SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
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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, 1996
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
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(State or other jurisdiction of (I.R.S. Employer Ident. No.)
incorporation or organization)
P. O. Box I, Coeur d'Alene, Idaho 83816
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (208) 667-3511
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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 [ ]
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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 21,890,971 shares
were issued and outstanding as of August 12, 1996.
COEUR D'ALENE MINES CORPORATION
INDEX
Page No.
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PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets -- 3-4
June 30, 1996 and December 31, 1995
Consolidated Statements of Operations -- 5
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows -- 6-7
Six Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of 11-17
Financial Condition and Results of Operations
PART II. Other Information. 18
SIGNATURES
-2-
UNAUDITED
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
ASSETS June 30, December 31,
1996 1995
------------- -------------
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents $ 46,373 $ 16,485
Funds held in escrow 2,271 2,271
Short term investments 128,857 63,076
Receivables 19,050 13,809
Inventories 29,891 30,981
--------- ---------
Total Current Assets 226,442 126,622
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 114,110 118,083
Less accumulated depreciation 51,355 34,152
--------- ---------
62,755 83,931
MINING PROPERTIES
Operational mining properties 145,935 150,656
Less accumulated depletion 35,470 38,529
--------- ---------
110,465 112,127
Developmental properties 104,308 108,820
--------- ---------
214,773 220,947
OTHER ASSETS
Investment in unconsolidated subsidiary 46,652
Marketable securities 20,193 4,390
Debt issuance costs, net of
accumulated amortization 4,390 4,703
Notes receivable 4,000 5,000
Other 10 53
--------- ---------
75,245 14,146
--------- ---------
$579,215 $445,646
========= =========
-3-
UNAUDITED
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, December 31,
1996 1995
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(In Thousands)
CURRENT LIABILITIES
Accounts payable $ 3,404 $ 5,743
Accrued liabilities 11,177 3,525
Accrued interest payable 3,332 4,526
Accrued salaries and wages 4,343 5,039
Bank Loans 18,900
Current portion of obligations under
capital leases 1,116 2,193
--------- ---------
Total Current Liabilities 42,272 21,026
OTHER LIABILITIES
6% Subordinated Convertible Debentures 49,840 50,000
6 3/8% Subordinated Convertible Debentures 100,000 100,000
Limited recourse project financing 24,000 24,000
Other long-term liabilities 11,519 9,386
Deferred income taxes 1,404 1,402
--------- ---------
Total Long-Term Liabilities 186,763 184,788
COMMITMENTS AND CONTINGENCIES:
SHAREHOLDERS' EQUITY
Mandatory Adjustable Redeemable Convertible
Securities (MARCS), par value $1.00 per
share, (a class of preferred stock)-
authorized 10,000,000 shares,
7,077,833 issued and outstanding 7,078
Common Stock, par value $1.00 per share-
authorized 60,000,000 shares, issued
22,950,182 and 21,524,093 shares
(including 1,059,211 shares
held in treasury stock) 22,950 21,524
Capital surplus 405,471 247,100
Accumulated deficit (72,637) (15,889)
Unrealized gains (losses) on
short-term investments 547 361
Repurchased and Nonvested Shares (13,229) (13,264)
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350,180 239,832
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$579,215 $445,646
========= =========
See notes to consolidated financial statements.
