SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-Q/A No. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Amendment No. 1 to Quarterly Report on Form 10-Q for the quarter ended March 31,
2001.
COEUR D'ALENE MINES CORPORATION
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(Exact name of Registrant as specified in its charter)
Idaho 1-8641 82-0109423
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
505 Front Avenue, P.O. Box "I"
Coeur d'Alene, Idaho 83814
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (208) 667-3511
The undersigned registrant hereby includes the following portions of its
Annual Report on Form 10-K for the year ended December 31, 2000, as set forth in
the pages attached hereto:
Part I. Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
Date: May 31, 2001 By: /s/ Geoffrey A. Burns
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Geoffrey A. Burns
Senior Vice President and Chief Financial Officer
COEUR D'ALENE MINES CORPORATION
AMENDMENT NO. 1 TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001
The purpose of this Amendment No. 1 to the Quarterly Report on Form 10-Q of
Coeur d'Alene Mines Corporation (the "Company") is to set forth the market
prices of silver and gold as of a recent date that were inadvertently not
included in the second sentence of the second paragraph of the Management's
Discussion and Analysis of Financial Condition and Results of Operations (the
"MD&A") on page 14 of the Form 10-Q as filed on May 15, 2001. That sentence has
been revised to set forth the $4.35 market price of silver and $269.05 market
price of gold as of May 11, 2001. No other revisions to the MD&A are made by
this amendment.
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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General
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The results of the Company's operations are significantly affected by the
market prices of gold and silver which may fluctuate widely and are affected by
many factors beyond the Company's control, including, without limitation,
interest rates, expectations regarding inflation, currency values, governmental
decisions regarding the disposal of precious metals stockpiles, global and
regional political and economic conditions, and other factors.
The average price of silver and gold in the first quarter of 2001 was $4.56
and $263 per ounce, respectively. The market price of silver (Handy & Harman)
and gold (London Final) on May 11, 2001 were $4.35 per ounce and $269.05 per
ounce, respectively.
The Company's currently operating mines are the Rochester mine in Nevada,
the Galena mine in the Coeur d'Alene Mining District of Idaho, and the Petorca
mine in Chile.
This document contains numerous forward-looking statements relating to the
Company's gold and silver mining business. The United States Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for certain forward
looking statements. Operating, exploration and financial data, and other
statements in this document are based on information the company believes
reasonable, but involve significant uncertainties as to future gold and silver
prices, costs, ore grades, estimation of gold and silver reserves, mining and
processing conditions, changes that could result from the Company's future
acquisition of new mining properties or businesses, the risks and hazards
inherent in the mining business (including environmental hazards, industrial
accidents, weather or geologically related conditions), regulatory and
permitting matters, and risks inherent in the ownership and operation of, or
investment in, mining properties or businesses in foreign countries. Actual
results and timetables could vary significantly from the estimates presented.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
The following table sets forth the amounts of gold and silver produced by
the mining properties owned by the Company or in which the Company has an
interest, based on the amounts attributable to the Company's ownership interest,
and the cash and full costs of such production during the three-month periods
ended March 31, 2001 and 2000:
THREE MONTHS ENDED
March 31,
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2001 2000
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ROCHESTER MINE
Gold ozs. 19,519 15,457
Silver ozs. 1,501,649 1,538,260
Cash Costs per equiv. oz./silver $3.88 $4.27
Full Costs per equiv. oz./silver $4.84 $5.45
Galena Mine
Silver ozs. 1,107,941 790,792
Cash Costs per oz./silver $4.36 $5.82
Full Costs per oz./silver $5.01 $6.54
PRIMARY SILVER MINES --------- ---------
Consolidated Cash Costs per
equivalent oz.of silver $4.02 $4.65
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YILGARN STAR MINE (Note A)
Gold ozs. N/A 6,120
Cash Costs per oz./gold N/A $268
Full Costs per oz./gold N/A $378
FACHINAL MINE (Note B)
Gold ozs. N/A 5,415
Silver ozs. N/A 263,726
Cash Costs per equiv. oz./gold N/A $338
Full Costs per equiv. oz./gold N/A $462
PETORCA MINE
Gold ozs. 7,159 5,172
Silver ozs. 22,127 10,642
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Cash Costs per oz./gold $354 $384
Full Costs per oz./gold $373 $395
PRIMARY GOLD MINES --------- ---------
Consolidated Cash Costs per
equivalent oz.of gold $354 $365
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CONSOLIDATED TOTAL METAL PRODUCTION
Gold ozs. 26,678 32,164
Silver ozs. 2,631,717 2,603,390
Note A: On February 7, 2001, the Company sold its interest in the Yilgarn Star
Mine, effective December 31, 2000.
