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, 2017
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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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þ
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Accelerated filer
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¨
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||
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
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 181,451,398 shares were issued and outstanding as of July 24, 2017.
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
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Condensed Consolidated Statement of Changes in Stockholders’ Equity
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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Consolidated Financial Results
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Results of Operations
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Liquidity and Capital Resources
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Non-GAAP Financial Performance Measures
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Item 4.
Controls and Procedures
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Part II.
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Item 1.
Legal Proceedings
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Item 1A.
Risk Factors
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Item 4.
Mine Safety Disclosures
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Item 5. Other Information
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Item 6.
Exhibits
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Signatures
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2
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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2017
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2016
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2017
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2016
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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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173,354
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$
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182,007
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$
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379,492
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$
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330,394
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|||
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COSTS AND EXPENSES
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||||||||||||||||
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Costs applicable to sales
(1)
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3
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125,621
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100,465
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258,333
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202,020
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|||||||
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Amortization
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32,946
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37,505
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73,050
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65,470
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General and administrative
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7,042
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7,400
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17,175
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15,676
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||||||||
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Exploration
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7,813
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2,233
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13,065
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3,963
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||||||||
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Write-downs
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—
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—
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—
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4,446
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Pre-development, reclamation, and other
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4,366
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4,364
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8,947
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8,568
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||||||||
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Total costs and expenses
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177,788
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151,967
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370,570
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300,143
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OTHER INCOME (EXPENSE), NET
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||||||||||||||||
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Loss on debt extinguishment
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17
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(9,342
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)
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—
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(9,342
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)
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—
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|||||||
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Fair value adjustments, net
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10
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336
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(3,579
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)
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(864
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)
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(12,274
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)
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Interest expense, net of capitalized interest
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17
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(3,749
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)
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(10,875
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)
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(7,335
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)
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(21,995
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)
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Other, net
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7
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4,136
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(1,857
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)
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25,275
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(543
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)
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|||||||
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Total other income (expense), net
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(8,619
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)
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(16,311
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)
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7,734
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(34,812
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)
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Income (loss) before income and mining taxes
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(13,053
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)
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13,729
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16,656
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(4,561
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)
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Income and mining tax (expense) benefit
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8
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2,098
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768
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(8,948
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)
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(1,338
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)
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NET INCOME (LOSS)
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$
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(10,955
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)
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$
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14,497
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$
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7,708
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$
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(5,899
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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 ($2,174) for the three and six months June 30, 2016, respectively
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(18
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2,103
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(2,200
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3,146
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Reclassification adjustments for impairment of equity securities
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305
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20
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426
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20
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Reclassification adjustments for realized (gain) loss on sale of equity securities
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(203
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)
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(314
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)
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1,268
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273
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||||||||
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Other comprehensive income (loss)
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84
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1,809
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(506
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)
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3,439
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|||||||
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COMPREHENSIVE INCOME (LOSS)
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$
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(10,871
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)
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$
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16,306
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$
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7,202
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$
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(2,460
|
)
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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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(0.06
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)
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$
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0.09
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$
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0.04
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$
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(0.04
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)
|
||||
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Diluted
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$
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(0.06
|
)
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$
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0.09
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$
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0.04
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$
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(0.04
|
)
|
||||
(1) Excludes amortization.
The accompanying notes are an integral part of these condensed 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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2017
|
2016
|
2017
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2016
|
||||||||||||
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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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(10,955
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)
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$
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14,497
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7,708
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(5,899
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)
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||||||
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Adjustments:
|
||||||||||||||||
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Amortization
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32,946
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37,505
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73,050
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65,470
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||||||||
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Accretion
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2,593
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2,848
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5,107
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6,017
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|
||||||||
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Deferred taxes
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(4,844
|
)
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(15,170
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)
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(3,469
|
)
|
(17,275
|
)
|
||||||||
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Loss on debt extinguishment
|
9,342
|
|
—
|
|
9,342
|
|
—
|
|
||||||||
|
Fair value adjustments, net
|
10
|
(336
|
)
|
3,579
|
|
864
|
|
12,274
|
|
|||||||
|
Stock-based compensation
|
5
|
2,235
|
|
2,307
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|
5,542
|
|
5,222
|
|
|||||||
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Gain on sale of the Joaquin project
|
—
|
|
—
|
|
(21,138
|
)
|
—
|
|
||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
4,446
|
|
||||||||
|
Other
|
(3,624
|
)
|
1,930
|
|
(5,822
|
)
|
494
|
|
||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||||||
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Receivables
|
(1,916
|
)
|
(12,402
|
)
|
11,190
|
|
(8,921
|
)
|
||||||||
|
Prepaid expenses and other current assets
|
3,612
|
|
(898
|
)
|
(687
|
)
|
381
|
|
||||||||
|
Inventory and ore on leach pads
|
(997
|
)
|
(7,686
|
)
|
13,295
|
|
(15,508
|
)
|
||||||||
|
Accounts payable and accrued liabilities
|
1,223
|
|
19,429
|
|
(10,432
|
)
|
5,855
|
|
||||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
29,279
|
|
|
45,939
|
|
|
84,550
|
|
52,556
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||
|
Capital expenditures
|
(37,482
|
)
|
(23,288
|
)
|
(61,461
|
)
|
(45,460
|
)
|
||||||||
|
Proceeds from the sale of assets
|
436
|
|
7,293
|
|
15,455
|
|
11,302
|
|
||||||||
|
Purchase of investments
|
(8,948
|
)
|
(92
|
)
|
(9,964
|
)
|
(99
|
)
|
||||||||
|
Sale of investments
|
898
|
|
648
|
|
10,918
|
|
1,645
|
|
||||||||
|
Other
|
(61
|
)
|
(1,446
|
)
|
(1,607
|
)
|
(2,919
|
)
|
||||||||
|
CASH USED IN INVESTING ACTIVITIES
|
(45,157
|
)
|
|
(16,885
|
)
|
(46,659
|
)
|
|
(35,531
|
)
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||
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Issuance of common stock
|
—
|
|
73,071
|
|
—
|
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73,071
|
|
||||||||
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Issuance of notes and bank borrowings
|
17
|
244,958
|
|
—
|
|
244,958
|
|
—
|
|
|||||||
|
Payments on debt, capital leases, and associated costs
|
17
|
(188,931
|
)
|
(6,712
|
)
|
(192,157
|
)
|
(12,683
|
)
|
|||||||
|
Gold production royalty payments
|
—
|
|
(10,461
|
)
|
—
|
|
(19,592
|
)
|
||||||||
|
Other
|
(473
|
)
|
(448
|
)
|
(3,720
|
)
|
(728
|
)
|
||||||||
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
55,554
|
|
|
55,450
|
|
|
49,081
|
|
40,068
|
|
||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
329
|
|
(302
|
)
|
884
|
|
(216
|
)
|
||||||||
|
INCREASE IN CASH AND CASH EQUIVALENTS
|
40,005
|
|
84,202
|
|
|
87,856
|
|
56,877
|
|
|||||||
|
Cash and cash equivalents at beginning of period
|
210,033
|
|
173,389
|
|
162,182
|
|
200,714
|
|
||||||||
|
Cash and cash equivalents at end of period
|
$
|
250,038
|
|
$
|
257,591
|
|
|
$
|
250,038
|
|
$
|
257,591
|
|
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
|
June 30, 2017 (Unaudited)
|
December 31, 2016
|
|||||||
|
ASSETS
|
Notes
|
In thousands, except share data
|
||||||
|
CURRENT ASSETS
|
||||||||
|
Cash and cash equivalents
|
$
|
250,038
|
|
$
|
162,182
|
|
||
|
Receivables
|
13
|
69,656
|
|
60,431
|
|
|||
|
Inventory
|
14
|
67,895
|
|
106,026
|
|
|||
|
Ore on leach pads
|
14
|
75,699
|
|
64,167
|
|
|||
|
Prepaid expenses and other
|
18,563
|
|
17,981
|
|
||||
|
481,851
|
|
410,787
|
|
|||||
|
NON-CURRENT ASSETS
|
||||||||
|
Property, plant and equipment, net
|
15
|
227,738
|
|
216,796
|
|
|||
|
Mining properties, net
|
16
|
550,247
|
|
558,455
|
|
|||
|
Ore on leach pads
|
14
|
69,954
|
|
67,231
|
|
|||
|
Restricted assets
|
12
|
19,294
|
|
17,597
|
|
|||
|
Equity securities
|
12
|
11,872
|
|
4,488
|
|
|||
|
Receivables
|
13
|
15,140
|
|
30,951
|
|
|||
|
Other
|
18,552
|
|
12,604
|
|
||||
|
TOTAL ASSETS
|
$
|
1,394,648
|
|
$
|
1,318,909
|
|
||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
CURRENT LIABILITIES
|
||||||||
|
Accounts payable
|
$
|
58,800
|
|
$
|
53,335
|
|
||
|
Accrued liabilities and other
|
41,250
|
|
42,743
|
|
||||
|
Debt
|
17
|
13,014
|
|
12,039
|
|
|||
|
Royalty obligations
|
10
|
—
|
|
4,995
|
|
|||
|
Reclamation
|
4
|
3,599
|
|
3,522
|
|
|||
|
116,663
|
|
116,634
|
|
|||||
|
NON-CURRENT LIABILITIES
|
||||||||
|
Debt
|
17
|
271,766
|
|
198,857
|
|
|||
|
Royalty obligations
|
10
|
—
|
|
4,292
|
|
|||
|
Reclamation
|
4
|
99,541
|
|
95,804
|
|
|||
|
Deferred tax liabilities
|
75,388
|
|
74,798
|
|
||||
|
Other long-term liabilities
|
53,779
|
|
60,037
|
|
||||
|
500,474
|
|
433,788
|
|
|||||
|
STOCKHOLDERS’ EQUITY
|
||||||||
|
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 181,441,769 at June 30, 2017 and 180,933,287 at December 31, 2016
|
1,814
|
|
1,809
|
|
||||
|
Additional paid-in capital
|
3,316,407
|
|
3,314,590
|
|
||||
|
Accumulated other comprehensive income (loss)
|
(2,994
|
)
|
(2,488
|
)
|
||||
|
Accumulated deficit
|
(2,537,716
|
)
|
(2,545,424
|
)
|
||||
|
777,511
|
|
768,487
|
|
|||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,394,648
|
|
$
|
1,318,909
|
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
|
In thousands
|
Common
Stock
Shares
|
Common
Stock Par
Value
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
|
||||||||||||||||
|
Balances at December 31, 2016
|
180,933
|
|
$
|
1,809
|
|
$
|
3,314,590
|
|
$
|
(2,545,424
|
)
|
$
|
(2,488
|
)
|
$
|
768,487
|
|
|||||
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
7,708
|
|
—
|
|
7,708
|
|
||||||||||
|
Other comprehensive income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
(506
|
)
|
(506
|
)
|
||||||||||
|
Common stock issued under stock-based compensation plans, net
|
509
|
|
5
|
|
1,817
|
|
—
|
|
—
|
|
1,822
|
|
||||||||||
|
Balances at June 30, 2017 (Unaudited)
|
181,442
|
|
$
|
1,814
|
|
$
|
3,316,407
|
|
$
|
(2,537,716
|
)
|
$
|
(2,994
|
)
|
$
|
777,511
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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, 2017. The condensed consolidated December 31, 2016 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, 2016 (the “2016 10-K”).
Recent Accounting Standards
In January 2017, the FASB issued ASU 2017-01, “
Business Combinations (Topic 805) - Clarifying the Definition of a Business,
” which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. 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 November 2016, the FASB issued ASU 2016-18, “
Statement of Cash Flows (Topic 230) - Restricted Cash,
” which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in 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 August 2016, the FASB issued ASU 2016-15, “
Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,
” which provides guidance on presentation and classification of certain cash receipts and payments in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company is currently evaluating this standard and does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
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 became effective for the Company’s fiscal year beginning January 1, 2017, and the Company’s adoption had no impact 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 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 May 2014, the FASB issued ASU 2014-09, “
Revenue from Contracts with Customers
”
,
which has subsequently been amended several times. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. These changes become effective for the Company’s fiscal year beginning January 1, 2018. The Company has substantially completed its analysis of the new standard and reviewed potential impacts from timing of when control is transferred to customers, variable consideration on concentrate sales and classification of refining fees. The Company does not expect this ASU to materially impact the Company’s consolidated net income, financial position or cash flows.
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The Company’s operating segments include the Palmarejo complex, and the Rochester, Kensington, Wharf, and San Bartolomé mines. All operating segments are engaged in the discovery, mining, and production of gold and/or silver. Other includes the La Preciosa project, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts. The Company eliminated Coeur Capital as a standalone reportable segment in the first quarter of 2017 and has classified the operating performance, segment assets, and capital expenditures of the Endeavor silver stream and other remaining non-core assets in Other. All prior period amounts have been adjusted to conform to the current presentation.