-4-
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- ---------------------------
1996 1995 1996 1995
-------- -------- -------- --------
INCOME (In thousands except for per share data)
Sale of concentrates and dore' $ 18,752 $ 23,621 $ 41,361 $ 41,512
Less cost of mine operations 18,546 17,932 38,142 33,972
--------- --------- --------- ---------
Gross Profits 206 5,689 3,219 7,540
OTHER INCOME
Interest and other 2,223 2,061 4,154 4,447
--------- --------- --------- ---------
Total Income 2,429 7,750 7,373 11,987
EXPENSES
Administration 967 1,002 2,055 1,966
Accounting and legal 369 489 643 857
General corporate 1,750 1,737 3,400 3,200
Interest 776 2,635 1,460 5,617
Mining exploration 1,656 857 2,695 1,993
Idle facilities 583 1,124
Write down of mining
properties 54,382 54,382
--------- --------- --------- ---------
Total Expenses 59,900 7,303 64,635 14,757
--------- --------- --------- ---------
NET INCOME(LOSS)FROM CONTINUING
OPERATIONS BEFORE TAXES (57,471) 447 (57,262) (2,770)
Income tax benefit 590 791 514 642
NET INCOME(LOSS)FROM CONTINUING
OPERATIONS (56,881) 1,238 (56,748) (2,128)
INCOME FROM DISCONTINUED
OPERATIONS 2,169 2,360
--------- --------- --------- ---------
NET INCOME (LOSS) $(56,881) $ 3,407 $(56,748) $ 232
--------- --------- --------- ---------
EARNINGS PER SHARE DATA Earnings per share data:
Weighted average number
of shares of Common Stock
and equivalents used in
calculation 21,620 15,614 21,043 15,597
========= ========= ========= =========
Net Income (Loss)from
Continuing Operations $ (2.63) $ .08 $ (2.70) $ (.14)
Net Income From
Discontinued Operations .14 .15
--------- --------- --------- ---------
Net Income (Loss) Per Share $ (2.63) $ .22 $ (2.70) .01
========= ========= ========= =========
Net Income (Loss) per share
attributable to Common Shareholders:
Income(Loss)from continuing
operations $ (2.75) $ .08 $ (2.85) $ (.14)
Income(Loss) from discontinuing
operations .14 .15
--------- --------- --------- ---------
Net Income(Loss) $ (2.75) $ .22 $ (2.85) $ .01
========= ========= ========= =========
-5-
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995
(continued)
3 MONTHS ENDED 6 MONTHS ENDED
JUNE 30 JUNE 30
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1996 1995 1996 1995
-------- -------- -------- --------
(In thousands except for per share data)
Fully Diluted Earnings Per Share:
Weighted average number
of shares of Common
Stock outstanding 26,137
Income (Loss) per share
from continuing
operations $ .11
Income per share from
discontinued operations .08
---------
NET INCOME(LOSS) PER SHARE $ .19
=========
Cash Dividends per
Common Shareholders $ .15 $ .15
========= =========
-6-
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Six months ended June 30, 1996 and 1995
1996 1995
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations $ (56,748) $ (2,128)
Adjustments to reconcile net loss from
continuing operations to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 5,521 8,494
Accrued reclamation 694
Deferred income taxes (728) (1,980)
Loss on disposition of assets 54,301 178
Gain on foreign currency transactions (92) (549)
Loss on sale of short-term investments 26 1,128
Change in operating assets and liabilities:
Accounts receivable (227) (3,828)
Inventories 1,090 825
Accounts payable and accrued liabilities (3,786) 280
Interest payable (1,194) (1,470)
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Net cash used in continuing operations (1,143) 950
Income from discontinued operations 2,360
Adjustments to reconcile income from
discontinued operations to net cash provided
by discontinued operations (1,757)
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603
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,143) 1,553
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in unconsolidated subsidiary (18,629)
Purchase of property, plant, and equipment (1,727) (1,831)
Purchase of short-term investments (114,973) (2,410)
Proceeds from sales of marketable securities 33,959 60,012
Expenditures on developmental properties (5,851) (29,295)
Expenditures on operational mining properties (19,988) (12,511)
Proceeds from sale of discontinued operations 1,420 2,855
Proceeds from disposition of other assets 115 864
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (125,674) 17,684
-7-
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Six Months ended June 30, 1996 and 1995
1996 1995
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(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of Cash Dividends (5,762) (2,339)
Proceeds from preferred stock issuance
(net of offering costs) 144,644
Proceeds from bank loans 18,900 16,091
Retirement of obligations under capital leases (1,077) (1,002)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 156,705 12,750
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 29,888 31,987
Cash and cash equivalents at beginning of year 16,485 15,148
--------- ---------
CASH AND CASH EQUIVALENTS AT
JUNE 30, 1996 AND 1995 $ 46,373 $ 47,135
========= =========
See notes to consolidated financial statements.
-8-
UNAUDITED
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, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. 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, 1995.
NOTE B: Inventories are comprised of the following:
JUNE 30, DECEMBER 31,
1996 1995
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(In Thousands)
Ore in process and on leach pads $24,267 $25,727
Dore' inventory 1,490 2,052
Supplies 4,134 3,202
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$29,891 $30,981
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
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:
The Company's income tax benefit for the three month and six month
periods ended June 30, 1996 results primarily from the recognition of tax
benefits associated with operating losses.
