UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number: 1-8641
-------
COEUR D'ALENE MINES CORPORATION
(Exact name of registrant as specified on its charter)
IDAHO 82-0109423
- ------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. Employer Ident. No.)
incorporation or organization)
P. O. Box I, Coeur d'Alene, Idaho 83816-0316
- --------------------------------- ----------
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:(208) 667-3511
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
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 X NO
----- -----
-------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of Issuer's classes of common stock, as of the latest practicable date:
Common stock, par value $1.00, of which 43,095,186 shares were issued and
outstanding as of May 11, 2001.
COEUR D'ALENE MINES CORPORATION
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
March 31, 2002 (unaudited) and December 31, 2001
Consolidated Statements of Operations -- 5
Three Months Ended March 31, 2002 and 2001
(unaudited)
Consolidated Statements of Cash Flows -- 6
Three Months Ended March 31, 2002 and 2001
(unaudited)
Notes to Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of 14
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure of
Market Risk 22
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
2
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
March 31, December 31,
2002 2001
----------- ------------
ASSETS (In Thousands)
CURRENT ASSETS
Cash and cash equivalents $ 8,707 $ 14,714
Short-term investments 2,024 3,437
Restricted short-term investments 11,469 11,219
Receivables 7,081 5,902
Inventories 46,289 46,286
--------- ---------
TOTAL CURRENT ASSETS 75,570 81,558
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 99,429 99,096
Less accumulated depreciation (67,136) (63,017)
--------- ---------
32,293 36,079
MINING PROPERTIES
Operational mining properties 120,268 116,852
Less accumulated depletion (80,980) (79,697)
--------- ---------
39,288 37,155
Properties acquired or in development 46,711 46,685
--------- ---------
85,999 83,840
OTHER ASSETS
Debt issuance costs, net of accumulated
amortization 2,582 3,262
Other 3,062 5,641
--------- ---------
5,644 8,903
--------- ---------
$ 199,506 $ 210,380
========= =========
See notes to condensed consolidated financial statements.
3
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
March 31, December 31,
2002 2001
---------- ------------
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,850 $ 3,721
Accrued liabilities 4,043 5,503
Accrued interest payable 3,207 2,720
Accrued salaries and wages 4,005 4,542
Current portion of reclamation costs 1,956 2,058
6% convertible subordinated debentures
due June 2002 19,767 23,171
--------- ---------
TOTAL CURRENT LIABILITIES 37,828 41,715
LONG-TERM LIABILITIES
13 3/8% convertible senior subordinated notes
due December 2003 35,670 41,399
6 3/8% convertible subordinated debentures
due January 2004 66,270 66,270
7 1/4% convertible subordinated debentures
due October 2005 14,650 14,650
Reclamation and mine closure 13,298 14,462
Other long-term liabilities 6,510 5,096
--------- ---------
TOTAL LONG-TERM LIABILITIES 136,398 141,877
COMMITMENTS AND CONTINGNECIES (See Notes C, D, F, and G)
SHAREHOLDERS' EQUITY
Common Stock, par value $1.00 per share-
authorized 125,000,000 shares,
issued 57,846,960 and 49,278,232
shares in 2001 and 2000 (including
1,059,211 shares held in treasury) 57,847 49,278
Capital surplus 389,769 388,050
Accumulated deficit (409,895) (397,999)
Shares held in treasury (13,190) (13,190)
Accumulated other comprehensive income 749 649
--------- ---------
25,280 26,788
--------- ---------
$ 199,506 $ 210,380
========= =========
See notes to condensed consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
THREE MONTHS ENDED
March 31,
-------------------------
2002 2001
--------- ---------
(In Thousands, except for per share data)
REVENUES
Product sales $ 16,469 $ 18,006
Interest and other revenues 528 16
-------- --------
Total Revenues 16,997 18,022
COSTS and Expenses
Production 18,014 18,257
Depreciation and depletion 1,878 2,817
Administrative and general 2,105 2,277
Exploration 628 1,392
Pre-feasibility 822 566
Interest 4,401 3,744
Other 1,045 217
-------- --------
Total Costs and Expenses 28,893 29,270
-------- --------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE TAXES AND
EXTRAORDINARY ITEM (11,896) (11,248)
Income tax provision -- (1)
-------- --------
NET LOSS BEFORE EXTRAORDINARY ITEM (11,896) (11,249)
Extraordinary item - early
retirement of debt
(net of taxes) -- 3,181
-------- --------
NET LOSS (11,896) (8,068)
