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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ___________________________
Commission File Number 1-8641
COEUR D'ALENE MINES CORPORATION
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(Exact name of registrant as specified in its charter)
Idaho 82-0109423
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
505 Front Ave., P. O. Box "I"
Coeur d'Alene, Idaho 83816
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(Address of principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (208) 667-3511
Securities Registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2002
6 3/8% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
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(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
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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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X /
State the aggregate market value of the voting stock held by
non-affiliates of the registrant. (The aggregate market value is computed by
reference to the last sale price of such stock, as of March 3,
1995.)$265,129,280
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 21, 1995.
15,595,840 shares of Common Stock, Par Value $1.00
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of the Form 10-K is incorporated
byreference from the registrant's definitive proxy statement which will be
filed pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this report.
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PART I
ITEM 1. BUSINESS
Coeur d'Alene Mines Corporation ("Coeur" or the "Company") is principally
engaged in the exploration, development, operation and/or ownership of gold and
silver mining properties located within the United States in Nevada, Idaho and
Alaska and abroad in New Zealand and Chile. The Company's most significant
properties are: (i) the Rochester Mine, a silver and gold surface mining
operation located in northwestern Nevada, which is owned and operated by Coeur
and which is believed to be one of the largest and lowest cost of production
primary silver mines in the United States and is a significant gold producer as
well; (ii) the Golden Cross Mine, an underground and surface gold mining
operation located near Waihi, New Zealand, which is operated by Coeur and in
which it has an 80% operating interest acquired on April 30, 1993; (iii) the
Galena Mine and the Coeur Mine, underground silver mines in the Coeur d'Alene
Mining District in Northern Idaho at which mining operations were suspended in
July 1992 and April 1991, respectively, due to then prevailing silver prices,
and in which the Company has an indirect 50% ownership interest through its
ownership of 50% of the capital stock of Silver Valley Resources Corporation, a
Delaware corporation formed by the Company and ASARCO Incorporated ("Asarco")
in January 1995; (iv) the Kensington Property, located north of Juneau, Alaska,
which was acquired in 1987 and is being developed as an underground gold mine
jointly by Coeur and its 50% joint venture partner; (v) the Fachinal Property,
located in southern Chile, South America, which Coeur acquired in 1990, at
which construction commenced on an open pit and underground mine and processing
plant in November 1994, with completion scheduled for the fourth quarter of
1995; and (vi) the El Bronce Mine, a Chilean gold mine of which the Company
acquired operating control in October 1994. In addition, in September 1994,
the Company entered into an agreement under which it has the right to acquire
up to a 51% operating interest in another Chilean gold mine, the Faride Mine.
Coeur also has interests in other properties which are the subject of silver or
gold exploration activities and on which no commercially mineable ore bodies
have been identified.
Through The Flexaust Company ("Flexaust") division of the Company's
wholly-owned subsidiary Callahan Mining Corporation ("Callahan"), Coeur is also
engaged in the manufacture and sale of lightweight flexible hose and duct and
metal tubing. Flexaust's products are used in a wide variety of industrial and
commercial applications for conveying air, dust, fumes and materials.
The Rochester Mine, the Golden Cross Mine and the El Bronce Mine, which
are operated by the Company, currently constitute the Company's sources of
mining revenues. The Rochester Mine accounted for approximately 67.9%, 56.2%
and 50.4% of the Company's total revenues in 1992, 1993 and 1994, respectively.
The Golden Cross Mine accounted for 23.9% of the Company's total revenues for
1993, 35.3% of total revenues for the eight-month period subsequent to its
acquisition on April 30, 1993 and 26.2% of total revenues in 1994. Flexaust
revenues accounted
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for approximately 17.9%, 12.2% and 11.0% of the Company's total revenues in
1992, 1993 and 1994, respectively. The El Bronce Mine accounted for
approximately 1% of the Company's total revenues in 1994 and 4% of total
revenues for the three-month period subsequent to its acquisition on October 3,
1994. The balance of revenues was attributable to interest, dividend and
other income.
The following sets forth definitions of certain important mining terms
used in this report. "Ore reserve" means that part of a mineral deposit which
could be economically and legally extracted or produced at the time of the
reserve determination. "Proven reserves" means reserves for which (a) quantity
is computed from dimensions revealed in outcrops, trenches, workings or drill
holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspections, sampling and measurement are spaced so
closely and the geologic character is so well defined that size, shape, depth
and mineral content of reserves are well-established. "Probable reserves"
means reserves for which quantity and grade and/or quality are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for
proven reserves, is high enough to assume continuity between points of
observation. References herein to "silver" mean an alloy with a minimum
fineness of 999 parts per 1000 pure silver; references to "gold" mean an alloy
with a minimum fineness of 995 parts per 1000 pure gold; and references to an
"ounce" mean a troy ounce, which is 31.10348 grams. References to "dore" mean
a bullion produced by smelting, containing gold, silver and minor amounts of
impurities. "Mineralized material" is a mineralized underground body which has
been intersected by sufficient closely spaced drill holes and/or underground
sampling to support sufficient tonnage and average grade of metal(s) to warrant
further exploration-development work. Such material does not qualify as an
"ore reserve" until a final and comprehensive economic, technical and legal
feasibility study based upon the test results is concluded. References to a
"ton" mean a short ton, which is 2,000 pounds.
ROCHESTER MINE
The Rochester Mine is a silver-gold, surface mine located in Pershing
County, Nevada, approximately 25 road miles northeast of Lovelock. The
Rochester orebody consists of disseminated precious-metals mineralization
hosted in Triassic volcanic rocks. The mine, which is accessible by road,
utilizes the heap-leaching process to extract both silver and gold from ore
mined using open-pit methods. The property consists of 16 patented and 552
unpatented contiguous mining claims and 74 mill-site claims totaling
approximately 10,000 acres. The Company owns 100% of the Rochester Mine by
virtue of its 100% ownership of its subsidiary, Coeur Rochester, Inc. Asarco,
the prior lessee, has a net smelter royalty interest which varies from 0 to 5%
provided the market price of silver equals or exceeds $17.00 per ounce.
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Based on the reserve-review report dated January 1995, of Independent
Mining Consultants, Inc., and accounting for production through December 31,
1994, in-place, proven and probable ore reserves, as of January 1, 1995, total
approximately 80.7 million tons averaging 1.259 ounces per ton silver and
0.0108 ounces per ton gold. The reserve estimate is based on a 1.20 ounce per
ton silver-equivalent, breakeven-design cutoff grade and a silver and gold
price of $5.50 and $385, respectively. The average grades do not reflect
losses in the recovery process nor any allowance for extractive dilution during
the mining process. The amount of proven and probable reserves will vary
depending on the relative price of silver and gold. A reserve estimate
calculated at various silver and gold prices are outlined as follows:
$Per Troy Ounce Ore Silver Gold Strip
Silver/Gold Tons Grade Grade Ratio
--------------- ------------ ------------- ------------ ------
(Thousands) (Ounces/ton) (Ounces/ton)
$6.50/$455 91,200 1.210 0.0102 1.59
$6.00/$420 88,500 1.214 0.0103 1.49
$5.50/$385 80,700 1.259 0.0108 1.56
$5.00/$375 75,400 1.283 0.0112 1.58
$4.50/$350 69,900 1.299 0.0115 1.47
$4.00/$350 64,700 1.319 0.0120 1.48
Based upon its experience and certain metallurgical testing, the Company
estimates recovery rates at 55% for silver and 85% for gold. Although, as
shown in the preceding table, the average strip ratio for the remaining life of
the mine will vary based primarily on future gold and silver prices. The
actual strip ratio may vary significantly from year-to-year during the
remaining life of the mine. The realization of the Company's production
estimates is subject to actual rates of recovery, continuity of ore grades,
mining rates, the levels of silver and gold prices and other uncertainties
inherent in any mining and processing operation.
The following table sets forth information for the periods indicated
relating to Rochester Mine production. Production may decrease during the
winter due to slower solution flow from the heaps. Such conditions are not
expected to effect annual production levels since mining, crushing and heap
construction are expected to continue during those months at normal rates,
resulting in increased dore' production during warmer weather. Also,
production will vary from time to time depending upon the area being mined.
Year Ended December 31,
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1990 1991 1992 1993 1994
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Ore mined (tons) 6,819,253 6,982,366 7,356,336 7,247,553 7,844,631
Silver (ounces) 4,779,518 5,707,700 5,431,369 5,943,894 5,937,770
Gold (ounces) 59,082 60,565 56,562 66,412 56,886
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The following table sets forth the costs of production per ounce of silver
and goldon a silver equivalent basis during the periods indicated at the
Rochester Mine. Such costs include mining, processing and direct
administration costs, financing costs, royalties and exploration expenses. To
obtain the silver equivalent, each ounce of gold produced is multiplied by the
same ratio as the then current ratio of the price of gold to the price of
silver. This silver equivalent gold production is then added to actual silver
production to determine total silver equivalent production.
Year Ended December 31,
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1990 1991 1992 1993 1994
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Cash costs per ounce $ 3.33 $ 3.28 $ 2.82 $ 3.55 3.57
Depreciation, depletion
and amortization
per ounce .43 .48 .40 .54 .59
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Total costs per ounce $ 3.76 $ 3.76 $ 3.22 $ 4.09 $ 4.16
======== ======== ======== ========= =======
A new life-of-mine leach pad and conveyor system commenced operations in
September, 1994. Initially, the new pad is expected to permit faster metals
recovery than the previous pad. The leach cycle at the Rochester Mine requires
approximately five years from the point ore is mined until all recoverable
metal is recovered. The above costs are based upon actual operating experience
at the mine. There can be no assurance that these costs will remain at the
same level for future operations.
GOLDEN CROSS MINE
Effective April 30, 1993, a wholly-owned subsidiary of the Company acquired
from a wholly-owned subsidiary of Cyprus Minerals Company all of the
outstanding capital stock of Cyprus Gold New Zealand Limited ("Cyprus NZ"), the
name of which was changed by the Company to Coeur Gold New Zealand Limited
("Coeur NZ"). The principal asset of Coeur NZ is its undivided 80%
participating joint venture interest in the Golden Cross Mine located near
Waihi on the North Island of New Zealand, approximately 100 miles southeastof
Auckland, and certain other exploration properties in New Zealand. The
remaining undivided 20% joint venture interest is owned by a subsidiary of The
Todd Company Limited, a New Zealand corporation.
In addition to all the capital stock of Cyprus NZ, the Company also
acquired from the former parent of Cyprus NZ a term loan receivable from Cyprus
NZ in the principal amount of approximately $53.2 million which was owed by
Cyprus NZ to its former parent and is now owed by Coeur NZ to the Company. A
cash purchase price of approximately $54 million was paid by the Company for
the Cyprus NZ capital stock and term loan. The Company accounted for the
acquisition as a purchase transaction.
The Golden Cross Mining License covers an area of approximately 961 acres
of which 274 acres are occupied by the current Golden Cross Mine operation.
The mine property includes the open-pit and underground mine facilities,
process plant, tailings pond, water treatment plant and mine
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offices which are all accessible by road from the town of Waihi. Construction
of the Golden Cross Mine began in April, 1990, and commercial production
commenced in December, 1991. Ore is mined from an extensive precious-metals
bearing, epithermal vein system hosted in Tertiary volcanic rocks.
Based upon reserve reports dated September 1, 1994 (open-pit reserve) and
December, 1994, (underground reserve) by Snowden Associates Pty Ltd, an
independent consulting firm, in-place, open-pit and underground, proven and
probable ore reserves less actual production through December 31, 1994, total
7.565 million tons averaging 0.079 ounces per ton gold. The open-pit reserve
estimate, totaling 6.642 million tons averaging 0.065 ounces per ton gold, is
based on a 0.029 ounce per ton gold cutoff, $400 per ounce gold price and a
currency exchange rate of US$ = 0.58 NZ$. The underground-reserve estimate,
totaling 924,000 tons averaging 0.182 ounces per ton gold, is based on a 0.117
ounce per ton cutoff, gold and silver prices of $385 and $5.50, respectively
and a currency exchange rate of $US = 0.61 NZ$. The reserve estimate reflects
an allowance for extractive dilution during the mining process, but does not
reflect losses during the recovery process. In addition, the reserve estimate
has identified 404,000 tons of mineralized material averaging 0.05 ounce per
ton gold which is insufficiently defined to be included in the reserve, but may
be mineable given additional definition or changes in economic parameters.
Silver reserves are empirically estimated using past production/recovery
ratios for silver:gold. Open pit and underground silver:gold ratios have
historically averaged 4:1 and 5:1, respectively. Total contained silver ounces
are estimated at 2,572,000 ounces, with an average grade of 0.34 ounces of
silver per ton, for open pit and underground proven/probable reserves. No
mineralized material grades for silver were estimated.
The following table sets forth Golden Cross Mine production data.
Information relating to production prior to April 30, 1993 was obtained from
the former owner of Cyprus NZ. Because the Company's acquisition of Cyprus NZ
was accounted for as a purchase, results of its operations prior to April 30,
1993 are not included in the Company's reported results of operations. The
following data reflects the amount of production attributable to Cyprus NZ's
80% interest in the mine:
Four Months Eight Months
Year Ended Ended Ended Year Ended
December 31, 1992 April 30, 1993 December 31, 1993 December 31, 1994
----------------- -------------- ----------------- -----------------
Ore mined (tons) 528,923 242,961 479,688 709,411
Gold (ounces) 69,899 26,360 56,898 67,400
Silver (ounces) 274,905 103,690 175,325 222,246
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The following table sets forth the costs of production per ounce of gold
and silver on a gold equivalent basis during the periods indicated at the
Golden Cross Mine. Such costs include mining, processing and direct
administration costs, royalties and exploration expenses, but do not include
financing costs associated with the term loan formerly owed by Coeur Gold NZ to
its parent. The production costs per ounce of gold for any period is computed
on a gold equivalent basis. Each ounce of silver produced is multiplied by the
same ratio as the then current silver-to-gold price ratio. This gold
equivalent silver production is then added to actual gold production to
determine the total gold equivalent production.
Four Months Eight Months
Year Ended Ended Ended Year Ended
December 31, 1992 April 30, 1993 December 31, 1993 December 31, 1994
----------------- -------------- ----------------- -----------------
Cash costs
per ounce $261.00 $245.00 $220.00 $277.00
Depreciation,
depletion
and amortization
per ounce 130.00 174.00 117.00 111.00
------- ------- ------- -------
$391.00 $419.00 $337.00 $388.00
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The above-reported Golden Cross Mine production and cost data relating to
operations subsequent to the commencement of commercial production in December
1991 reflect an initial under-utilization of the mine's productive capacity
associated with commencement of operations as well as other start-up costs
expected to be nonrecurring in nature. The 1994 increase in the cash costs of
production per ounce of gold was primarily attributable to the presence of a
harder grinding ore in the open pit requiring more milling and chemicals in the
processing and a lower grade of ore being provided from the underground portion
of the mine. The increase in ore reserves during 1994 enabled the Company to
lower the depletion at the mine, which had the effect of reducing non-cash
costs per ounce.
The Company estimates the current waste-to-ore strip ratio to be
approximately 4.32 to 1. Approximately 1550 tons per day of ore is currently
being mined at the open pit operation. The underground mine is a trackless
operation with a declining access from the surface, currently mining
approximately 700 to 850 tons per day of ore and utilizing mechanized cut and
fill and long hole benching methods. A 2,000 ton per day mill processes ore
from both the open pit and underground operations and Coeur NZ estimates that
approximately 89% of the gold and 60% of the silver contained in the ore mined
is recovered. The production of gold and silver is subject to the risks of
actual rates of recovery, continuity of ore grades, mining rates, the levels of
gold and silver prices and other uncertainties inherent in any mining and
processing operation. Tailings are treated by a proprietary process that
removes and recycles cyanide used in the milling process.
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The Company obtained favorable variances to the Golden Cross Mine's
effluent discharge permit by a decision from the Waikato Regional Council
issued in August 1993. While this decision has been appealed to the Planning
Tribunal by environmental organizations, and while the environmental
organizations filed a petition for enforcement of the permit in November 1993
with the Planning Tribunal which raises issues related to the permit, the
Company nevertheless believes that environmental issues will not hamper
operations of the Golden Cross Mine and that the appeal and petition will be
resolved favorably to the Company.
Coeur NZ expended approximately $579,313 during 1994 to explore properties
adjacent to the Golden Cross Mine and various other properties in the eastern
portion of the North Island of New Zealand. Such exploratory activities
included drilling, sampling and assaying. Coeur NZ plans during 1995 to expend
approximately $1.4 million to explore Waihi East, Waitekauri and three other
New Zealand licenses on the north island.
In addition to significantly increasing the Company's total gold production
capability, the acquisition of Coeur NZ geographically diversified the
Company's operations, may contribute to further expansion in the Pacific Rim
and may widen the Company's potential investor base.
COEUR D'ALENE MINING DISTRICT - SILVER VALLEY RESOURCES CORPORATION
In late 1994, the Company, Callahan and Asarco formed Silver Valley
Resources Corporation, a Delaware corporation ("Silver Valley"), and effective
January 1, 1995, the Company, Callahan and Asarco transferred certain assets,
including their interests in the Coeur Mine and the Galena Mine in the Coeur
d'Alene Mining District of northern Idaho, to Silver Valley. Specifically,
Asarco contributed to Silver Valley Asarco's (i) ownership interest in the
Joint Venture Agreement, dated August 31, 1964, related to the Coeur Mine
property; (ii) interest in the lease, dated January 15, 1947, relating to the
Galena Mine property; (iii) ownership interest in the Osburn tailings pond;
(iv) 75% interest in the royalty deficit related to the Galena Mine property;
and (v) ownership interest in certain other assets located in the Coeur d'Alene
Mining District. Coeur and Callahan contributed to Silver Valley Coeur's or
Callahan's (i) ownership and lease interest in the Coeur Mine property; (ii)
ownership and lease interest in the Galena Mine property; (iii) ownership
interest in the Caladay operating agreement; (iv) ownership interest in certain
properties surrounding the above properties; and (v) 25% interest in the
royalty deficit related to the Galena Mine property.
The Board of Directors of Silver Valley consists of six directors,
three of whom, including the Chairman of the Board, are appointed by Asarco and
three of whom, including the President, are appointed by Coeur. Pursuant to a
Shareholders' Agreement between the parties, certain specified corporate
actions may not be taken without the approval of at least 80% of the members of
Silver Valley's Board of Directors. Such actions include certain major capital
expenditures and
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asset sales, the commencement of mining operations and approvals of certain
operating plans and budgets, substantial borrowings, issuances of capital stock
and other specified significant actions. Certain other specified matters
require approval by a majority of the members of the Board. As to matters
requiring a majority vote, if the voting results in a tie at any Board Meeting,
the Chairman of the Board of Silver Valley, who also is the Chairman of the
Board of Asarco, will decide the issue. The President of Coeur also is the
President of Silver Valley and serves on its Executive Committee. Certain
other officers of Silver Valley are officers of Coeur or Asarco, which
companies may provide management and other services to Silver Valley upon the
request of its Board of Directors. Asarco and Coeur furnish certain management
and other services to Silver Valley pursuant to a Management Services Agreement
between them and Silver Valley.