-9-
NOTE D:
On March 8, 1996, the Company completed a public offering of $140.0
million of Mandatory Adjustable Redeemable Convertible Securities (MARCS). The
Company issued 6,588,235 shares of MARCS which were offered at a public
offering price of $21.25 per share. Each share of MARCS is mandatorily
convertible four years after issuance into 1.111 shares of Common Stock of the
Company, subject to adjustment in certain events, unless earlier converted by
the holder into Common Stock or redeemed for Common Stock by the Company. The
annual dividend payable on the MARCS will be $1.488 per share, payable
quarterly. The dividends will be deducted in computing net income (loss)
attributable to Common Shareholders. On April 8, 1996, the Company sold an
additional 489,598 shares of MARCS to the underwriters as a result of their
exercise of an overallotment option granted to them in connection with the
public offering. With the exercise of the overallotment option, the Company
has sold a total of 7,077,833 shares of MARCS for a total offering price of
$150.4 million which resulted in net proceeds to the Company of $144.6
million.
NOTE E:
On December 21, 1995, the Company announced it had entered into an option
agreement to acquire a 19.9% interest in a publicly listed Australian gold
producer, Gasgoyne Gold Mines NL ("Gasgoyne"), and intended to extend an offer
to Gasgoyne's shareholders to acquire all of the outstanding shares of
Gasgoyne. On January 31, 1996, Coeur made the filings required under the
Australian securities laws with the Australian Securities Commission ("ASC")
to initiate proceedings for the public offer. As of April 26, 1996, on which
date the Company's offer expired, Coeur held or was entitled to hold
approximately 35% of Gasgoyne's outstanding shares which it acquired by
issuing a total of 1,419,832 shares of the Company's Common Stock and paying a
total of approximately $15.4 million to Gasgoyne shareholders. Coeur cash
payments to Gasgoyne shareholders were financed by a loan facility with
Rothschild Australia Ltd. which provided for a maximum of US$50 million of
borrowings at an annual interest rate equal to LIBOR plus 1.5%. Borrowings
under the agreement were $18.9 million as of June 30, 1996. During the second
quarter of 1996, Coeur is reporting its proportionate share of Gasgoyne's net
results of operations pursuant to the equity method of accounting for
investments. Such amounts are reflected as a component of interest and other
income.
-10-
The following table sets forth a condensed summary of the results of
operations of Gasgoyne for the six month period ended June 30, 1996.
(In thousands - US$) June 30, 1996
-------------
Total Revenues $18,631
Operating profit $ 6,176
Net Income from
continuing operations $ 2,113
The following pro forma information reflects the Company's results of
operations as if the Gasgoyne transaction, that occurred in April 1996, had
occurred at the beginning of the periods presented.
For the Six Months Ended
(In thousands - US$) June 30, 1996 June 30, 1995
------------- -------------
Total Income $ 7,898 $ 12,533
Net Income (Loss) $(56,411) $ 317
Net Income (Loss) per share $ (2.68) $ .02
On January 26, 1996, for a total consideration of approximately US$10.7
million, the Company acquired 5.5 million shares and options to acquire an
additional 5.0 million shares of Orion Resources NL, an Australian gold mining
company ("Orion"). Earlier in 1995 and in 1994, Coeur had acquired a total of
3.33 million shares of Orion for a total cost of US$3.8 million. On March 27,
1996, the Company exercised its option to acquire the additional 5.0 million
shares of Orion. As a result, Coeur holds approximately 19.2% of Orion's
outstanding shares.
NOTE F:
During the second quarter of 1996, the Company determined that certain
adjustments were required to properly reflect the estimated net realizable
values of certain mining properties in accordance with FASB statement No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to be disposed of." The Golden Cross Mine was written down by approximately
$53 million due to increased expenditure requirements related to remediation
of ground movement which impacts the tailings impoundment area. An engineering
evaluation is currently underway to determine the full extent and cost of the
remedial measures required to stabilize the on-site land movement. The
write-down included accrual of the anticipated remediation costs. The Faride
property write down of $1.1 million was necessary due to management's decision
not to exercise its final option payment on the project.
NOTE G:
Certain reclassifications of prior year balances have been made to
conform to current year classifications.