Financial information relating to the Company’s segments is as follows (in thousands):
|
Three months ended June 30, 2017
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Other
|
Total
|
||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||
|
Metal sales
|
$
|
53,235
|
|
$
|
32,791
|
|
$
|
35,567
|
|
$
|
27,013
|
|
$
|
23,814
|
|
$
|
934
|
|
$
|
173,354
|
|
||||||
|
Costs and Expenses
|
|||||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
33,894
|
|
24,161
|
|
27,988
|
|
15,768
|
|
23,392
|
|
418
|
|
125,621
|
|
|||||||||||||
|
Amortization
|
14,431
|
|
4,938
|
|
8,347
|
|
2,549
|
|
2,212
|
|
469
|
|
32,946
|
|
|||||||||||||
|
Exploration
|
3,124
|
|
315
|
|
1,980
|
|
3
|
|
—
|
|
2,391
|
|
7,813
|
|
|||||||||||||
|
Other operating expenses
|
310
|
|
831
|
|
350
|
|
632
|
|
298
|
|
8,987
|
|
11,408
|
|
|||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||
|
Loss on debt extinguishment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9,342
|
)
|
(9,342
|
)
|
|||||||||||||
|
Fair value adjustments, net
|
—
|
|
336
|
|
—
|
|
—
|
|
—
|
|
—
|
|
336
|
|
|||||||||||||
|
Interest expense, net
|
(102
|
)
|
(133
|
)
|
(113
|
)
|
(17
|
)
|
(5
|
)
|
(3,379
|
)
|
(3,749
|
)
|
|||||||||||||
|
Other, net
|
(498
|
)
|
2,344
|
|
(57
|
)
|
336
|
|
92
|
|
1,919
|
|
4,136
|
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
(3,229
|
)
|
44
|
|
—
|
|
(1,060
|
)
|
245
|
|
6,098
|
|
2,098
|
|
|||||||||||||
|
Net income (loss)
|
$
|
(2,353
|
)
|
|
$
|
5,137
|
|
|
$
|
(3,268
|
)
|
|
$
|
7,320
|
|
|
$
|
(1,756
|
)
|
|
$
|
(16,035
|
)
|
|
$
|
(10,955
|
)
|
|
Segment assets
(2)
|
$
|
397,254
|
|
$
|
241,381
|
|
$
|
207,103
|
|
$
|
104,311
|
|
$
|
62,864
|
|
$
|
83,338
|
|
$
|
1,096,251
|
|
||||||
|
Capital expenditures
|
$
|
11,202
|
|
$
|
13,816
|
|
$
|
8,649
|
|
$
|
1,471
|
|
$
|
375
|
|
$
|
1,969
|
|
$
|
37,482
|
|
||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Three months ended June 30, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
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
|
|
514
|
|
37,505
|
|
|||||||||||||
|
Exploration
|
562
|
|
188
|
|
977
|
|
—
|
|
—
|
|
506
|
|
2,233
|
|
|||||||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||
|
Other operating expenses
|
278
|
|
700
|
|
257
|
|
688
|
|
1,076
|
|
8,765
|
|
11,764
|
|
|||||||||||||
|
Other income (expense)
|
|
|
|
|
|||||||||||||||||||||||
|
Loss on debt extinguishment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||
|
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
|
|
5,747
|
|
(1,857
|
)
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
3,153
|
|
8
|
|
—
|
|
(352
|
)
|
848
|
|
(2,889
|
)
|
768
|
|
|||||||||||||
|
Net income (loss)
|
$
|
7,330
|
|
|
$
|
995
|
|
|
$
|
2,783
|
|
|
$
|
13,672
|
|
|
$
|
4,863
|
|
|
$
|
(15,146
|
)
|
|
$
|
14,497
|
|
|
Segment assets
(2)
|
$
|
427,938
|
|
$
|
207,764
|
|
$
|
196,403
|
|
$
|
113,821
|
|
$
|
83,814
|
|
$
|
84,219
|
|
$
|
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 interests
8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
|
Six months ended June 30, 2017
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
Other
|
Total
|
||||||||||||||||||||
|
Revenue
|
|||||||||||||||||||||||||||
|
Metal sales
|
$
|
130,939
|
|
$
|
71,770
|
|
$
|
73,531
|
|
$
|
57,264
|
|
$
|
44,398
|
|
$
|
1,590
|
|
$
|
379,492
|
|
||||||
|
Costs and Expenses
|
|
|
|||||||||||||||||||||||||
|
Costs applicable to sales
(1)
|
76,895
|
|
50,600
|
|
56,431
|
|
32,088
|
|
41,614
|
|
705
|
|
258,333
|
|
|||||||||||||
|
Amortization
|
34,581
|
|
10,754
|
|
17,525
|
|
5,660
|
|
3,623
|
|
907
|
|
73,050
|
|
|||||||||||||
|
Exploration
|
4,755
|
|
459
|
|
2,819
|
|
3
|
|
—
|
|
5,029
|
|
13,065
|
|
|||||||||||||
|
Other operating expenses
|
611
|
|
1,641
|
|
695
|
|
1,251
|
|
1,050
|
|
20,874
|
|
26,122
|
|
|||||||||||||
|
Other income (expense)
|
|||||||||||||||||||||||||||
|
Loss on debt extinguishment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(9,342
|
)
|
(9,342
|
)
|
|||||||||||||
|
Fair value adjustments, net
|
—
|
|
(864
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(864
|
)
|
|||||||||||||
|
Interest expense, net
|
(227
|
)
|
(250
|
)
|
(153
|
)
|
(36
|
)
|
(12
|
)
|
(6,657
|
)
|
(7,335
|
)
|
|||||||||||||
|
Other, net
|
(127
|
)
|
2,312
|
|
(865
|
)
|
425
|
|
371
|
|
23,159
|
|
25,275
|
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
(14,415
|
)
|
(454
|
)
|
—
|
|
(2,017
|
)
|
214
|
|
7,724
|
|
(8,948
|
)
|
|||||||||||||
|
Net income (loss)
|
$
|
(672
|
)
|
|
$
|
9,060
|
|
|
$
|
(4,957
|
)
|
|
$
|
16,634
|
|
|
$
|
(1,316
|
)
|
|
$
|
(11,041
|
)
|
|
$
|
7,708
|
|
|
Segment assets
(2)
|
$
|
397,254
|
|
$
|
241,381
|
|
$
|
207,103
|
|
$
|
104,311
|
|
$
|
62,864
|
|
$
|
83,338
|
|
$
|
1,096,251
|
|
||||||
|
Capital expenditures
|
$
|
17,432
|
|
$
|
24,384
|
|
$
|
14,170
|
|
$
|
2,358
|
|
$
|
763
|
|
$
|
2,354
|
|
$
|
61,461
|
|
||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
|
Six months ended June 30, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San Bartolomé
|
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
|
|
1,723
|
|
65,470
|
|
|||||||||||||
|
Exploration
|
1,363
|
|
297
|
|
930
|
|
—
|
|
—
|
|
1,373
|
|
3,963
|
|
|||||||||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,446
|
|
4,446
|
|
|||||||||||||
|
Other operating expenses
|
593
|
|
1,381
|
|
509
|
|
1,181
|
|
1,367
|
|
19,213
|
|
24,244
|
|
|||||||||||||
|
Other income (expense)
|
|
|
|||||||||||||||||||||||||
|
Loss on debt extinguishment
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||||||
|
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
|
|
7,988
|
|
(543
|
)
|
|||||||||||||
|
Income and mining tax (expense) benefit
|
3,251
|
|
(415
|
)
|
—
|
|
(236
|
)
|
(723
|
)
|
(3,215
|
)
|
(1,338
|
)
|
|||||||||||||
|
Net income (loss)
|
$
|
965
|
|
|
$
|
(451
|
)
|
|
$
|
5,491
|
|
|
$
|
21,722
|
|
|
$
|
5,340
|
|
|
$
|
(38,966
|
)
|
$
|
(5,899
|
)
|
|
|
Segment assets
(2)
|
$
|
427,938
|
|
$
|
207,764
|
|
$
|
196,403
|
|
$
|
113,821
|
|
$
|
83,814
|
|
$
|
84,219
|
|
$
|
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
|
Assets
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
Total assets for reportable segments
|
$
|
1,096,251
|
|
$
|
1,122,038
|
|
|
|
Cash and cash equivalents
|
250,038
|
|
162,182
|
|
|||
|
Other assets
|
48,359
|
|
|
34,689
|
|
||
|
Total consolidated assets
|
$
|
1,394,648
|
|
|
$
|
1,318,909
|
|
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Geographic Information
|
Long-Lived Assets
|
June 30, 2017
|
|
December 31, 2016
|
||||
|
Mexico
|
$
|
375,536
|
|
$
|
397,697
|
|
|
|
United States
|
365,519
|
|
338,897
|
|
|||
|
Bolivia
|
29,918
|
|
31,539
|
|
|||
|
Australia
|
2,684
|
|
2,983
|
|
|||
|
Argentina
|
228
|
|
10,228
|
|
|||
|
Other
|
5,601
|
|
5,564
|
|
|||
|
Total
|
$
|
779,486
|
|
|
$
|
786,908
|
|
|
Revenue
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
United States
|
$
|
95,371
|
|
$
|
106,236
|
|
$
|
202,565
|
|
$
|
199,890
|
|
|||
|
Mexico
|
53,235
|
|
48,489
|
|
130,939
|
|
79,011
|
|
|||||||
|
Bolivia
|
23,814
|
|
25,185
|
|
44,398
|
|
46,463
|
|
|||||||
|
Australia
|
934
|
|
504
|
|
1,590
|
|
2,395
|
|
|||||||
|
Other
|
—
|
|
|
1,593
|
|
—
|
|
|
2,635
|
|
|||||
|
Total
|
$
|
173,354
|
|
$
|
182,007
|
|
$
|
379,492
|
|
|
$
|
330,394
|
|
||
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
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Asset retirement obligation - Beginning
|
$
|
99,240
|
|
$
|
83,974
|
|
$
|
97,380
|
|
$
|
82,072
|
|
|||
|
Accretion
|
2,397
|
|
2,009
|
|
4,735
|
|
3,968
|
|
|||||||
|
Additions and changes in estimates
|
—
|
|
(130
|
)
|
—
|
|
121
|
|
|||||||
|
Settlements
|
(510
|
)
|
(308
|
)
|
(988
|
)
|
(616
|
)
|
|||||||
|
Asset retirement obligation - Ending
|
$
|
101,127
|
|
|
$
|
85,545
|
|
$
|
101,127
|
|
$
|
85,545
|
|
||
The Company has accrued
$2.0 million
and
$1.9 million
at
June 30, 2017
and
December 31, 2016
, respectively, for reclamation liabilities related to former mining activities, which are included in
Reclamation.
10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The Company has stock incentive plans for executives and eligible employees. Stock awards include performance shares, restricted stock and stock options. Stock-based compensation expense for the three and six months ended June 30, 2017 was
$2.2 million
and
$5.5 million
, respectively, compared to
$2.3 million
and
$5.2 million
for the three and six months ended June 30, 2016, respectively. At
June 30, 2017
, there was
$8.9 million
of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of
1.6
years.
The following table summarizes the grants awarded during the
six months ended June 30, 2017
:
|
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 18, 2017
|
236,581
|
|
$
|
11.47
|
|
—
|
|
$
|
—
|
|
316,213
|
|
$
|
11.58
|
|
||||||
|
March 7, 2017
|
539,858
|
|
$
|
7.60
|
|
14,820
|
|
$
|
3.91
|
|
—
|
|
$
|
—
|
|
||||||
The following options and stock appreciation rights were exercisable during the
six months ended June 30, 2017
:
|
Award Type
|
Number of
Exercised Units
|
Weighted Average
Exercised Price
|
Number of Exercisable Units
|
Weighted Average
Exercisable Price |
||||||||||
|
Stock options
|
16,400
|
|
$
|
1.81
|
|
462,181
|
|
$
|
13.74
|
|
||||
|
Stock appreciation rights
|
—
|
|
$
|
—
|
|
42,152
|
|
$
|
14.14
|
|
||||
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. 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, 2017 were
$1.8 million
and
$3.9 million
, respectively, compared to
$0.9 million
and
$1.9 million
for the three and six months ended June 30, 2016, respectively. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations.
Other, net
consists of the following:
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Foreign exchange gain (loss)
|
$
|
1,000
|
|
$
|
(5,656
|
)
|
$
|
2,442
|
|
$
|
(5,819
|
)
|
|||
|
Gain (loss) on sale of assets and investments
|
513
|
|
3,126
|
|
(1,552
|
)
|
4,211
|
|
|||||||
|
Gain on sale of the Joaquin project
|
—
|
|
—
|
|
21,138
|
|
—
|
|
|||||||
|
Gain on repurchase of the Rochester royalty obligation
|
2,332
|
|
—
|
|
2,332
|
|
—
|
|
|||||||
|
Impairment of equity securities
|
(305
|
)
|
(20
|
)
|
(426
|
)
|
(20
|
)
|
|||||||
|
Other
|
596
|
|
|
693
|
|
|
1,341
|
|
1,085
|
|
|||||
|
Other, net
|
$
|
4,136
|
|
$
|
(1,857
|
)
|
$
|
25,275
|
|
$
|
(543
|
)
|
|||
11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following table summarizes the components of
Income and mining tax (expense) benefit
for the
three and six months ended June 30, 2017 and 2016
by significant jurisdiction:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||||||||||||||
|
|
2017
|
2016
|
2017
|
2016
|
|||||||||||||||||||||||
|
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
|
$
|
(6,493
|
)
|
$
|
1,588
|
|
$
|
119
|
|
$
|
(1,810
|
)
|
$
|
14,221
|
|
$
|
(377
|
)
|
$
|
(9,242
|
)
|
$
|
(2,342
|
)
|
|||
|
Argentina
|
(129
|
)
|
945
|
|
4,453
|
|
(1,793
|
)
|
(457
|
)
|
2,070
|
|
3,438
|
|
(250
|
)
|
|||||||||||
|
Mexico
|
(2,195
|
)
|
(4,766
|
)
|
3,353
|
|
4,316
|
|
6,455
|
|
(14,689
|
)
|
(4,155
|
)
|
4,333
|
|
|||||||||||
|
Bolivia
|
(2,001
|
)
|
245
|
|
4,016
|
|
848
|
|
(1,530
|
)
|
214
|
|
6,062
|
|
(722
|
)
|
|||||||||||
|
Other jurisdictions
|
(2,235
|
)
|
4,086
|
|
|
1,788
|
|
(793
|
)
|
|
(2,033
|
)
|
3,834
|
|
|
(664
|
)
|
(2,357
|
)
|
||||||||
|
$
|
(13,053
|
)
|
$
|
2,098
|
|
$
|
13,729
|
|
$
|
768
|
|
$
|
16,656
|
|
$
|
(8,948
|
)
|
$
|
(4,561
|
)
|
$
|
(1,338
|
)
|
||||
The Company’s effective tax rate is impacted by recurring and nonrecurring items. These items include foreign exchange rates on deferred tax balances, mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. Changes in currency rates increased income and mining tax expense by
$3.0 million
and
$8.6 million
for the three and six months ended June 30, 2017, predominately due to the strength of the Mexican Peso. Also, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The Company’s consolidated effective income and mining 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. 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 factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the sections titled “Risk Factors” set forth in the 2016 10-K.
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 2009 forward for certain other foreign jurisdictions. As a result of statutes of limitation that will begin to expire within the next twelve 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
$1.5 million
and
$2.5 million
in the next twelve months.
At
June 30, 2017
and December 31, 2016, the Company had
$17.4 million
and
$19.6 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, 2017
and December 31, 2016, the amount of accrued income-tax-related interest and penalties was
$8.4 million
and
$8.7 million
, respectively.
12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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, 2017
,
852,176
and
1,426,480
common stock equivalents, respectively, related to equity-based awards were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly,
439,721
and
1,600,669
common stock equivalents were excluded from the diluted earnings per share calculation for the
three and six months ended June 30, 2016
, respectively.
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 because there is no excess value upon conversion over the principal amount of the Convertible Notes. The outstanding Convertible Notes were redeemed in the third quarter of 2016.
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
In thousands except per share amounts
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Net income (loss) available to common stockholders
|
$
|
(10,955
|
)
|
$
|
14,497
|
|
$
|
7,708
|
|
$
|
(5,899
|
)
|
|||
|
Weighted average shares:
|
|||||||||||||||
|
Basic
|
179,241
|
|
153,972
|
|
179,071
|
|
152,110
|
|
|||||||
|
Effect of stock-based compensation plans
|
—
|
|
3,928
|
|
4,049
|
|
—
|
|
|||||||
|
Diluted
|
179,241
|
|
|
157,900
|
|
|
183,120
|
|
|
152,110
|
|
||||
|
Income (loss) per share:
|
|||||||||||||||
|
Basic
|
$
|
(0.06
|
)
|
$
|
0.09
|
|
$
|
0.04
|
|
|
$
|
(0.04
|
)
|
||
|
Diluted
|
$
|
(0.06
|
)
|
$
|
0.09
|
|
$
|
0.04
|
|
|
$
|
(0.04
|
)
|
||
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Rochester royalty obligation
|
$
|
336
|
|
$
|
(878
|
)
|
$
|
(864
|
)
|
$
|
(5,756
|
)
|
|||
|
Palmarejo royalty obligation embedded derivative
|
—
|
|
$
|
(2,687
|
)
|
$
|
—
|
|
(4,936
|
)
|
|||||
|
Silver and gold options
|
—
|
|
|
(14
|
)
|
—
|
|
(1,582
|
)
|
||||||
|
Fair value adjustments, net
|
$
|
336
|
|
$
|
(3,579
|
)
|
$
|
(864
|
)
|
$
|
(12,274
|
)
|
|||
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, 2017
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
11,872
|
|
$
|
11,614
|
|
$
|
—
|
|
$
|
258
|
|
|||
|
Other derivative instruments, net
|
4
|
|
—
|
|
4
|
|
—
|
|
|||||||
|
$
|
11,876
|
|
$
|
11,614
|
|
$
|
4
|
|
$
|
258
|
|
||||
|
Liabilities:
|
|||||||||||||||
|
Other derivative instruments, net
|
$
|
169
|
|
$
|
—
|
|
$
|
169
|
|
$
|
—
|
|
|||
13
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
|
|
Fair Value at December 31, 2016
|
||||||||||||||
|
In thousands
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
|
Assets:
|
|||||||||||||||
|
Equity securities
|
$
|
4,488
|
|
$
|
4,209
|
|
$
|
—
|
|
$
|
279
|
|
|||
|
$
|
4,488
|
|
$
|
4,209
|
|
$
|
—
|
|
$
|
279
|
|
||||
|
Liabilities:
|
|||||||||||||||
|
Rochester royalty obligation
|
9,287
|
|
—
|
|
—
|
|
9,287
|
|
|||||||
|
Other derivative instruments, net
|
762
|
|
—
|
|
762
|
|
—
|
|
|||||||
|
$
|
10,049
|
|
$
|
—
|
|
$
|
762
|
|
$
|
9,287
|
|
||||
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 other derivative instruments, net, relate to concentrate and certain doré sales contracts 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.
In May 2017, the Company repurchased the Rochester royalty obligation for
$5.0 million
in cash. The Company recorded a pre-tax gain of
$2.3 million
on this repurchase which is included in
Other, net
. The fair value of the Rochester royalty obligation was 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 classified this obligation as a Level 3 financial liability.
No assets or liabilities were transferred between fair value levels in the
six months ended June 30, 2017
.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the
six months ended June 30, 2017
:
|
Three Months Ended June 30, 2017
|
|||||||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Gain on settlement
|
Balance at the
end of the
period
|
||||||||||||||
|
Assets:
|
|||||||||||||||||||
|
Equity securities
|
$
|
279
|
|
$
|
(21
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
258
|
|
||||
|
Liabilities:
|
|||||||||||||||||||
|
Rochester royalty obligation
|
$
|
9,277
|
|
$
|
(336
|
)
|
$
|
(6,609
|
)
|
(2,332
|
)
|
$
|
—
|
|
|||||
|
Six Months Ended June 30, 2017
|
|||||||||||||||||||
|
In thousands
|
Balance at the beginning of the period
|
Revaluation
|
Settlements
|
Gain on settlement
|
Balance at the
end of the
period
|
||||||||||||||
|
Assets:
|
|||||||||||||||||||
|
Equity securities
|
$
|
279
|
|
$
|
(21
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
258
|
|
||||
|
Liabilities:
|
|||||||||||||||||||
|
Rochester royalty obligation
|
$
|
9,287
|
|
$
|
864
|
|
$
|
(7,819
|
)
|
(2,332
|
)
|
$
|
—
|
|
|||||
The fair value of financial assets and liabilities carried at book value in the financial statements at
June 30, 2017
and
December 31, 2016
is presented in the following table:
|
|
June 30, 2017
|
||||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
|
Liabilities:
|
|
||||||||||||||||||
|
5.875% Senior Notes due 2024
(1)
|
$
|
244,827
|
|
$
|
238,497
|
|
$
|
—
|
|
$
|
238,497
|
|
$
|
—
|
|
||||
|
(1)
|
Net of unamortized debt issuance costs of
$5.2 million
.
|
14
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
|
|
December 31, 2016
|
||||||||||||||||
|
In thousands
|
Book Value
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
|
Liabilities:
|
|||||||||||||||||
|
7.875% Senior Notes due 2021
(1)
|
$
|
175,991
|
|
$
|
184,373
|
|
—
|
|
$
|
184,373
|
|
—
|
|
||||
|
(1)
|
Net of unamortized debt issuance costs and premium received of
$2.0 million
.
|
The fair value of the 5.875% Senior Notes due 2024 (the “2024 Senior Notes”) and the 7.875% Senior Notes due 2021 (the “2021 Senior Notes”) were estimated using quoted market prices.
Palmarejo Gold Production Royalty
In January 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 that covered
50%
of the life of mine production from the Palmarejo mine and legacy adjacent properties. The royalty transaction included a minimum obligation of
4,167
gold ounces per month and terminated upon delivery of
400,000
gold ounces, which occurred in July 2016.
The price volatility associated with the minimum royalty obligation was considered an embedded derivative. The Company was required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. For the three and six months ended June 30, 2016, the mark-to-market adjustment associated with the change were losses of
$0.9 million
and
$5.8 million
, respectively. Payments on the royalty obligation decreased the carrying amount of the minimum obligation and the derivative liability. For the three and six months ended June 30, 2016, realized losses on settlement of the liabilities were
$4.3 million
and
$7.3 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 losses of
$0.8 million
and gains of
$0.6 million
in the three and six months ended June 30, 2016, respectively, compared to gains of
$0.6 million
and
$1.2 million
in the three and six months ended June 30, 2016, respectively.