It is expected that under a two-year plan of development, improving
infrastructure and diamond drilling to extend reserves and mine life, Silver
Valley will invest approximately $25 million in the further development and
exploration at its properties. The reopening of the Galena and Coeur Mines is
dependent upon the favorable action of the Board of Directors of Silver Valley,
which will base its decision on several factors, including silver prices.
GALENA MINE
Callahan, which became a wholly-owned subsidiary of the Company on December
31, 1991, owned the Galena Mine located in the Coeur d'Alene Mining District of
northern Idaho, prior to the transfer of such ownership to Silver Valley,
effective January 1, 1995. The Galena Mine property consists of approximately
1,100 acres lying immediately west of the City of Wallace, Shoshone County,
Idaho adjoining the Coeur Mine's eastern boundary. The property consists of 52
patented mining claims in which Callahan owns a fee title, and 25 unpatented
mining claims, paramount title to which is vested in the United States. The
Galena Mine is an underground silver-copper mine which is served by two
vertical shafts.
On July 26, 1992, Asarco, which was the Galena Mine operator, suspended
operations at the Galena Mine due to then prevailing silver prices and placed
the property on a care and maintenance basis to conserve ore reserves. Silver
Valley has the power to make a decision as to the resumption of production at
the mine. Coeur cannot predict whether or when operations will resume there.
Operating losses were incurred at the Galena Mine throughout 1990, 1991 and
1992. As a result, Callahan's revenues from the Galena Mine were limited to
minimum royalty payments of $87,000 in 1990, $91,418 in 1991 and $45,809 in
1992.
Based on the ore-reserve estimate, dated July 1, 1992, of Asarco, proven
and probable ore reserves at the Galena Mine total 951,000 tons averaging 15.07
ounces per ton silver, 8.80% lead and 0.49% copper. The Asarco reserve
estimate is based on a minimum diluted mining width of 5.0
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feet for most silver-copper and silver-lead veins and 5.5 feet for lead-zone
veins. Cutoff grade is based on the cost of breaking and producing ore from a
stope, but do not include development costs and administrative overhead. The
cutoff grade varies from area-to-area within the mine due to changing
silver-copper ratios of the ore.
The reserve estimate has also identified an additional 856,000 tons of
mineralized material which has not been included in the reserve, but given
additional definition drilling or more favorable silver prices, may become
mineable. This material averages 8.84 ounce per ton silver, 5.73% lead and
0.43% copper.
The following table sets forth information, for the periods indicated,
relating to total Galena Mine production:
Year Ended December 31,
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1988 1989 1990 1991 1992
--------- --------- --------- --------- ----------
(through
July)
Ore mined (tons) 202,097 201,494 173,687 182,836 91,617
Silver (ounces) 3,048,633 3,080,539 3,066,246 3,278,650 1,572,501
Copper (pounds) 1,996 045 2,058,393 1,808,408 1,993,649 1,064,085
Gold (ounces) 459 323 337 332 143
The Company's previous ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan on December 31, 1991,
amounted to 50% through June 11, 1992, and 62.5% thereafter until such
ownership was transferred to Silver Valley effective January 1, 1995.
The total cost of production per ounce of silver (net of credit for copper
byproduct), including mining, processing, direct administrative costs and
exploration expenses, but not including financing costs, royalties and smelter
charges, amounted to $4.50 in 1988, $4.35 in 1989, $4.19 in 1990, $3.94 in 1991
and $4.23 in 1992 prior to the temporary discontinuation of operations at the
Galena Mine on July 26, 1992. Such costs are not necessarily indicative of
actual costs that would be incurred if and when mining operations resume at the
mine.
COEUR MINE
The Coeur Mine is an underground silver mine located in the Coeur d'Alene
Mining District of Shoshone County in northern Idaho, and consists of
approximately 868 acres comprised of 38 patented mining claims, and four
unpatented mining claims paramount title to which is vested in the United
States. Commercial production began in 1976, and total pre-production
expenditures of approximately $20 million were recovered by April 1979, at
which time the Company commenced receiving revenues from its non-operating
joint venture interest in the mine. Asarco is the operator of the Coeur Mine
pursuant to a joint venture agreement with the Company, Callahan and, prior to
November 30, 1990, Hecla. Until November 30, 1990, the Company owned 40% of
the ores
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produced from the Coeur Mine and was obligated to pay 40% of the costs. On
November 30, 1990, the Company purchased Hecla's 5% interest thereby increasing
the Company's interest to 45%. Effective December 31, 1991, Coeur increased
its non-operating joint venture interest in the mine to 50% as a result of
Coeur's acquisition of Callahan, which had acquired a 5% interest in the mine
in March,1968. Effective January 1, 1995, Coeur and Asarco transferred their
interests in the Coeur Mine to Silver Valley.
Asarco suspended operations at the Coeur mine on April 3, 1991 due to then
prevailing silver prices and placed the property on a care and maintenance
basis to conserve ore reserves. Silver Valley has the power to make a decision
as to the resumption of production at the mine. Coeur cannot predict whether
or when operations will resume there.
The following table sets forth information, for the periods indicated,
relating to total Coeur Mine production:
Year Ended December 31,
---------------------------------------------------------
1988 1989 1990 1991
--------- --------- --------- ---------
(through
April 3)
Ore mined (tons) 144,386 159,045 147,883 37,165
Silver (ounces) 2,155,623 2,198,465 379,856 379,856
Copper (pounds) 1,893,318 2,002,864 335,865 335,865
Gold (ounces) 313 313 433 80
The Company's ownership interest in the above production, giving
retroactive effect to Coeur's acquisition of Callahan's 5% interest on December
31, 1991, amounted to 45% prior to November 30, 1990 and 50% thereafter until
such ownership was transferred to Silver Valley Resources effective January 1,
1995.
The total cost of production per ounce of silver (net of credit for copper
byproduct), including mining, processing, direct administration costs and
exploration expenses, but not including financing costs, royalties and smelter
charges, amounted to $4.71 in 1988, $4.36 in 1989, $4.68 in 1990 and $5.38 in
1991 prior to the suspension of operations at the Coeur Mine on April 3, 1991.
Such costs are not necessarily indicative of actual costs that would be
incurred if and when mining operations resume at the mine.
Based on the ore-reserve estimate, dated January 1, 1991, of Asarco, proven
and probable ore reserves in the Coeur Mine total 377,000 tons averaging 17.33
ounces per ton silver and 0.80% copper. The Asarco reserve estimate is based
on a minimum mining width of 4.5 to 5.0 feet with a minimum dilution of 1.0
foot from each margin of the vein. Cutoff grades used in the reserve estimate
are estimated from costs based on the unit superintendent's forecast for 1991.
The reserve estimate has also identified an additional 172,000 tons of
mineralized material which has not been included in the reserve, but given
additional definition drilling or more favorable precious silver prices, may
become mineable. This material averages 14.21 ounce per ton silver and 0.64%
copper.
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KENSINGTON PROPERTY JOINT VENTURE
On August 5, 1987, Coeur purchased certain patented and unpatented claims
located approximately 50 miles north of Juneau, Alaska known as the Kensington
gold property (the "Kensington Property") from Placid Oil Company of Dallas,
Texas ("Placid"). The purchase price paid to Placid for the Kensington
Property was $20 million, of which $10 million was paid by Coeur and the $10
million balance was paid by Echo Bay Mines, Ltd., a Canadian corporation ("Echo
Bay Parent"). On the same date, Coeur conveyed an undivided 50% interest in
the Kensington Property to Echo Bay Exploration, Inc., a Delaware corporation
("Echo Bay") that is a wholly-owned subsidiary of Echo Bay Parent, and the
remaining undivided 50% interest in the Kensington Property to Coeur-Alaska,
Inc., a Delaware corporation ("Coeur-Alaska") that is a wholly-owned subsidiary
of the Company.
Coeur-Alaska and Echo Bay entered into a joint venture agreement pursuant
to which the companies agreed to participate in the exploration, evaluation,
development and mining of the Kensington Property. Echo Bay is the operator of
the Kensington Property under programs that must be approved by a management
committee composed of an equal number of members from both Echo Bay and
Coeur-Alaska. The joint venture agreement permits either party, under certain
circumstances, to increase its ownership interest in the venture by paying the
other party's appropriate share of exploration and development costs in the
event the other party declines or is unable to fund its share.
The Kensington orebody consists of an extensive, precious-metals bearing,
mesothermal, quartz-stockwork vein system hosted in Cretaceous intrusive rocks.
Based on Echo Bay's ore-reserve study, as audited during January 1995, by
Woollett Consulting Ltd., independent consulting geologists, Kensington
Property proven and probable ore reserves, as of December 31, 1994, are
estimated to be 13.641 million tons averaging 0.143 ounce of gold per ton
totaling 1.946 million ounces of gold. An additional 3.188 million tons of
mineralized material averaging 0.147 ounce per ton gold has been identified,
but is insufficiently defined to be included in the reserve. The Kensington
ore zone has not been fully defined and several peripheral veins remain to be
explored. The reserve estimate reflects the effects of extractive dilution
during the mining process, but not losses during the recovery process. A gold
price of $375 per ounce was used in calculating the reserve estimate. Based
upon metallurgical testing work, the Company expects that 92% of the gold
contained in ores milled will be recovered. The joint venture has completed
metallurgical testing primarily consisting of bench-scale test work, including
grinding, flotation, cyanide leaching, carbon recovery and other tests, and a
subsequent pilot scale test conducted on a bulk ore sample to simulate
full-scale plant operations and to confirm selected operating parameters.
During 1994, the activities at Kensington were directed toward the
permitting process. As of December 31, 1994, the Company had invested a total
of $52,139,488 (including capitalized interest of $11,796,897) in the
Kensington Property.
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Based on a comprehensive feasibility study prepared by an independent
engineering firm engaged to perform detailed design and engineering at the
Kensington Property, Coeur estimates that in the event it is decided to proceed
with the construction of the Kensington facility, approximately $180 million
(in addition to monies previously expended), 50% of which will be the
responsibility of Coeur, will be required in order to place the property into
commercial production. That estimate is based upon the engineering firm's
completion of 30% of the engineering upon the project to date.
Further development of the Kensington Property is contingent upon several
factors, including gold prices and the ability of the joint venture to obtain
valid permits. The Kensington feasibility study contemplates a gold price of
$400 per ounce and it is unlikely that the project facility will be constructed
unless the venturers are able to satisfy themselves that this gold price is
reasonably achievable. The construction of the project cannot commence until
all necessary permits are obtained. The major permits necessary for the
construction and operation of the facility have been obtained with the
exception of two, the Army Corps of Engineers Section 404 Permit and the
Environmental Protection Agency National Pollutant Discharge Elimination System
Permit. Kensington is intensively regulated under various local laws and
regulations. Numerous permits are required by government agencies which
authorize construction and operations.
The United States Forest Service ("USFS") approved the environmental
impact statement ("EIS") in February 1992. Thereafter, administrative appeals
were filed by parties opposed to the project. The appeals alleged that the EIS
did not satisfy the requirements of the National Environmental Policy Act due
to, among other alleged reasons, inadequacy of baseline data used to analyze
environmental impacts and failure to adequately consider alternative methods of
mining and waste disposal. The appellants sought to prevent USFS approval of an
operating plan for the project pending completion of EIS meeting all legal
requirements. On July 7, 1992, the USFS approved the Company's proposed Plan
of Operations for the project. On July 28, 1992, the USFS ruled against the
appellants upon their appeal. While Coeur believes a court would uphold the
USFS determination in the event it were to be further appealed, no assurance
can be given as to the outcome of any such appeal if filed. On September 16,
1992, parties opposed to the project requested that the USFS withdraw its
decision to approve the operating plan on the grounds that the plan was not
complete at the time it was approved. The USFS decided not to withdraw the
July 7, 1992 approval of the Plan of Operations on November 10, 1992.
In addition to the USFS decision to permit operation, other key permits are
required by the U.S. Environmental Protection Agency (the "EPA"), the U.S. Army
Corps of Engineers, the State of Alaska and the City and Borough of Juneau. In
November 1992, the project's Large Mine Permit was approved bythe City and
Borough of Juneau. On April 30, 1993, a group opposed to the project filed an
appeal in state court to that approval, which has been denied. The motion is
now pending before
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the Alaska Supreme Court. Additional permitting requirements include the EPA
National Pollutant Discharge Elimination System ("NPDES") permit for discharge
of effluent from the tailings impoundment and the U.S. Army Corps of Engineers
"fill" permit.
In November 1994, the EPA issued a draft of its Technical Assistance Report
("TAR") calling for the redesign of portions of the project and certain
additional data and recommending that certain specific actions should be taken
in order for the Kensington project to meet environmental requirements and
comply with the Clean Water Act. These actions include providing additional
waste water treatment, a redesign to address peak flow information, further
analysis of avalanche hazard, a movement of the outfall into deeper water to
assure adequate mixing, additional testing for potential acid generation and
the performance of additional analysis on ore samples to project effluent
quality. Compliance with the TAR should enable the U.S. Army Corps of
Engineers to complete its work for issuance of a federal permit for
construction of a water treatment facility at the Kensington property pursuant
to Section 404 of the Clean Water Act. If, in the final TAR, the EPA adheres to
the recommendations in the draft, the Company believes it is feasible to make
design changes and furnish necessary data. It is anticipated that a final TAR
will be furnished by the EPA to the Army Corps of Engineers in the second
quarter of 1995. However, no assurance can be given as to when or whether the
required federal permit will be issued.
December 20, 1993, a coalition of environmental and citizen groups,
including the National Wildlife Federation and the Sierra Club, filed a
complaint in the Federal District Court of Alaska against the EPA and the U.S.
Army Corps of Engineers challenging the two federal agencies' interpretation of
the Clean Water Act regulations as they relate to the Kensington Property and
another mining project near Juneau, Alaska. Under that interpretation,
announced in October 1992, NPDES permits would not be required for discharge of
tailings from process facilities into proposed tailings impoundment ponds
constructed in "waters of the United States." The suit was dismissed by the
court on July 15, 1994, on the grounds that it was not ripe for decision.
On July 15, 1993, the Company acquired a 66 2/3% interest, and in August,
1994 the Company acquired the remaining 33 1/3% interest in the Jualin
property, an exploratory property located adjacent to the Kensington Property,
and an exploratory property in Mexico. The Jualin property consists of
approximately 9,400 acres, of which approximately 345 acres of patented claims.
The Company's initial 66 2/3% interest in the Jualin property was acquired in
connection with the Company's purchase of 26% of its capital stock of
International Curator Resources, Ltd.(ICR), a Canadian corporation. The 33
1/3% interest in the property was acquired by the Company from ICR in
connection with the Company's sale of ICR shares between August 1994 and
February 1995.
FACHINAL PROPERTY
In January 1990, the Company acquired, through its wholly-owned subsidiary,
CDE Chilean Mining Corporation, ownership of the Fachinal
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gold and silver project (the "Fachinal Property") and six exploration projects
located in Chile. Coeur acquired these properties for $5 million by purchasing
a wholly-owned subsidiary of Freeport Minerals Company, which held the
exploitation and exploration concessions for this area of known mineralization.
The Fachinal property covers about 90 square miles and is located south of
Coihaique, the capital of Region XI in southern Chile, and approximately 10
miles west of the town of Chile Chico. The project lies on the east side of
the Andes at an elevation from 600 to 4,500 feet and is serviced by a gravel
road from Chile Chico. The Fachinal property is believed to contain at least
67 veins containing gold and silver and at least five zones of mineralization.
The Company has been granted exploitation concessions (the Chilean equivalent
to a patented claim except that the owner does not have title to the surface
which must be separately acquired from the surface owner) covering the
mineralized areas of Fachinal property as well as the necessary surface rights
to permit mining there.
As of December 31, 1994, the Company had expended a total of $35,945,229
(including capitalized interest of $4,596,960) on the Fachinal Property.
Currently, three mineral systems are the primary development targets, namely
Laguna Verde, Temer, and Guanaco. To date, the work program at the Fachinal
Property has included diamond drilling, underground drifting and cross-cutting
at Laguna Verde, Temer and Guanaco, initiation of metallurgical testing, mine
modeling, mine planning and cost estimating.
Following the completion by an independent engineering firm of a final
feasibility study, the Company announced in July 1994 its decision to proceed
with the construction of mining facilities on the Fachinal property. The
Company expects that the new mining facilities will be completed in the fourth
quarter of 1995 and will include both underground and open pit mining
operations, with an estimated 1,650 per ton day throughput. The milling
facility will use conventional crush/grind/floatation methods to produce a
gold/silver concentrate, which will then be shipped to off site smelters for
processing. The total project construction cost is expected to approximate
$41.8 million. When completed, the Fachinal Mine will be one of the southern
most mining operations in the world, employing approximately 225 workers near
the town of Chile Chico, located 800 miles south Santiago at an elevation of
approximately 1,200 feet. The Company estimates that the Fachinal Mine will
produce approximately 41,000 ounces of gold and 2.6 million ounces of silver
during its first full year of production.
Economic, precious metals bearing mineralization at Fachinal occurs in an
extensive epithermal, quartz-veins system hosted in Jurassic volcanic rocks.
Based on a reserve-review report dated April 1994, by Micon International
Limited, total, in-place, open-pit and underground, proven and probable
reserves at the Fachinal property are approximately 4.547 million tons
averaging 0.07 ounces per ton gold and 3.219 ounces per ton silver. The
Fachinal open-pit reserve estimate, totaling 3.562 million tons averaging 0.057
ounces per ton gold and 2.55 ounces per ton
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silver, is based on an internal cutoff grade of 0.04 ounces per ton equivalent
gold. The underground reserve is based on internal cutoff grades ranging form
0.088 to 0.102 ounces per ton equivalent gold. Both reserve estimates are
based on gold and silver prices of $375 per ounce and $5.00 per ounce,
respectively. Average grades reflect extractive dilution, but not losses
during the recovery process. The Company estimates, based upon thorough
metallurgical testing, recovery rates between 86.8 - 94.6% for gold and 82.2 -
92.3% for silver. The open-pit reserve estimate has also identified 872,000
tons of mineralized material, averaging 0.05 ounce per ton gold and 1.14 ounce
per ton silver. Likewise, the underground resource estimate has identified an
additional 656,000 tons of mineralized material averaging 0.11 ounce per ton
gold and 6.01 ounces per ton silver. Confidence in these additional tonnages
is insufficient for them to be included in the Fachinal reserve. Numerous other
attractive exploration targets with known precious-metals mineralization remain
to be evaluated.
Although the government and economy of Chile has been relatively stable in
recent years, the ownership of property in a foreign country is always subject
to the risk of expropriation or nationalization with inadequate compensation.
