SECURITIES AND EXCHANGE COMMISSION Washington, D. C. ----------------- 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 June 30, 1997 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 --------------------------------- ---------- (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 21,890,568 shares were issued and outstanding as of August 8, 1997. COEUR D'ALENE MINES CORPORATION INDEX Page No. -------- PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets -- 3-4 June 30, 1997 and December 31, 1996 Consolidated Statements of Operations -- 5 Six Months Ended June 30, 1997 and 1996 Consolidated Statements of Cash Flows -- 6 Six Months Ended June 30, 1997 and 1996 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of 9-16 Financial Condition and Results of Operations PART II. Other Information. Item 1. Legal Proceedings 16 Item 4. Submission of Matters to a Vote of Security-Holders 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES -2- PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, 1997 1996 ------------------------------------- (In Thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 60,261 $ 43,455 Short-term investments 77,875 124,172 Receivables 11,237 11,573 Inventories 35,976 31,992 --------- --------- TOTAL CURRENT ASSETS 185,349 211,192 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment 119,354 118,993 Less accumulated depreciation 55,094 50,743 --------- --------- 64,260 68,250 MINING PROPERTIES Operational mining properties 236,449 171,517 Less accumulated depletion 48,552 38,264 --------- --------- 187,897 133,253 Developmental properties 126,634 110,985 --------- --------- 314,531 244,238 OTHER ASSETS Investment in unconsolidated affiliate 48,231 Notes receivable 8,605 4,000 Debt issuance costs, net of accumulated amortization 3,769 4,081 Marketable equity securities and other 2,257 338 --------- --------- 14,631 56,650 --------- --------- $578,771 $580,330 ========= ========= -3- UNAUDITED COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, 1997 1996 ------------------------------------- (In Thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 6,945 $ 4,327 Accrued liabilities 5,981 4,976 Accrued interest payable 3,536 4,968 Accrued salaries and wages 5,363 5,242 Bank loans 8,932 8,021 Current portion of remediation costs 8,500 3,500 Other current liabilities 407 532 --------- --------- TOTAL CURRENT LIABILITIES 39,664 31,566 LONG-TERM LIABILITIES 6% subordinated convertible debentures 49,840 49,840 6 3/8% subordinated convertible debentures 100,000 100,000 Long-term borrowings 41,724 39,900 Other long-term liabilities 8,836 12,826 --------- --------- TOTAL LONG-TERM LIABILITIES 200,400 202,566 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Mandatory Adjustable Redeemable Convertible Securities (MARCS), par value $1.00 per share,(a class of preferred stock) - authorized 7,500,000 shares, 7,077,833 issued and outstanding 7,078 7,078 Common Stock, par value $1.00 per share- authorized 60,000,000 shares, issued 22,950,182 shares (including 1,059,211 shares held in treasury) 22,950 22,950 Capital surplus 394,921 400,187 Accumulated deficit (72,454) (70,459) Unrealized losses on short-term investments (598) (352) Repurchased and nonvested shares (13,190) (13,206) --------- --------- 338,707 346,198 --------- --------- $578,771 $580,330 ========= ========= See notes to consolidated financial statements. -4- UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Three Months Ended June 30, 1997 and 1996 Six Months Ended June 30, 1997 and 1996 3 MONTHS ENDED 6 MONTHS ENDED JUNE 30 JUNE 30 ----------------------------- ----------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- (In thousands except for per share data) INCOME Sales of concentrates and dore' $ 33,659 $ 18,752 $ 58,129 $ 41,361 Less cost of mine operations 35,508 18,546 62,574 38,142 ---------- ---------- ---------- ---------- Gross Profit (Loss) (1,849) 206 (4,445) 3,219 OTHER INCOME Interest and other 9,780 2,223 17,586 4,154 ---------- ---------- ---------- ---------- Total Income 7,931 2,429 13,141 7,373 EXPENSES Administration 1,212 967 2,339 2,055 Accounting and legal 463 369 885 643 General corporate 1,934 1,750 3,555 3,400 Interest 2,087 776 4,348 1,460 Mining exploration 2,512 1,656 4,011 2,695 Write down of mining properties 54,382 54,382 ---------- ---------- ---------- --------- Total Expenses 8,208 59,900 15,138 64,635 ---------- ---------- ---------- ---------- NET LOSS FROM CONTINUING OPERATIONS BEFORE TAXES (277) (57,471) (1,997) (57,262) Income tax benefit 2 590 2 514 ---------- ---------- ---------- ---------- NET LOSS $ (275) $(56,881) $ (1,995) $ (56,748) ========== ========== ========== ========== NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (2,908) $(59,549) $ (7,261) $(59,879) ========== ========== ========== ========== EARNINGS PER SHARE DATA Earnings per share data: Weighted average number of shares of Common Stock and equivalents used in calculation 21,891 21,620 21,891 21,043 ========== ========== ========== ========== Net Loss Per Share $ (.01) $ (2.63) $ (.09) (2.70) ========== ========== ========== ========== Net Loss per share attributable to Common Shareholders $ (.13) $ (2.75) $ (.33) $ (2.85) ========== ========== ========== ========== -5- UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES Six months ended June 30, 1997 and 1996 1997 1996 ----------- ----------- (In Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (1,995) $ (56,748) Add (less) noncash items: Depreciation, depletion and amortization 13,455 5,521 Loss on disposition of assets 54,301 Other changes 1,324 (100) ----------- ----------- CASH PROVIDED BY OPERATING ACTIVITIES BEFORE WORKING CAPITAL CHANGES 12,824 2,974 Change in working capital: Receivables 2,717 (227) Inventories (3,157) 1,090 Accounts payable and accrued liabilities (4,074) (3,786) Interest payable (1,432) (1,194) ----------- ----------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 6,878 (1,143) CASH FLOWS FROM INVESTING ACTIVITIES Investment in mining company (14,643) (18,629) Purchase of property, plant, and equipment (1,264) (1,727) Purchase of short-term investments (54,790) (114,973) Proceeds from sales of marketable securities 100,675 33,959 Expenditures on developmental properties (6,758) (5,851) Expenditures on operational mining properties (8,383) (19,988) Proceeds from sale of discontinued operations 1,420 Other assets 814 115 ----------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 15,651 (125,674) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from MARCS issuance 144,644 Proceeds from bank loans 18,900 Retirement of obligations under capital leases (1,077) Payment of cash dividends (5,266) (5,762) Other (457) ----------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5,723) 156,705 ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 16,806 29,888 Cash and cash equivalents at beginning of year 43,455 16,485 ----------- ----------- CASH AND CASH EQUIVALENTS AT JUNE 30, 1997 AND 1996 $ 60,261 $ 46,373 =========== =========== See notes to consolidated financial statements. -6- Coeur d'Alene Mines Corporation and Subsidiaries Notes to Consolidated Financial Statements NOTE A: Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. 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, 1996. NOTE B: Inventories are comprised of the following: JUNE 30, DECEMBER 31, 1997 1996 -------- -------- (In Thousands) In process and on leach pads $ 20,175 $ 19,948 Concentrate inventory 5,152 4,996 Dore' inventory 4,839 739 Supplies 5,810 6,309 --------- -------- $ 35,976 $ 31,992 ========= ======== Inventories of ore on leach pads and in the milling process are valued based on actual costs incurred to place such ore into production, 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. Management evaluates this estimate on an ongoing basis. Adjustments to the recovery are -7- accounted for prospectively. All other inventories are stated at the lower of cost or market with cost being determined using first in, first out and weighted average cost methods. Dore' inventory includes product at the mine site and product held by refineries. NOTE C: On June 6, 1997, the Company acquired, for approximately US$14.6 million in cash, an additional 14% interest in Gasgoyne Gold Mines NL of Australia, increasing its total ownership to 50%. The acquisition has been accounted for as a purchase. Effective June 6, 1997, the investment in Gasgoyne will be accounted for on a proportionate consolidation basis. NOTE D: In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share, which is required to be adopted in the fourth quarter of 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. Adoption of the standard would have had no effect on the net loss per share for the three-month period ended June 30, 1997 and the six-month period ended June 30, 1996. The Company has not yet determined what the impact of Statement 128 will be on the calculation of fully diluted earnings per share. NOTE E: The Company has not recorded an income tax benefit for the three- and six-month periods ended June 30, 1997 as it is currently not assured of the realizability of operating loss carryforwards. The related deferred tax asset has been fully reserved. NOTE F: Certain reclassifications of prior year balances have been made to conform to current year classifications. -8- 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 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 Company's currently operating mines are the Rochester Mine in Nevada, which it wholly owns and operates; the Golden Cross Mine in New Zealand, in which the Company has an 80% operating interest; the El Bronce Mine, a wholly-owned Chilean gold mine; and the Fachinal Mine, a Chilean gold mine wholly-owned by the Company. The Company also has significant interests in other companies that operate gold and silver mines. The Company owns 50% of Silver Valley Resources Corporation ("Silver Valley"), which owns and operates the Coeur Mine (where operations resumed in June 1996 and are expected to continue until early 1999) and the Galena Mine (where operations resumed in June 1997) in the Coeur d'Alene Mining District of Idaho. In May 1996, the Company acquired 35% of Gasgoyne Gold Mines NL, an Australian gold mining company ("Gasgoyne"), which owns a 50% interest in the Yilgarn-Star Gold Mine in Australia. In June 1997, the Company increased its ownership interest in Gasgoyne to 50%. A production decision at the Kensington Property, a wholly-owned developmental gold property in Alaska, is subject to a market price of gold of at least $400 per ounce and the receipt of certain required permits. The market price of gold (London final) on August 8, 1997 was $323.70 per ounce. The Company has been advised that the U.S. Forest Service approved the Final Supplemental Environmental Impact