Unrealized holding gain (loss)
on securities 101 415
-------- --------
COMPREHENSIVE LOSS $(11,795) $ (7,653)
======== ========
BASIC AND DILUTED EARNINGS PER SHARE:
Weighted average number
of shares of Common Stock 52,389 37,308
======== ========
Loss before extraordinary item $ (.23) $ (.31)
Extraordinary item - early
retirement of debt (net of taxes) -- .09
-------- --------
Net loss per share attributable
to common shareholders $ (.23) $ (.22)
======== ========
See notes to condensed consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
---------------------------
2002 2001
---------- ----------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(11,896) $ (8,068)
Add (deduct) noncash items:
Depreciation and depletion 1,878 2,817
Loss (gain) on early retirement of debt
(net of tax) 252 (3,181)
Interest expense on Convertible Senior
Subordinated Notes paid in Common Stock 895 --
Other 811 2,189
Unrealized loss (gain) on written call options 62 (379)
Changes in Operating Assets and Liabilities:
Receivables (1,299) 818
Inventories 2,722 1,041
Accounts payable and accrued liabilities 1,056 (1,208)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (5,519) (5,971)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments -- (1,255)
Proceeds from sales of short-term investments 1,264 5,266
Proceeds from sale of assets -- 14,733
Expenditures on mining assets (1,554) (1,977)
Other (137) (259)
-------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (427) 16,508
CASH FLOWS FROM FINANCING ACTIVITIES
Other (61) (296)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (61) (296)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,007) 10,241
Cash and cash equivalents at beginning
of period 14,714 35,227
-------- --------
Cash and cash equivalents at end of period $ 8,707 $ 45,468
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE
During the 1st quarter of 2002 the Company repurchased $3.5 million
principal amount of its outstanding 6% Convertible Subordinated Debentures
in exchange for approximately 3.4 million shares of common stock. In
addition, holders of $5.7 principal amount of 13 3/8% Convertible Senior
Subordinated Notes voluntarily converted their Notes for 5.1 million shares
of common stock.
During the 1st quarter of 2001 the Company repurchased $5.0 million
principal amount of its outstanding 7 1/4% Convertible Subordinated
Debentures in exchange for 1,787,500 shares of common stock.
See notes to condensed consolidated financial statements.
6
Coeur d'Alene Mines Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
NOTE A: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and the instructions for
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2002.
The balance sheet at December 31, 2001 has been derived from the
audited financial statements at that date and it also does not include all of
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Coeur d'Alene Mines Corporation Annual Report on Form
10-K for the year ended December 31, 2001.
NOTE B: Inventories
Inventories are comprised of the following:
MARCH 31, DECEMBER 31,
2002 2001
---------- -----------
(In Thousands)
In process and on leach pads $38,336 $39,794
Concentrate and dore' inventory 2,719 1,567
Supplies 5,234 4,925
------- -------
$46,289 $46,286
======= =======
Long-term inventory in-process and
on leach pads (included in other
assets) $ -- $ 2,725
======= =======
Inventories of ore on leach pads and in the milling process are valued
based on actual costs incurred, less costs allocated to minerals recovered
through the leaching and milling processes. Inherent in this valuation is an
estimate of the percentage of the minerals on leach pads and in-process that
will ultimately be recovered. All other inventories are stated at the
lower-of-cost or market, with cost being determined using the first-in,
first-out and weighted-average-cost methods. Dore inventory includes product at
the mine site and product held by refineries.
7
NOTE C: Income Taxes
The Company has reviewed its net deferred tax asset for the three-month
period ended March 31, 2002, together with net operating loss carryforwards, and
has decided to forego recognition of potential tax benefits arising therefrom.
In making this determination, the Company has considered the Company's history
of tax losses incurred since 1989, the current level of gold and silver prices
and the ability of the Company to use accelerated depletion and amortization
methods in the determination of taxable income. As a result, the Company's net
deferred tax asset has been fully reserved as of March 31, 2002 and December 31,
2001.