Any foreign operation or investment may also be adversely affected by exchange
controls, currency fluctuations, taxation and laws or policies of particular
countries as well as laws and policies of the United States affecting foreign
trade, investment and taxation.
EL BRONCE MINE
In July 1994, the Company entered into an agreement with Compania Minera El
Bronce de Petorca, a Chilean corporation ("CMEB"), pursuant to which the
Company acquired an option exercisable through July 1997 to purchase from CMEB
a 51% equity interest in the producing El Bronce Mine. The El Bronce Mine is
an underground, gold-silver mine located on approximately 33,000 acres in the
Andean foothills about 90 miles north of Santiago, Chile and is accessible by
road. The property consists of 64 exploitation concessions and 10 exploration
concessions. Surface rights to permit mining on the property are leased from
private owners. Ore is produced from an extensive, precious-metals bearing,
epithermal, quartz-vein system hosted in Cretaceous volcanic rocks. Pursuant
to the agreement, the Company made an initial payment to CMEB of $750,000 on
July 25, 1994, an option payment of $4,050,000 on October 14, 1994 and expended
$1.2 million during the balance of 1994 for exploration and mine development
activities. In order to exercise its option to acquire a 51% equity interest
in the mine, the Company will be required to invest an additional $20.4
million and also to invest at least $5 million (including 1994 s expenditures)
prior to July 1996 for exploratory and developmental activities designed to
increase ore reserves and increased annual gold production to 65,000 ounces
from the present level of 40,000 ounces of gold.
In October 1994, the Company assumed operating control of the El Bronce
Mine, in which the Company has 51% interest in any operating profits. The
Company plans to maintain the 500 to 600 ton per day milling rate at the mine,
improve the mining method to increase ore
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reserves and to restructure the work force. The mill currently has a 1,200 ton
per day capacity. In addition, the Company has commenced exploratory
activities at three main exploration sites within the 17,800 acre area
surrounding the mine.
Based on a reserve-report review dated January, 1995 by Compania Minera
CDE El Bronce, in-place, proven and probable ore reserves on the El Bronce
property total 393,000 tons averaging 0.172 ounces per ton gold. An additional
627,000 tons of mineralized material, averaging 0.18 ounce per ton gold, has
been identified, but is currently insufficiently defined to be included in the
reserve. The reserve is based on an internal cutoff of 0.058 ounce per ton
gold. The Company estimates, based on past experience and metallurgical
testing, mill recovery rates are 91.5% for gold and 90% for silver. The
mineralized system remains geologically open both along strike and down-dip.
The following table sets forth El Bronce Mine production data subsequent to
its acquisition on October 3, 1994. As stated above, the Company has a 51%
interest in any operating profits from the mine. The Company's 5l% interest in
the mine's operating profits from October 3, 1994 through December 31, 1994
amounted to $1,023,537.
Three Months
Ended
December 31, 1994
-----------------
Ore mined (tons) 47,462
Gold (ounces) 9,712
Silver (ounces) 39,605
The following sets forth the costs of production per ounce of gold and
silver on a gold equivalent basis during the period subsequent to October 3,
1994 at the El Bronce Mine. Such costs include mining, processing and direct
administration costs, royalties and exploration expenses. The production costs
per ounce of gold for the period is computed on a gold equivalent basis. Each
ounce of silver produced is multiplied by the same ratio as the then current
silver-to-gold price ratio. This gold equivalent silver production is then
added to actual gold production to determine the total gold equivalent
production.
Three Months
Ended
December 31, 1994
-----------------
Cash costs per ounce $ 174.67
Depreciation,
depletion and
amortization per ounce 20.40
--------
$ 195.07
========
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The Company plans to spend expend approximately $3.9 million during 1995 on
exploratory anddevelopmental activities at the El Bronce Mine and surrounding
areas.
THE FARIDE MINE
In September 1994, the Company entered into an agreement with Minera Cerro
Dominador, a Chilean corporation ("MCD") pursuant to which the Company acquired
an option, exercisable through January 15, 1998, to purchase from MCD a 51%
operating interest in the fully-developed Faride Mine. The Faride property is
located in northern Chile approximately 800 miles north of Santiago in the
Andean foot-hills of Region II and is accessible by road. It consists of 36
exploitation concessions covering approximately 7,000 acres. Surface rights to
permit mining are under lease from the Chilean government. Mineralization at
Faride occurs in an extensive, precious and base-metal bearing, epithermal,
quartz-vein system hosted in Tertiary granitic-intrusive rocks.
The Company can acquire its 51% operating interest by paying MCD $4 million
over a four-year period and investing $3.5 million in exploration. Upon
exercise of that option, the Company also has the right to purchase 51% of the
crushing and milling facility at the mine for an additional $8 million.
The Faride property includes the fully-developed, underground Faride Mine,
which was built to produce 660 tons of ore per day, and a 46,200 ton per month
floatation mill, which is undergoing expansion to 77,000 tons per month
capacity. The mine has not been operational since 1988.
The Company expended approximately $542,873 during 1994 to conduct surface
and underground drilling in order to define reserves and to increase the
resource base at the mine.
Based on a reserve-review report dated July 1990 by Minera Cerro Dominador,
in-place, proven and probable ore reserves on the Faride property total
approximately 1.075 million tons averaging 0.078 ounce per ton gold, 3.82 ounce
per ton silver and 0.88% copper. An additional 566,000 tons of mineralized
material, averaging 0.04 ounce per ton gold and 4.5 ounces per ton silver, has
been identified during the reserve estimation. This material is insufficiently
defined to be included in the reserve. The reserve estimate is based on gold,
silver and copper prices of $400 per ounce, $6.20 per ounce and $0.80 per
pound, respectively. Average grades reported in the reserve estimate do not
reflect losses during the recovery process nor allowance for extractive
dilution. Estimated recovery rates based on using a traditional milling
process are approximately 80% gold, 75% silver and 25% copper. The vein system
remains geologically open both down-dip and along strike.
The mill currently processes copper slag from Chuquicamata on a contract
that is expected to terminate between 1996 and 1998. During
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late 1994, the Company conducted extensive sampling and completed approximately
3,000 meters of surface and underground drilling to develop and define
sufficient reserves.
The Company s work program consists of additional drilling to further
delineate the ore body to enable the commencement of a feasibility study late
in 1995.
SILVER AND GOLD PRICES
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. The volatility of such prices is
illustrated by the following table, which sets forth the high and low prices of
silver (as reported by Handy and Harman) and gold (London final) per ounce
during the periods indicated:
Year Ended December 31,
-------------------------------------------------------------------------
1991 1992 1993 1994
---------------- ---------------- ----------------- ---------------
High Low High Low High Low High Low
------- ------- ------- ------- ------- ------- ------- ------
Silver $ 4.53 $ 3.58 $ 4.32 $ 3.63 $ 5.37 $ 3.55 $ 5.76 $ 4.63
Gold $403.00 $344.25 $359.60 $330.35 $405.60 $326.10 $396.25 $369.65
MARKETING
Coeur has historically sold its gold and silver from its mines both
pursuant to forward contracts and at spot prices prevailing at the time of sale
to various precious metals firms. As of December 31, 1994, the Company has
entered into forward contracts to deliver a total of 115,000 ounces of gold at
an average price of $416.20 per ounce through 1996.
EXPLORATORY MINING PROPERTIES
Coeur, either directly or through its wholly-owned subsidiaries, owns,
leases and has interests in certain exploration-stage mining properties located
in the United States, Mexico, Chile, and New Zealand. Giving retroactive
effect to the Company's acquisition of Callahan, exploration expenses of
approximately $2.3 million, $2.5 million and $3.9 million were incurred by the
Company in connection with exploration activities in 1992, 1993 and 1994,
respectively.
MANUFACTURING -- THE FLEXAUST COMPANY
Flexaust manufactures several lines of lightweight flexible hose and duct
and metal tubing at plants located in Warsaw, Indiana and Ontario, California.
In September 1992, the manufacturing operations previously located in Amesbury,
Massachusetts were consolidated at the Flexaust facilities located in Warsaw,
Indiana and Ontario, California in order to achieve efficiencies and economies
of scale. Flexaust's
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major product line consists of Flexaust close-pitch hose for low pressure and
suction use as well as severe flexing conditions. A second line consists of
Springflex wide-pitch retractable duct. Both lines are made primarily of
neoprene-coated synthetic fabrics, wire-reinforced and are approximately
one-third the weight of metal duct work of comparable load-carrying capacity.
They are used in a wide variety of industrial and commercial applications for
conveying air, dust, fumes and other materials.
Flexaust also produces Genesis , which is plastic hose used in industrial
markets as well as commercial cleaning and vacuum applications; and Bendway
duct, a line of metal tubing made of aluminum or stainless steel which also has
a wide variety of industrial applications.
In addition, Flexaust participates in two joint ventures: Flexadux,
Incorporated, a 50%-owned U.S. company, formed in partnership with a European
producer, which makes and sells plastic industrial hose in the United States
and Canada; and Flexaust GmbH, also 50%-owned, located in West Germany, which
produces and markets Flexaust's regular line of wire-reinforced neoprene-coated
fabric hose in Europe. In both joint ventures, Flexaust and its partner share
equally in costs and profits. Each of the joint ventures has an exclusive
license to produce and market the respective joint venture's products. These
licenses are terminable upon one year's prior notice.
Flexaust's products are sold principally for industrial use through
distributors, dealers and Flexaust's own sales force. Approximately 850
stocking distributors and dealers market Flexaust's products, and sales to
distributors and dealers have averaged approximately 80% of total sales in the
last three years. There are no continuing contracts for the sale of products.
Approximately 80% of the products sold are standard while the remaining 20% are
made to order or contain variations from standard. U.S. government sales and
foreign sales are not material. There are no seasonal aspects to Flexaust's
operations. Pre-tax income contributed by Flexaust in 1992, 1993 and 1994
amounted to approximately $1.1 million, $1.1 million and $1.2 million,
respectively.
GOVERNMENT REGULATION AND LEGAL PROCEEDINGS
The Company's mining and mineral processing operations and property
exploration and development activities are subject to extensive federal, state
and local laws governing the protection of the environment, prospecting,
development, production, taxes, labor standards, occupational health, mine
safety, toxic substances and other matters. Coeur believes it is in substantial
compliance with all applicable laws and regulations.
For the years ended December 31, 1992, 1993 and 1994, the Company expended
$1,050,015, $2,404,698 and $2,974,438 respectively, in connection with
environmental compliance activities at its operating
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properties. Furthermore, as discussed under "Bunker Hill Superfund Site"
below, the Company agreed in October 1993 to settle an environmental matter for
$1,230,000. In addition, as of December 31, 1994, the Company had expended
approximately $4.6 million on environmental and permitting activities at the
Kensington Property, which expenditures have been capitalized as part of its
development cost. Future environmental expenditures will be determined by
governmental regulations and the overall scope of the Company's operating and
development activities.
Federal Environmental Laws
Among the numerous federal environmental laws to which the Company is
subject is the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("Superfund" or "CERCLA"), which is the most important federal
program for remediating environmental dangers caused by hazardous substances.
CERCLA provides for the possible imposition of joint and several liability upon
potentially responsible parties ("PRPs"), including current and past owners and
operators at the site involved, persons who generated or otherwise arranged for
the disposal of hazardous substances released at the site, and persons who were
involved in the transport, treatment or disposal of hazardous substances
released at the site. The Resource Conservation and Recovery Act of 1976
("RCRA") established a comprehensive regulatory framework for the management of
hazardous waste at active facilities, complementing the Superfund Program which
more often addresses inactive waste sites. RCRA sets up a system for the
management of hazardous wastes (including leach spoil waste containing cyanide
such as the waste generated by the Rochester Mine), imposing requirements for
performance, testing and record keeping upon parties who generate, transport,
treat, store or dispose of waste.
The Company's commitment to environmental responsibility has been
recognized in eight awards received since 1987, which included the
Dupont/Conoco Environmental Leadership Award, awarded to the Company on October
1, 1991 by a judging panel that included representatives from environmental
organizations and the federal government and the "Star" award granted on June
23, 1993 by the National Environmental Development Association. The receipt of
such awards does not relieve the Company of its obligations to comply with all
applicable environmental laws.
Bunker Hill Superfund Site.
The Company knows of no material environmental liabilities to which it
currently is subject. During October 1993, the Company and Callahan negotiated
a tentative settlement agreement with the U.S. Environmental Protection Agency
(the "EPA") and a group of other companies that are potentially responsible
parties ("PRPs") in connection with the Bunker Hill Superfund site. The
Company and Callahan were notified in February 1990 by the EPA that they were
PRPs in connection with that site, where the EPA claims there is a need for
cleanup action under CERCLA. The negotiated settlement agreement called for
the Company and
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Callahan to pay a total of $1,230,000 to a group of other PRPs in order to
remove the Company and Callahan from any additional cleanup liability relating
to the site. Accordingly, the Company recorded a non-recurring environmental
settlement expense of $1,230,000 during the third quarter of 1993. An order
approving the settlement was issued by the Unites States District Court for the
District of Idaho on November 17, 1994 and the settlement amount was paid on
December 16, 1994.
Mining Act of 1872.
Legislation is presently pending in the U.S. Congress to change the Mining
Law of 1872 (the "Mining Act") under which the Company holds mining claims on
public lands. It is considered possible that the Mining Act will be amended or
be replaced by stricter legislation in 1995. Some of the legislation being
discussed contains strict new environmental standards and conditions,
additional reclamation requirements and extensive new procedural steps which
would likely result in delays in permitting. The legislation may also impose
an 8% gross royalty on the value of minerals mined on public lands, payable to
the U.S. Government. Whether changes will be enacted or the extent of any
changes is not presently known and the potential impact on the Company's United
States activities is difficult to predict.
New Zealand and Chile Government Regulations
The mining properties located in New Zealand and Chile are subject to
various government laws and regulations pertaining to the protection of the
air, surface water, ground water and the environment in general, as well as the
health of the work force, labor standards and the socioeconomic impacts of
mining facilities upon the communities. The Company believes it is in
substantial compliance with all applicable laws and regulations in both Chile
and New Zealand, and believes that it can comply with the laws in Chile which
will govern operations at Fachinal.
EMPLOYEES
At March 1, 1995, the Company employed a total of 1,007 full-time
employees, of which 46 are located at the Company's executive offices in Coeur
d'Alene, Idaho, 307 are employed at the Rochester Mine, 169 are employed at the
Golden Cross Mine in New Zealand, 82 are employed by Flexaust, 400 are employed
in Chile and 3 are employed in other various activities. The Company maintains
labor agreements under country statutes in New Zealand at the Coeur Golden
Cross Mine and in Chile at the El Bronce Mine. Both agreements are for three
years and currently are being proactively administered. In the opinion of the
Company, its labor relations have been satisfactory. The personnel developing
the Kensington property are employees of Echo Bay Mines Alaska, Inc. and the
employees of Silver Valley Resources are employees of that company.
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ITEM 2. PROPERTIES.
Information regarding the Company's properties is set forth under Item 1
above.
ITEM 3. LEGAL PROCEEDINGS.
Promissory Note Suit
On September 22, 1994, a judgment was entered against the Company in the
United States District Court for the District of Idaho in a case entitled
Goldberg v. Coeur d'Alene Mines Corporation in the amount of $725,688. The
action involves an alleged claim by the plaintiff to recover on four promissory
notes made by a predecessor of the Company. The notes are claimed to be the
obligation of the Company by virtue of successive mergers which occurred in
1974 and 1988. The plaintiff filed with the court a cost bill in the
approximate amount of $225,000. The claim was settled on January 11, 1995 by
the payout of $800,000.
Internal Revenue Service Audit
In December 1993, the IRS completed an audit of the Company for the years
1990 and 1991. In November 1994, the IRS also initiated their audit of the
Company for the years 1992 and 1993. For all such years, the IRS has advised
the Company that three material issues remain unresolved. All issues involve
the deductibility of costs previously claimed by the Company.
On February 7, 1995, the IRS issued its thirty-day letter assessing tax
deficiencies of $738,806. If resolved in favor of the IRS, the Company would
be subject to the deficiency, net operating loss carryforwards would be
decreased by $28.2 million, and approximately $2 million of pending tax refunds
would be forfeited. The Company believes it has treated each issue in question
in a manner that is consistent with applicable law and prevailing industry
practice and is in the process of filing a petition with the United States Tax
Court to contest the assessment.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the Company's
current executive officers:
Office with Appointed
Name Age the Company to Office
---- --- --------------- ---------
Dennis E. Wheeler 52 Chairman of the Board 1992
President 1980
Chief Executive Officer 1986
James A. Sabala 40 Senior Vice President 1987
Chief Financial Officer
Treasurer 1982
Michael L. Clark 50 Senior Vice President 1992
Chief Operating Officer
Alan L. Wilder 46 Vice President-Engineering 1992
William F. Boyd 56 Corporate Counsel & Secretary 1990
Tom T. Angelos 39 Controller 1987
Messrs. Wheeler, Sabala and Angelos have been principally employed by the
Company for more than the past five years. Prior to his employment with the
Company in October 1992, Mr. Clark had served as the Executive Vice President
and Chief Operating Officer of Pegasus Gold, Inc. since 1990 and as the Vice
President-Operations and Chief Operating Officer of that company since 1986.
Mr. Boyd was a partner in the law firm of Evans, Keane, Koontz, Boyd, Simko &
Ripley for more than five years prior to his employment with the Company in
April 1990. Mr. Alan L. Wilder was Process Plant Superintendent at Coeur
Rochester in 1986, Project Manager for Newmont Mining Corporation until 1989, a
consultant in 1990 and 1991, and Manager of Engineering and Construction for
the Company in 1991 until his appointment as an executive officer effective
January 1, 1992.
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25
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") and the Pacific Coast Exchange. The following table sets forth, for
the periods indicated, the high and low closing sales prices of the Common
Stock as reported by the NYSE:
High Low
------- -------
1993: First Quarter $16.000 $10.000
Second Quarter $20.875 $15.375
Third Quarter $23.750 $15.750
Fourth Quarter $22.000 $17.500
1994: First Quarter $23.500 $18.250
Second Quarter $22.625 $16.500
Third Quarter $22.125 $17.125
Fourth Quarter $21.500 $14.375
The Company paid per share cash dividends of $.15, $.15, $.15, $.12, $.11,
and $.11 on its Common Stock on April 15, 1994, April 16, 1993, April 15, 1992,
April 12, 1991, April 20, 1990 and April 21, 1989 respectively. Future
dividends on the Common Stock, if any, will be determined by the Company's
Board of Directors and will depend upon the Company's results of operations,
financial conditions, capital requirements and other factors.
At March 21, 1995, there were 8,859 record holders of the Company's
outstanding Common Stock.
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26
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
with respect to the Company and its subsidiaries and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this report. The information has been restated to give
effect to a business combination with Callahan Mining Corporation. (See Note C
to the consolidated financial statements.)