At
June 30, 2017
, the Company had the following provisionally priced sales that settle as follows:
|
In thousands except average prices and notional ounces
|
2017
|
Thereafter
|
|||||
|
Provisional silver sales contracts
|
$
|
1,994
|
|
$
|
—
|
|
|
|
Average silver price
|
$
|
16.85
|
|
$
|
—
|
|
|
|
Notional ounces
|
118,361
|
|
—
|
|
|||
|
Provisional gold sales contracts
|
$
|
41,176
|
|
$
|
—
|
|
|
|
Average gold price
|
$
|
1,263
|
|
$
|
—
|
|
|
|
Notional ounces
|
32,602
|
|
—
|
|
|||
Silver and Gold Options
During three and six months ended June 30, 2016, the Company had realized losses of
$0.1 million
and
$1.6 million
, from settled option contracts. At
June 30, 2017
, the Company had no outstanding gold and silver options contracts.
15
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following summarizes the classification of the fair value of the derivative instruments:
|
|
June 30, 2017
|
||||||||||||||
|
In thousands
|
Prepaid expenses and other
|
Accrued liabilities and other
|
Current portion of royalty obligation
|
Non-current portion of royalty obligation
|
|||||||||||
|
Provisional silver and gold sales contracts
|
$
|
4
|
|
$
|
169
|
|
$
|
—
|
|
$
|
—
|
|
|||
|
|
December 31, 2016
|
||||||||||
|
In thousands
|
Prepaid expenses and other
|
Accrued liabilities and other
|
Current portion of royalty obligation
|
Non-current portion of royalty obligation
|
|||||||
|
Provisional silver and gold sales contracts
|
—
|
|
762
|
|
—
|
|
—
|
|
|||
The following represent mark-to-market gains (losses) on derivative instruments for the
three and six months ended June 30, 2017 and 2016
(in thousands):
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
Financial statement line
|
Derivative
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Revenue
|
Provisional silver and gold sales contracts
|
$
|
(775
|
)
|
$
|
597
|
|
$
|
597
|
|
$
|
1,163
|
|
|||
|
Fair value adjustments, net
|
Palmarejo gold production royalty
|
336
|
|
(878
|
)
|
(864
|
)
|
(5,756
|
)
|
|||||||
|
Fair value adjustments, net
|
Silver and gold options
|
—
|
|
(14
|
)
|
—
|
|
(1,582
|
)
|
|||||||
|
$
|
(439
|
)
|
|
$
|
(295
|
)
|
$
|
(267
|
)
|
$
|
(6,175
|
)
|
||||
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.
Equity Securities
The Company makes strategic investments 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, 2017
|
|||||||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||||||
|
Almaden Minerals, Ltd.
|
$
|
3,125
|
|
$
|
—
|
|
$
|
461
|
|
$
|
3,586
|
|
|||
|
Northern Empire Resources Corp.
|
2,999
|
|
—
|
|
41
|
|
3,040
|
|
|||||||
|
Rockhaven Resources, Ltd.
|
2,064
|
|
(197
|
)
|
—
|
|
1,867
|
|
|||||||
|
Kootenay Silver, Inc.
|
1,291
|
|
—
|
|
—
|
|
1,291
|
|
|||||||
|
Other
|
1,518
|
|
(45
|
)
|
615
|
|
2,088
|
|
|||||||
|
Equity securities
|
$
|
10,997
|
|
$
|
(242
|
)
|
$
|
1,117
|
|
$
|
11,872
|
|
|||
|
At December 31, 2016
|
|||||||||||||||
|
In thousands
|
Cost
|
Gross
Unrealized
Losses
|
Gross
Unrealized
Gains
|
Estimated
Fair Value
|
|||||||||||
|
Kootenay Silver, Inc.
|
$
|
2,645
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,645
|
|
|||
|
Silver Bull Resources, Inc.
|
233
|
|
—
|
|
783
|
|
1,016
|
|
|||||||
|
Other
|
229
|
|
—
|
|
598
|
|
827
|
|
|||||||
|
Equity securities
|
$
|
3,107
|
|
$
|
—
|
|
$
|
1,381
|
|
$
|
4,488
|
|
|||
16
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The Company performs a quarterly assessment on each of its equity securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded pre-tax other-than-temporary impairment losses of
$0.3 million
and
$0.4 million
in the three and six months ended June 30, 2017, respectively, in
Other, net
.
No
impairment losses were recorded in the three and six months ended June 30, 2016, in
Other, net
. The following table summarizes 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, 2017:
|
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
|
$
|
(242
|
)
|
$
|
2,083
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(242
|
)
|
$
|
2,083
|
|
||
Restricted Assets
The Company, under the terms of its self-insurance and bonding agreements with certain banks, lending institutions and regulatory agencies, is required to collateralize certain portions of its asset retirement obligations. The Company has collateralized these obligations by assigning certificates of deposit that have maturity dates ranging from three months to a year to the applicable institutions or agencies.
At June 30, 2017
and December 31, 2016, the Company held certificates of deposit and cash under these agreements of $
19.3 million
and
$17.6 million
, respectively. The ultimate timing of the release of the collateralized amounts is dependent on the timing and closure of each mine and repayment of the obligation. In order to release the collateral, the Company must seek approval from certain government agencies responsible for monitoring the mine closure status. Collateral could also be released to the extent the Company is able to secure alternative financial assurance satisfactory to the regulatory agencies. The Company believes the collateral will remain in place beyond a twelve-month period and has therefore classified these investments as long-term.
Receivables consist of the following:
|
In thousands
|
June 30, 2017
|
December 31, 2016
|
|||||
|
Current receivables:
|
|||||||
|
Trade receivables
|
$
|
13,291
|
|
$
|
10,669
|
|
|
|
Income tax receivable
|
5,957
|
|
1,038
|
|
|||
|
Value added tax receivable
|
49,135
|
|
46,083
|
|
|||
|
Other
|
1,273
|
|
2,641
|
|
|||
|
$
|
69,656
|
|
$
|
60,431
|
|
||
|
Non-current receivables:
|
|||||||
|
Value added tax receivable
|
$
|
15,140
|
|
$
|
19,293
|
|
|
|
Income tax receivable
|
—
|
|
11,658
|
|
|||
|
15,140
|
|
30,951
|
|
||||
|
Total receivables
|
$
|
84,796
|
|
$
|
91,382
|
|
|
17
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Inventory consists of the following:
|
In thousands
|
June 30, 2017
|
December 31, 2016
|
|||||
|
Inventory:
|
|||||||
|
Concentrate
|
$
|
10,746
|
|
$
|
17,994
|
|
|
|
Precious metals
|
18,957
|
|
47,228
|
|
|||
|
Supplies
|
38,192
|
|
40,804
|
|
|||
|
$
|
67,895
|
|
$
|
106,026
|
|
||
|
Ore on leach pads:
|
|||||||
|
Current
|
$
|
75,699
|
|
$
|
64,167
|
|
|
|
Non-current
|
69,954
|
|
67,231
|
|
|||
|
$
|
145,653
|
|
$
|
131,398
|
|
||
|
Total inventory and ore on leach pads
|
$
|
213,548
|
|
$
|
237,424
|
|
|
Property, plant and equipment consist of the following:
|
In thousands
|
June 30, 2017
|
December 31, 2016
|
|||||
|
Land
|
$
|
9,417
|
|
$
|
7,878
|
|
|
|
Facilities and equipment
|
655,366
|
|
650,480
|
|
|||
|
Assets under capital leases
|
64,221
|
|
54,968
|
|
|||
|
729,004
|
|
713,326
|
|
||||
|
Accumulated amortization
(1)
|
(538,260
|
)
|
(524,806
|
)
|
|||
|
190,744
|
|
188,520
|
|
||||
|
Construction in progress
|
36,994
|
|
28,276
|
|
|||
|
Property, plant and equipment, net
|
$
|
227,738
|
|
$
|
216,796
|
|
|
(1) Includes
$19.6 million
of accumulated amortization related to assets under capital leases.
18
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Mining properties consist of the following (in thousands):
|
June 30, 2017
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San
Bartolomé
|
La Preciosa
|
Other
|
Total
|
||||||||||||||||||||||||
|
Mine development
|
$
|
185,416
|
|
$
|
181,199
|
|
$
|
286,801
|
|
$
|
37,818
|
|
$
|
39,423
|
|
$
|
—
|
|
$
|
—
|
|
$
|
730,657
|
|
||||||||
|
Accumulated amortization
|
(139,170
|
)
|
(141,026
|
)
|
(165,193
|
)
|
(13,476
|
)
|
(33,094
|
)
|
—
|
|
—
|
|
(491,959
|
)
|
||||||||||||||||
|
46,246
|
|
40,173
|
|
121,608
|
|
24,342
|
|
6,329
|
|
—
|
|
—
|
|
238,698
|
|
|||||||||||||||||
|
Mineral interests
|
629,303
|
|
—
|
|
—
|
|
45,837
|
|
12,868
|
|
49,085
|
|
41,272
|
|
778,365
|
|
||||||||||||||||
|
Accumulated amortization
|
(404,134
|
)
|
—
|
|
—
|
|
(21,176
|
)
|
—
|
|
(11,839
|
)
|
—
|
|
(29,667
|
)
|
(466,816
|
)
|
||||||||||||||
|
225,169
|
|
—
|
|
—
|
|
24,661
|
|
1,029
|
|
49,085
|
|
11,605
|
|
311,549
|
|
|||||||||||||||||
|
Mining properties, net
|
$
|
271,415
|
|
$
|
40,173
|
|
$
|
121,608
|
|
$
|
49,003
|
|
$
|
7,358
|
|
$
|
49,085
|
|
$
|
11,605
|
|
$
|
550,247
|
|
||||||||
|
December 31, 2016
|
Palmarejo
|
Rochester
|
Kensington
|
Wharf
|
San
Bartolomé
|
La Preciosa
|
Joaquin
|
Other
|
Total
|
||||||||||||||||||||||||||
|
Mine development
|
$
|
174,890
|
|
$
|
165,230
|
|
$
|
271,175
|
|
$
|
37,485
|
|
$
|
39,184
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
687,964
|
|
||||||||
|
Accumulated amortization
|
(134,995
|
)
|
(138,244
|
)
|
(154,744
|
)
|
(11,699
|
)
|
(32,192
|
)
|
—
|
|
|
|
—
|
|
(471,874
|
)
|
|||||||||||||||||
|
39,895
|
|
26,986
|
|
116,431
|
|
25,786
|
|
6,992
|
|
—
|
|
—
|
|
—
|
|
216,090
|
|
||||||||||||||||||
|
Mineral interests
|
629,303
|
|
—
|
|
—
|
|
45,837
|
|
12,868
|
|
49,085
|
|
10,000
|
|
37,272
|
|
784,365
|
|
|||||||||||||||||
|
Accumulated amortization
|
(381,686
|
)
|
—
|
|
—
|
|
(19,249
|
)
|
(11,695
|
)
|
—
|
|
—
|
|
(29,370
|
)
|
(442,000
|
)
|
|||||||||||||||||
|
247,617
|
|
—
|
|
—
|
|
26,588
|
|
1,173
|
|
49,085
|
|
10,000
|
|
7,902
|
|
342,365
|
|
||||||||||||||||||
|
Mining properties, net
|
$
|
287,512
|
|
$
|
26,986
|
|
$
|
116,431
|
|
$
|
52,374
|
|
$
|
8,165
|
|
$
|
49,085
|
|
$
|
10,000
|
|
$
|
7,902
|
|
$
|
558,455
|
|
||||||||
In February 2017, the Company sold the Joaquin silver-gold exploration project for consideration of
$27.4 million
and a
2.0%
NSR royalty on the Joaquin project, which is included in Other. The Company recognized a
$21.1 million
pre-tax gain on this sale, included in
Other, net
on the Consolidated Statements of Comprehensive Income.
In June 2017, the Company entered into a Share and Asset Purchase Agreement with Metalla Royalty & Streaming Ltd. to sell the Endeavor silver stream and our remaining portfolio of royalties for total consideration of
$13.0 million
. The transaction is expected to close in the third quarter of 2017, subject to customary closing conditions. Current and prior period amounts are included in Other.
|
|
June 30, 2017
|
December 31, 2016
|
|||||||||||||
|
In thousands
|
Current
|
Non-Current
|
Current
|
Non-Current
|
|||||||||||
|
2024 Senior Notes, net
(1)
|
$
|
—
|
|
$
|
244,827
|
|
$
|
—
|
|
$
|
—
|
|
|||
|
2021 Senior Notes, net
(2)
|
—
|
|
—
|
|
—
|
|
175,991
|
|
|||||||
|
Capital lease obligations
|
13,014
|
|
26,939
|
|
12,039
|
|
22,866
|
|
|||||||
|
$
|
13,014
|
|
$
|
271,766
|
|
$
|
12,039
|
|
$
|
198,857
|
|
||||
(1)
Net of unamortized debt issuance costs
$5.2 million
at
June 30, 2017
.
(2)
Net of unamortized debt issuance costs and premium received of
$2.0 million
at December 31, 2016.
5.875% Senior Notes due 2024
In May 2017, the Company completed an offering of
$250.0 million
in aggregate principal amount of 2024 Senior Notes in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended for net proceeds of approximately
$245.0 million
. The 2024 Senior Notes are governed by an Indenture dated as of May 31, 2017 (the “Indenture”), among the Company, as issuer, certain of the Company's subsidiaries named therein, as guarantors thereto (the “Guarantors”), and the Bank of New York Mellon, as trustee. The 2024 Senior Notes bear interest at a rate of
5.875%
per year from the date of issuance. Interest on the 2024 Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2017. The 2024 Senior Notes will mature on June 1, 2024 and are fully and unconditionally guaranteed by the Guarantors. At any time prior to June 1, 2020, the Company may redeem all or part of the 2024 Senior Notes
19
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i)
100%
of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) 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 2024 Senior Notes on or after June 1, 2020, at redemption prices set forth in the Indenture, together with accrued and unpaid interest. At any time prior to June 1, 2020, the Company may use the proceeds of certain equity offerings to redeem up to
35%
of the aggregate principal amount of the 2024 Senior Notes, including any permitted additional 2024 Senior Notes, at a redemption price equal to
105.875%
of the principal amount. The Indenture contains covenants that, among other things, limit the Company’s ability under certain circumstances to incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and investments, create liens, sell, transfer or otherwise dispose of assets, enter into transactions with affiliates, enter into agreements restricting the Company's subsidiaries' ability to pay dividends and impose conditions on the Company’s ability to engage in mergers, consolidations and sales of all or substantially all of its assets. The Indenture also contains certain “Events of Default” (as defined in the Indenture) customary for indentures of this type. If an Event of Default has occurred and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the 2024 Senior Notes then outstanding may, and the Trustee at the request of the holders of not less than 25% in aggregate principal amount of the 2024 Senior Notes then outstanding shall, declare all unpaid principal of, premium, if any, and accrued interest on all the 2024 Senior Notes to be due and payable.
In connection with the sale of the 2024 Senior Notes, the Company entered into a Registration Rights Agreement, dated as of May 31, 2017 (the “Registration Rights Agreement”), with the Guarantors and the initial purchaser of the 2024 Senior Notes. Under the Registration Rights Agreement, the Company and the Guarantors have agreed, to (i) file a registration statement (the “Exchange Offer Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”) with respect to a registered offer (the “Exchange Offer”) to exchange the 2024 Senior Notes for new notes of the Company having terms substantially identical in all material respects to the 2024 Senior Notes (the “Exchange Notes”), (ii) to use their commercially reasonable efforts to cause the Exchange Offer to be completed on or prior to November 27, 2017 and (iii) to commence the Exchange Offer and use their commercially reasonable efforts to issue on or prior to 35 business days, or longer, if required by applicable securities laws, after the date on which the Exchange Offer Registration Statement was declared effective by the SEC, the Exchange Notes in exchange for all 2024 Senior Notes tendered prior thereto in the Exchange Offer.
7.875% Senior Notes due 2021
Concurrent with the offering of the 2024 Senior Notes, the Company commenced a cash tender offer (the “Tender Offer”) to purchase the outstanding
$178.0 million
in aggregate principal amount of its 2021 Senior Notes. The Tender Offer was made on the terms and subject to the conditions set forth in the Offer to Purchase dated May 19, 2017. The Tender Offer expired at 5:00 p.m., New York City time, on May 25, 2017 (the “Expiration Time”). Holders of the 2021 Senior Notes who tendered (and did not validly withdraw) their notes at or prior to the Expiration Time were entitled to receive in cash
$1,043.88
per $1,000 principal amount of 2021 Senior Notes validly tendered (and not validly withdrawn) and accepted for purchase by the Company in the Tender Offer, plus accrued and unpaid interest on such 2021 Senior Notes.
$118.1 million
aggregate principal amount of the 2021 Senior Notes were validly tendered and purchased by the Company on May 31, 2017. In accordance with the terms of the indenture governing the 2021 Senior Notes, the remaining
$59.9 million
aggregate principal amount of the Notes were redeemed on June 30, 2017 at the redemption price specified in the indenture governing the 2021 Senior Notes (
$1,039.38
per $1,000 principal amount redeemed, plus accrued and unpaid interest). The Company recorded a loss of
$9.3 million
as a result of the extinguishment of the 2021 Senior Notes.
Lines of Credit
At
June 30, 2017
, the Company’s subsidiary that holds the San Bartolomé mine had an available line of credit for
$12.0 million
that matures in June 30, 2018, bearing interest at
6.0%
per annum, which is secured by machinery and equipment. There was
no
outstanding balance at
June 30, 2017
.
Capital Lease Obligations
From time to time, the Company acquires mining equipment under capital lease agreements. In the
six months ended June 30, 2017
, the Company entered into new lease financing arrangements primarily for diesel generators at Kensington and mining equipment at Rochester. All capital lease obligations are recorded, upon lease inception, at the present value of future minimum lease payments.