Note B: The Company placed the Fachinal Mine on temporary standby effective
December 7, 2000.
OPERATING HIGHLIGHTS
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North America
Rochester Mine (Nevada)
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The Rochester Mine produced 1.5 million ounces of silver and 19,519 ounces
of gold in the first quarter of 2001 compared to 1.54 million ounces of silver
and 15,457 ounces of gold in the first quarter of the prior year. The increase
in gold production was largely anticipated as the planned mining sequence for
2001 concentrated in a gold-rich area of the main pit. Cash costs for the period
declined to $3.88 per silver equivalent ounce from $4.27 per ounce in 2000. The
decline in cash costs is due in part to the higher gold production but also to
the number of operating improvements carried out last year, particularly
upgrading the crushing circuit, changing the blasting pattern to increase ore
fragmentation and adjusting the leach solution chemistry. Additional
modifications to increase crushing capacity at Rochester, will be completed by
the end of May.
To follow up on last year's very successful mine exploration program, Coeur
commenced reverse circulation drilling at Rochester on March 20. By the end of
the month, 12 holes comprising 5,200 feet were completed and the data is
currently being analyzed. In early April, drilling commenced at the Nevada
Packard satellite deposit located to the south of the main pit.
Coeur Silver Valley (Idaho)
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Silver production at Coeur Silver Valley (the Galena mine) increased by
more than 40 percent to 1.1 million ounces in 2001 compared to 0.79 million
ounces in the first quarter of last year. Total cash costs for the quarter were
down in excess of 25 percent at $4.36 per ounce from $5.82 per ounce in 2000.
The increase in production and decrease in cash costs was due to comprehensive
underground development and optimization programs instituted in the prior year.
This has provided greater access to the recently discovered high-grade vein
systems at depth.
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These vein structures also tend to be wider than most of the vein systems mined
in the upper levels and this has enabled Coeur to increase mill throughput and
further lower costs.
As the development of these deeper vein systems progressed, the mine staff
completed intensive studies that supported the Company's decision to introduce
trackless mining equipment in these areas. To date, trackless mining and
drilling equipment have been transported underground, an underground hoist has
been installed and ramp construction is well underway. Coeur expects the initial
production of ore from trackless mining by the end of June of this year.
Exploration drilling is presently underway to extend the high grade 72 vein
up dip and to the west of current operations as well as the detailed evaluation
of the 117 vein on the 3700 level of the mine.
Chile
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Earlier this year, Coeur formally engaged Macquarie North America Limited
to assist with the sale of the Company's gold holdings in Chile. These holdings
consist of the Fachinal and Petorca mines, exploration properties and other
financial assets.
Fachinal Mine
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Coeur suspended operations at the Fachinal mine in the fourth quarter of
2000 to evaluate and fully develop the Cerro Bayo gold-silver discovery.
Although there was no mining activity in the latest quarter, surface mapping and
detailed sampling programs were carried out to extend the limits of the Cerro
Bayo zone, and have provided positive results.
Petorca
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At Petorca, gold and silver production increased to 7,159 ounces and 22,127
ounces respectively, compared to 5,172 ounces of gold and 10,642 ounces of
silver in the first quarter of 2000. Total cash costs for gold were $354 per
ounce compared to $384 per ounce in the prior year's first quarter.
Australia
Yilgarn Star (Western Australia)
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Consistent with the Company's stated strategy to focus primarily on the
development of its silver assets, Coeur initiated a program in early 2001 to
sell its non-core gold holdings. Consequently, on February 7, 2001, the Company
sold its 50% shareholding in Gasgoyne Gold Mines NL ("Gasgoyne") for A$28.1
million (US$15.6 million) in cash. Gasgoyne owns 50% of the Yilgarn Star Mine
located in Western Australia and certain other exploration stage properties. The
purchaser was Sons of Gwalia Ltd., an Australian corporation who owned the other
50% of Gasgoyne.