Year Ended December 31,
------------------------------------------------------------------------------------
1990 1991 1992 1993 1994
----------- ---------- ---------- --------- ----------
(Restated)
(Thousands Except Per Share Information)
INCOME STATEMENT DATA:
Income:
Sale of concentrates
and dore' $ 53,125 $ 49,035 $ 41,414 $ 67,990 $ 79,606
Less cost of mine
operations 45,375 44,072 37,829 59,804 67,802
--------- --------- --------- --------- --------
Gross profits 7,750 4,963 3,585 8,186 11,804
Sale of industrial
products 11,264 10,187 10,108 10,192 11,417
Less cost of
manufacturing 10,202 8,791 8,987 9,088 10,264
--------- --------- --------- --------- ----------
Gross profits 1,062 1,396 1,121 1,104 1,153
Other income 9,062 7,824 4,906 5,537 12,857
--------- --------- --------- --------- ----------
Total income 17,874 14,183 9,612 14,827 25,814
Expenses 23,118 29,178 14,118 31,548 29,493
--------- ---------- --------- --------- ----------
Loss before income
taxes and
cumulative effect
of change in
accounting method (5,244) (14,995) (4,506) (16,721) (3,679)
Income taxes (benefit) (1,054) (596) (3,747) (3,431) 264
--------- --------- --------- --------- ----------
Loss before cumulative
effect of change in
accounting method (4,190) (14,399) (759) (13,290) (3,943)
Cumulative effect of
change in accounting
method(1) 5,181
--------- --------- --------- --------- ----------
Net loss $ (4,190) $(14,399) $ (759) $ (8,109) $ (3,943)
========= ========= ========= ========= ==========
Per Share Data: (2)
Earnings per share data:
Loss per share
before cumulative
effect of change in
accounting method $ (0.30) $ (0.94) $ (0.05) $ (.87) (.26)
Cumulative effect of
change in account-
ing method .34
--------- --------- --------- --------- --------
Net loss per share $ (0.30) $ (0.94) $ (0.05) $ (.53) $ (.26)
========= ========= ========= ========= =========
Cash dividends
per share $ 0.11 $ 0.12 $ 0.15 $ .15 $ .15
========= ========= ========= ========= ==========
Weighted average
number of shares of
Common Stock and
equivalents used in
calculation 13,792 15,308 15,317 15,328 15,388
========= ========= ========= ========== ==========
BALANCE SHEET DATA:
Total Assets $276,402 $261,600 $325,256 $325,708 $412,843
Working capital 153,768 132,126 181,775 107,633 173,546
Long-term debt 59,548 57,902 131,134 129,234 227,193
Shareholders' equity 200,040 183,938 180,991 170,849 160,292
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27
(1) Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards
(FAS) 109, "Accounting for Income Taxes." FAS 109 requires an asset and
liability approach to accounting for income taxes and establishes
criteria for recognizing deferred tax assets. Accordingly, the Company
adjusted its existing deferred income tax assets and liabilities to
reflect current statutory income tax rates and previously unrecognized
tax benefits related to federal and certain state net operating loss
carryforwards. FAS 109 also contains new requirements regarding balance
sheet classification and prior business combinations. Hence, the Company
adjusted the carrying values of an incremental interest in the Rochester
Property acquired in 1988 and CDE Chilean Mining Corp. acquired in 1990
to reflect the gross purchase value previously reported net-of-tax. The
cumulative effect of the accounting change on prior years at January 1,
1993 is a nonrecurring gain of $5,181,188, or $.34 per share, and is
included in the Consolidated Statement of Operations for the year ended
December 31, 1993. Other than the cumulative effect, the accounting
change had no material effect on the results of operations for the year
ended December 31, 1993.
As of January 1, 1993, after giving effect to the implementation of FAS
109, the significant components of the Company's net deferred tax
liability were as follows:
Deferred Income Taxes
--------------------------
Assets Liabilities
----------- -----------
Property, plant and equipment $16,756,918
AMT credit carryforwards $ 938,672
Business credit carryforwards 628,933
Net operating loss carryforwards 17,721,115
------------ -----------
Total 19,288,720 16,756,918
Less--valuation allowance (7,927,904)
------------ -----------
Net $11,360,816 $16,756,918
============ ===========
As permitted by FAS 109, prior year financial statements have not been
restated to reflect the change in accounting method.
(2) Earnings per share are calculated based on the weighted average number
of common shares outstanding and those Common Stock equivalents that are
deemed to be dilutive. The 6% Convertible Subordinated Debentures Due
2002 are considered to be Common Stock equivalents. Accordingly, such
debentures are assumed to be converted, and interest expense on such
debentures, net of tax expense, has been considered in the computation
of earnings per share, except in those instances where the effects of
conversion would be antidilutive.
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28
ITEM 7. 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; and the El Bronce Mine, a Chilean gold mine of which the
Company acquired operating control in October 1994. In addition, in September
1994, the Company entered into an agreement under which it has the right to
acquire up to a 51% operating interest in another Chilean gold mine, the Faride
Mine.
Effective January 1, 1995, the Company, Callahan and Asarco contributed to
Silver Valley their interests in and relating to the Galena and Coeur Mines in
Idaho, at which mining activities were suspended in July 1992 and April 1991,
respectively, due to then prevailing silver prices, and the adjoining Caladay
property, a silver exploration property. It is contemplated that Silver
Valley, of which Asarco owns 50% and the Company and Callahan own 50%, will
invest approximately $25 million in development and exploration at the
properties under a two-year plan of lengthening the existing workings,
improving infrastructure and diamond drilling to increase reserves and mine
life. The reopening of the Galena and Coeur Mines is dependent upon the
favorable action of the Board of Directors of Silver Valley, which will base
its decision upon several factors, including silver prices.
The Company has an option until July 1997 to increase its ownership
interest in the El Bronce Mine to 51% if it invests $20.4 million and also
invests a minimum of $5 million over a two-year period for exploration and mine
development designed to expand ore reserves and increase annual gold production
above the current level of 40,000 ounces per year. The Company also has an
option until January 15, 1998 to acquire up to a 51% operating interest in the
Faride Mine by paying the current owner $4 million over a four-year period and
investing $3.5 million in exploratory activities.
In July 1994, the Company's Board of Director's approved construction of
the Fachinal Project. Construction of the new mine is expected to be completed
in the fourth quarter of 1995 at a total estimated cost of approximately $41.8
million. The mine presently is expected to produce approximately 41,000 ounces
of gold and 2.6 million ounces of silver in its first year.
A production decision at the Kensington Property is subject to the approval
by the Company and its joint venture partner, 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 March 9, 1995 was $381.50 per ounce. With
respect to the permits, the Company is unable to
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29
control the timing of their issuance. On November 8, 1994 EPA issued a draft
of its Technical Assistance Report which calls for the Kensington venture to
redesign portions of its project and furnish additional data, in order to
satisfy certain environmental requirements. If, in its final report, the EPA
adheres to the recommendations in the draft, the Company believes it is
feasible to make design changes and furnish necessary data. It is anticipated
that a final EPA Technical Assistance Report will be furnished by the EPA to
the Army Corps of Engineers in the second quarter of 1995, which should lead to
the issuance by the Corps of its Section 404 permit in due course. However,
the Company is not able to control the timing of such regulatory issues.
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.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
SALES AND GROSS PROFITS
Sales of concentrates and dore' in 1994 increased by $11,616,272, or 17%,
over 1993. The increase is primarily attributable to an increase in gold
production and increases in metal prices. Silver and gold prices averaged
$5.28 and $384.01 per ounce, respectively, in 1994 compared to $4.30 and
$359.77 per ounce, respectively, in 1993. During 1994, the Company produced
6,180,215 ounces of silver and 129,239 ounces of gold compared to 6,119,219
ounces of silver and 123,310 ounces of gold in 1993. The increase in gold
production is due to the Company's acquisition of an 80% interest in the Golden
Cross Mine effective April 30, 1993. The Company's 80% interest in Golden
Cross production in 1994 amounted to 67,400 ounces of gold and 222,246 ounces
of silver compared to 56,898 ounces of gold and 175,325 ounces of silver in
1993.
The cost of mine operations in 1994 increased by $7,998,962, or 13%, over
1993. Gross profit from mine operations increased by $3,617,310, or 44%,
over 1993. Mine operations gross profit as a percent of sales increased to 15%
in 1994 compared to 12% in 1993. The increase was primarily attributable to
the increases in silver and gold prices in 1994 over the prior year.
The cash costs of production per ounce of gold at the Golden Cross Mine
amounted to $277 per ounce in 1994, compared to $245 per ounce during the four
months ended April 30, 1993 and $220 per ounce during the eight months ended
December 31, 1993. The increase was primarily attributable to the presence of
a harder grinding ore in the open pit requiring more milling and chemicals in
the processing and lower grade of ore being provided from the underground
portion of the mine. The cash costs of production per ounce of silver on a
silver equivalent basis at the Rochester Mine amounted to $3.57 per ounce in
1994, compared to $3.55 per ounce in 1993.
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30
Sales of industrial products in 1994 increased by $1,224,646, or 12%,
compared to 1993. Cost of manufacturing increased by $1,175,157, or 13%, in
1994 compared to 1993. As a result, gross profit from manufacturing in 1994
increased by $49,489, or 4%, compared to 1993.
OTHER INCOME
Interest and other income in 1994 increased by $7,320,550, or 132%, over
1993. The increase is primarily due to an increase in the level of the
Company's cash and securities portfolio and a gain of $2.7 million arising from
the sale by the Company of common shares of International Curator in the third
quarter of 1994.
EXPENSES
Total expenses in 1994 decreased by $2,054,213, or 7%, from 1993. The
decrease is primarily due to the non-recurring write-offs of $9,374,000, or
$.61 per share, effected in the third quarter of 1993. Those write-offs are
discussed below and included one-time provisions for litigation settlement of
$5,875,000, environmental settlement of $1,230,000 and the write-off of
uncollectible notes receivable of $2,268,564. A non-recurring write-off of
$800,000 was recorded in 1994 as a result of an adverse judgment in a lawsuit
described below relating to four promissory notes made by a predecessor of the
Company.
On September 22, 1994, a judgment was entered against the Company in the
United States District Court for the District of Idaho in a case entitled
Goldberg v. Coeur d'Alene Mines Corporation in the amount of $725,688 plus
attorney fees. The action involves an alleged claim by the plaintiff to
recover on four promissory notes made by a predecessor of the Company. The
notes are claimed to be the obligation of the Company by virtue of successive
mergers which occurred in 1974 and in 1988. Plaintiff filed with the court a
cost bill in the approximate amount of $225,000. The claim was settled on
January 11, 1995 by payout of $800,000.
On November 12, 1993, the Company's Board of Directors approved the
proposed settlement of Kassover v. Coeur d'Alene Mines Corporation, the class
action originally filed in November 1990 and amended in March 1991 alleging
violations of the federal securities laws and common law primarily in
connection with the Company's public offering of Common Stock in September
1990. The proposed settlement called for the Company to (i) issue to the class
members Common Stock of the Company having a fair market value of $4 million
based on the average closing sale price of the Common Stock on the New York
Stock Exchange during the five trading days immediately preceding the court
hearing to be held in connection with the settlement and (ii) pay $1,875,000 in
cash. On June 24, 1994, the U.S. District Court for the District of Idaho
approved the settlement and prior to the end of 1994, a total of 220,083 shares
of Common Stock were issued in connection with the settlement. The Board's
decision reflected its desire to avoid the continuing substantial costs and
expenses associated with the lawsuit and the inherent uncertainties
30
31
of litigation. The Company recorded a litigation settlement expense of
$5,875,000 in the third quarter of 1993.
During October 1993, the Company and Callahan negotiated a tentative
settlement agreement with the U.S. Environmental Protection Agency (the "EPA")
and a group of other companies that are potentially responsible parties
("PRPs") in connection with the Bunker Hill Superfund site. The Company and
Callahan had been notified in February 1990 by the EPA that they were PRPs in
connection with that site, where the EPA claimed there was a need for cleanup
action under the Comprehensive Environmental Response Compensation and
Liability Act of 1980. The negotiated settlement agreement called for the
Company and Callahan to pay a total of $1,230,000 to a group of other PRPs in
order to remove the Company and Callahan from any additional cleanup liability
relating to the site. Accordingly, the Company recorded a non-recurring
environmental settlement expense of $1,230,000 during the third quarter of
1993. An order approving the settlement was issued by the United States
District Court for the District of Idaho on November 17, 1994, and the
settlement amount was paid on December 16, 1994.
During September 1993, the Company commenced foreclosure proceedings upon
the collateral underlying two delinquent collateralized promissory notes, the
recorded principal and accrued interest on which amounted to $2,268,564. The
notes originally were acquired by a corporation that merged with the Company in
1988. Demand for payment had been made without satisfaction and the Company
discontinued accruing interest on the notes in October 1991. As a result of
the institution of the foreclosure proceedings and the Company's inability to
ascertain what amounts, if any, could be realized therefrom, the Company
effected a non-recurring write-off of uncollectible notes receivable of
$2,268,564 in the third quarter of 1993.
The above-described decrease in non-recurring expenses in 1994 from 1993
was partially offset by an increase in interest expense of approximately $6.0
million in 1994, which was related to the issuance of $100 million principal
amount of 6-3/8% Convertible Subordinated Debentures in the first quarter of
1994, and increases in administrative expenses of approximately $.2 million
and mining exploration of approximately $1.3 million.
INCOME (LOSS) BEFORE TAXES AND ACCOUNTING CHANGE
As a result of the above, the Company's loss before income taxes and the
cumulative effect of a change in accounting amounted to $3,679,258 in 1994
compared to $16,720,820 in 1993. The provision for income taxes amounted to
$263,306 in 1994, compared to a benefit of $3,430,760 in 1993. As a result,
the Company reported a net loss before the cumulative effect of a change in
accounting of $3,942,564, or $ .26 per share, in 1994, compared to a net loss
of $13,290,060, or $.87 per share, in 1993.
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32
CHANGE IN ACCOUNTING
Effective January 1, 1993, the Company changed its method of accounting for
income taxes by adopting the mandatory Statement of Financial Accounting
Standards (FAS) 109, "Accounting for Income Taxes." FAS 109 requires an asset
and liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related to
federal and certain state net operating loss carry forwards. The cumulative
effect of the accounting change on prior years at January 1, 1993, resulted in
a non-recurring gain of $5,181,188, or $.34 per share, and is included in the
results of operations for 1993.
NET INCOME (LOSS)
As a result of the above, the Company reported a net loss of $3,942,564, or
$.26 per share, in 1994, compared to a net loss of $8,108,872, or $.53 per
share, in 1993.
RESULTS OF OPERATIONS - 1993 COMPARED TO 1992
SALES AND GROSS PROFIT
Sales of concentrates and dore in 1993 increased by $26,575,500, or 64%,
over 1992. The increase is primarily attributable to an increase in gold
production and increases in metal prices. Silver and gold prices averaged
$4.30 and $359.77 per ounce, respectively, in 1993 compared to $3.94 and
$343.73 per ounce, respectively, in 1992. During 1993, the Company produced
6,119,219 ounces of silver and 123,310 ounces of gold compared to 6,254,273
ounces of silver and 56,638 ounces of gold in 1992. The decrease in silver
production is due to the temporary closure of the Galena Mine in July 1992.
The Galena Mine contributed 822,904 ounces of silver production during 1992.
The increase in gold production is due to the Company's acquisition of an 80%
interest in the Golden Cross Mine effective April 30, 1993. The Company's 80%
interest in Golden Cross Mine production in 1993 amounted to 56,898 ounces of
gold and 175,325 ounces of silver.
The cost of mine operations in 1993 increased by $21,974,182, or 58%, over
1992 and is primarily due to the acquisition of the Golden Cross Mine in 1993.
Gross profit from mine operations increased by $4,601,318, or 128%, in 1993
from 1992. Mine operations gross profit as a percent of sales increased to
12.0% in 1993 compared to 8.7% in 1992. The increase was primarily
attributable to the increases in silver and gold prices in 1993 from the prior
year.
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33
Sales of industrial products in 1993 increased by $84,116, or .8%, compared
to 1992. Cost of manufacturing increased by $101,134, or 1.1%, in 1993,
compared to the prior year. As a result, gross profit from manufacturing for
1993 decreased by $17,018, or 1.5%, compared to 1992.
EXPENSES
Total expenses in 1993 increased by $17,429,334, or 123%, over the prior
year. The increase is primarily due to non-recurring write-offs of $9,373,564,
or $.61 per share ($.49 per share net of taxes), effected in the third quarter
of 1993. The write-offs include a one time provision for litigation settlement
of $5,875,000, resolution of an environmental matter of $1,230,000 and the
write-off of uncollectible notes receivable of $2,268,564. The increase is
also attributable to an increase in interest expense of $4,267,802, which is
related to the issuance of $75 million principal amount of 7% Convertible
Subordinated Debentures in December 1992, and increases in accounting and legal
expenses of $1,641,235, idle facilities expense of $769,902, corporate expenses
of $617,067 and administrative expenses of $485,501.
NON-RECURRING CHARGES
As described above, non-recurring expenses recorded by the Company during
1993 included (i) a litigation settlement expense of $5,875,000 in connection
with the settlement of the Kassover class action lawsuit, (ii) an environmental
expense of $1,230,000 in connection with the settlement relating to the Bunker
Hill Superfund site and (iii) a write-off of uncollectible notes receivable of
$2,268,564.
INCOME (LOSS) BEFORE TAXES AND ACCOUNTING CHANGE
As a result of the above, the Company's loss before income taxes and the
cumulative effect of a change in accounting amounted to $16,720,820 in 1993,
compared to $4,506,391 in 1992. The benefit for income taxes amounted to
$3,430,760 in 1993, compared to $3,747,136 in 1992. The Company reported a net
loss before the cumulative effect of a change in accounting of $13,290,060, or
$.87 per share, in 1993, compared to $759,255, or $.05 per share, in 1992.
CHANGE IN ACCOUNTING
Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting the mandatory Statement of Financial Accounting
Standards (FAS) 109, "Accounting for Income Taxes." FAS 109 requires an asset
and liability approach to accounting for income taxes and establishes criteria
for recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related to
federal and certain state net operating loss carry forwards. The cumulative
effect of the
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34
accounting change on prior years at January 1, 1993, results in a non-recurring
gain of $5,181,188, or $.34 per share, and is included in the results of
operations for 1993.
NET INCOME (LOSS)
The Company reported a net loss of $8,108,872, or $.53 per share, in 1993,
compared to a net loss of $759,255, or $.05 per share, in 1992.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital; Cash and Cash Equivalents
The Company's working capital at December 31, 1994 was approximately
$173.5 million compared to $107.6 million at December 31, 1993. The ratio of
current assets to current liabilities was 10.4 to one at December 31, 1994
compared to 6.0 to one at December 31, 1993.