20
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Interest Expense
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
2024 Senior Notes
|
$
|
1,265
|
|
$
|
—
|
|
$
|
1,265
|
|
$
|
—
|
|
|||
|
2021 Senior Notes
|
2,717
|
|
7,457
|
|
6,221
|
|
14,913
|
|
|||||||
|
Term Loan due 2020
|
—
|
|
2,258
|
|
—
|
|
4,521
|
|
|||||||
|
Capital lease obligations
|
383
|
|
416
|
|
689
|
|
680
|
|
|||||||
|
Accretion of Palmarejo gold production royalty obligation
|
—
|
|
397
|
|
—
|
|
1,162
|
|
|||||||
|
Amortization of debt issuance costs
|
172
|
|
631
|
|
338
|
|
1,262
|
|
|||||||
|
Accretion of debt premium
|
(28
|
)
|
(91
|
)
|
(71
|
)
|
(182
|
)
|
|||||||
|
Other debt obligations
|
14
|
|
|
21
|
|
|
30
|
|
|
56
|
|
||||
|
Capitalized interest
|
(774
|
)
|
(214
|
)
|
(1,137
|
)
|
(417
|
)
|
|||||||
|
Total interest expense, net of capitalized interest
|
$
|
3,749
|
|
$
|
10,875
|
|
$
|
7,335
|
|
$
|
21,995
|
|
|||
The following 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 its subsidiaries, and Coeur Capital, Inc. (collectively, the “Subsidiary Guarantors”) of the 2024 Senior Notes. The following schedules present 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 and joint and several obligations. There are no restrictions on the ability of Coeur to obtain funds from the Subsidiary Guarantors by dividend or loan.
21
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED
JUNE 30, 2017
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
95,371
|
|
$
|
77,983
|
|
$
|
—
|
|
$
|
173,354
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
67,916
|
|
57,705
|
|
—
|
|
125,621
|
|
||||||||||
|
Amortization
|
298
|
|
15,835
|
|
16,813
|
|
—
|
|
32,946
|
|
||||||||||
|
General and administrative
|
6,960
|
|
(4
|
)
|
86
|
|
—
|
|
7,042
|
|
||||||||||
|
Exploration
|
395
|
|
3,217
|
|
4,201
|
|
—
|
|
7,813
|
|
||||||||||
|
Pre-development, reclamation, and other
|
598
|
|
1,890
|
|
1,878
|
|
—
|
|
4,366
|
|
||||||||||
|
Total costs and expenses
|
8,251
|
|
88,854
|
|
80,683
|
|
—
|
|
177,788
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Loss on debt extinguishments
|
(9,342
|
)
|
—
|
|
—
|
|
—
|
|
(9,342
|
)
|
||||||||||
|
Fair value adjustments, net
|
—
|
|
336
|
|
—
|
|
—
|
|
336
|
|
||||||||||
|
Other, net
|
2,000
|
|
2,477
|
|
1,071
|
|
(1,412
|
)
|
4,136
|
|
||||||||||
|
Interest expense, net of capitalized interest
|
(3,377
|
)
|
(264
|
)
|
(1,520
|
)
|
1,412
|
|
(3,749
|
)
|
||||||||||
|
Total other income (expense), net
|
(10,719
|
)
|
2,549
|
|
(449
|
)
|
—
|
|
(8,619
|
)
|
||||||||||
|
Loss before income and mining taxes
|
(18,970
|
)
|
9,066
|
|
(3,149
|
)
|
—
|
|
(13,053
|
)
|
||||||||||
|
Income and mining tax (expense) benefit
|
3,395
|
|
(938
|
)
|
(359
|
)
|
—
|
|
2,098
|
|
||||||||||
|
Total loss after income and mining taxes
|
(15,575
|
)
|
8,128
|
|
(3,508
|
)
|
—
|
|
(10,955
|
)
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
4,620
|
|
1,139
|
|
(238
|
)
|
(5,521
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
(10,955
|
)
|
$
|
9,267
|
|
$
|
(3,746
|
)
|
$
|
(5,521
|
)
|
$
|
(10,955
|
)
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(18
|
)
|
(469
|
)
|
—
|
|
469
|
|
(18
|
)
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
305
|
|
305
|
|
—
|
|
(305
|
)
|
305
|
|
||||||||||
|
Reclassification adjustments for realized gain (loss) on sale of equity securities, net of tax
|
(203
|
)
|
(203
|
)
|
—
|
|
203
|
|
(203
|
)
|
||||||||||
|
Other comprehensive income (loss)
|
84
|
|
(367
|
)
|
—
|
|
367
|
|
84
|
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(10,871
|
)
|
$
|
8,900
|
|
$
|
(3,746
|
)
|
$
|
(5,154
|
)
|
$
|
(10,871
|
)
|
|||||
(1) Excludes amortization.
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
|
|
||||||||||
|
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
|
)
|
||||||||||
|
Income (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
|
|
||||||||||
|
Income (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 equity 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.
22
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
JUNE 30, 2017
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(5,005
|
)
|
$
|
14,844
|
|
$
|
24,961
|
|
$
|
(5,521
|
)
|
29,279
|
|
||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||||||
|
Capital expenditures
|
(989
|
)
|
(23,937
|
)
|
(12,556
|
)
|
—
|
|
(37,482
|
)
|
||||||||||
|
Proceeds from the sale of long-lived assets
|
1
|
|
443
|
|
(8
|
)
|
—
|
|
436
|
|
||||||||||
|
Purchase of investments
|
(8,948
|
)
|
—
|
|
—
|
|
—
|
|
(8,948
|
)
|
||||||||||
|
Sales and maturities of investments
|
—
|
|
898
|
|
—
|
|
—
|
|
898
|
|
||||||||||
|
Other
|
—
|
|
—
|
|
(61
|
)
|
—
|
|
(61
|
)
|
||||||||||
|
Investments in consolidated subsidiaries
|
(550
|
)
|
823
|
|
240
|
|
(513
|
)
|
—
|
|
||||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(10,486
|
)
|
|
(21,773
|
)
|
|
(12,385
|
)
|
(513
|
)
|
(45,157
|
)
|
||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
244,958
|
|
—
|
|
—
|
|
—
|
|
244,958
|
|
||||||||||
|
Payments on debt, capital leases, and associated costs
|
(185,538
|
)
|
(2,021
|
)
|
(1,372
|
)
|
—
|
|
(188,931
|
)
|
||||||||||
|
Net intercompany financing activity
|
(6,680
|
)
|
10,886
|
|
(10,240
|
)
|
6,034
|
|
—
|
|
||||||||||
|
Other
|
(473
|
)
|
—
|
|
—
|
|
—
|
|
(473
|
)
|
||||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
52,267
|
|
|
8,865
|
|
|
(11,612
|
)
|
|
6,034
|
|
|
55,554
|
|
||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
329
|
|
—
|
|
329
|
|
||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
36,776
|
|
|
1,936
|
|
|
1,293
|
|
—
|
|
40,005
|
|
||||||||
|
Cash and cash equivalents at beginning of period
|
67,102
|
|
45,976
|
|
96,955
|
|
—
|
|
210,033
|
|
||||||||||
|
Cash and cash equivalents at end of period
|
$
|
103,878
|
|
|
$
|
47,912
|
|
|
$
|
98,248
|
|
|
$
|
—
|
|
|
$
|
250,038
|
|
|
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:
|
||||||||||||||||||||
|
Issuance of common stock
|
73,071
|
|
—
|
|
—
|
|
—
|
|
73,071
|
|
||||||||||
|
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
|
|
—
|
|
||||||||||
|
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
|
|
|
23
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED
JUNE 30, 2017
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
Revenue
|
$
|
—
|
|
$
|
202,565
|
|
$
|
176,927
|
|
$
|
—
|
|
$
|
379,492
|
|
|||||
|
COSTS AND EXPENSES
|
||||||||||||||||||||
|
Costs applicable to sales
(1)
|
—
|
|
139,118
|
|
119,215
|
|
—
|
|
258,333
|
|
||||||||||
|
Amortization
|
622
|
|
33,939
|
|
38,489
|
|
—
|
|
73,050
|
|
||||||||||
|
General and administrative
|
17,066
|
|
20
|
|
89
|
|
—
|
|
17,175
|
|
||||||||||
|
Exploration
|
731
|
|
4,944
|
|
7,390
|
|
—
|
|
13,065
|
|
||||||||||
|
Pre-development, reclamation, and other
|
773
|
|
3,671
|
|
4,503
|
|
—
|
|
8,947
|
|
||||||||||
|
Total costs and expenses
|
19,192
|
|
181,692
|
|
169,686
|
|
—
|
|
370,570
|
|
||||||||||
|
OTHER INCOME (EXPENSE), NET
|
||||||||||||||||||||
|
Loss on debt extinguishments
|
(9,342
|
)
|
—
|
|
—
|
|
—
|
|
(9,342
|
)
|
||||||||||
|
Fair value adjustments, net
|
—
|
|
(864
|
)
|
—
|
|
—
|
|
(864
|
)
|
||||||||||
|
Other, net
|
17,222
|
|
7,935
|
|
2,944
|
|
(2,826
|
)
|
25,275
|
|
||||||||||
|
Interest expense, net of capitalized interest
|
(6,656
|
)
|
(439
|
)
|
(3,066
|
)
|
2,826
|
|
(7,335
|
)
|
||||||||||
|
Total other income (expense), net
|
1,224
|
|
6,632
|
|
(122
|
)
|
—
|
|
7,734
|
|
||||||||||
|
Loss before income and mining taxes
|
(17,968
|
)
|
27,505
|
|
7,119
|
|
—
|
|
16,656
|
|
||||||||||
|
Income and mining tax (expense) benefit
|
4,983
|
|
(3,372
|
)
|
(10,559
|
)
|
—
|
|
(8,948
|
)
|
||||||||||
|
Total loss after income and mining taxes
|
(12,985
|
)
|
24,133
|
|
(3,440
|
)
|
—
|
|
7,708
|
|
||||||||||
|
Equity income (loss) in consolidated subsidiaries
|
20,693
|
|
1,209
|
|
(305
|
)
|
(21,597
|
)
|
—
|
|
||||||||||
|
NET INCOME (LOSS)
|
$
|
7,708
|
|
$
|
25,342
|
|
$
|
(3,745
|
)
|
$
|
(21,597
|
)
|
$
|
7,708
|
|
|||||
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
||||||||||||||||||||
|
Unrealized gain (loss) on marketable securities, net of tax
|
(2,200
|
)
|
(748
|
)
|
—
|
|
748
|
|
(2,200
|
)
|
||||||||||
|
Reclassification adjustments for impairment of equity securities, net of tax
|
426
|
|
426
|
|
—
|
|
(426
|
)
|
426
|
|
||||||||||
|
Reclassification adjustments for realized gain (loss) on sale of equity securities, net of tax
|
1,268
|
|
(572
|
)
|
—
|
|
572
|
|
1,268
|
|
||||||||||
|
Other comprehensive income (loss)
|
(506
|
)
|
(894
|
)
|
—
|
|
894
|
|
(506
|
)
|
||||||||||
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
7,202
|
|
$
|
24,448
|
|
$
|
(3,745
|
)
|
$
|
(20,703
|
)
|
$
|
7,202
|
|
|||||
(1) Excludes amortization.
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
|
|
||||||||||
|
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
|
)
|
||||||||||
|
Income (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
|
)
|
||||||||||
|
Income (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.
24
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30, 2017
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||||||||||||||
|
Cash provided by (used in) operating activities
|
$
|
(9,820
|
)
|
$
|
32,027
|
|
52,577
|
|
$
|
83,940
|
|
$
|
(21,597
|
)
|
84,550
|
|
|||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|||||||||||||||||||||
|
Capital expenditures
|
(1,308
|
)
|
(40,912
|
)
|
52,577
|
|
(19,241
|
)
|
—
|
|
(61,461
|
)
|
|||||||||
|
Proceeds from the sale of long-lived assets
|
8,917
|
|
6,594
|
|
52,577
|
|
(56
|
)
|
—
|
|
15,455
|
|
|||||||||
|
Purchase of investments
|
(9,964
|
)
|
—
|
|
52,577
|
|
—
|
|
—
|
|
(9,964
|
)
|
|||||||||
|
Sales and maturities of investments
|
9,157
|
|
1,761
|
|
52,577
|
|
—
|
|
—
|
|
10,918
|
|
|||||||||
|
Other
|
(1,486
|
)
|
—
|
|
52,577
|
|
(121
|
)
|
—
|
|
(1,607
|
)
|
|||||||||
|
Investments in consolidated subsidiaries
|
(13,004
|
)
|
753
|
|
52,577
|
|
307
|
|
11,944
|
|
—
|
|
|||||||||
|
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(7,688
|
)
|
(31,804
|
)
|
(19,111
|
)
|
11,944
|
|
(46,659
|
)
|
|||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||||||||||
|
Issuance of notes and bank borrowings
|
244,958
|
|
—
|
|
52,577
|
|
—
|
|
—
|
|
244,958
|
|
|||||||||
|
Payments on debt, capital leases, and associated costs
|
(185,538
|
)
|
(3,895
|
)
|
52,577
|
|
(2,724
|
)
|
—
|
|
(192,157
|
)
|
|||||||||
|
Net intercompany financing activity
|
7,638
|
|
1,561
|
|
52,577
|
|
(18,852
|
)
|
9,653
|
|
—
|
|
|||||||||
|
Other
|
(3,720
|
)
|
—
|
|
52,577
|
|
—
|
|
—
|
|
(3,720
|
)
|
|||||||||
|
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
63,338
|
|
(2,334
|
)
|
(21,576
|
)
|
9,653
|
|
49,081
|
|
|||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
—
|
|
884
|
|
—
|
|
884
|
|
|||||||||||
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
45,830
|
|
(2,111
|
)
|
44,137
|
|
—
|
|
87,856
|
|
|||||||||||
|
Cash and cash equivalents at beginning of period
|
58,048
|
|
50,023
|
|
54,111
|
|
—
|
|
162,182
|
|
|||||||||||
|
Cash and cash equivalents at end of period
|
$
|
103,878
|
|
$
|
47,912
|
|
$
|
98,248
|
|
$
|
—
|
|
$
|
250,038
|
|
||||||
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:
|
||||||||||||||||||||
|
Issuance of common stock
|
73,071
|
|
—
|
|
—
|
|
—
|
|
73,071
|
|
||||||||||
|
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
|
|
—
|
|
||||||||||
|
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
|
|
|||||
25
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2017
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
103,878
|
|
$
|
47,912
|
|
$
|
98,248
|
|
$
|
—
|
|
$
|
250,038
|
|
|||||
|
Receivables
|
54
|
|
13,527
|
|
56,075
|
|
—
|
|
69,656
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
75,699
|
|
—
|
|
—
|
|
75,699
|
|
||||||||||
|
Inventory
|
—
|
|
35,099
|
|
32,796
|
|
—
|
|
67,895
|
|
||||||||||
|
Prepaid expenses and other
|
6,696
|
|
2,366
|
|
9,501
|
|
—
|
|
18,563
|
|
||||||||||
|
110,628
|
|
174,603
|
|
196,620
|
|
—
|
|
481,851
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
3,908
|
|
146,826
|
|
77,004
|
|
—
|
|
227,738
|
|
||||||||||
|
Mining properties, net
|
4,000
|
|
210,785
|
|
335,462
|
|
—
|
|
550,247
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
69,954
|
|
—
|
|
—
|
|
69,954
|
|
||||||||||
|
Restricted assets
|
11,711
|
|
226
|
|
7,357
|
|
—
|
|
19,294
|
|
||||||||||
|
Equity securities
|
9,930
|
|
1,942
|
|
—
|
|
—
|
|
11,872
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
15,140
|
|
—
|
|
15,140
|
|
||||||||||
|
Net investment in subsidiaries
|
274,908
|
|
12,858
|
|
(861
|
)
|
(286,905
|
)
|
—
|
|
||||||||||
|
Other
|
211,384
|
|
10,186
|
|
8,366
|
|
(211,384
|
)
|
18,552
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
626,469
|
|
$
|
627,380
|
|
$
|
639,088
|
|
$
|
(498,289
|
)
|
$
|
1,394,648
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
1,599
|
|
$
|
24,168
|
|
$
|
33,033
|
|
$
|
—
|
|
$
|
58,800
|
|
|||||
|
Other accrued liabilities
|
5,638
|
|
12,299
|
|
23,313
|
|
—
|
|
41,250
|
|
||||||||||
|
Debt
|
—
|
|
7,338
|
|
5,676
|
|
—
|
|
13,014
|
|
||||||||||
|
Reclamation
|
—
|
|
2,749
|
|
850
|
|
—
|
|
3,599
|
|
||||||||||
|
7,237
|
|
46,554
|
|
62,872
|
|
—
|
|
116,663
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
244,827
|
|
22,163
|
|
216,160
|
|
(211,384
|
)
|
271,766
|
|
||||||||||
|
Reclamation
|
—
|
|
77,743
|
|
21,798
|
|
—
|
|
99,541
|
|
||||||||||
|
Deferred tax liabilities
|
5,304
|
|
6,137
|
|
63,947
|
|
—
|
|
75,388
|
|
||||||||||
|
Other long-term liabilities
|
2,390
|
|
4,758
|
|
46,631
|
|
—
|
|
53,779
|
|
||||||||||
|
Intercompany payable (receivable)
|
(410,800
|
)
|
336,771
|
|
74,029
|
|
—
|
|
—
|
|
||||||||||
|
(158,279
|
)
|
447,572
|
|
422,565
|
|
(211,384
|
)
|
500,474
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,814
|
|
250
|
|
193,175
|
|
(193,425
|
)
|
1,814
|
|
||||||||||
|
Additional paid-in capital
|
3,316,407
|
|
182,611
|
|
1,809,559
|
|
(1,992,170
|
)
|
3,316,407
|
|
||||||||||
|
Accumulated deficit
|
(2,537,716
|
)
|
(46,225
|
)
|
(1,849,083
|
)
|
1,895,308
|
|
(2,537,716
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(2,994
|
)
|
(3,382
|
)
|
—
|
|
3,382
|
|
(2,994
|
)
|
||||||||||
|
777,511
|
|
133,254
|
|
153,651
|
|
(286,905
|
)
|
777,511
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
626,469
|
|
$
|
627,380
|
|
$
|
639,088
|
|
$
|
(498,289
|
)
|
$
|
1,394,648
|
|
|||||
26
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2016
|
In thousands
|
Coeur Mining, Inc.
