CDE-06.30.14 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________ 
FORM 10-Q
___________________________________________
þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2014
OR
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission file number 001-08641
____________________________________________ 
COEUR MINING, INC.
(Exact name of registrant as specified in its charter)
____________________________________________
Delaware
 
82-0109423
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
104 S. Michigan Ave., Suite 900 Chicago, Illinois
 
60603
(Address of principal executive offices)
 
(Zip Code)
(312) 489-5800
(Registrant’s telephone number, including area code)
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  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
The Company has 150,000,000 shares of common stock, par value of $0.01, authorized of which 103,466,078 shares were issued and outstanding as of August 5, 2014.



COEUR MINING, INC.
INDEX
 
 
Page
Part I.
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
 
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II.
 
 
 
 
 
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
 
 
 
 
Item 6. Exhibits





2



COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
Notes
(In thousands, except share data)
Revenue
3
$
164,562

 
$
204,525

 
$
324,195

 
$
376,322

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
118,687

 
142,386

 
225,583

 
230,444

Amortization
 
41,422

 
56,894

 
81,849

 
106,589

General and administrative
 
9,398

 
15,026

 
23,294

 
25,253

Exploration
 
5,153

 
6,774

 
9,370

 
13,615

Litigation settlement
19

 
32,046

 

 
32,046

Pre-development, reclamation, and other
 
8,760

 
1,817

 
15,775

 
7,163

Total costs and expenses
 
183,420

 
254,943

 
355,871

 
415,110

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Fair value adjustments, net
9
(8,282
)
 
66,754

 
(19,717
)
 
84,550

Impairment of marketable securities
12
(934
)
 
(17,192
)
 
(3,522
)
 
(17,227
)
Interest income and other, net
 
(116
)
 
419

 
(2,100
)
 
4,275

Interest expense, net of capitalized interest
17
(12,310
)
 
(10,930
)
 
(25,365
)
 
(20,662
)
Total other income (expense), net
 
(21,642
)
 
39,051

 
(50,704
)
 
50,936

Income (loss) before income and mining taxes
 
(40,500
)
 
(11,367
)
 
(82,380
)
 
12,148

Income and mining tax (expense) benefit
7
(2,621
)
 
(23,673
)
 
2,068

 
(34,918
)
NET INCOME (LOSS)
 
$
(43,121
)
 
$
(35,040
)
 
$
(80,312
)
 
$
(22,770
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized loss on marketable securities, net of tax of $487 and $253 for the three and six months ended June 30, 2014, respectively
 
(773
)
 
(7,491
)
 
(401
)
 
(11,057
)
Reclassification adjustments for impairment of marketable securities, net of tax of $(362) and $(1,363) for the three and six months ended June 30, 2014, respectively
 
572

 
17,192

 
2,159

 
17,227

Reclassification adjustments for realized loss on sale of marketable securities, net of tax of $(10) for the three and six months ended June 30, 2014, respectively
 
17

 

 
17

 

Other comprehensive income (loss)
 
(184
)
 
9,701

 
1,775

 
6,170

COMPREHENSIVE INCOME (LOSS)
 
$
(43,305
)
 
$
(25,339
)
 
$
(78,537
)
 
$
(16,600
)
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
8
 
 
 
 
 
 
 
Basic
 
$
(0.42
)
 
$
(0.35
)
 
$
(0.78
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.42
)
 
$
(0.35
)
 
$
(0.78
)
 
$
(0.24
)
(1) Excludes amortization.
The accompanying notes are an integral part of these condensed consolidated financial statements.

3




COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
Notes
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(43,121
)
 
$
(35,040
)
 
$
(80,312
)
 
(22,770
)
Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
41,422

 
56,896

 
81,849

 
106,589

Accretion
 
4,502

 
5,380

 
9,093

 
10,840

Deferred income taxes
 
(3,844
)
 
12,123

 
(15,705
)
 
19,548

Loss on termination of revolving credit facility
 

 

 
3,035

 

Fair value adjustments, net
 
8,288

 
(65,754
)
 
18,845

 
(81,795
)
Litigation settlement
19

 
22,046

 

 
22,046

Stock-based compensation
5
2,385

 
1,617

 
4,950

 
2,713

(Gain) loss on sale of assets
 
(48
)
 
(264
)
 
222

 
(1,132
)
Impairment of marketable securities
12
934

 
17,192

 
3,522

 
17,227

Other
 
(12
)
 
234

 
(219
)
 
(112
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
4,921

 
4,401

 
10,544

 
8,647

Prepaid expenses and other current assets
 
3,551

 
2,930

 
(4,558
)
 
411

Inventory and ore on leach pads
14
(1,606
)
 
31,483

 
(15,519
)
 
10,990

Accounts payable and accrued liabilities
 
13,118

 
10,094

 
5,117

 
(16,930
)
CASH PROVIDED BY OPERATING ACTIVITIES
 
30,490

 
63,338

 
20,864

 
76,272

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(15,356
)
 
(27,201
)
 
(27,292
)
 
(40,028
)
Acquisitions
11
(2,250
)
 
(101,648
)
 
(2,250
)
 
(113,214
)
Purchase of short-term investments and marketable securities
 
(2,139
)
 
(683
)
 
(48,360
)
 
(5,332
)
Sales and maturities of short-term investments
 
800

 
1,522

 
890

 
6,344

Other
 
12

 
254

 
(13
)
 
1,209

CASH USED IN INVESTING ACTIVITIES
 
(18,933
)
 
(127,756
)
 
(77,025
)
 
(151,021
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
17

 

 
153,000

 
300,000

Payments on long-term debt, capital leases, and associated costs
 
(2,851
)
 
(1,857
)
 
(6,962
)
 
(57,197
)
Gold production royalty payments
 
(12,345
)
 
(15,480
)
 
(27,028
)
 
(30,929
)
Share repurchases
 

 

 

 
(12,557
)
Other
 
(160
)
 
(25
)
 
(406
)
 
(477
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(15,356
)
 
(17,362
)
 
118,604

 
198,840

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(3,799
)
 
(81,780
)
 
62,443

 
124,091

Cash and cash equivalents at beginning of period
 
272,932

 
331,311

 
206,690

 
125,440

Cash and cash equivalents at end of period
 
$
269,133

 
$
249,531

 
$
269,133

 
$
249,531


The accompanying notes are an integral part of these condensed consolidated financial statements.

4



COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
June 30, 2014
(Unaudited)
 
December 31,
2013
ASSETS
Notes
 
(In thousands, except share data)
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
269,133

 
$
206,690

Investments
12
 
47,642

 

Receivables
13
 
68,693

 
81,074

Ore on leach pads
 
 
44,964

 
50,495

Inventory
14
 
137,644

 
132,023

Deferred tax assets
7
 
35,079

 
35,008

Prepaid expenses and other
 
 
23,593

 
25,940

 
 
 
626,748

 
531,230

NON-CURRENT ASSETS
 
 
 
 
 
Property, plant and equipment, net
15
 
482,787

 
486,273

Mining properties, net
16
 
1,728,667

 
1,751,501

Ore on leach pads
 
 
46,956

 
31,528

Restricted assets
 
 
7,510

 
7,014

Marketable securities
12
 
13,761

 
14,521

Receivables
13
 
38,424

 
36,574

Debt issuance costs, net
 
 
11,031

 
10,812

Deferred tax assets
7
 
808

 
1,189

Other
 
 
10,830

 
15,336

TOTAL ASSETS
 
 
$
2,967,522

 
$
2,885,978

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable
 
 
$
49,651

 
$
53,847

Accrued liabilities and other
 
 
40,632

 
38,266

Debt
17
 
11,565

 
2,505

Royalty obligations
9,10
 
51,087

 
48,019

Reclamation
4
 
752

 
913

Deferred tax liabilities
7
 
1,858

 
1,011

 
 
 
155,545

 
144,561

NON-CURRENT LIABILITIES
 
 
 
 
 
Debt
17
 
468,570

 
306,130

Royalty obligations
9,10
 
58,505

 
65,142

Reclamation
4
 
59,757

 
57,515

Deferred tax liabilities
7
 
540,232

 
556,246

Other long-term liabilities
 
 
28,280

 
25,817

 
 
 
1,155,344

 
1,010,850

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 103,485,960 at June 30, 2014 and 102,843,003 at December 31, 2013
 
 
1,034

 
1,028

Additional paid-in capital
 
 
2,785,761

 
2,781,164

Accumulated other comprehensive income (loss)
 
 
(3,131
)
 
(4,906
)
Accumulated deficit
 
 
(1,127,031
)
 
(1,046,719
)
 
 
 
1,656,633

 
1,730,567

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
$
2,967,522

 
$
2,885,978


The accompanying notes are an integral part of these condensed consolidated financial statements.


5



COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
Common
Stock
Shares
 
Common
Stock Par
Value
 
Additional Paid-
In Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balances at December 31, 2013
102,843

 
$
1,028

 
$
2,781,164

 
$
(1,046,719
)
 
$
(4,906
)
 
$
1,730,567

Net income (loss)

 

 

 
(80,312
)
 

 
(80,312
)
Other comprehensive income (loss)

 

 

 

 
1,775

 
1,775

Common stock issued under stock-based compensation plans, net
643

 
6

 
4,597

 

 

 
4,603

Balances at June 30, 2014 (Unaudited)
103,486

 
$
1,034

 
$
2,785,761

 
$
(1,127,031
)
 
$
(3,131
)
 
$
1,656,633

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


NOTE 1 -
BASIS OF PRESENTATION
The interim condensed consolidated financial statements of Coeur Mining, Inc. (collectively "Coeur" or "the Company") are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results reported for the year ending December 31, 2014. The condensed consolidated December 31, 2013 balance sheet data was derived from the audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the "2013 10-K").
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards

On January 1, 2014, the Company adopted ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The updated guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforwards, a similar tax loss, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax provision. The Company's adoption had no impact on the Company's consolidated financial position, results of operations, or cash flows.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The updated guidance provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. These changes become effective prospectively for the Company's fiscal year beginning January 1, 2017. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo, San Bartolomé, Rochester, and Kensington mines, the La Preciosa project, and Coeur Capital. All operating segments are engaged in the discovery and mining of gold and silver and generate the majority of their revenues from the sale of these precious metals with the exception of Coeur Capital, which holds the Endeavor silver stream and other precious metals royalties. Other includes the Joaquin project, Martha mine, corporate headquarters, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended June 30, 2014
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
72,446

 
$
29,078

 
$
29,018

 
$
31,193

 
$

 
$
1,971

 
$

 
$
163,706

Royalties

 

 

 

 

 
856

 

 
856

 
72,446

 
29,078

 
29,018

 
31,193

 

 
2,827

 

 
164,562

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
49,551

 
20,695

 
23,218

 
24,381

 

 
842

 

 
118,687

Amortization
18,044

 
4,855

 
11,566

 
5,025

 
22

 
1,419

 
491

 
41,422

Exploration
1,637

 
57

 
1,636

 
738

 
26

 
109

 
950

 
5,153

Other operating expenses
325

 
194

 
199

 
844

 
5,711

 
263

 
10,622

 
18,158

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(1,202
)
 
691

 
4

 
32

 
118

 
(964
)
 
271

 
(1,050
)
Interest expense, net
(2,771
)
 
(11
)
 
(53
)
 
(261
)
 

 

 
(9,214
)
 
(12,310
)
Fair value adjustments, net
(4,989
)
 

 

 
(1,837
)
 

 

 
(1,456
)
 
(8,282
)
Income and mining tax (expense) benefit
1,342

 
(2,204
)
 

 
(419
)
 
(1,159
)
 
263

 
(444
)
 
(2,621
)
Net income (loss)
$
(4,731
)
 
$
1,753

 
$
(7,650
)
 
$
(2,280
)
 
$
(6,800
)
 
$
(507
)
 
$
(22,906
)
 
$
(43,121
)
Segment assets(2)
$
1,133,851

 
$
309,565

 
$
331,151

 
$
206,665

 
$
412,226

 
$
67,864

 
$
110,406

 
$
2,571,728

Capital expenditures
$
5,589

 
$
1,711

 
$
3,989

 
$
3,956

 
$
3

 
$

 
$
108

 
$
15,356

(1)    Excludes amortization

7

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

(2)     Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests



Three months ended June 30, 2013
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
86,217

 
$
49,236

 
$
30,851

 
$
34,903

 
$

 
$
3,479

 
$
(161
)
 
$
204,525

Royalties

 

 

 

 

 

 

 

 
$
86,217

 
$
49,236

 
$
30,851

 
$
34,903

 
$

 
$
3,479

 
$
(161
)
 
$
204,525

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
55,218

 
32,815

 
30,154

 
22,516

 

 
1,683

 

 
142,386

Amortization
35,384

 
4,824

 
13,159

 
1,989

 
2

 
1,224

 
312

 
56,894

Exploration
3,189

 
27

 
563

 
512

 
690

 
322

 
1,471

 
6,774

Litigation settlement

 

 

 
32,046

 

 

 

 
32,046

Other operating expenses
173

 
117

 
236

 
2,466

 

 
(191
)
 
14,042

 
16,843

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(428
)
 
683

 
150

 

 
(11
)
 
91

 
(17,258
)
 
(16,773
)
Interest expense, net
(4,190
)
 
(14
)
 
(95
)
 
(5
)
 

 

 
(6,626
)
 
(10,930
)
Fair value adjustments, net
61,066

 

 
6,350

 

 

 

 
(662
)
 
66,754

Income and mining tax (expense) benefit
(17,282
)
 
(4,506
)
 

 
(538
)
 

 
(191
)
 
(1,156
)
 
(23,673
)
Net income (loss)
$
31,419

 
$
7,616

 
$
(6,856
)
 
$
(25,169
)
 
$
(703
)
 
$
341

 
$
(41,688
)
 
$
(35,040
)
Segment assets(2)
$
1,860,240

 
$
286,325

 
$
485,215

 
$
122,917

 
$
409,458

 
$
31,493

 
$
108,954

 
$
3,304,602

Capital expenditures
$
9,166

 
$
3,159

 
$
7,406

 
$
6,596

 
$
735

 
$

 
$
139

 
$
27,201

(1)    Excludes amortization
(2)     Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Six months ended June 30, 2014
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
140,434

 
$
56,632

 
$
65,079

 
$
55,347

 
$

 
$
4,860

 
$

 
$
322,352

Royalties

 

 

 

 

 
1,843

 

 
1,843

 
140,434

 
56,632

 
65,079

 
55,347

 

 
6,703

 

 
324,195

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
93,126

 
39,595

 
51,749

 
39,089

 

 
2,024

 

 
225,583

Amortization
36,702

 
9,313

 
22,275

 
9,476

 
41

 
3,121

 
921

 
81,849

Exploration
2,642

 
82

 
2,680

 
1,912

 
210

 
312

 
1,532

 
9,370

Other operating expenses
622

 
335

 
390

 
2,189

 
10,668

 
504

 
24,361

 
39,069

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(2,772
)
 
1,373

 
4

 
51

 
(17
)
 
(3,512
)
 
(749
)
 
(5,622
)
Interest expense, net
(5,595
)
 
(31
)
 
(75
)
 
(266
)
 

 

 
(19,398
)
 
(25,365
)
Fair value adjustments, net
(15,225
)
 

 

 
(2,510
)
 

 

 
(1,982
)
 
(19,717
)
Income and mining tax (expense) benefit
5,171

 
(4,969
)
 

 
(419
)
 
(1,271
)
 
(25
)
 
3,581

 
2,068

Net income (loss)
$
(11,079
)
 
$
3,680

 
$
(12,086
)
 
$
(463
)
 
$
(12,207
)
 
$
(2,795
)
 
$
(45,362
)
 
$
(80,312
)
Segment assets(2)
$
1,133,851

 
$
309,565

 
$
331,151

 
$
206,665

 
$
412,226

 
$
67,864

 
$
110,406

 
$
2,571,728

Capital expenditures
$
9,331

 
$
3,152

 
$
8,700

 
$
4,915

 
$
141

 
$

 
$
1,053

 
$
27,292

(1)    Excludes amortization
(2)     Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests

8

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Six months ended June 30, 2013
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
143,643

 
$
82,377

 
$
70,126

 
$
74,377

 
$

 
$
6,461

 
$
(662
)
 
$
376,322

Royalties

 

 

 

 

 

 

 

 
143,643

 
82,377

 
70,126

 
74,377

 

 
6,461

 
(662
)
 
376,322

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
81,937

 
48,494

 
53,718

 
43,293

 

 
3,002

 

 
230,444

Amortization
64,166

 
9,464

 
26,445

 
3,842

 
2

 
2,052

 
618

 
106,589

Exploration
5,170

 
79

 
1,235

 
996

 
690

 
630

 
4,815

 
13,615

Litigation

 

 

 
32,046

 

 

 

 
32,046

Other operating expenses
341

 
3,954

 
412

 
2,938

 

 
(245
)
 
25,016

 
32,416

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
1,514

 
1,288

 
281

 
57

 
(11
)
 
138

 
(16,219
)
 
(12,952
)
Interest expense, net
(7,928
)
 
(46
)
 
(354
)
 
(11
)
 

 

 
(12,323
)
 
(20,662
)
Fair value adjustments, net
75,494

 

 
10,577

 

 

 

 
(1,521
)
 
84,550

Income and mining tax (expense) benefit
(20,816
)
 
(8,834
)
 