NOTE D: Long-Term Debt
During the first quarter of 2002, the Company repurchased $3.5 million principal
amount of its outstanding 6% Convertible Subordinated Debentures due June 2002
in exchange for approximately 3.5 million shares of Common Stock. As a result of
the repurchase, the Company has recorded an expense (included in other expenses)
of approximately $0.3 million. The share price used as consideration was based
upon market prices at the time of the transactions. Also during the first
quarter of 2002, holders of the 13-3/8% Convertible Senior Subordinated Notes
voluntarily exchanged $5.7 million principal amount of the outstanding Notes for
approximately 5.1 million shares of Common Stock under the terms of the Notes.
In several additional privately negotiated transactions completed in
April and May 2002, the Company repurchased, in aggregate, $6.7 million
principal amount of its outstanding 6% Convertible Subordinated Debentures due
2002 in exchange for approximately 6.7 shares of Common Stock. As a result of
the transactions completed, the Company expects to record an additional expense
of approximately $1.5 million in the quarter ending June 30, 2002.
Also during April 2002, holders of $3.2 million principal amount of the
13-3/8% Convertible Senior Subordinated Notes voluntarily converted their
outstanding Notes into approximately 2.9 million shares of common stock, in
accordance with the terms of the 13-3/8% Convertible Senior Subordinated Notes.
Building Loan
The Company has secured a 10-year loan for $1.3 million at an interest
rate of 10% for the Corporate Office Building utilizing the building as
collateral for the loan.
NOTE E: Segment Reporting
Operating segments are defined as components of an enterprise about
which separate financial information is available that is
8
evaluated regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance. The
Company's chief operating decision making group is comprised of the Chief
Executive Officer, Chief Financial Officer and the Chief Operating Officer.
The operating segments are managed separately because each segment
represents a distinct use of Company resources and contribution to the Company's
cash flows in its respective geographic area. The Company's reportable operating
segments include the Rochester, Coeur Silver Valley, Cerro Bayo, Petorca, and
Coeur Australia and exploration and development properties. All operating
segments are engaged in the discovery and/or mining of gold and silver and
generate the majority of their revenues from the sale of these precious metals.
Intersegment revenues consist of precious metal sales to the Company's metals
marketing division and are transferred at the market value of the respective
metal on the date of the transfer. The other segment includes earnings (loss)
from unconsolidated subsidiaries accounted for under the equity method, the
corporate headquarters, elimination of intersegment transactions and other items
necessary to reconcile to consolidated amounts. Revenues in the other segment
are generated principally from interest received from the Company's cash and
investments that are not allocated to the operating segments. The accounting
policies of the operating segments are the same as those described in the
summary of significant accounting policies in the Company's Annual Report on
Form 10-K. The Company evaluates performance and allocates resources based on
each segments profit or loss before interest, income taxes, depreciation and
amortization, unusual and infrequent items and extraordinary items.
9
Segment Reporting
(In Thousands)
Silver
Rochester Valley Cerro Bayo Petorca Exploration Other Total
--------------- ------------- ------------- ------------- ------------- ------------- -------------
March 31, 2002
Total net sales and revenues $ 12,208 $ 5,592 $ 24 $ - $ - $ (826) $ 16,997
================================ =============== ============= ============= ============= ============= ============= =============
Depreciation and amortization 1,274 955 - - 5 69 2,303
Interest income - - - - - 118 118
Interest expense - - 582 - - 3,818 4,401
Gain on forward sale contracts - - - - - 62 62
Write-down of mine property - 126 280 - - 388 794
(Loss) gain on early
retirement of debt - - - - - - -
Profit (loss) (1,754) 789 (95) - (98) (2,927) (4,084)
Segment assets (A) 66,551 29,085 24,733 554 43 50,693 171,662
Capital expenditures for
property 201 240 1,053 - - 60 1,554
--------------- ------------- ------------- ------------- ------------- ------------- -------------
March 31, 2001
Total net sales and revenues $ 13,012 $ 4,456 $ (54) $ 870 $ - $ (263) $ 18,022
================================ =============== ============= ============= ============= ============= ============= =============
Depreciation and amortization 2,675 703 - 133 5 331 3,847
Interest income - - (1) (2) - (529) (532)
Interest expense - - 574 - - 3,169 3,744
Other Expense - 131 69 - - 17 217
Income tax (credit) expense - 1 - - - - 1
Gain on early retirement of
debt - - - - - 3,181 3,181