|
Guarantor Subsidiaries
|
Non-Guarantor Subsidiaries
|
Eliminations
|
Consolidated
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
58,048
|
|
$
|
50,023
|
|
$
|
54,111
|
|
$
|
—
|
|
$
|
162,182
|
|
|||||
|
Receivables
|
12
|
|
6,865
|
|
53,554
|
|
—
|
|
60,431
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
64,167
|
|
—
|
|
—
|
|
64,167
|
|
||||||||||
|
Inventory
|
—
|
|
49,393
|
|
56,633
|
|
—
|
|
106,026
|
|
||||||||||
|
Prepaid expenses and other
|
3,803
|
|
1,459
|
|
12,719
|
|
—
|
|
17,981
|
|
||||||||||
|
61,863
|
|
171,907
|
|
177,017
|
|
—
|
|
410,787
|
|
|||||||||||
|
NON-CURRENT ASSETS
|
||||||||||||||||||||
|
Property, plant and equipment, net
|
3,222
|
|
139,885
|
|
73,689
|
|
—
|
|
216,796
|
|
||||||||||
|
Mining properties, net
|
—
|
|
195,791
|
|
362,664
|
|
—
|
|
558,455
|
|
||||||||||
|
Ore on leach pads
|
—
|
|
67,231
|
|
—
|
|
—
|
|
67,231
|
|
||||||||||
|
Restricted assets
|
10,170
|
|
226
|
|
7,201
|
|
—
|
|
17,597
|
|
||||||||||
|
Equity securities
|
—
|
|
4,488
|
|
—
|
|
—
|
|
4,488
|
|
||||||||||
|
Receivables
|
—
|
|
—
|
|
30,951
|
|
—
|
|
30,951
|
|
||||||||||
|
Net investment in subsidiaries
|
273,056
|
|
11,650
|
|
—
|
|
(284,706
|
)
|
—
|
|
||||||||||
|
Other
|
221,381
|
|
9,263
|
|
3,344
|
|
(221,384
|
)
|
12,604
|
|
||||||||||
|
TOTAL ASSETS
|
$
|
569,692
|
|
$
|
600,441
|
|
$
|
654,866
|
|
$
|
(506,090
|
)
|
$
|
1,318,909
|
|
|||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||
|
Accounts payable
|
$
|
2,153
|
|
$
|
24,921
|
|
$
|
26,261
|
|
$
|
—
|
|
$
|
53,335
|
|
|||||
|
Other accrued liabilities
|
12,881
|
|
13,664
|
|
16,198
|
|
—
|
|
42,743
|
|
||||||||||
|
Debt
|
—
|
|
6,516
|
|
5,523
|
|
—
|
|
12,039
|
|
||||||||||
|
Royalty obligations
|
—
|
|
4,995
|
|
—
|
|
—
|
|
4,995
|
|
||||||||||
|
Reclamation
|
—
|
|
2,672
|
|
850
|
|
—
|
|
3,522
|
|
||||||||||
|
15,034
|
|
52,768
|
|
48,832
|
|
—
|
|
116,634
|
|
|||||||||||
|
NON-CURRENT LIABILITIES
|
||||||||||||||||||||
|
Debt
|
175,991
|
|
15,214
|
|
229,036
|
|
(221,384
|
)
|
198,857
|
|
||||||||||
|
Royalty obligations
|
—
|
|
4,292
|
|
—
|
|
—
|
|
4,292
|
|
||||||||||
|
Reclamation
|
—
|
|
75,183
|
|
20,621
|
|
—
|
|
95,804
|
|
||||||||||
|
Deferred tax liabilities
|
13,810
|
|
6,179
|
|
54,809
|
|
—
|
|
74,798
|
|
||||||||||
|
Other long-term liabilities
|
1,993
|
|
4,750
|
|
53,294
|
|
—
|
|
60,037
|
|
||||||||||
|
Intercompany payable (receivable)
|
(405,623
|
)
|
336,813
|
|
68,810
|
|
—
|
|
—
|
|
||||||||||
|
(213,829
|
)
|
442,431
|
|
426,570
|
|
(221,384
|
)
|
433,788
|
|
|||||||||||
|
STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Common stock
|
1,809
|
|
250
|
|
197,913
|
|
(198,163
|
)
|
1,809
|
|
||||||||||
|
Additional paid-in capital
|
3,314,590
|
|
181,009
|
|
1,864,261
|
|
(2,045,270
|
)
|
3,314,590
|
|
||||||||||
|
Accumulated deficit
|
(2,545,424
|
)
|
(73,529
|
)
|
(1,882,710
|
)
|
1,956,239
|
|
(2,545,424
|
)
|
||||||||||
|
Accumulated other comprehensive income (loss)
|
(2,488
|
)
|
(2,488
|
)
|
—
|
|
2,488
|
|
(2,488
|
)
|
||||||||||
|
768,487
|
|
105,242
|
|
179,464
|
|
(284,706
|
)
|
768,487
|
|
|||||||||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
569,692
|
|
$
|
600,441
|
|
$
|
654,866
|
|
$
|
(506,090
|
)
|
$
|
1,318,909
|
|
|||||
27
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, 2017
, approximately
10%
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.
Palmarejo Gold Stream
Effective August 2016, Coeur Mexicana sells
50%
of Palmarejo gold production (excluding production from the Paramount properties acquired in 2015) to a subsidiary of Franco-Nevada Corporation under a gold stream agreement for the lesser of
$800
or spot price per ounce. In 2015, Coeur Mexicana received a
$22.0 million
deposit toward future deliveries under the gold stream agreement.
Bolivian Temporary Restriction on Mining above
4,400
Meters
In October 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. 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. The Company is not currently mining above the 4,400 meter level.
If COMIBOL decides to affirmatively adopt a new resolution to restrict access above the 4,400 meter level, 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.
28
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining, Inc. and its subsidiaries (collectively the “Company”, “our”, or “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of these measures, please see “Non-GAAP Financial Performance Measures” at the end of this item.
We provide certain operational and financial data on a silver equivalent basis, converting gold to silver at a historical 60:1 ratio of silver ounces to gold ounces, unless otherwise noted. We also provide realized silver equivalent data determined by average spot silver and gold prices during the relevant period.
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 and Mexico. The Palmarejo complex, and Rochester, Kensington, Wharf, and San Bartolomé mines constitute our principal sources of revenue.
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
|
•
|
Production of
8.9 million
silver equivalent ounces, consisting of
4.0 million
silver ounces and
82,819
gold ounces
|
|
•
|
Sales of
9.3 million
silver equivalent ounces, consisting of
4.1 million
silver ounces and
86,194
gold ounces
|
|
•
|
Net loss of
$11.0 million
(
$0.06
per share) and adjusted net loss of
$2.5 million
(
$0.01
per share) (see “Non-GAAP Financial Performance Measures”)
|
|
•
|
Costs applicable to sales were
$13.15
per silver equivalent ounce (
$12.23
per average spot silver equivalent ounce) and
$866
per gold equivalent ounce (see “Non-GAAP Financial Performance Measures”)
|
|
•
|
All-in sustaining costs were
$17.83
per silver equivalent ounce (
$15.90
per average spot silver equivalent ounce) (see “Non-GAAP Financial Performance Measures”)
|
|
•
|
Operating cash flow of
$29.3 million
and adjusted EBITDA of
$33.4 million
(see “Non-GAAP Financial Performance Measures”)
|
|
•
|
Issued $250.0 million of 5.875% Senior Notes due 2024 (the “2024 Senior Notes”)
|
|
•
|
Repurchased
$178.0 million
of our 7.875% Senior Notes due 2021 (the “2021 Senior Notes”)
|
|
•
|
Cash and cash equivalents of
$250.0 million
at
June 30, 2017
|
|
•
|
Announced the sale of the Endeavor Silver Stream and our remaining portfolio of royalties for total consideration of
$13.0 million
. The transaction is expected to close in the third quarter of 2017, subject to customary closing conditions
|
29
Selected Financial and Operating Results
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Metal sales
|
$
|
173,354
|
|
$
|
180,197
|
|
$
|
379,492
|
|
$
|
326,833
|
|
|||
|
Net income (loss)
|
$
|
(10,955
|
)
|
$
|
14,497
|
|
$
|
7,708
|
|
$
|
(5,899
|
)
|
|||
|
Net income (loss) per share, diluted
|
$
|
(0.06
|
)
|
$
|
0.09
|
|
$
|
0.04
|
|
$
|
(0.04
|
)
|
|||
|
Adjusted net income (loss)
(1)
|
$
|
(2,517
|
)
|
$
|
16,948
|
|
$
|
4,469
|
|
$
|
6,490
|
|
|||
|
Adjusted net income (loss) per share, diluted
(1)
|
$
|
(0.01
|
)
|
$
|
0.11
|
|
$
|
0.02
|
|
$
|
0.04
|
|
|||
|
EBITDA
(1)
|
$
|
23,642
|
|
$
|
62,109
|
|
$
|
97,041
|
|
$
|
82,904
|
|
|||
|
Adjusted EBITDA
(1)
|
$
|
33,354
|
|
$
|
72,041
|
|
$
|
89,899
|
|
$
|
108,413
|
|
|||
|
Silver ounces produced
|
3,974,982
|
|
4,029,976
|
|
7,907,358
|
|
7,402,450
|
|
|||||||
|
Gold ounces produced
|
82,819
|
|
92,727
|
|
171,037
|
|
170,799
|
|
|||||||
|
Silver equivalent ounces produced
|
8,944,122
|
|
|
9,593,596
|
|
|
18,169,578
|
|
|
17,650,390
|
|
||||
|
Silver ounces sold
|
4,086,828
|
|
3,973,475
|
|
8,560,540
|
|
7,502,977
|
|
|||||||
|
Gold ounces sold
|
86,194
|
|
88,543
|
|
197,068
|
|
167,634
|
|
|||||||
|
Silver equivalent ounces sold
|
9,258,455
|
|
9,286,033
|
|
20,384,641
|
|
17,561,045
|
|
|||||||
|
Average realized price per silver ounce
|
$
|
16.98
|
|
$
|
17.38
|
|
$
|
17.31
|
|
$
|
16.34
|
|
|||
|
Average realized price per gold ounce
|
$
|
1,206
|
|
$
|
1,255
|
|
$
|
1,174
|
|
$
|
1,218
|
|
|||
|
Costs applicable to sales per silver equivalent ounce
(1)
|
$
|
13.15
|
|
$
|
10.82
|
|
$
|
12.18
|
|
$
|
11.53
|
|
|||
|
Costs applicable to sales per average spot silver equivalent ounce
(1)
|
$
|
12.23
|
|
$
|
10.00
|
|
$
|
11.33
|
|
$
|
10.58
|
|
|||
|
Costs applicable to sales per gold equivalent ounce
(1)
|
$
|
866
|
|
$
|
649
|
|
$
|
825
|
|
$
|
688
|
|
|||
|
All-in sustaining costs per silver equivalent ounce
(1)
|
$
|
17.83
|
|
$
|
14.92
|
|
$
|
16.29
|
|
$
|
15.56
|
|
|||
|
All-in sustaining costs per average spot silver equivalent ounce
(1)
|
$
|
15.90
|
|
$
|
13.04
|
|
$
|
14.67
|
|
$
|
13.37
|
|
|||
|
(1)
|
See
“
Non-GAAP Financial Performance Measures.
”
|
Consolidated Financial Results
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Net Income (Loss)
Net
loss
was
$11.0 million
(
$0.06
per share) compared to
Net
income
of
$14.5 million
(
$0.09
per share). The
Net loss
is primarily due to a
$9.3 million
loss on debt extinguishment, lower average realized silver and gold prices and higher all-in sustaining costs per silver equivalent ounce, partially offset by lower interest expense and a
$2.3 million
gain on the repurchase the Rochester royalty obligation.
Revenue
Metal sales
decreased
due to lower gold production and a
decrease
in average realized silver and gold prices of
2%
and
4%
, respectively. The Company sold
4.1 million
silver ounces and
86,194
gold ounces, compared to sales of
4.0 million
silver ounces and
88,543
gold ounces. Gold contributed
60%
of sales and silver contributed
40%
, compared to
62%
of sales from gold and
38%
from silver. Metal sales from North American operations provided 85.7% of consolidated revenue, compared to 85.0%.
Costs Applicable to Sales
Costs applicable to sales
increased
due to lower production and higher mining and processing costs. For a complete discussion of costs applicable to sales, see
Results of Operations
below.
Amortization
Amortization
decreased
$4.6 million
, or
12%
, primarily due to lower production and increased life of mine reserves at Wharf.
30
Expenses
General and administrative expenses
decreased
5%
due to lower legal and professional service costs.
Exploration expense
increased
$5.6 million
, due to the Company’s expansion of drilling activities at Palmarejo, Kensington and Rochester as well as regional exploration with a focus on projects in Nevada and Chihuahua, Mexico.
Pre-development, reclamation, and other expenses remained comparable at
$4.4 million
.
Other Income and Expenses
During the second quarter of 2017, the Company incurred a
$9.3 million
loss in connection with the repurchase of the 2021 7.875% Senior Notes concurrent with the completed offering of the 2024 5.875% Senior Notes.
Non-cash fair value adjustments, net, were a
gain
of
$0.3 million
compared to a
loss
of
$3.6 million
, primarily due to the termination of the Palmarejo gold production royalty (in the third quarter of 2016) and the lesser impact of changes in future metal prices on the Rochester royalty obligation which was repurchased and terminated in May 2017.
Interest expense (net of capitalized interest of
$0.8 million
)
decreased
to
$3.7 million
from
$10.9 million
, primarily due to lower debt levels and a lower interest rate on the 2024 Senior Notes.
Other, net
increased
by
$6.0 million
, primarily due to a
$2.3 million
gain on the repurchase of the Rochester royalty obligation and foreign exchange gains.
Income and Mining Taxes
During the second quarter of 2017, the Company reported estimated income and mining tax
benefit
of approximately
$2.1 million
resulting in an effective tax rate of
16.1%
. This compares to estimated income and mining tax
benefit
of
$0.8 million
for an effective tax rate of
(5.6%)
during the second quarter of 2016.
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,
|
|||||||||||||
|
|
2017
|
2016
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
(6,493
|
)
|
$
|
1,588
|
|
$
|
119
|
|
$
|
(1,810
|
)
|
|
|
Argentina
|
(129
|
)
|
945
|
|
4,453
|
|
(1,793
|
)
|
|||||
|
Mexico
|
(2,195
|
)
|
(4,766
|
)
|
3,353
|
|
4,316
|
|
|||||
|
Bolivia
|
(2,001
|
)
|
245
|
|
4,016
|
|
848
|
|
|||||
|
Other jurisdictions
|
(2,235
|
)
|
4,086
|
|
1,788
|
|
(793
|
)
|
|||||
|
$
|
(13,053
|
)
|
$
|
2,098
|
|
$
|
13,729
|
|
$
|
768
|
|
||
The Company’s effective tax rate is impacted by recurring and nonrecurring items. These items include foreign exchange rates on deferred tax balances, mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. During the second quarter of 2017, changes in currency rates increased income and mining tax expense by $3.0 million, predominately due to the strength of the Mexican Peso. Favorable operating results at Palmarejo continued to contribute to higher income and mining tax expense. The Company’s consolidated effective income and mining 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 benefits will not be realized. The Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.
31
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Net Income (Loss)
Net
income
was
$7.7 million
(
$0.04
per share) compared to
Net
loss
of
$5.9 million
(
$0.04
per share). The
increase
in
Net income
is primarily due to a
$21.1 million
gain on the sale of the Joaquin project, less unfavorable fair value adjustments, higher silver and gold production, higher average realized silver prices and lower interest expense, partially offset by lower average realized gold prices, higher all-in sustaining costs per silver equivalent ounce and a
$9.3 million
loss incurred in connection with the repurchase of the 2021 Senior Notes.
Revenue
Metal sales
increased
due to higher silver and gold production, a reduction in metal inventory and a
6%
increase
in average realized silver prices, partially offset by a
4%
decrease
in average realized gold prices. The Company sold
8.6 million
silver ounces and
197,068
gold ounces, compared to sales of
7.5 million
silver ounces and
167,634
gold ounces. Gold contributed
61%
of sales and silver contributed
39%
, compared to
62%
of sales from gold and
38%
from silver. Royalty revenue was lower due to the Company’s divestiture of non-core royalty assets throughout 2016 and the first half of 2017. Metal sales from North American operations provided 87.9% of revenue, compared to 84.4%.
Costs Applicable to Sales
Costs applicable to sales
increased
due to higher silver equivalent ounces sold and higher mining and processing costs. For a complete discussion of costs applicable to sales, see
Results of Operations
below.
Amortization
Amortization
increased
$7.6 million
, or
12%
, primarily due to higher silver and gold ounces sold, partially offset by higher life of mine reserves at Wharf.
Expenses
General and administrative expenses
increased
10%
due to higher compensation, severance and professional service costs.
Exploration expense
increased
$9.1 million
, due to the Company’s expansion of drilling activities at Palmarejo, Kensington and Rochester as well as regional exploration with a focus on projects in Nevada and Chihuahua, Mexico.
Pre-development, reclamation, and other expenses
increased
4%
to
$8.9 million
as a result of additional work at La Preciosa.