(1
)
 
(1,264
)
 

 
(245
)
 
(3,758
)
 
(34,918
)
Net income (loss)
$
40,293

 
$
12,794

 
$
(1,181
)
 
$
(9,956
)
 
$
(703
)
 
$
915

 
$
(64,932
)
 
$
(22,770
)
Segment assets(2)
$
1,860,240

 
$
286,325

 
$
485,215

 
$
122,917

 
$
409,458

 
$
31,493

 
$
108,954

 
$
3,304,602

Capital expenditures
$
14,480

 
$
3,616

 
$
10,736

 
$
9,894

 
$
735

 
$

 
$
567

 
$
40,028

(1)    Excludes amortization
(2)     Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests


(in thousands)
June 30, 2014

December 31, 2013
Assets
 
 
 
Total assets for reportable segments
$
2,571,728

 
$
2,595,408

Cash and cash equivalents
269,133

 
206,690

Short term investments
47,642

 

Other assets
79,019

 
83,880

Total consolidated assets
$
2,967,522

 
$
2,885,978


Geographic Information
(in thousands)
June 30, 2014

December 31, 2013
Long Lived Assets
 
 
 
United States
$
387,617

 
$
384,626

Australia
23,858

 
25,668

Argentina
94,495

 
94,705

Bolivia
228,606

 
235,085

Mexico
1,461,228

 
1,487,228

Other Foreign Countries
15,650

 
10,462

Total
$
2,211,454

 
$
2,237,774

 

9

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2014
 
2013
 
2014
 
2013
Revenue
 
 
 
 
 
 
 
United States
$
60,212

 
$
65,754

 
$
120,427

 
$
144,502

Mexico
72,657

 
86,217

 
141,167

 
143,643

Bolivia
29,078

 
49,236

 
56,632

 
82,377

Australia
1,971

 
3,479

 
4,860

 
6,462

Other
644

 
(161
)
 
$
1,109

 
$
(662
)
Total
$
164,562

 
$
204,525

 
$
324,195

 
$
376,322


NOTE 4 – RECLAMATION
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, mineral prices, mineral processing recovery rates, production levels, capital costs and reclamation costs. On an ongoing basis, management evaluates its estimates and assumptions, and future expenditures could differ from current estimates.
Changes to the Company’s asset retirement obligations are as follows (in thousands): 
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Asset retirement obligation - Beginning
$
58,460

 
$
35,197

 
$
57,454

 
$
34,457

Accretion
1,435

 
758

 
2,752

 
1,500

Settlements
(100
)
 
(377
)
 
(411
)
 
(379
)
Asset retirement obligation - Ending
$
59,795

 
$
35,578

 
$
59,795

 
$
35,578

The Company has accrued $0.7 million and $1.0 million at June 30, 2014 and December 31, 2013, respectively, for reclamation liabilities related to former mining activities. These amounts are also included in Reclamation.
NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance share units. Stock-based compensation expense for the three months ended June 30, 2014 and 2013 was $2.4 million and $1.6 million, respectively. Stock-based compensation expense for the six months ended June 30, 2014 and 2013 was $5.0 million and $2.7 million, respectively. At June 30, 2014, there was $11.8 million of unrecognized stock-based compensation cost which is expected to be recognized over a period of 1.8 years.

The following table summarizes the grants awarded during the six months ended June 30, 2014:
Grant date
 
Restricted
stock
 
Grant date fair
value of
restricted stock
 
Stock options
 
Grant date
fair value of
stock
options
 
Performance
shares
 
Grant date fair
value of
performance
shares
January 17, 2014
 
243,351

 
$
11.12

 
32,417

 
$
4.39

 
345,833

 
$
12.65

March 26, 2014
 
435,208

 
$
9.31

 
382,755

 
$
3.74

 

 
$

The following options and stock appreciation rights were exercised during the six months ended June 30, 2014:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Options
 

 
$

 
256,927

 
$
28.91

Stock Appreciation Rights
 

 
$

 
50,209

 
$
14.15


10

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6 – RETIREMENT SAVINGS PLAN
The Company maintains a retirement savings plan (which qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all eligible U.S. employees. Under the plan, employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. The Company maintains a Safe Harbor Match and is required to make matching contributions equal to 100% of the employee’s contribution up to 4% of each employee’s salary. In addition, the Company provides a noncontributory defined contribution based on a percentage of each eligible employee's salary. Total plan expenses recognized for the three and six months ended June 30, 2014 and 2013 were $1.6 million and $0.8 million, and $3.0 million and $2.1 million, respectively.
NOTE 7 – INCOME AND MINING TAXES
The following table summarizes the components of the Company's income and mining tax (expense) benefit for the three and six months ended June 30, 2014 and 2013 by significant location:
 
Three months ended June 30,
 
Six months ended June 30,
 
2014

2013
 
2014
 
2013
(in thousands)
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(31,370
)
$
(146
)

$
(67,824
)
$
(1,329
)
 
$
(60,214
)
$
(292
)
 
$
(61,896
)
$
(4,541
)
Argentina
(688
)
(349
)

(2,989
)
(117
)
 
(2,892
)
4,083

 
(6,981
)
(44
)
Mexico
(12,710
)
107


47,214

(15,798
)
 
(28,716
)
3,828

 
58,756

(19,471
)
Bolivia
3,957

(2,205
)

12,122

(4,556
)
 
8,649

(4,969
)
 
21,628

(8,884
)
Other jurisdictions
311

(28
)
 
110

(1,873
)
 
793

(582
)
 
641

(1,978
)

$
(40,500
)
$
(2,621
)
 
$
(11,367
)
$
(23,673
)
 
$
(82,380
)
$
2,068

 
$
12,148

$
(34,918
)

The income tax provision for the three and six months ended June 30, 2014 differs from the statutory rate primarily due to (i) a full valuation allowance against the deferred tax assets relating to losses incurred in the United States and certain foreign locations, (ii) the impact of foreign exchange adjustments on deferred tax account balances, reserves for uncertain tax positions, and foreign earnings not considered as permanently reinvested with respect to certain foreign locations, and (iii) differences in foreign tax rates in the Company's foreign locations. In conjunction with these items, the Company's consolidated effective income tax rate is a function of the combined effective tax rates in the jurisdictions in which it operates. Variations in the relative proportions of jurisdictional income and loss result in significant fluctuations in its consolidated effective tax rate.

The Company has U.S. net operating loss carryforwards which expire in 2019 through 2033. Net operating losses in foreign countries have an indefinite carryforward period, except in Mexico where net operating loss carryforwards are limited to ten years.
NOTE 8 – NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the three months ended June 30, 2014, 2,147,989 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation due to the net loss incurred. For the three months ended June 30, 2013, 1,202,100 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
For the six months ended June 30, 2014, 2,147,390 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation due to the net loss incurred. For the six months ended June 30, 2013, 1,202,100 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
The 3.25% Convertible Senior Notes were not included in the computation of diluted net income (loss) per share for the three and six months ended June 30, 2014 and 2013 because there is no excess value upon conversion over the principal amount of the Notes.


11

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
In thousands except per share amounts
2014
 
2013
 
2014
 
2013
Net income (loss) available to common stockholders
$
(43,121
)
 
$
(35,040
)
 
$
(80,312
)
 
$
(22,770
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
102,444

 
99,833

 
102,405

 
94,918

Effect of share based compensation plans

 

 

 

Diluted
102,444

 
99,833

 
102,405

 
94,918

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.42
)
 
$
(0.35
)
 
$
(0.78
)
 
$
(0.24
)
Diluted
$
(0.42
)
 
$
(0.35
)
 
$
(0.78
)
 
$
(0.24
)
NOTE 9 – FAIR VALUE MEASUREMENTS
The following table presents the components of Fair value adjustments, net (in thousands):
 
 
Three months ended March 31,
 
Six months ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Palmarejo royalty obligation embedded derivative
 
$
(5,061
)
 
$
61,066

 
$
(15,296
)
 
$
75,495

Rochester net smelter royalty obligation
 
(1,837
)
 

 
(2,510
)
 

Silver and gold options
 
(1,374
)
 
6,350

 
(2,868
)
 
10,577

Foreign exchange contracts
 
(10
)
 
(662
)
 
957

 
(1,522
)
Fair value adjustments, net
 
$
(8,282
)
 
$
66,754

 
$
(19,717
)
 
$
84,550

Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2
Quoted market prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
 
Fair Value at June 30, 2014
 
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Short-term investments
$
47,642

 
$
47,642

 
$

 
$

Marketable equity securities
13,761

 
13,761

 

 

Silver and gold options
1,298

 

 
1,298

 

Other derivative instruments, net
240

 

 
240

 

 
$
62,941

 
$
61,403

 
$
1,538

 
$

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
43,960

 
$

 
$

 
$
43,960

Rochester net smelter royalty obligation
23,656

 

 

 
23,656

Silver and gold options
291

 

 
291

 

 
$
67,907

 
$

 
$
291

 
$
67,616

 

12

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
Fair Value at December 31, 2013
 
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Marketable equity securities
$
14,521

 
$
14,521

 
$

 
$

Silver and gold options
135

 

 
135

 

 
$
14,656

 
$
14,521

 
$
135

 
$

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
40,338

 
$

 
$

 
$
40,338

Rochester net smelter royalty obligation
21,630

 

 

 
21,630

Other derivative instruments, net
1,591

 

 
1,591

 

 
$
63,559

 
$

 
$
1,591

 
$
61,968

The Company’s short-term investments are readily convertible to cash. The Company’s investments in marketable equity securities are recorded at fair market value in the financial statements based on quoted market prices, which are accessible at the measurement date for identical assets. Such instruments are classified within Level 1 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves and credit spreads. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation was estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads.  The Company’s current mine plans are a significant input used in the estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation and is considered company specific and unobservable.  Therefore, the Company has classified the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation as Level 3 financial liabilities. Based on the current mine plans, expected royalty durations of 2.0 years and 4.6 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation, respectively, at June 30, 2014.
No assets or liabilities were transferred between fair value levels in the three and six months ended June 30, 2014.
The following tables present the changes in the fair value of the Company's Level 3 financial liabilities for the three and six months ended June 30, 2014 (in thousands):
 
Three months ended June 30, 2014
 
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the end of the period
Palmarejo royalty obligation embedded derivative
$
44,357

 
$
5,061

 
$
(5,458
)
 
$
43,960

Rochester net smelter royalty obligation
22,303

 
1,837

 
(484
)
 
23,656

 
Six months ended June 30, 2014
 
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the end of the period
Palmarejo royalty obligation embedded derivative
$
40,338

 
$
15,296

 
$
(11,674
)
 
$
43,960

Rochester net smelter royalty obligation
21,630

 
2,510

 
(484
)
 
23,656



13

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

The fair value of financial assets and liabilities measured at book value in the financial statements at June 30, 2014 and December 31, 2013 is presented in the following table (in thousands):
 
June 30, 2014
 
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
5,334

 
$
5,047

 
$

 
$
5,047

 
$

7.875% Senior Notes due 2021
452,855

 
455,625

 

 
455,625

 

Palmarejo Gold Production Royalty Obligation
41,976

 
51,252

 

 

 
51,252

 
December 31, 2013
 
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 
 
 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
5,334

 
$
5,067

 
$
5,067

 
$

 
$

7.875% Senior Notes due 2021
300,000

 
307,314

 
307,314

 

 

Palmarejo Gold Production Royalty Obligation
51,193

 
65,212

 

 

 
65,212

The fair value at June 30, 2014 and December 31, 2013 of the 3.25% Convertible Senior Notes and 7.875% Senior Notes outstanding were estimated using quoted market prices. The fair value of debt was transferred to Level 2 from Level 1 of the fair value hierarchy at March 31, 2014 due to observability of quoted market prices.
The fair value of the Palmarejo gold production royalty obligation is estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads.  The Company’s current mine plan is a significant input used in the estimated fair value of the Palmarejo gold production royalty obligation and is considered company specific and unobservable.  Therefore, the Company has classified the Palmarejo gold production royalty obligation as Level 3 financial liabilities. Based on the current mine plan, an expected royalty duration of 2.0 years was used to estimate the fair value of the Palmarejo gold production royalty obligation as of June 30, 2014.
NOTE 10 – DERIVATIVE FINANCIAL INSTRUMENTS
Palmarejo Gold Production Royalty
On January 21, 2009, the Company's subsidiary, Coeur Mexicana S.A. de C.V. ("Coeur Mexicana") entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties. The royalty transaction includes a minimum obligation of 4,167 ounces per month that ends when payments have been made on a total of 400,000 ounces of gold. At June 30, 2014, a total of 110,240 ounces of gold remain outstanding under the minimum royalty obligation.
The price volatility associated with the minimum royalty obligation is considered an embedded derivative. The Company is required to recognize the change in fair value of the remaining minimum obligation due to changing gold prices. Unrealized gains are recognized in periods when the gold price has decreased from the previous period and unrealized losses are recognized in periods when the gold price increases. The fair value of the embedded derivative is reflected net of the Company's current credit adjusted risk free rate, which was 6.1% and 4.2% at June 30, 2014 and December 31, 2013, respectively. The fair value of the embedded derivative at June 30, 2014 and December 31, 2013 was a liability of $44.0 million and $40.3 million, respectively. For the three months ended June 30, 2014 and 2013, the mark-to-market adjustments were losses of $5.1 million and gains of $61.1 million, respectively. For the six months ended June 30, 2014 and 2013, the mark-to-market adjustments were losses of $15.3 million and gains of $75.5 million, respectively.
Payments on the royalty obligation decrease the carrying amount of the minimum obligation and the derivative liability. Each monthly payment is an amount equal to the greater of the minimum of 4,167 ounces of gold or 50% of the actual gold production per month multiplied by the excess of the monthly average market price of gold above $408 per ounce, subject to a 1% annual inflation adjustment. For the three months ended June 30, 2014 and 2013, realized losses on settlement of the liabilities were $5.5 million and $8.1 million, respectively. For the six months ended June 30, 2014 and 2013, realized losses on settlement of the liabilities were $11.7 million and $17.2 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net.


14

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Foreign Exchange Contracts
The Company periodically enters into foreign currency derivative contracts to reduce the foreign exchange risk associated with Mexican peso (“MXN”) operating costs at its Palmarejo mine. At June 30, 2014, the Company had outstanding call and put option contracts, or collars, on $23.0 million with a weighted-average strike price of 12.60 MXN for the floor and 14.97 MXN for the ceiling. The fair value of these contracts was nil at June 30, 2014. At December 31, 2013, the Company had MXN foreign exchange forward contracts on $12.0 million in U.S. dollars. These contracts required the Company to exchange U.S. dollars for MXN at a weighted average exchange rate of 12.21 MXN to each U.S. dollar and the fair value of those contracts was a liability of $0.9 million at December 31, 2013. In addition, at December 31, 2013, the Company had outstanding collars on $45.0 million with a weighted-average strike price of 12.60 MXN for the floor and 14.80 MXN for the ceiling. The fair value of these contracts was nil at December 31, 2013.
The Company recorded no mark-to-market adjustments for the three months ended June 30, 2014 and mark-to-market losses of $0.7 million for the three months ended June 30, 2013 on the MXN forward contracts and collars. For the six months ended June 30, 2014 and 2013, the Company recorded mark-to-market gains of $1.0 million and losses of $1.5 million, respectively, on MXN forward contracts and collars. These mark-to-market adjustments are reflected in Fair value adjustments, net.
The Company recorded no realized gains or losses and realized gains of $0.2 million in Costs applicable to sales during the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, the Company recorded realized losses of $0.9 million and realized gains of $0.8 million in Costs applicable to sales.
Concentrate Sales Contracts
The Company's concentrate sales to third-party smelters, in general, provide for a provisional payment based upon preliminary assays and forward metal prices. The provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates at the forward price at the time of sale. The embedded derivatives do not qualify for hedge accounting and are marked to market through earnings each period until final settlement. Changes in silver and gold prices resulted in no provisional pricing mark-to-market adjustments in the three months ended June 30, 2014 and mark-to-market gains of $0.9 million in the six months ended June 30, 2014, compared to mark-to-market losses of $0.7 million and $2.4 million in the three and six months ended June 30, 2013. At June 30, 2014, the Company had outstanding provisionally priced sales of 0.2 million ounces of silver and 11,559 ounces of gold at prices of $19.99 and $1,286, respectively.
Silver and Gold Options
At June 30, 2014, the Company has outstanding put spread contracts on 3,750,000 ounces of silver and 74,000 ounces of gold. The weighted average high and low strike prices on the silver put spreads are $18.00 per ounce and $16.00 per ounce, respectively. The weighted average high and low strike prices on the gold put spreads are $1,200 and $1,050, respectively.
If the market price of silver and gold were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver and gold were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period.
The put spread contracts are generally net cash settled and expire during the remainder of 2014 and the first quarter of 2015. At June 30, 2014, the fair market value of the put spreads was a net asset of $1.0 million.
At December 31, 2013, the Company had outstanding put options allowing it to net settle 25,000 ounces of gold and 1,250,000 ounces of silver at weighted average prices of $1,150 per ounce and $17.00 per ounce, respectively, if the market price of gold or silver were to average less than the strike price during the contract period. At December 31, 2013, the fair market value of these contracts was a net asset of $0.1 million.
During the three months ended June 30, 2014 and 2013, the Company recorded unrealized losses of $1.4 million and unrealized gains of $6.4 million, respectively, related to outstanding options which was included in Fair value adjustments, net. The Company also recognized a realized loss of $0.7 million and $0.2 million resulting from expiring contracts during the three months ended June 30, 2014 and 2013, respectively.
During the six months ended June 30, 2014 and 2013, the Company recorded unrealized losses of $2.9 million and unrealized gains of $10.6 million, respectively, related to outstanding options which was included in Fair value adjustments, net. The Company also recognized a realized loss of $0.4 million and a realized loss of $1.1 million resulting from expiring contracts during the six months ended June 30, 2014 and 2013, respectively.