Profit (loss) 1,531 (5) (77) (490) (301) (4,478) (3,820)
Segment assets (A) 77,672 27,944 23,895 3,573 67 59,302 192,453
Capital expenditures for
property 166 757 672 - 15 367 1,977
Notes:
(A) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
Segment Reporting
(in thousands)
Three months ended March 31,
----------------------------
2002 2001
----------- -----------
Profit (loss)
Total profit or loss from reportable segments $ (4,084) $ (3,820)
Depreciation, depletion and amortization (2,303) (3,847)
Interest expense (4,401) (3,744)
Other (1,108) 163
-------- --------
Loss before extraordinary item and income taxes $(11,896) $(11,248)
======== ========
March 31, 2002 March 31, 2002
Assets
Total assets for reportable segments $ 171,662 $ 192,453
Cash and cash equivalents 8,707 45,468
Short-term investments 13,493 14,375
Other assets 5,644 6,781
--------- ---------
Total consolidated assets $ 199,506 $ 259,077
========= =========
10
Geographic Information
(In thousands) Long-Lived
2002: Revenues Assets
----------------------------------------
United States $17,064 $ 76,747
Chile (67) 22,245
Bolivia - 18,862
Other Foreign Countries - 438
---------------------------------------
Consolidated Total $16,997 $118,292
=======================================
Long-Lived
2001: Revenues Assets
----------------------------------------
United States $18,311 $88,795
Chile 35 21,417
Bolivia - 18,881
Other Foreign Countries (324) 530
---------------------------------------
Consolidated Total $18,022 $ 129,623
=======================================
Revenues are geographically separated based upon the country in which operations
and the underlying assets generating those revenues reside.
NOTE F: Hedging
For the first quarter of 2002 the Company recorded a realized loss of
approximately $32,000 in connection with its hedge program and an additional
$0.4 million of mark to market loss on its call options. The Company has 11,000
ounces in forward sales in its gold protection program, whereby over the next
five months the Company will receive an average price of $296.06 per ounce.
The following table summarizes the information at March 31, 2002
associated with the Company's financial and derivative financial instruments
that are sensitive to changes in interest rates, commodity prices and foreign
exchange rates. For long term debt obligations, the table presents principal
cash flows and related average interest rates. For gold call options and
amortizing forward sales, the table presents ounces expected to be delivered and
the related average price per ounce in U.S. dollars.
11
Fair
Value
(dollars in thousands) 2002 2003 2004 2005 Thereafter Total 3/31/02
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
Long Term Debt $19,767 $35,670 $ 66,270 $ 14,650 $ - $136,357 $112,305
Fixed Rate
Average Interest Rate 9.784% 8.629% 7.007% 7.250%
Derivative Financial
Instruments
Gold Forward
Sales - USD
Ounces 11,000 - - - 11,000 $ (59)
Price Per Ounce $ 296.06 $ - $ - $ -
Gold Call Options
Sold - USD
Ounces (1)(2) - - - 24,640 24,640 $ (435)
Price Per Ounce $ - $ - $ - $346.46
(1) The call options sold have a knock-out provision whereby the calls for 24,640 ounces will terminate if gold trades below
$300 per ounce after December 27, 2002.
(2) These call options were subsequently closed in April 2002 and the Company has realized a loss of approximately $398,000.
NOTE G: Contingencies
Bunker Hill Action
On January 7, 2002, a private class action suit captioned Baugh vs.
Asarco, et al., was filed in the Idaho District Court for the First District
(Lawsuit No. 2002131) in Kootenai County, Idaho against the companies that have
been defendants in the prior Bunker Hill and natural resources litigation in the
Coeur d'Alene Basin, including the Company, by eight northern Idaho residents
seeking medical benefits and property compensation from the mining companies
involved in the Bunker Hill Superfund site. At this early stage of the
litigation, the Company cannot predict the outcome of this suit.
Proposed Mining Legislation
Recent legislative developments may affect the cost of and ability of
mining claimants to use the Mining Law of 1872, as amended, (the "Mining Act")
to acquire or use federal lands for mining operations. Since October 1994, a
moratorium has been imposed on processing new patent applications for mining
claims. Management believes that this moratorium will not affect the status of
patent applications outstanding prior to the moratorium.
Legislation is presently being considered in the U.S. Congress to change
the Mining Act under which the Company holds mining claims on public lands. It
is possible that the Mining Act will be amended or be replaced by more onerous
legislation in the future. The
12
legislation under consideration, as well as regulations under development by the
Bureau of Land Management, contain new environmental standards and conditions,
additional reclamation requirements and extensive new procedural steps which
would be likely to result in delays in permitting.