Statement and issued the Record of Decision for the project. Coeur expects that all remaining key permits will be received during the third quarter of 1997. The Company's business plan is to continue to acquire mining properties and/or businesses that are operational or expected to become operational in the near future so that they can reasonably be -9- expected to contribute to the Company's near-term cash flow from operations and expand the Company's gold and/or silver production. This report contains certain forward-looking statements relating to the Company's gold and silver mining business, including estimated production data, expected operating schedules and other operating data. Actual production, operating schedules and results of operations 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) changes in the market prices of gold and silver, (ii) the uncertainties inherent in the Company's production, exploratory and developmental activities, including risks related to permitting and regulatory delays, (iii) the uncertainties inherent in the estimation of gold and silver ore reserves, (iv) changes that could result from the Company's future acquisition of new mining properties or businesses, (v) the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), (vi) the effects of environmental and other governmental regulations, and (vii) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries. 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. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996. --------------------------------------------------------------------- SALES AND GROSS PROFITS Sales of concentrates and dore' increased by $14,907,000, or 79%, for the second quarter of 1997 over the same quarter of 1996. The increase is primarily attributable to increased sales of metals produced at the Fachinal and El Bronce Mines due to i) the classification of the Fachinal Mine as an operating property for accounting purposes as of January 1, 1997, and ii) the company's increased ownership of the El Bronce Mine from 50% to 100% commencing in the third quarter of 1996. In the second quarter of 1997, the Company produced a total of 2,716,566 ounces of silver and 74,053 -10- ounces of gold compared to 1,953,220 ounces of silver and 44,260 ounces of gold in the second quarter of 1996. Silver and gold market prices averaged $4.76 and $343.03 per ounce, respectively, in the second quarter of 1997 compared with $5.30 and $390.02 per ounce, respectively, in the second quarter of 1996. On August 6, 1997, the market price of gold (London final) was $319.35 per ounce, the lowest market price since 1985. In the second quarter of 1997, the Company realized average silver and gold prices of $4.79 and $344.78, respectively. The cost of mine operations for the second quarter of 1997 increased by $16,962,000, or 91%, compared to the second quarter of 1996. The increase is primarily attributable to the fact that i) the Company increased its ownership in the El Bronce Mine from 50% to 100% commencing in the third quarter of 1996, which resulted in a proportionate increase in cost of mine operations in the second quarter of 1997, and ii) the Company classified the Fachinal mine as an operating property for accounting purposes as of January 1, 1997 and began recording cost of mine operations at the Fachinal Mine on that date. Of the approximately $17.0 million increase in the cost of operations, $3.8 million or 22% were non-cash expenses attributable to the 160% increase in depreciation, depletion and amortization expense recorded in the second quarter of 1997 over the prior year's second quarter. The increase in these non-cash expenses primarily resulted from the Company's increased El Bronce ownership interest and the fact that no such expenses were being recorded by Fachinal in the second quarter of 1996. Gross losses from mining operations in the second quarter of 1997 amounted to $1.8 million compared to a gross profit from mining operations of $206,000 in the second quarter of 1996. The $2.1 million decrease in gross profits is due to the above mentioned changes in sales and cost of mine operations coupled with substantially lower gold and silver prices realized in the second quarter of 1997. INTEREST AND OTHER INCOME Interest and other income increased by $7,557,000, or 340%, in the second quarter of 1997 compared to the second quarter of 1996. The increase is primarily the result of the receipt of $8 million of insurance proceeds received in connection with the business interruption and property damage at the Golden Cross Mine. -11- EXPENSES For the second quarter of 1997, total expenses decreased by $51,692,000, or 86%, below the prior year's comparable quarter. The 1996 results include a $54,382,000 writedown of the Golden Cross Mine. This decrease was partially offset by an increase in interest expense of $1,311,000 attributable to the classification, effective January 1, 1997, of the Fachinal Mine as an operating property for accounting purposes. Prior to January 1, 1997, interest expense related to the Fachinal construction loan was capitalized. The other major change related to mining exploration expense which increased by $856,000 over 1996 levels. NET INCOME (LOSS) As a result of the above factors, the Company's loss before taxes amounted to $277,000 in the second quarter of 1997 compared to a net loss before taxes of $57.5 million in the second quarter of 1996. The