-11-
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 Chilean gold mine of which the
Company acquired operating control in October 1994; and the Fachinal Mine, a
Chilean gold mine wholly-owned by the Company at which initial production
commenced in late October 1995. In addition, the Company and Callahan own 50%
of Silver Valley Resources ("Silver Valley") which owns and operates the Coeur
and Galena silver mines which commenced operation in June 1996.
Silver Valley estimates that during the mines' first full year of
operations, they will produce a total of approximately 3,000,000 ounces of
silver per annum. Silver Valley is also conducting a development and
exploration program at the properties in connection with which it is expanding
the existing workings, improving infrastructure and conducting diamond
drilling to further increase reserves and mine life. In February of 1996,
Silver Valley announced reopening of the Coeur and Galena Mines. Silver Valley
began shipping concentrates in June, 1996.
As discussed below under "Liquidity and Capital Resources," the Company
expects prior to the end of August 1996 to increase its ownership in the El
Bronce Mine from 51% to 100%. Since the Company took over operations at El
Bronce, it has been able to increase production 42.5% from approximately
40,000 ounces per year to approximately 57,000 ounces forecast in 1996.
Construction of the new Fachinal mine was completed at a total cost of
approximately $41.1 million and initial production commenced in October 1995.
The mine, while currently producing gold and silver, has not reached
commercial production and is in the developmental stage at the end of 1996's
second quarter.
During the second quarter of 1996, the Company determined that certain
adjustments were required to properly reflect the estimated net realizable
values of certain mining properties. The Golden Cross Mine was written down by
approximately $53 million due to increased expenditure requirements related to
remediation of ground movement which impacts the tailings impoundment area. An
engineering evaluation is currently underway to determine the full extent and
cost of the remedial measures required to stabilize the on-site land movement.
The write-down included accrual of the anticipated remediation costs. The
Faride property write down of $1.1
-12-
million was necessary due to management's decision not to exercise its final
option payment on the project.
A production decision at the Kensington Property is subject to completion
of an updated feasibility study, 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 12, 1996 was $387.15 per ounce. With respect to the
permits, the Company is unable to control the timing of their issuance;
however, it is expected that all permits will be received by the end of 1996.
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 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 exploratory
and developmental activities, (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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS
ENDED JUNE 30, 1995.
SALES AND GROSS PROFITS
Sales of concentrates and dore' decreased by $4,869,000, or 21%, for the
second quarter of 1996 from the same quarter of 1995 and is primarily
attributable to decreased production at the Golden Cross Mine. While overall
production for the Company increased substantially, revenue decreased due to
the fact that revenues attributable to the Fachinal Mine from 492,595 ounces
of silver and 5,397 ounces of gold are not reflected in the sales of
concentrates due to the fact that the Fachinal Mine has not achieved
commercial production; therefore, it continues to be treated as a development
stage property. As a result, the revenues generated from
-13-
these preproduction metal sales have been offset against the capital cost of
the mine. The Company has implemented various programs designed to rectify
certain start-up inefficiencies at Fachinal.
Silver and gold prices averaged $5.30 and $394.94 per ounce,
respectively, in the second quarter of 1996 compared with $5.48 and $387.94
per ounce, respectively, in the second quarter of 1995. In the second quarter
of 1996, the Company produced 1,953,220 ounces of silver and 42,260 ounces of
gold compared to 1,679,814 ounces of silver and 41,822 ounces of gold in the
second quarter of 1995.
The cost of mine operations for the second quarter of 1996 increased by
$614,000, or 3%, above the prior year's comparable quarter. The increase is
primarily attributable to increased costs at the Golden Cross Mine as a result
of decreased ore grade and lower ore throughput associated with the land
stabilization issue. Mine operations gross profit as a percent of sales
decreased from 24% in the quarter ended June 30, 1995 to 1% in the quarter
ended June 30, 1996. As a result, gross profits from mine operations decreased
by $5,483,000.
The cash costs of production per ounce of silver on a silver equivalent
basis at the Rochester Mine amounted to $3.66 in the quarter ended June 30,
1996, compared to $3.65 per ounce in the quarter ended June 30, 1995. The cash
costs of production per ounce of gold at the El Bronce Mine were $258.86
during the second quarter of 1996 compared to $337.03 in 1995's same quarter.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $503.17 per ounce in the quarter ended June 30, 1996, compared to
$198.35 per ounce in the prior year's comparable quarter. The increase in
Golden Cross costs of production is primarily attributable to decreased ore
grades and lower ore throughput associated with the land stabilization issue.