15

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


At June 30, 2014, the Company had the following derivative instruments that settle in each of the years indicated (in thousands except average prices and notional ounces):
 
 
2014
 
2015
 
2016
 
Thereafter
Palmarejo gold production royalty
$
27,334

 
$
46,078

 
$
27,741

 
$

Average gold price in excess of minimum contractual deduction
$
913

 
$
919

 
$
920

 
$

Notional ounces
29,920

 
50,153

 
30,168

 

 
 
 
 
 
 
 
 
Mexican peso put options purchased
$
23,000

 
$

 
$

 
$

Average rate (MXN/$)
14.97

 

 

 

Mexican peso notional amount
344,310

 

 

 

 
 
 
 
 
 
 
 
Mexican peso call options sold
$
23,000

 
$

 
$

 
$

Average rate (MXN/$)
12.60

 

 

 

Mexican peso notional amount
289,800

 

 

 

 
 
 
 
 
 
 
 
Silver concentrate sales contracts
$
3,253

 
$

 
$

 
$

Average silver price
$
19.99

 
$

 
$

 
$

Notional ounces
162,724

 

 

 

 
 
 
 
 
 
 
 
Gold concentrate sales contracts
$
14,865

 
$

 
$

 
$

Average gold price
$
1,286

 
$

 
$

 
$

Notional ounces
11,559

 

 

 

 
 
 
 
 
 
 
 
Gold put options purchased
$
60,000

 
$
28,800

 
$

 
$

Average gold strike price
$
1,200

 
$
1,200

 
$

 
$

Notional ounces
50,000

 
24,000

 

 

 
 
 
 
 
 
 
 
Silver put options purchased
$
45,000

 
$
22,500

 
$

 
$

Average silver strike price
$
18.00

 
$
18.00

 
$

 
$

Notional ounces
2,500,000

 
1,250,000

 

 

 
 
 
 
 
 
 
 
Gold put options sold
$
(52,500
)
 
$
(25,200
)
 
$

 
$

Average gold strike price
$
1,050

 
$
1,050

 
$

 
$

Notional ounces
50,000

 
24,000

 

 

 
 
 
 
 
 
 
 
Silver put options sold
$
(40,000
)
 
$
(20,000
)
 
$

 
$

Average silver strike price
$
16.00

 
$
16.00

 
$

 
$

Notional ounces
2,500,000

 
1,250,000

 

 


The following summarizes the classification of the fair value of the derivative instruments (in thousands):
 
June 30, 2014
 
Prepaid
expenses and
other
 
Accrued
liabilities and
other
 
Current
portion of
royalty
obligation
 
Non-current
portion of
royalty
obligation
Foreign exchange contracts, peso
$
49

 
$

 
$

 
$

Palmarejo gold production royalty

 

 
22,393

 
21,567

Silver and gold options
1,298

 
291

 

 

Concentrate sales contracts
192

 
1

 

 

 
$
1,539

 
$
292

 
$
22,393

 
$
21,567


16

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
December 31, 2013
 
Prepaid
expenses and
other
 
Accrued
liabilities and
other
 
Current
portion of
royalty
obligation
 
Non-current
portion of
royalty
obligation
Foreign exchange contracts, peso
$
38

 
$
947

 
$

 
$

Palmarejo gold production royalty

 

 
17,650

 
22,688

Silver and gold options
135

 

 

 

Concentrate sales contracts
11

 
693

 

 

 
$
184

 
$
1,640

 
$
17,650

 
$
22,688

The following represent mark-to-market gains (losses) on derivative instruments for the three and six months ended June 30, 2014, and 2013 (in thousands):
 
 
 
Three months ended June 30,
 
Six months ended June 30,
Financial statement line
Derivative
 
2014
 
2013
 
2014
 
2013
Sales of metal
Concentrate sales contracts
 
$
7

 
$
(667
)
 
$
872

 
$
(2,422
)
Costs applicable to sales
Foreign exchange contracts
 

 
203

 
(924
)
 
830

Fair value adjustments, net
Foreign exchange contracts (MXN)
 
(10
)
 
(2,260
)
 
957

 
(1,522
)
Fair value adjustments, net
Foreign exchange contracts (CDN)
 

 
1,598

 

 

Fair value adjustments, net
Palmarejo gold royalty
 
(5,061
)
 
61,066

 
(15,296
)
 
75,495

Fair value adjustments, net
Silver and gold options
 
(1,374
)
 
6,350

 
(2,868
)
 
10,577

 
 
 
$
(6,438
)
 
$
66,290

 
$
(17,259
)
 
$
82,958

Credit Risk
The credit risk exposure related to any derivative instrument is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company enters into contracts with financial institutions management deems credit worthy and limits credit exposure to each institution. The Company does not anticipate non-performance by any of its counterparties. In addition, to allow for situations where derivative positions may need to be revised, the Company transacts only in markets that management considers highly liquid.
NOTE 11 – ACQUISITIONS
On May 27, 2014, the Company's subsidiary Coeur Capital Inc. entered into a net smelter royalty agreement with International Northair Mines, Ltd. ("Northair"). Pursuant to the agreement, Coeur Capital, Inc. paid $2.2 million cash for a 1.25% net smelter royalty and, subject to satisfaction of certain conditions by Northair, will pay an additional $1.8 million on September 2, 2014 for an additional 1.25% net smelter royalty payable on future production from the La Cigarra silver project located in north central Mexico.
On April 16, 2013, the Company completed its acquisition of Orko Silver Corporation (“Orko”). Upon completion of the acquisition, the Company holds the La Preciosa silver-gold project in the state of Durango, Mexico. The transaction was accounted for as a purchase of mineral interests since La Preciosa is a development stage project.
Total consideration paid (in thousands):
Common shares issued (11,572,918 at $14.98)
$
173,363

Cash
99,059

Warrants (1,588,768 valued at $3.64 per warrant)
5,777

Transaction advisory fees and other acquisition costs
17,642

Total purchase price
295,841

Current liabilities
2,616

Deferred income taxes
114,339

Total liabilities assumed
116,955

Total Consideration
$
412,796


17

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Estimated fair value of the assets acquired (in thousands):
Cash
$
3,487

Other current assets
635

Mineral interests
408,352

Other assets
322

Total assets acquired
$
412,796

NOTE 12 – INVESTMENTS
The Company invests part of its cash balances in a managed portfolio of liquid investments including highly-rated corporate bonds which are classified as short-term investments. The Company also invests in marketable equity securities of silver and gold exploration and development companies. These investments are classified as available-for-sale and are measured at fair value in the financial statements with unrealized gains and losses recorded in Other comprehensive income (loss).
(in thousands)
At June 30, 2014
 
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Short-term investments
$
47,661

 
$
(31
)
 
$
12

 
$
47,642

Marketable equity securities
13,972

 
(677
)
 
466

 
13,761


(in thousands)
At December 31, 2013
 
Cost
 
Gross
Unrealized
Losses
 
Gross
Unrealized
Gains
 
Estimated
Fair Value
Marketable equity securities
$
17,649

 
$
(3,300
)
 
$
172

 
$
14,521


The following table summarizes the gross unrealized losses on investment securities for which other-than-temporary impairments have not been recognized and the fair values of those securities, aggregated by the length of time the individual securities have been in a continuous unrealized loss position, at June 30, 2014 (in thousands):
 
Less than twelve months
 
Twelve months or more
 
Total
 
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
 
Unrealized Losses
Fair Value
Short-term investments
$
(31
)
$
29,090

 
$

$

 
$
(31
)
$
29,090

Marketable equity securities
$

$

 
$
(677
)
$
1,399

 
$
(677
)
$
1,399


The Company recognized net of tax unrealized losses of $0.8 million and $7.5 million in the three months ended June 30, 2014 and 2013, respectively, and $0.4 million and $11.1 million in the six months ended June 30, 2014 and 2013, respectively, in Other comprehensive income (loss). The Company performs a quarterly assessment on each of its marketable securities with unrealized losses to determine if the security is other than temporarily impaired. The Company recorded other-than-temporary impairment losses of $0.9 million and $17.2 million in the three months ended June 30, 2014 and 2013, respectively, and $3.5 million and $17.2 million in the six months ended June 30, 2014 and 2013, respectively.

18

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 13 – RECEIVABLES
Receivables consist of the following (in thousands):
 
June 30, 2014
 
December 31, 2013
Receivables - current:
 
 
 
Trade receivables
$
7,467

 
$
17,303

Income tax receivable
7,845

 
6,240

Value added tax receivable
47,340

 
49,168

Other
6,041

 
8,363

 
$
68,693

 
$
81,074

Receivables - non-current:
 
 
 
Value added tax receivable
$
38,424

 
$
36,574

 
NOTE 14 – INVENTORY AND ORE ON LEACH PADS
Inventory consists of the following (in thousands): 
Inventory:
June 30, 2014
 
December 31, 2013
Concentrate
$
19,151

 
$
14,855

Precious metals
52,630

 
52,250

Supplies
65,863

 
64,918

 
$
137,644

 
$
132,023

Ore on Leach Pads:
 
 
 
Current
$
44,964

 
$
50,495

Non-Current
46,956

 
31,528

 
$
91,920

 
$
82,023

Total Inventory and Ore on Leach Pads
$
229,564

 
$
214,046

NOTE 15 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands): 
 
June 30, 2014
 
December 31, 2013
Land
$
1,764

 
$
1,764

Facilities and equipment
872,575

 
855,318

Capital leases
25,680

 
16,133

 
900,019

 
873,215

Accumulated amortization
(429,904
)
 
(395,520
)
 
470,115

 
477,695

Construction in progress
12,672

 
8,578

Property, plant and equipment, net
$
482,787

 
$
486,273


19

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 16 – MINING PROPERTIES
Mining properties consist of the following (in thousands):
June 30, 2014
Palmarejo
 
San
Bartolomé
 
Kensington
 
Rochester
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
158,631

 
$
70,764

 
$
275,660

 
$
152,443

 
$

 
$

 
$

 
$
657,498

Accumulated amortization
(116,097
)
 
(24,091
)
 
(92,162
)
 
(108,109
)
 

 

 

 
(340,459
)
 
42,534

 
46,673

 
183,498

 
44,334

 

 

 

 
317,039

Mineral interests
1,146,572

 
26,643

 

 

 
408,352

 
93,429

 
85,838

 
1,760,834

Accumulated amortization
(318,214
)
 
(9,434
)
 

 

 

 

 
(21,558
)
 
(349,206
)
 
828,358

 
17,209

 

 

 
408,352

 
93,429

 
64,280

 
1,411,628

Mining properties, net
$
870,892

 
$
63,882

 
$
183,498

 
$
44,334

 
$
408,352

 
$
93,429

 
$
64,280

 
$
1,728,667

December 31, 2013
Palmarejo
 
San
Bartolomé
 
Kensington
 
Rochester
 
La Preciosa
 
Joaquin
 
Coeur Capital
 
Total
Mine development
$
151,845

 
$
70,761

 
$
268,351

 
$
150,348

 
$

 
$

 
$

 
$
641,305

Accumulated amortization
(110,143
)
 
(22,236
)
 
(80,032
)
 
(103,130
)
 

 

 

 
(315,541
)
 
41,702

 
48,525

 
188,319

 
47,218

 

 

 

 
325,764

Mineral interests
1,146,572

 
26,643

 

 

 
408,352

 
93,429

 
78,133

 
1,753,129

Accumulated amortization
(300,187
)
 
(8,759
)
 

 

 

 

 
(18,446
)
 
(327,392
)
 
846,385

 
17,884

 

 

 
408,352

 
93,429

 
59,687

 
1,425,737

Mining properties, net
$
888,087

 
$
66,409

 
$
188,319

 
$
47,218

 
$
408,352

 
$
93,429

 
$
59,687

 
$
1,751,501

NOTE 17 – DEBT
Long-term debt and capital lease obligations at June 30, 2014 and December 31, 2013 are as follows (in thousands):
 
June 30, 2014
 
December 31, 2013
 
Current
 
Non-Current
 
Current
 
Non-Current
3.25% Convertible Senior Notes due 2028
$
5,334

 
$

 
$

 
$
5,334

7.875% Senior Notes due 2021

 
452,855

 

 
300,000

Capital lease obligations
6,231

 
15,715

 
2,505

 
796

 
$
11,565

 
$
468,570

 
$
2,505

 
$
306,130

7.875% Senior Notes due 2021
On January 29, 2013, the Company completed an offering of $300 million in aggregate principal amount of 7.875% Senior Notes due 2021 (the “Original Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Company commenced an exchange offer for the Notes on September 30, 2013 to exchange the Notes for freely transferable notes containing substantially similar terms, in accordance with the registration rights granted to the holders of the Notes when they were issued. The exchange offer was consummated on November 5, 2013.

On March 12, 2014, the Company completed an offering of $150 million in aggregate principal amount of 7.875% Senior Notes due 2021 (the “Additional Notes” and together with the Original Notes, the "Senior Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act. The Additional Notes constitute a further issuance of the Original Notes and form a single series of debt securities with the Original Notes. Upon completion of Coeur’s offering of the Additional Notes, the aggregate principal amount of the outstanding Senior Notes was $450 million. The Company commenced an exchange offer for the Additional Notes on April 10, 2014 to exchange the Additional Notes for freely transferable notes containing substantially similar terms, in accordance with the registration rights granted to the holders of the Additional Notes when they were issued. The exchange offer was consummated on May 9, 2014.



20

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

3.25% Convertible Senior Notes due 2028
Per the indenture governing the 3.25% Convertible Senior Notes due 2028 (the “Convertible Notes”), the Company announced on February 13, 2013 that it was offering to repurchase all of the Convertible Notes. As of February 12, 2013, there was $48.7 million aggregate principal amount of Convertible Notes outstanding. The Company repurchased $43.3 million in aggregate principal amount, leaving a balance of $5.3 million at June 30, 2014. The notes are classified as current liabilities at June 30, 2014 as a result of the holders' option to require the Company to repurchase the notes on March 15, 2015.
Revolving Credit Facility
On August 1, 2012, Coeur Alaska, Inc. and Coeur Rochester, Inc. (the “Borrowers”), each a wholly-owned subsidiary of the Company, entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the Borrowers, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent. The Credit Agreement provided for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $100.0 million, which principal amount may be increased, subject to receiving additional commitments therefor, by up to $50.0 million.
On January 16, 2014, the Company and the Borrowers entered into Amendment No. 1 to Credit Agreement (the “Amendment”) to amend the Credit Agreement. Pursuant to the Amendment, among other things, the pricing of loans and undrawn commitments under the Credit Agreement was modified and certain modifications were made to the financial covenants and negative covenant provisions under the Credit Agreement. On March 20, 2014, the Borrowers notified the administrative agent that they were terminating the Revolving Credit Facility, effective March 25, 2014. The Company wrote off $3.0 million related to the termination of the Credit Agreement in the six months ended June 30, 2014. No amounts were outstanding under the Revolving Credit Facility at the time of termination, and no early termination penalty was payable in connection with the termination.
Lines of Credit
At June 30, 2014, San Bartolomé had two outstanding lines of credit supporting value added tax recoveries in Bolivia. One line is for $7.0 million bearing interest at 2.75% per annum and the other line is for $4.0 million bearing interest at 3.0% per annum. There was no balance outstanding on the two lines of credit at June 30, 2014 and 2013, respectively.
Palmarejo Gold Production Royalty Obligation
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with a subsidiary of Franco-Nevada Corporation under which Franco-Nevada Mexico Corporation S.A. de C.V. ("Franco-Nevada Mexico") purchased a royalty covering 50% of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico.
The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight year period. Each monthly payment is an amount equal to the greater of 4,167 ounces of gold or 50% of actual gold production multiplied by the excess of the monthly average market price of gold above $408 per ounce, subject to a 1% annual inflation compounding adjustment. As of June 30, 2014, payments had been made on a total of 289,760 ounces of gold with further payments to be made on an additional 110,240 ounces of gold. After payments have been made on a total of 400,000 ounces of gold, the royalty obligation is payable in the amount of 50% of actual gold production per month multiplied by the excess of the monthly average market price of gold above $400 per ounce, adjusted as described above. Payments under the royalty agreement are to be made in cash or gold bullion. During the three months ended June 30, 2014 and 2013, the Company paid $12.3 million and $15.5 million, respectively, and the Company paid $27.0 million and $30.9 million during the six months ended June 30, 2014 and 2013, respectively, in royalty payments to Franco-Nevada Corporation. Payments made during the minimum obligation period will result in a reduction to the remaining minimum obligation. Payments made beyond the minimum obligation period will be recognized in operating expenses.
The Company used an implicit interest rate of 30.5% to discount the original obligation, based on the fair value of the consideration received projected over the expected future cash flows at inception of the obligation. The discounted obligation is accreted to its expected future value over the expected minimum payment period based on the implicit interest rate. The Company recognized accretion expense for the three months ended June 30, 2014 and 2013 of $2.9 million and $4.1 million, respectively, and $6.1 million and $8.2 million for the six months ended June 30, 2014 and 2013, respectively. At June 30, 2014 and December 31, 2013, the remaining minimum obligation under the royalty agreement was $42.0 million and $51.2 million, respectively.