During the last several Congressional sessions, bills have been
introduced which would supplant or materially alter the Mining Act. If enacted,
such legislation may materially impair the ability of the Company to develop or
continue operations which derive ore from federal lands. No such bills have been
passed and the extent of the changes, if any, which may be enacted by Congress
is not presently known. A significant portion of Coeur's U.S. mining properties
are on public lands. Any reform of the Mining Act or regulations thereunder
based on these initiatives could increase the costs of mining activities on
unpatented mining claims, and as a result could have an adverse effect on the
Company and its results of operations.
Until such time, if any, as new reform legislation or regulations are enacted,
the ultimate effects and costs of compliance on the Company cannot be estimated.
NOTE H: Subsequent Events
The Company has entered into a purchase agreement to issue $21.5
million principal amount of new 13-3/8% Convertible Senior Subordianted Notes
("New Notes") for $16.0 million in proceeds. The New Notes will be convertible
into common stock at a conversion price of $1.35 per share and will be issued on
similar terms, subject to certain contingent provisions, as the Company's
currently outstanding 13-3/8% Convertible Senior Subordinated Notes due December
31, 2003. This financing is subject to final documentation and customary closing
conditions. The Company plans to use $9.4 million of the proceeds from the sale
of the New Notes to pay the entire $9.4 million principal amount of 6%
Debentures expected to be outstanding when they mature on June 10, 2002.
In the Company's latest Form 10-K filing, the Company stated that
without a certainty of financing the Company may not be able to repay its
obligations under its 6% Debentures. Upon successful completion of this
financing agreement the Company will use a portion of the proceeds received to
repay the entire expected outstanding balance of $9.4 million of the 6%
Convertible Subordinated Debentures on June 10, 2002.
NOTE I: Reclassification
Certain reclassifications of prior-year balances have been made to
conform to current year classifications.
13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
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 2002 was
$4.51 and $290 per ounce, respectively. The market price of silver (Handy &
Harman) and gold (London Final) on May 13, 2002 were $4.63 per ounce and $310.75
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
Cerro Bayo 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, 2002 and 2001:
14
THREE MONTHS ENDED
March 31,
-----------------------------
2002 2001
--------- ---------
ROCHESTER MINE
Gold ozs. 16,423 19,457
Silver ozs. 1,415,767 1,501,649
Cash Costs per equiv. oz./silver $4.06 $3.88
Full Costs per equiv. oz./silver $4.56 $4.84
GALENA MINE
Silver ozs. 1,473,542 1,107,941
Cash Costs per oz./silver $3.97 $4.36
Full Costs per oz./silver $4.62 $5.01
PRIMARY SILVER MINES
--------- ---------
Consolidated Cash Costs per
equivalent oz.of silver $4.02 $4.02
--------- ---------
PETORCA MINE (Note A)
Gold ozs. N/A 7,159
Silver ozs. N/A 22,127
Cash Costs per oz./gold N/A $354
Full Costs per oz./gold N/A $373
PRIMARY GOLD MINES
--------- ---------
Consolidated Cash Costs per
equivalent oz.of gold N/A $354
--------- ---------
CONSOLIDATED TOTAL METAL PRODUCTION
Gold ozs. 16,423 26,678
Silver ozs. 2,889,309 2,631,717
Note A: The Company suspended operations at the Petorca Mine in the third
quarter of 2001, and does not expect to re-open this mine in the foreseeable
future.
OPERATING HIGHLIGHTS
Cerro Bayo Mine (Chile)
Coeur's new Cerro Bayo high-grade gold and silver mine officially
commenced production on April 17, 2002, approximately one month ahead of
schedule. During the start-up phase, the milling facility is processing
development ore averaging approximately 0.29 ounces per ton gold equivalent
until previously delineated high-grade zones are accessed in late June or early
July. At least initially, the bulk of the tonnage mined and processed will be
from the Lucero vein. Total production in 2002, including the Martha mine, is
forecast at 52,000 ounces of gold and 3.6 million ounces of silver at a cash
cost of less than $150 per gold equivalent ounce.
The Company is actively drilling previously delineated high-grade zones
to increase reserves and discover new mineralized vein structures.