Company also reported a net loss of $275,000, or $.01 per share ($.13 attributable to common shareholders), for the second quarter of 1997 compared with a loss of $56,881,000, or $2.63 per share ($2.75 attributable to common shareholders), for the second quarter of 1996. SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 --------------------------------------------------------------------- SALES AND GROSS PROFITS Sales of concentrates and dore' increased by $16,768,000, or 41%, for the six months ended June 30, 1997 compared with the same period of 1996. The increase was primarily attributable to increased sales of metals produced at the Fachinal and El Bronce Mines due to i) the fact that the Company increased its ownership in the El Bronce Mine from 50% to 100% during the third quarter of 1996, and ii) the classification of the Fachinal Mine as an operating property for accounting purposes as of January 1, 1997. During the first six months of 1997, the Company achieved record production of 5,258,855 ounces of silver and 134,016 ounces of gold compared to 4,144,905 ounces of silver and 89,462 ounces of gold in the first six months of 1996. Silver and gold market prices averaged $4.89 and $347.10 per ounce, respectively, in the first six months of 1997 compared to $5.42 and $395.08 per ounce, respectively, in the same period in -12- 1996. On August 6, 1997, the market price of gold (London final) was $319.35 per ounce, the lowest market price since 1985. In the first six months of 1997, the Company realized average silver and gold prices of $4.89 and $350.78, respectively. The cost of mine operations in the first six months of 1997 increased by $24,432,000, or 64%, compared with the first six months of 1996. The increase is primarily attributable to the fact that the Company increased its ownership in the El Bronce Mine from 50% to 100% commencing in the third quarter of 1996, which resulted in a proportionate increase in cost of mine operations in the first six months of 1997. In addition, Fachinal was classified as an operating property for accounting purposes as of January 1, 1997 and began recording cost of mine operations on that date. Of the $24.4 million increase in the cost of operations, approximately $6.9 million or 28% was attributable to increases in depreciation, depletion and amortization recorded in the first six months of 1997 over the prior year's comparable period. As a result of the above, gross losses from mine operations amounted to $4,445,000, in the first six months of 1997 compared to gross profits of $3,219,000 from mine operations during the six months ended June 30, 1996. The $7,664,000 decrease in gross profits from mine operations is due to the above mentioned changes in sales and cost of mine operations in the six-month period ended June 30, 1997. OTHER INCOME Other income in the first half of 1997 increased by $13,432,000 or 323%, compared to the first half of 1996. The increase is primarily a result of i) the receipt of $8 million of insurance proceeds for business interruption and property damage at the Golden Cross Mine, and ii) a gain of $5.3 million arising from the sale of gold purchased on the open market which was delivered pursuant to fixed-price forward contracts in the first quarter of 1997. EXPENSES Total expenses in the first half of 1997 decreased by $49,497,000, or 77%, compared with the prior year's six-month period. The decrease is primarily attributable to the writedown of the Golden Cross Mine during the second quarter of 1996. In the first six months of 1997, interest expense increased by $2,888,000, primarily -13- attributable to the reclassification of the Fachinal Mine from a developmental-stage property to an operating property. Effective in 1997, interest expense on the Fachinal construction loan, which was previously capitalized during the development stage, is now charged to operating expense. Mining exploration expense for the first six months of 1997 increased by $1,316,000, or 49%, over the prior year's comparable period. NET LOSS As a result of the above, the Company's loss before income taxes amounted to $1,997,000 in the first six months of 1997 compared to a net loss before taxes of $57.3 million during the same period last year. The Company also reported a net loss of $1,995,000, or $.09 per share ($.33 attributable to common shareholders) in the first six months of 1997, compared to net loss of $56,748,000, or $2.70 per share ($2.85 attributable to common shareholders), in the prior year's comparable six-month period. LIQUIDITY AND CAPITAL RESOURCES WORKING CAPITAL; CASH AND CASH EQUIVALENTS The Company's working capital at June 30, 1997 was approximately $145.7 million compared to $179.6 million at December 31, 1996. The ratio of current assets to current liabilities was 4.7 to one at June 30, 1997 compared to 6.7 to one at December 31, 1996. Net cash provided by operating activities for the first six months of 1997 increased by $8.0 million to $6.9 million from $1.1 million used in operating activities during the first six months of 1996, attributable largely to movements in working capital items and the proceeds of the Golden Cross insurance recovery. A total of $15.7 million of cash was provided by investing activities in the first six months of 1997 compared to $125.7 million used in investing activities in the first six months of 1996. Of the $125.7 million used in investing activities during