The increase in the Company's working capital at December 31, 1994 compared
to December 31, 1993 is primarily attributable to the Company's sale in January
and February 1994 of an aggregate of $100,000,000 principal amount of 6-3/8%
Convertible Subordinated Debentures Due 2004 (the "6 3/8% Debentures"). The 6
3/8% Debentures were sold by the Company to Kidder, Peabody & Co. Incorporated
("Kidder") pursuant to a Purchase Agreement, dated January 18, 1994, at a price
equal to 96.75% of the principal amount sold and were issued by the Company in
connection with an offering to "qualified institutional buyers" as defined in
Rule 144A under the Securities Act and to certain non-U.S. persons in reliance
upon Regulation S under the Securities Act of 1933 (the "Securities Act"). The
6 3/8% Debentures were issued pursuant to an Indenture, dated as of January 26,
1994 (the "Indenture"), between the Company and Bankers Trust Company, as
trustee. The 6 3/8% Debentures are convertible into shares of Common Stock on
or before January 31, 2004, unless previously redeemed, at a conversion price
of $26.20 per share, subject to adjustment in certain events. The 6 3/8%
Debentures are redeemable, in whole or in part, at any time on or after January
31, 1997, at redemption prices declining from 103.643% of the principal amount
during the year beginning January 31, 1997, to 100% of the principal amount
during the year beginning January 31, 2001 and thereafter. The 6 3/8%
Debentures are required to be repurchased at the option of the holder if a
Designated Event (as defined in the Indenture) occurs, at 100% of the principal
amount thereof plus accrued interest. The Debentures are unsecured and
subordinate in right of payment to all Senior Debt (as defined in the
Indenture). The Indenture, Purchase Agreement and Registration Rights
Agreement are filed as exhibits to this Report.
Pursuant to a Registration Rights Agreement, dated January 26, 1994,
("Registration Rights Agreement") between the Company and Kidder, the Company
filed a shelf registration statement under the Securities Act in April 1994 for
the purpose of registering the 6 3/8% Debentures and underlying shares of
Common Stock issuable upon the conversion thereof under the Securities Act.
The Company plans to use the approximately $95.5 million net proceeds from such
offering for general corporate purposes, including the possible acquisition of,
or investment in,
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35
additional precious metals mines, properties or businesses, and for possible
developmental activities on new or existing mining properties. The Company's
acquisition efforts are primarily focused upon operating precious metals mines
and precious metals properties or businesses that are expected to become
operational in the near future. The Company currently is engaged in the review
and investigation of opportunities for expansion of its business through
acquisitions, investments or other transactions. While preliminary agreements
have been entered into with respect to certain proposed acquisitions, the
consummation of such acquisitions is subject to significant contingencies. The
Company invested the proceeds of the above offering in interest-bearing
marketable securities and money market obligations, and plans to continue such
investments pending the use of the proceeds of that offering as discussed
above.
Net cash provided by operating activities in 1994 was $6,403,007 compared
to $4,202,377 in 1993. Net cash used in investing activities in 1994 was
$97,244,073 compared to $119,558,375 in 1993. Net cash provided by financing
activities in 1994 was $91,310,877 compared to$4,072,853 net cash used in
financing activities in 1993. As a result of the above, cash and cash
equivalents increased by $469,811 in 1994 compared to a $119,428,851 decrease
in 1993.
Construction of Fachinal Mine
In July 1994, following completion by an independent engineering firm of a
detailed feasibility study regarding the Company's Fachinal property, the
Company's Board of Directors approved the construction of the project. Based
on that study, the Company estimates that the cost to complete the Fachinal
mining facilities will be approximately $41.8 million. The Company is funding
that construction on a project financing basis. The Company expects to enter
into a financing agreement with N.M. Rothschild and Sons, Ltd. under which the
bank will provide $24 million for project development. The agreement requires
Coeur d Alene Mines to guarantee repayment of the facility until the project
reaches a defined completion after which the project alone is liable for
repayment. The agreement has numerous financial covenants. The interest rate
prior to completion is equal to LIBOR plus 1.5% and increases to LIBOR plus
2.75% after completion. The facility is repayable in eight equal semiannual
installments after project completion.
Environmental Compliance Expenditures
For the years ended December 31, 1994, 1993 and 1992, the Company expended
$2,974,438, $2,404,698, and $1,050,015, respectively, in connection with
environmental compliance activities at its operating properties. At December
31, 1994, the Company had expended a total of approximately $4.6 million on
environmental and permitting activities at the Kensington Property, which
expenditures have been capitalized as part of its development cost.
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36
The Company estimates that its environmental compliance expenditures at
its operating properties during 1995 will approximate $2,071,000. Such
activities at the Rochester and Golden Cross Mines include monitoring, bonding,
earth moving, water treatment and revegetation activities. The Company
estimates that environmental compliance expenditures at its Kensington and
Fachinal developmental properties during 1995 will approximate $542,904 and
relate to activities associated with obtaining permits required for
construction. Such expenditures would significantly increase in the event a
decision is made to proceed with the construction of production facilities at
the Kensington property. The Company established a $585,000 reserve in 1991
for future costs relating to the closure of the Ropes Mine previously owned by
Callahan; the Company is currently reviewing the adequacy of that reserve to
cover expenditures required to comply with environmental regulations. Future
environmental expenditures will be determined by governmental regulations and
the overall scope of the Company's operating and development activities. The
Company places a very high priority on its compliance with environmental
regulations.
Exploration and Development Expenditures
During 1994, the Company expended approximately $2.2 million (excluding
capitalized interest) for its share of the developmental costs at the
Kensington Property, approximately $5.8 million for leach pad construction at
the Rochester Mine, $7.5 million (excluding capitalized interest) for the
development of the Fachinal Property, $4.8 million representing investment in
the El Bronce Mine and $1.2 million to continue its planned development
exploration programs. During 1995, the Company presently plans to expend
approximately $1.7 million (excluding capitalized interest) for its share of
Kensington Property development costs, approximately $38.3 million (excluding
capitalized interest) for development at the Fachinal Property, and $3.9
million for developmental and exploration activities at the El Bronce Mine.
Construction of the new Fachinal mining facilities is expected to be completed
in the fourth quarter of 1995. No decision has been made as to when or whether
the Kensington Property will be placed into commercial production.
Internal Revenue Service Audit
In December 1993, the IRS completed an audit of the Company for the years
1990 and 1991. The IRS has advised the Company that two issues remain
unresolved, and that the IRS will issue a proposed assessment. One issue
involves the alternative minimum tax, which, if resolved in favor of the IRS,
would require payment by the Company of approximately $1.2 million. The other
issue involves the deductibility of costs previously claimed by the Company.
If resolved in favor of the IRS, the Company's net operating loss carryforward
would be decreased by $8.2 million. The Company believes it has treated both
issues in a manner that is consistent with applicable law and prevailing
industry practice and will contest any such assessment.
36
37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item regarding directors is hereby incorporated by reference from
the Company's definitive proxy statement to be filed pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this
report. Information regarding the Company's executive officers is set forth
above under Item 4A of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference from the Company's
definitive proxy statement to be filed pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
37
38
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Financial Statements and Financial Statement Schedules:
(1) The following consolidated financial statements of Coeur d'Alene Mines
Corporation and subsidiaries are included in Item 8.
Consolidated Balance Sheets-December 31, 1993 and 1994.
Consolidated Statements of Operations--Years Ended December 31, 1992,
1993 and 1994.
Consolidated Statements of Changes in Shareholders' Equity--Years Ended
December 31, 1992, 1993 and 1994.
Consolidated Statements of Cash Flows--Years Ended December 31, 1992,
1993 and 1994.
Notes to Consolidated Financial Statements.
(b) Reports on Form 8-K: No Form 8-K was filed by the Company during 1994. On
January 17, 1995, the Company filed a Form 8-K reporting the transfer,
effective as of January 1, 1995, of certain assets to Silver Valley.
(c) Exhibits: The following listed documents are filed as Exhibits to this
report:
3(a) - Articles of Incorporation of the Registrant and amendments
thereto. (Incorporated herein by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
3(b) - Bylaws of the Registrant and amendments thereto. (Incorporated
herein by reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
3(c) - Certificate of Designations, Powers and Preferences of the Series
A Junior Preferred Stock of the Registrant, as filed with Idaho
Secretary of State on May 25, 1989 (Incorporated by reference to
Exhibit 4(a) of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989.)
4 - Specimen certificate of the Registrant's stock. (Incorporated
herein by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-2 (File No. 2-84174).)
38
39
10(a) - Agreement, dated August 31, 1964, between the Registrant, Rainbow
Mining and Milling Company Ltd. and American Smelting and
Refining Company, and amendments thereto. (Incorporated herein
by reference to Exhibit H to the Registrant's Registration
Statement on Form 10 dated April 25, 1977.)
10(b) - Agreement, dated August 1, 1979, between the Registrant, Callahan
Mining Corporation, Day Mines Incorporated and ASARCO
Incorporated. (Incorporated herein by reference to Exhibit (a)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1979.)
10(c) - Agreement, dated January 1, 1982, between the Registrant,
Callahan Mining Corporation and ASARCO Incorporated.
(Incorporated herein by reference to Exhibit 10(c) of the
Registrant's Registration Statement on Form S-2 [File No. 2-
84174].)
10(d) - Executive Compensation Program. (Incorporated herein by
reference to Exhibit 10(e) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989.) *
10(e) - Employment Agreement, dated March 30, 1989 between the Registrant
and Dennis E. Wheeler. (Incorporated herein by reference to
Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989.) *
10(f) - Severance Agreements, dated March 30, 1989, between the
Registrant and James Sabala, Robert Richins, and Tom Angelos.
(Incorporated herein by reference to Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989.) *
10(g) - Profit Sharing Retirement Plan of the Registrant. (Incorporated
herein by reference to Exhibit (q) to Registrant's Registration
Statement on Form S-2 (File No. 2-98631).) *
10(h) - Lease agreement, dated as of October 10, 1986, between
Manufacturers Hanover Commercial Corporation and Coeur-Rochester,
Inc. (Incorporated herein by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K, dated October 10, 1986.)
--------------------------------
* Management contract or compensatory plan
39
40
10(i) - Indenture, dated as of June 10, 1987, between the Registrant and
Citibank, N.A., as Trustee, relating to the Registrant's 6%
Convertible Subordinated Debentures Due 2002. (Incorporated
herein by reference to Exhibit 4 to the Registrant's Current
Report on Form 8-K dated June 10, 1987.)
10(j) - Venture Agreement, dated as of August 5, 1987, between Coeur
Alaska, Inc. and Echo Bay Exploration Inc. (Incorporated herein
by reference to Exhibit 10(a) of the Registrant's Current Report
on Form 8-K dated August 5, 1987.)
10(k) - Venture Agreement, dated as of August 5, 1987, among the
Registrant, Echo Bay Exploration Inc. and Echo Bay Minerals
Company. (Incorporated herein by reference to Exhibit 10(b) of
the Registrant's Current Report on Form 8-K dated August 5,
1987.)
10(l) - Amended Venture Agreement, dated November 1, 1990 between Coeur
Alaska, Inc. and Echo Bay Exploration, Inc. (Incorporated herein
by reference to Exhibit 10(l) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991.)
10(m) - Agreement, dated January 1, 1994, between Coeur-Rochester, Inc.
and Johnson Matthey Inc. (Incorporated herein by reference to
Exhibit 10(m) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.)
10(n) - Refining Agreement, dated January 24, 1994, between the
Registrant and Handy & Harman. (Incorporated herein by reference
to Exhibit 10(n) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
10(o) - Master Equipment Lease No. 099-03566-01, dated as of December 28,
1988, between Idaho First National Bank and the Registrant.
(Incorporated herein by reference to Exhibit 10(w) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
10(p) - Master Equipment Lease No. 01893, dated as of December 28, 1988,
between Cargill Leasing Corporation and the Registrant.
(Incorporated herein by reference to Exhibit 10(x) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
--------------------------------
* Management contract or compensatory plan
40
41
10(q) - Rights Agreement, dated as of May 24, 1989, between the
Registrant and First Interstate Bank of Oregon, N.A., as Rights
Agent. (Incorporated herein by reference to Exhibit 2 to the
Registrant's Form 8-A relating to the registration of the Rights
on the American and Spokane Stock Exchanges.)
10(r) - Participation Agreement, dated as of November 1, 1988, between
the Registrant and ASARCO, Incorporated. (Incorporated herein by
reference to Exhibit 10(y) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989.)
10(s) - Form of letter, dated May 10, 1991, extending the term of
Severance Agreement, dated March 30, 1989 between the Registrant
and Dennis Wheeler,James Sabala, Robert Richins and Tom Angelos.
(Incorporated herein by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.) *
10(t) - Lease dated January 15, 1947 between Vulcan Silver-Lead
Corporation and American Smelting and Refining Company.
(Incorporated herein by reference to Exhibit 10(v) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(u) - Supplemental Agreement dated June 4, 1959 between Callahan Mining
Corporation, American Smelting and Refining Company and Day
Mines, Inc., amending lease dated January 15, 1947.
(Incorporated herein by reference to Exhibit 10(w) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(v) - Operating Agreement dated as of March 18, 1970 between Callahan
Mining Corporation, American Smelting and Refining Company and
Day Mines, Inc. with respect to the Caladay Project.
(Incorporated herein by reference to Exhibit 10(x) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(w) - Lease dated September 20, 1982 between Callahan Mining
Corporation and Hecla Mining Company for the Hornsilver-Peerless
properties (Incorporated herein by reference to Exhibit 10(y) to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
--------------------------------
* Management contract or compensatory plan
41
42
10(x) - Agreement and Plan of Merger, dated as of September 16, 1991, by
and among the Registrant, CMC Acquisition Corporation and
Callahan Mining Corporation. (Incorporated herein by reference
to Exhibit A to the Prospectus, dated November 22, 1991,
contained in the Registrant's Registration Statement on Form S-4
(File No. 33-44096).
10(y) - Agreement, dated June 11, 1992, between Callahan Mining
Corporation and Hecla Mining Company (Incorporated herein by
reference to Exhibit 10(z) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992.)
10(z) - Indenture, dated as of December 1, 1992, between the Registrant
and Bankers Trust Company, as Trustee, relating to the Company's
7% Convertible Subordinated Debentures Due 2002. (Incorporated
herein by reference to Exhibit 10(aa) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.)
10(aa) - Severance Agreement, dated October 1, 1992, between Registrant
and Michael L. Clark. (Incorporated herein by reference to
Exhibit 10(bb) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992.) *
10(bb) - Form of letter, dated June 28, 1993, extending the term of
Severance Agreement dated March 30, 1989 between the Registrant
and James Sabala, Robert Richins, Tom Angelos, William Boyd, Al
Wilder and Michael L. Clark. (Incorporated herein by reference
to Exhibit 10(cc) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)*
10(cc) - Employment Agreement, dated June 28, 1993, extending the
agreement dated March 30, 1989 between the Registrant and Dennis
E. Wheeler. (Incorporated herein by reference to Exhibit 10(cc)
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.) *
10(dd) - Stock Purchase Agreement, dated as of April 30, 1993, among Coeur
New Zealand, Inc., the Registrant, Cyprus gold New Zealand
Limited, Cyprus Exploration and Development Corporation and
Cyprus Minerals Company. (Incorporated herein by reference to
Exhibit 2 of the Registrant's Current Report on Form 8K dated
April 30, 1993.)
--------------------------------
* Management contract or compensatory plan
42
43
10(ee) - Amended and Restated Profit Sharing Retirement Plan of the
Registrant. (Incorporated herein by reference to Exhibit 10(ff)
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.) *
10(ff) - Indenture, dated as of January 26, 1994, between the Registrant
and Bankers Trust Company relating to the Registrant's 6 3/8%
Convertible Subordinated Debentures Due 2004. (Incorporated
herein by reference to Exhibit 10(gg) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.)
10(gg) - Purchase Agreement, dated January 18, 1994, between the
Registrant and Kidder, Peabody & Co. Incorporated relating to the
6 3/8% Convertible Subordinated Debentures Due 2004.
(Incorporated herein by reference to Exhibit 10(hh) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(hh) - Registration Rights Agreement, dated January 26, 1994, between
the Registrant and Kidder, Peabody & Co., Incorporated relating
to the 6 3/8% Convertible Subordinated Debentures Due 2004.
(Incorporated herein by reference to Exhibit 10(ii) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(ii) - 1993 Annual Incentive Plan and Long-Term Performance Share Plan
of the Registrant. (Incorporated herein by reference to Exhibit
10(jj) of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.) *
10(jj) - Supplemental Retirement and Deferred Compensation Plan, dated
January 1, 1993, of the Registrant. (Incorporated herein by
reference to Exhibit 10(kk) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.) *
10(kk) - Lease Agreement, dated January 12, 1994, between First Security
Bank of Idaho and Coeur Rochester, Inc. (Incorporated herein by
reference to Exhibit 10(mm) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
10(ll) - Agreement, dated January 1, 1994, between Coeur Gold New Zealand
Limited and Johnson Matthey (Aust.) Ltd. (Incorporated herein by
reference to Exhibit 10(mm) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
--------------------------------
* Management contract or compensatory plan
43
44
10(mm) - Nonemployee Directors' Retirement Plan effective as of March 19,
1993, of the Registrant. (Incorporated herein by reference to
Exhibit 10(oo) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.) *
10(nn) - Extension of Employment and Severance Agreement
between the Registrant and Dennis E. Wheeler which
extension is dated June 28, 1994. (Filed herewith.)*
10(oo) - Form of letter, dated June 28, 1994, extending the
terms of the Severance Agreements dated march 30,
1989 between the Registrant and James Sabala, Tom
Angelos, Michael Clark, Al Wilder and William Boyd.
(Filed herewith.)*
10(pp) - 401k Plan of the Registrant. (Filed herewith.)*
10(qq) - Option Agreement of October 24, 1994 between
Compania Minera El Bronce and CDE Chilean Mining
Corporation. (Filed herewith.)
21 - List of subsidiaries of the Registrant.
(Filed herewith.)
23 - Consent of Ernst & Young. (Filed herewith.)
27 - Financial Data Schedule
--------------------------------
* Management contract or compensatory plan
(d) Independent auditors' reports are included herein as follows:
Coeur d'Alene Mines Corporation
Report of Ernst & Young at December 31, 1993, and 1994, and for
each of the three years in the period ended December 31, 1994.