Other Income and Expenses
During the first half of 2017, the Company incurred a
$9.3 million
loss in connection with the repurchase of the 2021 7.875% Senior Notes concurrent with the completed offering of the 2024 5.875% Senior Notes.
Non-cash fair value adjustments, net, were a
loss
of
$0.9 million
compared to a
loss
of
$12.3 million
, primarily due to the termination of the Palmarejo gold production royalty (in the third quarter of 2016) and the lesser impact of changes in future metal prices on the Rochester royalty obligation which was repurchased and terminated in May 2017.
Interest expense (net of capitalized interest of
$1.1 million
)
decreased
to
$7.3 million
from
$22.0 million
, primarily due to lower debt levels and a lower interest rate on the 2024 Senior Notes compared to the 2021 Senior Notes.
Other, net increased by
$25.8 million
, primarily due to a
$21.1 million
gain on the sale of the Joaquin project in Argentina and a
$2.3 million
gain on the repurchase of the Rochester royalty obligation.
Income and Mining Taxes
During the first half of 2017, the Company reported estimated income and mining tax
expense
of approximately
$8.9 million
resulting in an effective tax rate of
53.7%
. This compares to estimated income and mining tax
expense
of
$1.3 million
for an effective tax rate of
(29.3%)
during the first half of 2016.
32
The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
|
Six months ended June 30,
|
|||||||||||||
|
|
2017
|
2016
|
|||||||||||
|
In thousands
|
Income (loss) before tax
|
Tax (expense) benefit
|
Income (loss) before tax
|
Tax (expense) benefit
|
|||||||||
|
United States
|
$
|
14,221
|
|
$
|
(377
|
)
|
$
|
(9,242
|
)
|
$
|
(2,342
|
)
|
|
|
Argentina
|
(457
|
)
|
2,070
|
|
3,438
|
|
(250
|
)
|
|||||
|
Mexico
|
6,455
|
|
(14,689
|
)
|
(4,155
|
)
|
4,333
|
|
|||||
|
Bolivia
|
(1,530
|
)
|
214
|
|
6,062
|
|
(722
|
)
|
|||||
|
Other jurisdictions
|
(2,033
|
)
|
3,834
|
|
(664
|
)
|
(2,357
|
)
|
|||||
|
$
|
16,656
|
|
$
|
(8,948
|
)
|
$
|
(4,561
|
)
|
$
|
(1,338
|
)
|
||
The Company’s effective tax rate is impacted by recurring and nonrecurring items. These items include foreign exchange rates on deferred tax balances, mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. During the first half of the year, changes in currency rates increased income and mining tax expense by $8.6 million, predominately due to the strength of the Mexican Peso. During the first half of the year, favorable operating results at Palmarejo contributed to higher income and mining tax expense. The Company’s consolidated effective income and mining 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 benefits will not be realized. The Company analyzes its deferred tax assets and if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets.
33
2017 Outlook
The Company revised its full-year 2017 production guidance to reflect higher expected gold production at Wharf due to higher mining and crushing rates, lower expected silver production at the San Bartolomé mine due to persistent drought conditions, and the pending sale of the Endeavor silver stream, under which production and any associated sales began accruing to the buyer as of June 1, 2017. Cost guidance has been updated to reflect revised production levels.
2017 Production Outlook
|
(silver and silver equivalent ounces in thousands)
|
Silver
|
Gold
|
Silver Equivalent
1
|
|
Palmarejo
|
6,500 - 7,000
|
110,000 - 120,000
|
13,100 - 14,200
|
|
Rochester
|
4,200 - 4,700
|
47,000 - 52,000
|
7,020 - 7,820
|
|
San Bartolomé
|
5,000 - 5,400
|
—
|
5,000 - 5,400
|
|
Endeavor
|
105
|
—
|
105
|
|
Kensington
|
—
|
120,000 - 125,000
|
7,200 - 7,500
|
|
Wharf
|
—
|
90,000 - 95,000
|
5,400 - 5,700
|
|
Total
|
15,805 - 17,205
|
367,000 - 392,000
|
37,825 - 40,725
|
2017 Cost Outlook
|
(dollars in millions, except per ounce amounts)
|
Previous Guidance
|
Revised Guidance
|
|
CAS per AgEqOz
1
–
Palmarejo
|
$10.00 - $10.50
|
$10.00 - $10.50
|
|
CAS per AgEqOz
1
–
Rochester
|
$11.50 - $12.00
|
$11.50 - $12.00
|
|
CAS per AgOz
1
–
San Bartolomé
|
$14.00 - $14.50
|
$15.75 - $16.25
|
|
CAS per AuOz
1
–
Kensington
|
$800 - $850
|
$800 - $850
|
|
CAS per AuEqOz
1
–
Wharf
|
$775 - $825
|
$700 - $750
|
|
Capital Expenditures
|
$109 - $129
|
$109 - $129
|
|
General and Administrative Expenses
|
$28 - $32
|
$28 - $32
|
|
Exploration Expense
|
$29 - $31
|
$29 - $31
|
|
AISC per AgEqOz
1
|
$15.75 - $16.25
|
$15.75 - $16.25
|
|
(1)
|
See
“
Non-GAAP Financial Performance Measures.
”
|
Results of Operations
The Company produced
4.0 million
ounces of silver and
82,819
ounces of gold in the
three months ended June 30, 2017
, compared to
4.0 million
ounces of silver and
92,727
ounces of gold in the
three months ended June 30, 2016
. Gold production
decreased
11%
due to lower tons placed at Rochester and lower gold grade at Wharf, Kensington and Palmarejo, partially offset by higher mill throughput and recovery at Palmarejo.
The Company produced
7.9 million
ounces of silver and
171,037
ounces of gold in the
six months ended June 30, 2017
, compared to
7.4 million
ounces of silver and
170,799
ounces of gold in the
six months ended June 30, 2016
. Silver production
increased
7%
due to higher mill throughput and grade at Palmarejo and timing of leach pad recoveries at Rochester, partially offset by lower mill throughput and silver grade at San Bartolomé.
Costs applicable to sales were
$13.15
per silver equivalent ounce (
$12.23
per average spot silver equivalent ounce) and
$866
per gold equivalent ounce in the
three months ended June 30, 2017
compared to
$10.82
per silver equivalent ounce (
$10.00
per average spot silver equivalent ounce) and
$649
per gold equivalent ounce in the
three months ended June 30, 2016
. Costs applicable to sales per silver equivalent ounce
increased
22%
in the
three months ended June 30, 2017
due to higher unit costs at Palmarejo, Rochester and San Bartolomé. Costs applicable to sales per gold equivalent ounce
increased
33%
in the
three months ended June 30, 2017
due to higher unit costs at Kensington and Wharf.
34
Costs applicable to sales were
$12.18
per silver equivalent ounce (
$11.33
per average spot silver equivalent ounce) and
$825
per gold equivalent ounce in the
six months ended June 30, 2017
compared to
$11.53
per silver equivalent ounce (
$10.58
per average spot silver equivalent ounce) and
$688
per gold equivalent ounce in the
six months ended June 30, 2016
. Costs applicable to sales per silver equivalent ounce
increased
6%
in the
six months ended June 30, 2017
due to higher unit costs at Palmarejo, Rochester and San Bartolomé. Costs applicable to sales per gold equivalent ounce
increased
20%
in the
six months ended June 30, 2017
due to higher unit costs at Kensington and Wharf.
All-in sustaining costs
were
$17.83
per silver equivalent ounce (
$15.90
per average spot silver equivalent ounce) in the
three months ended June 30, 2017
, compared to
$14.92
per silver equivalent ounce (
$13.04
per average spot silver equivalent ounce) in the
three months ended June 30, 2016
. The
20%
increase
in all-in sustaining costs per silver equivalent ounce in 2017 was primarily due to higher costs applicable to sales and higher exploration expense, partially offset by lower general and administrative expense and lower sustaining capital.
All-in sustaining costs
were
$16.29
per silver equivalent ounce (
$14.67
per average spot silver equivalent ounce) in the
six months ended June 30, 2017
, compared to
$15.56
per silver equivalent ounce (
$13.37
per average spot silver equivalent ounce) in the
six months ended June 30, 2016
. The
5%
increase
in all-in sustaining costs per silver equivalent ounce in 2017 was primarily due to higher costs applicable to sales and higher general and administrative and exploration expense, partially offset by lower sustaining capital.
Palmarejo
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Tons milled
|
335,428
|
|
270,142
|
|
695,811
|
|
516,675
|
|
|||||||
|
Silver ounces produced
|
1,456,821
|
|
1,307,097
|
|
2,987,362
|
|
2,240,466
|
|
|||||||
|
Gold ounces produced
|
24,292
|
|
18,731
|
|
55,084
|
|
33,399
|
|
|||||||
|
Silver equivalent ounces produced
|
2,914,341
|
|
2,430,957
|
|
6,292,402
|
|
4,244,406
|
|
|||||||
|
Costs applicable to sales per silver equivalent oz
(1)
|
$
|
11.31
|
|
$
|
9.14
|
|
$
|
10.36
|
|
$
|
10.44
|
|
|||
|
Costs applicable to sales per average spot silver equivalent oz
(1)
|
$
|
10.20
|
|
$
|
8.20
|
|
$
|
9.40
|
|
$
|
9.23
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Silver equivalent production
increased
20%
due to higher mining rates from Independencia, partially offset by lower silver grade. Metal sales were
$53.2 million
, or
31%
of Coeur’s metal sales, compared with
$48.3 million
, or
27%
of Coeur’s metal sales. Costs applicable to sales per ounce
increased
24%
as a result of higher waste tons mined, backfill costs, equipment maintenance and consumable costs. Amortization remained comparable at
$14.4 million
. Capital expenditures were
$11.2 million
as the Company continues underground development at Guadalupe and Independencia.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Silver equivalent production
increased
48%
due to higher mining rates from Guadalupe and Independencia and higher silver and gold grades, partially offset by lower silver recovery. Metal sales were
$130.9 million
, or
35%
of Coeur’s metal sales, compared with
$78.1 million
, or
24%
of Coeur’s metal sales. Costs applicable to sales per ounce remained comparable. Amortization increased to
$34.6 million
compared to
$22.1 million
, primarily due to higher production from Guadalupe and Independencia. Capital expenditures remained comparable at
$17.4 million
.
35
Rochester
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Tons placed
|
4,493,100
|
|
6,402,013
|
|
8,006,808
|
|
10,776,472
|
|
|||||||
|
Silver ounces produced
|
1,156,341
|
|
1,197,013
|
|
2,283,663
|
|
2,125,915
|
|
|||||||
|
Gold ounces produced
|
10,745
|
|
13,940
|
|
21,101
|
|
24,401
|
|
|||||||
|
Silver equivalent ounces produced
|
1,801,041
|
|
2,033,413
|
|
3,549,723
|
|
3,589,975
|
|
|||||||
|
Costs applicable to sales per silver equivalent oz
(1)
|
$
|
13.62
|
|
$
|
11.36
|
|
$
|
13.05
|
|
$
|
11.98
|
|
|||
|
Costs applicable to sales per average spot silver equivalent oz
(1)
|
$
|
12.63
|
|
$
|
10.30
|
|
$
|
12.17
|
|
$
|
10.75
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Silver equivalent production
decreased
11%
due to lower tons placed, partially offset by the timing of recoveries. Metal sales were
$32.8 million
, or
19%
of Coeur’s metal sales, compared with
$35.8 million
, or
20%
of Coeur’s metal sales. Costs applicable to sales per silver equivalent ounce
increased
20%
due to higher waste tons mined and higher blasting and processing costs. Amortization decreased to
$4.9 million
compared to
$5.4 million
due to lower production. Capital expenditures increased to
$13.8 million
compared to
$3.9 million
due to the stage IV leach pad expansion.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Silver equivalent production was consistent. Metal sales were
$71.8 million
, or
19%
of Coeur’s metal sales, compared with
$65.7 million
, or
20%
of Coeur’s metal sales. Costs applicable to sales per silver equivalent ounce
increased
9%
due to higher waste tons mined and higher blasting, processing, and maintenance costs. Amortization remained comparable at
$10.8 million
. Capital expenditures increased to
$24.4 million
compared to
$7.2 million
due to the stage IV leach pad expansion.
Kensington
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Tons milled
|
163,163
|
|
157,117
|
|
329,058
|
|
316,477
|
|
|||||||
|
Gold ounces produced
|
26,424
|
|
32,210
|
|
52,621
|
|
64,183
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
964
|
|
$
|
749
|
|
$
|
922
|
|
$
|
761
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Gold production
decreased
18%
due to lower grades mined as a result of mine sequencing, partially offset by higher mill throughput. Metal sales were
$35.6 million
, or
21%
of Coeur’s metal sales, compared to
$36.5 million
, or
20%
of Coeur’s metal sales. Costs applicable to sales per ounce were
29%
higher
, primarily due to lower production and higher contract services. Amortization was
$8.3 million
compared to
$9.8 million
due to lower production, partially offset by higher amortizable mining properties and equipment. Capital expenditures increased to
$8.6 million
compared to
$7.5 million
, due to more underground mine development.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Gold production
decreased
18%
due to lower grades mined as a result of mine sequencing, partially offset by higher mill throughput. Metal sales were
$73.5 million
, or
19%
of Coeur’s metal sales, compared to
$72.2 million
, or
22%
of Coeur’s metal sales. Costs applicable to sales per ounce were
21%
higher
, primarily due to lower production and higher contract services and other mining costs. Amortization was
$17.5 million
compared to
$18.2 million
due to lower production, mostly offset by higher amortizable mining properties and equipment. Capital expenditures decreased to
$14.2 million
compared to
$15.6 million
, due to less underground mine development.
36
Wharf
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Tons placed
|
993,167
|
|
915,631
|
|
2,285,348
|
|
1,890,294
|
|
|||||||
|
Gold ounces produced
|
21,358
|
|
27,846
|
|
42,231
|
|
48,816
|
|
|||||||
|
Silver ounces produced
|
12,587
|
|
35,201
|
|
32,652
|
|
48,180
|
|
|||||||
|
Gold equivalent ounces produced
(1)
|
21,568
|
|
|
28,433
|
|
|
42,775
|
|
|
49,619
|
|
||||
|
Costs applicable to sales per gold equivalent oz
(1)
|
$
|
734
|
|
$
|
535
|
|
$
|
696
|
|
$
|
597
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Gold equivalent production
decreased
24%
due to fewer high-grade tons placed from the Golden Reward deposit. Metal sales were
$27.0 million
, or
16%
of Coeur’s metal sales, compared to
$34.0 million
, or
19%
of Coeur’s metal sales. Costs applicable to sales per gold equivalent ounce
increased
37%
due to lower production, timing of pad unload, and higher blasting and crushing costs. Amortization was
$2.5 million
compared to
$5.1 million
due to lower production and higher life of mine reserves. Capital expenditures remained comparable at
$1.5 million
.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Gold equivalent production
decreased
14%
due to lower grade, partially offset by higher tons placed. Metal sales were
$57.3 million
, or
15%
of Coeur’s metal sales, compared to
$61.9 million
, or
19%
of Coeur’s metal sales. Costs applicable to sales per gold equivalent ounce
increased
17%
due to lower production and higher blasting and crushing costs. Amortization was
$5.7 million
compared to
$9.2 million
due to lower production and higher life of mine reserves. Capital expenditures remained comparable at
$2.4 million
.
San Bartolomé
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Tons milled
|
417,784
|
|
440,441
|
|
802,051
|
|
848,247
|
|
|||||||
|
Silver ounces produced
|
1,284,561
|
|
1,457,944
|
|
2,499,068
|
|
2,839,857
|
|
|||||||
|
Costs applicable to sales/oz
(1)
|
$
|
16.73
|
|
$
|
13.14
|
|
$
|
16.34
|
|
$
|
12.89
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Silver production
decreased
12%
due to lower high-grade ore purchases and mill throughput due to continued drought conditions, partially offset by higher recoveries. Silver sales were
$23.8 million
, or
14%
of Coeur’s metal sales, compared with
$25.2 million
, or
14%
of Coeur’s metal sales. Costs applicable to sales per ounce
increased
due to lower production and higher processing costs. Amortization remained comparable at
$2.2 million
due to lower life of mine reserves. Capital expenditures were
$0.4 million
compared to
$1.3 million
.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Silver production
decreased
12%
due to lower high-grade ore purchases and mill throughput due to drought conditions, partially offset by higher recoveries. Silver sales were
$44.4 million
, or
12%
of Coeur’s metal sales, compared with
$46.5 million
, or
14%
of Coeur’s metal sales. Costs applicable to sales per ounce
increased
due to lower production and higher processing costs. Amortization remained comparable at
$3.6 million
due to lower life of mine reserves. Capital expenditures were
$0.8 million
compared to
$1.8 million
.
Endeavor Silver Stream
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||
|
Tons milled
|
88,565
|
|
37,521
|
|
133,905
|
|
124,384
|
|
|||||
|
Silver ounces produced
|
64,672
|
|
32,721
|
|
104,613
|
|
148,032
|
|
|||||
|
Costs applicable to sales/oz
(1)
|
$
|
7.06
|
|
$
|
7.94
|
|
7.12
|
|
5.93
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
37
In June 2017, the Company entered into a Share and Asset Purchase Agreement with Metalla Streaming & Royalty Ltd. to sell the Endeavor silver stream. The transaction is expected to close in the third quarter of 2017, subject to customary closing conditions. Reported production and financial results include operations through May 2017, as the buyer is entitled to production and any associated sales subject to the stream agreement after June 1, 2017 under the terms of the sale agreement.
Three Months Ended June 30, 2017
compared to
Three Months Ended June 30, 2016
Silver production at Endeavor
increased
due to higher mining and mill throughput rates. Costs applicable to sales per ounce
decreased
due to the impact of lower silver prices on the Company’s silver price sharing agreement with the Endeavor mine operator. Amortization was
$0.2 million
compared to
$0.1 million
due to higher production.