21

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Interest Expense
Interest expense is made up of the following (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
3.25% Convertible Senior Notes due 2028
$
43

 
$
43

 
$
86

 
$
380

7.875% Senior Notes due 2021
8,859

 
5,906

 
15,323

 
10,041

Revolving Credit Facility

 
133

 
179

 
258

Loss on Revolving Credit Facility

 

 
3,035

 

Capital lease obligations
333

 
98

 
392

 
266

Other debt obligations

 
72

 

 
268

Accretion of Palmarejo gold production royalty obligation
2,898

 
4,107

 
6,094

 
8,170

Amortization of debt issuance costs
420

 
539

 
918

 
1,064

Accretion of debt (premium) discount
(108
)
 

 
(144
)
 
576

Capitalized interest
(135
)
 
32

 
(518
)
 
(361
)
Total interest expense, net of capitalized interest
$
12,310

 
$
10,930

 
$
25,365

 
$
20,662


NOTE 18 - SUPPLEMENTAL GUARANTOR INFORMATION
The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10 of Regulation S-X resulting from the guarantees by Coeur Alaska, Inc., Coeur Explorations, Inc., Coeur Rochester, Inc., Coeur South America Corp., and Coeur Capital Inc. (collectively, the “Subsidiary Guarantors”) of the $450 million aggregate principal amount of Senior Notes. The following schedules present Condensed Consolidating Financial Statements of (a) Coeur, the parent company; (b) the Subsidiary Guarantors; and (c) certain wholly owned domestic and foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Each of the Subsidiary Guarantors is 100% owned by Coeur and the guarantees are full and unconditional. There are no restrictions on the ability of Coeur to obtain funds from its subsidiaries by dividend or loan.


22

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2014
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
60,748

 
$
103,814

 
$

 
$
164,562

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
47,599

 
71,088

 

 
118,687

Amortization
 
448

 
16,784

 
24,190

 

 
41,422

General and administrative
 
9,716

 
(163
)
 
(155
)
 

 
9,398

Exploration
 
950

 
2,483

 
1,720

 

 
5,153

Pre-development, reclamation, and other
 
352

 
1,307

 
7,101

 

 
8,760

Total costs and expenses
 
11,466

 
68,010

 
103,944

 

 
183,420

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
(1,456
)
 
(1,837
)
 
(4,989
)
 

 
(8,282
)
Impairment of marketable securities
 

 
(934
)
 

 

 
(934
)
Interest income and other, net
 
1,075

 
12

 
(507
)
 
(696
)
 
(116
)
Interest expense, net of capitalized interest
 
(9,215
)
 
(314
)
 
(3,477
)
 
696

 
(12,310
)
Total other income (expense), net
 
(9,596
)
 
(3,073
)
 
(8,973
)
 

 
(21,642
)
Loss before income and mining taxes
 
(21,062
)
 
(10,335
)
 
(9,103
)
 

 
(40,500
)
Income and mining tax (expense) benefit
 
273

 
(419
)
 
(2,475
)
 

 
(2,621
)
Total loss after income and mining taxes
 
(20,789
)
 
(10,754
)
 
(11,578
)
 

 
(43,121
)
Equity income (loss) in consolidated subsidiaries
 
(22,332
)
 
121

 

 
22,211

 

NET INCOME (LOSS)
 
$
(43,121
)
 
$
(10,633
)
 
$
(11,578
)
 
$
22,211

 
$
(43,121
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(773
)
 
(847
)
 

 
847

 
(773
)
Reclassification adjustments for impairment of marketable securities
 
572

 
572

 

 
(572
)
 
572

Reclassification adjustments for realized loss on sale of marketable securities
 
17

 
17

 

 
(17
)
 
17

Other comprehensive income (loss)
 
(184
)
 
(258
)
 

 
258

 
(184
)
COMPREHENSIVE INCOME (LOSS)
 
$
(43,305
)
 
$
(10,891
)
 
$
(11,578
)
 
$
22,469

 
$
(43,305
)
(1) Excludes amortization.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2013
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
65,754

 
$
138,771

 
$

 
$
204,525

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
52,669

 
89,717

 

 
142,386

Amortization
 
231

 
15,151

 
41,512

 

 
56,894

General and administrative
 
12,617

 
1,375

 
1,034

 

 
15,026

Exploration
 
314

 
1,398

 
5,062

 

 
6,774

Litigation settlement
 

 
32,046

 

 

 
32,046

Pre-development, reclamation, and other
 

 
1,135

 
682

 

 
1,817

Total costs and expenses
 
13,162

 
103,774

 
138,007

 

 
254,943

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
 
(662
)
 
6,350

 
61,066

 

 
66,754

Impairment of marketable securities
 
(17,192
)
 

 

 

 
(17,192
)
Interest income and other, net
 
1,309

 
241

 
(247
)
 
(884
)
 
419

Interest expense, net of capitalized interest
 
(6,623
)
 
(100
)
 
(5,091
)
 
884

 
(10,930
)
Total other income (expense), net
 
(23,168
)
 
6,491

 
55,728

 

 
39,051

Loss before income and mining taxes
 
(36,330
)
 
(31,529
)
 
56,492

 

 
(11,367
)
Income and mining tax (expense) benefit
 
(824
)
 
(730
)
 
(22,119
)
 

 
(23,673
)
Total loss after income and mining taxes
 
(37,154
)
 
(32,259
)
 
34,373

 

 
(35,040
)
Equity income (loss) in consolidated subsidiaries
 
2,114

 

 

 
(2,114
)
 

NET INCOME (LOSS)
 
$
(35,040
)
 
$
(32,259
)
 
$
34,373

 
$
(2,114
)
 
$
(35,040
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(7,491
)
 

 

 

 
(7,491
)
Reclassification adjustments for impairment of marketable securities
 
17,192

 

 

 

 
17,192

Other comprehensive income (loss)
 
9,701

 

 

 

 
9,701

COMPREHENSIVE INCOME (LOSS)
 
$
(25,339
)
 
$
(32,259
)
 
$
34,373

 
$
(2,114
)
 
$
(25,339
)
(1) Excludes amortization.


23

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2014

 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(35,100
)
 
$
4,210

 
$
39,169

 
$
22,211

 
30,490

CASH FLOWS FROM INVESTING ACTIVITIES
 

 

 

 
 
 
 
Capital expenditures
 
(106
)
 
(7,945
)
 
(7,305
)
 

 
(15,356
)
Purchase of short term investments and marketable securities
 
(2,106
)
 
(33
)
 

 

 
(2,139
)
Sales and maturities of short term investments
 
217

 
583

 

 

 
800

Acquisitions
 

 
(2,250
)
 

 

 
(2,250
)
Other
 

 
4

 
8

 

 
12

Investments in consolidated subsidiaries
 
65,832

 
(121
)
 

 
(65,711
)
 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
63,837

 
(9,762
)
 
(7,297
)
 
(65,711
)
 
(18,933
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt, capital leases, and associated costs
 
(403
)
 
(2,131
)
 
(317
)
 

 
(2,851
)
Gold production royalty payments
 

 

 
(12,345
)
 

 
(12,345
)
Net intercompany financing activity
 
(20,555
)
 
7,828

 
(30,773
)
 
43,500

 

Other
 
(160
)
 

 

 

 
(160
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(21,118
)
 
5,697

 
(43,435
)
 
43,500

 
(15,356
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
7,619

 
145

 
(11,563
)
 

 
(3,799
)
Cash and cash equivalents at beginning of period
 
204,045

 
754

 
68,133

 

 
272,932

Cash and cash equivalents at end of period
 
$
211,664

 
$
899

 
$
56,570

 
$

 
$
269,133


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2013

 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(4,114
)
 
$
3,768

 
$
65,798

 
$
(2,114
)
 
$
63,338

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(129
)
 
(14,003
)
 
(13,069
)
 

 
(27,201
)
Purchase of short term investments and marketable securities
 

 
(23
)
 
(660
)
 

 
(683
)
Sales and maturities of short term investments
 
1,498

 
24

 

 

 
1,522

Acquisitions
 
(101,648
)
 

 

 

 
(101,648
)
Other
 
(18
)
 
205

 
67

 

 
254

Investments in consolidated subsidiaries
 
(5,602
)
 


 
3,488

 
2,114

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(105,899
)
 
(13,797
)
 
(10,174
)
 
2,114

 
(127,756
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Payments on long-term debt, capital leases, and associated costs
 

 
(715
)
 
(1,142
)
 

 
(1,857
)
Gold production royalty payments
 

 

 
(15,480
)
 

 
(15,480
)
Net intercompany financing activity
 
(11,666
)
 
11,183

 
483

 

 

Other
 
(25
)
 

 

 

 
(25
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(11,691
)
 
10,468

 
(16,139
)
 

 
(17,362
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
 
(121,704
)
 
439

 
39,485

 

 
(81,780
)
Cash and cash equivalents at beginning of period
 
308,585

 
284

 
22,442

 

 
331,311

Cash and cash equivalents at end of period
 
$
186,881

 
$
723

 
$
61,927

 
$

 
$
249,531



24

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2014
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
121,248

 
$
202,947

 
$

 
$
324,195

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
90,837

 
134,746

 

 
225,583

Amortization
 
825

 
32,080

 
48,944

 

 
81,849

General and administrative
 
22,768

 
3

 
523

 

 
23,294

Exploration
 
1,536

 
4,904

 
2,930

 

 
9,370

Pre-development, reclamation, and other
 
352

 
2,843

 
12,580

 

 
15,775

Total costs and expenses
 
25,481

 
130,667

 
199,723

 

 
355,871

Fair value adjustments, net
 
(1,982
)
 
(2,510
)
 
(15,225
)
 

 
(19,717
)
Impairment of marketable securities
 

 
(3,522
)
 

 

 
(3,522
)
Interest income and other, net
 
1,915

 
58

 
(2,720
)
 
(1,353
)
 
(2,100
)
Interest expense, net of capitalized interest
 
(19,398
)
 
(340
)
 
(6,980
)
 
1,353

 
(25,365
)
Total other income (expense), net
 
(19,465
)
 
(6,314
)
 
(24,925
)
 

 
(50,704
)
Loss before income and mining taxes
 
(44,946
)
 
(15,733
)
 
(21,701
)
 

 
(82,380
)
Income and mining tax (expense) benefit
 
127

 
(419
)
 
2,360

 

 
2,068

Total loss after income and mining taxes
 
(44,819
)
 
(16,152
)
 
(19,341
)
 

 
(80,312
)
Equity income (loss) in consolidated subsidiaries
 
(35,493
)
 
299

 

 
35,194

 

NET INCOME (LOSS)
 
$
(80,312
)
 
$
(15,853
)
 
$
(19,341
)
 
$
35,194

 
$
(80,312
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(401
)
 
(380
)
 

 
380

 
(401
)
Reclassification adjustments for impairment of marketable securities
 
2,159

 
2,159

 

 
(2,159
)
 
2,159

Reclassification adjustments for realized loss on sale of marketable securities
 
17

 
17

 

 
(17
)
 
17

Other comprehensive income (loss)
 
1,775

 
1,796

 

 
(1,796
)
 
1,775

COMPREHENSIVE INCOME (LOSS)
 
$
(78,537
)
 
$
(14,057
)
 
$
(19,341
)
 
$
33,398

 
$
(78,537
)
(1) Excludes amortization.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 2013
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Revenue
 
$

 
$
144,502

 
$
231,820

 
$

 
$
376,322

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
 

 
97,010

 
133,434

 

 
230,444

Amortization
 
450

 
30,295

 
75,844

 

 
106,589

General and administrative
 
22,354

 
1,542

 
1,357

 

 
25,253

Exploration
 
663

 
2,862

 
10,090

 

 
13,615

Litigation settlement
 

 
32,046

 

 

 
32,046

Pre-development, reclamation, and other
 

 
1,563

 
5,600

 

 
7,163

Total costs and expenses
 
23,467

 
165,318

 
226,325

 

 
415,110

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
.
 
 
 
 
Fair value adjustments, net
 
(1,522
)
 
10,577

 
75,495

 

 
84,550

Impairment of marketable securities
 
(17,227
)
 

 

 

 
(17,227
)
Interest income and other, net
 
2,208

 
475

 
3,316

 
(1,724
)
 
4,275

Interest expense, net of capitalized interest
 
(12,320
)
 
(364
)
 
(9,702
)
 
1,724

 
(20,662
)
Total other income (expense), net
 
(28,861
)
 
10,688

 
69,109

 

 
50,936

Loss before income and mining taxes
 
(52,328
)
 
(10,128
)
 
74,604

 

 
12,148

Income and mining tax (expense) benefit
 
(3,310
)
 
(1,510
)
 
(30,098
)
 

 
(34,918
)
Total loss after income and mining taxes
 
(55,638
)
 
(11,638
)
 
44,506

 

 
(22,770
)
Equity income (loss) in consolidated subsidiaries
 
32,868

 

 

 
(32,868
)
 

NET INCOME (LOSS)
 
$
(22,770
)
 
$
(11,638
)
 
$
44,506

 
$
(32,868
)
 
$
(22,770
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax
 
(11,057
)
 

 

 

 
(11,057
)
Reclassification adjustments for impairment of marketable securities
 
17,227

 

 

 

 
17,227

Other comprehensive income (loss)
 
6,170

 

 

 

 
6,170

COMPREHENSIVE INCOME (LOSS)
 
$
(16,600
)
 
$
(11,638
)
 
$
44,506

 
$
(32,868
)
 
$
(16,600
)
(1) Excludes amortization.

25

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2014
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(72,723
)
 
$
9,142

 
$
49,251

 
$
35,194

 
20,864

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(1,051
)
 
(13,615
)
 
(12,626
)
 

 
(27,292
)
Purchase of short term investments and marketable securities
 
(47,903
)
 
(457
)
 

 

 
(48,360
)
Sales and maturities of short term investments
 
307

 
583

 

 

 
890

Acquisitions
 

 
(2,250
)
 

 

 
(2,250
)
Other
 

 
4

 
(17
)
 

 
(13
)
Investments in consolidated subsidiaries
 
78,993

 
(299
)
 

 
(78,694
)
 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
30,346

 
(16,034
)
 
(12,643
)
 
(78,694
)
 
(77,025
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
153,000

 

 

 

 
153,000

Payments on long-term debt, capital leases, and associated costs
 
(3,599
)
 
(2,543
)
 
(820
)
 

 
(6,962
)
Gold production royalty payments
 

 

 
(27,028
)
 

 
(27,028
)
Net intercompany financing activity
 
(32,030
)
 
9,343

 
(20,813
)
 
43,500

 

Other
 
(406
)
 

 

 

 
(406
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
116,965

 
6,800

 
(48,661
)
 
43,500

 
118,604

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
74,588

 
(92
)
 
(12,053
)
 

 
62,443

Cash and cash equivalents at beginning of period
 
137,076

 
991

 
68,623

 

 
206,690

Cash and cash equivalents at end of period
 
$
211,664

 
$
899

 
$
56,570

 
$

 
$
269,133


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2013
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
18,860

 
$
20,659

 
$
69,621

 
$
(32,868
)
 
$
76,272

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(557
)
 
(20,629
)
 
(18,842
)
 

 
(40,028
)
Purchase of short term investments and marketable securities
 
(1,598
)
 
(39
)
 
(3,695
)
 

 
(5,332
)
Sales and maturities of short term investments
 
2,873

 
38

 
3,433

 

 
6,344

Acquisitions
 
(113,214
)
 

 

 

 
(113,214
)
Other
 
(6
)
 
443

 
772

 

 
1,209

Investments in consolidated subsidiaries
 
(36,355
)
 

 
3,487

 
32,868

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(148,857
)
 
(20,187
)
 
(14,845
)
 
32,868

 
(151,021
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
 
300,000

 

 

 

 
300,000

Payments on long-term debt, capital leases, and associated costs
 
(52,565
)
 
(1,955
)
 
(2,677
)
 

 
(57,197
)
Gold production royalty payments
 

 

 
(30,929
)
 

 
(30,929
)
Share repurchases
 
(12,557
)
 

 

 

 
(12,557
)
Net intercompany financing activity
 
(4,311
)
 
1,806

 
2,505

 

 

Other
 
(477
)
 

 

 

 
(477
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
230,090

 
(149
)
 
(31,101
)
 

 
198,840

NET CHANGE IN CASH AND CASH EQUIVALENTS
 
100,093

 
323

 
23,675

 

 
124,091

Cash and cash equivalents at beginning of period
 
86,788

 
400

 
38,252

 

 
125,440

Cash and cash equivalents at end of period
 
$
186,881

 
$
723

 
$
61,927

 
$

 
$
249,531



26

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2014
 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
211,664

 
$
899

 
$
56,570

 
$

 
$
269,133

Investments
 
47,642

 


 


 

 
47,642

Receivables
 
83

 
10,420

 
58,190

 

 
68,693

Ore on leach pads
 

 
44,964

 

 

 
44,964

Inventory
 

 
47,331

 
90,313

 

 
137,644

Deferred tax assets
 

 