44
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Date: March 28, 1995 By: /s/ DENNIS E. WHEELER
----------------- ---------------------------
Dennis E. Wheeler
(Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
---------
/s/ DENNIS E. WHEELER Chairman, President, March 28, 1995
---------------------- Chief Executive Officer
Dennis E. Wheeler and Director
/s/ JAMES A. SABALA Senior Vice President-Finance March 28, 1995
---------------------- Treasurer (Principal Financial
James A. Sabala and Accounting Officer)
and Director
/s/JOSEPH C. BENNETT Director March 28, 1995
----------------------
Joseph C. Bennett
/s/ JAMES J. CURRAN Director March 28, 1995
----------------------
James J. Curran
/s/ DUANE B. HAGADONE Director March 28, 1995
----------------------
Duane B. Hagadone
/s/ JAMES A. McCLURE Director March 28, 1995
----------------------
James A. McClure
/s/ JEFFERY T. GRADE Director March 28, 1995
----------------------
Jeffery T. Grade
45
46
ANNUAL REPORT ON FORM 10-K
Item 8, Item 14(a), and Item 14(d)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
COEUR D'ALENE MINES CORPORATION
COEUR D'ALENE, IDAHO
47
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Coeur d'Alene Mines Corporation
We have audited the accompanying consolidated balance sheets of Coeur d'Alene
Mines Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, changes in shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Coeur
d'Alene Mines Corporation and subsidiaries at December 31, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note I to the financial statements, in 1993, the Company
changed its method of accounting for income taxes.
February 10, 1995 ERNST YOUNG
F-1
48
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
December 31,
1994 1993
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,147,908 $ 14,678,097
Short-term investments 128,112,407 70,221,106
Receivables 9,468,112 7,757,910
Refundable income taxes 3,413,344 1,924,065
Inventories 35,946,125 34,670,469
------------- -------------
TOTAL CURRENT ASSETS 192,087,896 129,251,647
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 88,468,531 81,007,505
Less accumulated depreciation 39,947,983 35,310,111
------------- -------------
48,520,548 45,697,394
MINING PROPERTIES
Operational mining properties 100,833,487 90,120,998
Less accumulated depletion 38,162,432 33,125,461
------------- -------------
62,671,055 56,995,537
Developmental properties 95,896,774 83,536,738
------------- -------------
158,567,829 140,532,275
OTHER ASSETS
Funds held in escrow 2,270,695 2,270,695
Debt issuance costs, net of accumulated
amortization of $2,416,963 and 8,240,209 4,708,372
$1,462,643
Marketable equity securities 418,052 2,422,416
Other 2,737,454 825,538
------------- -------------
13,666,410 10,227,021
------------- -------------
$412,842,683 $325,708,337
============= =============
F-2
49
CONSOLIDATED BALANCE SHEETS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
December 31,
1994 1993
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,458,605 $ 1,946,273
Accrued liabilities 4,158,792 5,265,232
Accrued interest payable 4,634,961 2,008,851
Accrued salaries and wages 4,164,061 2,898,486
Accrued litigation settlement 800,000 5,875,000
Accrued environmental settlement 1,230,000
Reserve for mine closure 284,366 494,800
Current portion of obligations under
capital leases 2,041,057 1,899,771
------------- -------------
TOTAL CURRENT LIABILITIES 18,541,842 21,618,413
LONG-TERM LIABILITIES
6% subordinated convertible debentures 50,000,000 50,000,000
7% subordinated convertible debentures 75,000,000 75,000,000
6 3/8% subordinated convertible debentures 100,000,000
Obligations under capital leases 2,192,856 4,233,913
Other long-term liabilities 5,234,899 2,325,764
Deferred income taxes 1,580,804 1,681,542
------------- -------------
TOTAL LONG-TERM LIABILITIES 234,008,559 133,241,219
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1.00 per share--
authorized 10,000,000 shares, none outstanding
Common Stock, par value $1.00 per share--
authorized 60,000,000 shares, issued 16,633,163
nd 16,394,302 shares (including 1,059,211
and 1,058,453 shares held in treasury) 16,633,163 16,394,302
Capital surplus 182,881,071 181,038,631
Accumulated deficit (17,043,506) (13,100,942)
Unrealized losses on short-term investments (8,820,137)
Repurchased and nonvested shares (13,358,309) (13,483,286)
------------- -------------
160,292,282 170,848,705
------------- -------------
$412,842,683 $325,708,337
============= =============
See notes to consolidated financial statements.
F-3
50
CONSOLIDATED STATEMENTS OF OPERATIONS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Year Ended December 31,
1994 1993 1992
------------- ------------- ------------
INCOME
From mine operations:
Sale of concentrates and dore' $ 79,605,938 $ 67,989,666 $ 41,414,166
Less cost of mine operations 67,802,368 59,803,406 37,829,224
------------- ------------- --------------
GROSS PROFITS 11,803,570 8,186,260 3,584,942
From manufacturing operations:
Sale of industrial products 11,416,654 10,192,008 10,107,892
Less cost of manufacturing 10,263,476 9,088,319 8,987,185
------------- ------------- -------------
GROSS PROFITS 1,153,178 1,103,689 1,120,707
OTHER INCOME--interest, dividends,
and other 12,857,321 5,536,771 4,906,166
------------- ------------- --------------
TOTAL INCOME 25,814,069 14,826,720 9,611,815
EXPENSES
Administration 3,824,946 3,618,772 3,133,271
Accounting and legal 1,673,223 3,108,705 1,467,470
General corporate 6,359,710 5,089,224 4,472,157
Mining exploration 3,877,614 2,533,542 2,259,279
Idle facilities 1,558,752 2,459,159 1,689,257
Interest 11,399,082 5,364,574 1,096,772
Nonrecurring charges 800,000 9,373,564
------------- ------------- --------------
TOTAL EXPENSES 29,493,327 31,547,540 14,118,206
------------- ------------- --------------
LOSS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING METHOD (3,679,258) (16,720,820) (4,506,391)
Income tax provision (benefit) 263,306 (3,430,760) (3,747,136)
------------- ------------- -------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING METHOD (3,942,564) (13,290,060) (759,255)
Cumulative effect of change in
accounting method 5,181,188
------------- ------------- -------------
NET LOSS $(3,942,564) $ (8,108,872) $ (759,255)
============= ============= =============
LOSS PER SHARE DATA
Weighted average number of shares
of Common Stock outstanding 15,387,889 15,327,862 15,317,405
============= ============= =============
Net loss per share before cumulative
effect of change in accounting
method $ ( .26) $ (.87) $ (.05)
Cumulative effect of change in
accounting method .34
------------- ------------- -------------
NET LOSS PER SHARE $ ( .26) $ (.53) $ (.05)
============= ============= =============
CASH DIVIDENDS PER SHARE $ .15 $ .15 $ .15
============= ============= =============
See notes to consolidated financial statements.
F-4
51
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For Years Ended December 31, 1994, 1993, and 1992
Common Stock
----------------------- Unrealized Losses
Par Capital Accumulated on Short Term
Shares Value Surplus Deficit Investements
-----------------------------------------------------------------------
Balance at January 1, 1992 16,368,403 $16,368,403 $185,229,686 $ (4,232,815)
Net Loss (759,255)
Cash dividends (2,296,493)
Issuance of shares under
Long-Term Incentive
Plan (net) 12,000 12,000 169,500
Other (3,175) (3,175) (52,081)
-----------------------------------------------------------------------
Balance at December 31, 1992 16,377,228 16,377,228 183,050,612 (4,992,070)
Net Loss (8,108,872)
Sale of Common Stock for
cash 8,675 8,675 139,535
Cash Dividends (2,297,520)
Issuance of shares under
Long-Term Incentive
Plan (net) 10,374 10,374 181,545
Other (1,975) (1,975) (35,541)
-----------------------------------------------------------------------
Balance at December 31, 1993 16,394,302 16,394,302 181,038,631 (13,100,942)
Net Loss (3,942,564)
Cash Dividends (2,303,194)
Issuance of shares under
Long-Term Incentive
Plan (net) 18,778 18,778 365,717
Unrealized Gains (Losses) $(8,820,137)
Other 220,083 220,083 3,779,917
-----------------------------------------------------------------------
Balance at December 31, 1994 16,633,163 $16,633,163 $182,881,071 $(17,043,506) $(8,802,137)
=======================================================================
Repurchased and
Nonvested Shares
-------------------------
Shares Amount Total
------------------------------------------
Balance at January 1, 1992 (1,058,453) $(13,427,556) $183,937,718
Net Loss (759,255)
Cash dividends (2,296,493)
Issuance of shares under
Long-Term Incentive
Plan (net) (16,714) 164,786
Other (55,256)
------------------------------------------
Balance at December 31, 1992 (1,058,453) (13,444,270) 180,991,500
Net Loss (8,108,872)
Sale of Common Stock for 148,210
cash (2,297,520)
Cash Dividends
Issuance of shares under
Long-Term Incentive
Plan (net) (39,016) 152,903
Other (37,516)
------------------------------------------
Balance at December 31, 1993 (1,058,453) (13,483,286) 170,848,705
Net Loss (3,942,564)
Cash Dividends (2,303,194)
Issuance of shares under
Long-Term Incentive
Plan (net) 124,977 509,472
Unrealized Gains (Losses) (8,820,137)
Other (758) 4,000,000
------------------------------------------
Balance at December 31, 1994 (1,059,211) $(13,358,309) $160,292,282
==========================================
See notes to consolidated financial statements.
F-5
52
CONSOLIDATED STATEMENTS OF CASH FLOWS
COEUR D'ALENE MINES CORPORATION AND SUBSIDIARIES
Year Ended December 31,
1994 1993 1992
-------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,942,564) $ (8,108,872) $ (759,255)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating activities:
Depreciation, depletion, and
amortization 17,826,021 13,852,762 5,799,590
Cumulative effect of change
in accounting method (5,181,188)
Deferred income taxes (100,738) (3,716,180) (1,684,209)
Deferred Stripping (1,494,716)
(Gain) loss on disposition of assets 133,627 444,950 (11,647)
Foreign currency transaction gain (783,894)
Gain on sale of short term investments (1,541,735)
Nonrecurring charges 9,373,564
Change in Operating Assets and Liabilities:
Accounts receivable (3,199,481) (3,427,588) (1,073,926)
Inventories (1,275,656) (2,298,051) (213,639)
Accounts payable and
accrued liabilities 782,143 3,262,980 (2,491,745)
Accrued merger liabilities (2,572,642)
-------------- -------------- -------------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 6,403,007 4,202,377 (3,007,473)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Cyprus Gold New Zealand,
Ltd. (net of cash received) (52,818,247)
Purchases of short-term investments (107,900,947) (85,387,368) (21,689,084)
Sales of short-term investments 43,349,371 34,548,248
Purchases of property, plant and
equipment (9,248,331) (4,563,607) (3,602,580)
Proceeds from sale of assets 488,353 680,873 557,081
Expenditures on operational mining
properties (11,241,937) (2,524,454) (4,155,600)
Expenditures on developmental
properties (12,760,036) (8,926,809) (13,788,514)
Other 69,454 (567,011) 554,259
-------------- ------------- -------------
NET CASH USED IN
INVESTING ACTIVITIES (97,244,073) (119,558,375) (42,124,438)
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of obligations under
capital leases (1,899,771) (1,775,333) (1,649,006)
Payment of cash dividends (2,303,194) (2,297,520) (2,296,493)
Proceeds from bond issuance 95,513,842 71,416,034
-------------- -------------- -------------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 91,310,877 (4,072,853) 67,470,535
-------------- ------------- --------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 469,811 (119,428,851) 22,338,624
Cash and cash equivalents at beginning
of year 14,678,097 134,106,948 111,768,324
-------------- ------------- -------------
Cash and cash equivalents at end
of year $ 15,147,908 $ 14,678,097 $134,106,948
============= ============= =============
See notes to consolidated financial statements.
F-6
53
NOTE A--BUSINESS OF COEUR D'ALENE MINES CORPORATION
Coeur d'Alene Mines Corporation (Coeur or the Company) is
principally engaged in the exploration, development and operation of silver and
gold mining properties located in the United States (Nevada, Idaho and Alaska),
New Zealand and Chile. Coeur is also engaged in the manufacture and sale of
lightweight flexible hose and duct and metal tubing.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements
include the wholly-owned subsidiaries of the Company, the most significant of
which are Coeur Rochester, Callahan Mining Corporation, including Coeur New
Zealand, Inc., Coeur-Alaska, Inc. and CDE Chilean Mining Corporation. The
consolidated financial statements also include all non-wholly owned entities in
which voting control of more than 50% is held by the Company. Related minority
interests are not material and are included in other assets. Intercompany
balances and transactions have been eliminated in consolidation. Investments
in unincorporated joint ventures are accounted for on a proportionate
consolidation basis, the most significant of which are the Golden Cross Mine,
Kensington Property, Coeur Mine and Galena Mine.
Revenue Recognition: Revenue is recognized when title to gold and
silver passes to the buyer. The effects of forward sales are reflected in
revenue at the date the related precious metals are delivered or the contracts
expire.
Inventories: Inventories of ores on leach pads and in the milling
process are valued based on actual costs incurred to place such ores 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 rate are accounted for prospectively. All other inventories are
stated at the lower of cost or market, cost being determined using the
first-in, first-out and weighted average cost methods.
Property, Plant, and Equipment: Property, plant, and equipment are
recorded at cost. Depreciation, using the straight-line method, is provided
over the estimated useful lives of the assets. Certain mining equipment is
depreciated using the units of production method based upon proven and probable
reserves. Maintenance and repairs are charged to operations as incurred.
Mining Properties: Values for mining properties represent
acquisition costs or fair market value of Common Stock issued for properties
plus developmental costs. Cost depletion has been recorded based on the
units-of-production method over the estimated total reserves. Management
evaluates the net carrying value of all operations, property by property, on a
regular basis to reach a judgment concerning possible permanent impairment of
value and the need for a write-down in asset value to net realizable value.
These
F-7
54
reviews require significant judgment and the use of estimates, and are affected
by the risks and uncertainties inherent in normal operations. Considerations
include the level of maintenance and standby costs, current projections of
metal prices and other nonoperating alternatives.
Reclamation Costs: Post-closure reclamation and site restoration
costs are estimated based upon environmental regulatory requirements and are
accrued over the life of the mine using the units of production method.
Current expenditures relating to ongoing environmental and reclamation programs
are expensed as incurred. As of December 31, 1994 and 1993 the Company has
provided approximately $2,843,658 and $1,616,506 for post-closure reclamation
and restoration, and anticipates the total of such costs will be approximately
$12.1 million. Amounts provided are included as other Long Term Liabilities.
Exploration and Development: Costs incurred in the search for new
mineral properties are charged directly to expense. Development expenditures
incurred prior to reaching the production stage, related to mining and drilling
properties with identified economic reserves, are capitalized. Interest cost
is capitalized on development properties until the properties are placed into
operation.
Cash Equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. As of December 31, 1994 and 1993, cash and cash equivalents
included $14,182,060 and $9,618,316 of cash, respectively. The balance of the
reported amounts consists principally of investment grade commercial paper.
Amounts reported in the balance sheet for cash and cash equivalents represent
cost which approximates fair value.
Short-term Investments: The Company invests in debt and equity
securities which, prior to January 1, 1994, are stated at the lower of cost or
market. Effective January 1, 1994, the Company changed its method of
accounting for investments by adopting Statement of Financial Accounting
Standards (FAS) 115, "Accounting for Certain Investments in Debt and Equity
Securities". FAS 115 requires the use of fair market value accounting. The
Company has classified its short term investments as available for sale,
according to provisions of the new pronouncement. Available for sale
securities are carried at fair value, determined by quoted prices. Unrealized
holding gains and losses on such securities are excluded from earnings and
reported as a separate component of shareholders' equity until realized.
Foreign Currencies: Monetary assets and liabilities of the
Company's New Zealand and Chilean operations are translated into U.S. dollars
at year-end exchange rates and revenue and expenses are translated at average
exchange rates. Non-monetary assets and liabilities are converted at
historical rates. In each instance, the functional currency is the U.S.
dollar. Realized gains and losses from foreign currency transactions are
reflected in income.
Foreign Currency Forward Exchange Contracts: As part of its
program to manage foreign currency risk, the Company has entered into foreign
currency forward exchange contracts. Contracts related to firm commitments,
F-8
55
primarily foreign construction projects, are designated and effective as
hedges. Gains and losses are deferred and recognized in the same period as the
related transactions. For contracts associated with anticipated transactions
(foreign operating expenses), changes in forward rates are reflected currently
in determining net income. At December 31, 1994, the Company had contracts
outstanding, payable in U.S. dollars, to purchase approximately $4.8 million,
$3.4 million and $22.1 million denominated in New Zealand, Australian and
Chilean currencies, respectively. These contracts mature at various dates
through December 1995.
Forward Delivery Contracts: The Company sells refined gold and
silver from its mines to various precious metals refiners pursuant to fixed
price forward contracts or at spot prices prevailing at the time of sale. As
of December 31, 1994, the Company had entered into contracts which require
future delivery of 75,000 ounces of gold on various dates through 1996 at an
average price of $417.17. Revenue from forward sales transactions is
recognized as metal is delivered.
Earnings Per Share: Earnings per share is calculated based on the
weighted average number of common stock and common stock equivalents
outstanding, unless the addition of common stock equivalents would be
anti-dilutive.
Reclassification: Certain reclassifications of prior year balances
have been made to conform to current year classifications.
NOTE C--BUSINESS COMBINATIONS
Cyprus Gold New Zealand, Limited
On April 30, 1993, the Company acquired Cyprus Gold New Zealand, Limited
for approximately $54 million in cash,. The acquisition has been accounted for
as a purchase. Had the acquisition taken place as of January 1, 1993,
management estimates that consolidated sales of dore' would have been $91.1
million, consolidated net loss would have been $10.1 million and net loss would
have been $.66 per share in 1993. Had the acquisition taken place as of
January 1, 1992, management estimates that consolidated sales of dore' would
have been $78.4 million, consolidated net loss would have been $1.3 million and
net loss would have been $.09 per share in 1992.
F-9
56
NOTE D--SHORT TERM INVESTMENTS AND MARKETABLE SECURITIES
The amortized cost of available-for-sale securities is adjusted for
premium and discount amortization. Such amortization is included in Other
Income. The following is a summary of Available-for-Sale Securities as of
December 31, 1994.
Available-For-Sale Securities
----------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
(In Thousands) Cost Losses Gains Value
-------- ------ ----- --------
U.S. Corporate $ 67,856 $3,438 $ 64,418
U.S. Government 48,314 2,461 45,853
-------- ------ ---- --------
Total Debt Securities 116,170 5,899 110,271
Equity Securities 21,180 3,184 263 18,259
-------- ------ ---- --------
$137,350 $9,083 $263 $128,530
======== ====== ==== ========
The gross realized gains on sales of Available-For-Sale Securities
totaled $2,731,499 and $192,983 during 1994 and 1993, respectively. The gross
realized losses totaled $1,189,764 and $63,961 during 1994 and 1993,
respectively. Investments mature at various dates through December 1996.