Martha Mine (Argentina)
Coeur plans to begin transporting high-grade silver ore in late May
from the Martha mine to the Cerro Bayo facility for processing. The high-grade
Martha mine is expected to contribute 1.6 million ounces of silver to Cerro Bayo
in 2002. Preparation of a detailed
15
exploration program for areas in and around the Martha mine is currently under
way.
Rochester Mine (Nevada)
Coeur's Rochester mine reached a major milestone in the third week of
January 2002 when it officially poured over one million ounces of gold and 88
million ounces of silver since commencing production in 1986.
The Rochester mine produced 1.4 million ounces of silver and 16,423
ounces of gold in the first quarter of 2002 compared to 1.5 million ounces of
silver and 19,457 ounces of gold in the first three months of 2001. In 2001
operations were largely confined to gold-rich sections of the pit, which
accounted for the high gold output last year. In January and February of 2002,
the Company decided to mine lower grade stockpiled ore while completing a review
of the life-of-mine plan. As a result, cash costs for the three month period
rose to $4.06 per silver equivalent ounce compared to $3.88 per silver
equivalent ounce in the prior year. After completion of this analysis,
production has increased and cash costs per silver equivalent ounce decreased
sharply to $3.66 in March with further declines realized in April.
Coeur Silver Valley (Idaho)
Silver production at Coeur Silver Valley rose to a record 1.5 million
ounces in the latest quarter, up 33 percent from the 1.1 million ounces produced
in the first quarter of 2001. Total cash costs during the quarter decreased to
$3.97 per ounce, nine percent lower than the $4.36 per ounce recorded in the
previous year. The increase in silver output and reduction in cash costs is due
to the extensive underground development program carried out last year and the
successful implementation of mechanized mining in selected areas of the mine.
The accelerated underground development program has provided greater mining
flexibility and much better access to the wider, higher-grade vein structures,
especially the 72 vein which is currently one of the major sources of silver
production.
Mine exploration has significantly extended the prominent 117 vein to
the 3,100 foot level where subsequent development could significantly lower
mining costs. In addition, Coeur is drifting towards the Silver vein on the
2,400 level where reserves of four million ounces of silver have previously been
delineated. These recent developments confirm the considerable exploration
potential at Coeur Silver Valley both at depth and in areas much closer to the
surface.
San Bartolome (Bolivia)
The final feasibility study at Coeur's San Bartolome silver property in
Bolivia is progressing. Recent results indicate that total cash costs can be
reduced to $3.25 per ounce. In addition, exploration and confirmation drilling
is under way in conjunction
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with the implementation of recent process flow sheet improvements. Test results
on a portion of the resource base has produced a saleable tin concentrate and a
more comprehensive resource-wide review has been commissioned.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2002 Compared to Three Months
Ended March 31, 2001.
Revenues
Product sales in the first quarter of 2002 decreased by $1.5 million,
or 9%, from the first quarter of 2001 to $16.5 million. The decrease in sales is
primarily attributable to the shutdown of the Petorca mine in August 2001. In
the first quarter of 2002, the Company produced a total of 2,889,309 ounces of
silver and 16,423 ounces of gold compared to 2,631,717 ounces of silver and
26,678 ounces of gold in the first quarter of 2001. In the first quarter of
2002, the Company realized average silver and gold prices of $4.45 and $291,
respectively, compared with realized average prices of $4.52 and $270,
respectively, in the prior year's first quarter. The decline in gold production
was primarily due to lower production from Petorca, which was shutdown in June
of last year. This was partially offset by higher gold prices realized and
higher silver production at the Rochester and Galena mines.
Interest and other income in the first quarter of 2002 increased by
$0.5 million compared with the first quarter of 2001. The increase is primarily
due to a $0.4 million increase in gains recorded on the sale of short-term
investments.
Costs and Expenses
Production costs in the first quarter of 2002 decreased by $0.2
million, or 1%, from the first quarter of 2001 to $18.0 million.
Depreciation and amortization decreased in the first quarter of 2002 by
$1.0 million, or 33%, from the prior year's first quarter, primarily due to
reduced depletion at the Rochester mine and none taken at the Petorca mine due
to suspension of operations.
Administrative and general expenses decreased $0.2 million in the first
quarter of 2002 compared to 2001, due to continued cost reduction measures in
2002.