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The sale was effective as at December 31, 2000, and as a result Coeur did
not have an interest in the Yilgarn Star Mine's production in the first quarter
of 2001.
DEVELOPMENT PROJECTS
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San Bartolome (Bolivia)
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Late last year, Coeur completed a comprehensive prefeasibility study at its
San Bartolome silver development project near the town of Potosi, Bolivia. The
San Bartolome project is located adjacent to Cerro Rico mountain, one of world's
historic and most prolific silver producing regions. The prefeasibility study
defined a resource of 122 million contained ounces of silver of which 93 percent
was classified as measured and indicated. In addition, a detailed process flow
sheet design and site plan layout was completed as well as comprehensive
estimates of all operating and capital costs. All data has been checked and
verified by third-party engineering and geological consulting firms.
During this year's first quarter, work continued primarily to expand the
existing resource and carry out further metallurgical studies to optimize silver
recoveries and possibly recover tin as a by-product. Alternate tailings disposal
sites were also examined and additional baseline environmental data was
collected.
Coeur intends to commence a formal feasibility study during 2001.
RESULTS OF OPERATIONS
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Three Months Ended March 31, 2001 Compared to Three Months
Ended March 31, 2000.
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Revenues
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Despite sharply lower realized gold and silver prices, product sales in the
first quarter of 2001 increased by $3.2 million, or 21%, from the first quarter
of 2000 to $18.0 million. The increase in sales is primarily attributable to
increased production of silver and concentrate inventory sales from the Galena
and Petorca mines. In the first quarter of 2001, the Company produced a total of
2,631,717 ounces of silver and 26,678 ounces of gold compared to 2,603,390
ounces of silver and 32,164 ounces of gold in the first quarter of 2000. In the
first quarter of 2001, the Company realized average silver and gold prices of
$4.52 and $270, respectively, compared with realized average prices of $5.19 and
$342, respectively, in the prior year's first quarter. The decline in gold
production was due primarily to the sale of the Company's interest in Gasgoyne,
as well as the lack of production from Fachinal. This was partially offset by
higher gold production at Rochester and Petorca.
Interest and other income in the first quarter of 2001 decreased by $3.0
million compared with the first quarter of 2000. The decrease is primarily due
to a $1.2 million decrease in gains recorded on the mark to market adjustment
for the call option portion of the Company's hedge
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program and $.7 million less interest income received as a result of lower
interest rates and lower cash balances.
Costs and Expenses
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Production costs in the first quarter of 2001 increased by $4.8 million, or
36%, from the first quarter of 2000 to $18.3 million. The increase in production
costs is primarily a result of increased sales for the first quarter of 2001
over the first quarter of 2000.
Depreciation and amortization decreased in the first quarter of 2001 by
$2.1 million, or 43%, from the prior year's first quarter, primarily due to no
depletion or amortization taken at the Fachinal mine due to temporary suspension
of operations, resulting in no production, and no depletion associated with the
Yilgarn Star mine due to sale of the Company's interest in early February 2001.
Administrative and general expenses decreased $.8 million in the first
quarter of 2001 compared to 2000, due to decreased annual incentive awards in
2001.
Net Loss
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As a result of the above mentioned factors, as well as debt retirement
discussed below, the Company's net loss amounted to $8.1 million in the first
quarter of 2001 compared to a net loss of $9.8 million in the first quarter of
2000. The net loss attributable to common shareholders was $8.1 million for the
first quarter of 2001, or $.22 per share, compared to $12.0 million for the
first quarter of 2000, or $.39 per share.
Debt Reduction Program
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One of the Company's major objectives over the past three years has been to
reduce the level of its long-term debt and consequent interest payments. To the
end of April 2001, Coeur had reduced its long-term debt by more than $100
million, recognizing extraordinary gains of approximately $41 million over the
past three years.
On March 19, 2001, the Company exchanged 1,787,500 of its common shares for
$5 million principal value of its 7 1/4 percent Convertible Subordinated
Debentures due 2005, recording an extraordinary gain of $3.0 million in the
first quarter of 2001.
On April 30, 2001, the Company announced that it completed three similar
transactions, exchanging a total of 4,257,618 common shares for a principal
amount of $11 million of its 7 1/4 percent Convertible Subordinated Debentures
due 2005. As a consequence of these latest transactions, Coeur's total
outstanding convertible debt had been reduced to $188.1 million at April 30,
2001, and annual interest expense will be decreased by approximately $1.2
million.