INTEREST AND OTHER INCOME
Interest and other income increased by $162,000, or 8%, in the second
quarter of 1996 compared to the second quarter of 1995. The increase is
primarily the result of an increase in the level of the Company's cash and
securities portfolio.
TOTAL INCOME
As a result of the above, the Company's total income decreased by
$5,321,000, or 69%, in the second quarter of 1996 compared to the second
quarter of 1995.
EXPENSES
For the second quarter of 1996, total expenses, prior to the write-down
of mining property, decreased by $1,785,000, or 24%, below the prior year's
comparable quarter. The decrease is primarily due to decreases in interest
expense of $1,859,000 resulting from reduced long-term debt and the effect of
capitalized interest, and idle facilities expenses of
-14-
$583,000. In the second quarter of 1996, the Company reported the write down
of mining properties of $54,382,000 related to the write down at the Golden
Cross Mine and the Faride property.
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES
As a result of the above, the Company's loss from continuing operations
before income taxes amounted to $57,471,000 for the second quarter of 1996
compared to income from continuing operations before income taxes of $447,000
for the second quarter of 1995. The Company reported an income tax benefit for
the second quarter of 1996 of $590,000 compared to $791,000 for the same
period of 1995. As a result, the Company reported a net loss from continuing
operations of $56,881,000, or $2.63 per primary share, for the second quarter
of 1996 compared to income from continuing operations of $1,238,000, or $.08
per primary share, for 1995's comparable quarter.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
On May 2, 1995, The Company sold the Flexaust division, a manufacturer of
flexible hose and tubing, for $10 million of which $4 million was paid at
closing and the remainder is payable in five annual installments. In the
second quarter of 1995, the Company reported $2,169,000 from discontinued
operations (net of taxes).
NET INCOME (LOSS)
As a result of the above, the Company reported a net loss of $56,881,000,
or $2.63 per primary share ($2.75 attributable to common shareholders), for
the second quarter of 1996 compared with $3,407,000, or $.22 per primary share
attributable to common shareholders. ($.19 per fully diluted share), for the
second quarter of 1995. Fully diluted earnings per share is not presented
during the second quarter of 1996 because it is antidilutive.
SIX MONTHS ENDED JUNE 30, 1996, COMPARED TO SIX MONTHS ENDED JUNE 30,
1995
SALES AND GROSS PROFITS
Sales of concentrates and dore' decreased by $151,000, or less than 1%,
for the six months ended June 30, 1996 compared with the same period of 1995
and was primarily attributable to decreased production at Golden Cross in 1996
compared to the same period in 1995. While overall production for the Company
increased substantially, revenues decreased due to the fact that revenues from
1,067,995 ounces of silver and 11,832 ounces of gold attributable to the
Fachinal Mine are not reflected in the sales of concentrates due to the fact
that the Fachinal Mine has not achieved commercial production; therefore, it
continues to be treated as a development stage property. As a result, a net
operating loss of approximately $281,000 at the mine was capitalized during
the six months
-15-
ended June 30, 1996. The Company has implemented various programs designed to
rectify certain start-up inefficiencies at Fachinal. During the first six
months of 1996, the Company produced 4,144,905 ounces of silver and 89,462
ounces of gold compared to 3,208,631 ounces of silver and 78,394 ounces of
gold in the first six months of 1995. Silver and gold prices averaged $5.42
and $395.08 per ounce, respectively, in the first six months of 1996 compared
to $5.09 and $383.52 per ounce, respectively, in the same period in 1995.
The cost of mine operations in the first six months of 1996 increased by
$4,170,000, or 12%, over the first six months of 1995. The increase is
primarily attributable to an increase in the costs of Golden Cross operations.
As a result, gross profit from mine operations decreased by $4,321,000, or
57%, in the first six months of 1996 from 1995's comparable period. Mine
operations gross profit as a percent of sales decreased from 18% in the six
months ended June 30, 1995 to 8% in the six months ended June 30, 1996.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $403.33 per ounce in the six months ended June 30, 1996, compared
to $217.27 in the prior year's comparable six month period. The increase is
primarily attributable to decreased mine ore grades and costs associated with
the land stabilization program. The cash costs of production per ounce of
silver on a silver equivalent basis at the Rochester Mine amounted to $3.65
per ounce in the six months ended June 30, 1996, compared to $3.80 in the six
months ended June 30, 1995. The cash costs of production per ounce of gold at
the El Bronce Mine were $251.78 for the six months ended June 30, 1996
compared to $303.12 for the six months ended June 30, 1995.