 
35,079

 

 
35,079

Prepaid expenses and other
 
2,573

 
8,546

 
12,474

 

 
23,593

 
 
261,962

 
112,160

 
252,626

 

 
626,748

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
6,234

 
153,551

 
323,002

 

 
482,787

Mining properties, net
 

 
235,216

 
1,493,451

 

 
1,728,667

Ore on leach pads
 

 
46,956

 

 

 
46,956

Restricted assets
 
830

 
50

 
6,630

 

 
7,510

Marketable securities
 

 
13,761

 

 

 
13,761

Receivables
 

 

 
38,424

 

 
38,424

Debt issuance costs, net
 
11,031

 

 

 

 
11,031

Deferred tax assets
 
955

 


 
(147
)
 

 
808

Net investment in subsidiaries
 
1,165,274

 
24,277

 
1,601,038

 
(2,790,589
)
 

Other
 
55,212

 
31,601

 
324,941

 
(400,924
)
 
10,830

TOTAL ASSETS
 
$
1,501,498

 
$
617,572

 
$
4,039,965

 
$
(3,191,513
)
 
$
2,967,522

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
2,209

 
$
16,456

 
$
30,986

 
$

 
$
49,651

Accrued liabilities and other
 
19,768

 
7,370

 
14,577

 
(1,083
)
 
40,632

Debt
 
5,334

 
5,637

 
334,873

 
(334,279
)
 
11,565

Royalty obligations
 

 
4,716

 
46,371

 

 
51,087

Reclamation
 

 

 
633

 
119

 
752

Deferred tax liabilities
 

 
847

 
1,011

 

 
1,858

 
 
27,311

 
35,026

 
428,451

 
(335,243
)
 
155,545

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
452,855

 
15,345

 
65,932

 
(65,562
)
 
468,570

Royalty obligations
 

 
18,941

 
39,564

 

 
58,505

Reclamation
 

 
47,467

 
12,409

 
(119
)
 
59,757

Deferred tax liabilities
 
31,595

 
1,618

 
507,019

 

 
540,232

Other long-term liabilities
 
2,901

 
518

 
24,861

 

 
28,280

Intercompany payable (receivable)
 
(669,797
)
 
437,030

 
232,767

 

 

 
 
(182,446
)
 
520,919

 
882,552

 
(65,681
)
 
1,155,344

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,034

 
250

 
123,167

 
(123,417
)
 
1,034

Additional paid-in capital
 
2,785,761

 
79,712

 
3,258,037

 
(3,337,749
)
 
2,785,761

Accumulated deficit
 
(1,127,031
)
 
(15,226
)
 
(652,242
)
 
667,468

 
(1,127,031
)
Accumulated other comprehensive income (loss)
 
(3,131
)
 
(3,109
)
 

 
3,109

 
(3,131
)
 
 
1,656,633

 
61,627

 
2,728,962

 
(2,790,589
)
 
1,656,633

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,501,498

 
$
617,572

 
$
4,039,965

 
$
(3,191,513
)
 
$
2,967,522



27

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2013

 
 
Coeur Mining, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
137,076

 
$
991

 
$
68,623

 
$

 
$
206,690

Investments
 

 

 

 

 

Receivables
 
530

 
19,982

 
60,562

 

 
81,074

Ore on leach pads
 

 
50,495

 

 

 
50,495

Inventory
 

 
35,290

 
96,733

 

 
132,023

Deferred tax assets
 

 

 
35,008

 

 
35,008

Prepaid expenses and other
 
4,128

 
5,282

 
16,530

 

 
25,940

 
 
141,734

 
112,040

 
277,456

 

 
531,230

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
 
5,980

 
143,118

 
337,175

 

 
486,273

Mining properties, net
 

 
235,537

 
1,515,964

 

 
1,751,501

Ore on leach pads
 

 
31,528

 

 

 
31,528

Restricted assets
 
830

 
50

 
6,134

 

 
7,014

Marketable securities
 

 
14,521

 

 

 
14,521

Receivables
 

 

 
36,574

 

 
36,574

Debt issuance costs, net
 
10,812

 

 

 

 
10,812

Deferred tax assets
 
955

 

 
234

 

 
1,189

Net investment in subsidiaries
 
1,242,480

 
46,215

 
1,578,799

 
(2,867,494
)
 

Other
 
53,858

 
14,616

 
320,425

 
(373,563
)
 
15,336

TOTAL ASSETS
 
$
1,456,649

 
$
597,625

 
$
4,072,761

 
$
(3,241,057
)
 
$
2,885,978

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,963

 
$
15,864

 
$
36,020

 
$

 
$
53,847

Accrued liabilities and other
 
16,693

 
8,016

 
14,611

 
(1,054
)
 
38,266

Debt
 

 
1,262

 
309,472

 
(308,229
)
 
2,505

Royalty obligations
 

 
3,934

 
44,085

 

 
48,019

Reclamation
 

 

 
794

 
119

 
913

Deferred tax liabilities
 

 

 
1,011

 

 
1,011

 
 
18,656

 
29,076

 
405,993

 
(309,164
)
 
144,561

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
Debt
 
305,335

 
255

 
64,820

 
(64,280
)
 
306,130

Royalty obligations
 

 
17,696

 
47,446

 

 
65,142

Reclamation
 

 
45,894

 
11,740

 
(119
)
 
57,515

Deferred tax liabilities
 
37,095

 
1,618

 
517,533

 

 
556,246

Other long-term liabilities
 
2,467

 
544

 
22,806

 

 
25,817

Intercompany payable (receivable)
 
(637,471
)
 
427,085

 
210,386

 

 

 
 
(292,574
)
 
493,092

 
874,731

 
(64,399
)
 
1,010,850

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Common stock
 
1,028

 
250

 
122,666

 
(122,916
)
 
1,028

Additional paid-in capital
 
2,781,164

 
79,712

 
3,258,037

 
(3,337,749
)
 
2,781,164

Accumulated deficit
 
(1,046,719
)
 
401

 
(588,666
)
 
588,265

 
(1,046,719
)
Accumulated other comprehensive income (loss)
 
(4,906
)
 
(4,906
)
 

 
4,906

 
(4,906
)
 
 
1,730,567

 
75,457

 
2,792,037

 
(2,867,494
)
 
1,730,567

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,456,649

 
$
597,625

 
$
4,072,761

 
$
(3,241,057
)
 
$
2,885,978



28

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 19 – COMMITMENTS AND CONTINGENCIES
Labor Union Contracts
The Company maintains a labor agreement in South America with Sindicato de Trabajadores Mineros de la Empresa Manquiri S.A. at the San Bartolomé mine in Bolivia. The San Bartolomé mine labor agreement, which became effective January 28, 2010, is currently active and does not have a fixed term. At June 30, 2014, approximately 10% of the Company’s worldwide labor force was covered by collective bargaining agreements. The Company cannot predict whether this agreement will be renewed on similar terms or at all, whether future labor disruptions will occur or, if disruptions do occur, how long they will last.
Kensington Production Royalty
On July 7, 1995, Coeur, through its wholly owned subsidiary, Coeur Alaska, Inc., acquired the 50% ownership interest of Echo Bay Exploration Inc., or Echo Bay, giving Coeur 100% ownership of the Kensington property. Coeur Alaska is obligated to pay Echo Bay, a subsidiary of Kinross Gold Corporation, a scaled net smelter return royalty on 1.0 million ounces of future gold production after Coeur Alaska recoups the $32.5 million purchase price and its construction and development expenditures incurred after July 7, 1995 in connection with placing the property into commercial production. The royalty ranges from 1% at gold prices of $400 per ounce to a maximum of 2.5% at gold prices above $475 per ounce, with the royalty to be capped at 1.0 million ounces of production. No royalty has been paid to date as the purchase price and construction and development costs have not been recouped.
Rochester Production Royalties
The Company acquired the Rochester property from ASARCO, a subsidiary of Grupo Mexico S.A. de C.V., in 1983. The Company is obligated to pay a net smelter royalty interest to ASARCO when the market price of silver equals or exceeds $23.60 per ounce up to a maximum rate of 5% with the condition that Rochester achieves positive cash flow for the applicable year. If cash flow at Rochester is negative in any calendar year, the maximum royalty payable is $250,000. Royalty expense was nil due to silver prices below $23.60 per ounce for the three and six months ended June 30, 2014, and nil and $1.0 million for the three and six months ended June 30, 2013.
Commencing January 1, 2014, Coeur Rochester is obligated to pay a 3.4% net smelter returns royalty on up to 39.4 million silver equivalent ounces produced and sold from a portion of the Rochester mine, payable on a quarterly basis. For each calendar quarter, the royalty will be payable on the actual sales prices received (exclusive of gains or losses associated with trading activities), less refining costs, of gold and silver produced and sold from the applicable portions of the Rochester mine. Changes in the Company's mine plan and silver and gold prices will result in the recognition of mark-to-market gains or losses in Fair value adjustments, net.
Palmarejo Gold Production Royalty
On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with Franco-Nevada Mexico under which Franco-Nevada Mexico purchased a royalty covering 50% of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico. The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight-year period. Please see Note 10 -- Derivative Financial Instruments for further discussion on the royalty obligation. On June 23, 2014, the Company announced that it had entered into letters of intent with each of Franco-Nevada Mexico and Franco-Nevada (Barbados) Corp. ("Franco-Nevada Barbados"), providing for termination of the existing royalty stream agreement with Franco-Nevada Mexico effective upon the satisfaction of the minimum payment obligation thereunder, and the entry into a new gold stream agreement with Franco-Nevada Barbados. The Company expects to enter into definitive agreements governing the transactions contemplated by the letters of intent in the third quarter of 2014.
Sites Related to Callahan Mining Corporation
In 1991, the Company acquired all of the outstanding common stock of Callahan Mining Corporation. The Company has received requests for information or notices of potential liability from state or federal agencies with regard to Callahan's operations at sites in Maine, Colorado and Washington. The Company did not make any decisions with respect to generation, transport or disposal of hazardous waste at these sites. Therefore, the Company believes that it is not liable for any potential cleanup costs either directly as an operator or indirectly as a parent. To date, none of these agencies have made any claims against the Company or Callahan for cleanup costs at these sites. The Company anticipates that further agency interaction may be possible with respect to these sites.
Callahan operated a mine and mill in Brooksville, Maine from 1968 until 1972 and subsequently disposed of the property. In 2000, the U.S. Environmental Protection Agency, or EPA, made a formal request to the Company for information regarding the site. The site was placed on the National Priorities List on September 5, 2002, and the Maine Department of Transportation, a partial owner of the property, signed a consent order in 2005. In January 2009, the EPA and the State of Maine made additional

29

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

formal requests to the Company for information relating to the site, to which the Company responded. The first phase of cleanup at the site began in April 2011.
The Van Stone Mine in Stevens County, Washington consists of several parcels of land and was mined from 1926 until 1993 by multiple owners. Callahan sold its parcel in 1990. In February 2010, the State of Washington Department of Ecology notified Callahan that it, among others, is a potentially liable person (PLP) under Washington law. Asarco LLC ("Asarco"), an affiliate of American Smelting and Refining Company, which developed the mill on the site in 1951, settled for $3.5 million. Another potentially liable person, Vaagen Brothers, signed a consent order which allows access to the site for a Remedial Investigation and Feasibility Study. Neither the Company nor Callahan has received any further notices from the Washington Department of Ecology. On June 5, 2012, Asarco filed a lawsuit in the U.S. District Court for the Eastern District of Washington against five named defendants, including Callahan, seeking contribution for the $3.5 million settlement. Callahan filed a response and defense to the lawsuit on December 11, 2012 and does not believe it has any liability to Asarco. On January 23, 2013, the Court entered an Order dismissing one of the five named defendants from the lawsuit as a result of the parties reaching a settlement. The Court set a trial date for September 22, 2014; however, on June 3, 2014, the Court granted a joint motion to stay proceedings pending finalization of settlement arrangements between Asarco and Callahan.
Callahan controlled the Akron Mine located in Gunnison County, Colorado under lease and option agreements with several owners from 1937-1960. In December 2003, the United States Forest Service (“USFS”) made a formal request for information to the Company for information regarding the site, to which the Company responded. In February 2007, the USFS made a formal request for information to Callahan for information regarding the site, to which Callahan responded. In April 2013, the USFS made a formal request for information to the Company regarding the site, to which the Company responded on June 10, 2013. In November 2013, the USFS made a formal request for additional information to the Company regarding the site, to which the Company responded on January 21, 2014.
Bolivian Temporary Restriction on Mining above 4,400 Meters
On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives that hold their rights under contract themselves with COMIBOL. The Company temporarily adjusted its mine plan to confine mining activities to the ore deposits below 4,400 meters above sea level and timely notified COMIBOL of the need to lift the restriction. Mining in other areas above the 4,400 meter level continues to be suspended.
The suspension may reduce production until the Company is able to resume mining above 4,400 meters. It is uncertain at this time how long the suspension will remain in place. If COMIBOL decides to restrict access above the 4,400 meter level on a permanent basis, the Company may need to write down the carrying value of the asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.
Appeal of Plan of Operations Amendment at Rochester in Nevada
The Rochester property was the subject of an administrative appeal filed by Great Basin Resource Watch (“GBRW”) with the Interior Board of Land Appeals (“IBLA”). This appeal challenged the decision of the U.S. Bureau of Land Management (“BLM”) to approve a plan of operations amendment permitting resumed mining in the existing mine pit and construction of a new heap leach pad.  GBRW asserted that the National Environmental Policy Act (“NEPA”) required an Environmental Impact Statement for the plan of operations amendment, as opposed to the Environmental Assessment (“EA”) that was prepared.  GBRW further alleged that BLM violated the Federal Land Policy & Management Act (“FLPMA”) by failing to avoid unnecessary and undue degradation of public lands.  Because GBRW did not seek a stay of BLM's decision, operations proceeded as approved during the course of the administrative appeal. Coeur was granted intervenor status in the appeal and actively participated in its resolution.  The BLM and Coeur asserted that the EA complies with NEPA and that BLM complied with FLPMA by, among other things, requiring mitigation of any possible future effects on water quality.  BLM filed a Supplemental Briefing on March 1, 2012 regarding additional analysis conducted by the BLM that further supported and strengthened BLM and Coeur's positions that the EA complies with NEPA. On June 30, 2014, the IBLA affirmed the BLM's decision to approve the plan of operations amendment.
Settlement of Unpatented Mining Claims Dispute at Rochester in Nevada
In the second quarter of 2013, Coeur Rochester settled all claims associated with a dispute involving ownership of unpatented mining claims surrounding the Coeur Rochester operation and, in connection therewith, agreed to make a one-time $10.0 million cash payment and granted the 3.4% net smelter returns royalty described above under "Rochester Production Royalties." The above settlement resulted in a $32.0 million charge in the second quarter of 2013.