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LIQUIDITY AND CAPITAL RESOURCES
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Working Capital; Cash and Cash Equivalents
The Company's working capital at March 31, 2001 was approximately $98.5
million compared to $93.0 million at December 31, 2000. The ratio of current
assets to current liabilities was 5.1 to 1.0 at March 31, 2001 compared to 4.7
to 1.0 at December 31, 2000.
Net cash used in operating activities in the three months ended March 31,
2001 was $6.0 million compared to $7.8 million in the three months ended March
31, 2000. Net cash provided from investing activities in the 2001 period was
$16.5 million compared to net cash provided in investing activities of $4.5
million in the prior year's comparable period. The cash provided in the 2001
period was attributable to net proceeds of $14.7 million received from the sale
of the Company's interest in Gasgoyne and proceeds from sale of short-term
investments and marketable securities of $4.0 million net of purchases in the
first three months of 2001, offset by capital expenditures primarily at the
Fachinal and Galena Mines, and the Kensington Development property. Net cash
used in financing activities was $.3 million in the first three months of 2001,
compared to $2.8 million used in the first three months of 2000. As a result of
the above, cash and cash equivalents increased by $10.2 million in the first
three months of 2001 compared to a decrease of $6.1 million for the comparable
period in 2000.
Federal Natural Resources Action
On March 22, 1996, an action was filed in the United States District Court
for the District of Idaho by the United States against various defendants,
including the Company, asserting claims under CERCLA and the Clean Water Act for
alleged damages to federal natural resources in the Coeur d'Alene River Basin of
Northern Idaho as a result of alleged releases of hazardous substances from
mining activities conducted in the area since the late 1800s.
On March 16, 2001, the Company and representatives of the U.S. Government,
including the Environmental Protection Agency, the Department of Interior and
the Department of Agriculture, reached an agreement in principle to settle the
lawsuit, which represents the only suit in which the Company has been named a
party. Effectiveness of the settlement and related dismissal of the lawsuit
against the Company is subject to final Justice Department and Court approval.
Pursuant to the terms of the proposed settlement, the Company will pay the U.S.
Government a total of approximately $3.9 million, of which $3.3 million will be
paid within 15 days after effectiveness of the settlement and the remaining $.6
million will be paid within 45 days after effectiveness of the settlement. In
addition, the Company will (i) pay the United States 50% of any future
recoveries from insurance companies for claims for defense and indemnification
coverage under general liability insurance policies in excess of $600,000, (ii)
accomplish certain cleanup work on the Mineral Point property (i.e., the former
Coeur Mine site) and Calladay property, and (iii) make available certain real
property to be used as a waste repository. Finally, commencing five years after
effectiveness of the settlement, the Company will be obligated to pay net
smelter royalties on its operating properties, up to a maximum of $3 million,
amounting to a 2% net smelter royalty on silver production if the price of
silver exceeds $6.50 per ounce, and a $5.00 per ounce net smelter royalty on
gold production if the price of gold exceeds $325 per ounce. The royalty would
run for 15 years commencing five years after
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effectiveness of the settlement. When the settlement agreement becomes
effective, the Court will issue a consent decree dismissing the action against
the Company.
As a result of the settlement, the Company recorded a charge to other
expense of $4.2 million in the fourth quarter of 2000 which includes $3.9
million of settlement payments, the land transfer expenses and related legal
fees.
Lawsuit to Recover Inventory
During the first quarter of 2000, Handy and Harmon Refining Group, Inc., to
which the Rochester Mine had historically sent approximately 50% of its dore,
filed for Chapter 11 bankruptcy. The Company had an inventory at the refinery of
approximately 67,000 ounces of silver and 5,000 ounces of gold that has been
delivered to certain creditors of Handy and Harmon. The dore inventory has a
cost basis of $1.8 million. On February 27, 2001, the Company commenced a
lawsuit against Handy and Harmon and certain others in the U.S. Bankruptcy Court
for the District of Connecticut seeking recovery of the metals and/or damages.
Although the Company believes it has a basis for full recovery, it is premature
to predict the outcome of the lawsuit.
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