Exploration expenses decreased by $0.8 million in the first quarter of
2002 compared to 2001, due to the Company's decision to limit the amount of
exploration in 2002.
Pre-feasibility expenses increased by $0.8 million due to increased
spending on the San Bartolome silver project.
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Interest expense increased $0.7 million primarily due to make whole
interest paid to holders of the 13-3/8% notes that converted their holdings to
common stock.
Other expenses increased $0.8 million primarily due to additional mine
care and maintenance expenditures at both the Petorca and Cerro Bayo mines, and
the additional expense recorded in connection with the repurchase of 6%
debentures in the first quarter of 2002.
Net Loss
As a result of the above mentioned factors, as well as debt retirement
discussed below, the Company's net loss amounted to $11.9 million or $0.23 per
share in the first quarter of 2002 compared to a net loss of $8.1 million or
$0.22 per share in the first quarter of 2001.
Debt Reduction Program
During the first quarter of 2002 the Company repurchased $3.5 million
principal amount of its outstanding 6% Convertible Subordinated Debentures in
exchange for approximately 3.5 million shares of common stock. Also during the
1st quarter of 2002 holders of $5.7 million principal amount of the 13 3/8%
Convertible Senior Subordinated Notes voluntarily converted their outstanding
Notes into approximately 5.1 million shares of Common Stock.
During April and May 2002, the Company repurchased an additional $6.7
million principal amount of its outstanding 6% Convertible Subordinated
Debentures in exchange for approximately 6.7 million shares of common stock and
will record an additional expense of approximately $1.5 million in the second
quarter for these exchanges, further reducing the outstanding 6% Convertible
Subordinated Debentures Due June 2002 to $13.0 million. In connection with its
issuance of new 13-3/8% Convertible Senior Subordinated Notes, discussed below
under "Issuance of New Notes," the Company repurchased an additional $3.6
million principal amount of 6% Debentures in exchange for approximately 4.0
million shares of Common Stock, thereby reducing the outstanding 6% debentures
outstanding to $9.4 million.
Also during April 2002, holders of $3.2 million principal amount of the
13-3/8% Convertible Senior Subordinated Notes voluntarily converted their
outstanding Notes into approximately 2.9 million shares of Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Cash and Cash Equivalents
The Company's working capital at March 31, 2002 was approximately $37.7
million compared to $39.8 million at December 31,
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2001. The ratio of current assets to current liabilities was 2.0 to 1.0 at March
31, 2002 compared to 2.0 to 1.0 at December 31, 2001.
Net cash used in operating activities in the three months ended March
31, 2002 was $5.5 million compared to $6.0 million in the three months ended
March 31, 2001. Net cash used in investing activities in the 2002 period was
$0.4 million compared to net cash provided in investing activities of $16.5
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. Net cash used in financing activities was
$0.1 million in the first three months of 2002, compared to $0.3 million used in
the first three months of 2001. As a result of the above, cash and cash
equivalents decreased by $6.0 million in the first three months of 2002 compared
to an increase of $10.2 million for the comparable period in 2001.
CONTINGENCIES
Bunker Hill Action
On January 7, 2002, a private class action suit captioned Baugh vs.
Asarco, et al., was filed in the Idaho District Court for the First District
(Lawsuit No. 2002131) in Kootenai County, Idaho against the companies that have
been defendants in the prior Bunker Hill and natural resources litigation in the
Coeur d'Alene Basin, including the Company, by eight northern Idaho residents
seeking medical benefits and property compensation from the mining companies
involved in the Bunker Hill Superfund site. At this early stage of the
litigation, the Company cannot predict the outcome of this suit.
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Proposed Mining Legislation
Recent legislative developments may affect the cost of and ability of
mining claimants to use the Mining Law of 1872, as amended, (the "Mining Act")
to acquire or use federal lands for mining operations. Since October 1994, a
moratorium has been imposed on processing new patent applications for mining
claims. Management believes that this moratorium will not affect the status of
patent applications outstanding prior to the moratorium.
Legislation is presently being considered in the U.S. Congress to
change the Mining Act under which the Company holds mining claims on public
lands. It is possible that the Mining Act will be amended or be replaced by more
onerous legislation in the future. The legislation under consideration, as well
as regulations under development by the Bureau of Land Management, contain new
environmental standards and conditions, additional reclamation requirements and
extensive new procedural steps which would be likely to result in delays in
permitting.