30



Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Coeur Mining and its subsidiaries (collectively, "Coeur", "the Company", "our", and "we"). The Company uses certain non-GAAP financial performance measures in its MD&A such as costs applicable to sales, all-in sustaining costs, and adjusted net income. For a detailed description of each of these non-GAAP measures, please see "Non-GAAP Financial Performance Measures" at the end of this item. The Company believes it is important to read this item in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report and our 2013 Form 10-K, as well as other information the Company files with the Securities and Exchange Commission.
Overview
The Company is a large primary silver producer with significant gold production and mines located in the United States, Mexico, and Bolivia; development projects in Mexico and Argentina; and streaming and royalty interests in Australia, Mexico, Ecuador, and Chile. The Palmarejo, San Bartolomé, Kensington, and Rochester mines, each of which is operated by the Company, and Coeur Capital, primarily comprised of the Endeavor silver stream and other precious metal royalties, constitute the Company’s principal sources of revenues.
The Company’s business strategy is to discover, acquire, develop and operate low-cost silver and gold mines and acquire precious metal streaming and royalty interests that together produce long-term cash flow, provide opportunities for growth through continued exploration, and generate superior and sustainable returns for stockholders. The Company’s management focuses on maximizing net cash flow through identifying and implementing revenue enhancement opportunities at existing operations, reducing operating and non-operating costs, consistent capital discipline, and efficient management of working capital.
Highlights - Three months ended June 30, 2014
Metal sales of $163.7 million and royalty revenue of $0.9 million
Production of 8.1 million silver equivalent ounces, consisting of 4.5 million silver ounces and 61,025 gold ounces
Costs applicable to sales were $14.31 per silver equivalent ounce and $1,008 per gold ounce (see "Non-GAAP Financial Performance Measures")
All-in sustaining costs were $19.89 per silver equivalent ounce (see "Non-GAAP Financial Performance Measures")
Adjusted net loss of $31.6 million or $0.31 per share (see "Non-GAAP Financial Performance Measures")
$15.4 million in capital expenditures
Signed Letters of Intent to terminate the Palmarejo gold production royalty stream upon delivery of the minimum ounce royalty and sell a new gold stream for 50% of the remaining Palmarejo gold production
Completed the La Preciosa project feasibility study indicating a 10% internal rate of return and initial proven and probable reserves of 126 million silver ounces and 209,000 gold ounces; deferring development to maintain the project's leverage to higher silver and gold prices and pursue limited drilling and metallurgical work to further improve the project's expected return
Consolidated Performance
Net loss was $43.1 million for the three months ended June 30, 2014 compared to Net loss of $35.0 million for the three months ended June 30, 2013.  The higher Net loss for the three months ended June 30, 2014 is primarily due to lower average realized silver and gold prices and unfavorable fair value adjustments, partially offset by lower silver and gold costs applicable to sales per ounce and the Rochester claims dispute settlement in 2013.
The Company produced 4.5 million ounces of silver and 61,025 ounces of gold in the three months ended June 30, 2014, compared to 4.6 million ounces of silver and 60,178 ounces of gold in the three months ended June 30, 2013. Silver production decreased in the three months ended June 30, 2014 due to lower throughput and grade at Palmarejo, partially offset by higher recoveries and tons placed at Rochester. Gold production increased slightly in the three months ended June 30, 2014 due to higher mill throughput at Kensington, mostly offset by lower gold grade at Palmarejo.
Costs applicable to sales were $14.31 per silver equivalent ounce and $1,008 per gold ounce for the three months ended June 30, 2014, compared to $14.88 per silver equivalent ounce and $1,227 per gold ounce for the three months ended June 30, 2013. Costs applicable to sales per silver equivalent ounce decreased in the three months ended June 30, 2014 due to lower unit costs at Palmarejo and San Bartolomé. Costs applicable to sales per gold ounce decreased in the three months ended June 30,

31


2014 due to higher production at Kensington.
Net loss was $80.3 million for the six months ended June 30, 2014 compared to Net loss of $22.8 million for the six months ended June 30, 2013.  The higher Net loss in the six months ended June 30, 2014 is primarily due to unfavorable fair value adjustments and lower average realized silver and gold prices, partially offset by lower silver and gold costs applicable to sales per ounce at each of the Company's mine sites.
The Company produced 8.5 million ounces of silver and 119,861 ounces of gold in the six months ended June 30, 2014, compared to 8.4 million ounces of silver and 116,462 ounces of gold in the six months ended June 30, 2013. Silver production increased in the six months ended June 30, 2014 due to higher recoveries and tons placed at Rochester, partially offset by lower mill throughput and grade at Palmarejo. Gold production increased in the six months ended June 30, 2014 due to higher mill throughput at Kensington.
Costs applicable to sales were $13.80 per silver equivalent ounce and $1,007 per gold ounce in the six months ended June 30, 2014, compared to $14.57 per silver equivalent ounce and $1,058 per gold ounce in the six months ended June 30, 2013. Costs applicable to sales per silver equivalent ounce decreased in the six months ended June 30, 2014 due to higher silver production at Rochester and lower unit costs at Palmarejo and San Bartolomé. Costs applicable to sales per gold ounce decreased in the six months ended June 30, 2014 due to higher production at Kensington.
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Silver ounces produced(2)
4,465,387

 
4,612,455

 
8,538,159

 
8,427,320

Gold ounces produced(2)
61,025

 
60,178

 
119,861

 
116,462

Silver equivalent ounces produced(1)
8,126,887

 
8,223,135

 
15,729,819

 
15,415,040

Silver ounces sold(2)
4,589,547

 
5,207,427

 
8,465,014

 
8,265,694

Gold ounces sold(2)
57,751

 
63,523

 
120,328

 
115,156

Silver equivalent ounces sold(1)
8,054,581

 
9,018,657

 
15,684,701

 
15,175,040

Average realized price per silver ounce
$
19.60

 
$
22.73

 
$
19.91

 
$
25.50

Average realized price per gold ounce
$
1,277

 
$
1,356

 
$
1,278

 
$
1,437

Costs applicable to sales per silver equivalent ounce(3) (excluding Kensington)
$
14.31

 
$
14.88

 
$
13.80

 
$
14.57

Costs applicable to sales per gold ounce(3) (Kensington)
$
1,008

 
$
1,227

 
$
1,007

 
$
1,058

All-in sustaining costs per silver equivalent ounce(3)
$
19.89

 
$
21.22

 
$
19.58

 
$
20.80

(1)
Silver equivalent ounces calculated using a 60:1 silver to gold ratio.
(2)
Payable basis. Production before smelter losses was 4,483,761 and 4,633,341 silver ounces and 61,467 and 60,757 gold ounces for the three months ended June 30, 2014 and 2013, respectively. Sales before smelter losses were 4,606,796 and 5,228,270 silver ounces and 58,082 and 63,389 gold ounces for the three months ended June 30, 2014 and 2013, respectively. Production before smelter losses was 8,578,127 and 8,468,172 silver ounces and 120,823 and 117,671 gold ounces for the six months ended June 30, 2014 and 2013, respectively. Sales before smelter losses were 8,502,354 and 8,304,805 silver ounces and 121,438 and 115,315 gold ounces for the six months ended June 30, 2014 and 2013, respectively.
(3)
See "Non-GAAP Financial Performance Measures."
Consolidated Financial Results

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013
Revenue
Metal sales decreased by $40.8 million, or 20.0%, to $163.7 million due to lower silver and gold ounces sold and lower average realized silver and gold prices. The Company sold 4.6 million ounces of silver and 57,751 ounces of gold, compared to sales of 5.2 million ounces of silver and 63,523 ounces of gold. The Company realized average silver and gold prices of $19.60 per ounce and $1,277 per ounce, respectively, compared with realized average prices of $22.73 per ounce and $1,356 per ounce, respectively. Silver contributed 55% of sales and gold contributed 45%, compared to 57% of sales from silver and 43% from gold. Royalty revenues were $0.9 million higher due to the creation of Coeur Capital and its acquisition of Global Royalty Corp. in the fourth quarter of 2013.

32


Costs Applicable to Sales
Costs applicable to sales decreased by $23.7 million, or 16.6%, to $118.7 million. The decrease in costs applicable to sales is primarily due to lower silver and gold ounces sold and lower silver unit costs at Palmarejo and San Bartolomé and lower gold unit costs at Kensington.
Amortization
Amortization decreased by $15.5 million, or 27.2%, primarily due to lower amortizable mineral interests and mining equipment as a result of the 2013 impairment charges at the Palmarejo and Kensington mines.
Expenses
General and administrative expenses decreased $5.6 million, primarily due to lower consulting and professional fees and relocation costs incurred in 2013.
Exploration expense decreased by $1.6 million, or 23.9%, to $5.2 million primarily as a result of reduced exploration at Palmarejo and the Joaquin project, partly offset by higher exploration at Kensington. A total of 165,164 feet (50,336 meters) of combined core and reverse circulation drilling was completed to discover new silver and gold mineralization.
The $32.0 million Litigation settlement in 2013 relates to the settlement of the Rochester claims dispute. In connection with the settlement, Coeur Rochester acquired all mining claims in dispute in exchange for a one-time $10.0 million cash payment and granting a 3.4% net smelter returns royalty on up to 39.4 million silver equivalent ounces from the Rochester mine beginning January 1, 2014.
Pre-development, reclamation, and other expenses increased to $8.8 million, primarily due to La Preciosa feasibility study costs.
Other Income and Expenses
Non-cash fair value adjustments, net, including other-than-temporary impairments of marketable securities, were a loss of $9.2 million compared to a gain of $49.6 million, primarily due to the impact of changing future gold prices on the Palmarejo gold production royalty obligation and the commencement of the Rochester 3.4% NSR royalty obligation in 2014.
Interest income and other, net decreased by $0.5 million to an expense of $0.1 million, compared to income of $0.4 million, primarily due to a gain on the sale of various assets in the 2013 period.
Interest expense, net of capitalized interest of $0.1 million, increased to $12.3 million from $10.9 million primarily due to the March 2014 issuance of an additional $150 million 7.875% Senior Notes due 2021.
Income and Mining Taxes
The Company reported an income and mining tax expense of approximately $2.6 million compared to income and mining tax expense of $23.7 million. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
 
Three months ended June 30, 2014
 
Three months ended June 30, 2013
(in thousands)
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(31,370
)
$
(146
)
 
$
(67,824
)
$
(1,329
)
Argentina
(688
)
(349
)
 
(2,989
)
(117
)
Mexico
(12,710
)
107

 
47,214

(15,798
)
Bolivia
3,957

(2,205
)
 
12,122

(4,556
)
Other jurisdictions
311

(28
)
 
110

(1,873
)

$
(40,500
)
$
(2,621
)
 
$
(11,367
)
$
(23,673
)

In both periods, the Company recorded tax expense that differs from an amount calculated at the statutory rate primarily due to (i) a full valuation allowance against the deferred tax assets relating to losses incurred in the United States and certain foreign locations, (ii) the impact of foreign exchange adjustments on deferred tax account balances, reserves for uncertain tax positions, and foreign earnings not considered as permanently reinvested with respect to certain foreign locations, and (iii) differences in foreign tax rates of its foreign locations. In conjunction with these items, the Company's consolidated effective income tax rate is a function of the combined effective tax rates in the jurisdictions in which it operates. Variations in the relative proportions of jurisdictional income and loss result in significant fluctuations in its consolidated effective tax rate.

33



In the fourth quarter of 2013, the Company changed its position regarding the accumulated earnings and basis difference with respect to its investment in its Coeur Mexicana mining operations, concluding they were permanently reinvested. The Company continues to maintain this position. In periods prior to the quarter ended December 31, 2013, it was the Company's position that such earnings were not permanently reinvested. Therefore, for the three months ended June 30, 2014, no provision has been made for income taxes attributable to the Company's investment in Coeur Mexicana. For the three months ended June 30, 2013, the impact of a provision for tax expense for this item of $1.3 million is reflected.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013
Revenue
Metal sales decreased by $54.0 million, or 14.3%, to $322.4 million due to lower average realized silver and gold prices, partially offset by higher silver and gold ounces sold. The Company sold 8.5 million ounces of silver and 120,328 ounces of gold, compared to sales of 8.3 million ounces of silver and 115,156 ounces of gold. The Company realized average silver and gold prices of $19.91 per ounce and $1,278 per ounce, respectively, compared with realized average prices of $25.50 per ounce and $1,437 per ounce, respectively. Silver contributed 52% of sales and gold contributed 48%, compared to 55% of sales from silver and 45% from gold. Royalty revenues increased $1.8 million due to the creation of Coeur Capital and its acquisition of Global Royalty Corp. in the fourth quarter of 2013.
Costs Applicable to Sales
Costs applicable to sales decreased by $4.9 million, or 2.1%, to $225.6 million. The decrease in costs applicable to sales is primarily due to lower unit costs at all of the Company's mines, partially offset by higher silver and gold ounces sold.
Amortization
Amortization decreased by $24.7 million, or 23.2%, primarily due to lower amortizable mineral interests and mining equipment as a result of the 2013 impairment charges at the Palmarejo and Kensington mines.
Expenses
General and administrative expenses decreased $2.0 million, primarily due to lower consulting and professional fees and relocation costs incurred in 2013.
Exploration expense decreased by $4.2 million, or 31.2%, to $9.4 million primarily as a result of reduced exploration activity near the Company’s Joaquin project in Argentina. A total of 241,867 feet (73,715 meters) of combined core and reverse circulation drilling was completed to discover new silver and gold mineralization.
The $32.0 million Litigation settlement in 2013 relates to the settlement of the Rochester claims dispute, as described above.
Pre-development, reclamation, and other expenses increased to $15.8 million or 120.2%, primarily due to La Preciosa feasibility study costs.
Other Income and Expenses
Non-cash fair value adjustments, net, including other-than-temporary impairments of marketable securities, were a loss of $23.2 million compared to a gain of $67.3 million, primarily due to the impact of changing future gold prices on the Palmarejo gold production royalty obligation and the commencement of the Rochester 3.4% NSR obligation in 2014.
Interest income and other, net decreased by $6.4 million to expense of $2.1 million, compared to income of $4.3 million, primarily due to a gain on the sale of various assets in 2013.
Interest expense, net of capitalized interest of $0.5 million, increased to $25.4 million from $20.7 million primarily due to the March 2014 issuance of an additional $150 million 7.875% Senior Notes due 2021 and write-off of the Revolving Credit Agreement costs.

34


Income and Mining Taxes
The Company reported an income and mining tax benefit of approximately $2.1 million compared to income and mining tax expense of $34.9 million. The following table summarizes the components of the Company’s income (loss) before tax and income and mining tax (expense) benefit:
 
Six months ended June 30, 2014
 
Six months ended June 30, 2013
(in thousands)
Income (loss) before tax
Tax (expense) benefit
 
Income (loss) before tax
Tax (expense) benefit
United States
$
(60,214
)
$
(292
)
 
$
(61,896
)
$
(4,541
)
Argentina
(2,892
)
4,083

 
(6,981
)
(44
)
Mexico
(28,716
)
3,828

 
58,756

(19,471
)
Bolivia
8,649

(4,969
)
 
21,628

(8,884
)
Other jurisdictions
793

(582
)
 
641

(1,978
)

$
(82,380
)
$
2,068

 
$
12,148

$
(34,918
)

In both periods, the Company recorded tax expense that differs from an amount calculated at the statutory rate primarily due to (i) a full valuation allowance against the deferred tax assets relating to losses incurred in the United States and certain foreign locations, (ii) the impact of foreign exchange adjustments on deferred tax account balances, reserves for uncertain tax positions, and foreign earnings not considered as permanently reinvested with respect to certain foreign locations, and (iii) differences in foreign tax rates in its foreign locations. In conjunction with these items, the Company's consolidated effective income tax rate is a function of the combined effective tax rates in the jurisdictions in which it operates. Variations in the relative proportions of jurisdictional income and loss result in significant fluctuations in its consolidated effective tax rate.

In the fourth quarter of 2013, the Company changed its position regarding the accumulated earnings and basis difference with respect to its investment in its Coeur Mexicana mining operations, concluding they were permanently reinvested. In periods prior to the quarter ended December 31, 2013, it was the Company's position that such earnings were not permanently reinvested. The Company continues to maintain this position. Therefore, for the six months ended June 30, 2014, no provision has been made for income taxes attributable to the Company's investment in Coeur Mexicana. For the six months ended June 30, 2013, the impact of a provision for tax expense for this item of $1.4 million is reflected.
Results of Operations
Palmarejo
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Tons milled
534,718

 
570,322

 
1,106,063

 
1,143,492

Silver ounces produced
1,761,145

 
2,044,967

 
3,581,629

 
3,691,365

Gold ounces produced
23,706

 
28,191

 
48,922

 
51,157

Silver equivalent ounces produced
3,183,505

 
3,736,427

 
6,516,949

 
6,760,785

Costs applicable to sales/oz(1)
$
14.04

 
$
14.97

 
$
13.71

 
$
14.42

(1) See Non-GAAP Financial Performance Measures

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013

Silver production decreased due to lower throughput and grade. Metal sales were $72.4 million, or 44% of Coeur's metal sales, compared with $86.2 million, or 42% of Coeur's metal sales. Costs applicable to sales per ounce decreased due to lower open pit mining, power, and consumables costs. Amortization decreased to $18.0 million compared to $35.4 million due to lower amortizable mineral interests and mining equipment. Capital expenditures were $5.6 million compared to $9.2 million.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013

Silver production decreased due to lower throughput and grade. Metal sales were $140.4 million, or 44% of Coeur's metal sales, compared with $143.6 million, or 38% of Coeur's metal sales. Costs applicable to sales per ounce decreased due to lower mining and milling costs. Amortization decreased to $36.7 million compared to $64.2 million due to lower amortizable mineral interests and mining equipment. Capital expenditures were $9.3 million compared to $14.5 million.

35



San Bartolomé
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Tons milled
437,975

 
424,310

 
823,349

 
799,295

Silver ounces produced
1,481,009

 
1,523,262

 
2,836,429

 
2,914,361

Costs applicable to sales/oz(1)
$
13.85

 
$
15.26

 
$
13.89

 
$
14.88

(1) See Non-GAAP Financial Performance Measures

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013

Silver production decreased due to lower recovery, mostly offset by higher mill throughput. Silver sales were $29.1 million, or 18% of Coeur's metal sales, compared with $49.2 million, or 24% of Coeur's metal sales. Costs applicable to sales per ounce decreased as a result of lower milling and insurance costs. Amortization was $4.9 million compared to $4.8 million. Capital expenditures were $1.7 million compared to $3.2 million.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013

Silver production decreased due to lower recovery, mostly offset by higher mill throughput. Silver sales were $56.6 million, or 18% of Coeur's metal sales, compared with $82.4 million, or 22% of Coeur's metal sales. Costs applicable to sales per ounce decreased as a result of lower insurance, milling, and royalty costs. Amortization was $9.3 million compared to $9.5 million. Capital expenditures were $3.2 million compared to $3.6 million.
Rochester
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Tons placed
3,329,582

 
2,457,423

 
6,970,443

 
5,063,424

Silver ounces produced
1,112,239

 
843,845

 
1,862,601

 
1,491,434

Gold ounces produced
9,230

 
9,404

 
17,422

 
18,146

Silver equivalent ounces produced
1,666,039

 
1,408,085

 
2,907,921

 
2,580,194

Costs applicable to sales/oz(1)
$
15.79

 
$
14.95

 
$
14.45

 
$
15.04

(1) See Non-GAAP Financial Performance Measures

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013
    
Silver production increased as a result of higher grade, higher tons placed, and timing of recoveries. Metal sales were $31.2 million, or 19% of Coeur’s metal sales, compared with $34.9 million, or 17% of Coeur's metal sales. Costs applicable to sales per ounce increased due to higher leaching and maintenance costs. Amortization was $5.0 million compared to $2.0 million due to higher production from the Stage III leach pad. Capital expenditures were $4.0 million compared to $6.6 million.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013

Silver production increased as a result of higher grade, higher tons placed, and timing of recoveries. Metal sales were $55.3 million, or 17% of Coeur’s metal sales, compared with $74.4 million, or 20% of Coeur's metal sales. Costs applicable to sales per ounce decreased due to lower royalty costs, partially offset by higher leaching costs. Amortization was $9.5 million compared to $3.8 million due to higher production from the Stage III leach pad. Capital expenditures were $4.9 million compared to $9.9 million.