Six Months Ended June 30, 2017
compared to
Six Months Ended June 30, 2016
Silver production at Endeavor
decreased
due to lower grades. Costs applicable to sales per ounce
increased
due to the impact of higher silver prices on the Company’s silver price sharing agreement with the Endeavor mine operator. Amortization was
$0.3 million
compared to
$0.9 million
due to lower production and lower amortizable mining properties.
Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the
three and six months ended June 30, 2017
was
$29.3 million
and
$84.6 million
, respectively, compared to net cash provided by operating activities of
$45.9 million
and
$52.6 million
, respectively, for the
three and six months ended June 30, 2016
and was impacted by the following key factors:
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,258,455
|
|
9,286,033
|
|
20,384,641
|
|
17,561,045
|
|
|||||||
|
Average realized price per consolidated silver equivalent ounce
|
$
|
18.72
|
|
$
|
19.41
|
|
$
|
18.62
|
|
$
|
18.61
|
|
|||
|
Costs applicable to sales per consolidated silver equivalent ounce
(1)
|
(13.57
|
)
|
(10.82
|
)
|
(12.67
|
)
|
(11.50
|
)
|
|||||||
|
Operating margin per consolidated silver equivalent ounce
|
$
|
5.15
|
|
$
|
8.59
|
|
$
|
5.95
|
|
$
|
7.11
|
|
|||
|
(1)
|
See Non-GAAP Financial Performance Measures.
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|||||||||||||
|
In thousands
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Cash flow before changes in operating assets and liabilities
|
$
|
27,357
|
|
$
|
47,496
|
|
$
|
71,184
|
|
$
|
70,749
|
|
|||
|
Changes in operating assets and liabilities:
|
|||||||||||||||
|
Receivables
|
(1,916
|
)
|
(12,402
|
)
|
11,190
|
|
(8,921
|
)
|
|||||||
|
Prepaid expenses and other
|
3,612
|
|
(898
|
)
|
(687
|
)
|
381
|
|
|||||||
|
Inventories
|
(997
|
)
|
(7,686
|
)
|
13,295
|
|
(15,508
|
)
|
|||||||
|
Accounts payable and accrued liabilities
|
1,223
|
|
19,429
|
|
(10,432
|
)
|
5,855
|
|
|||||||
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
$
|
29,279
|
|
$
|
45,939
|
|
$
|
84,550
|
|
$
|
52,556
|
|
|||
Cash
provided by
operating activities
decreased
$16.7 million
for the
three months ended June 30, 2017
compared to the
three months ended June 30, 2016
due to
lower
silver equivalent ounces sold,
lower
average realized prices and
higher
costs applicable to sales per consolidated silver equivalent ounce, partially offset by favorable working capital adjustments. Metal sales for the
three months ended June 30, 2017
decreased
$6.8 million
, with
$0.9 million
due to
lower
silver equivalent ounces sold and
$5.9 million
due to
lower
average realized prices. The
$1.9 million
working capital
decrease
in the
three months ended June 30, 2017
was primarily due to an increase in accounts payable partially offset by an increase in receivables, compared to the
$1.6 million
working capital
increase
in the
three months ended June 30, 2016
due to an increase in trade receivables and inventories, partially offset by an increase in accounts payable.
Cash
provided by
operating activities
increased
$32.0 million
for the
six months ended June 30, 2017
compared to the
six months ended June 30, 2016
due to
higher
silver equivalent ounces sold and favorable working capital adjustments, partially offset by
higher
costs applicable to sales per consolidated silver equivalent ounce. Metal sales for
six months ended June 30, 2017
38
increased
$52.7 million
, with
$52.9 million
due to
higher
silver equivalent ounces sold, partially offset by
$0.2 million
due to
lower
average realized prices. The
$13.4 million
working capital
decrease
in the
six months ended June 30, 2017
was primarily due to the reduction in precious metal inventory and receivables, compared to the
$18.2 million
working capital
increase
in the
six months ended June 30, 2016
, primarily due to an increase in inventories and receivables, partially offset by an increase in accounts payable.
Cash Used in Investing Activities
Net cash
used in
investing activities in the
three months ended June 30, 2017
was
$45.2 million
compared to
$16.9 million
in the
three months ended June 30, 2016
, primarily due to higher capital expenditures, the purchase of strategic equity investments, and the sales of non-core assets in 2016. The Company had capital expenditures of
$37.5 million
in the
three months ended June 30, 2017
compared with
$23.3 million
in the
three months ended June 30, 2016
. Capital expenditures in the
three months ended June 30, 2017
were primarily related to underground development at Palmarejo and Kensington, and the Stage IV leach pad expansion at Rochester. Capital expenditures in the
three months ended June 30, 2016
were primarily related to underground development at Palmarejo and Kensington.
Net cash
used in
investing activities in the
six months ended June 30, 2017
was
$46.7 million
compared to
$35.5 million
in the
six months ended June 30, 2016
, primarily due to higher capital expenditures and the purchase of strategic equity investments, partially offset by the proceeds from the sale of the Joaquin project. The Company had capital expenditures of
$61.5 million
in the
six months ended June 30, 2017
compared with
$45.5 million
in the
six months ended June 30, 2016
. Capital expenditures in the
six months ended June 30, 2017
were primarily related to underground development at Palmarejo and Kensington, and the Stage IV leach pad expansion at Rochester. Capital expenditures in the
six months ended June 30, 2016
were primarily related to underground development at Palmarejo and Kensington.
Cash Provided by Financing Activities
Net cash
provided by
financing activities in the
three months ended June 30, 2017
remained comparable with the
three months ended June 30, 2016
at
$55.6 million
. During the
three months ended June 30, 2017
, the Company received net proceeds of approximately
$245.0 million
from the issuance of the 2024 Senior Notes, partially offset by the repurchase of the 2021 Senior Notes for
$185.5 million
, including premiums. In addition, the Company made payments of
$10.5 million
under the Palmarejo gold production royalty obligation that terminated in July 2016. Coeur Mexicana now sells 50% of Palmarejo gold production (excluding production from Independencia Este, acquired in the 2015 Paramount transaction) for the lesser of $800 or spot price per ounce under a gold stream agreement.
Net cash
provided by
financing activities in the
six months ended June 30, 2017
was
$49.1 million
compared to
$40.1 million
in the
six months ended June 30, 2016
. During the
six months ended June 30, 2017
, the Company received net proceeds of approximately
$245.0 million
from the issuance of the 2024 Senior Notes, partially offset by the repurchase of the 2021 Senior Notes for
$185.5 million
, including premiums. Payments of
$19.6 million
were made in 2016 under the Palmarejo gold production royalty that terminated in July 2016. Coeur Mexicana now sells 50% of Palmarejo gold production (excluding production from Independencia Este, acquired in 2015 Paramount transaction) for the lesser of $800 or spot price per ounce under a gold stream agreement.
In May 2017, the Company completed an offering of $250.0 million in aggregate principal amount of 2024 Senior Notes in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended for net proceeds of approximately
$245.0 million
. The 2024 Senior Notes are governed by an Indenture dated as of May 31, 2017 (the “Indenture”), among the Company, as issuer, certain of the Company's subsidiaries named therein, as guarantors thereto (the “Guarantors”), and the Bank of New York Mellon, as trustee. The 2024 Senior Notes bear interest at a rate of 5.875% per year from the date of issuance. Interest on the 2024 Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2017. The 2024 Senior Notes will mature on June 1, 2024 and are fully and unconditionally guaranteed by the Guarantors. At any time prior to June 1, 2020, the Company may redeem all or part of the 2024 Senior Notes upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to the sum of (i) 100% of the principal amount thereof, plus (ii) a make-whole premium as of the date of redemption, plus (iii) 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 2024 Senior Notes on or after June 1, 2020, at redemption prices set forth in the Indenture, together with accrued and unpaid interest. At any time prior to June 1, 2020, the Company may use the proceeds of certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2024 Senior Notes, including any permitted additional 2024 Senior Notes, at a redemption price equal to 105.875% of the principal amount. The Indenture contains covenants that, among other things, limit the Company’s ability under certain circumstances to incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and investments, create liens, sell, transfer or otherwise dispose of assets, enter into transactions with affiliates, enter into agreements restricting the Company's subsidiaries' ability to pay dividends and impose conditions on the Company’s ability to engage in mergers, consolidations and sales of all or substantially all of its assets. The Indenture also contains certain “Events of Default” (as defined in the Indenture) customary for indentures of this type. If an
39
Event of Default has occurred and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the 2024 Senior Notes then outstanding may, and the Trustee at the request of the holders of not less than 25% in aggregate principal amount of the 2024 Senior Notes then outstanding shall, declare all unpaid principal of, premium, if any, and accrued interest on all the 2024 Senior Notes to be due and payable.
In connection with the sale of the 2024 Senior Notes, the Company entered into a Registration Rights Agreement, dated as of May 31, 2017 (the “Registration Rights Agreement”), with the Guarantors and the initial purchaser of the 2024 Senior Notes. Under the Registration Rights Agreement, the Company and the Guarantors have agreed, to (i) file a registration statement (the “Exchange Offer Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”) with respect to a registered offer (the “Exchange Offer”) to exchange the 2024 Senior Notes for new notes of the Company having terms substantially identical in all material respects to the 2024 Senior Notes (the “Exchange Notes”), (ii) to use their commercially reasonable efforts to cause the Exchange Offer to be completed on or prior to November 27, 2017 and (iii) to commence the Exchange Offer and use their commercially reasonable efforts to issue on or prior to 35 business days, or longer, if required by applicable securities laws, after the date on which the Exchange Offer Registration Statement was declared effective by the SEC, the Exchange Notes in exchange for all 2024 Senior Notes tendered prior thereto in the Exchange Offer.
Concurrent with the offering of the 2024 Senior Notes, the Company commenced a cash tender offer (the “Tender Offer”) to purchase the outstanding
$178.0 million
in aggregate principal amount of its 2021 Senior Notes. The Tender Offer was made on the terms and subject to the conditions set forth in the Offer to Purchase dated May 19, 2017. The Tender Offer expired at 5:00 p.m., New York City time, on May 25, 2017 (the “Expiration Time”). Holders of the 2021 Senior Notes who tendered (and did not validly withdraw) their notes at or prior to the Expiration Time were entitled to receive in cash $1,043.88 per $1,000 principal amount of 2021 Senior Notes validly tendered (and not validly withdrawn) and accepted for purchase by the Company in the Tender Offer, plus accrued and unpaid interest on such 2021 Senior Notes.
$118.1 million
aggregate principal amount of the 2021 Senior Notes were validly tendered and purchased by the Company on May 31, 2017. In accordance with the terms of the indenture governing the 2021 Senior Notes, the remaining
$59.9 million
aggregate principal amount of the Notes that were not tendered were redeemed on June 30, 2017 at the redemption price specified in the indenture governing the 2021 Senior Notes ($1,039.38 per $1,000 principal amount redeemed, plus accrued and unpaid interest). The Company recorded a loss of
$9.3 million
as a result of the extinguishment of the 2021 Senior Notes.
Other Liquidity Matters
We believe that our liquidity and capital resources from U.S. operations are adequate to fund our U.S. operations and corporate activities. The Company has asserted indefinite reinvestment of earnings from its Mexican operations 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.
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, 2016 (the “2016 10-K”) for the Company’s critical accounting policies and estimates. Those critical accounting policies and estimates have been supplemented and updated in this Form 10-Q.
40
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. The tax effect of adjustments are based on statutory tax rates and the Company’s tax attributes, including the impact through the Company’s valuation allowance. The combined effective rate of tax adjustments may not be consistent with the statutory tax rates or the Company’s effective tax rate due to jurisdictional tax attributes and related valuation allowance impacts which may minimize the tax effect of certain adjustments and may not apply to gains and losses equally.
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
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Net income (loss)
|
$
|
(10,955
|
)
|
$
|
14,497
|
|
$
|
7,708
|
|
$
|
(5,899
|
)
|
|||
|
Fair value adjustments, net
|
(336
|
)
|
3,579
|
|
864
|
|
12,274
|
|
|||||||
|
Impairment of marketable securities
|
305
|
|
20
|
|
426
|
|
20
|
|
|||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
4,446
|
|
|||||||
|
Gain on sale of Joaquin project
|
—
|
|
—
|
|
(21,138
|
)
|
—
|
|
|||||||
|
(Gain) loss on sale of assets and securities
|
(513
|
)
|
(3,126
|
)
|
1,552
|
|
(4,211
|
)
|
|||||||
|
Gain on repurchase of Rochester royalty
|
(2,332
|
)
|
—
|
|
(2,332
|
)
|
—
|
|
|||||||
|
Loss on debt extinguishment
|
9,342
|
|
—
|
|
9,342
|
|
—
|
|
|||||||
|
Transaction costs
|
—
|
|
792
|
|
—
|
|
1,172
|
|
|||||||
|
Foreign exchange loss (gain)
|
1,972
|
|
(2,810
|
)
|
6,240
|
|
(3,933
|
)
|
|||||||
|
Tax effect of adjustments
(1)
|
—
|
|
3,996
|
|
1,807
|
|
2,621
|
|
|||||||
|
Adjusted net income (loss)
|
$
|
(2,517
|
)
|
|
$
|
16,948
|
|
|
$
|
4,469
|
|
$
|
6,490
|
|
|
|
Adjusted net income (loss) per share - Basic
|
$
|
(0.01
|
)
|
$
|
0.11
|
|
$
|
0.02
|
|
$
|
0.04
|
|
|||
|
Adjusted net income (loss) per share - Diluted
|
$
|
(0.01
|
)
|
$
|
0.11
|
|
$
|
0.02
|
|
$
|
0.04
|
|
|||
|
(1)
|
For the three months ended June 30, 2016, tax effect of adjustments of
$4.0 million
(-316%) is primarily related to the tax gain on the sale of an asset, partially offset by losses on other asset sales where no tax benefit was recognized and tax benefit from fair value adjustment.
|
For the six months ended June 30, 2017, tax effect of adjustments of
$1.8 million
(-16%) is primarily related to a taxable gain on the sale of the Joaquin project. For the six months ended June 30, 2016, tax effect of adjustments of
$2.6 million
(-19%) is primarily related to a taxable gain on the sale of assets and the tax valuation allowance impact from an asset write-down, partially offset by tax benefit from fair value adjustments.
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.
Adjusted EBITDA
is a measure used in the 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
|
2017
|
2016
|
2017
|
2016
|
|||||||||||
|
Net income (loss)
|
$
|
(10,955
|
)
|
$
|
14,497
|
|
$
|
7,708
|
|
$
|
(5,899
|
)
|
|||
|
Interest expense, net of capitalized interest
|
3,749
|
|
10,875
|
|
7,335
|
|
21,995
|
|
|||||||
|
Income tax provision (benefit)
|
(2,098
|
)
|
(768
|
)
|
8,948
|
|
1,338
|
|
|||||||
|
Amortization
|
32,946
|
|
37,505
|
|
73,050
|
|
65,470
|
|
|||||||
|
EBITDA
|
23,642
|
|
|
62,109
|
|
|
97,041
|
|
|
82,904
|
|
||||
|
Fair value adjustments, net
|
(336
|
)
|
3,579
|
|
864
|
|
12,274
|
|
|||||||
|
Impairment of equity securities
|
305
|
|
20
|
|
426
|
|
20
|
|
|||||||
|
Foreign exchange (gain) loss
|
(1,000
|
)
|
5,655
|
|
(2,349
|
)
|
5,820
|
|
|||||||
|
Gain on sale of Joaquin project
|
—
|
|
—
|
|
(21,138
|
)
|
—
|
|
|||||||
|
(Gain) loss on sale of assets and securities
|
(513
|
)
|
(3,126
|
)
|
1,552
|
|
(4,211
|
)
|
|||||||
|
Gain on repurchase of Rochester royalty
|
(2,332
|
)
|
—
|
|
(2,332
|
)
|
—
|
|
|||||||
|
Loss on debt extinguishment
|
9,342
|
|
—
|
|
9,342
|
|
—
|
|
|||||||
|
Transaction costs
|
—
|
|
792
|
|
—
|
|
1,172
|
|
|||||||
|
Asset retirement obligation accretion
|
2,450
|
|
2,066
|
|
4,841
|
|
4,125
|
|
|||||||
|
Inventory adjustments and write-downs
|
1,796
|
|
946
|
|
1,652
|
|
1,863
|
|
|||||||
|
Write-downs
|
—
|
|
—
|
|
—
|
|
4,446
|
|
|||||||
|
Adjusted EBITDA
|
$
|
33,354
|
|
|
$
|
72,041
|
|
|
$
|
89,899
|
|
|
$
|
108,413
|
|
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, 2017
|
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)
|
$
|
48,325
|
|
$
|
29,099
|
|
$
|
25,604
|
|
$
|
586
|
|
$
|
103,614
|
|
$
|
36,335
|
|
$
|
18,317
|
|
$
|
54,652
|
|
$
|
158,266
|
|
|||||||||
|
Amortization
|
14,431
|
|
4,938
|
|
2,212
|
|
168
|
|
21,749
|
|
8,347
|
|
2,549
|
|
10,896
|
|
32,645
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
33,894
|
|
$
|
24,161
|
|
$
|
23,392
|
|
$
|
418
|
|
$
|
81,865
|
|
$
|
27,988
|
|
$
|
15,768
|
|
$
|
43,756
|
|
$
|
125,621
|
|
|||||||||
|
Silver equivalent ounces sold
|
2,995,623
|
|
1,774,000
|
|
1,398,038
|
|
59,234
|
|
6,226,895
|
|
9,258,455
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
29,031
|
|
21,495
|
|
50,526
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
11.31
|
|
$
|
13.62
|
|
$
|
16.73
|
|
$
|
7.06
|
|
$
|
13.15
|
|
$
|
964
|
|
$
|
734
|
|
$
|
866
|
|
$
|
13.57
|
|
|||||||||
|
Costs applicable to sales per average spot ounce
|
$
|
10.20
|
|
$
|
12.63
|
|
$
|
12.23
|
|
$
|
12.10
|
|
||||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
125,621
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
1,288
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
17,569
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
7,042
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
7,813
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
4,096
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
1,677
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
165,106
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
6,226,895
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
3,031,560
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
9,258,455
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
17.83
|
|
|||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold (average spot)
|
10,384,025
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per average spot silver equivalent ounce
|
$
|
15.90
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Guadalupe South Portal and Rochester expansion permitting.