INTEREST AND OTHER INCOME
Interest and other income in the first half of 1996 decreased by
$293,000, or 7%, compared to the first half of 1995. The decrease is primarily
a result of a decrease in the management fee income resulting from the
Company's interest in the El Bronce Mine.
TOTAL INCOME
As a result of the above, the Company's total income decreased by
$4,614,000, or 39%, in the six months ended June 30, 1996, compared with the
prior year's comparable period.
EXPENSES
Total expenses in the first half of 1996, prior to the write-down of
mining properties, decreased by $4,504,000, or 31%, compared with the prior
year's six-month period. The decrease is primarily attributable to decreases
of $4,157,000 in interest expense resulting from reduced long-term debt and
the effect of capitalized interest and $1,124,000 in idle facilities expense.
In the second quarter of 1996, the Company reported
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the write-down of mining properties of $54,382,000 related to the Golden Cross
Mine and the Faride property.
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES
As a result of the above, the Company's loss from continuing operations
before income taxes amounted to $57,262,000 in the first six months of 1996
compared to $2,770,000 in the first six months of 1995. The Company reported
an income tax benefit of $514,000 for the first six months of 1996, compared
to $642,000 in the first six months of 1995. As a result, the Company reported
a net loss from continuing operations of $56,748,000, or $2.70 per share, in
the first six months of 1996, compared to a net loss of $2,128,000, or $.14
per share, in the first six months of 1995.
INCOME FROM DISCONTINUED OPERATIONS
As stated earlier, on May 2, 1995, the Company sold the Flexaust
division, a manufacturer of flexible hose and tubing. In the six months ended
June 30, 1995, the Company reported income from discontinued operations (net
of taxes) of $2,360,000, or $.15 per share.
NET INCOME (LOSS)
As a result of the above, the Company reported a net loss of $56,748,000,
or $2.70 per share ($2.85 attributable to common shareholders), in the first
six months of 1996, compared to net income of $232,000, or $.01 per share, 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, 1996 was approximately $184.2
million compared to approximately $105.6 million at December 31, 1995. The
ratio of current assets to current liabilities was 5.4 to 1 at June 30, 1996,
compared with 6.0 to 1 at December 31, 1995. The increase in the Company's
working capital at June 30, 1996 compared to December 31, 1995 is primarily
attributable to the issuance of $150 million of mandatory adjustable
convertible securities during the first half of 1996.
Net cash consumed by operating activities for the first six months of
1996 was $1.1 million compared with $1.6 million provided by operating
activities during the first six months of 1995. A total of $125.7 million of
cash was used in investing activities in the six months of 1996 compared to
$17.7 million provided by investing activities in the first six months of
1995. Of the $125.7 million used in investing activities during the first six
months of 1995, $115.0 million relates to the purchase of investment grade
intermediate term investments. The Company's financing activities provided
$156.7 million of cash during the
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first six months of 1996 compared with $12.8 million for the first six months
of 1995. As a result of the above, the Company's net cash increase for the
first six months of 1996 was $29.9 million compared with a net cash increase
of $32.0 million for the first six months of 1995.
For the years ended June 30, 1996 and 1995, the Company expended
$1,315,000 and $1,279,000, respectively, in connection with environmental
compliance activities at its operating properties. At June 30, 1996, the
Company had expended a total of approximately $8.2 million on environmental
and permitting activities at the Kensington property, which expenditures have
been capitalized as part of its development cost.
ACQUISITION OF REMAINING EL BRONCE INTEREST
The Company expects prior to the end of August 1996 to consummate the
purchase of 49% of the shares of Compania Minera CDE El Bronce. In July 1994,
the Company had made an agreement pursuant to which the Company acquired
operating control, a 51% interest in operating profits and an option to
acquire a 51% equity interest in the producing El Bronce Mine. With the
acquisition of the additional interest, the Company will own 100% of the mine.
The terms of the purchase are $10,500,000 cash, prepayment of the remainder of
the option price in the approximate amount of $3,800,000 and a net smelter
return royalty of 3% to be paid quarterly.