36


Kensington
 
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Tons milled
163,749

 
127,987

 
323,446

 
257,044

Gold ounces produced
28,089

 
22,583

 
53,517

 
47,159

Costs applicable to sales/oz(1)
$
1,008

 
$
1,227

 
$
1,007

 
$
1,058

(1) See Non-GAAP Financial Performance Measures

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013

Gold production increased due to higher mill throughput. Metal sales were $29.0 million, or 18% of Coeur's metal sales, compared with $30.9 million, or 15% of Coeur’s metal sales. Costs applicable to sales per ounce decreased due to higher production and lower contracted services. Amortization was $11.6 million compared to $13.2 million due to lower amortizable mineral interests and mining equipment. Capital expenditures were $4.0 million compared to $7.4 million.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013

Gold production increased due to significantly higher mill throughput, partially offset by lower grade. Metal sales were $65.1 million, or 20% of Coeur's metal sales, compared to $70.1 million, which represented 19% of Coeur’s metal sales in each period. Costs applicable to sales per ounce decreased due to higher production and lower contracted services. Amortization was $22.3 million compared to $26.4 million due to lower amortizable mineral interests and mining equipment. Capital expenditures were $8.7 million compared to $10.7 million.

Coeur Capital
 
Three months ended June 30,
 
Six months ended June 30,
Endeavor Silver Stream
2014
 
2013
 
2014
 
2013
Tons milled
185,538

 
198,517

 
378,757

 
393,035

Silver ounces produced
110,994

 
200,381

 
257,500

 
330,160

Costs applicable to sales/oz(1)
$
7.94

 
$
8.49

 
$
8.00

 
$
9.77

(1) See Non-GAAP Financial Performance Measures

Three Months Ended June 30, 2014 compared to Three Months Ended June 30, 2013

Metal sales were $2.0 million compared to $3.5 million. Silver production decreased due to lower grade and throughput. Royalty revenue was $0.9 million compared to nil primarily due to the acquisition of Global Royalty Corp. in December 2013. Costs applicable to sales per ounce increased due to higher refining charges. Amortization was $1.4 million compared to $1.2 million due to depletion of royalty interests offset by lower production.

Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013

Metal sales were $4.9 million compared to $6.5 million. Silver production decreased due to lower grade and throughput. Royalty revenue was $1.8 million compared to nil primarily due to the acquisition of Global Royalty Corp. in December 2013. Costs applicable to sales per ounce decreased due to the impact of lower silver prices on the Company's silver price sharing agreement with the Endeavor mine operator, partly offset by higher refining charges. Amortization was $3.1 million compared to $2.1 million due to depletion of royalty interests.
Liquidity and Capital Resources
Cash Provided by Operating Activities
Net cash provided by operating activities for the three months ended June 30, 2014 was $30.5 million compared to $63.3 million for the three months ended June 30, 2013, due to lower average realized silver and gold prices, lower silver and gold ounces sold, and less favorable changes in operating assets and liabilities.

37


Net cash provided by operating activities for the six months ended June 30, 2014 was $20.9 million, compared to $76.3 million for the six months ended June 30, 2013, due to lower average realized silver and gold prices and an increase in ore on leach pads, partially offset by higher silver and gold ounces sold.
 
Three months ended June 30,
 
Six months ended June 30,
(in thousands)
2014
 
2013
 
2014
 
2013
Cash flow before changes in operating assets and liabilities
$
10,506

 
$
14,430

 
$
25,280

 
$
73,154

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Receivables and other current assets
4,921

 
4,401

 
10,544

 
8,647

Prepaid expenses and other
3,551

 
2,930

 
(4,558
)
 
411

Inventories
(1,606
)
 
31,483

 
(15,519
)
 
10,990

Accounts payable and accrued liabilities
13,118

 
10,094

 
5,117

 
(16,930
)
CASH PROVIDED BY OPERATING ACTIVITIES
$
30,490

 
$
63,338

 
$
20,864

 
$
76,272

Cash Used in Investing Activities
Net cash used in investing activities for the three months ended June 30, 2014 was $18.9 million compared to $127.8 million for the three months ended June 30, 2013, due to lower capital expenditures and the acquisition of Orko Silver Corporation in 2013. The Company spent $15.4 million on capital expenditures in the three months ended June 30, 2014 compared to $27.2 million in the three months ended June 30, 2013. Capital expenditures in the three months ended June 30, 2014 were primarily related to underground development at Palmarejo and Kensington, plant improvements at San Bartolomé, and resource definition at Rochester.
Net cash used in investing activities for the six months ended June 30, 2014 was $77.0 million compared to $151.0 million in the six months ended June 30, 2013, primarily due to lower capital expenditures and the acquisition of Orko Silver Corporation in 2013, partially offset by purchase of short-term investments. The Company spent $27.3 million on capital expenditures in the six months ended June 30, 2014, compared with $40.0 million in the six months ended June 30, 2013. Capital expenditures in the six months ended June 30, 2014 were primarily related to underground development at Palmarejo and Kensington, plant improvements at San Bartolomé, and resource definition at Rochester.
Cash Used in Financing Activities
Net cash used in financing activities for the three months ended June 30, 2014 was $15.4 million compared to $17.4 million for the three months ended June 30, 2013, primarily due to the effect of lower gold prices on Palmarejo gold production royalty payments.
Net cash provided by financing activities for the six months ended June 30, 2014 was $118.6 million compared to $198.8 million for the six months ended June 30, 2013. The decrease in cash provided by financing activities is primarily the result of the follow-on offering of $150 million of Senior Notes in the six months ended June 30, 2014 compared to the original offering of $300 million of Senior Notes in the six months ended June 30, 2013, partially offset by the repurchase of $43.3 million of Convertible Notes in the six months ended June 30, 2013.
Termination of Revolving Credit Facility

On March 20, 2014, Coeur Alaska, Inc. and Coeur Rochester, Inc., each a wholly-owned subsidiary of the Company, notified the administrative agent under the Credit Agreement that they were terminating the Revolving Credit Facility, effective March 25, 2014.  No amounts were outstanding under the Revolving Credit Facility at the time of termination, and no early termination penalty was payable in connection with the termination. 
Other Liquidity Matters
The Company asserts that its earnings from the Palmarejo operation are permanently reinvested. Therefore, no provision has been made for United States federal and state income taxes on the Company's tax basis differences in Mexico, which primarily relate to accumulated foreign earnings which have been reinvested and are expected to be reinvested outside the United States indefinitely. The Company does not believe that the amounts permanently reinvested will have a material impact on liquidity.
The Company may elect to defer some capital investment activities or to secure additional capital to ensure it maintains sufficient liquidity. In addition, if the Company decides to pursue the acquisition of additional mineral interests, new capital projects, or acquisitions of new properties, mines or companies, additional financing activities may be necessary. There can be no assurances that such financing will be available when or if needed upon acceptable terms, or at all.

38


Critical Accounting Policies and Accounting Developments
Please see Note 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES contained in the Company’s Form 10-K for the year ended December 31, 2013 for the Company's critical accounting policies and estimates.

Cautionary Statement Concerning Forward-Looking Statements

This report contains numerous forward-looking statements relating to the Company's gold and silver mining business, including growth strategies, tax positions, and initiatives to discover, acquire, develop and operate low-cost silver and gold mines and acquire precious metal streaming and royalty interests, generate returns, generate and maximize cash flow, manage metals price risk, reduce costs, enhance revenue, demonstrate capital discipline and manage working capital and expenditures. Such forward-looking statements are identified by the use of words such as “believes,” “intends,” “expects,” “hopes,” “may,” “should,” “will,” “plan,” “projects,” “contemplates,” “anticipates” or similar words. Actual results could differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ materially from those in the forward-looking statements include: (i) the risk factors set forth below under Part II, Item 1A and in the "Risk Factors" section of the 2013 10-K and the risks and uncertainties discussed in this MD&A; (ii) the risks and hazards inherent in the mining business (including risks inherent in developing large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (iii) changes in the market prices of gold and silver and a sustained lower price environment, (iv) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays, ground conditions and grade variability, (v) any future labor disputes or work stoppages, (vi) the uncertainties inherent in the estimation of gold and silver ore reserves and future production, (vii) changes that could result from the Company’s future acquisition of new mining properties or businesses, (viii) reliance on third parties to operate certain mines where the Company owns silver production and reserves, (ix) the absence of control over mining operations in which the Company or any of its subsidiaries holds royalty or streaming interests and risks related to these mining operations (including results of mining and exploration activities, environmental, economic and political risks and changes in mine plans and project parameters); (x) the loss of any third-party smelter to which the Company markets silver and gold, (xi) the effects of environmental and other governmental regulations, (xii) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xiii) the Company’s ability to raise additional financing necessary to conduct its business, make payments or refinance any debt.  Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Performance Measures
Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles ("GAAP"). These measures should not be considered in isolation or as a substitute for performance measures prepared in accordance with GAAP.
Adjusted Net Income (Loss)
Management uses Adjusted net income (loss) to evaluate the Company's operating performance, and to plan and forecast business operations. The Company believes the use of Adjusted net income (loss) reflects the underlying operating performance of our core mining business and allows investors and analysts to compare results of the Company to similar results of other mining companies. Management's determination of the components of Adjusted net income (loss) are evaluated periodically and are based, in part, on a review of non-GAAP financial measures used by mining industry analysts.

39


Net income (loss) is reconciled to Adjusted net income (loss) in the table below, with amounts presented after-tax:
In thousands except per share amounts
Three months ended June 30,
 
Six months ended June 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
(43,121
)
 
$
(35,040
)
 
$
(80,312
)
 
$
(22,770
)
Fair value adjustments, net
6,498

 
(48,434
)
 
14,325

 
(61,902
)
Stock-based compensation
2,299

 
1,554

 
4,757

 
2,654

Impairment of marketable securities
934

 
17,192

 
3,522

 
17,227

Accretion of royalty obligation
1,789

 
2,897

 
3,609

 
5,466

Litigation settlement

 
32,046

 

 
32,046

Loss on Revolving Credit Facility termination

 

 
3,035

 

Adjusted net income (loss)
$
(31,601
)
 
$
(29,785
)
 
$
(51,064
)
 
$
(27,279
)
 
 
 
 
 
 
 
 
Adjusted net income (loss) per share
$
(0.31
)
 
$
(0.30
)
 
$
(0.50
)
 
$
(0.29
)
Costs Applicable to Sales and All-in Sustaining Costs

Management uses Costs applicable to sales ("CAS") and All-in sustaining costs (“AISC") to evaluate the Company’s current operating performance and life of mine performance from discovery through reclamation. We believe these measures assist analysts, investors and other stakeholders in understanding the costs associated with producing silver and assessing our operating performance and ability to generate free cash flow from operations. These measures may not be indicative of operating profit or cash flow from operations as determined under GAAP. Management believes converting the benefit from selling gold into silver equivalent ounces (silver to gold ratio of 60:1) best allows management, analysts, investors and other stakeholders to evaluate the operating performance of the Company. Other companies may calculate CAS and AISC differently as a result of reflecting the benefit from selling non-silver metals as a by-product credit rather than converting to silver equivalent ounces, differences in the determination of sustaining capital expenditures and differences in underlying accounting principles and accounting frameworks such as in International Financial Reporting Standards.
Three Months Ended June 30, 2014
 
 
Silver
 
Gold
 
 
 
 
Palmarejo
 
San Bartolomé
 
Rochester
 
Endeavor
 
Total
 
Kensington
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
67,595

 
$
25,550

 
$
29,406

 
$
1,701

 
$
124,252

 
$
34,784

 
$
159,036

Amortization
 
18,044

 
4,855

 
5,025

 
859

 
28,783

 
11,566

 
40,349

Costs applicable to sales
 
$
49,551

 
$
20,695

 
$
24,381

 
$
842

 
$
95,469

 
$
23,218

 
$
118,687

Silver equivalent ounces sold
 
3,528,219

 
1,494,100

 
1,544,456

 
106,126

 
6,672,901

 
 
 
 
Gold ounces sold
 
 
 
 
 
 
 
 
 
 
 
23,028

 
 
Costs applicable to sales per ounce
 
$
14.04

 
$
13.85

 
$
15.79

 
$
7.94

 
$
14.31

 
$
1,008

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
963

Sustaining capital
 
 
 
 
 
 
 
 
 
 
 
 
 
17,617

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
9,398

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
5,153

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
1,964

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
6,388

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
$
160,170

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
6,672,901

Kensington silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
1,381,680

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
8,054,581

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
19.89


40


Three Months Ended June 30, 2013
 
 
Silver
 
Gold
 
 
 
 
Palmarejo
 
San Bartolomé
 
Rochester
 
Endeavor
 
Total
 
Kensington
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
90,602

 
$
37,639

 
$
24,505

 
$
2,907

 
$
155,653

 
$
43,313

 
$
198,966

Amortization
 
35,384

 
4,824

 
1,989

 
1,224

 
43,421

 
13,159

 
56,580

Costs applicable to sales
 
$
55,218

 
$
32,815

 
$
22,516

 
$
1,683

 
$
112,232

 
$
30,154

 
$
142,386

Silver equivalent ounces sold
 
3,688,500

 
2,151,000

 
1,506,508

 
198,269

 
7,544,277

 
 
 
 
Gold ounces sold
 
 
 
 
 
 
 
 
 
 
 
24,573

 
 
Costs applicable to sales per ounce
 
$
14.97

 
$
15.26

 
$
14.95

 
$
8.49

 
$
14.88

 
$
1,227

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
2,742

Sustaining capital
 
 
 
 
 
 
 
 
 
 
 
 
 
22,776

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
15,026

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
6,774

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
936

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
701

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
$
191,341

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
7,544,277

Kensington silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
1,474,380

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
9,018,657

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
21.22


Six Months Ended June 30, 2014
 
 
Silver
 
Gold
 
 
 
 
Palmarejo
 
San Bartolomé
 
Rochester
 
Endeavor
 
Total
 
Kensington
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
129,828

 
$
48,908

 
$
48,565

 
$
3,836

 
$
231,137

 
$
74,024

 
$
305,161

Amortization
 
36,702

 
9,313

 
9,476

 
1,812

 
57,303

 
22,275

 
79,578

Costs applicable to sales
 
$
93,126

 
$
39,595

 
$
39,089

 
$
2,024

 
$
173,834

 
$
51,749

 
$
225,583

Silver equivalent ounces sold
 
6,790,201

 
2,851,407

 
2,705,285

 
252,968

 
12,599,861

 
 
 
 
Gold ounces sold
 
 
 
 
 
 
 
 
 
 
 
51,414

 
 
Costs applicable to sales per ounce
 
$
13.71

 
$
13.89

 
$
14.45

 
$
8.00

 
$
13.80

 
$
1,007

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
2,524

Sustaining capital
 
 
 
 
 
 
 
 
 
 
 
 
 
30,403

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
23,294

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
9,370

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
3,877

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
11,999

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
$
307,050

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
12,599,861

Kensington silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,084,840

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
15,684,701

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
19.58


41


Six Months Ended June 30, 2013
 
 
Silver
 
Gold
 
 
 
 
Palmarejo
 
San Bartolomé
 
Rochester
 
Endeavor
 
Total
 
Kensington
 
Total
Costs applicable to sales, including amortization (U.S. GAAP)
 
$
146,103

 
$
57,958

 
$
47,135

 
$
5,054

 
$
256,250

 
$
80,163

 
$
336,413

Amortization
 
64,166

 
9,464

 
3,842

 
2,052

 
79,524

 
26,445

 
105,969

Costs applicable to sales
 
$
81,937

 
$
48,494

 
$
43,293

 
$
3,002

 
$
176,726

 
$
53,718

 
$
230,444

Silver equivalent ounces sold
 
5,683,500

 
3,259,874

 
2,878,105

 
307,361

 
12,128,840

 
 
 
 
Gold ounces sold
 
 
 
 
 
 
 
 
 
 
 
50,770

 
 
Costs applicable to sales per ounce
 
$
14.42

 
$
14.88

 
$
15.04

 
$
9.77

 
$
14.57

 
$
1,058

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Treatment and refining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
4,916

Sustaining capital
 
 
 
 
 
 
 
 
 
 
 
 
 
35,222

General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
25,253

Exploration
 
 
 
 
 
 
 
 
 
 
 
 
 
13,615

Reclamation
 
 
 
 
 
 
 
 
 
 
 
 
 
1,840

Project/pre-development costs
 
 
 
 
 
 
 
 
 
 
 
 
 
4,424

All-in sustaining costs
 
 
 
 
 
 
 
 
 
 
 
 
 
$
315,714

Silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
12,128,840

Kensington silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
3,046,200

Consolidated silver equivalent ounces sold
 
 
 
 
 
 
 
 
 
 
 
 
 
15,175,040

All-in sustaining costs per silver equivalent ounce
 
 
 
 
 
 
 
 
 
 
 
 
 