NOTE E--INVENTORIES
Inventories are composed of the following:
December 31,
1994 1993
------------- -------------
Mining:
Ore in process and
on leach pads $ 28,895,419 $ 27,958,186
Dore' inventory 1,748,207 1,947,294
Supplies 3,571,501 3,356,544
------------- -------------
34,215,127 33,262,024
Manufacturing:
Raw Materials 1,092,727 755,206
Finished goods 638,271 653,239
------------- -------------
$ 35,946,125 $ 34,670,469
============= =============
F-10
57
NOTE F--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
December 31,
1994 1993
------------- -------------
Land $ 2,225,434 $ 1,684,835
Buildings and improvements 20,269,747 19,603,642
Machinery and equipment 57,622,995 51,368,673
Capital leases, buildings
and equipment 8,350,355 8,350,355
------------- -------------
$ 88,468,531 $ 81,007,505
============= =============
Assets subject to capital leases consist of the following:
December 31,
1994 1993
------------ ------------
Buildings $ 5,104,730 $ 5,104,730
Equipment 3,245,625 3,245,625
------------ ------------
TOTAL BUILDINGS AND EQUIPMENT 8,350,355 8,350,355
Operational mining property 7,871,007 7,871,007
------------ ------------
16,221,362 16,221,362
Less allowance for accumulated
amortization and depletion 8,633,847 7,987,780
------------ ------------
TOTAL ASSETS SUBJECT TO CAPITAL
LEASES $ 7,587,515 $ 8,233,582
============= ============
Lease amortization is included in depreciation and depletion expense.
The Company has a capital lease agreement for the Rochester mineral
processing facilities, which expires in 1996. The Company has the option to
renew the lease for two additional years. Upon expiration of the lease, the
Company is entitled to purchase the facilities for the lesser of $5,850,000 or
fair market value. The Company is required to maintain a security deposit of
approximately $2.3 million in an interest-bearing escrow account with the
interest payable to the Company.
F-11
58
The Company has entered into various operating lease agreements, which
expire over a period of five years. The total rent expense charged to
operations under these agreements was $3,140,692, $3,261,261 and $3,460,729 for
1994, 1993 and 1992, respectively.
Minimum lease payments under capital and operating leases are as follows:
Year Ending Capital Operating
December 31 Leases Leases
----------- ----------- -----------
1995 $ 2,292,941 $ 3,203,837
1996 2,292,952 1,897,291
1997 1,766,772
1998 1,550,185
1999 589,315
------------ ------------
TOTAL MINIMUM PAYMENTS DUE 4,585,893 $ 9,007,400
===========
Less amount representing interest 351,980
-----------
PRESENT VALUE OF NET
MINIMUM LEASE PAYMENTS 4,233,913
Less current maturities 2,041,057
-----------
$ 2,192,856
===========
F-12
59
NOTE G - MINING PROPERTIES
Capitalized costs for mining properties December 31,
consist of the following: 1994 1993
----------- ------------
Operational mining properties:
Rochester Mine, less accumulated
depletion of $28,399,912
and $24,420,982 $ 37,355,588 $ 36,070,308
Golden Cross Mine, less
accumulated depletion of
$ 3,631,051 and $1,756,888 12,116,068 13,654,420
Coeur d'Alene Mining District,
less accumulated depletion of
$5,715,913 and $6,633,633 7,176,695 7,184,623
El Bronce Mine less accumulated
depletion of $101,598 5,936,518
Other 86,186 86,186
------------- -------------
TOTAL OPERATIONAL MINING PROPERTIES 62,671,055 56,995,537
Developmental mining properties:
Kensington 52,139,488 47,388,330
Fachinal 32,444,979 26,779,454
Waihi East 8,454,000 8,454,000
Other 2,858,307 914,954
------------ ------------
TOTAL DEVELOPMENTAL MINING PROPERTIES 95,896,774 83,536,738
------------- -------------
TOTAL MINING PROPERTIES $158,567,829 $140,532,275
============= =============
OPERATIONAL MINING PROPERTIES
The Rochester Mine: The Company owns and operates this silver and gold
surface mining operation. The Company has conducted operations at the
Rochester Mine since September 1986. It is one of the largest primary silver
mines in the United States and a significant gold producer as well. A prior
owner of the property has retained a royalty interest that varies between 0%
and 5% of the net smelter revenues of the Rochester property, provided the
market price of silver is at least $17.
Golden Cross Mine: On April 30, 1993, the Company acquired an 80%
operating interest in the Golden Cross Mine. The mine is an underground and
surface gold mining operation located near Waihi, New Zealand.
F-13
60
The Company's 80% interest in the Golden Cross Mine, accounted for by
the proportionate consolidation method, is summarized as follows:
Year Ended December 31,
(Dollars in Thousands) 1994 1993
---------- ----------
Sales of dore' $ 27,582 $ 21,452
Cost of mine operation (28,297) (19,761)
---------- ---------
Loss before income taxes
and cumulative effect
of change in accounting
method $ (715) 1,691
========== ==========
Assets $ 94,139 74,305
Liabilities (92,804) (70,751)
---------- ---------
Shareholders' equity $ 1,335 $ 3,554
========== ==========
During the third quarter of 1994, the Company received updated reserve
information indicating an increase in reserves at the Golden Cross Mine.
Accordingly, the Company adjusted its depletion rate effective July 1, 1994 to
reflect the increased reserves. The impact of the change was an increase in
net income of $1,156,178 or $.075 per share for the six months ended December
31, 1994.
Coeur d'Alene Mining District: The Company has been the holder of
mineral interests in the Coeur d'Alene Mining District continuously since 1928.
The Company's most significant interests included, through December 31, 1994, a
50% joint venture interest in the Coeur Mine, a 62.5% interest in the profits
from operation of the Galena Mine and other ancillary mining claims. Hecla
Mining Company retains a net profits royalty interest in the Galena Mine up to
a maximum of $2 million commencing when the price of silver reaches $11 an
ounce. At December 31, 1994, Hecla was entitled to recoup a total of
$1,117,572 from the first net profits received from future mine operations.
Effective January 1, 1995, the Company entered into an agreement with
ASARCO Incorporated, forming a new company called Silver Valley Resources, Inc.
Both Coeur and ASARCO contributed their respective interests in the Galena and
Coeur Mines, as well as other assets and waived certain cash flow entitlements
at the Galena Mine in return for shares of capital stock of Silver Valley
Resources. ASARCO and Coeur each hold a 50% equity interest in Silver Valley
Resources, Inc.
El Bronce Mine: On October 3, 1994, the Company invested in and
assumed operating control of the El Bronce gold mine under terms of a
management agreement. The mine is located in northern Chile, approximately 90
miles north of Santiago. According to the terms of the management agreement,
the Company is entitled to 51% of the operating profits, and has an option to
acquire a 51% equity interest in CDE El Bronce within three years for a total
price of $20.5 million, subject to meeting certain criteria. Coeur has
commenced a three year program designed to increase gold production and improve
the reserve base and profitability levels. Management fees earned in 1994,
reflected as a component of "Other Income", totaled $1.0 million.
F-14
61
DEVELOPMENTAL PROPERTIES
Kensington: The Company owns a 50% interest in the Kensington gold
property located near Juneau, Alaska, is responsible for 50% of project costs,
and will receive 50% of the project revenues. The Company's joint venture
partner is the operator of the project. On August 15, 1994, the Company
purchased 33 1/3% of the Jualin property adjacent to the Kensington property
for $2.1 million, bringing its ownership interest in the Jualin property to
100%. Concurrent with the acquisition, the Company sold the common stock of
International Curator which it previously owned, and relinquished all of its
rights with respect to the Boleo property. The Company recorded a gain on the
sale of International Curator stock of $2.7 million, which is reflected as a
component of "Other Income". The Company's investment in the Kensington Joint
Venture is accounted for under the proportionate consolidation method and is
summarized as follows:
December 31,
1994 1993
-------------- -------------
Total Assets/Venture's Equity $ 54,242,841 $ 47,495,650
============== =============
The Kensington Joint Venture is a development stage mining property and
consequently has no operations.
Fachinal: The Fachinal Mine will be a silver and gold mining operation
located in southern Chile. On July 19, 1994, the Company's Board of Directors
approved the construction of the Fachinal project, following the completion by
an independent engineering firm of a detailed feasibility study. Commitments
of $27,121,795 have been made to purchase the power plant, processing equipment
and major mining equipment. Initial production is expected in the fourth
quarter of 1995.
NOTE H--LONG-TERM DEBT
The $50 million of 6% Convertible Subordinated Debentures Due 2002 are
convertible into shares of Common Stock prior to maturity, unless previously
redeemed, at a conversion rate of approximately 38 shares of Common Stock for
each $1,000 of principal (equivalent to a conversion price of $26.00 per share
of Common Stock). The Company is required to make an annual interest payment.
The debentures are redeemable at the option of the Company. The debentures,
which have no other funding requirements until maturity, mature June 10, 2002.
The $75 million of 7% Convertible Subordinated Debentures Due 2002 are
convertible into shares of Common Stock at any time prior to maturity unless
previously redeemed at a conversion rate of approximately 63 shares of Common
Stock for each $1,000 of principal (equivalent to conversion price of $15.68
per share of Common Stock). The Company is required to make semi-annual
F-15
62
interest payments. The debentures are redeemable at the option of the Company
on or after December 15, 1995. The debentures, which have no other funding
requirements until maturity, mature December 11, 2002.
During the first quarter of 1994, the Company effected an offering of
$100 million of 6 3/8% Convertible Subordinated Debentures Due 2004 which are
convertible into shares of Common Stock on or before January 31, 2004, unless
previously redeemed, at a conversion price of $26.20 per share. The Company is
required to make semi-annual interest payments. The debentures are redeemable
at the option of the Company on or after January 31, 1997. The debentures,
which have no other funding requirements until maturity, mature January 31,
2004.
The carrying amounts and fair values of long-term borrowings, which are
based on published values on December 31, 1994, consisted of the following:
December 31, 1994 December 31, 1993
------------------------------------ -----------------------------------
Carrying Fair Carrying Fair
Amount Value Value Value
----------- ------------- ----------- ------------
6% Convertible
Subordinated
Debentures
Due 2002 $50,000,000 $40,000,000 $50,000,000 $ 51,500,000
7% Convertible
Subordinated
Debentures
Due 2002 $75,000,000 $85,125,000 $75,000,000 $109,875,000
6.375% Convertible
Subordinated
Debentures
Due 2004 $100,000,000 $83,500,000
Total interest accrued in 1994, 1993 and 1992 was $15,641,771, $9,293,420
and $4,104,639, respectively, of which $4,242,689, $3,928,846 and $3,007,887,
was capitalized as a cost of the mines under construction.
Interest paid was $12,061,341, $8,834,559, and $3,663,349 in 1994, 1993
and 1992, respectively.
As of December 31, 1994, the Company has outstanding letters of credit
totaling approximately $11.2 million related to performance bonds.
NOTE I--INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards (FAS)
109, "Accounting for Income Taxes." FAS 109 requires an asset and liability
approach to accounting for income taxes and establishes criteria for
recognizing deferred tax assets. Accordingly, the Company adjusted its
existing deferred income tax assets and liabilities to reflect current
statutory income tax rates and previously unrecognized tax benefits related to
federal and certain state net operating loss carryforwards. The cumulative
effect of the accounting change on prior years at January 1, 1993 is a
non-recurring gain of $5,181,188, or $.34 per share, and is included in
F-16
63
the accompanying Consolidated Statement of Operations for the year ended
December 31, 1993.
The components of the provision (benefit) for income taxes in the
consolidated statements of operations are as follows:
Year Ended December 31,
--------------------------------------------------------------
1994 1993 1992
------------ ------------ ------------
Current $ 364,044 $ 285,420 $ 135,628
Deferred (100,738) (3,716,180) (3,882,764)
------------- ------------ ------------
PROVISION (BENEFIT) FOR
INCOME TAX $ 263,306 $(3,430,760) $(3,747,136)
============= ============ ============
Deferred taxes arise due to temporary differences in deductions for tax
purposes and for financial statement accounting purposes. The tax effect and
sources of these differences are as follows:
Year Ended December 31,
--------------------------------------------------------------
1994 1993 1992
----------- ------------ ------------
Reserve for loss on
mine closure $ 122,881 $ (84,541) $ 272,842
Net mine exploration and
development costs 1,248,575 1,329,435 1,876,045
Net lease payments 469,745 547,783 553,872
Regular tax benefit on
utilization of net
operating losses (1,196,892) (7,341,935) (6,467,765)
Impact on deferred taxes
of alternative minimum
tax in current year 337,721
Environmental costs 430,500 (426,273)
Amortization of bond premium (689,447)
Unrealized investment losses (3,087,048)
Change in valuation
allowance 2,691,752 334,689
Change in deferred
state taxes (40,077) 617,119
Accrual to return
reconciliation (159,421)
Other 108,694 1,307,543 (455,479)
----------- ------------ ------------
$ (100,738) $(3,716,180) $(3,882,764)
=========== ============ ============
F-17
64
As of December 31, the significant components of the Company's net
deferred tax liability were as follows:
Year Ended December 31,
--------------------------------------------
1994 1993
------------- --------------
Deferred tax liabilities:
PP&E, net $ 20,624,892 $ 19,756,681
State taxes 427,104
------------- --------------
Total deferred tax liabilities 21,051,996 19,756,681
Deferred tax assets:
Net operating loss carryforwards 26,549,914 25,353,022
AMT credit carryforwards 938,670 938,672
Business credit carryforward 432,800 628,933
Unrealized losses on short-term
investments 3,087,048
------------- --------------
Total deferred tax assets 31,008,432 26,920,627
Valuation allowance for deferred
tax assets (11,537,240) (8,845,488)
-------------- -------------
Net deferred tax assets 19,471,192 18,075,139
Net deferred tax liabilities $ 1,580,804 $ 1,681,542
============== ==============
The change in the valuation allowance in 1994 is primarily due to
uncertainties related to the ultimate recovery of deferred tax assets from
unrealized losses on short-term investments.
A reconciliation of the Company's effective income tax rate with the
federal statutory tax rate for the periods indicated is as follows:
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
-------- ------- -------
Tax benefit computed at
statutory rates (35.0%) (35.0%) (34.0%)
Percentage depletion (55.1%) (7.9%) (21.6%)
Deemed dividend from foreign affiliate 6.2%
Dividend received deduction (6.2%)
Alternative minimum tax impact (27.2%)
Interest on foreign subsidiary debt 85.1% 8.2%
Increase in valuation allowance (1.3%) 2.0%
Payment of foreign taxes 11.5% 2.4%
Investment on foreign subsidiary debt 10.2% 3.3%
Other (net) (2.0%) 6.6% (6.6%)
---------- -------- -------
EFFECTIVE TAX RATE 7.2% (20.4%) (83.2%)
========== ======== =======
For tax purposes, as of December 31, 1994, the Company has an operating
loss carryforward of approximately $75.9 million and an alternative minimum tax
loss carryforward of approximately $52.3 million which expire through
F-18
65
2006. The Company also has alternative minimum tax credit carryforwards of
approximately $939,000.
As of December 31, 1994, Callahan Mining Corporation, a subsidiary, has
a net operating loss carryforward of approximately $24.5 million and an
alternative minimum tax loss carryforward of approximately $16.7 million which
expire through 2006. The utilization of Callahan Mining Corporation's net
operating losses is subject to limitations.
NOTE J--SHAREHOLDERS' EQUITY AND STOCK PLANS
In June 1989, the shareholders adopted a shareholder rights plan which
entitles each holder of the Company's Common Stock to one right. Each right
entitles the holder to purchase one one-hundredth of a share of newly
authorized junior preferred stock. The exercise price is $100, making the
price per full preferred share $10,000. The rights will not be distributed and
become exercisable unless and until ten days after a person acquires 20% of the
outstanding common shares or commences an offer that would result in the
ownership of 30% or more of the shares. Each right also carries the right to
receive upon exercise that number of Coeur common shares which has a market
value equal to two times the exercise price. Each preferred share issued is
entitled to receive 100 times the dividend declared per share of Common Stock
and 100 votes for each share of Common Stock and is entitled to 100 times the
liquidation payment made per common share. The Board may elect to redeem the
rights prior to their exercisability at a price of one cent ($.01) per right.
Any preferred shares issued are not redeemable.
The Company has an Annual Incentive Plan (the "Annual Plan") and a
Long-Term Incentive Plan ("Long-Term Plan") which were approved by shareholders
in June 1989. Under the Annual Plan, benefits are payable 50% in cash and 50%
in shares of Common Stock. Under the Long-Term Plan, 40% of the benefits
consist of non-qualified stock options that are exercisable at prices equal to
the fair market value of the shares on the date of grant and vest cumulatively
at an annual rate of 25% during the four-year period following the date of
grant. Of the remaining 60% balance of the awards under the Long-Term Plan,
60% is payable in shares of Common Stock and 40% is payable in cash at the end
of a four-year vesting period.
As of December 31, 1994 and December 31, 1993, nonqualified stock
options to purchase 153,600 shares and 125,888 shares, respectively, were
outstanding under the Long-Term Plan. The options are exercisable at prices
ranging from $13.75 to $27.00 per share.
As of December 31, 1994 and December 31, 1993, the Company had awarded
57,189 shares and 38,411 shares, respectively, of Common Stock under the
Long-Term Plan and the Annual Plan, representing deferred compensation of
$909,326 and $401,747, respectively, based on the fair market value of the
shares at the date of the award.
F-19
66
Total compensation expense charged to operations under the Plans was
$1,359,692, $396,212 and $804,812 for 1994, 1993 and 1992, respectively.
Exercise
Shares Price
----------- ---------
Stock options outstanding
at 1/1/92 80,700 $ 18.38
Issued 43,100 15.13
Canceled (19,300) 17.11
----------- --------
Stock options outstanding
at 12/31/92 104,500 17.28
Issued 39,963 18.50
Exercised (8,675) 13.86
Canceled (9,900) 17.31
----------- --------
Stock options outstanding
at 12/31/93 125,888 17.90
Issued 27,712 20.38
---------- --------
Stock options outstanding
at 12/31/94 153,600 $ 18.34
========== ========
As of December 31, 1994 and 1993, 121,537 shares and 168,027 shares,
respectively, were available for grant under the Plans and 10,523,032 shares of
Common Stock are reserved for potential conversion of Convertible Subordinated
Debentures.
NOTE K--EMPLOYEE BENEFIT PLANS
The Company provides a noncontributory defined contribution
profit-sharing plan for all eligible employees. Total plan expense charged to
operations was $609,782, $585,477, and $476,516 for 1994, 1993 and 1992,
respectively, which is based on a percentage of salary of qualified employees.
Effective January 1, 1995, the Company has adopted a savings plan
(which qualifies under Section 401(k) of the U.S. Internal Revenue code)
covering all full-time U.S. employees. Under the plan, employees may elect to
contribute up to 10% of their cash compensation, subject to ERISA limitations.
The Company is required to make matching cash contributions equal to 50% of the
employee's contribution or up to 3% of the employee's compensation. Employees
have the option of investing in four different types of investment funds.