PUBLIC OFFERING OF MARCS
On March 8, 1996, the Company completed a public offering of $140.0
million of Mandatory Adjustable Redeemable Convertible Securities (MARCS). The
Company issued 6,588,235 shares of MARCS which were offered at a public
offering price of $21.25 per share. Each share of MARCS is mandatorily
convertible four years after issuance into 1.111 shares of Common Stock of the
Company, subject to adjustment in certain events, unless earlier converted by
the holder into Common Stock or redeemed for Common Stock by the Company. The
annual dividend payable on the MARCS will be $1.488 per share, payable
quarterly. On April 8, 1996, the Company sold an additional 489,598 shares of
MARCS to the underwriters as a result of their exercise of an overallotment
option granted to them in connection with the public offering. With the
exercise of the overallotment option, the Company sold a total of 7,077,833
shares of MARCS for a total offering price of $150.4 million which resulted in
net proceeds to the Company of $144.6 million.
ACQUISITIONS OF INTERESTS IN AUSTRALIAN GOLD MINING COMPANIES
GASGOYNE. As stated above, Coeur's Offer for outstanding Gasgoyne shares
expired on April 26, 1996. Pursuant to the Offer, which was conducted on the
basis of 7 Coeur shares of Common Stock plus A$96 in exchange for each 100
Gasgoyne shares, Coeur issued a total of 1,419,832 shares of Common Stock and
paid a total of approximately A$19.5 (or US$15.4 based on prevailing currency
exchange rates) to accepting Gasgoyne shareholders, and acquired a total of
20,293,691 Gasgoyne shares
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constituting 35.4% of Gasgoyne's outstanding shares (or 35.1% of Gasgoyne's
outstanding shares and shares subject to outstanding options). Pursuant to the
Sons of Gwalia offer for Gasgoyne shares that also expired on April 26, 1996,
Sons of Gwalia acquired 35,159,497 Gasgoyne shares constituting approximately
61.4% of Gasgoyne's outstanding shares (or 60.9% of Gasgoyne's outstanding
shares and shares subject to outstanding options). Coeur's cash payments to
Gasgoyne shareholders were financed by a loan facility with Rothschild
Australia Limited, which provides for a maximum of US$50 million of borrowings
at an annual interest rate equal to LIBOR plus 1.5%.
ORION. On January 24, 1996, at a cost of US$10.7 million, Coeur acquired
from Homestake Mining Company ("Homestake") 5.5 million shares of and an
option to acquire an additional 5.0 million shares of Orion held by Homestake.
(Earlier in January 1995 and in the last quarter of 1994, Coeur had acquired
3.3 million outstanding Orion shares for a total cost of approximately US$3.8
million.) On March 26, 1996, Coeur exercised the options previously acquired
from Homestake for the additional 5.0 million Orion shares for a purchase
price of US$3.8 million. As a result of the above acquisitions of Orion
shares, which were funded by Coeur's own cash resources, Coeur presently owns
approximately 19.2% of Orion's outstanding shares.
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 at an appropriate stage will seek to be dismissed from this action. At
this initial stage of the proceedings it is not possible to predict its
ultimate outcome.
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PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's Annual Meeting of Shareholders was held on May 14, 1996.
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
17,114,900 shares for and 100,293 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
17,112,438 shares for, 49,724 shares against, with 53,031 shares abstaining.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed herewith:
Exhibit No. Document
10(a) Credit Agreement dated June 6, 1996 between Registrant
and N.M. Rothschild & Sons, Ltd. (Australia)
11 Statement regarding computation of per share earnings.
(b) REPORTS ON FORM 8-K
On April 30, 1996, the Company filed a Form 8-K reporting under Item
2 thereof information relating to the expiration and results of the
Company's Offer for outstanding shares of Gasgoyne Gold Mines N.L.
(an Australian gold company). Amendment No. 1 to this report was
filed on May 10, 1996. Financial statements and pro forma financial
information to the Company's acquisition of Gasgoyne was furnished by
Amendment No. 2 to Form 8-K which was filed on July 1, 1996.
On July 12, 1996, the Company filed a Form 8-K reporting the write
down of its Golden Cross property.
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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 August 13, 1996 /s/DENNIS E. WHEELER
---------------------
Dennis E. Wheeler
Chairman, President and
Chief Executive Officer
Dated August 13, 1996 /s/JAMES A. SABALA
------------------
James A. Sabala
Senior Vice President
(Principal Financial and
Accounting Officer)