$
20.80



42


Item 3.         Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to various market risks as a part of its operations. In an effort to mitigate losses associated with these risks, the Company may, at times, enter into derivative financial instruments. These may take the form of forward sales contracts, put and call options related to future silver and gold production, foreign currency exchange contracts and interest rate swaps. The Company does not actively engage in the practice of trading derivative instruments for profit. This discussion of the Company’s market risk assessments contains “forward looking statements” that contain risks and uncertainties. Actual results and actions could differ materially from those discussed below.
The Company’s operating results are substantially dependent upon the world market prices of silver and gold. The Company has no control over silver and gold prices, which can fluctuate widely and are affected by numerous factors, such as supply and demand and investor sentiment. In order to mitigate some of the risk associated with these fluctuations, the Company will at times enter into forward sales contracts or purchase put and call options. The Company continually evaluates the potential benefits of engaging in these strategies based on current market conditions. The Company may be exposed to nonperformance risk by counterparties as a result of its hedging activities. This exposure would be limited to the amount that the spot price of the metal falls short of the contract price. The Company enters into contracts and other arrangements from time to time in an effort to reduce the negative effect of price changes on its cashflows. These arrangements typically consist of managing its exposure to foreign currency exchange rates and market prices associated with changes in gold and silver commodity prices.
Concentrate Sales Contracts
The Company enters into concentrate sales contracts with third-party smelters. The contracts, in general, provide for a provisional payment based upon provisional assays and quoted metal prices. The provisionally priced sales contracts contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates at the forward price at the time of sale. The embedded derivative, which is the final settlement based on a future price, does not qualify for hedge accounting. These embedded derivatives are recorded as derivative assets in prepaid expenses and other or as derivative liabilities in accrued liabilities and other on the balance sheet and are adjusted to fair value through earnings each period until the date of final settlement.
At June 30, 2014, the Company had outstanding provisionally priced sales of 0.2 million ounces of silver and 11,559 ounces of gold at prices of $19.99 and $1,286, respectively. For a 10% change in realized silver price, revenue would vary (plus or minus) approximately $2.9 million and for a 10% change in realized gold price, revenue would vary (plus or minus) approximately $13.4 million. At December 31, 2013, the Company had outstanding provisionally priced sales consisting of 0.2 million ounces of silver and 30,780 ounces of gold at prices of $20.98 and $1,259, respectively.
Foreign Currency Contracts
The Company operates, or has mineral interests, in several foreign countries, specifically Australia, Bolivia, Chile, Mexico, Argentina, and Ecuador, which exposes it to risks associated with fluctuations in the exchange rates of the currencies involved. As part of its program to manage foreign currency risk, the Company from time to time enters into foreign currency exchange hedge contracts. These contracts enable the Company to purchase a fixed amount of foreign currencies at a fixed exchange rate or to lock in a specific exchange rate. Gains and losses on foreign exchange contracts that are related to firm commitments and designated and effective as hedges are deferred and recognized in the same period as the related transaction. All other contracts that do not qualify as hedges are marked to market and the resulting gains or losses are recorded in income. The Company continually evaluates the potential benefits of entering into these contracts to mitigate foreign currency risk and proceeds when it believes that the exchange rates are most beneficial.
During the six months ended June 30, 2014 and 2013, the Company entered into forward foreign currency exchange contracts as well as call and put option contracts, also referred to as collars, to reduce the foreign exchange risk associated with forecasted Mexican peso (“MXN”) operating costs at its Palmarejo mine and development costs at La Preciosa.
At June 30, 2014, the Company had outstanding collars on $23.0 million with a weighted-average strike price of 12.60 MXN for the floor and 14.97 MXN for the ceiling. The Company had an asset related to these contracts with a fair value of nil at June 30, 2014. A 10% increase or decrease in the MXN rate at June 30, 2014 would result in a settlement value of zero and a gain of $1.8 million, respectively.
The Company recorded no mark-to-market gains or losses and mark-to-market losses of $0.7 million for the three months ended June 30, 2014 and 2013, respectively, on the MXN forward contracts and collars. For the six months ended June 30, 2014 and 2013, the Company recorded mark-to-market gains of $1.0 million and losses of $1.5 million, respectively, on MXN forward contracts and collars. These mark-to-market adjustments are reflected in Fair value adjustments, net.


43


Palmarejo Gold Production Royalty
On January 21, 2009, Coeur Mexicana entered into the gold production royalty transaction with a subsidiary of Franco-Nevada Corporation. The minimum royalty obligation ends when payments have been made on a total of 400,000 ounces of gold. As of June 30, 2014, a total of 110,240 ounces of gold remain outstanding under the minimum royalty obligation. The price volatility associated with the minimum royalty obligation is considered an embedded derivative financial instrument under U.S. GAAP. The fair value of the embedded derivative at June 30, 2014 and December 31, 2013 was a liability of $44.0 million and $40.3 million, respectively. For the three months ended June 30, 2014 and 2013, the mark-to-market adjustments for this embedded derivative amounted to losses of $5.1 million and gains of $61.1 million, respectively. For the six months ended June 30, 2014 and 2013, the mark-to-market adjustments for this embedded derivative amounted to losses of $15.3 million and gains of $75.5 million, respectively. For the three months ended June 30, 2014 and 2013, realized losses on settlement of the liabilities were $5.5 million and $8.1 million, respectively. For the six months ended June 30, 2014 and 2013, realized losses on settlement of the liabilities were $11.7 million and $17.2 million, respectively. The mark-to-market adjustments and realized losses are included in Fair value adjustments, net in the Consolidated Statements of Comprehensive Income (Loss).
The Company used an implicit interest rate of 30.5% to discount the original obligation, based on the fair value of the consideration received projected over the expected future cash flows at inception of the obligation. The discounted obligation is accreted to its expected future value over the expected minimum payment period based on the implicit interest rate. The Company recognized accretion expense for the three and six months ended June 30, 2014 and 2013 of $2.9 million, $4.1 million, $6.1 million and $8.2 million, respectively. At June 30, 2014 and December 31, 2013, the remaining minimum obligation under the royalty agreement was $42.0 million and $51.2 million, respectively. A 10% change in the price of gold would result in a change in the fair value of the net derivative liability at June 30, 2014 to vary by approximately $13.3 million. On June 23, 2014, the Company announced that it had entered into a letter of intent with Franco-Nevada to terminate the royalty transaction once the minimum royalty obligation has been satisfied.
Gold and Silver Put Options
At June 30, 2014, the Company has outstanding put spread contracts on 3,750,000 ounces of silver and 74,000 ounces of gold. The weighted average high and low strike prices on the silver put spreads are $18.00 per ounce and $16.00 per ounce, respectively. The weighted average high and low strike prices on the gold put spreads are $1,200 and $1,050, respectively.
If the market price of silver and gold were to average less than the high strike price but more than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period. If the market price of silver and gold were to average less than the low strike price during the contract period, the Company would receive the difference between the average market price and the high strike price for the contracted volume over the contract period, and the Company would be required to pay the difference between the average market price and the low strike price for the contracted volume over the contract period.
The put spread contracts are generally net cash settled. The put spreads expire during the remainder of 2014 and the first quarter of 2015. At June 30, 2014, the fair market value of the put spreads was a net asset of $1.0 million. A 10% increase or decrease in the price of silver and gold at June 30, 2014 would result in a loss of $1.0 million and a $1.2 million gain on settlement, respectively.
During the three months ended June 30, 2014 and 2013, the Company recorded unrealized losses of $1.4 million and unrealized gains of $6.4 million, respectively, related to outstanding options which was included in Fair value adjustments, net. The Company also recognized a realized loss of $0.7 million and a realized loss of $0.2 million resulting from expiring contracts during the three months ended June 30, 2014 and 2013, respectively. During the six months ended June 30, 2014 and 2013, the Company recorded unrealized losses of $2.9 million and unrealized gains of $10.6 million, respectively, related to outstanding options which was included in Fair value adjustments, net. The Company also recognized a realized loss of $0.4 million and a realized loss of $1.1 million resulting from expiring contracts during the six months ended June 30, 2014 and 2013, respectively.
Additional information about the Company’s derivative financial instruments may be found in Note 10 -- Derivative Financial Instruments in the notes to the consolidated financial statements.

44


Item 4.    Controls and Procedures
(a)
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding management’s control objectives. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. Based upon the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by it in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b)
Management’s Report on Internal Control Over Financial Reporting
Based on an evaluation by the Company’s Chief Executive Officer and Chief Financial Officer, such officers concluded that there was no change in the Company’s internal control over financial reporting during three months ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


45



PART II. Other Information
Item 1.        Legal Proceedings

The information contained in Note 19 -- Commitments and Contingencies in the notes to the consolidated financial statements included in this quarterly report is incorporated herein by reference.
Item 1A.
Risk Factors

Item 1A (Risk Factors) of the 2013 10-K and of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2014 sets forth information relating to important risks and uncertainties that could materially adversely affect the Company's business, financial condition or operating results. Those risk factors have been supplemented and updated in this Form 10-Q. Additional risks and uncertainties that the Company does not presently know or that it currently deems immaterial also may impair our business operations.

The Company’s silver-gold project, La Preciosa, is subject to significant development, operational and regulatory risks.

As a development phase project, La Preciosa is subject to numerous risks. The economic feasibility of a development project is based on many factors such as: estimation of mineral reserves, anticipated metallurgical recoveries, environmental considerations and permitting, future metals prices, and anticipated capital and operating costs of these projects. For the La Preciosa project, the Company’s recently-completed feasibility study derives estimates of costs and economic returns based upon anticipated tonnage and grades of reserves to be mined and processed, the configuration of the mineral body, expected recovery rates, estimated expenditures, anticipated climatic conditions and other factors. As a result, it is possible that actual costs and economic returns will differ significantly from those currently estimated for the project in the feasibility study. Further, when the Company ultimately determines to proceed with project construction, the Company may be unable to complete project and environmental permitting within an economically acceptable time frame.

As a result of these and related risks, future estimates of or actual costs and economic returns of the La Preciosa project may materially differ from the estimated costs and returns for this project contained in the feasibility study, and accordingly, the Company’s financial condition, results of operations and cash flows may be negatively affected.

The Company relies on third parties who own, maintain and operate the mines underlying its royalty and streaming assets.

The Endeavor mine is owned, maintained and operated by Cobar, a wholly owned subsidiary of CBH. However, pursuant to a silver sale and purchase agreement, the Company’s wholly owned subsidiary, CDE Australia Pty. Ltd. (“CDE Australia”), has acquired all silver production and reserves at the Endeavor mine, up to a total of 20.0 million payable ounces. CDE Australia has agreed to pay Cobar an operating cost contribution of $1.00 for each ounce of payable silver plus 50% of the amount by which the silver price exceeds $7.00 per ounce, subject to annual adjustments for inflation. In addition, the Company currently holds a tiered royalty on McEwen Mining Inc.’s El Gallo/Magistral mine in Mexico, currently paying a 3.5% NSR, a 1.5% NSR on Dynasty Metals & Mining, Inc.’s Zaruma mine in Ecuador and a 2.0% NSR on Mandalay Resources Corp.’s Cerro Bayo mine in Chile, as well as several royalties on mining assets that are not yet developed and plans to acquire additional royalty and streaming interests in the future.

The Company relies on third parties to own, maintain and operate the mining projects underlying its royalty and streaming interests, which exposes it to substantial counterparty risk. These third parties may fail to adequately or appropriately operate or maintain their respective projects or may be unable or unwilling to fulfill their obligations under their agreements with the Company.

The Company cannot ensure that each of these third parties will not suffer financial hardship, will continue as a going concern or will not enter bankruptcy or otherwise liquidate. Any such event could expose the Company to significant costs and could limit the amounts, if any, the Company could recover in any proceeding against any such third party for breach of their agreement with the Company. There can be no assurance that the production from any of these mining operations will meet forecasted production targets. At any time, any of the owners or operators of these mining operations may decide to suspend or discontinue operations. In addition, the owners or operators of projects that are not yet operational in which the Company may hold royalty or streaming interests may decide to delay or not to proceed with commencing commercial production. Any failure, inability or refusal of a counterparty to meet its obligations to the Company under these royalty or streaming arrangements could have a material adverse effect on the Company’s business, results of operations or financial condition.


46


The Company’s ability to obtain necessary government permits to expand operations or begin new operations can be materially affected by third party activists.

Private parties such as environmental activists frequently attempt to intervene in the permitting process and to persuade regulators to deny necessary permits or seek to overturn permits that have been issued. Obtaining the necessary governmental permits is a complex and time-consuming process involving numerous jurisdictions and often involving public hearings and costly undertakings. These third party actions can materially increase the costs and cause delays in the permitting process and could cause the Company to not proceed with the development or expansion of a mine.

An environmental organization, Great Basin Resource Watch (“GBRW”) brought an administrative appeal challenging the Bureau of Land Management’s (“BLM”) approval in October 2010 of a plan of amendment which allows active mining to be resumed and a new heap leach pad to be constructed at the Rochester property. However, because GBRW did not seek a stay of the BLM’s decision, operations proceeded as approved during the Interior Board of Land Appeals (the "IBLA") proceeding. On June 30, 2014, the IBLA affirmed the BLM's approval of the plan of amendment. The Company cannot predict whether there will be future challenges of the IBLA's decision or involving permits for further expansion projects at its mines.

The Company’s operations in Bolivia are subject to political risks.

Since 2009, a working group composed of Bolivian government officials and key mining sector participants has been working on amendments to the country’s existing mining law. In March 2014, the Bolivian President officially presented the working group's new mining law proposal to Congress for approval. During this legislative process, amendments were proposed which triggered protests by mining cooperatives. In May 2014, the new mining law was approved. The Company has been assessing the potential effects of the legislation on its Bolivian operations but any effects remain uncertain until the regulations implementing the law are enacted. The law regulates royalties and provides for mining contracts with the government rather than concession holding. If the regulations promulgated under the new mining law mandate a renegotiation of the terms of our existing contracts with the Bolivian state-owned mining company, Corporacion Minera de Bolivia (“COMIBOL”) and the mining cooperatives, this could materially adversely affect the profitability and cash flow of our operations in Bolivia. It is also uncertain if any new mining or investment policies or shifts in political attitude may further affect mining in Bolivia.
 
In addition, companies are also operating under Law No. 403 of September 18, 2013, and its regulatory Supreme Decree, which provides for the reversion of mining rights if the Ministry of Mines verifies that a person with mining rights has not initiated mining activities or developed the mining rights. The contracts with COMIBOL and the cooperatives are excluded from the application of Law No. 403. In April 2014, our subsidiary in Bolivia was served by the Bolivian government with a reversion decision affecting nine mining rights wholly-owned by our subsidiary. The affected area is not in an area of active mining by the Company and the Company’s San Bartolomé operations were not targeted as an area of interest in the decision since all of our past and current mining activity is performed through our contracts with COMIBOL and the mining cooperatives.

On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives that hold their rights under contract themselves with COMIBOL. The Company temporarily adjusted its mine plan to confine mining activities to the ore deposits below 4,400 meters above sea level and timely notified COMIBOL of the need to lift the restriction. Mining in other areas above the 4,400 meter level continues to be suspended.
The suspension may reduce production until the Company is able to resume mining above 4,400 meters. It is uncertain at this time how long the suspension will remain in place. If COMIBOL decides to restrict access above the 4,400 meter level on a permanent basis, the Company may need to write down the carrying value of the asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.
 
Although the Company previously carried political risk insurance with respect to the San Bartolomé mine in Bolivia, it recently determined not to renew this coverage. In determining whether to renew the coverage, the Company based its assessment on the political risk environment and the likelihood of a timely and material claim payout against the cost of carrying political risk insurance, which was approximately $2.1 million as of the most recent period ended December 16, 2013.

Item 4.         Mine Safety Disclosures

Information pertaining to mine safety matters is reported in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act in Exhibit 95.1 attached to this Quarterly Report on Form 10-Q.

47


Item 6.        Exhibits

31.1
Certification of the CEO (Filed herewith).
31.2
Certification of the CFO (Filed herewith).
32.1
CEO Section 1350 Certification (Filed herewith).
32.2
CFO Section 1350 Certification (Filed herewith).
95.1
Mine Safety Disclosure (Filed herewith).
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
101.DEF
XBRL Taxonomy Extension Definition Linkbase*
101.LAB
XBRL Taxonomy Extension Label Linkbase*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase*
*    The following financial information from Coeur Mining, Inc.'s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2014, formatted in XBRL (Extensible Business Reporting Language): Condensed Consolidated Statements of Comprehensive Loss, Condensed Consolidated Statements of Cash Flows, Condensed Consolidated Balance Sheets, Condensed Consolidated Statement of Changes in Stockholders' Equity


48


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
COEUR MINING, INC.
 
 
 
(Registrant)
 
 
 
 
 
Dated
August 6, 2014
/s/ Mitchell J. Krebs
 
 
 
MITCHELL J. KREBS
 
 
 
President and Chief Executive Officer (Principal Executive Officer)
 
 
 
 
Dated
August 6, 2014
/s/ Peter C. Mitchell
 
 
 
PETER C. MITCHELL
 
 
 
Senior Vice President and Chief Financial Officer (Principal Financial Officer)
 
 
 
 
Dated
August 6, 2014
/s/ Mark Spurbeck
 
 
 
MARK SPURBECK
 
 
 
Vice President, Finance (Principal Accounting Officer)




49