the first six months of 1996, $115.0 million relates to the purchase of investment grade intermediate term investments. The Company's financing activities used $5.7 million of cash during the first six months of 1997 compared with $156.7 million provided by financing activities for the first six months of 1996. As a result of the above, the Company's net cash increase for the first six months of 1997 was $16.8 million -14- compared with a net cash increase of $29.9 million for the first six months of 1996. For the six months ended June 30, 1997 and 1996, the Company expended $2,329,000 and $1,315,000, respectively, in connection with environmental compliance activities at its operating properties. For the six months ended June 30, 1997, the Company expended a total of approximately $1.7 million on environmental and permitting activities at the Kensington property, which expenditures have been capitalized as part of its development cost. FEDERAL NATURAL RESOURCES ACTION On March 22, 1996, an action was filed in the United States District Court for the District of Idaho (Civ. No. 96-0122-N-EJL) by the United States against various defendants, including the Company, asserting claims under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 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 releases of hazardous substances from mining activities conducted in the area since the late 1800s. No specific monetary damages are identified in the complaint. However, in July 1996, the government indicated damages may approximate $982 million. The United States asserts that the defendants are jointly and severally liable for costs and expenses incurred by the United States in investigation, removal and remedial action and the restoration or replacement of affected natural resources. In 1986 and 1992 the Company had settled similar issues with the State of Idaho and the Coeur d'Alene Indian Tribe, respectively, and believes that those prior settlements exonerate it of further involvement with alleged natural resource damage in the Coeur d'Alene River Basin. Accordingly, the Company intends to vigorously defend this matter and, in March 1997, filed a motion for summary judgment which is pending decision by the court. At this initial stage it is not possible to predict its ultimate outcome. INCREASE IN INTEREST IN GASGOYNE In February 1997, Gasgoyne effected a selective reduction of capital by repurchasing its publicly held shares from those shareholders other than Coeur and Sons of Gwalia, as a result of which Coeur's ownership interest increased from 35% to 36% of Gasgoyne's outstanding shares. On June 6, 1997, the Company acquired, for approximately US$14.6 million in cash, -15- an additional 14% interest in Gasgoyne increasing its total ownership to 50%. The acquisition has been accounted for as a purchase. Effective June 6, 1997, the investment in Gasgoyne will be accounted for on a proportionate consolidation basis. PART II. Other Information. ITEM 1. LEGAL PROCEEDINGS On July 2, 1997 a complaint was filed in Federal District Court for the District of Colorado naming the Company as a defendant. The plaintiff is Queen Uno Limited Partnership of Chicago, Illinois. The complaint alleges that the Company violated the Securities Exchange Act of 1934 during the period January 1, 1995 to July 11, 1996, and asserts that it is a class action. The class members are alleged to be those persons who purchased publicly traded debt and equity securities of the Company during the time period stated. The action seeks unspecified compensatory damages, pre-judgment and post-judgment interest, attorney's fees and costs of litigation. In addition to the Company, Dennis E. Wheeler and James A. Sabala, officers and directors of the Company, as well as Ernst & Young, the Company's independent auditors are named as defendants. The complaint asserts that the defendants knew or had access to material adverse non-public information about the Company's financial results which was not disclosed, and which related to the Golden Cross and Fachinal Mines; and that the defendants intentionally and fraudulently disseminated false statements which were misleading and failed to disclose material facts. The Company believes the allegations are without merit and intends to vigorously defend against them. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS The Company's Annual Meeting of Shareholders was held on May 3, 1997. Messrs. Dennis E. Wheeler, Joseph C. Bennett, Duane B. Hagadone, James J. Curran, James A. Sabala, James A. McClure, Jeffery T. Grade and Cecil D. Andrus were nominated and elected to serve as members of the Board for one year or until their successors are elected and qualified, by a vote of 25,047,582 shares for and 275,741 shares abstaining. Shareholders ratified the selection of Ernst & Young to serve as the Company's public accountants for the current fiscal year by a vote of 25,178,802 shares for, 84,414 shares against, with 60,107 shares abstaining. -16- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS No. 27 Financial Data Schedule (b) REPORTS ON FORM 8-K None -17- 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 August 13, 1997 /s/DENNIS E. WHEELER ----------------------- Dennis E. Wheeler Chairman, President and Chief Executive Officer Dated August 13, 1997 /s/JAMES A. SABALA ----------------------- James A. Sabala Senior Vice President and Chief Financial Officer -18-