governmental permits in order to conduct operations, a process which is often costly and time-consuming. The Company’s ability to obtain necessary government permits to expand operations or begin new operations can be materially affected by third party activists.
In the normal course of its business, the Company is required to obtain and renew governmental permits for exploration, operations and expansion of existing operations and for the development of new projects. Obtaining and renewing governmental permits is a complex and time-consuming process. The timeliness and success of permitting efforts are contingent upon many variables not within the Company's control, including the interpretation of permit approval requirements administered by the applicable permitting authority. The Company may not be able to obtain or renew permits that are necessary to its operations or the cost and time required to obtain or renew permits may exceed the Company's expectations. Any unexpected delays or costs associated with the permitting process could delay the development or impede the operation of a mine, which in turn could materially adversely affect the Company's revenues and future growth. In addition, key permits and approvals may be revoked or suspended or may be changed in a manner that adversely affects the Company’s operations.
Private parties such as environmental activists frequently attempt to intervene in the permitting process and to persuade regulators to deny necessary permits or seek to overturn permits that have been issued. Obtaining the necessary governmental permits is a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. These third party actions can materially increase the costs and cause delays in the permitting process and could cause the Company to not proceed with the development or expansion of a mine. In addition, the Company’s ability to successfully
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obtain key permits and approvals to explore for, develop, operate and expand mines and to conduct its operations will likely depend on the Company’s ability to develop, operate, expand and close mines in a manner that is consistent with the creation of social and economic benefits in the surrounding communities, which may or may not be required by law. The Company’s ability to obtain permits and approvals and to successfully operate in particular communities may be adversely impacted by real or perceived detrimental events associated with its activities or those of other mining companies affecting the environment, human health and safety of communities in which it operates.
Item 4.
Mine Safety Disclosures
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 Form 10-Q.
Item 6.
Exhibits
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31.1
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Certification of the CEO (Filed herewith).
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31.2
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Certification of the CFO (Filed herewith).
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32.1
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CEO Section 1350 Certification (Filed herewith).
|
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32.2
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CFO Section 1350 Certification (Filed herewith).
|
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95.1
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Mine Safety Disclosure (Filed herewith).
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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 months ended
and six months ended
June 30, 2016
, formatted in XBRL (Extensible Business Reporting Language): Condensed Consolidated Statements of Comprehensive Income (Loss), Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, and Condensed Consolidated Statement of Changes in Stockholders' Equity
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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.
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COEUR MINING, INC.
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|||
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(Registrant)
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|||
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Dated
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7/27/2016
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/s/ Mitchell J. Krebs
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MITCHELL J. KREBS
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|||
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President and Chief Executive Officer (Principal Executive Officer)
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|||
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Dated
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7/27/2016
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/s/ Peter C. Mitchell
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PETER C. MITCHELL
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Senior Vice President and Chief Financial Officer (Principal Financial Officer)
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|||
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Dated
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7/27/2016
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/s/ Mark Spurbeck
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|
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MARK SPURBECK
|
|||
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Vice President, Finance (Principal Accounting Officer)
|
|||
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TABLE OF CONTENTS
Part IItem 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 - Other, NetNote 8 Income and Mining TaxesNote 9 Net Income (loss) Per ShareNote 10 Fair Value MeasurementsNote 11 Derivative Financial InstrumentsNote 12 AcquisitionsNote 13 InvestmentsNote 14 ReceivablesNote 15 Inventory and Ore on Leach PadsNote 16 Property, Plant and EquipmentNote 17 Mining PropertiesNote 18 DebtNote 19 - Supplemental Guarantor InformationNote 20 Commitments and ContingenciesNote 21 Subsequent EventsItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart IIItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 4. Mine Safety DisclosuresItem 6. Exhibits