NOTE L--LITIGATION
On June 24, 1994, the U.S. District Court for the District of Idaho
approved the settlement of Kassover v. Coeur d'Alene Mines Corporation et al
(the "Lawsuit"), a class action lawsuit instituted against the Company and
others in 1990. Pursuant to the Settlement, 220,083 shares of Common Stock
F-20
67
were issued by the Company in exchange for the claims of the members of the
plaintiff class (the "Claimants") and their counsel. The number of shares was
determined by dividing $4 million by the average daily closing price of the
Common Stock for the five business days preceding the "fairness hearing"
relating to the Settlement held on June 16, 1994. The Company issued 66,025
shares to counsel for the Claimants in late July 1994, and issued the balance
of 154,058 shares in December 1994, following the processing of the Claimants'
claims.
During October 1993, the Company and Callahan negotiated an agreement
with the U.S. Environmental Protection Agency (the "EPA") and a group of other
companies that are potentially responsible parties ("PRPs") in connection with
the Bunker Hill Superfund site. The negotiated settlement agreement, adopted
in a Court Consent Decree, calls for the Company and Callahan to pay a total of
$1,230,000 to a group of other PRPs in order to remove the Company and Callahan
from any additional cleanup liability relating to the site. Accordingly, the
Company recorded a non-recurring environmental settlement expense of $1,230,000
during the third quarter of 1993. Payment was made on December 16, 1994.
During September 1993, the Company commenced foreclosure proceedings
upon the collateral underlying two delinquent collateralized promissory notes.
In view of this and the Company's inability to ascertain what amount, if any,
may be realized therefrom, the Company effected a non-recurring write-off of
uncollectible notes receivable and accrued interest of approximately $2,268,000
in the third quarter of 1993.
The items referred to above are reflected as nonrecurring charges in
the 1993 Consolidated Statements of Operations.
On September 29, 1994, following a jury trial, a judgment was entered
in favor of Callahan in a lawsuit commenced in March 1992 by FN Enterprises,
Inc. ("FN"), a business consulting firm for Callahan. The suit, which is
before the federal district court for the District of Northern California,
seeks to recover a "success fee" in the approximate amount of $673,000 in
connection with the merger that resulted in Callahan becoming a wholly-owned
subsidiary of the Company. Callahan has filed a counterclaim seeking
rescission of the contract and damages from FN equal to the amount of fees and
expenses paid to FN. The court dismissed FN's claim in its entirety. The
claim is now pending post-trial motions made by FN.
On September 22, 1994, a judgment was entered against the Company in
the United States District Court for the District of Idaho in a case entitled
Goldberg v. Coeur d'Alene Mines Corporation in the amount of $725,688, plus
costs and attorney fees in the approximate amount of $225,000. The action
involves an alleged claim by the plaintiff to recover on four promissory notes
made by a predecessor of the Company. The notes are claimed to be the
obligation of the Company by virtue of successive mergers which occurred in
1974 and in 1988. On January 19, 1995 the case was resolved by virtue of a
settlement in the amount of $800,000. The amount was fully accrued as of
December 31, 1994.
The Company is also subject to other pending or threatened legal actions
that arise in the normal course of business. In the opinion of management,
F-21
68
liabilities arising from these claims, if any, will not have a material effect
on the financial position of the Company. Depending on the timing of any
future liabilities, the amount of which cannot now be reasonably estimated,
relating to these matters, such amounts could possibly have a material impact
on the results of operations for a given period.
F-22
69
NOTE M--GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION
The Company operates in two business segments: mining and
manufacturing. Financial information regarding these segments is as follows.
Corporate assets included in the presentation consist principally of cash and
cash equivalents.
Year Ended December 31,
---------------------------------------------------------
1994 1993 1992
---------------------------------------------------------
(Thousands of Dollars)
Revenues:
--------
Mining group $ 79,606 $ 67,990 $ 41,414
Manufacturing group 11,417 10,192 10,108
------- ---------- -----------
Totals, business segments 91,023 78,182 51,522
Other revenues 12,857 5,537 4,906
--------- ---------- -----------
Consolidated revenues $ 103,880 $ 83,719 $ 56,428
========== ========== ===========
Income (Loss) Before Income Taxes:
---------------------------------
Mining group $ 6,367 $ 3,194 $ (363)
Manufacturing group 1,153 1,103 1,121
---------- ---------- -----------
Totals, business segments 7,520 4,297 758
Other revenues 12,857 5,537 4,906
Corporate and other expenses (24,056) (26,555) (10,170)
---------- ---------- -----------
Consolidated net loss before taxes
and cumulative effect $ (3,679) $ (16,721) $ (4,506)
========== ========== ===========
Depreciation, Depletion and Amortization:
----------------------------------------
Mining group $ 12,384 $ 12,010 $ 4,941
Manufacturing group 288 259 232
---------- ---------- -----------
Totals, business segments 12,672 12,269 5,173
Corporate 3,946 1,584 627
--------- ---------- -----------
Total $ 16,618 $ 13,853 $ 5,800
========= ========== ===========
Property, Plant and Equipment Additions
---------------------------------------
(Including Noncash Expenditures):
--------------------------------
Mining group $ 7,731 $ 29,680 $ 2,614
Manufacturing group 252 853 272
---------- ---------- -----------
Totals, business segments 7,983 30,533 2,886
Corporate 1,265 2,755 716
---------- ---------- -----------
Total $ 9,248 $ 33,288 $ 3,602
========== ========== ===========
Identifiable Assets:
-------------------
Mining group $ 240,415 $ 219,110 $ 151,281
Manufacturing group 6,481 5,499 4,460
---------- ---------- -----------
Totals, business segments 246,896 224,609 155,741
Corporate and other 165,947 101,099 169,515
---------- ---------- -----------
Consolidated assets $ 412,843 $ 325,708 $ 325,256
========== ========== ===========
F-23
70
The following table sets forth certain financial information relating to
international and domestic operations.
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992
-----------------------------------------------------
(Thousands of Dollars)
Revenues:
--------
United States $ 74,735 $ 62,630 $ 56,428
New Zealand 27,450 21,089
Chile 1,695
---------- ---------- ------------
Consolidated revenues $ 103,880 $ 83,719 $ 56,428
========== ========== ===========
Income (Loss) Before Income Taxes:
---------------------------------
United States $ (3,746) $ (18,399) $ (4,411)
New Zealand (803) 1,678
Chile 870 (95)
---------- ---------- -----------
Consolidated net loss before taxes
and cumulative effect $ (3,679) $ (16,721) $ (4,506)
========== ========== ===========
Depreciation, Depletion and Amortization:
----------------------------------------
United States $ 9,788 $ 7,482 $ 5,742
New Zealand 6,632 6,230
Chile 198 141 58
---------- ---------- -----------
Total $ 16,618 $ 13,853 $ 5,800
========== ========== ===========
Property, Plant and Equipment Additions
---------------------------------------
(Including Noncash Expenditures):
--------------------------------
United States $ 5,253 $ 3,818 $ 3,349
New Zealand 303 29,310
Chile 3,692 160 253
---------- ---------- -----------
Total $ 9,248 $ 33,288 $ 3,602
========== ========== ===========
Identifiable Assets:
-------------------
United States $ 319,072 $ 243,387 $ 305,424
New Zealand 46,613 54,452
Chile 47,158 27,869 19,832
---------- ---------- -----------
Consolidated assets $ 412,843 $ 325,708 $ 325,256
========== ========== ============
F-24
71
NOTE N--SUMMARY OF QUARTERLY FINANCIAL DATA
The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1994 and 1993:
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- ----------- ----------
(000's-Except Per Share Data)
1994
-----
Net Sales $ 22,895 $ 22,291 $ 23,526 $ 22,310
Gross Margin 2,856 2,992 4,151 1,455
Net income (loss) $ (2,597) $ (1,335) $ 1,643 $ (1,653)
Net income (loss) per share $ (.17) $ (.09) $ .11 $ (.11)
1993
----
Net Sales $ 11,981 $ 18,663 $ 22,602 $ 24,935
Gross Margin 731 1,864 2,704 3,991
Net income (loss) before
cumulative effect (1,981) (1,007) (10,388) 86
Net income (loss) $ 3,201 $ (1,007) $(10,388)(b) $ 86
Net income (loss) per shares
before cumulative effect $ (.08) $ (.07) $ (.68) $ .01
Net income (loss) per share $ .22 $ (.07) $ (.68)(b) $ .01
Fully diluted income per share $ .19(a)
(a) Fully diluted income per share reflects the impact of all convertible
securities including those not considered to be Common Stock
equivalents.
(b) Includes one time provisions for litigation settlement of $5,875,000,
environmental settlement of $1,230,000 and the write-off of
uncollectible notes receivable of $2,268,564.
F-25
72
EXHIBIT INDEX
-------------
3(a) - Articles of Incorporation of the Registrant and amendments
thereto. (Incorporated herein by reference to Exhibit 3(a) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
3(b) - Bylaws of the Registrant and amendments thereto. (Incorporated
herein by reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
3(c) - Certificate of Designations, Powers and Preferences of the Series
A Junior Preferred Stock of the Registrant, as filed with Idaho
Secretary of State on May 25, 1989 (Incorporated by reference to
Exhibit 4(a) of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989.)
4 - Specimen certificate of the Registrant's stock. (Incorporated
herein by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-2 (File No. 2-84174).)
73
10(a) - Agreement, dated August 31, 1964, between the Registrant, Rainbow
Mining and Milling Company Ltd. and American Smelting and
Refining Company, and amendments thereto. (Incorporated herein
by reference to Exhibit H to the Registrant's Registration
Statement on Form 10 dated April 25, 1977.)
10(b) - Agreement, dated August 1, 1979, between the Registrant, Callahan
Mining Corporation, Day Mines Incorporated and ASARCO
Incorporated. (Incorporated herein by reference to Exhibit (a)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1979.)
10(c) - Agreement, dated January 1, 1982, between the Registrant,
Callahan Mining Corporation and ASARCO Incorporated.
(Incorporated herein by reference to Exhibit 10(c) of the
Registrant's Registration Statement on Form S-2 [File No. 2-
84174].)
10(d) - Executive Compensation Program. (Incorporated herein by
reference to Exhibit 10(e) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989.) *
10(e) - Employment Agreement, dated March 30, 1989 between the Registrant
and Dennis E. Wheeler. (Incorporated herein by reference to
Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989.) *
10(f) - Severance Agreements, dated March 30, 1989, between the
Registrant and James Sabala, Robert Richins, and Tom Angelos.
(Incorporated herein by reference to Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1989.) *
10(g) - Profit Sharing Retirement Plan of the Registrant. (Incorporated
herein by reference to Exhibit (q) to Registrant's Registration
Statement on Form S-2 (File No. 2-98631).) *
10(h) - Lease agreement, dated as of October 10, 1986, between
Manufacturers Hanover Commercial Corporation and Coeur-Rochester,
Inc. (Incorporated herein by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K, dated October 10, 1986.)
--------------------------------
* Management contract or compensatory plan
74
10(i) - Indenture, dated as of June 10, 1987, between the Registrant and
Citibank, N.A., as Trustee, relating to the Registrant's 6%
Convertible Subordinated Debentures Due 2002. (Incorporated
herein by reference to Exhibit 4 to the Registrant's Current
Report on Form 8-K dated June 10, 1987.)
10(j) - Venture Agreement, dated as of August 5, 1987, between Coeur
Alaska, Inc. and Echo Bay Exploration Inc. (Incorporated herein
by reference to Exhibit 10(a) of the Registrant's Current Report
on Form 8-K dated August 5, 1987.)
10(k) - Venture Agreement, dated as of August 5, 1987, among the
Registrant, Echo Bay Exploration Inc. and Echo Bay Minerals
Company. (Incorporated herein by reference to Exhibit 10(b) of
the Registrant's Current Report on Form 8-K dated August 5,
1987.)
10(l) - Amended Venture Agreement, dated November 1, 1990 between Coeur
Alaska, Inc. and Echo Bay Exploration, Inc. (Incorporated herein
by reference to Exhibit 10(l) of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991.)
10(m) - Agreement, dated January 1, 1994, between Coeur-Rochester, Inc.
and Johnson Matthey Inc. (Incorporated herein by reference to
Exhibit 10(m) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.)
10(n) - Refining Agreement, dated January 24, 1994, between the
Registrant and Handy & Harman. (Incorporated herein by reference
to Exhibit 10(n) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
10(o) - Master Equipment Lease No. 099-03566-01, dated as of December 28,
1988, between Idaho First National Bank and the Registrant.
(Incorporated herein by reference to Exhibit 10(w) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
10(p) - Master Equipment Lease No. 01893, dated as of December 28, 1988,
between Cargill Leasing Corporation and the Registrant.
(Incorporated herein by reference to Exhibit 10(x) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
--------------------------------
* Management contract or compensatory plan
75
10(q) - Rights Agreement, dated as of May 24, 1989, between the
Registrant and First Interstate Bank of Oregon, N.A., as Rights
Agent. (Incorporated herein by reference to Exhibit 2 to the
Registrant's Form 8-A relating to the registration of the Rights
on the American and Spokane Stock Exchanges.)
10(r) - Participation Agreement, dated as of November 1, 1988, between
the Registrant and ASARCO, Incorporated. (Incorporated herein by
reference to Exhibit 10(y) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989.)
10(s) - Form of letter, dated May 10, 1991, extending the term of
Severance Agreement, dated March 30, 1989 between the Registrant
and Dennis Wheeler,James Sabala, Robert Richins and Tom Angelos.
(Incorporated herein by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.) *
10(t) - Lease dated January 15, 1947 between Vulcan Silver-Lead
Corporation and American Smelting and Refining Company.
(Incorporated herein by reference to Exhibit 10(v) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(u) - Supplemental Agreement dated June 4, 1959 between Callahan Mining
Corporation, American Smelting and Refining Company and Day
Mines, Inc., amending lease dated January 15, 1947.
(Incorporated herein by reference to Exhibit 10(w) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(v) - Operating Agreement dated as of March 18, 1970 between Callahan
Mining Corporation, American Smelting and Refining Company and
Day Mines, Inc. with respect to the Caladay Project.
(Incorporated herein by reference to Exhibit 10(x) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10(w) - Lease dated September 20, 1982 between Callahan Mining
Corporation and Hecla Mining Company for the Hornsilver-Peerless
properties (Incorporated herein by reference to Exhibit 10(y) to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
--------------------------------
* Management contract or compensatory plan
76
10(x) - Agreement and Plan of Merger, dated as of September 16, 1991, by
and among the Registrant, CMC Acquisition Corporation and
Callahan Mining Corporation. (Incorporated herein by reference
to Exhibit A to the Prospectus, dated November 22, 1991,
contained in the Registrant's Registration Statement on Form S-4
(File No. 33-44096).
10(y) - Agreement, dated June 11, 1992, between Callahan Mining
Corporation and Hecla Mining Company (Incorporated herein by
reference to Exhibit 10(z) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992.)
10(z) - Indenture, dated as of December 1, 1992, between the Registrant
and Bankers Trust Company, as Trustee, relating to the Company's
7% Convertible Subordinated Debentures Due 2002. (Incorporated
herein by reference to Exhibit 10(aa) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.)
10(aa) - Severance Agreement, dated October 1, 1992, between Registrant
and Michael L. Clark. (Incorporated herein by reference to
Exhibit 10(bb) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992.) *
10(bb) - Form of letter, dated June 28, 1993, extending the term of
Severance Agreement dated March 30, 1989 between the Registrant
and James Sabala, Robert Richins, Tom Angelos, William Boyd, Al
Wilder and Michael L. Clark. (Incorporated herein by reference
to Exhibit 10(cc) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)*
10(cc) - Employment Agreement, dated June 28, 1993, extending the
agreement dated March 30, 1989 between the Registrant and Dennis
E. Wheeler. (Incorporated herein by reference to Exhibit 10(cc)
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.) *
10(dd) - Stock Purchase Agreement, dated as of April 30, 1993, among Coeur
New Zealand, Inc., the Registrant, Cyprus gold New Zealand
Limited, Cyprus Exploration and Development Corporation and
Cyprus Minerals Company. (Incorporated herein by reference to
Exhibit 2 of the Registrant's Current Report on Form 8K dated
April 30, 1993.)
--------------------------------
* Management contract or compensatory plan
77
10(ee) - Amended and Restated Profit Sharing Retirement Plan of the
Registrant. (Incorporated herein by reference to Exhibit 10(ff)
of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.) *
10(ff) - Indenture, dated as of January 26, 1994, between the Registrant
and Bankers Trust Company relating to the Registrant's 6 3/8%
Convertible Subordinated Debentures Due 2004. (Incorporated
herein by reference to Exhibit 10(gg) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.)
10(gg) - Purchase Agreement, dated January 18, 1994, between the
Registrant and Kidder, Peabody & Co. Incorporated relating to the
6 3/8% Convertible Subordinated Debentures Due 2004.
(Incorporated herein by reference to Exhibit 10(hh) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(hh) - Registration Rights Agreement, dated January 26, 1994, between
the Registrant and Kidder, Peabody & Co., Incorporated relating
to the 6 3/8% Convertible Subordinated Debentures Due 2004.
(Incorporated herein by reference to Exhibit 10(ii) of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
10(ii) - 1993 Annual Incentive Plan and Long-Term Performance Share Plan
of the Registrant. (Incorporated herein by reference to Exhibit
10(jj) of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.) *
10(jj) - Supplemental Retirement and Deferred Compensation Plan, dated
January 1, 1993, of the Registrant. (Incorporated herein by
reference to Exhibit 10(kk) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.) *
10(kk) - Lease Agreement, dated January 12, 1994, between First Security
Bank of Idaho and Coeur Rochester, Inc. (Incorporated herein by
reference to Exhibit 10(mm) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
10(ll) - Agreement, dated January 1, 1994, between Coeur Gold New Zealand
Limited and Johnson Matthey (Aust.) Ltd. (Incorporated herein by
reference to Exhibit 10(mm) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
--------------------------------
* Management contract or compensatory plan
78
10(mm) - Nonemployee Directors' Retirement Plan effective as of March 19,
1993, of the Registrant. (Incorporated herein by reference to
Exhibit 10(oo) of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.) *
10(nn) - Extension of Employment and Severance Agreement
between the Registrant and Dennis E. Wheeler which
extension is dated June 28, 1994. (Filed herewith.)*
10(oo) - Form of letter, dated June 28, 1994, extending the
terms of the Severance Agreements dated march 30,
1989 between the Registrant and James Sabala, Tom
Angelos, Michael Clark, Al Wilder and William Boyd.
(Filed herewith.)*
10(pp) - 401k Plan of the Registrant. (Filed herewith.)*
10(qq) - Option Agreement of October 24, 1994 between
Compania Minera El Bronce and CDE Chilean Mining
Corporation. (Filed herewith.)
21 - List of subsidiaries of the Registrant.
(Filed herewith.)
23 - Consent of Ernst & Young. (Filed herewith.)
27 - Financial Data Schedule
--------------------------------
* Management contract or compensatory plan