|
Three Months Ended June 30, 2016
|
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)
|
$
|
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 average spot ounce
|
$
|
8.20
|
|
$
|
10.30
|
|
$
|
10.00
|
|
$
|
9.45
|
|
||||||||||||||||||||||||
|
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
|
|
|||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold (average spot)
|
10,622,163
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per average spot silver equivalent ounce
|
$
|
13.04
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Guadalupe, Independencia and Rochester crushing capacity expansion.
|
43
Six Months Ended June 30, 2017
|
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)
|
$
|
111,476
|
|
|
$
|
61,354
|
|
$
|
45,237
|
|
$
|
986
|
|
$
|
219,053
|
|
$
|
73,956
|
|
$
|
37,748
|
|
$
|
111,704
|
|
$
|
330,757
|
|
||||||||
|
Amortization
|
34,581
|
|
10,754
|
|
3,623
|
|
281
|
|
49,239
|
|
17,525
|
|
5,660
|
|
23,185
|
|
72,424
|
|
||||||||||||||||||
|
Costs applicable to sales
|
$
|
76,895
|
|
$
|
50,600
|
|
$
|
41,614
|
|
$
|
705
|
|
$
|
169,814
|
|
$
|
56,431
|
|
$
|
32,088
|
|
$
|
88,519
|
|
$
|
258,333
|
|
|||||||||
|
Silver equivalent ounces sold
|
7,422,969
|
|
3,878,209
|
|
2,546,044
|
|
98,999
|
|
13,946,221
|
|
20,384,641
|
|
||||||||||||||||||||||||
|
Gold equivalent ounces sold
|
61,175
|
|
46,132
|
|
107,307
|
|
||||||||||||||||||||||||||||||
|
Costs applicable to sales per ounce
|
$
|
10.36
|
|
|
$
|
13.05
|
|
$
|
16.34
|
|
$
|
7.12
|
|
$
|
12.18
|
|
$
|
922
|
|
$
|
696
|
|
$
|
825
|
|
$
|
12.67
|
|
||||||||
|
Costs applicable to sales per average spot ounce
|
$
|
9.40
|
|
$
|
12.17
|
|
|
|
$
|
11.33
|
|
|
|
|
$
|
11.41
|
|
|||||||||||||||||||
|
Costs applicable to sales
|
$
|
258,333
|
|
|||||||||||||||||||||||||||||||||
|
Treatment and refining costs
|
2,904
|
|
||||||||||||||||||||||||||||||||||
|
Sustaining capital
(1)
|
29,169
|
|
||||||||||||||||||||||||||||||||||
|
General and administrative
|
17,175
|
|
||||||||||||||||||||||||||||||||||
|
Exploration
|
13,065
|
|
||||||||||||||||||||||||||||||||||
|
Reclamation
|
7,915
|
|
||||||||||||||||||||||||||||||||||
|
Project/pre-development costs
|
3,566
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
332,127
|
|
|||||||||||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
13,946,221
|
|
||||||||||||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
6,438,420
|
|
||||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
20,384,641
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce
|
$
|
16.29
|
|
|||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold (average spot)
|
22,639,877
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per average spot silver equivalent ounce
|
$
|
14.67
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Guadalupe South Portal and Rochester expansion permitting.
|
Six Months Ended June 30, 2016
|
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)
|
$
|
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 average spot ounce
|
$
|
9.23
|
|
$
|
10.75
|
|
|
|
$
|
10.58
|
|
$
|
9.88
|
|
||||||||||||||||||||||
|
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
|
|
|||||||||||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold (average spot)
|
20,438,295
|
|
||||||||||||||||||||||||||||||||||
|
All-in sustaining costs per average spot silver equivalent ounce
|
$
|
13.37
|
|
|||||||||||||||||||||||||||||||||
|
(1)
|
Excludes development capital for Jualin, Guadalupe, Independencia and Rochester crushing capacity expansion.
|
44
Reconciliation of All-in Sustaining Costs per Silver Equivalent Ounce for Revised 2017 Guidance
|
Silver
|
Gold
|
||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total Silver
|
Kensington
|
Wharf
|
Total Gold
|
Total Combined
|
||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
228,500
|
|
$
|
113,550
|
|
$
|
92,300
|
|
$
|
1,038
|
|
$
|
435,388
|
|
$
|
136,600
|
|
$
|
82,200
|
|
$
|
218,800
|
|
$
|
654,188
|
|
|
Amortization
|
76,500
|
|
22,550
|
|
8,300
|
|
281
|
|
107,631
|
|
29,100
|
|
13,200
|
|
42,300
|
|
149,931
|
|
|||||||||
|
Costs applicable to sales
|
$
|
152,000
|
|
$
|
91,000
|
|
$
|
84,000
|
|
$
|
757
|
|
$
|
327,757
|
|
$
|
107,500
|
|
$
|
69,000
|
|
$
|
176,500
|
|
$
|
504,257
|
|
|
Silver equivalent ounces sold
|
14,900,000
|
|
7,800,000
|
|
5,200,000
|
|
105,000
|
|
28,005,000
|
|
41,505,000
|
|
|||||||||||||||
|
Gold equivalent ounces sold
|
130,000
|
|
95,000
|
|
225,000
|
|
|||||||||||||||||||||
|
Costs applicable to sales per ounce guidance
|
$10.00 - $10.50
|
$11.50 - $12.00
|
$15.75 - $16.25
|
$800 - $850
|
$700 - $750
|
||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
504,257
|
|
||||||||||||||||||||||||
|
Treatment and refining costs
|
4,500
|
|
|||||||||||||||||||||||||
|
Sustaining capital, including capital lease payments
|
77,000
|
|
|||||||||||||||||||||||||
|
General and administrative
|
30,000
|
|
|||||||||||||||||||||||||
|
Exploration
|
30,000
|
|
|||||||||||||||||||||||||
|
Reclamation
|
15,000
|
|
|||||||||||||||||||||||||
|
Project/pre-development costs
|
6,000
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
666,757
|
|
||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
28,005,000
|
|
|||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
13,500,000
|
|
|||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
41,505,000
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce guidance
|
$15.75 - $16.25
|
||||||||||||||||||||||||||
Reconciliation of All-in Sustaining Costs per Silver Equivalent Ounce for Previous 2017 Guidance
|
Silver
|
Gold
|
||||||||||||||||||||||||||
|
In thousands except per ounce amounts
|
Palmarejo
|
Rochester
|
San Bartolomé
|
Endeavor
|
Total Silver
|
Kensington
|
Wharf
|
Total Gold
|
Total Combined
|
||||||||||||||||||
|
Costs applicable to sales, including amortization (U.S. GAAP)
|
$
|
211,000
|
|
$
|
108,380
|
|
$
|
102,000
|
|
$
|
3,750
|
|
$
|
425,130
|
|
$
|
130,500
|
|
$
|
83,800
|
|
$
|
214,300
|
|
$
|
639,430
|
|
|
Amortization
|
69,200
|
|
19,860
|
|
18,500
|
|
—
|
|
107,560
|
|
29,100
|
|
11,500
|
|
40,600
|
|
148,160
|
|
|||||||||
|
Costs applicable to sales
|
$
|
141,800
|
|
$
|
88,520
|
|
$
|
83,500
|
|
$
|
3,750
|
|
$
|
317,570
|
|
$
|
101,400
|
|
$
|
72,300
|
|
$
|
173,700
|
|
$
|
491,270
|
|
|
Silver equivalent ounces sold
|
14,000,000
|
|
7,680,000
|
|
5,900,000
|
|
380,000
|
|
27,960,000
|
|
40,800,000
|
|
|||||||||||||||
|
Gold equivalent ounces sold
|
124,000
|
|
90,000
|
|
214,000
|
|
|||||||||||||||||||||
|
Costs applicable to sales per ounce guidance
|
$10.00 - $10.50
|
$11.50 - $12.00
|
$14.00 - $14.50
|
$800 - $850
|
$775 - $825
|
||||||||||||||||||||||
|
Costs applicable to sales
|
$
|
491,270
|
|
||||||||||||||||||||||||
|
Treatment and refining costs
|
4,300
|
|
|||||||||||||||||||||||||
|
Sustaining capital, including capital lease payments
|
82,000
|
|
|||||||||||||||||||||||||
|
General and administrative
|
30,000
|
|
|||||||||||||||||||||||||
|
Exploration
|
30,000
|
|
|||||||||||||||||||||||||
|
Reclamation
|
14,000
|
|
|||||||||||||||||||||||||
|
Project/pre-development costs
|
5,700
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs
|
$
|
657,270
|
|
||||||||||||||||||||||||
|
Silver equivalent ounces sold
|
27,960,000
|
|
|||||||||||||||||||||||||
|
Kensington and Wharf silver equivalent ounces sold
|
12,840,000
|
|
|||||||||||||||||||||||||
|
Consolidated silver equivalent ounces sold
|
40,800,000
|
|
|||||||||||||||||||||||||
|
All-in sustaining costs per silver equivalent ounce guidance
|
$15.75 - $16.25
|
||||||||||||||||||||||||||
45
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, generate superior and sustainable returns for stockholders, maximize net cash flow, reduce operating and non-operating costs, demonstrate consistent capital discipline, efficiently manage working capital, and statements regarding tax positions, anticipated production, costs and expenses, the anticipated closing of the sale of the Endeavor silver stream, drought conditions in Bolivia, 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 2016 10-K and in this Report, and the risks and uncertainties discussed in this MD&A, (ii) the risk that the sale of the Endeavor silver stream does not close on a timely basis or at all, (iii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iv) changes in the market prices of gold and silver and a sustained lower price environment, including any resulting impact on cash flows, (v) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions and grade variability, (vi) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (vii) the uncertainties inherent in the estimation of gold and silver reserves and mineralized material, (viii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (ix) the 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, (xii) the political risks and uncertainties associated with operations in Bolivia; and (xiii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance its debt. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
46
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. The Company had no outstanding gold and silver option contracts at
June 30, 2017
.
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 prices resulted in provisional pricing mark-to-market losses of
$0.8 million
and gains of
$0.6 million
in the three and six months ended June 30, 2016, respectively, compared to gains of
$0.6 million
and
$1.2 million
in the three and six months ended June 30, 2016, respectively.
At
June 30, 2017
, the Company had outstanding provisionally priced sales of
0.1 million
ounces of silver and
32,602
ounces of gold at prices of
$16.85
and
$1,263
, respectively. A 10% change in realized silver price would cause revenue to vary by $0.2 million and a 10% change in realized gold price would cause revenue to vary by $4.1 million.
Foreign Currency
The Company operates, or has mineral interests, in several foreign countries including Australia, Bolivia, Chile, Mexico, Argentina, Ecuador, and New Zealand, which exposes it to foreign currency exchange rate risks. Foreign currency exchange rates are influenced by world market factors beyond the Company’s control such as supply and demand for U.S. and foreign currencies 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 foreign exchange forward and/or option contracts when the Company believes such contracts would be beneficial. The Company had no outstanding foreign exchange contracts at
June 30, 2017
.
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, 2017 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 1.
Legal Proceedings
For a discussion of legal proceedings, see Note 19 -- Commitments and Contingencies in the notes to the Consolidated Financial Statements included herein.
Item 1A.
Risk Factors
Item 1A - Risk Factors of the 2016 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’s estimates of future production, costs, and financial results are imprecise, depend upon subjective factors, may not be realized in actual production and such estimates speak only as of their respective dates.
The Company has in the past, and may in the future, provide estimates and projections of its future production, costs and financial results. Any such information is forward-looking. Neither the Company’s independent registered public accounting firm nor any other independent expert or outside party compiles or examines these forward-looking statements and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto. These forward-looking statements are prepared by the Company’s management and technical personnel and are qualified by, and subject to, the assumptions and the other information contained or referred to in the filing, release or presentation in which they are made, including assumptions about the availability, accessibility, sufficiency and quality of mineralized material, the Company’s costs of production, the market prices of silver and gold, the Company’s ability to sustain and increase production levels, the sufficiency of its infrastructure, the performance of its personnel and equipment, its ability to maintain and obtain mining interests and permits, the state of government and community relations, and its compliance with existing and future laws and regulations. The Company sometimes states possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the suggested ranges. Actual results and experience may differ materially from these assumptions. Any such production, cost, or financial results estimates speak only as of the date on which they are made, and the Company disclaims any intent or obligation to update such estimates, whether as a result of new information, future events or otherwise. Accordingly, these forward-looking statements should be considered in the context in which they are made and undue reliance should not be placed on them.
The Company’s future operating performance may not generate cash flows sufficient to meet debt payment obligations.
As of June 30, 2017, the Company had approximately
$284.8 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
48
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.
If the Company’s cash flows and capital resources are insufficient to fund its debt services obligations, the Company could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. 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. The agreements governing the Company’s outstanding indebtedness restrict the Company’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict its ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. The Company may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. If the Company raises additional funds by issuing equity securities or securities convertible into equity securities, holders of its common stock could experience significant dilution of their ownership interest, and these securities could have rights senior to those of the holders of common stock.
The terms of the Company’s debt impose restrictions on its operations.
The agreements governing the Company’s outstanding indebtedness include a number of significant negative covenants. These covenants, among other things:
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•
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limit the Company’s ability to obtain additional financing, repurchase outstanding equity or issue debt securities;
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require a portion of the Company’s cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
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limit the Company’s ability to sell, transfer or otherwise dispose of assets, enter into transactions with affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends, consolidate, amalgamate, merger or sell all or substantially all of the Company’s assets;
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•
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increase our vulnerability to general adverse economic and industry conditions;
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limit the Company’s flexibility in planning for and reacting to changes in the industry in which we compete; and
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place the Company at a disadvantage compared to other, less leveraged competitors.
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A breach of any of these covenants could result in an event of default under the applicable agreement governing the Company’s outstanding indebtedness that, if not cured or waived, could cause all amounts outstanding with respect to the debt to be due and payable immediately. Acceleration of any debt could result in cross-defaults under the Company’s other debt instruments. The Company’s assets and cash flow may be insufficient to repay borrowings fully under all of its outstanding debt instruments if any of its debt instruments are accelerated upon an event of default, which could force the Company into bankruptcy or liquidation.
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 5.
Other Information
In accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and the Company’s insider trading policy, the transactions listed below were entered into by certain executive officers of the Company for diversification purposes. After giving effect to the transactions, each such executive officer would remain in compliance with the Company's executive stock ownership guidelines.
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Peter C. Mitchell, the Company’s Senior Vice President and Chief Financial Officer, entered into a selling plan effective May 4, 2017. Under the selling plan, between August 31, 2017 and May 27, 2018, Mr. Mitchell will sell a total of 40,000 shares of the Company’s common stock so long as the market price of the common stock is higher than a minimum threshold price specified in the plan.
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Frank L. Hanagarne, Jr., the Company’s Senior Vice President and Chief Operating Officer, entered into a selling plan effective June 7, 2017. Under the selling plan, between July 28, 2017 and June 30, 2018, Mr. Hanagarne will sell a total
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of 50,061 shares of the Company’s common stock so long as the market price of the common stock is higher than a minimum threshold price specified in the plan.
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Casey M. Nault, the Company’s Senior Vice President, General Counsel & Secretary, cancelled his previously reported selling plan effective March 6, 2017 and entered into a new selling plan effective June 12, 2017. Under the new selling plan, between July 28, 2017 and December 12, 2017, Mr. Nault will sell a total of 60,000 shares of the Company’s common stock so long as the market price of the common stock is higher than a minimum threshold price specified in the plan.
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Rule 10b5-1 permits an insider to implement a written prearranged trading plan entered into at a time when the insider is not aware of any material nonpublic information about the Company and allows the insider to trade on a one-time or regularly scheduled basis regardless of any material nonpublic information about the Company thereafter received by the insider.
On June 1, 2017, Coeur Alaska, Inc., a wholly-owned subsidiary of the Company and the operator of the Kensington mine, received an imminent danger order under section 107(a) of the Federal Mine Safety and Health Act of 1977, in response to anonymous allegations made to the Mine Safety and Health Administration. Following an investigation, the government determined no violation under 107(a) occurred and, accordingly,
the order was vacated on June 26, 2017.
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Item 6.
Exhibits
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4.2
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31.2
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32.1
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32.2
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95.1
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101.INS
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XBRL Instance Document**
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101.SCH
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XBRL Taxonomy Extension Schema**
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase**
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase**
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101.LAB
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XBRL Taxonomy Extension Label Linkbase**
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase**
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* Management contract or compensatory plan or arrangement.
** The following financial information from Coeur Mining, Inc.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017, 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.
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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(Registrant)
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Dated
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July 26, 2017
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/s/ Mitchell J. Krebs
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MITCHELL J. KREBS
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President and Chief Executive Officer (Principal Executive Officer)
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Dated
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July 26, 2017
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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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Dated
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July 26, 2017
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/s/ Mark Spurbeck
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MARK SPURBECK
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Vice President, Finance and Chief Accounting Officer (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 InvestmentsNote 13 ReceivablesNote 14 Inventory and Ore on Leach PadsNote 15 Property, Plant and EquipmentNote 16 Mining PropertiesNote 17 DebtNote 18 - Supplemental Guarantor InformationNote 19 Commitments and ContingenciesItem 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 5. Other InformationItem 6. Exhibits