During the last several Congressional sessions, bills have been
introduced which would supplant or materially alter the Mining Act. If enacted,
such legislation may materially impair the ability of the Company to develop or
continue operations which derive ore from federal lands. No such bills have been
passed and the extent of the changes, if any, which may be enacted by Congress
is not presently known. A significant portion of Coeur's U.S. mining properties
are on public lands. Any reform of the Mining Act or regulations thereunder
based on these initiatives could increase the costs of mining activities on
unpatented mining claims, and as a result could have an adverse effect on the
Company and its results of operations. Until such time, if any, as new reform
legislation or regulations are enacted, the ultimate effects and costs of
compliance on the Company cannot be estimated.
Issuance of New Notes
The Company has entered into a purchase agreement to issue $21.5
million principal amount of new 13-3/8% Convertible Senior Subordianted Notes
("New Notes") for $16.0 million in proceeds. The New Notes will be convertible
into common stock at a conversion price of $1.35 per share and will be issued on
similar terms, subject to certain contingent provisions, as the Company's
currently outstanding 13-3/8% Convertible Senior Subordinated Notes due December
31, 2003. This financing is subject to final documentation and customary closing
conditions. The Company plans to use $9.4 million of the proceeds from the sale
of the New Notes to pay the entire $9.4 million principal amount of 6%
Debentures expected to be outstanding when they mature on June 10, 2002.
In the Company's latest Form 10-K filing, the Company stated that
without a certainty of financing the Company may not be able to repay its
obligations under its 6% Debentures. Upon successful completion of this
financing agreement the Company will use a portion of the proceeds received to
repay the entire expected outstanding balance of $9.4 million of the 6%
Convertible Subordinated Debentures on June 10, 2002.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various market risks as a part of its
operations. As an effort to mitigate losses associated with these risks, the
Company may , at times, enter into derivative financial instruments. These may
take the form of forward sales contracts, foreign currency exchange contracts
and interest rate swaps. The Company does not actively engage in the practice of
trading derivative securities for profit. This discussion of the Company's
market risk assessments contains "forward looking statements" that contain risks
and uncertainties. Actual results and actions could differ materially from those
discussed below.
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The Company's operating results are substantially dependent upon the
world market prices of silver and gold. The Company has no control over silver
and gold prices, which can fluctuate widely and are affected by numerous
factors, such as supply and demand and investor sentiment. In order to mitigate
some of the risk associated with these fluctuations, the Company will at times,
enter into forward sale contracts. The Company continually evaluates the
potential benefits of engaging in these strategies based on the then current
market conditions. The Company may be exposed to nonperformance by
counterparties as a result of its hedging activities. This exposure would be
limited to the amount that the spot price of the metal falls short of the
contract price.
The Company operates in several foreign countries, specifically Bolivia
and Chile, which exposes it to risks associated with fluctuations in the
exchange rates of the currencies involved. As part of its program to manage
foreign currency risk, the Company will enter into foreign currency forward
exchange contracts. These contracts enable the Company to purchase a fixed
amount of foreign currencies. Gains and losses on foreign exchange contracts
that are related to firm commitments are designated and effective as hedges and
are deferred and recognized in the same period as the related transaction. All
other contracts that do not qualify as hedges are mark-to-market and the
resulting gains or losses are recorded in income. The Company continually
evaluates the potential benefits of entering into these contracts to mitigate
foreign currency risk and proceeds when it believes that the exchange rates are
most beneficial.
All of the Company's long term debt at March 31, 2001 is fixed-rate
based. The Company's exposure to interest rate risk, therefore, is limited to
the amount it could pay at current market rates. The Company currently does not
have any derivative financial instruments to offset the fluctuations in the
market interest rate. It may choose to use instruments, such as interest rate
swaps, in the future to manage the risk associated with interest rate changes.
See Note F - Hedging, to the consolidated financial statements for a
table which summarizes the Company's gold and foreign exchange hedging
activities at March 31, 2002.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits. None.
b) Reports on Form 8-K. None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COEUR D'ALENE MINES CORPORATION
(Registrant)
Dated May 14, 2002 /s/ Dennis E. Wheeler
-------------------------
DENNIS E. WHEELER
Chairman, President and
Chief Executive Officer
Dated May 14, 2002 /s/ Geoffrey A. Burns
-------------------------
GEOFFREY A. BURNS
Vice President and
Chief Financial Officer
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